Legal Alert: Director Vidal Issues Interim Guidance on Discretionary Denials under Fintiv


Earlier today, USPTO Director Kathi Vidal issued interim guidance regarding the application of the factors the PTAB considers in determining whether to institute an AIA post-grant proceeding where there is parallel district court litigation. The specific clarifications offered may receive mixed reactions, but the interim guidance nevertheless reflects decisive action by Director Vidal to promote uniformity in PTAB decisions, and thereby enhance the efficiency and predictability of AIA proceedings for all parties involved.

The precedential decision Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020), directs the Board to consider the following six factors when deciding whether to exercise its discretion to deny institution when there is a parallel litigation involving the same patent that has been brought before the PTAB:

  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.

The Office issued a Request for Comments on the Board's current approach to exercising discretion on whether to institute AIA proceedings. In parallel with the Office's evaluation of the comments received, and in advance of potential rulemaking, Director Vidal issued the interim guidance to clarify the Board's current application of Fintiv.

More specifically, the interim guidance provides the following four clarifications with respect to Board procedures:

1. No Fintiv Denials where Petition Presents Compelling Evidence of Unpatentability

Fintiv Factor 6 directs the Board to consider the merits of a petitioner's challenge when determining whether to institute a post-grant proceeding in view of parallel district court litigation. Under the new guidance, where the information presented at the institution stage is "merely sufficient to meet the statutory institution threshold," the Board maintains its authority to exercise discretion to deny institution in view of the other Fintiv factors. But where the Board determines that the information presented at the institution stage presents a "compelling unpatentability challenge," the Board will not deny institution based on Fintiv. The interim guidance explains that this clarification "strikes 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."

2. No Fintiv Denials for Parallel ITC Proceedings

While the Fintiv factors originally focused on the interplay between IPRs and district court litigation, the Board had more recently extended the application of the Fintiv factors to deny institution based not just on parallel district court litigation but also on parallel ITC investigations. The new guidance confines the precedential import of Fintiv to the facts of that case and precludes the Board from relying on Fintiv to discretionarily deny petitions based on parallel ITC proceedings. According to the interim guidance, "[t]he plain language of the Fintiv factors is directed to district court litigation and does not apply to parallel [ITC] proceedings, as the ITC lacks authority to invalidate a patent and the ITC’s invalidity rulings are not binding on the Office or on district courts."

3. No Fintiv Denials where Petitioner Commits to Sotera Stipulation

Fintiv Factor 4 directs the Board to consider overlap between issues raised in the petition and in the parallel proceeding. If the petition includes the same or substantially the same claims, grounds, arguments, and evidence, Factor 4 weighs in favor of denial. But where the petition includes materially different grounds, arguments, and evidence, Factor 4 weighs against denial. When a petitioner stipulates not to pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could reasonably have been raised in the petition (known as a Sotera stipulation), this mitigates concerns of potentially conflicting decisions and duplicative efforts between the district court and the PTAB. See Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, Paper 12 (PTAB Dec. 12020).

Under the new guidance, the Board will not discretionarily deny institution where a petitioner commits to a Sotera stipulation. "This clarification avoids inconsistent outcomes between the PTAB and the district court and allows the PTAB to review grounds that the parallel district court litigation will not resolve," according to the interim guidance.

4. Board Can Consider Median Time-to-Trial in District at Fintiv Factor 2

Fintiv Factor 2 directs the Board to consider the proximity of the court's trial date to the Board's projected statutory deadline for a final written decision. The Board generally has weighed this factor in favor of exercising discretion to deny institution if the trial date is scheduled before the projected statutory deadline. However, the Board's practice until now has been to take the district court's trial schedule at face value despite evidence that such schedules are often unreliable and subject to delay. Accordingly, the new guidance directs the Board to consider the median time-to-trial for civil actions in the district where the parallel litigation resides at Factor 2 rather than relying on the court's stated trial date alone. The Board will generally weigh this factor against exercising discretion to deny if the median time-to-trial is around the same time or after the projected statutory deadline for a final written decision.

The interim guidance clarifies that, even if the Board does not deny institution under Fintiv, it retains the right to deny institution for other reasons under 35 U.S.C. 314(a), 324(a), and 325(d). The interim guidance applies to all proceedings pending before the Board. It will remain in place until the USPTO replaces it with rules after it has completed the formal rulemaking process.