Inter partes reviews (IPRs) and post-grant reviews (PGRs) are proceedings in front of the Patent Trial and Appeal Board (PTAB) that allow a petitioner to challenge a patent’s validity and a patent owner to defend that patent’s validity after the patent has been issued. IPRs and PGRs were created by the Leahy-Smith America Invents Act as a more efficient and effective means for challenging the validity of patents and are also intended to reduce litigation costs. These post-grant proceedings were designed to lessen the burden on district courts while also ensuring that administrative judges with expertise in patent law and scientific disciplines would be rendering invalidity rulings. The statutes enacted that govern IPRs and PGRs allow for the director of the United States Patent and Trademark Office (USPTO), and PTAB judges by designation, to deny the institution of an IPR or PGR. However, the breadth of that ability has been the subject of debate and legal action.

One statute, 35 U.S.C. § 314(a), which governs the institution of IPRs, has, in the opinion of some, been expanded to provide powers to PTAB judges beyond the plain statutory language. The statute states: “The Director [and PTAB judges by designation] may not authorize an inter partes review to be instituted unless ... there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” The PTAB has relied on this statutory language for support for discretionary denials—denials of institution that are not based on the merits of the claims made by the petitioner. The Supreme Court affirmed this broad discretionary power of the PTAB in Cuozzo Speed Technologies, LLC v. Lee, 579 U.S. 261 (2016), finding that “the agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion” and that § 314(a) does not mandate institution in any instance. In NHK Spring Co. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8 (PTAB Sept. 12, 2018), a precedential decision at the PTAB, which operates in the similar manner as a precedential decision in a district court, the PTAB held that the advanced state of a parallel district court litigation is a factor that the board will consider when assessing its discretion to institute an IPR under § 314(a). About a year and a half later, in Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020), the PTAB provided factors that it would consider that would govern its institution decisions related to IPRs associated with a parallel district court litigation.

The Fintiv decision increased the frequency of discretionary denials, and the use of its factors has been a divisive issue. Although the PTAB issued guidance in June 2022 that limited discretionary denials relying on Fintiv, would-be petitioners argue that the Fintiv decision cuts sharply against the purpose of IPRs by creating uncertainty about the availability of IPRs as an alternative to district court litigation and closing the door to meritorious petitions that are seeking to utilize the post-grant proceeding in the exact manner that Congress contemplated. See 35 U.S.C. § 315(b) (contemplating the relationship between IPRs and coexisting district court infringement litigation). Furthermore, there is question about whether the manner through which the PTAB created the Fintiv rule violates the Administrative Procedure Act (APA).

In August 2020, several companies sued Andrei Iancu, the director of the USPTO at the time, in his official capacity in the Northern District of California. They argued that the Fintiv factors violated the APA for three reasons: (1) they are contrary to the statutory rules for IPRs, (2) they are arbitrary and capricious, and (3) they were issued without compliance with the notice-and-comment rulemaking requirements. The Northern District of California dismissed the case, holding that the plaintiffs lacked standing and, alternatively, that § 314(d) prevents review of institution decisions. Apple Inc. v. Iancu, No. 5:20-CV-06128-EJD, 2021 WL 5232241 (N.D. Cal. Nov. 10, 2021). In March 2023, the Federal Circuit affirmed the dismissal under the first two challenges but overturned the dismissal of the third challenge because at least one party had standing to challenge whether Fintiv should have been promulgated through notice-and-comment rulemaking. Apple Inc. v. Vidal, 63 F.4th 1, 14 (Fed. Cir. 2023). The Federal Circuit remanded that issue to the Northern District of California.

On April 21, 2023, following the decision of the Federal Circuit, the PTAB published an advance notice of proposed rulemaking (ANPR) seeking public comment on, among other things, proposed codification of rules governing institution decisions for IPRs and PGRs. The ANPR specifically sought to codify the Fintiv factors, likely as a direct response to the Federal Circuit’s ruling.

In January of this year, the Supreme Court denied a request for certiorari on the Federal Circuit’s decision regarding its first two challenges. And, on April 1, the Northern District of California again dismissed the remanded claims against the director, now Kathi Vidal. Judge Edward Davila stated that Fintiv was excluded from the APA’s notice-and-comment rulemaking requirements because Fintiv was a general statement of policy and not a substantive rule. Apple Inc. v. Vidal, No. 20-CV-06128-EJD, 2024 WL 1382465, at *13 (N.D. Cal. Mar. 31, 2024). A substantive rule requires notice-and-comment rulemaking under the APA. Davila found that a substantive rule affects individual rights and obligations and does not leave the PTAB free to exercise discretion and consider the individual facts before it in a given case, and that a general statement of policy must be only prospective and must not establish a binding norm or be finally determinative of the issues or rights. Davila ruled that because IPR institution is never required (referencing § 314(a)), the Fintiv factors do not affect individual rights or obligations, and because the Fintiv factors are referred to as “nonexclusive,” they are not determinative and leave the PTAB free to exercise discretion.

On April 19, the PTAB finally followed up on the ANPR and issued a notice of proposed rulemaking (NPR). Notably absent from the NPR was any mention of the Fintiv factors. It appears that, considering Davila’s order in the Northern District of California, Vidal and the PTAB are content leaving the Fintiv factors in their current state. Moreover, the denial of institution under Fintiv has declined following the guidance issued by Vidal, and petitioners can now utilize Sotera stipulations to avoid denial. See Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, Paper 12 (PTAB Dec. 1, 2020). As a result, the criticism that Fintiv discretionary denials frustrate the purpose of IPRs to provide a more efficient venue for patent issues no longer packs the same punch.

Despite the reduction in Fintiv denials by the PTAB, they remain an obstacle for petitioners. And although the controversy surrounding the use of Fintiv denials is not yet fully resolved, the Fintiv factors are almost certainly here to stay, albeit in their truncated form shaped by Vidal’s guidance. Judge Davila’s ruling was appealed to the Federal Circuit on May 15. The Federal Circuit could rule that the Fintiv factors must be promulgated through notice-and-comment rulemaking, but this presumably will only result in a temporary pause in their use, though potentially lengthened by their absence in the April 19 ANPR, before they are reinstated through that process. Afterwards, only the director of the USPTO and Congress will hold the power to alter the PTAB’s Fintiv practice.

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