PTAB Discretionary Denials Survive For Now: The Latest NHK/Fintiv Attack Ruling
The Patent Trial and Appeal Board’s NHK-Fintiv rule has received much scrutiny. Under the NHK-Fintiv rule, the Board considers whether the advanced state of co-pending parallel litigation justifies the Board’s denying trial in an IPR. At least one of the challenges to the Board’s authority to implement this policy has been stopped in its tracks. Meanwhile, other challenges remain pending. Only time will tell if and for how long the NHK-Fintiv rule will remain viable. Until then, petitioners are advised to file post-grant patent challenges as early as possible.
In the January 2021 issue of OBWB Monthly Insights, we discussed the NHK-Fintiv rule and the corresponding NHK-Fintiv factors (also referred to as “the Fintiv factors”), and asked “Are PTAB’s Discretionary Factors for Denying Institution of IPR Legal?” Under the NHK-Fintiv rule, the Patent Trial and Appeal Board (the “PTAB” or “Board”) is supposed to consider and balance certain factors when deciding whether to exercise its discretionary authority under 35 U.S.C. § 314(a) to deny institution in an inter partes review (IPR) due to parallel district court litigation being at an advanced stage.
The Fintiv factors are:
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.
These factors are supposed to relate to whether efficiency, fairness, and the merits support exercising discretion to deny institution in view of an earlier trial date in a parallel district court case. Because overlap exists among the factors and some facts may be relevant to more than one factor, “the Board takes a holistic view of whether efficiency and integrity of the system are best served by denying or instituting review.” See Apple v. Fintiv, Case IPR2020-00019, Paper 11, 6 (citing TPG at 58 (quoting 35 U.S.C. § 316(b)).
As we previously highlighted, a concern quickly mounted as to whether or not the PTAB has the power to have implemented the NHK-Fintiv factors at all. Sharing that concern, several tech giants, including Apple, Google, Cisco, and Intel challenged the legality of the NHK-Fintiv rule in a lawsuit against the Director of the USPTO in the United States District Court for the Northern District of California, Apple Inc. et al. v. Hirshfeld, Case No. 5:20-cv-06128 (C.D. Cal. 2020).
In the lawsuit, the tech companies alleged that NHK-Fintiv’s “vague factors lead to speculative, unpredictable, and unfair outcomes,” and charged that they violate the America Invents Act (AIA) and undermine the purpose of IPRs of providing a streamlined and specialized way to clear away invalid patents without the substantial costs, burdens, and delays of litigation.
On November 10, 2021, the district court dismissed the lawsuit, finding that the AIA’s provision that precludes the appeal of institution decisions also precludes the tech companies’ challenge. The Court primarily relied on the U.S. Supreme Court’s 2016 Cuozzo decision, which held that while constitutional challenges or jurisdictional violations related to institution decisions may still be appealable, the AIA clearly states that decisions on whether or not to institute an IPR are “final and nonappealable.”
According to the district court, to analyze the lawfulness of the NHK-Fintiv rule, the court would have to address questions closely tied to an IPR institution decision, which Cuozzo forbids. The court found that the tech companies’ challenge “does not fit within the categories of non-precluded review,” and the court could not “deduce a principled reason why preclusion of judicial review under [the AIA] would not extend to the director’s determination that parallel litigation is a factor in denying IPR.” As such, the Court found the tech companies’ challenge to the NHK-Fintiv rule barred.
Apple v. Hirshfeld is not the only challenge to the Board’s authority to deny IPRs utilizing these factors, however. The debate has escalated in other cases as well as in the U.S. Congress.
For example, over the summer, in two separate cases, parties asked the United States Supreme Court for help on the issue. First, in July 2021, Apple petitioned the Supreme Court for relief after the Federal Circuit refused to review the Board’s denial of three IPRs in Apple Inc. v. Optis Cellular Technology, LLC, Case No. 2021-1043 (Fed. Cir. 2021). The Board previously declined institution of Apple’s three IPR petitions, applying the NHK-Fintiv factors and concluding review would not be a proper use of resources given parallel district court proceedings. In the petition, Apple argues the NHK-Fintiv rule is unlawful because it “exceeds the PTO’s authority under the Leahy-Smith American Invents Act…, is arbitrary and capricious, and was adopted without the notice-and-comment rule-making required by the Administrative Procedure Act.”
The following month, Mylan petitioned the Supreme Court on grounds similar to Apple’s, in Mylan Laboratories Ltd., v. Janssen Pharmaceutica N.V., Case No. 2021-1071 (Fed. Cir. 2021). The questions presented in Mylan’s petition are (a) “Does 35 U.S.C. § 314(d) categorically preclude appeal of all decisions not to institute inter-partes review?” and (b) “Is the NHK-Fintiv Rule substantively and procedurally unlawful?”
Although briefing has progressed in both cases, they are still pending, and it will be some time before a decision is rendered in either case.
Other scholars and commentators have also published statistics and other district court data tending to show that the “time to district court trial” often relied on by the Board when analyzing the Fintiv factors is more often inaccurate than accurate, and sometimes substantially so. These voices add to the chorus of IP practitioners and litigation attorneys who would prefer to see the Fintiv factors eliminated, or at least cabined to some degree.
Meanwhile, Congress may also take action to change or eliminate the NHK-Fintiv rule. In late September 2021, Senators Patrick Leahy (D) and John Cornyn (R) introduced a bill in Congress, titled “Restoring the America Invents Act.” Among other things, this bill proposes to eliminate the NHK-Fintiv factors on the basis that the AIA statute did not provide the PTAB with discretion to deny IPR petitions based on factors such as parallel district court litigation. Whether or not that bill will pass as written (or at all in any form) is a separate question left for another future article.
Regardless, the point is that there are various efforts to address the same question—did the PTAB overstep its authority here? Realistically, none of the currently pending court challenges or the proposed congressional bill are likely to render a quick answer to that question. Therefore, regardless of which side of the debate one takes, for the foreseeable future, petitioners and patent owners alike should take the NHK-Fintiv factors into account whenever dealing with a post-grant challenge filed during co-pending district court litigation.
Our recommendation to petitioners is the same as it was earlier in the year: file patent challenges with the Board as early in litigation as possible to avoid the application of NHK-Fintiv in a way that could result in the Board’s discretionary denial of institution. Meanwhile patent owners would be wise to analyze whether the facts in the litigation case could lead to a denial of IPR institution under NHK-Fintiv, remembering that the more time that has passed and the more resources can be shown to have been invested in the district court proceedings, the better the odds are for obtaining the Board’s denial of institution. But as with any discretionary analysis, results can and will vary.
Cuozzo Speed Techs., LLC v. Lee, 579 U.S. 261 (2016).
