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Tech Companies Wage Broad Battle on Patent Office Challenge Rule

Sept. 4, 2020, 4:55 PM

Major technology companies are engaging in a multifaceted attack against the patent office over a rule they say makes it harder to invalidate patents they’re accused of infringing.

Apple Inc., Alphabet Inc.'s Google, Cisco Systems Inc. and Intel Corp. have sued the Patent and Trademark Office, arguing Patent Trial and Appeal Board precedent on instituting inter partes review oversteps both patent law and the Administrative Procedure Act.

Agency director Andrei Iancu has set what many see as a high bar for the board to launch formal patent reviews. Citing precedent, the board has in a number of cases declined to review patents while infringement trials related to them are pending. The lawsuit threatens to undermine Iancu’s approach, attorneys said.

“They are frankly sending a message to the patent office director saying, we’re going to complicate your agenda, and closely challenge anything you try to put forth that we deem unfavorable to our business interest,” Kayvan Noroozi, a patent attorney at Noroozi PC, said.

Big Tech says the rule is unlawful in how it gives the PTAB discretion to pass on validity challenges because of factors related to parallel infringement litigation.

The lawsuit, filed in the U.S. District Court for the Northern District of California, echoes a mandamus petition from Cisco with the U.S. Court of Appeals for the Federal Circuit. Tech trade groups wrote a letter urging Congress to investigate PTAB discretion to deny validity trials.

Tech companies have turned to the PTAB to try to invalidate patents they’ve been sued for for infringing, with the tribunal often greenlighting trials. Yet recent PTAB precedent has led to an increase in challenges being denied because of related lawsuits, many of which are in “rocket dockets,” or jurisdictions where trials are expedited, leading tech companies to go after the PTO rule, attorneys say.

The PTO declined to comment on the case.

Tech Companies’ Complaints

The Electronic Frontier Foundation and Computer and Communications Industry Association (CCIA), whose members include Google and Intel, are among groups that complain that patent owners are gaming the system.

“Increasing discretionary denials at the PTAB have led to a resurgence in forum shopping and gamesmanship in patent assertion,” the tech groups said in their letter to lawmakers."By strategically timing patent assertions and lawsuits, delaying certain stages of litigation, or expediting others, a patent owner can largely avoid the possibility of IPR.”

Some inventors see a Big Tech strategy they don’t like.

“Basically, multinational corporations are fighting to be able to more easily invalidate patents using an administrative court rather than an Article III court,” said Randy Landreneau, president of US Inventor Inc.

The PTAB, Landreneau said, is preferred by multinational corporations because it’s “much easier to invalidate patents there,” and “you have much less due process. You don’t have a jury.”

The cost to an inventor to defend each challenge can be hundreds of thousands of dollars, he said.

Bridget Smith, a Lowenstein & Weatherwax LLP patent attorney, said she has clients facing PTAB challenges involved in co-pending litigation in “rocket dockets.” They don’t always work in patent holders’ favor, with some panels interpreting the factors narrowly and declining to exercise discretionary denial, she said.

Still, the lawsuit shows that Big Tech is opposed to discretionary denials, Smith said.

“They want their final written decision from the PTAB,” Smith said. “And it doesn’t matter if seeking that decision increases costs, complexity, or likelihood of inconsistent outcomes.”

NHK-Fintiv Rule

Filed in the U.S. District Court for the Northern District of California, the Big Tech lawsuit alleges that a rule allowing the PTAB to pass on a validity challenge because of factors related to a parallel infringement litigation’s state—known as the NHK-Fintiv rule— violated the America Invents Act, the law that created the patent board and inter partes review.

Under the AIA, the argument goes, inter partes review can move alongside patent infringement litigation as long as the accused infringer filed a PTAB petition within a year of being served a complaint for infringement.

PTAB precedent, however, has complicated that equation, attorneys say. In its NHK Spring Co. v. Intri-Plex Technologies, Inc. precedential decision, the board wrote that “the advanced state” of a parallel lawsuit weighed in favor of foregoing a validity trial.

In Apple Inc. v. Fintiv, Inc, the board expanded on NHK, discussing how to consider a parallel lawsuit’s state prior to determining whether to hold a validity trial.

The tech companies allege that the patent office’s application of the NHK-Fintiv rule has significantly curbed the accessibility of IPR.

Some believe the precedent is at odds with the AIA.

“The statute is pretty clear that you get a year after you’ve been sued to file your IPR, and what the office has done is said you don’t always get that year,” said Josh Landau, patent counsel at the CCIA.

The tech companies also argue that adopting the rule through precedent rather than a notice-and-comment rulemaking—a process where proposed rules are published and open to public comment before going into effect—violated the Administrative Procedure Act.

Ripple Effect

Meanwhile, the Western District of Texas has become a popular venue for patent lawsuits, given local rules that speed up cases. A trial date’s proximity to the PTAB’s deadline for a validity decision is one of the factors considered under the Fintiv precedent.

The NHK-Fintiv rule, said Unified Patents chief IP counsel Jonathan Stroud, has “been rapidly pushing district court filings” to that venue even faster. Cisco, Apple and Google are Unified members.

PTAB denials of validity trials are up, too, because of the NHK-Fintiv rule, particularly in validity trials proposed by defendants in the Western District of Texas, according to attorneys.

“Bottom line,” Stroud said, is the rule “is forcing more potentially unnecessary district court trials.”

The case is Apple Inc. et al v. Iancu, N.D. Cal., No. 20-cv-06128, 8/31/20.

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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