Tag Archives: inter partes review

Sitting By Designation, Judge Albright Pens First Federal Circuit Opinion Vacating PTAB Decision for Failing to Consider Petitioner’s Reply Brief Claim Construction Arguments

by Dennis Crouch

The Federal Circuit’s 2023 decision in Axonics, Inc. v. Medtronic, Inc. marked an important change in inter partes review procedure, ensuring petitioners have an opportunity to respond patentee’s newly proposed arguments, with the hope of discouraging patent owners from holding-back (“sandbagging”) at the institution stage.  Case-in-point is the Federal Circuit’s recent Apple v. Omni MedSci decision authored by Judge Alan D. Albright sitting by designation.


IPRs and the APA: Review of Director’s Discretion to Initiate IPRs

By Jordan Duenckel.  Jordan is a second-year law student at the University of Missouri School of Law and a registered patent agent. 

Apple brought an action against the USPTO Director Vidal in district court under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701– 706, challenging the Director’s instructions to the Board regarding exercise of discretion in IPR institution decisions. In Apple v. Vidal, 2022-1249, — F.4th — (Fed. Cir. Mar. 13, 2023), Judge Taranto (joined by Judges Lourie and Stoll) largely affirmed the district court’s dismissal, confirming that the Director’s instructions are unreviewable.  The court did separately reverse a tertiary challenge to allow Apple to proceed on a claim related to the note-and-comments procedure of the APA. 

Apple and other repeat players in patent infringement litigation often use the inter partes review process under 35 U.S.C. §§ 311–319 to challenge the validity of asserted patents. The statute provides a two-step IPR process: Step 1 is the institution decision by the Director under § 314(b); Step 2 is the trial and final written decision by the PTAB.   

At least two prerequisites assist the Director in deciding to grant review: [1] a reasonable likelihood that the petitioner would prevail in 35 U.S.C. § 314(a) and [2] a petition must be filed within one year after service of the infringement complaint. § 315(b). Even if these conditions are met, the Director has unreviewable discretion over whether to initiate an IPR. The statutory text is seemingly as clear as a statute can be: “The determination by the Director whether to institute an inter partes review under [§ 314] shall be final and non-appealable.” 35 U.S.C. § 314(d); see also United States v. Arthrex, Inc., 141 S. Ct. 1970, 1977 (2021).   

From the outset of the IPR program, the Director delegated institution authority to the Board. 37 C.F.R. § 42.4(a). Practically, without this delegation, Director Vidal would spend a disproportional amount of time reviewing IPR petitions at the expense of other duties of the office, although she could have delegated responsibility to other agency departments such as the petitions division.  The right of delegation of the institution is settled law. See Ethicon Endo-Surgery, Inc. v. Covidien LP, 812 F.3d 1023, 1031–32 (Fed. Cir. 2016).  

At issue in Apple v. Vidal are the so-called Fintiv instructions issued by the Director based on Apple Inc. v. Fintiv, Inc., IPR2020-00019, 2020 WL 2126495 (P.T.A.B. Mar. 20, 2020) which provides six factors for analysis of whether to institute an IPR parallel to pending litigation.   

Proposing an analysis under the arbitrary and capricious standard, Apple and the other petitioners are directly focused now not on the denial of a specific petition for IPR review but as a general challenge to the Director’s instructions to the PTAB about how to exercise the delegated discretion.   

Slip Op. The district court ruled that 35 U.S.C. § 314(d) “precludes judicial review” of the challenged agency actions, bringing the case within the APA exclusion stated in 5 U.S.C. § 701(a)(1). According to this court, the IPR statute’s preclusion was settled by the Supreme Court in Arthrex and encompasses review of content-focused challenges to the Fintiv instructions. § 314(d) provides the clearest congressional delegation of nonreviewable discretion possible and the panel rightfully relied on plain-meaning and clear Supreme Court precedent.    

While affirming the dismissal of the content-based claims, the court separates the procedural requirements set forth in the APA. Reversing the district court in part, Judge Taranto’s panel opinion reopened Apple’s claim that the Director was required, by 35 U.S.C. § 116 together with 5 U.S.C. § 553, to promulgate institution instructions through notice-and-comment rulemaking procedures.  Slicing the procedure from the underlying substance of the rule, Taranto relies on Lincoln v. Vigil, 508 U.S. 182, 195 (1993) to clarify that the 5 U.S.C. § 553 provides the basis for rulemaking through the notice-and-comment procedure for the Director’s instructions and is a separate analysis of reviewability from the substance of the instructions. 

Standing was also preemptively addressed for the remand proceedings. Lujan provides the three-step test: injury-in-fact, causation, and redressability. In search of a particularized, concrete injury, the court takes notice that Apple is a repeat player with a history of IPR claims being denied. This past injury was used to show the eminency of future injury resulting from the denial of the benefits of IPRs linked to the concrete interest possessed by an infringement defendant. Redressability and causation were met because there is a genuine possibility that the instructions would be changed in a way favorable to Apple in notice-and-comment rulemaking.  

The Federal Circuit may have reached a bit to find standing in an effort to effectively resolve concerns about a heavily used procedure: the IPR process. On remand, the district court might rightly decide that a traditional notice-comment rulemaking procedure is required to redress harms or prophylactically provide clarifications for the patent system that can accomplish the goals of using agency resources effectively. Allowing the frequent fliers of the IPR system to at least have an appearance of input in the procedure would create a process with more certainty and produce more long-term economic efficiency.  

Dir. Vidal on Privity and Real-Party-in-Interest in IPRs

by Dennis Crouch

Samsung v. NetList, IPR2022-00615 (Dir. Rev. 2023)

USPTO Director Vidal has ordered the PTAB to expand its approach to the privity and real-party-in-interest (RPI) analysis at the start of inter partes review (IPR) proceedings.  The question in the Samsung case is whether Google should be considered an RPI or privy in a way that would bar Samsung’s IPR petition.

Back in October 2022, Samsung filed an IPR petition against Neglist’s US7619912; and the PTAB granted institution.  The patent covers a memory module, and Netlist previously sued Google for infringement back in 2009. That case is amazingly still pending in C.D.Cal.  The accused modules were supplied by Samsung, and Google at one point demanded indemnification from Samsung. Netlist agreed to stay the Google case in while awaiting the outcome of a parallel Samsung lawsuit that was filed more recently.

After the PTAB granted the IPR, Director Vidal quickly issued a sua sponte director review order and also ordered the PTAB to allow additional discovery into Google’s role.  Repeating precedent and rules already in place, Dir. Vidal has now ordered the PTAB to particularly consider the “extent to which Google has an interest in and will benefit from Samsung’s actions, and inquire whether Samsung can be said to be representing that interest after examining its relationship with Google.” Quoting with modification, Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed. Cir. 2018).  Further, the PTAB must also recognize that the notion of “privity” is a separate and distinct inquiry from that of RPI.  At times, a party may be in privity with the petitioner even if not a real-party-in-interest.

Statute of Limitations – One year Time Bar: An IPR petition has a clear deadline.  No IPR can be instituted if “the petitioner, real party in interest, or privy of the petitioner” had been sued for infringing the patent more than 1-year beforehand. 35 U.S.C. 315(b).   Based upon this statute, if Google is an RPI/Privy, then the IPR is time barred.

In this type of indemnification situation, it is easy for me to see the RPI/privity connection. But, the PTAB, at least originally, refused to see a connection.  Its basic idea is that Samsung’s indemnity agreement relieves Google of all liability — and therefore (despite being an accused infringer), Google has no interest in the outcome of the IPR.  It is really hard for me to wrap my head around this argument.  If I were being sued by a third party, I would be glad to have an indemnification agreement, but would be much more satisfied if the case were entirely dismissed.  A potential contract right is generally much less valuable than a final decision absolving liability.

Cancelling a Patent Claim

by Dennis Crouch

The pending case of Jump Rope Systems v. Coulter Ventures is fascinating to me as someone who teaches both property and civil procedure. The basic questions: (1) As an inter partes review (IPR) proceeding draws to a close – toward cancellation – at what point are the claims no longer enforceable? (2) What is the effect of cancellation, in particular, is it like canceling a magazine subscription where the former subscriber isn’t off the hook for past-due bills; or, is it like an annulment – an Ab Initio Extinguishment?  The case also (3) raises a straight-up due process challenge to the IPR system.

A typical IPR where the petitioner prevails includes the following three-step sequence:

  1. Unpatentable Decision: PTAB issues a final written decision concluding that the challenged claim has been proven unpatentable with a preponderance of the evidence.
  2. Affirmed on Appeal: On appeal, the Federal Circuit affirms that judgment.
  3. Certificate of Cancellation: Once the appeal is complete, the USPTO Director then issues a certificate canceling the claim. 35 U.S.C. 316.

The first question — if the patentee is involved in concurrent district court infringement litigation, at what step is the patent no longer enforceable?

Clearly, the patent claim is canceled at Step-3 and by that point cannot be enforced going forward. The Federal Circuit though has held that the claim is already unenforceable at Step-2 based upon the court’s questionable application of collateral estoppel.   I call it questionable because of the different standards  of proof applied in the PTAB vs the District Court.  The affirmed PTAB decision found the claim invalid with a preponderance of the evidence.  But, in district court litigation invalidation requires clear and convincing evidence, a substantially higher standard. And, a conclusion of invalidity under a lower standard does not conclusively tell us that the same claim would have been proven invalid under a higher standard.  Using a standard approach such as found in the Restatement (Second) of Judgments, collateral estoppel would not apply here because of the difference in standards.  Here, we tend to use an exacting standard for res judicata principles because of their due process implications — the result bars a party from making their argument in court.  The Federal Circuit’s fudging of the rule makes some practical sense – the statute appears to make the issuance of the cancellation certificate a ministerial process with its “Director shall” language.  And yet, fudging the rules in a way that undermines due process is troubling.  I’ll note here that courts appear to generally be waiting for the appeal decision before announcing preclusion, although it is unclear whether that approach is somehow required or simply prudential (since district courts generally see the Federal Circuit as unpredictable).  I’ll also note that I previously called out the Federal Circuit for improper expansion of preclusion law with regard to the Kessler Doctrine – they did not listen to me there either.

The second question at issue in Jump Rope Systems involves the impact of cancellation — what about infringement that occurred (and lawsuits pending) prior to the cancellation?

The reissue system is a somewhat-close relative to inter partes review and has the benefit of 150 years of case law, including numerous Supreme Court decisions.  With reissues, courts have clearly held that cancellation of claims during reissue render those claims entirely moot.  See, for instance, Moffitt v. Garr, 66 U.S. 273, 283 (1861) and Meyer v. Pritchard, 23 L. Ed. 961 (1877).  But, the reissue system has a significant difference — a reissue begins with a patentee surrendering its patent as required by statute. 35 U.S.C. 251.  It is that surrendering that makes the cancellation of claims in a reissue so dramatic.

With inter partes review, the patentee does not surrender the patent and so we have a potentially different situation.  Still, courts have regularly treated cancellation of claims as voiding the claims backward and forward through time.  But, it is not so clear that approach is correct and there are many situations where the courts have given “cancel” to only prospective effect.  In its briefing, Jump Rope cites a long string of cases in various areas of law as well as simple plain meaning of the word:

Plain English is in accord. “Canceling” a magazine subscription stops future deliveries, but past issues remain in hand.

Jump Rope Reply Brief. If Jump Rope wins on this, an IPR petition that cancels claims would only cut-off prospective damages and injunctive relief.  The patentee could still recover pre-cancellation damages so long as the defendant failed to prove the claims invalid in district court at the higher standard.

= = =

The briefing also includes an important due process challenge — arguing that the use of IPRs to prevent infringement lawsuits violate due process.  In Oil States, various the patentee raised various challenges to the system, but did not bring a due process challenge. Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (“We emphasize the narrowness of our holding. . . . Oil States [has not] raised a due process challenge.”).

Here, the patentee makes two arguments:

  1. “First, front-line adjudicators are not sufficiently insulated from political forces. United States v. Arthrex, Inc., 141 S. Ct. 1970, 1993 (2021) (Gorsuch, J., concurring in part & dissenting in part) (‘The Court’s decision in Oil States allowing executive officials to assume an historic judicial function was always destined to invite familiar due process problems. . . . [P]owerful interests are capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies.’) (citations and internal quotation marks omitted).”
  2. “Second, by not permitting traditional live cross-examination of witnesses
    (instead, relying on written depositions), IPR procedures violate due process in view of the importance of the property right at issue. See Goldberg v. Kelly, 397 U.S. 254, 269 (1970) (‘In almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses.’)”

Great questions from petitioner.

Robert Greenspoon (Dunlap Bennett) is counsel for the patentee Jump Rope Systems. Louis DiSanto (Banner Witcoff) is representing the accused infringer Coulter Ventures.   Their offices are a few blocks apart in downtown Chicago.