By Michelle O’Brien, Bob Hansen, and Tom Irving
The United States Patent and Trademark Office (USPTO) has issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking comments on various modifications, under consideration, to the rules of practice for inter partes review (IPR) and post grant review (PGR) proceedings before the Patent Trial and Appeal Board (PTAB). The proposed changes, if implemented, would, inter alia, impact discretionary denials of petitions in particular circumstance categories, subject to specific conditions and exceptions. The circumstance categories include IPR petitions filed by certain for-profit entities, petitions challenging under-resourced patent owner patents where the patentee has or is attempting to bring products to market, petitions that contest patent claims previously upheld against patentability challenges, serial petitions, petitions raising previously addressed prior art or arguments, parallel petitions, and petitions challenging patents subject to ongoing parallel litigation in district court. Additionally, there are new definitions proposed to determine the threshold of a “substantial relationship of entities,” “substantial overlap between claim sets,” and effect of “compelling merits.” Furthermore, the USPTO is also contemplating other modifications, including requiring petitioners, to avoid discretionary denial, to submit a stipulation on no multiple challenges, allowing separate briefing on discretionary denial issues, allowing payment of a fee to expand petition word-count limits, and filing of settlement agreements. Below is a summary of the ANPRM, the full version of which can be found here.
Non-competitive entities: The USPTO is considering changes to IPR and PGR processes to prevent for-profit, non-competitive entities from filing petitions to challenge patent claims. Under the proposed changes the Board would discretionarily deny any petition for IPR or PGR filed by an entity that: (1) is a for-profit entity (i.e., not tax exempt); (2) has not been sued on the challenged patent or has not been threatened with infringement of the challenged patent in a manner sufficient to give rise to declaratory judgment standing; (3) is not otherwise an entity that is practicing, or could be alleged to practice, in the field of the challenged patent with a product or service on the market or with a product or service in which the party has invested to bring to market; and (4) does not have a substantial relationship with an entity that falls within the scope of (1)–(3). Thus, if the proposed changes are adopted, entities with no actual or legitimate risk of being sued under a challenged patent would likely see their IPR petitions discretionarily denied.
Micro/small entities: The USPTO has proposed new rules pertinent to IPR and PGR petitions filed against “under-resourced” entities such as startups, small businesses, and individual inventors. Under the proposed rules, IPR/PGR petitions filed against patents owned by startups, small businesses, and individual inventors may be denied institution. The rules would apply to patent owners who had claimed micro-entity or small entity status at issuance of the challenged patent and who had not exceeded eight times the micro-entity gross income level in the preceding year. The proposals would also allow discretionary denial of a petition for IPR or PGR filed against such patent owner who is commercializing the subject matter of a challenged claim.
Prior adjudications upholding validity: The USPTO is considering changes that would result in discretionary denial of petitions challenging the validity of patent claims if there has been a prior final adjudication by a district court or the USPTO upholding the validity of substantially overlapping claims. Exceptions would be made for a petitioner with standing to challenge the validity of the claims in district court or who intends to pursue commercialization of a product or service in the field of the invention of a challenged claim, who was not a real party in interest or privy to the party previously challenging one or more of the challenged claims (with some exceptions), and who meets a heightened burden of compelling merits. The compelling merits standard is higher than the preponderance of evidence standard. The proposed changes would also define “final adjudication” as a decision on the merits by a district court that is final within the meaning of 28 U.S.C. § 1295(a)(1) and may be extended to include prior adjudications through ex parte reexaminations.
Serial petitions: The USPTO is considering revising the rules on IPR petitions to address repeated IPR/PGR attacks on patents, known as serial petitioning. The USPTO has proposed a new test that the PTAB would use in deciding whether to institute an IPR. This test would replace the seven factors laid out in General Plastic Co. v. Canon Kabushiki Kaisha. Under the proposed test, the PTAB will deny any serial IPR or PGR petition that is filed by the same petitioner, real party in interest or privy to that petitioner, a party with a significant relationship to that petitioner, or a party who previously joined an instituted IPR or PGR filed by that petitioner. Two exceptions to discretionary denial of serial IPR/PGR petitions are also being considered.
Application of § 325(d): Under 35 U.S.C. § 325(d), the PTAB may reject an IPR/PGR petition if “the same or substantially the same prior art or arguments previously were presented to the Office.” The USPTO is considering a procedure change in which § 325(d) would only apply to prior art or arguments that were previously addressed by the USPTO during proceedings pertaining to the challenged patent, its parent application, or other family member application, but only if the claims contain or contained substantially the same limitations as those at issue in the challenged claims. Prior art previously considered by the Office will be considered substantially the same only if it contains the same teaching relied upon in the petition and that same teaching was addressed by the USPTO in the previous proceeding (e.g., prosecution, reexam, etc.). If the patent owner shows that the same or substantially the same art or arguments were previously addressed by the USPTO, the PTAB will not institute trial unless the petitioner establishes material error by the USPTO, such as the Examiner misapprehending or overlooking specific teachings of the relevant prior art, newly-presented experimental evidence demonstrating an inherent feature of the prior art or rebutting a showing of unexpected results, and an error of law or misconstruing a claim term where the construction impacts the patentability of the challenged claims.
Parallel petitions: The USPTO is considering changes to its rules regarding parallel petitions (i.e., petitions filed against the same patent by the same or a related petitioner). Under the proposed changes, the PTAB would not institute parallel petitions unless the petitioner has shown good cause supporting the necessity of the parallel petitions. The USPTO may provide specific circumstances in which the Director would consider parallel petitions to be appropriate, in what it considers rare instances, including alternative claim constructions, many claims asserted in related litigation, and the complexity of technology. An alternative to this change under consideration is establishing a higher word-count limit for a single petition or excluding more sections of the petition from the word-count limit. The USPTO is considering allowing a higher word-count limit for an additional fee, thus enabling petitioners to effectively file two petitions as one long petition. However, filing two or more long parallel petitions challenging the same patent by the same petitioner would not be permitted.
Parallel litigation: The USPTO has proposed new rules aligned with the Fintiv decision, along with additional proposed reforms, which allow the PTAB to exercise discretion in denying IPR petitions when there is parallel district court litigation. The proposed new rules and related guidance, along with additional proposed reforms, would apply in the case of a parallel district court action in which a trial adjudicating the patentability of the challenged claims has not concluded at the time of an IPR institution decision. The USPTO previously issued a June 21, 2022, guidance memorandum that clarifies the PTAB’s current practice under Fintiv.
Under the proposed rules discretionary denial would not be available in the following scenarios:
- Parallel PGR and District Court Proceedings: Petitions for PGR would not be discretionarily denied when there is a parallel district court proceeding. PGR proceedings are valuable because they allow for early exploration of patentability issues. PGRs can only be filed within nine months of a patent’s grant, and they incentivize filing by allowing for any ground related to invalidity to be raised. The threshold for institution of a PGR is higher than an IPR (showing that at least one claim is more likely than not unpatentable versus merely a reasonable likelihood of prevailing). The statutory estoppel from a PGR proceeding is broader than an IPR proceeding, reducing the risk of conflicting decisions. The USPTO is considering whether different criteria should apply to discretionary denial of PGRs versus IPRs.
- IPR or PGR Proceedings and Parallel ITC Investigations: Petitions for PGR or IPR would not be discretionarily denied when the parallel proceeding is before the International Trade Commission (ITC). The proposed rule is consistent with the PTAB’s current practice, which is because ITC investigations lack authority to invalidate a patent.
Under the proposed rules discretionary denial would be available if neither scenario outlined above applies. In such instances, the PTAB would consider discretionary denial of an IPR in view of a parallel district court action under the following proposed rules.
- Clear, Predictable Rules: To provide what it believes to be clear and predictable rules, the USPTO is considering implementing a rule that, unless a safe harbor exception is met, the PTAB would deny institution of an IPR in view of pending parallel district court litigation involving at least one of the challenged claims if the PTAB determines a trial in the district court action is likely to occur before the projected statutory deadline for a final written decision. The USPTO is also considering an alternative rule precluding denial of institution if the IPR petition is filed within 6 months of the petitioner being served with a complaint for infringement of the patent.
- Exceptions—Safe Harbors Under Consideration: The USPTO is considering various rules that would prevent the PTAB from denying institution when a petitioner agrees not to pursue potentially overlapping grounds in district court. The USPTO seeks comment on whether a rule adopting a requirement for a Sotera stipulation, a Sand Revolution stipulation, or some other stipulation should be adopted, or whether maintaining the current practice of allowing a petitioner to avoid discretionary denial only by filing a Sotera stipulation is the most appropriate approach. The USPTO is also considering requiring petitioners to file a Sotera stipulation as a necessary condition for surviving a Fintiv Further, the USPTO is considering whether to implement a rule that the PTAB will not exercise discretion to deny institution if a Sotera stipulation is filed without consideration of other circumstances or factors. Finally, the USPTO is considering a rule that even if all other factors favor discretionary denial, the merits of the petition must be considered and if sufficient, the PTAB will not deny institution.
- Additional Factor-Based Test: The USPTO is considering implementing a factor-based test that would omit Fintiv factors 1 and 5, and include a version that may include variations of one or more of the other factors. Additionally, the USPTO is considering adopting a rule regarding petitions accompanied by a motion for joinder with respect to the timing of any underlying litigation of the earlier-filed petition.
Stipulation on no multiple challenges: The USPTO is considering a rule requiring petitioners to file a stipulation that the petitioner, real party in interest, or privy to the petitioner has not filed prior post-grant proceedings of any of the challenged claims, and that if their post-grant proceeding is instituted the petitioner, real party in interest, or privy to the petitioner will not challenge any of the challenged claims in a subsequent post-grant proceeding absent exceptional circumstances as a condition to avoid having the USPTO discretionarily deny institution.
Separate briefing for discretionary denials: The USPTO is considering amending the rules to permit separate briefing on the issue of whether a petition should be denied under its discretionary authority when the issue is raised, regardless of who raises the issue.
Settlement agreements: The USPTO is considering changes to its rules to clarify that parties must file with the USPTO a true copy of all settlement agreements made in connection with or in contemplation of the termination of a proceeding, including pre-institution settlement agreements. These changes align with the Executive Order on Promoting Competition in the American Economy, which encourages government agencies to cooperate on policing anticompetitive practices. The USPTO aims to have a depository of all settlement agreements in connection with contested cases, including AIA proceedings, to assist the Federal Trade Commission (FTC) and the Department of Justice in determining whether antitrust laws are being violated. The USPTO is proposing to clarify that 37 C.F.R. § 42.74(b) requires filing settlement agreements in writing with the PTAB before terminating a proceeding.
The deadline for providing comments on the ANPRM is June 20, 2023.
For any questions, please contact the co-authors by phone at 703-391-2900, or by email at mobrien@marburylaw.com; bhansen@marburylaw.com; or tirving@marburylaw.com.