The now ten year-old law that created the Inter Partes Review (“IPR”) system gave the U.S. Patent and Trademark Office (“PTO”) the discretion to deny institution of an IPR when there was not a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the Petition.”[i] The Patent Trial and Appeal Board (the “Board”) has since relied on this discretion to deny institution of IPR’s based on the status and timing of infringement litigation involving the same claims as in the IPR to prevent the inefficient use of Board resources.[ii] The Board further expanded on this reasoning in 2020, setting forth six factors (the “Fintiv factors”) to be considered in deciding on the institution of an IPR in light of overlapping infringement litigation.[iii]
The application of the Fintiv factors is facing challenges in several courts, mainly by large tech companies arguing that denying institution using this reasoning exceeds the PTO’s statutory authority, is arbitrary and capricious, or was adopted without legally required procedures. Senator Patrick Leahy (one of the authors of the law that created IPR’s) has announced a new bill seeking to reign in the PTO’s supposed expansion of the statutory reasons to deny institution of an IPR. With all of the effort pushing back against current PTO practice, it would be interesting to know how often, and under what circumstances, the Board denies institution of IPR’s based on the Fintiv factors.
Frequency of Non-institution Decisions Based on the Fintiv factors
Between January 1 and August 31, 2021, 809 petitions for IPR received Board decisions either instituting the IPR or denying institution of the IPR. Of this total, 39.1% (316) received a decision denying institution of the IPR. Out of this 316, 20.6% (65) petitions for IPR were denied institution based on the Fintiv factors. Table 1 below illustrates the distribution of the institution decisions during this time frame.
In sum, about 8% (65 of 809) of petitions for IPR that received a decision on institution had that institution denied based on the Fintiv factors. A closer look at the data also shows that most of the 65 petitions for IPR that were denied institution under Fintiv were part of multiple patent and/or multiple IPR disputes as these 65 petitions for IPR only represent 31 separate litigation disputes.
It’s not surprising that an overwhelming majority of petitions that were denied institution based on Fintiv were related to litigation in the Eastern District of Texas (36), the Western District of Texas (11) or the ITC (10). The other 8 petitions that were denied institution based on Fintiv were related to one of three separate litigations in either the District of Delaware, the District of Massachusetts, or the Southern District of Florida.
The data shows a drop off in the number of petitions for IPR being denied institution after the first quarter of 2021. The explanation of this drop-off is likely a combination of factors, including:
- District court trial dates in related litigation being reset and pushed back due to impacts from COVID-19;
- The PTAB designated Sotera Wireless[iv] as precedential in December of 2020, which provides guidance to Petitioners on making a stipulation to eliminate potential overlap between the IPR and the district court litigation (see discussion of Fintiv factor 4 below); and
- The PTAB may also be reacting to the legal challenges raised to Fintiv and NHK (a hearing was held in NDCal in March 2021) and reducing the reliance on Fintiv and NHK to deny institution
Board Approach to the Fintiv Factors
The six Fintiv factors, which should be considered holistically, are:
- Whether the district court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
- Proximity of the district court’s trial date to the Board’s projected statutory deadline for a final written decision;
- Investment in the parallel proceeding by the district court and the parties at the time of the institution decision;
- Overlap and potential conflict between issues raised in the petition and in the parallel district court proceeding;
- Whether the petitioner and the defendant in the parallel district court proceeding are the same party; and
- Other circumstances that impact the Board’s exercise of discretion, including the merits.
Table 2 below shows how, among the 65 petitions denied institution based on the Fintiv factors, each factor was considered to favor non-institution, favor institution, or as being neutral. As can be seen, in almost every decision to deny institution based on the Fintiv, factors 2, 3 and 5 were on the side of denying institution. Factors 1 and 6 were often neutral toward institution. Factor 4 tended to favor denial of institution but was more evenly split, which may indicate that factor 4 carries special weight among the six factors.
Factor 1 – Stay
Factor 1 considers whether or not a stay has been issued in the related litigation. The presence of a stay would favor institution of an IPR. Although some Boards found this factor to favor denial of institution, most Boards found that factor 1 was neutral because no stay was granted at the time of the institution decision. As discussed above, the majority of these petitions were related to litigation in jurisdictions that value moving toward trial.
Factor 2 – Time Between Trial and IPR Final Decision
Factor 2 considers the time between when the district court trial is scheduled and when the final written decision (FWD) would be issued in the IPR, if instituted. As shown in Table 3 below, petitions for IPR being denied institution based on Fintiv factors, ranged from less than 2 months between trial and FWD to more than 12 months, with an average of 8.8 months between the scheduled trial date and the statutory date for a final written decision. About 83% (54 out of 65) of the non-instituted IPR’s had at least 7 months between the scheduled trial date and the date for FWD. The Board does not give much weight to the likelihood of scheduled trial dates being delayed and gives significant deference to the trial date set by the Court. This seems to show that a defendant/Petitioner should not only docket their 12-month deadline for filing an IPR but should also, once a trial date is set, work backwards from that date to make sure to file petitions for IPR at least 18 months before the scheduled trial date if at all possible.
Factor 3 – Investment Made by Parties and Court in Litigation
Factor 3 considers the investment made by the Parties and by the Court in the related litigation. All of the litigation related to the 65 petitions that were denied institution had at least completed claim construction. More than 90% (59 of 65) of the petitions that were denied institution had related litigation in which substantial discovery was completed after a ruling on claim construction.
Factor 4 – Overlap of Issues between IPR and litigation
Factor 4 considers any potential overlap of issues that will be considered by the district court and the Board, if the IPR is instituted. In December 2020, the PTO designated as precedential a Board decision that held a stipulation filed with the district court by the petitioner agreeing that, if the IPR is instituted, petitioner would not pursue in the litigation any ground that was raised or could have been raised in an IPR.[v] Filing a similar stipulation seemed to be critical in the Board finding this factor favored institution of the IPR. Given the potential impact of such a stipulation, patent owners should identify other issues that overlap between the IPR and the district court litigation (such as priority date or claim construction) that may impact validity but could be decided differently by the Board and the district court.
Factor 5 – Are Same Parties Involved
Factor 5 considers whether the same parties are involved in both the IPR and the related litigation. In every case where the petition for IPR was denied institution, the Board found the parties were either the same or involved enough of the same parties that the parties were essentially the same.
Factor 6 - Other
Factor 6 considers any other facts that may impact the Board’s decision. In only 23% (15 of 65) of the petitions for IPR that were denied institution did the Board find this factor to be anything other than neutral to the institution decision. Although in many instances, both parties advocated for the relative strength of their validity arguments, these arguments were usually found to not impact the institution decision.
Despite statistics showing a decline in Fintiv-based non-institution decisions, Fintiv can still be a powerful tool for patent owners under the right facts. On the flip side, petitioners must have Fintiv in mind when they first become aware of the infringement suit. Gone are the days of waiting with relative impunity until the end of the 1 year statutory IPR filing window. Petitioners should file their petitions as soon as they can gather and evaluate the prior art, particularly in federal districts where time from complaint to trial is shorter than normal.
[i] 35 USC 314(a).
[ii] See NHK Spring Co. Ltd. v. Intra-Plex Techs. Inc., IRP2018-00752, Paper No. 8 (Sept. 12, 2018) (made precedential May 7, 2019).
[iii] See Apple Inc. v. Fintiv, Inc., IPR2020-0019, Paper No. 15 (May 13, 2020) (made informative July 13, 2020)
[iv] IPR2020-01019, Paper 12 (December 1, 2020) (made precedential on December 17, 2020)
Derek Forinash works with technology-driven businesses to protect and monetize intellectual property assets in order to fuel growth. In addition to helping his clients develop and execute their IP strategy, Derek assists clients ...
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