Thanks to a decision handed down by the Patent Office’s Patent Trial and Appeal Board (“PTAB”) last month, patent owners may find some difficulty in having petitions to institute inter partes review (“IPR”) dismissed based on the PTAB’s discretion under Section 314(a) of the patent act.  In Sand Revolution II, LLC v. Continental Intermodal Group,[1] the PTAB changed course on rehearing and reversed its denial to institute review based on supplementary briefing and new precedent.  Relying on the recent precedential decision Apple Inc. v. Fintiv, Inc.,[2] the PTAB identified six factors that considered together warranted modifying its original order and granting institution of IPR.

In the original institution decision, the PTAB had determined that another precedential decision – NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc.[3] – controlled the outcome of the case based on the preliminary record.  In NHK Spring Co., the PTAB denied institution partly under its Section 314(a) discretion on the basis that institution of IPR would be an inefficient use of its resources in light of the “advanced state” of the parallel district court with the same parties, patent, and invalidity contentions.[4]   In the decision denying institution, the Sand Revolution II panel found that the same facts supporting the NHK panel’s inefficient use decision were present: the district court litigation involved the same parties, the jury trial would begin before the requested IPR proceeding would issue a final written decision, the claim language at issue in the litigation was asserted in the petition and was interpreted similarly between the two, and the grounds asserted in the petition were asserted for invalidity in the litigation.

However, in between that decision and the decision last month, the panel in Fintiv issued its precedential decision elaborating on the application of NHK and laying out the six factors relevant in deciding whether to use the PTAB’s discretion to deny institution based on a parallel district court action:

  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 the 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 the merits.

These factors, as stated by the Fintiv panel, would help determine whether efficiency, fairness, and the merits would support the PTAB’s exercise of authority to deny institution in view of an earlier trial date in a parallel proceeding.

After supplemental briefing on these factors on rehearing, the panel in Sand Revolution II concluded that “a holistic view” of the evidence submitted on the Fintiv factors pointed to not invoking its §314(a) discretion and granting institution.  While it was a close call, the panel found that proximity of the court’s trial date, overlap of issues between proceedings, and other circumstances including merits favored granting institution more so than the amount of investment in the parallel proceeding and the fact that the petitioner was the defendant in the parallel proceeding weighed against it.  In particular, the panel paid attention to the fact that, although trial had been scheduled to occur at least five months before any final decision would be due, the scheduled deadlines were extended three times since the PTAB’s initial denial decision and once since supplemental briefing for the rehearing had concluded.  All three extensions were in response to joint motions from the parties.  The panel also noted that the language the court used in conjunction with its scheduled deadlines for the trial indicated a degree of recognized uncertainty, in stark contrast to the PTAB’s one-year statutory deadline for entry of final decisions.  These findings, coupled with the additional fact that the PTAB has been fully operational and on normal schedule despite the impact of COVID-19, led the panel to award the factor “marginally” in favor of granting institution.

The panel acknowledged the fact that petitioner and defendant were the same party, and that the court and parties have invested in the district court litigation.  However, despite the patent owner’s assertions that the investment had been substantial, the panel concluded that the court’s investments had been related to ancillary matters not tied to the validity issue; and the district court’s Markman Order, which was only two pages long, did not suggest a different conclusion.  Though the case had exchanged infringement and invalidity contentions, conducted a Markman hearing and entered the order, repeatedly set and amended the case’s schedule, granted several pro hac vice motions, heard and denied a motion to dismiss, and transferred the case between judges; the panel found the factor only marginally weighed in favor of exercising §314(a) discretion, if at all.

PTAB data over the past few years suggest that institution rate of IPRs has been falling, while denials based on §314(a) discretion has been rising, and that both will continue to do so.[5]  However, given the impact COVID-19 has had on litigation proceedings throughout the country, the PTAB may be more inclined to let defendants in delayed district court cases bring their fight into IPRs, especially when the invalidity contentions and the record present a strong case against the patent.

[1] No. IPR2019-01393, Paper No. 24 (PTAB June 16, 2020).

[2] No. IPR2020-00019, Paper No. 11 (PTAB Mar. 20, 2020).

[3] No. IPR2018-00752, Paper No. 8 (PTAB Sept. 12, 2018).

[4] The PTAB also denied institution based on its discretion under Section 325(d) based on similar arguments/prior art in a previous proceeding before the PTAB.

[5] PTAB Procedural Denials and the Rise of §314, Unified Patents (May 13, 2020),