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The Post-Fintiv World: The Interplay Between PTAB Discretionary Factors To Deny Institution And Parallel Litigation

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The institution rate of inter partes review (“IPR”) has generally declined since its inception in September 2012—from a high of approximately 83% in 2013 to a low of 58% in 2020.1  A driving force behind the falling rate, particularly after 2017, is an increasing procedural denial rate,2 mostly attributable to discretionary denial under § 314(a).3

In Apple Inc. v. Fintiv, Inc., the Patent Trial and Appeal Board (“PTAB” or “Board”)set forth a six-prong test to guide its exercise of discretionary denial under § 314(a).4  Since then, the Board’s regular application of this ruling has pieced together a map for the interplay between the Fintiv factors and parallel proceedings. This article analyzes these factors through the lens of post-Fintiv IPR institution decisions and endeavors to provide guidance for both patentees and petitioners who would argue in favor of or against discretionary denial.

The Fintiv Factors

Under § 314(a), the Director of the U.S. Patent and Trade Office (“USPTO”) has discretion to deny IPR institution and that discretion has been delegated to the Board.5  In NHK Spring Co. v. Intri-Plex Techs, the Board found the advanced state of a district court proceeding was a “factor that weighs in favor of denying” the petition under § 314(a).6  Building on NHK, the Fintiv panel outlined six factors to consider in determining whether to exercise discretionary denial:

(1) whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;

(2) proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;

(3) investment in the parallel proceeding by the court and the parties;

(4) overlap between issues raised in the petition and in the parallel proceeding;

(5) whether the petitioner and the defendant in the parallel proceeding are the same party; and
(6) other circumstances that impact the Board’s exercise of discretion, including the merits.7

The Board emphasized that it takes “a holistic view of whether efficiency and integrity of the system are best served by denying or instituting review.”8

Analysis

  1. The Likelihood of a District Court Stay

    A stay of a parallel proceeding pending resolution of an IPR weighs against discretionary denial.9  The Board explained that the stay “allays concerns about inefficiency and duplication of efforts.”10  For example, in Snap, Inc. v. SRK Technology LLC, the patentee argued that the then stayed district court litigation would likely resume and that the trial would be held before an IPR final decision.11  The Snap panel, however, rejected this argument as “unfounded speculation” and weighed the first factor against discretionary denial.12  In Apple INC. v. Seven Networks, LLC, the Board drew the same conclusion “because a stay exists, albeit temporary.”13

    However, the mere existence of a denial of stay request does not automatically favor discretionary denial.14  Thus if the court expressed willingness to reconsider whether to grant a stay following an institution decision, this fact could weigh against discretionary denial.15

    The Board has also recognized that Fintiv similarly applies to parallel International Trade Commission (“ITC”) investigation.16  Because 19 U.S.C. § 1337(b)(1) requires that ITC investigations be completed expeditiously, the ITC normally does not stay investigations when IPR proceedings are pending.17 As such, the court often weighs the first factor in favor of discretionary denial if the parallel proceeding is an ITC investigation.18


    2. Proximity of Trial Date

    This factor may appear straightforward, given the typical availability of a timeline showing whether the trial date is earlier than a projected IPR final decision.19  But factors such as a stay order, the district court’s caseload, a previous agreement to extend scheduling order, or other variables contributing to the trial date uncertainty can be raised.  In Seven Networks, for example, the trial in the district court was scheduled on November 2, 2020 while a final written decision, date (assuming institution), was October 21, 2021—almost a full year after the district court trial. Regardless, the Board held the second Fintiv factor weighed against discretionary denial in part because the district court granted a stay of 30 days and as the Board noted, the jury trial “may not occur at all.”20

    Further, uncertainty as to whether the trial will go forward on the scheduled date can diminish the extent to which the second factor weighs in favor of discretionary denial.21  Moreover, a previous agreement to extend a scheduling order can further increase such certainty.22


    3. Investment in the Parallel
    Proceeding

    The investment inquiry largely turns on whether a parallel tribunal has issued substantive orders—including a claim construction order—related to any patents-in-suit.23  Unsurprisingly, parties often invest considerable time and effort in the early stage of parallel litigation for (1) preparing infringement or invalidity contentions; (2) producing documents and responding to interrogatories; and (3) exchanging proposed terms and evidence for claim construction. Despite so, the third Fintiv factor can weigh against discretionary denial if, at the time of the institution decision, the parallel tribunal has not made any merit-based ruling such as issuing a claim construction order.24  The Board recognized that the weight to give claim construction orders varies because some district courts may postpone significant discovery until after the issuance of a claim construction claim, while others may not.25

    Further, petition timing matters.  If the petitioner does not expeditiously file its petition—e.g., “at or around the same time that the patentee responded to the petitioner’s invalidity contentions”—these facts can favor discretionary denial.26  Conversely, prompt filing weighs against denying institution. In PEAG LLC v. VARTA Microbattery Gmbh, the Board found diligence on the part of petitioner by filing approximately eight months before the allotted twelve-month statutory bar date.27

    However, expeditious filing alone is not sufficient to render the third factor weighing in favor of institution, particularly if the parallel proceeding is an ITC investigation.28 In Regeneron Pharmaceuticals v. Novartis, although the IPR petitioner filed less than a month after the patentee filed an ITC complaint, Board weighed the third Fintiv factor “somewhat against institution” because the investment by the parties and the ITC in the parallel proceeding outweighed the effort expended in the IPR.29  ITC proceedings are statutorily required to be completed expeditiously and, thus, the parties would typically have had invested substantial resources in the ongoing ITC investigation at the time of IPR institution decision.

    On the other hand, the mere fact that the petition is filed late within the statutory filing window is not dispositive either.  Rather, the Board has considered whether the petition was filed close to Patentee’s response to the invalidity contentions.  In Snap, for example, the IPR petition was filed almost 1 year later after the institution of the parallel proceeding,30 but the Snap panel found that the petition was filed “neither expeditiously nor with delay.”31 The Board explained that although the petition was not filed promptly after the petitioner became aware of the claims being asserted, “it was not filed in close proximity to any response by [the patentee] to the invalidity contentions” given that the patentee “did not file a response prior to the stay of the proceeding.”32

    4.Overlap of Issues

    If the prior art and arguments presented in a petition and its parallel proceeding are substantially identical, “concerns of inefficiency and the possibility of conflicting decisions [can be] particularly strong.”33 Conversely, materially different grounds, arguments, and/or evidence presented in parallel proceedings can weigh against exercising discretion to deny institution.34  There is no litmus test for the extent of overlapping sufficient to favor discretionary denial. In Snap, the Board found the prior art and arguments included in the IPR petition materially different than those in the district court because two additional prior art references are used in the IPR petition for almost every proposed challenge to patentability.35  Moreover, parties’ stipulation may affect the Board’s institution decision.  In Sotera Wireless Inc. v. Masimo Corporation, the panel weighed the fourth factor against discretionary denial because the petitioner has filed in the district court a stipulation that essentially forfeited any § 102 or § 103 arguments that were raised or could have been reasonably raised in an IPR.36  According to the panel, this mitigated “any concerns of duplicative efforts between the district court and the Board, as well as concerns of potentially conflicting decisions.”37

    5. Identity of Parties

    In practice, an accused infringer in district court litigation often turns to IPR to leverage the PTAB’s lower burden of proof—i.e., “by a preponderance of evidence,” compared with “by clear and convincing evidence” in a district court—to invalidate the asserted patent.  In such case, the IPR petitioner is typically at least related to the accused infringer in a parallel proceeding and, accordingly, the Board can weigh the fifth fact in favor of discretionary denial. 

    Even where a petitioner is unrelated to a defendant, however, the Board has cautioned that if the issues are substantially similar to those already or about to be litigated, the Board may nonetheless exercise the authority to deny institution.38

    6. Other Circumstances, Including the Merit

This sixth Fintiv factor is a catch-all for any other relevant circumstances, including the merits of the grounds raised in the petition.39 Other considerations may include filing of serial petitions, parallel petitions challenging the same patent, and considerations implicated by 35 U.S.C. § 325(d).40

Conclusion

The analysis of the Board’s post-Fitniv institution decisions lays out an increasingly clear framework for the interplay of IPR institution and its parallel proceeding.  Both patentees and petitioners should be mindful of how they advocate their positions regarding, for example, whether a parallel tribunal grants a stay; whether it issues any substantive orders; and whether the prior art and arguments in two proceedings are cumulative.  They should also consider circumstances that could impact the Board’s discretionary denial, including but not limited to the caseload of a parallel tribunal; a previous agreement to extend scheduling order; investment in the IPR proceeding, and even a broad stipulation in the parallel proceeding forfeiting cumulative arguments.



1 See PTAB Annual Report, unifiedpatents.com, https://portal.unifiedpatents.com/ptab/annual-report?year=2020.

2 Id. According to the report, the merit-based denial rate decreased from 33.8% in 2017 to 23.9% in 2020, while the procedural denial rate increased from 5.6% in 2017 to 17.6% in 2020.

3 See PTAB Discretionary Denials, unifiedpatents.com (July 27, 2020), https://www.unifiedpatents.com/insights/2020/7/27/ptab-discretionary-denials-in-the-first-half-of-2020-denials-already-exceed-all-of-2019 (“Indeed, § 314(a) now accounts for the majority of procedural denials (including denials under § 325 and those related to joinder).”).

4 IPR2020-00019, Paper 11 at 56 (PTAB. Mar. 20, 2020).

5 See 35 U.S.C § 314(a).

6 IPR2018-00752, Paper 8 at 1218 (PTAB Sept. 12, 2018).

7 Fintiv, at 56.

8 Id. at 6.
9 Id.

10 Id.

11 IPR2020-00820, Paper 15 at 9 (PTAB Oct. 21, 2020).

12 Id. 

13 IPR2020-00707, Paper 11 at 10 (PTAB Oct. 22, 2020).

14 Fintiv. at 8. The Board noted that a denial of stay request sometimes weighs in favor of discretionary denial.

15 Id. at 67.

16 Google LLC v. EcoFactor Inc., IPR2020-00946, Paper 11 at 811 (PTAB Nov. 18, 2020).

17 See, e.g., Certain Memory Modules and Components Thereof, Inv. No. 337-TA-1089, Order No. 49 (Apr. 11, 2019).

18 See, e.g., Regeneron Pharmaceuticals v. Novartis, IPR2020-01317, Paper 15 at 1213 (PTAB Jan. 15, 2021).

19 If the court’s trial date is earlier than the projected statutory deadline, this factor weighs in favor of discretionary denial; conversely, if the trial date is close to or after the statutory deadline, this factor is more neutral. Fintiv, at 9.

20 Apple INC. v. Seven Networks, LLC, IPR2020-00707, Paper 11 at 11 (PTAB Oct. 22, 2020).

21 Id. The Board agreed with the petitioner that “given the inevitability of further COVID-19 outbreaks, further scheduling issues are likely to arise,” since there are eighteen actions pending in the district court, each scheduled for trial on the same day as the parallel proceeding trial.

22 See, e.g., Sand Revolution II, LLC v. Continental Intermodal Group – Trucking LLC, IPR2019-01393, Paper 24 at 9–10 (PTAB June 16, 2020) (concluding that the second factor weighed marginally against discretionary denial—despite a parallel trial date scheduled at least 5 months prior to a projected IPR decision—particularly because of “the number of times the parties have jointly moved … to extend the scheduling order dates”); see also Apple v. Seven Networks, IPR2020-00707, Paper 11 at 11 (PTAB Oct 22, 2020) (the trial date already has been moved once, and the situation is evolving daily”).

23 Fintiv, at 9.

24 Id. at 9-10; see also PEAG LLC v. VARTA Microbattery Gmbh, IPR2020-01212 Paper 8 at 18 (PTAB Jan. 6, 2021) (concluding that the district court proceeding is still at its infancy when parallel proceeding has yet to proceed to claim construction hearing); Snap, Inc. v. SRK Technology LLC, IPR2020-00820, Paper 15 (PTAB Oct. 21, 2020) (emphasizing “no claim construction orders have issued in the District Court proceedings”).

25 Fintiv at 10 n. 17.
26 Id. at 1112. Despite the one-year window to file petition under § 315(b), the Fintiv panel recognized that failure to file a petition expeditiously could impose unfair costs to a patentee.

27 IPR2020-01212 Paper 8 at 20 (PTAB Jan. 6, 2021).

28 IPR2020-01317, Paper 15 at 9 (PTAB Jan. 15, 2021).

29 Id. at 17.

30 The district court was filed on April 3, 2019 while the IPR was filed on April 8, 2020. See Snap, Inc. v. SRK Technology LLC, IPR2020-00820, Paper 15 at 12 (PTAB Oct. 21, 2020).

31 Id.

32 Id.

33 Fintiv at 12.

34 Id. at 1213.

35 Snap, Inc. v. SRK Technology LLC, IPR2020-00820, Paper 15 at 15 (PTAB Oct. 21, 2020); see also Apple INC. v. Seven Networks, LLC, IPR2020-00707, Paper 11 at 15 (PTAB Oct 22, 2020) (noting that the issues in the petition and the parallel proceeding are distinct, partly because the district court is “not considering [two additional prior art references cited in the petition] as part of any combination”).

36 IPR2020-01019, Paper 12 at 1819 (PTAB Dec. 1, 2020). Specifically, the stipulation recites that if IPR is instituted, the accused infringer will not pursue in the district court litigation any ground raised or that could have been reasonably raised in an IPR.

37 Id. at 19. The panel further noted that such a broad stipulation further ensures the PTAB proceeding is a “true alternative” to the parallel proceeding in a district court.

38 Fintiv, at 14.

39 The Fintiv panel noted that this is not to suggest that a full merits analysis is necessary to evaluate this factor. Rather, there may be strengths or weaknesses regarding the merits that the Board as part of its balanced assessment. Id. at. 1516.

40 Id. at 1416.

 

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