United States: The Rising Tide Of Discretionary Denial At The Patent Trial And Appeal Board

Introduction

In the time since the America Invents Act (AIA) created the Patent Trial and Appeal Board (PTAB), inter partes review (IPR) and other PTAB proceedings for challenging patents' validity have proven to be powerful tools for those accused of infringement. But increasingly, the PTAB's exercise of its discretion to deny institution of review for non-merits-based reasons has become a powerful counter-defense for patent owners. Although discretionary denial has been a feature of PTAB proceedings since their inception, the range of circumstances in which the PTAB discretionarily denies institution and the frequency with which it does so are increasing. Discretionary denial has thus become a disputed issue in an increasingly large proportion of PTAB proceedings.

Among the PTAB's rationales for discretionarily denying a petition are the goals of protecting "the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings."¹ Until recently, the PTAB had other means to accomplish those goals-including its frequent practice of partially instituting review on only a subset of challenges in a petition that the PTAB found merited review, and denying the rest as lacking merit or being redundant over the instituted issues.

The PTAB, however, lost the ability to partially institute trials with the Supreme Court's decision in SAS Institute Inc. v. Iancu. ² SAS held that once the PTAB institutes a trial, it must address all challenged claims.³ Subsequent decisions from the Federal Circuit confirmed that an instituted trial must address all claims on all grounds presented in the petition.⁴ As a consequence, the PTAB can no longer partially institute an AIA trial.

The loss of partial institution has coincided with an increase in the PTAB's use of discretionary denial. In the time since SAS, the PTAB has discretionarily denied 10% of petitions, up from 4% of petitions in the four and a half years that the PTAB existed before SAS. ⁵

With the increased use of discretionary denial has come an increased focus on the PTAB's standards for determining when discretionary denial will occur. Unlike other PTAB practices that are set by statute or regulation, discretionary denial is largely a product of the PTAB's case decisions and informal guidance, such as the Trial Practice Guide.⁶ The PTAB has designated some of its decisions concerning discretionary denial "precedential," setting the standards that PTAB judges must apply.⁷ But like a common-law court, the PTAB has also revisited some of those standards with subsequent precedential decisions that refine the prior tests.

More than ever before, parties before the PTAB must consider and account for the possibility of discretionary denial. Petitioners should seek to understand and, where possible, proactively avoid situations that could lead to petitions being discretionarily denied institution. Patent owners would do well to recognize when discretionary denial may be a path to avoiding institution altogether. With rates of discretionary denial on the rise, the potential risks to petitioners and benefits to patent owners are too high to overlook.

This article investigates where the PTAB's practice on discretionary denial currently stands and provides practice pointers and tips along the way.

The PTAB's Authority to Discretionarily Deny Institution

The PTAB's authority for discretionary denial flows from two statutory provisions.

First, Section 314(a) states that an IPR "may not" be instituted "unless" the petition shows "a reasonable likelihood" of prevailing on at least one challenged claim.⁸ Because Section 314(a) "does not specify any particular circumstance in which review must be authorized," it has been interpreted as implicitly affording the PTAB discretion to decline to institute IPR even on petitions meeting the "reasonable likelihood" requirement.⁹

Second, Section 325(d) permits the PTAB to "take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office."¹⁰ Before SAS, Section 325(d) accounted for about two-thirds of the PTAB's discretionary denials, while Section 314(a) accounted for the other third. Since SAS, those proportions have reversed, with the PTAB's exercise of Section 314(a) denials approximately doubling those under Section 325(d).¹¹

The Supreme Court has observed that the "decision to deny a petition is a matter committed to the Patent Office's discretion" because there is "no mandate to institute review" in Section 314(a).¹² Likewise, the Federal Circuit has agreed that "the PTO is permitted, but never compelled, to institute an IPR proceeding."¹³ But while the PTAB's discretion to deny institution is widely accepted, it remains to be seen whether the courts might articulate some limits on what constitutes a proper exercise of that discretion. Due in large part to Section 314(d)'s bar against appealing institution decisions, the question of whether a particular exercise of discretionary denial was proper has not yet been squarely presented on appeal.¹⁴

A group of petitioners, however, have recently filed a district court lawsuit under the Administrative Procedures Act challenging the PTAB's exercise of discretionary denial in the context of parallel litigation.¹⁵ Thus, parties should keep in mind that the courts may yet constrain PTAB's rationales for discretionary denial, and indeed, parties should consider whether to seek that review.¹⁶ There, however, may come a time when a petitioner concerned by a specific rationale for discretionary denial might seek review of the PTAB's decision. The Supreme Court left open the possibility of review in some cases.¹⁷ Whether a discretionary denial decision would qualify for such review has not yet been made clear. Thus, parties should keep in mind that the PTAB's rationales for discretionary denial may yet be tested in court, and indeed, parties should consider whether to seek that review, such as via an appeal or a writ of mandamus.

Pending possible guidance from the courts, parties need to be aware of the evolving rationales that the PTAB applies now, which can and do form the basis for discretionary denial of institution in many cases before the PTAB.

The PTAB's Current Rationales for Discretionary Denial

Parallel Litigation

An increased focus at the PTAB on the status of parallel litigation (e.g., in district court) as a basis for discretionary denial of IPR institution has emerged recently as an issue of intense interest for practitioners. Given that a large proportion of patents challenged at the PTAB have also been asserted in litigation, this rationale for discretionary denial has the potential to affect most PTAB proceedings. Indeed, being sued for infringement is often the impetus for the petitioner to seek PTAB review of the patent, so the notion that the litigation's existence could be a reason to deny institution has the potential to force parties to reevaluate their strategies.

The PTAB's precedent for discretionary denial based on parallel litigation began with NHK Spring Co. v. IntriPlex Technologies, Inc.¹⁸ The PTAB's reasoning for discretionary denial in NHK largely focused on Section 325(d), finding the petition's challenges too similar to the issues raised during prosecution to warrant institution.¹⁹ The PTAB, however, also added that the "advanced state" of the parallel district court proceeding was an "additional factor" favoring discretionary denial for reasons of efficiency under Section 314(a), since the district court was set to consider the same prior art and arguments in a trial scheduled for six months before the PTAB's final written decision (FWD) deadline in the IPR.²⁰

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Footnotes

1. 35 U.S.C. §§ 316(b), 326(b). See also Consolidated Trial Practice Guide, November 2019 at 55-56 U.S.P.T.O. (Nov. 2019), available at https://www.uspto.gov/about-us/news-updates/consolidated-trial-practice-guide-november-2019 (citing Sections 316(b) and 326(b) when explaining the PTAB's rationale for discretionary denial).

2. 138 S. Ct. 1348 (2018).

3. Id. at 1359-60.

4. E.g., AC Techs. S.A. v. Amazon.com, Inc., 912 F.3d 1358, 1364-65 (Fed. Cir. 2019) (collecting cases).

5. Based on information collected from DocketNavigator (https://www.docketnavigator.com/).

6. Consolidated Trial Practice Guide, November 2019, U.S.P.T.O. (Nov. 2019), available at https://www.uspto.gov/about-us/news-updates/consolidated-trialpractice-guide-november-2019.

7. See Precedential and Informative Decisions, U.S.P.T.O., https://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/precedential-informative-decisions.

8. 35 U.S.C. § 314(a). 35 U.S.C. § 324(a) contains the corresponding language for post-grant review (PGR).

9. Gen. Plastic Indus. Co. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper 19 at 18-19 (Sept. 6, 2017) (precedential in relevant part) (emphasis added).

10. 35 U.S.C. § 325(d); see Becton, Dickinson & Co. v. B. Braun Melsungen AG, IPR2017-01586, Paper 8 at 17 (Dec. 15, 2017) (precedential in relevant part).

11. Based on information collected from DocketNavigator (https://www.docketnavigator.com/).

12. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016).

13. E.g., Harmonic Inc. v. Avid Tech, Inc., 815 F.3d 1356, 1367 (Fed. Cir. 2016).

14. See BioDelivery Scis. Int'l, Inc. v. Aquestive Therapeutics, Inc., 935 F.3d 1362, 1366 (Fed. Cir. 2019) (holding that the PTAB's decision to discretionarily deny institution is unappealable).

15. Complaint for Declaratory and Injunctive Relief, Apple Inc. v. Iancu, No. 5:20-cv-6128 (N.D. Cal. Aug. 31, 2020).

16. The Supreme Court also left open the possibility of appellate review in some circumstances. Cuozzo, 136 S. Ct. at 2141-42 (declining to rule that § 314(d) bars "appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond 'this section.'"); id. at 2151 n.5 (Alito, J., concurring in part and dissenting in part) (declining to address whether a writ of mandamus might be available in "extraordinary cases"); see Thryv, Inc v. Click-To-Call Techs., LP, 140 S. Ct. 1367, 1373 (2020) (relying on Cuozzo and noting that it declined to decide the effect of § 314(d) in such situations).

17. Cuozzo, 136 S. Ct. at 2141-42 (declining to rule that § 314(d) bars "appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond 'this section.'"); id. at 2151 n.5 (Alito, J., concurring in part and dissenting in part) (declining to address whether a writ of mandamus might be available in "extraordinary cases"); see Thryv, Inc v. Click-To-Call Techs., LP, 140 S. Ct. 1367, 1373 (2020) (relying on Cuozzo and noting that it declined to decide the effect of § 314(d) in such situations).

18. IPR2018-00752, Paper 8 (Sept. 12, 2018) (precedential).

19. Id. at 11-18.

20. Id. at 19-20.

Originally published in IP Litigator.

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