Discretionary denials of patents by the patent trial and appeal board may wane under proposed rule

In 2012, with the America Invents Act, the U.S. Patent and Trademark Office's Board of Patent Appeals and Interferences was reformed as the Patent Trial and Appeal Board (PTAB). The PTAB has since become a highly utilized venue for challenging patents in post-grant review (PGR) and inter partes review (IPR) proceedings.

Initially, there was some skepticism about whether companies litigating life sciences disputes would avail themselves of the venue. But by 2015, the annual number of IPR and PGR petitions in life sciences exceeded 200, over half of which were eventually instituted. See Fig. 1. The trend peaked in 2017 with 251 petitions challenging the validity of life sciences patents. Since then, petitions have leveled off at about 80 to 100 petitions per year. Although the overall number of institutions has declined due to this downward trend in filings, the ratio of grants to denials has remained fairly constant from 2015 to 2022 at slightly better than 50%. That ratio is significantly lower than the institution rate in other technologies, and if the first quarter of this year is any guide, the institution rate in life sciences is going down. So far, the PTAB has only instituted 11 petitions compared to denying 15 petitions, but that may change given how such petitions are denied.

Figure 1 data were collected from petitions assigned to Tech Center 1600 (Biotechnology and Organic Chemistry).

Under 35 U.S.C. Sections 314(a) and 324(a), the PTAB may only institute a proceeding if there is a reasonable likelihood - or in the case of a PGR, if it is more likely than not - that petitioner would prevail in showing unpatentability of at least one of the challenged claims. But the PTAB's institution power is discretionary, and the PTAB can deny institution even when it finds the petitioner has satisfied this requirement. For example, the PTAB may exercise its discretion to deny a petition under Section 325(d) where (a) the petition presents substantially the same prior art or arguments previously considered by the patent office and (b) the petition fails to demonstrate that the patent office materially erred in finding the challenged claims patentable. See e.g., Advanced Bionics, LLC v. Med-El Elektromedizinische Gerate GmbH, IPR2019-01469, Paper 6 at 8 (PTAB Feb. 13, 2020) (precedential). The PTAB may also exercise its discretion to deny a petition under Section 314(a) based on several other factors articulated in Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020) (designated precedential May 5, 2020). Although USPTO Director Vidal issued guidelines last year that many commentators expected to reduce the frequency of discretionary denials, those guidelines were only directed at the Fintiv factors, not discretionary denials under Section 325(d). But nearly all discretionary denials on life sciences patents in 2022 were made pursuant to Section 325(d) - a trend that continues this year.

In one recent life sciences decision denying institution, the PTAB first analyzed the merits of petitioner's § 102 and § 103 challenges and, finding that petitioner failed to demonstrate a reasonable likelihood that it would prevail on at least one challenged claim, declined to reach the question of discretionary denial. Mylan Pharmaceuticals Inc. v. Bausch Health Ireland Ltd., IPR2022-01103, Paper 15 at 21 (PTAB Jan. 4, 2023). Days later, the PTAB denied institution on another life sciences petition without considering the petition's merits, but rather by exercising its discretion under Section 325(d). Risen (Suzhou) Pharma Tech Co. Ltd. v. Alzheon, Inc., IPR 2022-01200, Paper 14 at 2 (PTAB Jan. 9, 2023). Notably, the PTAB found that an information disclosure statement's reference to prior art during prosecution was sufficient to find that such art was previously "presented to the Office" under Section 325(d), and that the petition's other prior art references were "no more relevant than" and "cumulative to" what was presented - and thus constitute "substantially the same" arguments as those raised during prosecution. Id., Paper 14 at 23-31.

Such discretionary denial arguments, however, may soon face greater scrutiny. On April 21, the USPTO proposed a new rule that would provide a procedure for separate briefing on discretionary denial to "allow parties to address relevant issues for discretionary denial without encroaching on the pages they are afforded to address the merits of a case." This, along with the rule's proposal to limit the applicability of Section 325(d), is likely to reduce the frequency with which the PTAB utilizes discretionary denials.

Only time will tell. Comments are due by June 20.

Matthew Chivvis is a partner, and Chelsea Caylin Kehrer is an associate at Morrison & Foerster LLP.