In Apple Inc. v. Fintiv, Inc., (IPR2020-00019, Fintiv), the Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office (USPTO) elegantly laid out six different factors that the Board currently considers in discretionarily denying institution of an Inter Partes Review (IPR) that has a parallel district court proceeding.

These non-dispositive factors take into account “efficiency, fairness, and the merits” and require the Board to take “a holistic view of whether efficiency and integrity of the system are best served by denying or instituting review.”[1] As PTAB case law develops, counsel should continue to monitor changes in PTAB decisions and case law regarding the Fintiv factors, as this could affect their ability to assert and defend themselves regarding intellectual property infringement.

Discussion

In Fintiv, the petitioner (Apple) petitioned for the IPR of U.S. Patent No. 8,843,125 over obviousness grounds. The patent generally relates to managing mobile wallets and their credentials. In response, the Board cited to 35 U.S.C. § 314(a) as justification for its decision to ask for briefing on several factors in deciding to institute the IPR and also cited to §316(b), which provides that “[i]n prescribing regulations under [§316], the Director shall consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.” The Supreme Court recently upheld this discretionary denial power in SAS Institute v. Iancu, 138 S. Ct. 1348: “[Section] 314(a) invests the Director with discretion on the question whether to institute review.”[2]

The Fintiv factors, in their entirety, include:

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.[3]

Recent institution decisions that evaluate Fintiv have focused on factor 1 and the likelihood of a stay given the advanced stages of ITC litigation, factor 2 and how close a trial date is to when a final written decision is due, and factor 3 and the investment in the parallel proceeding.[4] Parties that have a companion district court proceeding to an IPR should work closely with their counsel to ensure that the Board considers the Fintiv factors appropriately.

Fintiv is just one in a long line of cases the Board has used in the last few years to try to improve the efficiency of the Board and manage its caseload. Writing for the Board in Fintiv, then Vice-Chief Judge William Fink asked the parties for “supplemental briefing on the issue of discretionary denial” under 35 U.S.C. § 314(a).[5] He laid out the six factors above that the Board would consider in instituting an IPR with a companion district court litigation. The Board later designated this decision precedential on May 5, 2020. Under Standard Operating Procedure 2 (SOP2), a precedential decision is “binding Board authority in subsequent matters involving similar facts or issues.”[6]

The Board in Fintiv cited to NHK Spring Co., LTD., v. Intri-plex Technologics, Inc., (IPR2018-00752, NHK). In NHK, the Board found that “[i]nstitution of an inter partes review under these circumstances would not be consistent with ‘an objective of the AIA . . . to provide an effective and efficient alternative to district court litigation.’ Gen. Plastic, Paper 19, 16–17.”[7] They concluded that “the advanced state of the district court proceeding is an additional factor that weighs in favor of denying the Petition under 35 U.S.C. § 314(a).”[8]

In relevant part, 35 U.S.C. § 314(a) vests the Director with the ultimate authority to grant or deny IPR petitions and says: 

The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.

The USPTO vests the Board with this authority to institute and states in the relevant regulation that “[t]he Board institutes the trial on behalf of the Director.”[9]

Before Fintiv, the Board had routinely interpreted this provision using the guideposts laid out in General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha, Case (IPR2016-01357, General Plastic). From that case, the Board considered whether to deny institution under seven factors laid out in NVIDIA Corp. v. Samsung Elec. Co., Case (IPR2016-00134, NVIDIA). In NVIDIA, the board had collected a list of seven factors for denying institution and denied institution noting that “[i]nstitution of inter partes review is discretionary. See 35 U.S.C. § 314(a); 37 C.F.R. § 42.108(a). . . We are concerned about the limited resources of the Board and fundamental fairness for both Petitioner and Patent Owner.”[10]

The seven factors in NVDIA were:

(1) the finite resources of the Board; (2) the requirement under 35 U.S.C. § 316(a)(11) to issue a final determination not later than 1 year after the date on which the Director notices institution of review; (3) whether the same petitioner already previously filed a petition directed to the same claims of the same patent; (4) whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known about it; (5) whether at the time of filing of the second petition the petitioner already received patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute review in the first petition; (6) the length of time that elapsed between the time petitioner learned of the prior art asserted in the second petition and filing of the second petition; and (7) whether petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent.[11]

Recent Developments and the Fintiv factors in light of Arthrex

Recently, Apple filed a petition for cert at the United States Supreme Court regarding the ability of the Federal Circuit to review institution decisions using the Fintiv factors.[12] Of particular note that should influence this litigation is the Supreme Court’s recent United States v. Arthrex Inc. decision, and its bearing on the Director’s authority over the Board.[13] The Supreme Court gave the Director wide latitude to decide the merits of every case, writing , “We conclude that a tailored approach is the appropriate one: Section 6(c) cannot constitutionally be enforced to the extent that its requirements prevent the Director from reviewing final decisions rendered by APJs. Because Congress has vested the Director with the ‘power and duties’ of the PTO, §3(a)(1), the Director has the authority to provide for a means of reviewing PTAB decisions. See also §§3(a)(2)(A), 316(a)(4). The Director accordingly may review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board.”[14]

This broad holding appears to coincide with other cases from the Supreme Court regarding the ability of agencies to ensure the efficient and effective administrative tribunal, such as United States v. Mead Corp., 533 U.S. 218 (2001) and Barnhart v. Walton, 535 U.S. 212, 225 (2002). As noted in the Standard Operating Procedure for the Precedential Opinion Panel in Footnote 2, “This SOP does not limit the authority of the Director to convene a Precedential Opinion Panel consisting of any Board members, including statutory members, at any time, to review any matter before the Board, in his or her sole discretion.”[15] Counsel should continue to monitor changes in PTAB decisions and relevant case law, as this could affect their ability to assert and defend themselves regarding intellectual property infringement.