March/April 2017
IP Litigator
By Jason E. Stach; Ashley M. Winkler
Attorneys often are surprised to learn that the Patent Trial and Appeal Board (Board) views itself as having discretion to deny institution of any petition for inter partes review in its entirety—even when the petitioner raises new issues not previously considered by the Patent Office and meets every statutory and regulatory requirement for institution. Most attorneys are familiar with the Board’s practice of denying unpatentability grounds it views as redundant of other instituted grounds. But the Board interprets the same authority that permits denying redundant grounds as also granting the Board complete discretion over whether to deny an otherwise new and proper petition. Here, we further explore the Board’s basis for this authority and the factors the Board often considers when evaluating whether to exercise its discretion to deny institution.
Attorneys practicing before the Board generally are familiar with denials of institution based on the petitioner not carrying its burden of proof for institution, as set forth in 35 U.S.C. § 314(a). They also are familiar with the Board denying institution based on 35 U.S.C. § 325(d), which expressly allows the Board to deny petitions that present "the same or substantially the same prior art or arguments [that] previously were presented to the Office." Less well known, however, is that no statute expressly compels the Board to institute a proceeding. Instead, the America Invents Act (AIA) is written in the negative, stating only the conditions when the "Director may not authorize an inter partes review to be instituted." [35 U.S.C. § 314(a).] Patent Office regulations track this statutory language in 37 C.F.R. § 42.108(c), but the regulations also go one step further, stating that "[a]t any time prior to institution of inter partes review, the Board may deny some or all grounds for unpatentability for some or all of the challenged claims." [37 C.F.R. § 42.108(b) (emphasis added).]
This framework creates a minimum for instituting but no express requirement to do so. Summing up the framework, the Board stated that "Congress did not mandate that an inter partes review must be instituted under certain conditions. Rather by stating that the Director—and by extension, the Board—may not institute review unless certain conditions are met, Congress made institution discretionary." [Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., IPR2013-00324, Paper 19 at 4 (P.T.A.B. Nov. 21, 2013).]
The Patent Office took this view to its logical extreme during oral argument before the Federal Circuit in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. When asked whether the Board can decline to institute when "there’s only one claim, one ground," the Patent Office responded affirmatively, stating "[w]e actually have authority to do that. If you look at the legislative history and comments made by Senator Kyl, they even put in provisions where if, for efficiency reasons, there is a claim that has a reasonable likelihood of success of going forward, we can deny to institute that claim. That is within our discretion to do. It’s not something that usually happens, but it is permissible." [Oral Argument at 47:00-47:42, Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016) (Nos. 2015-1116, -1119), oralarguments.cafc.uscourts.gov/default.aspx?fl=2015-1116.mp3.]
The Federal Circuit has not directly addressed the question of whether the Patent Office’s discretion is so broad that it can deny an otherwise proper petition for inter partes review in its entirety even if the petition raises issues not previously considered by the Patent Office. Indeed, statute precludes the Federal Circuit from reviewing the decision whether to institute [see 35 U.S.C. § 314(d)], and so far the Federal Circuit has found that it lacks jurisdiction to hear most denials of institution. But that view may be starting to change, as the Federal Circuit recently took en banc the question of whether it has authority to review one aspect related to institution, namely whether the one-year bar under 35 U.S.C. § 315(b) is a reviewable issue. [Wi-Fi One, LLC v. Broadcom Corp., Nos. 2015-1944, -1945, -1946, Order on Petition for Rehearing (Fed. Cir. Jan. 4, 2017).] Practitioners will have to wait for the outcome and whether its collateral effects might allow for review of other denials of institution, such as those based on the Board’s discretion.
In the meantime, the Federal Circuit provides guidance on the scope of the Board’s discretion in the context of denying a subset of unpatentability grounds while instituting others. In Harmonic Inc. v. Avid Technology, Inc., the Federal Circuit stated that "the PTO is permitted, but never compelled, to institute an IPR proceeding," and that "the Board may choose to institute some grounds and not institute others as part of its comprehensive institution decision." [815 F.3d 1356, 1367-68 (Fed. Cir. 2016).] The court also found that the Board’s regulation in 37 C.F.R. § 42.108(b), which permits the Board to deny "some or all grounds for unpatentability for some or all of the challenged claims," reflects a reasonable exercise of the Patent Office’s authority to promulgate regulations to implement the AIA. [Id. at 1368.]
This view is not universally held among Federal Circuit judges, however. In a lengthy dissent in Synopsys, Inc. v. Mentor Graphics Corp., Judge Newman quoted 35 U.S.C. § 318(a) as requiring the Board to "issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner." [814 F.3d 1309, 1328 (Fed. Cir. 2016) (emphasis added).] She then explained that any regulations permitting partial institution, including 37 C.F.R. § 42.108, are invalid because they are inconsistent with the statutory scheme and cannot be given Chevron deference. [See id. at 1328-33.] By granting the Board discretion to choose a subset of grounds to institute, Judge Newman viewed her colleagues as undermining the purpose of the AIA, which was in part to create "an alternative and efficient forum for resolving patent validity issues." [Id. at 1325.] In her view, "the present practice of partial decision by the PTAB leads to duplicative proceedings in the PTAB and the district courts." [Id.]
Judge Newman primarily took aim at the Board’s practice of partial institution as opposed to denying institution entirely. In fact, she treated the situations separately and stated that "[t]he PTO can refuse to institute any post-grant challenge, as the statute provides." [Id. at 1332.] But because her analysis calls into question the validity of the Board’s discretion based on the same statutes and regulations the Board cites when denying entire petitions (despite otherwise meeting the statutory and regulatory requirements), the scope of the Board’s discretion may continue to be a subject of dispute for years to come.
The Board generally limits its exercise of discretion under 35 U.S.C. § 314 and 37 C.F.R. § 42.108 to decisions that partially deny institution, usually to avoid instituting grounds that the Board views as redundant of other instituted grounds. [See, e.g., Costco Wholesale Corp. v. Robert Bosch LLC, IPR2016-00034, Paper 16 at 33-35 (P.T.A.B. Apr. 25, 2016).] But there are some instances where the Board has exercised its discretion to completely deny institution of a petition without the Board identifying any statutory or regulatory defects in the merits of the petition. The situations are sometimes unique and generally are fact-specific, but the Board has set forth the following factors it has considered when deciding whether to exercise this discretion:
[Alarm.com Inc. v. Vivint, Inc., IPR2016-01110, Paper 11 at 4-5 (P.T.A.B. Nov. 28, 2016).]
Weighing these factors, the Board declined to institute a proceeding where the petitioner had filed three other petitions against the same patent, the new petition challenged the same set of claims as a previous petition (although the previous petition had been denied because the petitioner had not met its burden), the petitioner had been aware of the new petition’s art for more than six months, the petitioner had received institution decisions and preliminary responses in its prior petitions, and the new petition raised arguments similar to those previously raised. [Id. at 6-9.] The Board found that "the instant Petition is essentially a composite response to our decisions in [the] earlier proceedings." [Id. at 9.]
According to the Board, "this latest proceeding is a case of undesirable, incremental petitioning, in which a petitioner relies on a patent owner’s contentions or a Board decision in an earlier proceeding or proceedings involving the same parties, the same patent, and the same claims to mount another challenge after an earlier, unsuccessful or only partially successful challenge, by fixing deficiencies, noted by the Board, that were within the petitioner’s capacity to avoid in the earlier petition or petitions." [Id. at 10.] The Board then denied institution, stating that allowing "similar, serial challenges to the same patent, by the same petitioner, risks harassment of patent owners and frustration of Congress’s intent in enacting the Leahy-Smith America Invents Act." [Id. at 10-11.]
The Board does not weigh the factors equally in every case, and in some cases specific factors appear to control the analysis. In NVIDIA Corp. v. Samsung Electronics Co., the petitioner represented it was unaware of a prior art reference when it filed a first inter partes review petition, which was part of its justification for including that reference in a later-filed second petition. [IPR2016-00134, Paper 9 at 9-11 (P.T.A.B. May 4, 2016).] But it came to light that the reference had been known to petitioner before filing the first petition, contrary to petitioner’s contentions, and the Board stated that the petitioner had provided no rationale for why it waited more than five months between its petition filings despite possessing this prior art. [Id. at 11.] According to the Board, it would be unjust to the patent owner to institute the proceeding, but not instituting "would not be unjust to Petitioner, because Petitioner was aware of [the reference] when the first petition was filed … and subsequently waited too long to file the second petition relying on [the reference] with no apparent justification." [Id. at 11-12.] In exercising its discretion to deny review, the Board stated that "we hold Petitioner accountable for its own actions and inactions." [Id. at 12.]
The Board then added another basis for denying the petition, stating that it alternatively denied the petition under 35 U.S.C. § 325(d) because "the same or substantially the same prior art or arguments previously were presented to the Office." [Id.] By discussing this alternative basis, the Board reinforced that it views its discretionary denials under Section 314(a) and Section 42.108 as independent of Section 325(d)’s express authority to deny a petition. The analysis also highlights that both types of denials may arise out of similar facts and, at least in some circumstances, can be viewed as being closely related. Indeed, the eighth discretionary factor noted above tracks the language of Section 325(d), suggesting that the Board may exercise its discretion to deny institution under Section 314(a) and Section 42.108 if a petition presents arguments somewhat similar to those previously presented to the Patent Office, but perhaps not similar enough to warrant denial under Section 325(d) alone.
While the Alarm.com and NVIDIA Corp. decisions denied petitions filed months after the petitioners had filed their initial petitions, the Board also has exercised its discretion to deny petitions that were filed at about the same time. For example, within the span of three days, Microsoft Corporation had filed three inter partes review petitions against the same patent. The Board instituted grounds from two of the petitions but denied the third petition in its entirety.[Microsoft Corp. v. VirnetX Inc., IPR2014-00616, Paper 9 at 27-28 (P.T.A.B. Oct. 15, 2014).] In doing so, the Board did not comment on the merits of the third petition. [See id.] Instead, it stated that "[t]he Board’s rules for AIA post-grant proceedings, including those pertaining to institution, are 'construed to secure the just, speedy, and inexpensive resolution of every proceeding.’ 37 C.F.R. § 42.1(b)." [Id. at 27.] It then concluded that, to achieve this goal, "we exercise our discretion and do not institute a review" based on the grounds raised in the third petition. [Id.] The Board never mentioned redundancy in its decision, but some speculate that this denial was tantamount to a more traditional redundancy denial. The main difference here is that redundancy denials typically occur with extra grounds contained in a single petition, while this denial affected grounds in a separate, contemporaneously-filed petition.
The debate over the scope of the Board’s discretion under Section 314(a) and Section 42.108 may continue for some time, but outside the context of redundancy denials within a single petition, the Board infrequently exercises this discretion. When it does, however, it may deny entire petitions, so petitioners should be cautious with their strategy. If a petitioner must file multiple petitions—and particularly if those petitions will be filed months apart from one another—addressing the eight discretionary factors may help the Board understand the reasons for multiple filings and could make the difference between a discretionary denial and institution.
Originally printed in IP Litigator in March/April 2017. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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