United States: The USPTO Reins In Fintiv

No recent Patent Trial and Appeal Board (PTAB) decision has been more impactful than Apple Inc. v. Fintiv, Inc., IPR2020-00019 (Mar. 20, 2020). It has led to about 200 discretionary denials of post grant proceedings, sparked the filing of a lawsuit, and generated proposed legislation to abolish it. In the latest twist, the U.S. Patent and Trademark Office (USPTO) has taken steps today to curtail its impact while ensuring that patent owners are not overburdened. In a memorandum and accompanying press release, Director Vidal provides clarifications on the PTAB's current application of Fintiv, including creating safe harbors from the decision's reach. The PTAB will not deny institution (1) "when a request for denial under Fintiv is based on a parallel ITC proceeding" or (2) "where 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." In addition, the PTAB will not deny institution "when a petition presents compelling evidence of unpatentability." And the PTAB is empowered to look beyond a court's scheduled trial date and consider whether the "median time-to-trial is around the same time or after the projected statutory deadline for the PTAB's final written decision." While these developments will be welcomed by petitioners, Director Vidal also tried to strike a balance by emphasizing that the PTAB may nonetheless "deny institution if other pertinent circumstances are present, such as abuse of process by a petitioner." The USPTO expects to issue final rules after formal rulemaking, but the interim guidance "applies to all proceedings" immediately and "will remain in place until further notice."

The Fintiv Decision and Its Aftermath

The PTAB has discretion under Section 314(a) to deny institution of post grant proceedings. In its May 2019 precedential decision, NHK Spring Co. v. Intri-Plex Technologies, Inc., the PTAB held that a parallel co-pending district court proceeding scheduled to go to trial before the PTAB's expected final written decision favored denial of institution under Section 314(a).¹ The PTAB expanded NHK in its precedential Fintiv decision in March 2020, listing six factors for assessing whether to exercise discretion to deny institution when the PTAB's final written decision is expected around the same time or after a co-pending district court trial date.

The impact of Fintiv was swift and strong. Indeed, accompanying today's memorandum, the USPTO released a study on Fintiv's effects. The percentage of post grant proceedings that brought up the Fintiv ruling rose steeply from 11.1% in FY 2019 to 50.6% in FY 2022. And, unsurprisingly, the percentage of proceedings where institution was denied based on Fintiv reached over 10% in the first quarters of FY 2021.

Today's USPTO Fintiv Guidance

In this backdrop, the USPTO's guidance seeks to curtail Fintiv's force while still preserving the AIA's goal of limiting "unnecessary and counterproductive litigation costs."

• Compelling challenges may override all other factors and will be allowed to proceed at the PTAB. As clarified in the guidance, "[c]ompelling, meritorious challenges are those in which the evidence, if unrebutted in trial, would plainly lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence." This is a higher standard than the statutory institution threshold and thus seeks to strike "a balance among the competing concerns of avoiding potentially conflicting outcomes, avoiding overburdening patent owners, and strengthening the patent system by eliminating patents that are not robust and reliable."
• The PTAB will no longer discretionarily deny institution based on a parallel International Trade Commission (ITC) proceeding. Because the ITC lacks authority to invalidate a patent and its invalidity rulings are not binding on the USPTO or district courts, such denials will not resolve concerns over inefficient use of resources.
• When a petitioner files a broad, Sotera-like stipulation to not assert in district court grounds that were "raised" or "could have reasonably been raised" in the petition, the PTAB will not exercise its discretion to deny institution. Petitioners will likely take advantage of this Fintiv safe harbor absent a compelling challenge. That said, a weaker stipulation—e.g., to not assert the "same grounds" in district court—will not bring a petition within the safe harbor.
• Given that a court's scheduled trial date is not by itself a good indicator of whether the district court trial will occur before the final written decision statutory deadline, the PTAB will consider the most recent median time-to-trial statistics, along with additional supporting factors such as the number of cases before the judge in the parallel litigation and speed and availability of other case dispositions. This clarification blunts Fintiv's impact in proceedings with co-pending litigation in popular district courts where early trial dates are often set but may not hold.

Conclusion

Today, the USPTO took a formal step toward limiting Fintiv. Its guidance creates safe harbors from Fintiv's reach, including where a petitioner stipulates to not assert grounds that were raised or could have reasonably been raised in a petition. It also provides additional pathways for a PTAB panel to limit application of Fintiv, such as by finding the challenge to be "compelling." These clarifications should be welcome news to petitioners with parallel court proceedings. That said, Director Vidal sought to strike a balance between petitioners and patent owners by ensuring that the safe harbor stipulation covers grounds "that reasonably could have been raised," by underscoring that the "compelling" challenge standard is more than the statutory institution threshold, and by making it clear that the PTAB retains "the right to deny institution for other reasons under 35 U.S.C. §§ 314(a), 324(a), and 325(d)" beyond Fintiv.

Footnote

1 See NHK Spring Co. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8 at 19-20 (PTAB Sept. 12, 2018) (precedential, designated May 7, 2019).