The PTAB Provides Guidance on its Discretion to Deny Institution under § 314(a)

May 8, 2020
Firm Publication

Apple Inc. v. Fintiv, Inc., Case IPR2020-00019 (P.T.A.B. Mar. 20, 2020)

On May 5, the PTAB designated as precedential an Order (Paper 11) requesting the parties to submit supplemental briefing on whether it should deny institution of the petition under 35 U.S.C. § 314(a). In this Order, the PTAB provided a detailed explanation for the factors it will consider as well as the important considerations for each factor, providing practitioners with keen insight into the PTAB’s decision-making process.

The Factors

The PTAB listed the following relevant factors from NHK Spring Co. v. Intri-Plex Techs., Inc., IPR2019-00752, Paper 8 (PTAB Sept. 12, 2018):

  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 PTAB’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.
  6. Other circumstances that impact the PTAB’s exercise of discretion, including the merits.

The PTAB explained that it will take a “holistic view” of these factors when determining whether to exercise discretion not to institute review under § 314(a). The PTAB explained how it would evaluate and balance these factors as well as what the parties should address in their supplemental briefing:

Whether a stay exists or is likely to be granted if a proceeding is instituted.

The PTAB’s discretion is premised on concerns of efficiency and duplication of efforts between the district court and the PTAB. However, “a district court stay of the litigation pending resolution of the PTAB trial allays concerns about inefficiency and duplication of efforts,” and thus, a stay “has strongly weighed against … deny[ing] institution under NHK.” The fact that a district court has denied a stay motion without prejudice and indicated possible reconsideration upon institution usually weighs against denying institution. On the other hand, if the district court has denied a stay and has not indicated a willingness to reconsider after institution, this fact sometimes weighs in favor of denying institution.  The PTAB also noted that an early trial date in an ITC proceeding addressing substantially the same issues may favor denying institution.

Proximity of the court’s trial date to the PTAB’s projected statutory deadline.

For this factor the PTAB explained:

If the court’s trial date is earlier than the projected statutory deadline, the Board generally has weighed this fact in favor of exercising authority to deny institution under NHK. If the court’s trial date is at or around the same time as the projected statutory deadline or even significantly after the projected statutory deadline, the decision whether to institute will likely implicate other factors discussed herein, such as the resources that have been invested in the parallel proceeding.

Investment in the parallel proceeding by the court and parties.

Under this factor, the PTAB will consider the amount and type of work already completed by the court and the parties in the parallel litigation at the time of institution. For instance, if the district court has issued substantive orders related to the patent at issue, like a claim construction order, this fact favors denying institution. However, if the court has not issued any orders, this fact weighs toward institution.

The PTAB also addressed petition timing in this factor. If the Petitioner filed its petition expeditiously, such as soon after learning of which claims were asserted, this fact has weighed against denying institution. “If, however, the evidence shows that the Petitioner did not file the petition expeditiously, such as at or around the same time that the Patent Owner responds to the Petitioner’s invalidity contentions, or even if the Petitioner cannot explain the delay in filing its petition, these facts have favored denial.”

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 as presented in the parallel proceeding, this fact has favored denial.” On the other hand, if the arguments and/or evidence differs from what is before the district court, this weighs against exercising discretion. “The existence of non-overlapping claim challenges will weigh for or against exercising discretion to deny institution under NHK depending on the similarity of the claims challenged in the petition to those at issue in the district court.”

Whether the Petitioner and the defendant in the parallel proceeding are the same party.

Generally, when a Petitioner is unrelated to a defendant in an earlier district court litigation, this weighs against exercising discretion. Nevertheless, the PTAB may deny institution if the issues at the district court are the same as or substantially similar to those in the petition even though the Petitioner is unrelated to the defendant. Unrelated Petitioners should therefore inform the PTAB of any pending litigation involving the patent and explain how the petition’s issues differ.

Other circumstances that impact the PTAB’s exercise of discretion, including the merits.

In considering these factors, the PTAB may also consider the merits of the petition’s arguments. When those are “particularly strong on the preliminary record, this fact has favored institution.”  However, when the merits are a “closer call,” this has favored denial “when other factors favoring denial are present.”

Beyond the six NHK factors, the PTAB explained that “[o]ther facts and circumstances may also impact the Board’s discretion to deny institution. For example, factors unrelated to parallel proceedings that bear on discretion to deny institution include the filing of serial petitions, parallel petitions challenging the same patent, and considerations implicated by 35 U.S.C. § 325(d).”

Conclusion

Petitioners need to consider the NHK factors when timing and drafting their petitions. They should ensure that there are significant differences between the arguments made in the district court and the petition, even when they are not the defendant. Petitioners should address these differences as well as the timing of the district court action in the petition. Also, Petitioners should file their petition as soon as possible, which poses challenges because the plaintiff may not identify the asserted claims until late in the litigation.

Patent owners, on the other hand, should draw strong parallels between the Petitioner’s arguments and those made in any prior or co-pending litigations involving the patent at issue. Persuading the PTAB to use its discretion to deny institution is a huge win for Patent Owners.

If you have questions about what recent PTAB decisions mean for your business, please contact the authors.