In June, United States Patent and Trademark Office (USPTO) Director Kathi Vidal issued a new guidance memorandum on interim procedures for discretionary denials in the Patent Trial and Appeal Board (PTAB) post-grant proceedings (“Interim Procedures”). The memorandum addresses the availability for PTAB judges to deny patent challenges when the same claims and parties are involved in ongoing parallel district court litigation. The Interim Procedures are in effect until a final rulemaking process is complete.

PTAB post-grant proceedings—a mechanism for challenging the validity of patents after they have been granted—were implemented by Congress in 2011 through the America Invents Act (AIA) to promote a strong patent system and limit burdensome litigation costs. Small business innovators have commonly benefited from inter partes review (IPR), a post-grant proceeding that allows a patent challenger (petitioner) to assert claims against overly-broad and overly-asserted patents before an expert panel of judges for a fraction of the cost and time of litigation.

By the authority of the USPTO director during the Trump Administration, two precedential opinions expanded the ability of PTAB judges to deny proceedings at their discretion based on non-exclusive and procedural factors. The first decision, NHK Spring Co., Ltd. v. Intri-Plex Techs, Inc. (NHK) determined that PTAB judges could deny institution of IPR based on how close a parallel district court proceeding was to completion. Apple Inc. v. Fintiv, Inc. (Fintiv) took a leap further by providing a non-exclusive list of factors for the PTAB to consider when determining whether to deny institution of IPR proceedings in light of parallel district court litigation. ACT | The App Association publicly opposed the decision to declare NHK and Fintiv (NHK-Fintiv) as precedential and recognized that these decisions placed small business innovators in an inequitable position. In 2021 alone, NHK-Fintiv rulings were considered in 45 percent of IPR institution decisions. Discretionary denials purely based on procedure increased from 45 cases in 2018 to 123 cases in 2021. By contrast, in 2021, discretionary denials based on the merits of a claim were only exercised in 10 out of 310 cases.

NHK-Fintiv even enabled some federal judges to intentionally early-schedule district court cases in patent disputes (only to push trial dates back) in order to initiate a discretionary denial of the PTAB challenge to the validity of the same patents at issue. As a result, parties looking to avoid a PTAB examination of the validity of their patent(s) were incented to use those courts. At least one judge in the U.S. District Court for the Western District of Texas has been widely recognized for this practice.

In efforts to promote a clear and transparent PTAB process, new USPTO Interim Procedures expressly define three scenarios in which the PTAB will no longer exercise discretionarily denial under NHK-Fintiv factors in light of parallel district court litigation:

  1. When a Petition Presents Compelling Evidence of Unpatentability

The memorandum instructs the PTAB to allow institution of PTAB proceedings where a petitioner provides a compelling unpatentability challenge. This limitation on discretionary denials will prevent meritorious patent invalidity challenges from being denied based on purely procedural NHK–Fintiv factors.

  1. When a Request for DenialUnder NHK-Fintiv is Based on a Parallel ITC Proceeding

While discretionary denial is largely decided based on parallel district court litigation, the PTAB has exercised discretionary denial in light of parallel ITC proceedings. The memorandum on Interim Procedures notes that the ITC lacks authority to invalidate a patent and does not have binding authority on the USPTO or district court based on invalidity rulings. Discretionary denial is appropriately prohibited in this context and promotes the ability for someone to have an efficient venue to pursue patent invalidity claims.

  1. Where a Petitioner Stipulates Not to Pursue the Same Grounds Raised or That Could Have Reasonably Been Raised at the PTAB in a Parallel District Court Proceeding

The Interim Procedures implements petitioner stipulations as a factor that weighs against discretionary denial to PTAB proceedings where a petitioner stipulates to materially different grounds, arguments and/or evidence than the parallel district court proceeding. This limiting rule based on proper stipulation avoids the issue of having the same claim decided in different venues.

The USPTO’s new memorandum on Interim Procedures further states that NHK–Fintiv factor B above will be weighed against exercising discretionary denial. The Interim Procedures even provide the PTAB with a more defined consideration of a trial timeline being the median time between the filing of a suit in the district court and the present disposition of the suit. The memorandum’s instruction on weighing the value of a trial date combats the common PTAB practice of favoring discretionary denial when a trial date predates or foreseeably predates a PTAB written decision. The guidance on the trial date factor eliminates the ability to exclude petitions from the PTAB based on non-substantive procedural grounds and allows petitioners to bring challenges against invalid patents that claim infringement by the petitioner.

The Interim Procedures implemented under Director Vidal are a significant step towards restoring the balance of equities back to the IPR process, and the U.S. patent system writ large, and represent a much-needed aligning of agency practice with congressional intent. Director Vidal has also launched a new public consultation on ways to improve the review of PTAB practices and policies to assist in setting permanent policies.

IPR proceedings provide small business innovators with a critical avenue to defend themselves against high-cost litigation largely initiated by non-practicing entities (NPEs) and invalid patent holders. While challenges will remain in the implementation of this new guidance, the small business innovator community supports Director Vidal’s efforts to preserve the utility of the post-grant proceeding process.

You can find the memorandum on Interim Procedures here:https://www.uspto.gov/sites/default/files/documents/interim_proc_discretionary_denials_aia_parallel_district_court_litigation_memo_20220621_.pdf

You can find the request for comments here:
https://www.federalregister.gov/public-inspection/2022-15475/director-review-precedential-opinion-panel-review-and-internal-circulation-and-review-of-patent

You can see our filing to the USPTO on PTAB Discretionary Denial here: