District Court Dismisses Challenge to PTAB’s Discretion to Deny Inter Partes Review

by Eric Caligiuri
The IP Law Blog

In Apple Inc. et al. v. Hirshfeld, case number 5:20-cv-06128, in the U.S. District Court for the Northern District of California, the Court upheld the Patent Trial and Appeal Board’s (PTAB) practice of denying patent reviews due to looming trials in district court.

Under the America Invents Act (AIA), 35 U.S.C. § 100 et seq., a party may ask the U.S. Patent and Trademark Office (the PTO) to review and potentially cancel claims in an already-issued patent that the PTO finds to be unpatentable in light of prior art.  This process, called “inter partes review” (“IPR”), is widely used to determine the patentability of patent claims that are the subject of pending patent infringement litigation in district court.

An IPR functions similar to a civil litigation once instituted.  However, a party must first file a petition to institute an IPR of a patent. The petition may request to cancel as unpatentable one or more claims of [the] patent on the ground that the claims are obvious or not novel. The Director of the PTO then decides “whether to institute an inter partes review . . . pursuant to [the] petition.”  The Director has delegated this authority to the PTAB to exercise on his or her behalf.

When determining whether to institute an IPR in light of already pending district court litigation, the PTAB considers six factors (“the NHK-Fintiv rule”).  Those factors are:

  1. Whether the district court granted a stay or evidence exists that a stay may be granted if IPR proceedings are instituted;
  2. The proximity of the court’s trial date to the PTAB’s projected statutory deadline for a final written decision;
  3. The investment by the parties and district court in the parallel proceeding;
  4. The overlap between the issues raised in the petition and the parallel proceeding;
  5. Whether the IPR petitioner and the defendant in the parallel proceeding are the same party; and
  6. Other circumstances that impact the Board’s exercise of discretion, including the merits of the challenge to patentability.

In this case, a group of Plaintiffs challenged the PTO decisions that establish these six NHK-Fintiv rule factors used in the PTO’s determination of whether to institute IPR in light of a pending litigation, and argued that these decisions violate the Administrative Procedure Act (“APA”) because they are arbitrary, capricious, and unlawful under the AIA.  In response, the Defendant moved to dismiss on the grounds that Plaintiffs lack standing or, in the alternative, that Plaintiffs claims are not justiciable under the APA.

The Court first turned to Article III’s standing requirements, which require “a plaintiff must show (1) it has suffered an ‘injury in fact’ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.”  However, the Court found the Plaintiffs did have standing.

First, the Court found Plaintiffs have established that the NHK-Fintiv rule has harmed or presents a “substantial risk” of harming them, which is a sufficient injury-in-fact.  Second, the court found Plaintiffs have met the causation requirement because the NHK-Fintiv rule diminishes their opportunity to experience the benefits of IPR.  Third, if Plaintiffs prevail, the Court reasoned it could enjoin the use of the NHK-Fintiv rule, which would redress the Plaintiffs’ injuries.  Thus, the Court found Plaintiffs have established redressability and have met their obligation to establish standing.

Next, the Court turned to the question of whether the use of the NHK-Fintiv rule violates the APA.  However, before doing so, the Court noted it first had to determine whether this question is even reviewable in light of Supreme Court precedent and 35 U.S.C. 314(d) which states, “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”

The Court held that under recent Supreme Court precedent in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) and Thryv, Inc. v. Click-to-Call Technologies, LP, 140 S. Ct. 1367, 1373 (2020), it cannot deduce a principled reason why preclusion of judicial review under § 314(d) would not extend to the Director’s determination that parallel litigation is a factor in denying IPR.  To inquire into the lawfulness of the NHK-Fintiv rule, the Court reasoned it would have to analyze “questions that are closely tied to the application and interpretation of statutes related to the [Director’s] decision to initiate inter partes review.”  However, Cuozzo forbids this and so the Court determined it must conclude that Plaintiffs’ challenge to the NHK-Fintiv rule is barred by § 314(d).  Thus, the Court granted Defendant’s motion to dismiss for lack of subject-matter jurisdiction.