Fintiv Discretionary Denial of PTAB Proceedings Under the New Director

The new director of the U.S. Patent and Trademark Office, Katherine Vidal, recently issued a memorandum clarifying the Patent Trial and Appeal Board (PTAB) application of Fintiv to discretionary denial of PTAB proceedings, such as inter partes review (IPR) and post grant review (PGR), under Fintiv. Key elements of the director’s new guidance are outlined below.

When a party is accused of infringing a patent, it has become almost routine for the party to seek IPR or PGR of the patent. These proceedings have skyrocketed in popularity since their introduction almost a decade ago. One of the first lines of defense for a patent owner is to advocate for discretionary denial of the proceeding. While there are several grounds to seek discretionary denial, one of the more frequently invoked stems from Fintiv, a precedential decision that set forth a six-factor test to assess whether to institute an AIA post-grant proceeding where there is parallel district court litigation. Since Fintiv, the PTAB has denied institution of a number of petitions on discretionary grounds where the scheduled trial date was earlier than the projected statutory deadline for a final written decision. Several PTAB decisions also extended Fintiv to deny institution based on parallel International Trade Commission (ITC) investigations. The memorandum addresses these and other issues as summarized below.

Highlights of the New Director’s Fintiv Memorandum

• Denial under Fintiv can be avoided entirely “where a petition presents compelling evidence of unpatentability,” elevating the merits of the petition to the forefront of the analysis. Previously, the PTAB would weigh the relative strength of the asserted grounds under Fintiv Factor 6 along with other relevant factors. The memorandum clarifies that “[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,” as opposed to information that is “merely sufficient to meet the statutory institution threshold.” It will be fascinating to see how the PTAB applies the “compelling evidence” standard going forward.
• Fintiv will no longer be extended to proceedings at the ITC. Instead, Fintiv is explicitly limited to district court proceedings. This clarification is a significant development because ITC investigations proceed swiftly, leading to the PTAB to deny institution on discretionary grounds in several matters where the petitioner failed to provide a stipulation not to pursue at least the same grounds at the ITC. This change may impact a patent owner’s decision whether to commence an ITC investigation or instead limit claims to the district court where Fintiv denials may still be available. Patent owners may also no longer perceive a need to provide a stipulation to avoid discretionary denials.
• Denial under Fintiv can be avoided through a Sotera stipulation not to pursue in the district court “the same grounds or any grounds that could have reasonably been raised before the PTAB.” While the PTAB has recently declined to exercise jurisdiction to deny institution under Fintiv where the petitioner provides such a broad stipulation, the PTAB still needed to engage in balancing with other factors, such as the proximity of the court’s trial date. This change explicitly states that a Sotera stipulation will avoid discretionary denial under Fintiv. It remains to be seen if the PTAB will deny institution where the petitioner provides a more narrow Sand Revolution stipulation not to pursue the same grounds in district court.
• The proximity of the trial date to the PTAB’s projected statutory deadline for rendering a final written decision (Fintiv Factor 2) will now be based on the “median time from filing to disposition of the civil trial for the district in which the parallel litigation resides,” rather than the court’s scheduled trial date. The memorandum states that parties may present evidence regarding the most recent statistics reflecting median-time-to trial in the relevant district court as well as other evidence, such as the number of cases before the judge in the parallel litigation and speed and availability of other case dispositions.

Closing Thoughts and the Future of Proceedings at the PTAB

The message from the memorandum is clear — well supported IPR and PGR petitions are now more likely to result in institution. The overarching takeaway from the director’s new guidance is that discretionary denials under Fintiv are likely to become much less frequent, with a greater emphasis on the merits of the grounds set forth in the petition. Further, Sotera stipulations would appear to be sufficient to avoid denial under Fintiv. Patent owners will need to carefully assess the merits of a petition and the impact of stipulating to not pursue any grounds that could have “reasonably” been raised before the PTAB, particularly if a district court is unlikely to stay pending resolution of the PTAB proceedings. The guidance will also lead to increased significance of the merits arguments presented in a preliminary response. It may also become more common to see expert declarations, which had traditionally been reserved for after institution, to accompany preliminary responses in hopes of illustrating the weaknesses in the merits of the petition (and therefore increase likelihood of denial under Fintiv).