PTO Director’s Fintiv Guidance Gives Petitioners New Tools to Avoid Discretionary Denial

July 20, 2022 Articles

The PTAB’s 2020 Fintiv decision established six factors that guide its discretionary denial of an IPR or PGR petition in view of a parallel court case.  The Fintiv factors give significant weight to scheduling decisions of the trial court, include the proximity of the court’s trial date (Fintiv factor 2), and whether the court has granted a stay (Fintiv factor 1).  Some courts have shaped their dockets to maximize the chance of the PTAB denying review under Fintiv, e.g. by setting aggressive trial dates and refusing to grant stays pending PTAB proceedings.  Under those circumstances, unless a party files a petition in the PTAB immediately after it is sued in district court, it runs a high risk that its petition will be denied under Fintiv

In the two years since Fintiv issued, the PTAB has incrementally refined its analysis of discretionary denials through precedential and informative decisions.  However, with the analysis comprising six non-dispositive factors, there has been substantial uncertainty about how Fintiv would apply in any particular proceeding.  Now, in a more sweeping change, USPTO Director Kathi Vidal recently issued interim procedures (the “Guidance”) emphasizing some Fintiv factors over others.  As detailed below, the Guidance gives petitioners (i.e. parties challenging patents) tools to help them overcome discretionary denials.  The Guidance addresses the merits of the petition (Fintiv factor 6), Sotera stipulations (Fintiv factor 4), trial dates (Fintiv factor 2), and Fintiv’s inapplicability to parallel proceedings in the ITC.

The Merits: Compelling Evidence of Unpatentability is Dispositive of the Fintiv Analysis

Under the Guidance, the PTAB will not deny institution based on Fintiv if there is “compelling evidence of unpatentability.”  Where an IPR makes a “compelling, meritorious challenge” it will be allowed to proceed “even where district court litigation is proceeding in parallel.”  The notion of a “compelling” challenge is relevant to Fintiv factor 6 (i.e. other circumstances that impact the Board's exercise of discretion, including the merits).

The Guidance recognizes that the burden of making a “compelling unpatentability challenge” is higher than the statutory threshold for institution of an IPR, i.e. a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” [1]  The Guidance also recognizes that a “compelling unpatentability challenge” is a higher burden than the elevated institution threshold for a PGR, i.e. “more likely than not that at least 1 of the claims challenged in the petition is unpatentable.” [2]  The Guidance states that a suitably “compelling” challenge is one “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.”  The words “plainly lead” suggest a high standard of proof, perhaps akin to the “clear and convincing” burden that is required to invalidate a patent in district court.

It remains to be seen how the PTAB will determine whether a petition is suitably “compelling” under the Guidance.  In the meantime, practitioners may emphasize certain facts in their cases that suggest a strong (or weak) showing.  For Patent Owners, it may be useful that in addition to the Petition, “any response” affects whether there is a reasonable likelihood that the petitioner will prevail on at least one claim.[3]  So, if a Patent Owner’s Preliminary Response rebuts the substance of the Petition, the Patent Owner might argue that the challenge is not “compelling” because it does not “plainly lead” to a conclusion of unpatentability.  Conversely, if the POPR does not rebut the substance of the Petition, the Petitioner might argue in Reply that the evidence “plainly leads” to a conclusion of unpatentability, specifically because it stands unrebutted in the pre-institution phase.  For example, in Facebook v. Onstream Media,[4] the PTAB emphasized the lack of a substantive response: “Considering the Petition with its supporting evidence and the parties’ arguments in deciding the merits of the Petition at this preliminary stage, including the fact that the Preliminary Response only addresses discretionary denial but not the merits, Petitioner presents a strong showing on the merits.”  As another example, in SMIC v. Innovative Foundry,[5] the PTAB determined that “…the merits of Petitioner’s case are particularly strong...[i]n particular, at this stage of the proceeding, Patent Owner only contests Petitioner’s grounds for combining references, and its arguments are not supported by any testimony rebutting Petitioner’s declaration testimony…”  Of course, if the Patent Owner does not file a POPR at all, Fintiv may not be at issue since the Board is less likely to sua sponte consider discretionary denial, absent unusual facts of which the Board is aware. 

To show “compelling evidence,” Petitioners might emphasize why the merits of a petition “plainly lead” to a finding of unpatentability.  For example, some panels have considered the merits of a petition to be strong where the invalidity case is “straightforward” as to all asserted claims.  In Micron Tech., Inc. v. Godo Kaisha,[6] the PTAB found that “on the preliminary record, the merits of Petitioner's case are straightforward and strong, at least as to the ground involving Kishii and Ryan, and Patent Owner has not yet raised a persuasive defense to those allegations.”  The PTAB made a similar finding that the substance of the petitioner’s challenge was “straightforward” in Apple v. Koss,[7] although it ultimately did not institute in that case.  Naturally, whether the invalidity case is “straightforward” depends in part upon the complexity of the claims themselves.

In the PGR context, Petitioners might show “compelling evidence” by emphasizing the strength of a Section 101 challenge, or some other statutory challenge that is more straightforward than a 102 or 103 analysis.  The PTAB has been willing to declare Section 101 challenges “strong” based on analogy to the PTO's examination guidance on subject matter eligibility.  In Supercell Oy v. Gree,[8] the PTAB found that “…an initial review of the merits of Petitioner's challenge under § 101 suggests that the merits are strong, which weighs in favor of instituting…”, but then denied institution based on other factors.

Some PTAB decisions, including recent decisions issued before the Guidance, have declined to evaluate the merits of a petition where the other Fintiv factors weigh strongly in favor of discretionary denial.  In Nxp v. Impinj,[9] the Board denied institution under Fintiv, noting that “[w]e need not decide whether the merits of Petitioner’s asserted grounds are particularly strong because it would not impact our ultimate determination under § 324(a)…[t]hus, we determine that the sixth Fintiv factor is neutral.”  The Guidance contradicts decisions like Nxp by giving overwhelming weight to the merits, i.e. a strong showing on the merits alone is sufficient to avoid discretionary denial, irrespective of the other factors. 

If a party were able to file a timely rehearing petition pointing out conflicts between a Panel decision and the Guidance, the PTAB could consider reversing, since the Guidance “applies to all proceedings pending before the Office.”  In view of the limited 30-day window to request rehearing of a decision denying institution, it appears that few cases would be susceptible to rehearing under the Guidance.[10]  Nevertheless, if a short extension of time could permit reconsideration under the Guidance, parties might consider contacting the Panel assigned to their case.

A Sotera Stipulation is Dispositive of the Fintiv Analysis

Fintiv factor 4 is “overlap between issues raised in the petition and in the parallel proceeding.”  When a party is sued on a patent in district court and subsequently files a petition for inter partes review of the same patent in the PTAB, there is usually substantial overlap because the petitioner also files a compulsory counterclaim for invalidity in district court.  Petitioners have experimented with various stipulations to diminish the effect of Fintiv factor 4.  Sand-style stipulations are narrow, such as “if the IPR is instituted, Petitioner will not pursue the same grounds in the district court litigation,” as the PTAB found in the informative Sand Revolution decision.[11]  The PTAB found that a narrow Sand stipulation “weighs marginally in favor of not exercising discretion to deny institution.”  Sotera-style stipulations are broad, such as “if IPR is instituted, [Petitioner] will not pursue in the District Court Litigation any ground raised or that could have been reasonably raised in an IPR,” as defined in the precedential Sotera Wireless decision.[12]  The PTAB originally found that a broad Sotera stipulation “weighs strongly in favor of not exercising discretion to deny institution.” 

The Guidance goes further than the PTAB’s prior decisions and anoints the Sotera stipulation with dispositive weight.  Going forward, “the PTAB will not discretionarily deny institution in view of parallel district court litigation” when the petitioner makes a Sotera stipulation.  The stipulation is effective if the IPR or PGR is instituted.  Id. at 7.  A Sotera stipulation is therefore a get-out-of-Fintiv-free card for petitioners facing a discretionary denial.  For example, if a petition is filed close to trial (i.e. close to the mean elapsed time for trial in the relevant district, under the Guidance for Fintiv factor 2) then a Sotera stipulation can effectively immunize the petition from discretionary denial.  Even before the Guidance, statistically speaking, a Sotera stipulation was already a strong predictor that a petition would not be discretionarily denied.  Now, though, Petitioners will have certainty that a Sotera stipulation can prevent discretionary denial.

With the Sotera stipulation being dispositive of the Fintiv analysis, will some petitioners fall back to the weaker Sand-style stipulation, i.e. a stipulation not to raise grounds and references actually argued before the Board in a parallel proceeding?  The answer may be “yes” for petitioners hoping to preserve some anticipation and obviousness defenses for trial based on printed publications.  A Sand stipulation has always had some effect in overcoming discretionary denial, even if less so than a Sotera stipulation.  In view of the Guidance, a Sand stipulation will probably continue to have some impact, but all the other Fintiv factors will still apply, including the time to trial, and whether the petition has “compelling merits” under the PTO guidance.  Indeed, at least one PTAB decision issued since the Guidance found that a Sand stipulation caused Fintiv factor 4 to weigh against discretionary denial.[13] 

The District Court’s Scheduled Trial Date Is No Longer Taken At Face Value

Fintiv Factor 2 is the proximity of the district court’s trial date to the PTAB’s statutory deadline for a final written decision.  This factor has been controversial when a district court sets an aggressive trial date falling earlier than the PTAB’s deadline.  For example, parties have filed IPR petitions that were discretionarily denied based on the initially scheduled trial date in concurrent district court proceedings.  But in some of those district court cases, the trial date was later postponed due to litigation complexity, court congestion, or COVID shutdowns, such that the delayed trial date extended beyond the date an IPR decision would have been due.  This led to complaints from petitioners that the PTAB was giving too much credence to district courts’ initial scheduling orders, without considering the delays and scheduling changes that typically occur in litigation.

To address these concerns, the Guidance makes two significant changes to how the trial date is weighed under Fintiv: First, the PTAB will consider the court’s median time-to-trial, instead of the scheduled trial date in a specific case.  Second, instead of considering a single judge’s median time-to-trial, the PTAB will consider the district-wide median, which the Guidance makes clear by including a link to recent statistics on the U.S. Courts website.  These changes will likely diminish the effect of judges with “rocket docket” schedules in district court on the PTAB’s Fintiv analysis.

Based on the U.S. Courts’ March 2022 statistics linked in the Guidance, the fastest time-to-trial is in the Eastern District of Virginia, at 18.1 months for the year ending March 31, 2022.  (In prior years, that district had considerably shorter times to trial, averaging around 12 months for 2017-2020).  Other districts with heavy patent dockets moved more slowly: 24.2 months to trial for the Eastern District of Texas, and 27.2 months for the Western District of Texas.  But in earlier years, both of these districts clocked about 18 months to trial. Patent owners may use these statistics to argue that the most recent time-to-trial statistics skew high because of COVID, and that the speedier pre-COVID statistics should control the analysis.  But that rationale has already been rejected in at least one post-Guidance institution decision.

The Guidance hints that “the PTAB will also consider additional supporting factors such as the number of cases before the judge in the parallel litigation and the speed and availability of other case dispositions.”  The Guidance (at 9) cites to the Federal Circuit’s decisions in re Genentech [14] and in re Google [15].   Both of these decisions issued on writs of mandamus from district court orders denying motions to transfer: Google arose from The Western District of Texas, and Genentech arose from the Eastern District of Texas.  The Guidance therefore links Fintiv’s time-to-trial analysis to existing Federal Circuit doctrine comparing “court congestion” between two districts in a motion to transfer.  The Federal Circuit’s decision in re Juniper Networks [16] labeled the court congestion factor as “the most speculative of the factors bearing of the transfer decision,” and held that “it is improper to assess the court congestion factor based on the fact that the Western District of Texas has employed an aggressive scheduling order for setting a trial date.”  Even though the PTAB’s denial of institution is almost never appealable, the Director is analogizing Federal Circuit case law to reduce the PTAB’s emphasis on the “trial date” Fintiv factor.

Parallel ITC Proceedings Are Not a Basis for Discretionary Denial Under Fintiv

The Guidance clarifies at page 7 that “the PTAB will not discretionarily deny petitions based on applying Fintiv to a parallel ITC proceeding.”  It reasons at page 6 that the Fintiv factors seek to avoid duplicative efforts between the PTAB and “courts,” which does not include investigations at the ITC; the ITC lacks authority to invalidate a patent, and its invalidity rulings are not binding on the USPTO or a district court.

[1] Guidance at 4, note 5; 35 U.S.C. § 314(a).

[2] See 35 U.S.C. § 324(a). 

[3] Guidance at 4, note 5.

[4] Paper 11, IPR2020-01528 at 19; 2020 WL 9074819 at *8 (PTAB Apr. 5, 2020).

[5] Paper 10, IPR2020-01003 at 22, 2020 WL 7378835 at *10 (PTAB Dec. 15, 2020).

[6] Paper 15, IPR2020-01007 at 18, 2020 WL 7212722, at *7 (PTAB Dec. 7, 2020).

[7] Paper 14, IPR2021-00305 at 21, 2021 WL 2284700 at *9 (PTAB June 3, 2021).

[8] Paper 14, PGR2020-00049 at 17, 2020 WL 6051077 at *8 (PTAB Oct. 13, 2020).

[9] Paper 18, PGR2022-00005 at 12, 2022 WL 1416694 at *5 (PTAB May 2, 2022).

[10] See 37 C.F.R. § 42.71(d).

[11] Sand Revolution II, LLC v. Continental Intermodal Group – Trucking LLC, IPR2019-01393, Paper 24 (June 16, 2020) (designated July 13, 2020).

[12] Sotera Wireless, Inc. v. Masimo Corporation (§ II.A), IPR2020-01019, Paper 12 (Dec. 1, 2020) (designated Dec. 17, 2020).

[13] Paper 13, IPR2022-00324 at 17-18 (PTAB July 11, 2022).

[14] In re Genentech, Inc., 566 F.3d 1338, 1347 (Fed Cir. 2009).

[15] In re Google LLC, No. 2021-178, 2021 WL 5292267 at *3 (Fed. Cir. 2021).

[16] In re Juniper Networks, Inc., 14 F.4th 1313, 1322 (Fed. Cir. 2021).