IP Law Daily, TOP STORY: USPTO memo guides PTAB on denials of reviews based on pending court actions, (Jun 22, 2022)
Clarifying the much-criticized Fintiv doctrine, the memo states that review will not be denied when there is “compelling evidence of unpatentability,” and the PTAB is to consider a court’s median time-to-trial rather than taking its trial schedule at face value.
A memorandum issued by USPTO Director Kathi Vidal explains circumstances under which the Patent Trial and Appeal Board will not deny institution of an inter partes review (IPR) or post-grant review (PGR) on the basis of a pending action in court or the International Trade Commission (ITC). The guidance memo, “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation,” concerns the oft-maligned Fintiv doctrine of PTAB practice. Most significantly, the guidance memo directs members of the PTAB not to deny review on the basis of parallel litigation when the IPR or PGR petition presents “compelling evidence of unpatentability.” It also clarifies the approach to be taken by the PTAB in assessing the speed at which a court action is likely to be resolved. The guidance memo applies to all proceedings pending before the USPTO and will remain in place until further notice. According to the memo, the USPTO expects to replace the interim guidance with rules after it has completed formal rulemaking.
Fintiv doctrine. In NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc., No. IPR2018-00752 (2018, designated as precedential), the PTAB determined that it would defer to court proceedings that were in an “advanced state.” Two years later, in Apple Inc. v. Fintiv, Inc., No. IPR2020-00019 (2020, designated as precedential), the PTAB clarified its earlier decision by setting out six factors it would consider in determining whether to defer to ongoing court proceedings, among them the investment of the parties in the parallel proceeding and the proximity of the trial date. Those factors were:
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 Board’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; and
other circumstances that impact the Board’s exercise of discretion, including the merits.
Some critics have expressed concern that the doctrine’s emphasis on the proximity of the court’s trial date encourages excessive deferral to district courts that intentionally position themselves, through the setting of speedy trial dates—or “rocket dockets”—as a favored forum to aggressive patent litigants.
The U.S. Supreme Court recently denied review in two cases challenging the Fintiv doctrine. In the first petition, Apple Inc. sought review of an unpublished Federal Circuit decision concerning the PTAB’s refusal to initiate an IPR of patents held by Optis Cellular Technology, Inc. In the second petition, Mylan Laboratories Ltd., sought review of a Federal Circuit decision concerning the PTAB’s refusal to initiate an IPR of a patent held by Janssen Pharmaceutica, N.V. In each case, the Federal Circuit held that it had no jurisdiction to hear an appeal of the PTAB’s non-institution decision.
Guidance memo. The memo states that the PTAB will not deny institution of an IPR or PGR under Fintiv when: (1) a petition presents compelling evidence of unpatentability; (2) a request for denial under Fintiv is based on a parallel ITC proceeding; or (3) a petitioner stipulates not to 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. Additionally, the Director’s guidance directs the PTAB, when applying the second factor set forth by Fintiv, to consider the speed with which the district court case may come to trial and be resolved. The PTAB is to weigh this factor against exercising discretion to deny institution under Fintiv if the median time-to-trial is around the same time or after the projected statutory deadline for the PTAB’s final written decision.
According to the memo, this adjusted approach will “benefit the patent system and the public good.” It notes that the rule in Fintiv is limited to the situation presented by that case—which involved pending district court litigation—and by its plain language, the rule set out by the PTAB’s decision does not apply to ITC proceedings. As the memo explains, “the ITC lacks authority to invalidate a patent and the ITC’s invalidity rulings are not binding on the Office or on district courts.”
With respect to the second Fintiv factor, the memo notes that the PTAB has taken courts’ trial schedules at face value in the absence of strong evidence to the contrary. However, stakeholder have pointed out that trial schedules are unreliable and often subject to change. “Accordingly,” the memo advises, “when analyzing the proximity of the court’s trial date under factor two of Fintiv, when other relevant factors weigh against exercising discretion to deny institution or are neutral, the proximity to trial should not alone outweigh all of those other factors.”
Parallel litigation study. The USPTO also announced that it has released a study on the impact of PTAB denials of review petitions when there is a parallel district court proceeding addressing the same patent. The study found that:
After Fintiv was designated precedential, parallel litigation was raised in about 40% of all cases.
Fintiv denials peaked in the second quarter of fiscal year 2021 and dropped significantly afterward.
The PTAB had issued no Fintiv denials based on parallel litigation in the Western District of Texas since August 2021.
The USPTO’s guidance on using stipulations appears to have led to an increase in stipulation filings and a significant decrease in Fintiv.
The PTAB has denied institution based on Fintiv of only three total AIA petitions challenging drug patents: two Orange Book-listed patents and one biologic drug patent.
“Authoritative data helps inform and advance the conversation around the impact of PTAB discretionary denials by offering key insights and trends,” said Director Vidal. “The work in this area is centered around our mission to issue and maintain robust and reliable patents, while advancing the goals of the America Invents Act.”
Legislation. A bill introduced in the Senate on June 16—titled the Patent Trial and Appeal Board (PTAB) Reform Act of 2022” (S. 4417)—would, among other things, eliminate the Fintiv doctrine. Sponsored by Senators Patrick Leahy (D-Vt.), John Cornyn (R-Tex.), and Thom Tillis (R-N.C.), the measure would prohibit the USPTO from basing IPR institution decisions on ongoing civil actions or proceedings before the ITC, other than the time bars already laid out in the Patent Act. Section 315(b) of the Patent Act prohibits the PTAB from instituting an IPR based on a petition “filed more than 1 year after the date on which the petitioner … is served with a complaint alleging infringement.” Along with other critics, Sen. Tillis has contended that the Fintiv doctrine provides an incentive for judges to set “unrealistic trial schedules” that encourage forum shopping.
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