On November 18, 2020, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) denied institution of a petition for inter partes review (IPR). Google LLC v. EcoFactor Inc., case no. IPR2020-00946 (PTAB Nov. 18, 2020). In its decision, the PTAB exercised its discretion under 35 U.S.C. § 314(a) to deny institution because of a co-pending investigation before the International Trade Commission (ITC) involving the challenged patent.
35 U.S.C. § 314(a) provides that an IPR may not be instituted unless the petition “shows there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.” This provision has been interpreted to provide the PTAB with complete discretion to deny institution. See, e.g., Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016) (finding that the PTAB’s “decision to deny a petition is a matter committed to the Patent Office’s discretion,” and noting there is “no mandate to institute review” under Section 314(a)).
In Apple Inc. v. Fintiv, Inc., case no. IPR2020-00019 (PTAB designated precedential May 5, 2020), the PTAB set forth six non-exclusive factors to consider when considering whether to exercise Section 314(a) discretion due based on co-pending proceedings:
- whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
- proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
- investment in the parallel proceeding by the court and the parties;
- overlap between issues raised in the petition and in the parallel proceeding;
- whether the petitioner and defendant in the parallel proceeding are the same party; and
- other circumstances that impact the Board’s exercise of discretion, including the merits.
With respect to the interplay between the PTAB proceedings and ITC investigations, the PTAB in Fintiv remarked:
One particular situation in which stays arise frequently is during a parallel district court and ITC investigation involving the challenged patent.In such cases, the district court litigation is often stayed under 28 U.S.C. § 1659 pending the resolution of the ITC investigation. Regardless, even though the Office and the district court would not be bound by the ITC’s decision, an earlier ITC trial date may favor exercising authority to deny institution under NHK if the ITC is going to decide the same or substantially similar issues to those presented in the petition. The parties should indicate whether there is a parallel district court case that is ongoing or stayed under 28 U.S.C. § 1659 pending the resolution of the ITC investigation. We recognize that ITC final invalidity determinations do not have preclusive effect, but, as a practical matter, it is difficult to maintain a district court proceeding on patent claims determined to be invalid at the ITC. Accordingly, the parties should also indicate whether the patentability disputes before the ITC will resolve all or substantially all of the patentability disputes between the parties, regardless of the stay.
Patent Owner EcoFactor sought to leverage the PTAB’s remarks in Fintiv, based on a parallel ITC investigation involving the challenged patent. According to Patent Owner, while the district court has cases that have been stayed or dismissed, the ITC investigation is nearing competition, e.g., “[a]s of the filing date of the Preliminary Response, fact and expert discovery in the ITC investigation had closed, and the parties had already exchanged witness statements, exhibit lists, and deposition designations.”
Petitioner argued that the ITC investigation was inappropriate to consider, and that the more appropriate benchmark was the district court cases (which were dismissed or stayed). According to Petitioner, “Fintiv did not involve a co-pending ITC investigation” and “[t]he stayed district court cases are . . . a more appropriate benchmark for measuring the timing of parallel proceedings” because the ITC cannot hold claims invalid with binding effect, and, therefore, “whatever the result before the ITC—validity will be litigated again in various district court actions.” Petitioner also argued that because the ITC investigation involves only a subset of claims in the asserted patent, the remaining non-elected claims will be litigated in the district court actions regardless of the outcome at the ITC.
The PTAB disagreed, noting that Fintiv expressly addresses ITC investigations, and, therefore, the PTAB can and should consider parallel ITC investigations in weighing whether or not to exercise its discretion under 35 U.S.C. § 314.
Against this backdrop, the PTAB analyzed the six Fintiv factors and found that they weighed in favor of denying institution, largely because of the investment in, and timing of, the ITC investigation.
This decision demonstrates the recent trend—post-Fintiv—to deny institution based on a parallel ITC investigation, which is itself a departure from past PTAB practice that typically refused to discretionarily deny institution based on ITC investigations. If this trend continues, Petitioner-Respondents—to the extent they wish to seek inter partes review—will need to carefully weigh their strategy to best position themselves against a Fintiv-based denial, and, as always, move quickly if they plan to seek IPR.