Patent Board Precedent Points to Validity Review Denials (1)

Oct. 27, 2020, 3:31 PMUpdated: Oct. 27, 2020, 9:28 PM

A U.S. Patent and Trademark Office tribunal is denying more patent challenges, after recent agency precedent outlined new criteria for passing on reviews.

The Patent Trial and Appeal Board is a popular venue for accused infringers to attack patents held by tech companies, drugmakers and others. In fiscal year 2020 the PTAB greenlighted fewer patent review trials than in previous years, in part because it was following recent precedent under which it denies the reviews because of factors in district court trials.

Attorneys say precedent is forcing them to change how they consider PTAB trials, including filing petitions faster or not at all. Tech companies say that precedent has curbed their ability to use the tribunal to challenge problematic patents. That means it’s sometimes more difficult for them to get the PTAB to institute a trial about a patent’s validity when a company is sued for patent infringement.

“If you look at the daily decisions coming out of the PTAB, you see a huge increase in the number of discretionary denials,” Harper Batts, a patent attorney at Sheppard, Mullin, Richter & Hampton LLP, said. “It’s causing different approaches by petitioners.”

Since the PTAB launched in 2012, “there’s been an expansion of the board’s role,” Bridget Smith, a Lowenstein & Weatherwax LLP attorney who primarily represents patent owners. ”They were taking a very active role. And this year was the first we saw a contraction.”

Proceeding Problems

Discretionary denials, attorneys say, have been the biggest game changer for patent board trials this year.

The most controversial precedential PTAB decision is Apple Inc. v. Fintiv Inc. The board set precedent with six factors for PTAB judges to consider when weighing whether to institute a trial based on the status of a district court lawsuit involving the same patent. Among those factors are the investments made in the lawsuit by the parties and the court and the proximity of a court trial date to the PTAB’s deadline for a validity decision.

The board has been granting trials at a lower rate in recent years. In fiscal 2014 it instituted trials 75% of the time, declining over time to 63% for fiscal 2019 before dropping to 56% in fiscal 2020, according to patent office data.

Since Fintiv was deemed precedential by the PTO in May, parties used it in arguing the board should pass on holding an inter partes review in about a quarter of institution decisions, PTO press secretary Paul Fucito said in an email.

“In cases where Fintiv was argued, about two-thirds of decisions resulted in institution. Since Fintiv was designated precedential, the PTAB denied institution in about 8% of decisions on institution on the basis of Fintiv,” Fucito said.

Attorneys point to Fintiv as a catalyst for the PTAB denying more trials this year.

“It’s almost created a scenario where you’re in a race to the finish. How quickly can you get the PTAB proceeding done versus the trial,” Naveen Modi, global vice chair of Paul Hastings LLP’s IP group and former PTAB Bar Association president, said.

Certain courts move patent trials faster than others.

“There’s this race that can get created depending on what district court you’re in,” Modi said.

Companies that use the PTAB to challenge patents aren’t pleased with the Fintiv precedent.

Alphabet Inc.’s Google LLC, Apple Inc. and others have sued the patent office over its discretionary denial approach. Amazon.com, Twitter Inc. and others have asked Congress to investigate the board’s denial of petitions, arguing the practice threatens the economy.

“We see this opinion as contributing to the uptick in institution denials,” patent attorney Craig Kronenthal said of his firm, Banner Witcoff.

Scaling Back

The PTAB’s precedential Advanced Bionics, LLC v. MED-EL Elektromedizinische Geräte GmbH tackles the question of when to deny a validity trial on the grounds of evidence and arguments. In Advanced Bionics, the board set forth a two-part framework for considering requests to deny a trial because of multiple tribunal proceedings.

Judges consider whether the same or substantially the same arguments or art were presented to the PTO in another proceeding. If either condition is met, the judges consider whether the challenger has shown the office erred in a way material to the validity of the challenged claims. The board will generally pass on a trial if a condition in the first part is met and the challenger couldn’t prove material error.

“It’s clear that there’s been a huge increase in the number of challenges by patent owners for discretionary denials, whether under the Fintiv analysis or Advanced Bionics,” Batts said.

Those precedents, along with patent office guidance geared toward limiting the number of challenges filed against a single patent, have resulted in more denials of validity trials.

“It’s certainly making it harder to prepare IPRs to challenge the claims being asserted in the litigation, when you’re having your hands tied behind your back with limiting the filing of multiple petitions, or utilizing art that may have been overlooked by an examiner during a patent review, or always looking at the timing issues in Fintiv,” Batts said.

“There are people not bothering to file now in certain situations, because they say I’m going to get denied under Fintiv, or I’m going to get denied under Advanced Bionics, even if the patent is invalid,” he said.

Balancing Act

Some other notable precedential decisions in 2020 include:

Oticon Medical AB v. Cochlear Limited : The board allowed a trial despite a prior arguments challenge as well as district court activity.

The PTO designated that case and Advanced Bionics precedential on the same day.

“The PTO is striving for balance,” Kronenthal said. “I don’t think the precedential process is trying to push the pendulum too far in any one direction.”

Lectrosonics, Inc. v. Zaxcom, Inc.: The board allowed Zaxcom to amend a patent after finding secondary considerations weighed “heavily in favor of nonobviousness.”

Prior to the decision, practitioners were “a little reticent” about trying to use secondary considerations to overcome invalidity arguments, Lowenstein’s Smith said.

Hunting Titan, Inc. v. DynaEnergetics Europe GmbH: The agency said that the PTAB can, “in certain rare circumstances,” raise its own invalidity grounds against substitute claims put forward by a party trying to amend its patent during trial.

(Updated with additional reporting.)

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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