Legal Alert: USPTO Issues Advance Notice of Proposed Rulemaking for PTAB Proceedings


On April 21, the United States Patent and Trademark Office issued advance notice of proposed rulemaking concerning changes to America Invents Act proceedings before the Patent Trial and Appeal Board. Most of the changes under consideration relate to the PTAB’s discretion to deny institution of AIA proceedings, with additional changes addressing petition word count limits, settlement practices, and other issues. The proposed changes are based on comments from stakeholders and the public, including those received in response to the Office’s October 2020 request for comments on discretionary denial of institution.

Below is a summary of the proposed changes.

PTAB’s Discretion to Deny Institution

“In order to create clear, predictable rules where possible, as opposed to balancing tests that decrease certainty,” the Office would provide for discretionary denials of petitions in the following categories (subject to certain conditions, circumstances, and exceptions):

Petitions Filed by Certain For-Profit Entities

To curb abusive filings, this proposed change would limit institution on filings by for-profit, non-competitive entities. This change would apply to petitions for inter partes review or post-grant review filed by an entity that:

  1. Is a for-profit entity;
  2. Has not been sued on the challenged patent or has not been threatened with infringement of the challenged patent in a manner sufficient to give rise to declaratory judgment standing;
  3. Is not otherwise an entity that is practicing, or could be alleged to practice, in the field of the challenged patent with a product or service on the market or with a product or service in which the party has invested to bring to market; and
  4. Does not have a substantial relationship with an entity that falls outside the scope of elements 1-3

The Office is also considering defining “for-profit” entities to include any entity that is a real party in interest with, or in privy with, a for-profit entity.

Petitions Challenging Under-Resourced Patent Owner Patents Where the Patentee Has or Is Attempting to Bring Products to Market

The Office recognizes that the contributions of startups and other small businesses are essential to the development of a variety of important American industries. However, many such companies are under-resourced to the extent that they are unable to afford the costs involved in defending patents in IPR and PGR proceedings. Accordingly, the Office proposes to limit the impact of AIA proceedings on those patent owners by denying institution when certain conditions are met.

Under one proposal, institution would be denied where:

  1. The patent owner had claimed micro entity or small entity status at issuance of the challenged patent and timely requested discretionary denial when presented with the opportunity;
  2. During the calendar year preceding the filing of the petition, the patent owner did not exceed eight times the micro entity gross income level under 37 CFR 1.29(a)(3); and
  3. At the time the petition was filed, the patent owner (or a licensee of the patent that started practicing the patent after becoming a licensee) was commercializing the subject matter of a challenged claim.

Another option the Office is considering is excluding from consideration the activities of licensees in certain circumstances. The Office is also considering how to proceed with discretionary denials where the petitioner is under-resourced.

Petitions Challenging Patent Claims Previously Subject to a Final Adjudication Upholding the Patent Claims Against Patentability Challenges in District Court or in Post-Grant Proceedings Before the USPTO

The changes under consideration would provide that prior final adjudications by a District Court or by the Office in AIA post-grant proceedings upholding the validity of claims that substantially overlap the challenged claims will result in discretionary denial, except in cases where the petitioner:

  1. Has standing to challenge the validity of the claims in District Court or intends to pursue commercialization of a product or service in the field of the invention of a challenged claim;
  2. Was not a real party in interest or privy to the party previously challenging one or more of the challenged claims (unless any earlier challenge was resolved for reasons not materially related to the merits of the petition, e.g., a post-grant proceeding that was discretionarily denied or otherwise was not evaluated on the merits); and
  3. Meets a heightened burden of compelling merits.

The changes would define “final adjudication” as a decision on the merits by a District Court that is final within the meaning of 28 U.S.C. 1295(a)(1).

Serial Petitions

This proposed change would address the potential for abuse of the review process by repeated attacks on patents. To aid the Board’s assessment of the potential impacts on both the efficiency of the IPR process and the fundamental fairness of the process for all parties, General Plastic identified a number of non-exclusive factors that the Board will consider in exercising discretion in instituting an IPR, especially as to “follow-on” petitions challenging the same patent as challenged in a previous proceeding.

The proposed changes would replace factors 1-7 of the General Plastic factors with a new test in which the Board would discretionarily deny — subject to two exceptions — any serial IPR or PGR petition (with at least one challenged claim that is the same as a challenged claim in a previously filed IPR, PGR, or CBM petition) that is filed by one of the following:

  1. The same petitioner
  2. A real party in interest or privy to that petitioner
  3. A party with a significant relationship to that petitioner
  4. A party who previously joined an instituted IPR or PGR filed by that petitioner

The Board would make exceptions where (1) the earlier petition was resolved for reasons not materially related to the merits of the petition (e.g., was discretionarily denied or otherwise was not evaluated on the merits), or (2) exceptional circumstances are shown.

Petitions Raising Previously Addressed Prior Art or Arguments (Subject to the 35 U.S.C. 325(d) Framework)

When determining whether to exercise its discretion to deny institution under § 325(d), the Board applies the two-part framework set forth in Advanced Bionics, which entails (1) determining whether the same or substantially the same art was previously presented to the Office or whether the same or substantially the same arguments were previously presented to the Office, and (2) if either condition of the first part of the framework is satisfied, determining whether the petitioner has demonstrated that the Office erred in a manner material to the patentability of challenged claims. The Board also considers the non-exclusive factors set out in Becton, Dickinson.

The proposed changes would limit the application of § 325(d) to situations in which the Office previously addressed the prior art or arguments. Art or arguments would be deemed to have been previously addressed where the Office evaluated the art or arguments and articulated its consideration of the art or arguments in the record. This includes proceedings pertaining to (1) the challenged patent (in prosecution, reissue, ex parte reexamination, inter partes reexamination, and AIA post-grant proceedings, and appeals of the same), and (2) any parent application or other family member application of a challenged patent, but only if the claims of the parent application or other family member application contain or contained substantially the same limitations as those at issue in the challenged claims.

The Office states that this limitation increases efficiency and lowers the cost of proceedings for parties and the Board by providing a clear test that reduces unnecessary briefing.

Parallel Petitions

The proposed changes would direct the Board to deny petitions filed against the same patent by the same petitioner or by a petitioner with a substantial relationship with another petitioner challenging the same patent, absent a showing of good cause as to why parallel petitions are necessary. The Office is also considering allowing a petitioner to pay additional fees for a higher word-count limit as an alternative to filing multiple petitions. If a petitioner pays the fees for filing a petition with a higher word-count limit, the patent owner preliminary response, patent owner response, reply to patent owner response, and sur-reply may be filed with proportionally higher word-count limits at no additional charge to either party.

Petitions Challenging Patents Subject to Ongoing Parallel Litigation in District Court

The proposed changes incorporate Apple v. Fintiv and its related guidance, including Director Vidal’s June 2022 interim guidance on Fintiv denials, with a few additional reforms. Under the June 2022 guidance, the Board will not deny institution of an IPR under Fintiv where:

  1. A petition presents compelling merits of unpatentability;
  2. A request for denial under Fintiv is based on a parallel International Trade Commission proceeding; or
  3. A petitioner stipulates not to pursue in a parallel District Court proceeding the same grounds as those in the petition or any grounds that could have reasonably been raised in the petition (i.e. a “Sotera” style stipulation).

Additionally, when the Board applies Fintiv factor 2 (proximity of the District Court trial date), the Board may consider the median time-to-trial data in the district.

The proposed changes would direct the Board to apply a “clear, predictable rule” and deny institution of an IPR if the Board determines a trial in the District Court action is likely to occur before the projected statutory deadline for a final written decision. The Office is considering three new non-exclusive factors in addition to the clear, predictable rule that would guide the Board’s discretion in situations in which the petitioner, its real party in interest, or a privy is a party to ongoing District Court litigation:

  1. Past and future expected investment in the parallel proceeding by the District Court and the parties;
  2. The degree of overlap between the issues in the petition and the parallel District Court proceeding; and
  3. Any other circumstances that the parties contend are relevant to the Board's exercise of discretion.

The first two factors are similar to Fintiv factors 3 and 4, respectively, while the third factor is similar to Fintiv factor 6. As a result, these updated factors would effectively omit Fintiv factor 1 (the likelihood of a stay) and Fintiv factor 5 (whether the petitioner and the defendant in the parallel proceeding are the same party).

In addition to the “clear, predictable rule” noted above, the Office is also considering other alternative proposals, such as a rule that the Board will not invoke discretion to deny based on a parallel District Court litigation if the IPR petition is filed within six months after the date on which the petitioner, a real party in interest, or a privy thereof is served with a complaint alleging infringement of the patent. Given the large number of alternative proposals and their disparate impacts, the overall approach to parallel District Court litigation and its potential effects is difficult to predict at this stage.

Threshold Definitions

The proposed changes include several threshold definitions that are relevant to one or more of the categories of petitions subject to discretionary denial.

“Substantial Relationship” of Entities

The Office currently applies the common law formulations of “real party in interest” and “privy” to ensure that entities related to a party in an AIA proceeding are considered when evaluating conflicts and the effect of estoppel. However, the notice states that the current party relationship concepts are too limited in the discretionary denial context. The current frameworks thus would be replaced by a broader “substantial relationship” test, which would encompass, but not be limited to, real parties in interest or privies of the party to the AIA proceeding. The test would also encompass others that are significantly related to that party, including at least those entities as discussed in Valve I and Valve II.

“Substantial Overlap” Between Claim Sets

For certain of the proposed discretionary denial categories, the Board would consider whether there is “substantial overlap” between claim sets (for example, those previously adjudicated to not be invalid) and the challenged claims. The Office is thus considering a clear, predictable definition wherein claim sets are deemed to “substantially overlap” the challenged claims when at least one challenged claim is “substantially the same” as a claim in a set to which the claim is being compared. Claims will be deemed “substantially the same” when any differences between the claims are not material to patentability. Alternatively, the Office is open to considering a more subjective test in which substantial overlap between claim sets is determined on a case-by-case basis.

Effect of “Compelling Merits” on Discretionary Denials

Under certain circumstances, challenges that present “compelling merits” would be allowed to proceed even if they otherwise would be candidates for discretionary denial. A challenge presents “compelling merits” when the evidence of record before the Board at the institution stage is highly likely to lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence. The compelling merits standard is higher than the reasonable likelihood standard for IPR and the more likely than not standard for PGR. The petitioner would have the burden of presenting evidence at the institution stage that leaves the Board with a firm belief or conviction that it is highly likely that the petitioner would prevail with respect to at least one challenged claim. The Office is considering whether the compelling merits standard should apply as an exception to all of the bases for discretionary denial discussed above and, if not, which ones it should and should not apply to.

Stipulation on No Multiple Challenges

In exchange for not discretionarily denying institution under 35 U.S.C. § 314(a), the Office is considering requiring petitioners to file a stipulation that neither they nor their privy or real parties in interest have filed prior post-grant proceedings as to any of the challenged claims, and that if their post-grant proceeding is instituted, neither they nor their privy or real parties in interest, will challenge any of the challenged claims in a subsequent post-grant proceeding.

Separate Briefing for Discretionary Denial

The Office is considering amending the rules to provide for separate briefing on discretionary denial in which the patent owner would file a separate request for discretionary denial to address any relevant factors regarding discretionary denial prior to the deadline for a preliminary response. This would trigger the opportunity for the petitioner to file an opposition and for the patent owner to file a reply.

Settlement Agreements

For purposes of consistency and predictability, the Office is considering requiring parties to file pre-institution settlement agreements with the Office on the same basis as post-institution settlement agreements. The language of 37 CFR 42.74(b) would be updated to provide that settlement agreements must be in writing and filed with the Board prior to termination of the proceeding. The Office states that this policy change would prevent parties from circumventing the requirement by merely filing a motion to dismiss or withdrawing the petition, as granting such a motion would effectively terminate the proceeding.