Unnecessarily Ambitious

Late last week the USPTO issued an Advanced Notice of Proposed Rulemaking (ANPRM) that floated numerous rule proposals and requests for feedback — too numerous. Proposals addressing current 314(a) and 325(d) practices were not only expected, but long overdue. While these expected proposals were included in the sprawling Notice, the rule-making process will undoubtedly be bogged down by the remaining collection of controversial ideas and administrative over-reach.

Keep in mind that 314(a) Fintiv practices could soon be struck down as improper circumvention of APA rule-making. Stalling the issuance of those rules for at least another 12-18 months – if not longer – seems like a bad idea. My guess is political pressure from outside the agency led to the laundry list of additional proposals. Especially as they relate to for-profit entities in the wake of the Open Sky debacle.

Regardless, of how or why the expansive ANPRM came to be, I’ll walk through each proposal/idea in detail below.

Let’s start off with what I consider to be the “good” proposals:

The Good

314(a) – Codify Apple v. Fintiv as modified by the Director Memo of June 2022.

  • Exclude PGR from discretionary denial based on parallel litigation?
  • Avoid Fintiv where petition filed within 6 months of complaint service?
  • Limit Sotera stipulation to claims asserted at time of filing only?
  • Streamline Fintiv Factors down to three (removing stay likelihood (1) and same party (5)?
  • Joinder 314(a) analysis based on first-filed?
  • Stipulation to file only once (no follow-on)?
  • Separate 314(a) briefing?
  • Patent Owner disclosure on relationships for 314(a) consideration?

As I have discussed, 314(a) denials have fallen off significantly since the Director Memo. So, I am labeling these proposals “good” as this is more or less business as usual. That said, I have never been a big fan of Fintiv practices as these type of policy decisions should be left to the legislature.

But, let’s walk through each newish proposal above.

Excluding PGR from Fintiv makes sense given that a petitioner only has a 9 month window to file and Congress provided for an enhanced scope (as highlighted in the Notice). Likewise, the 9 month window is similar in concept to creating a bright line, 6 month safe harbor from 314(a) as discussed in the very next bullet (above). I like the 6-month rule.

For Sotera stipulations, the scope should be limited to the claims actually challenged in the IPR. I can’t imagine arguing otherwise, but attorneys are slimy (not me, of course, just everyone else)

I tend to agree that Factors 1 and 5 of the current Fintiv analysis are “throw-aways.” No big deal to simplify.

As to joinder, by definition, if you are joining an IPR, it is already instituted and has overcome 314(a). So, I would tweak this to be that Fintiv no longer applies tot he joined party. Going through the test again from the perspective of the first filer seems pointless. Although, that said, if the first proceeding was instituted based on a Sotera stipulation, the joining party should file one as well.

Separate briefing where 314(a) is in dispute makes sense. Nothing controversial there.

The Patent Owner disclosure requirement to argue 314(a) will not be popular. That said, if you are trying to argue district court litigation is better for patent policy than the PTAB, you should put all of your cards on the table.

Finally, requiring a stipulation from petitioners that they will not file a second challenge seems to run up against the estoppel statutes. There are a handful of proposals in the ANPRM that would appear to go beyond the power of the agency, this is one of them.

Serial Petitions – Codify General Plastics

Not much to say here, the Office has been operating under this framework for years. No controversy.

325(d) – Codify Advanced Bionics and Becton Dickinson

  • Clarify that art is only considered when distinguished on the record (IDS not enough)?
  • 325(d) extends to related applications with similar claims?
  • May relate to statements in unrelated applications?

Most of the 325(d) proposals codify current practices. I don’t know that extending the scope of 325(d) analysis to statements in unrelated applications makes sense. This strikes me as one of the many “exception rule-making” that is trying to do too much.

Parallel Petitions – Codify existing practices

  • Allow Petitioners to pay for extra word count to avoid a second petition

I’ve been advocating for the pay-for-word-count option since the AIA was passed. Hallelujah!! If a petitioner needs a few thousand more words than the current petition limit to cover all claims of interest, charging the full price for a second petition is wasteful. Likewise, where one petition (with extra space) is provided, the Office avoids disingenuous critics characterizing the split petition as somehow an abuse of the system. Long long overdue.

And, now for the “bad” proposals/ideas.

The Bad

Pre-institution Settlement

  • Provide for rules clarifying that settlement documents be filed if prior to institution?
  • Allow for binding term sheet to settle cases?
  • Expand “compelling merits” standard to all 314(a)

The Office notes that 35 U.S.C. 135(e), 317(b) and 327(b) govern the filing of settlement documents for post-institution settlement, but not pre-institution. Another way of saying this is that the statutes differentiate between the two. Not sure how the agency can promulgate a rule that would seemingly conflict with the statutes. I get that the settlement information is valuable from an anti-competitive practice/antitrust perspective, but this strikes me as another instance of rule making that runs up against a statutory conflict.

On the binding term sheet, it makes sense on the one hand to terminate a case while parties are committed to settlement. But, to avoid this mechanism being used to keep information away from the public, any such sheet-settlement should be updated when all the final agreements are in place. (I would have put this in “The Good” list, but for the rule making vs. statute problem discussed above).

The compelling merits standard was first introduced in the Director Memo of June 2022 as a short circuit of sorts to 314(a) denials under Fintiv. In other words, where a Fintiv denial is otherwise appropriate, compelling merits would prevent such a decision. While I would agree that consistency across all such 314(a) denials (serial petitioning, etc) makes sense, I have a problem with the agency applying new standards that are in direct conflict with the AIA statutes.

Substantial Claim Overlap

Here, it seems the agency is trying to keep a failed petitioner away from continuation patents with similar or “overlap” claims. The Notice asks for input on how they should assess such claims. In theory this seems fine. But, how common is this really? This strikes me as a rare scenario.

The more common scenario in my experience is where a parent patent is cancelled and the Patent Owner continues to churn out overlapping continuation claims sets (estoppel be damned) that are then subject to IPR in a wack-a-mole process. Is the Office prepared to expedite the cancellation of those overlapping claims in the interests of fairness? if so, then this can move up to the “good” list.

And now for the unnecessary noise.

The Ugly

Substantial Relationship Test – Expanding RPI and Privy Analysis

  • Establish new test for related parties?
  • Consider relationship in a member organization as related?
  • Deny for profit filings where no clear relation to patent (No DJ Jurisdiction)
  • Disclosure of Joint Defense Agreements?
  • Disclosure of SEC-like ownership interests by petitioner and Patent Owner

The USPTO is an expert agency, but it is not an expert agency in business relationships. The agency should stick to its area of expertise. Creating a nebulous test to reach a few exceptional situations will create far more trouble then it is worth, and encourage wasteful discovery battles.

Member organizations are targeting the worst of the worst in patent owners. These owners, now requesting $10-$20k shakedown settlements from real innovators (to stay off the radar of member organizations) will quickly go back to $100-$200k without an effective policing mechanism. This is shortsighted.

As to the added disclosure requirements, neither Petitioners nor Patent Owners are going to support this data being made public. More importantly, it is far from clear how the agency can claim rule making authority in this area. This is an over-reach that will undoubtedly spawn numerous lawsuits against the agency.

Covenant Not to Sue

The proposals seeks feedback on whether a covenant not to sue a petitioner should be used to deny a petition under 314(a), or any other covenant or stipulation (presumably a contractual prohibition on going to the PTAB for validity disputes would fall into this category).

Here, once again, I am not sure how the PTO has authority to issue such a rule as the AIA statutes provide limitations on filing timing and parties. While the PTO is given discretion under 314(a), it is not a license to expand to new areas of discretion outside of that contemplated by the AIA itself, or that would conflict with plain language of the AIA statutes. This would also result in litigation against the agency, and strikes me as a very specific “ask” that likely came from lobbyists for a particular industry. The public should not be forced to recognize improvidently granted patents based on private deals between a handful of players that are best suited to unravel such mistakes.

Micro Entities/Under Resourced

  • Treat under-resourced Patent Owners as a special form of discretionary denial

This proposal is my least favorite by a mile. There simply cannot be a different standard for institution based upon Patent Owner finances. First, there is a pro bono program that provides free counsel to such inventors, and from reputable firms. To my knowledge, not a single Patent Owner has participated in this program. Indeed, the PTAB’s proposed definition of those that would qualify might be 1 or 2 parties a year — if that. Seems to me that the PTO needs to identify this as a real problem before embarking on a needless rule-making effort that is going to derail other, more important initiatives. Exceptions should not make rules.

Moreover, no Patent Owner wants to disclose their contingency or litigation financing arrangements, so, even if implemented, I doubt anyone would take advantage.

Additionally, whether in the hands of a small business, or large business, and improvidently granted patent is a tax on the public. The finances of the holder should not be the focus. Taxing the American public on technology already in the public domain is the issue.

Prior Adjudication Discretionary Denial

  • Prior PTAB or District Court Decision final absent Article III standing
  • Extend final adjudication to ex part reexams

This seems like a lot of unnecessary window dressing as serial petitioning has no been possible for some time, and the General Plastic Factors are being codified as noted above. So, by definition, a second filing on a patent upheld would have to be by an unrelated party (i.e., not RPI or privy). Requiring Article III standing seems like another over-reach that is nowhere supported in the statutes.

As to reexamination, I don’t understand how this can be included even if this rule were lawfully promulgated. It is an ex parte proceeding that is no different from original prosecution, and where piles of claims can be added. The PTO should not give any deference to such one-sided outcomes.