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Gray Areas in Patent Review Denials Catch Agency Director’s Eye

Sept. 27, 2022, 9:00 AM

US Patent and Trademark Office Director Kathi Vidal has wielded a US Supreme Court-granted power to audit her agency’s patent validity decisions nearly a dozen times since taking the agency’s helm in April, and practitioners say she’s giving initial patent review denials a particularly close look.

In the past six months, Vidal has initiated her director review authority in cases involving a wide-range of patents, from data communication to pig virus vaccines.

Attorneys say she’s displayed a focus on clearing up when it’s appropriate for the Patent Trial and Appeal Board to use its discretion to reject a validity review based on factors other than the patent’s merits—such as when a parallel infringement lawsuit is proceeding in federal court—and when the board might reconsider a review it initially declined to take up.

Vidal’s reviews, mostly done on her own accord rather than in response to a formal request, indicate she’s actively leveraging her power to offer more transparency into the board’s inner workings, attorneys say.

“I think she is definitely wanting to exert her influence over the board on the institution stage of the proceedings,” said Ted Cannon, an intellectual property partner with Knobbe Martens.

Vidal told Bloomberg Law during an interview last week that she’s been focused on giving practitioners more certainty and making sure PTAB judges decide cases based on substantive merit—not narrowly based on procedural factors.

She also said she believes the office’s procedures should be ever evolving to keep pace with the changing field of intellectual property.

“Right now, I’m just taking cases as they come to me and as I believe that certain issues should be clarified,” Vidal said. “I do want to make sure that all of the issues that stakeholders are seeing are elevated to me so I am constantly rethinking and thinking about our processes to make sure that we’ve got the right ones in place.”

Board Discretionary Denials

In its June 2021 US v. Arthrex decision, the Supreme Court gave the patent office director the ability to review final PTAB decisions in “inter partes review” patent validity challenges, as a course-correction for what the justices saw as unchecked tribunal power.

A majority of the matters Vidal’s taken up through director reviews, however, have focused on the board’s initial decisions to institute or deny IPR. Many of those cases were first dismissed by the PTAB based on discretionary factors—such as those under Apple v. Fintiv, which allows the board to deny review of a patent’s validity because of parallel litigation.

Many of the grants are aimed at giving certainty to parties that often feel dead-ended at the institution denial stage, especially if the decision isn’t based on the viability of the patent itself, according to Emily Michiko Morris, associate IP professor at the University of Akron School of Law.

“There have been a lot of complaints about the lack of review and lack of appealability of these decisions,” she said.

Last month, Vidal examined whether the PTAB had rightly shot down a pair of data communication patent review bids brought against Bright Data Ltd. by a series of petitioners believed to be “roadmapping,” or throwing a smattering of claims at the board and seeing what sticks in an effort to divine a path to administrative review.

She found that the board had improperly relied on what’s known as the “General Plastics” factor—a reason for granting discretionary denial meant to discourage serial petitioners from harassing patent owners—to dismiss the challenges instead of addressing the underlying merits of the case.

“It indicates a desire on the director’s part that the merits be given a little more weight in the consideration than things that might be considered procedural,” Cannon of Knobbe Martens said.

In another discretionary denial case involving a pig virus vaccine patent, Vidal indicated she’ll examine when the board should accept or deny a review based on prior inventions or arguments that the board has already considered.

The vaccine patent case—in which the PTAB denied Boehringer Ingelheim Animal Health USA’s request for post-grant review of Kansas State University Research Foundation’s patent—turns on whether “substantially the same written description arguments were previously presented” to the board, said David O’Brien, who leads Haynes and Boone LLP’s Patent Office Trials Practice Group.

Parallel Litigation

Still, Vidal’s main focus has been addressing gray areas over the scope of Fintiv discretionary denials. She released guidance in June clarifying that parties can waive certain patent invalidity arguments in a district court dispute in exchange for a PTAB review grant.

In her review of NXP USA, Inc. v. Impinj, Vidal further explained Sept. 7 that parties can’t wait for the board to deny inter partes review, offer to waive arguments in a district court dispute, and then seek rehearing at the PTAB.

Vidal underlined that “a stipulation not to pursue the same grounds, or grounds that reasonably could have been raised in the petition, in a parallel district court proceeding is a quid pro quo to avoiding a discretionary denial that must be affirmatively invoked prior to the Board’s institution decision,” said Nick Restauri, an IP associate at Morgan, Lewis & Bockius LLP.

In another Fintiv-related review, Vidal agreed to look into whether the PTAB rightly declined to probe an eSports patent that a California federal court had already invalidated because it covered technology that wasn’t eligible for IP protection.

The PTAB initially disagreed with the challenger, AviaGames, that the denial is contrary to Fintiv precedent, but attorneys say Vidal could decide that it’s not wise to deploy Fintiv in the face of a district court decision finding patent-ineligible subject matter. As the initial PTAB decision noted, institution in light of a district court invalidity finding is “an issue on which Board panels have not uniformly agreed.”

Eliot Williams, co-chair of Baker Botts LLP’s PTAB Trials Practice Group, pointed out that Vidal “hasn’t attempted to dramatically rewrite the framework that the board has been applying to discretionary denials,” instead putting finer points on how to apply precedent and existing PTO guidance.

However, according to Haynes and Boone’s O’Brien, the sum of the director review decisions contribute to the sense that “Fintiv discretionary denial doctrines have been repudiated or at least neutered.”

Addressing Process Concerns

Notably, Vidal has also agreed to look into new entities that appear interested in gaming the PTAB system for financial gain, opening up conversations about what constitutes abuse of the PTAB process.

In June, Vidal said she would review the PTAB’s decisions to examine two patents based on validity challenges brought by OpenSky Industries LLC and Patent Quality Assurance LLC—which were formed after a jury handed VLSI Technology LLC a $2.18 billion verdict against Intel and which appear to make nearly identical invalidity claims as the semiconductor giant did.

Vidal asked the parties and the public to comment on how she and the PTAB should assess and respond to conduct that “thwarts” the goals of the patent office or the America Invents Act, but her decisions in those cases are still pending.

“A lot of people are waiting to see that with anticipation,” Cannon said.

—With assistance from Riddhi Setty

To contact the reporter on this story: Kelcee Griffis in Washington at kgriffis@bloombergindustry.com

To contact the editor responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Jo-el J. Meyer at jmeyer@bloombergindustry.com