USPTO Director Clarifies PTAB’s Application of Fintiv to Limit Discretionary Denials

Morgan Lewis
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Morgan Lewis

The USPTO has issued interim procedures curbing the PTAB’s discretionary denials over post-grant proceedings associated with parallel ITC proceedings or district court litigation.

US Patent and Trademark Office (USPTO) Director Katherine Vidal recently released a memorandum providing interim procedures for discretionary denials in AIA post-grant proceedings associated with parallel International Trade Commission (ITC) proceedings or district court litigation.

This memorandum provides definitive instances of when the Patent Trial and Appeal Board (PTAB) will not discretionarily deny institution of an Inter Partes Review (IPR) or Post-Grant Review (PGR). Namely, the PTAB will not deny institution (1) when a petition presents compelling evidence of unpatentability; (2) when the parallel proceeding occurs in the ITC; and (3) where a petitioner stipulates not to pursue in a parallel district court proceeding the same grounds or any grounds that could have reasonably been raised before the PTAB.[1] Further, the PTAB will no longer take court trial dates at face value and instead will consider additional factors such as the median time-to-trial in the relevant district court.[2]

In deciding whether to discretionally deny institution, the PTAB relies on the following Fintiv factors:[3]

  • Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted
  • Proximity of the court’s trial date to the PTAB’s projected statutory deadline for a final written decision
  • Investment in the parallel proceeding by the court and the parties
  • Overlap between issues raised in the petition and in the parallel proceeding
  • Whether the petitioner and the defendant in the parallel proceeding are the same party
  • Other circumstances that impact the PTAB’s exercise of discretion, including the merits

After the Fintiv decision took precedential effect in May 2020, the number of discretionary denials for petitions with parallel litigation skyrocketed. Critics attributed the increase in denials to the PTAB’s over-reliance on Fintiv factor two, which relied on unrealistic trial dates mainly in the Western District of Texas.[4] Discretionary denials have since decreased to 3% in 2022 since the number peaked in 2020.[5] The memorandum provides clarification about how the PTAB will consider district court trial dates when evaluating Fintiv factor two, to decrease the PTAB’s over-reliance on inaccurate and unrealistic trial dates while providing petitioners with a more predictable path to cost-effective post-grant proceedings.

The issuance of these interim procedures does not overturn the precedence of the Fintiv factors, but rather, aligns the PTAB’s Fintiv discretionary denial analysis with the intended benefits of the AIA’s post-grant proceedings—mitigated litigation costs and improved patent quality.

The new interim procedures are as follows.

COMPELLING EVIDENCE OF UNPATENTABILITY

If the PTAB determines that the information presented at the institution stage provides compelling evidence of unpatentability, then it will not deny the petition’s institution based on Fintiv.[6] The USPTO Director notes that this rule is a clarification of Fintiv factor six and is consistent with Congress’s objective to create a robust and reliable patent system in which the PTAB can review and revise earlier patent grants.[7]

SOTERA STIPULATIONS

The PTAB will not discretionarily deny institution of an IPR or PGR if the petitioner stipulates not to pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could have been reasonably raised in the petition.[8] This rule is consistent with Sotera, where the petitioner filed such a stipulation and the PTAB subsequently instituted the IPR.[9] After Sotera was designated as precedential, petitions with stipulations increased and frequently avoided Fintiv denials.[10] Thus, the Director’s guidance memorializes the practice of stipulations as a means of avoiding discretionary denials.

PARALLEL ITC PROCEEDINGS

Fintiv no longer applies to parallel ITC proceedings.[11] The Director outlined key distinctions between the ITC and district courts which make the application of Fintiv inappropriate when there is a corresponding ITC investigation.[12] For instance, the language of the Fintiv factors is directed to district court litigation, not the ITC. More importantly, ITC invalidity decisions are not precedential on the PTAB or US district courts. As such, the danger of inconsistent rulings between the PTAB and ITC is minimal.

CONSIDERATION OF TRIAL DATES

Scheduled trial dates are notoriously unreliable. In light of this, the Director ruled that the PTAB will no longer take court trial dates at face value.[13] Instead, when applying Fintiv factor two, the PTAB will consider the median time-to-trial in the relevant district court. When such evidence is presented by the petitioner, the PTAB will consider additional district court factors, such as the number of cases before the assigned district court judge. This clarification provides that the PTAB can no longer deny compelling, meritorious petitions based on a scheduled trial date alone.

CONCLUSION

Overall, the issuance of these interim procedures effectively limits instances in which the PTAB can deny institution of IPRs and PGRs with associated parallel district court litigation under Fintiv. This will provide the public with more predictable access to the proven cost-effective alternative to litigation provided by the AIA. In light of this guidance, petitioners with parallel district court litigation should ensure that sufficient compelling evidence of unpatentability is presented at the institution stage, and, if appropriate, provide a Sotera stipulation to successfully avoid Fintiv discretionary denial.

 

[1] USPTO Memorandum “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation” at 2-3.

[2] Id. at 3.

[3] Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PT AB Mar. 20, 2020) (designated precedential May 5, 2020).

[4] USPTO Executive Summary “Public Views on Discretionary Institution of AIA Proceedings” at 4; Patent Trial and Appeal Board Parallel Litigation Study at 34.

[5] Supra note 4.

[6] Supra note 1 at 5.

[7] Id. at 4.

[8] Id. at 7.

[9] Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, Paper 12 (PTAB Dec. 1, 2020)

[10] Patent Trial and Appeal Board Parallel Litigation Study at 8.

[11] Supra note 1 at 7.

[12] Id. at 6.

[13] Id. at 8.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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