In Chongqing Yanmei Technology v. Terves,[1] the Patent Trial and Appeal Board (“Board”) granted institution over Patent Owner’s arguments seeking discretionary denial under 35 U.S.C. §§ 314(a), 316(b), and 325(d).

Background

Chongqing filed a petition for IPR challenging Terves’ U.S. Patent No. 10,689,740, which is directed to a magnesium composite for use as a dissolvable component in oil drilling.

Terves asserted two arguments as to why the Board should exercise its discretionary powers to deny institution. First, Terves contended that the Petition assets prior art grounds relying on references that were previously presented to the Office and, thus, denial is warranted under 35 U.S.C. § 325(d). Second, Terves argued that discretionary denial is also appropriate because reviewing the challenged patent would be contrary to an Executive Order that established an ongoing national emergency for critical minerals, including magnesium.

PTAB Decision

The Board rejected both of Terves’ arguments.

In rejecting the first argument, the Board applied the two-part framework set out in Advanced Bionics to determine whether denial under § 325(d) was warranted.[2] This framework first analyzes whether the art or arguments presented in the petition are the same or substantially the same as those previously presented to the Office. If not, then the inquiry ends and denial under § 325(d) is not warranted. However, if the art or arguments are the same or substantially the same as those previously presented to the Office, then the second part of the Advanced Bionics framework examines whether the Office materially erred in its review of the challenged patent.[3] If not, then denial under § 325(d) is not warranted.

The Board first determined that the prior art asserted in the petition was previously presented to the USPTO. All three references that Chongqing asserted were either listed in an IDS during prosecution of the challenged patent or appeared on the face of the challenged patent. The Board, thus, moved to part two of the Advanced Bionics framework, and determined that Chongqing demonstrated that the USPTO materially erred. The Board made its determination because the examiner failed to mention the references in the reasons for allowance or assert any rejections that applied any of the references, and because Chongqing presented arguments that the USPTO failed to consider regarding the challenged claims’ entitlement to priority and the prior art effect of the cited references. Thus, the Board declined to exercise its discretion to deny the Petition under § 325(d).

Terves’ second argument asserted that Executive Order 13953 declared a national emergency and directed every federal agency to prioritize the “protection of the domestic supply chain” for critical materials, including magnesium. Terves alleged that it was the only American company manufacturing magnesium composites and that invalidation of the challenged patent could threaten Terves’ business operations and lead to foreign companies undermining the domestic supply chain for magnesium. Thus, Terves argued that the USPTO should deny institution because review of the challenged patent would be contrary to the Executive Order, would threaten domestic production of magnesium, and would benefit foreign interests. The Board rejected these arguments, since Terves had not cited to any cases in which a Director had invoked Executive Order 13953 or any related orders to discretionarily deny institution of an IPR.

Takeaways

When analyzing whether discretionary denial under 35 U.S.C. § 325(d) is appropriate based on art that was previously cited during prosecution, the Board will examine whether there is evidence on the record that indicates what, if any, focus was given to those references by the Examiner during prosecution. Such evidence could include whether the references formed the basis of a rejection.

When analyzing whether discretionary denial under 35 U.S.C. § 316(b) is appropriate based on the effect of the proceeding on the economy or the integrity of the patent system, the Board will consider whether there is prior precedent on point. If none, Patent Owner may find it difficult to argue for discretionary denial on such a basis.