Patent litigation reset

Late last week, recently confirmed U.S. Patent Office Director Kathy Vidal issued new policy guidance clarifying the scope of discretionary denials in inter partes review (IPR) proceedings. At its peak, the Patent Office was discretionarily denying 11% of all IPR challenges to issued patents. Although Director Vidal has actively issued new policy guidance in her short tenure, to date this guidance has been her most significant yet, impacting all forthcoming and pending petitions at the Patent Office. This new guidance yet again changes the game for IPR proceedings.

IPRs allow for certain patent validity challenges to be litigated more cost-effectively at the Patent Office, and frequently run in parallel with litigation on the same patents either in federal court or before the International Trade Commission. Under the last Director, the Patent Trial and Appeal Board (PTAB), which hears IPR disputes, was permitted to exercise its discretion to decline to hear IPR challenges under the Fintiv precedential decision. Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020).

Fintiv was controversial from the start. Shortly after Fintiv was decided, the Patent Office issued a request for comment regarding the PTAB’s current approach to exercising discretion in instituting IPRs. Discretion to Institute Trials Before the Patent Trial and Appeal Board, 85 FR 66502 (Oct. 20, 2020). In response, it received 822 public comments, showing the exceptional level of public interest in Fintiv discretionary denials.

Origin of Fintiv

In 2018, the PTAB issued a precedential decision NHK Spring, holding that the advanced state of a parallel district court litigation involving the same patent challenged in IPR proceedings could be a factor weighing in favor of denying institution of an IPR. NHK Spring Co. v. Intri-Plex Techs., Inc., IPR2018-00751, Paper 8 (PTAB Sept. 12, 2018). Two years later, the PTAB issued Fintiv, enumerating a non-exclusive list of six factors to consider in exercising discretion on instituting IPRs in light of parallel district court litigation:

1. Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted,

2. Proximity of the court’s trial date to the PTAB’s projected statutory deadline for a final written decision,

3. Investment in the parallel proceeding by the court and the parties,

4. Overlap between issues raised in the petition and the parallel proceeding,

5. Whether the petitioner and the defendant in the parallel proceeding are the same party, and

6. Other circumstances that impact the Board’s exercise of discretion, including the merits.

Fintiv, Inc., IPR2020-00019, Paper 11.

Fintiv dramatically changed how parties approached IPR proceedings at the Patent Office. As shown in the graph below, parties raised the issue of discretionary denial based on parallel litigation in about 40% of all IPRs after Fintiv, as compared to only 10-15% after NHK Spring.Source: USPTO, Patent Trial and Appeal Board Parallel Litigation Study (June 2022).

According to Patent Office data, the number of IPRs denying institution under Fintiv dropped significantly after a peak during the first half of fiscal year 2021. The graph below depicts the cases that were instituted or denied under Fintiv as a percentage of all cases. Source: USPTO, Patent Trial and Appeal Board Parallel Litigation Study (June 2022).

Looking Forward

The new guidance provides some much-needed clarity on Fintiv’s reach. It specifies that the PTAB will not deny petitions based on Fintiv if: (1) the petition presents “compelling evidence of unpatentability,” (2) the patent challenger provides a stipulation to not “pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could have reasonably been raised in the petition,” or (3) the request for denial under Fintiv is based on a parallel International Trade Commission proceeding.

Fintiv also resulted in confusion about assessing district court trial dates. The recent guidance also provides clarification on Fintiv’s second factor, comparing the proximity of IPR and district court trial dates, stating that the PTAB will consider the average time-to-trial for the federal court of the parallel proceeding, not the scheduled trial date as some PTAB panels had done. Additionally, the guidance emphasizes that the PTAB retains the right to deny institution for other reasons under 35 U.S.C. § 314(a), 324(a), and 325(d).

After releasing the new Fintiv guidance, Director Vidal explained that the guidance was intended “to make the rules even more clear so that parties didn’t have to spend time briefing these issues if they knew with certainty how the PTO would apply certain factors.” Britain Eakin, Vidal Sees More Fintiv Changes After Formal Rulemaking, Law360 (June 24, 2022). She also explained that the guidance was issued simply to reflect “what the board was doing anyway.” Id.

Although the new guidance provides some clarity, this is far from the Patent Office’s last word on the subject. The Patent Office will be seeking further public notice and comment on Fintiv, which could provide yet another set of rules for discretionary denials. As IPRs rapidly evolve, only time will tell how the new guidance will affect future proceedings. However, one thing is certain – the constantly changing state of affairs is sure to keep patent attorneys on their toes.