With Uncertainty Brings Change: A Q3 Look at Fintiv Denials

The recent introduction of the Restoring the America Invents Act by Senate IP Subcommittee Chair Senator Patrick Leahy and Senator John Cornyn aims, in part, to remove the uncertainty that the precedential Fintiv orders have caused. Looking at the actual number of denials and frequency of the Board’s use of their discretionary line of cases, though, the consistent takeaway is that Fintiv continues to be used in unpredictable, ever-changing ways to deny otherwise-meritorious, timely challenges.

Despite the slight dip in overall filings (and decisions from last year’s also-down filings) so far in 2021, procedural denials are now used nearly 16% of the time, as compared to just 5% in 2016, before Fintiv and related cases were designated precedential. That is a 220% increase. Even with the uncertainty of Arthex over the first half of the year and the overall dip in filing decisions, the USPTO was still not shy about using procedural denials.

Section 314(a) is still being used 73% of the time for procedural denials.

Interestingly, the use of §§ 314(a) and 325(d) has jumped 6% versus last year. This year has seen these two denials 94.5% of the time in terms of overall procedural denials.

Section 314(a) denials are now 12.4% of denials, a very slight increase from last quarter.

Meanwhile, § 325(d) denials are being used 5.7% of the time, slight increase from last quarter.

The NHK Spring/Fintiv framework continues to be the dominant framework for § 314(a) denials with 77 already, 8 shy of the total last used last year.

Fintiv denials continue to be predominantly used in cases with parallel proceedings in the Eastern District of Texas.

That nearly 63% of all Fintiv-cited denials lead to a settlement begs the question of whether the PTAB might have been more effective at resolving unnecessary litigations; it would appear that, by and large, courts are being used to force settlements rather than address the merits of a patent claim.

Even despite the strategy of a given plaintiff, cases in Fintiv-cited denials are averaging almost two years (700 days) for a case to be terminated, no matter the outcome.

Relevantly, comparing the caseload of the PTAB judges versus the Western District of Texas and Judge Albright’s court docket—inarguably the single biggest patent docket for a U.S. district court judge—it becomes apparent that PTAB dockets are far less crowded and the Board has the necessary resources to hear cases efficiently while giving each cases its due attention; for instance, the highest-docketed PTAB judges have around 100-200 cases on their docket currently (with many having just a handful of PTAB cases balanced with ex parte appeals), whereas Albright has had roughly 700 patent and 1,250 total civil cases on his docket—and growing. See Ryan Davis, Albright Says He’ll Very Rarely Put Cases on Hold for PTAB, Law360, May 11, 2021 (6:50 PM EDT) https://www.law360.com/articles/1381597/albright-says-he-ll-very-rarely-put-cases-on-hold-for-ptab (Judge Albright, noting as of may that he has his civil docket has 1,250 cases, roughly 60% of which were patent cases).

This accounts for both having a certain rate of settlement and new filings, and shows a snapshot in time of the total docket of active patent cases. This suggests that even the most favorable comparisons of dockets indicate the PTAB three-APJ panels can devote much more time and many more resources to each individual ground—an observation only magnified by the myriad other issues attendant on a Federal District court judge’s docket in any particular case.

Unified Files Amicus Addressing Manipulation of Venue Rules

On September 28, 2021, Unified filed an amicus curiae brief with the U.S. Court of Appeals for the Federal Circuit in support of a mandamus petition related to what it views as systemic delays in decisions on venue in patent-heavy District Court dockets, and how they are frustrating the Congressional intent of the America Invents Act. The writ, In re: Netflix, was filed by Mark Lemley of Durie Tangri.

Unified is represented by Bill Jenks of Jenks IP and in-house by Jonathan Stroud. Read the amicus below:

9-2 Unified's Amicus Brief by Jennifer M Gallagher on Scribd

Expansion of AIA would have added $1.5 billion to GDP

In a new economic study, the Perryman Group has determined that enhancements to the America Invents Act’s post-grant review proceedings and increased use of district court stays would have saved the U.S. economy almost $1.5 billion dollars in gross domestic product (GDP), $712.7 million in personal income, and would have generated upwards of +6,792 job-years of employment between 2014 and 2019. That would have been in addition to the substantial savings realized of almost $3 billion already reported based on the current AIA regime. In other words, it could have been upwards of $4.5 billion of GDP savings, combined. This demonstrates that while the AIA has had a strong positive impact on the U.S. economy, it has fallen short of the benefits it could have accomplished with broader use of stays and a more comprehensive mandate. 

The study found that U.S. manufacturing would have experienced the greatest gains. It analyzed three scenarios: 1) If all court proceedings on a patent were automatically stayed after IPR was instituted, 2) if all invalidity defenses could be asserted in IPR proceedings, and 3) if both expansions had been in place. 

For 1), automatic district court stays, the Report estimates those changes would have led to an increase in U.S. business activity of an additional $543.1 million in GDP, $259.6 million in personal income, and +2,474 job-years of employment.

For 2), adding all defenses to the process, it estimates that adding those defenses would have led to an estimated $731.3 million additional increase in gross product, $349.5 million in personal income, and +3,331 job-years of employment.

And for 3) both, including multiplier effects, it estimates additional savings of $1.49 billion in gross product, $712.7 million in personal income, and +6,792 job-years of employment, noting that the benefits associated with Scenario Three are greater than the sum of the prior two if implemented separately, as the additional proceedings allowed if all invalidity defenses could be asserted would also benefit from being universally stayed while the IPR process is ongoing. 

Unified Patent’s Patent Quality Initiative (PQI) previously commissioned a study that demonstrated the substantial financial impact passage of the America Invents Act, and in particular, challenges like inter partes review (IPR), have had on the U.S. economy. That study demonstrated that U.S. businesses and the economy as a whole saved upwards of $2.95 billion dollars in gross domestic product, $1.41 billion in personal income, and generated upwards of +13,500 job-years of employment between 2014 and 2019.  

That study relied on the current AIA regime of post-grant review, where district court stays are inconsistently applied, limited grounds of challenge are available, and in practice—given recalcitrance to stay, confusion in caselaw and regulatory requirements like discretionary denials, and some resulting duplication of efforts between fora—the Congressional goals of providing a true cost-effective alternative to inefficient district court litigation have fallen short. Further study was needed to determine how much could have been saved over the same time period had district courts automatically stayed cases or had more grounds of invalidity been available in IPR.

Indeed, innovation has long been recognized as the key factor supporting U.S. economic growth and competitiveness. A critical element of the infrastructure facilitating product development and commercialization is the system that protects intellectual property and encourages its widespread adoption and implementation. The current framework that facilitates this process includes the Leahy-Smith America Invents Act (AIA) and the Patent Trial and Appeal Board (PTAB). The AIA and PTAB reduce the need for patent litigation, reducing costs and generating substantial economic benefits. Potential expansions of the AIA would lead to additional gains in business activity.

Economic performance in the United States over the long term is tied to innovation. The AIA and PTAB not only support innovation, but also generate substantial economic benefits. These benefits could be even greater with expansion of the AIA. 

The report is part of Unified Patents’ ongoing Patent Quality Initiative (PQI), an effort to gather and provide objective data and research demonstrating how lowering patent quality will inevitably lead to even higher cost and risk for U.S. SMEs, inventors, and manufacturers, and can lead to less innovation, fewer U.S. jobs, and a drain on the U.S. economy. Our PQI aims to provide data, studies, and testimonials to give policymakers and practitioners a clear picture of the state of the patent system. More information about our PQI efforts can be found here.

For far greater detail, read the entire report HERE.

The PTAB’s Misplaced Reliance on Litigation Trial Dates in the NHK Spring/Fintiv Framework

As discussed in prior blog posts (for example, here and here), the Patent Trial and Appeal Board (PTAB) has increasingly exercised its discretion under 35 U.S.C. § 314 (a) to deny institution of post-grant proceedings when the challenged patent is involved in related litigation, using the framework outlined in NHK Spring and Fintiv. See NHK Spring Co. Ltd. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8 (Precedential); Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (Precedential). A major consideration in the NHK Spring/Fintiv framework is whether trial in related litigation will occur before the PTAB’s one-year statutory deadline for issuing a final written decision after institution; if trial will occur before, the PTAB will likely exercise discretion to deny institution. The rationale is simple and seemingly cogent: due to the advanced state of related litigation, institution would be an inefficient use of PTAB resources and inconsistent with the America Invents Act’s goal of providing an “effective and efficient alternative to district court litigation.” NHK Spring, Paper 8, pp. 19-20. But determining when trial in related litigation will occur is not straightforward because litigation schedules often change. Over the past year, such changes have become more prevalent due to the COVID-19 pandemic. Thus, the PTAB may deny institution based on a litigation trial date that ultimately falls after the statutory deadline. We discuss instances where this occurred below. 

• Next Caller, Inc. v. TRUSTID, Inc – Institution is denied but the trial date relied on is delayed by a year. 

TRUSTID asserted U.S. Patent 9,001,985 against Next Caller in January 2018 and amended its complaint to additionally assert U.S. Patents 8,238,532, and 9,871,913 in April 2018. See TRUSTID, Inc. v. Next Caller, Inc., 1:18-cv-00172-MN (D. Del. 2018). Next Caller filed an IPR petition challenging validity of the ’985 patent in October 2018; this proceeding was instituted and resulted in a final written decision finding some claims unpatentable and others not. IPR2019-00039, Paper 1; id., Paper 77, p. 90.

In April 2019, Next Caller filed IPR petitions challenging validity of the ’532 and ’913 patents. See IPR2019-00961; IPR2019-00962; IPR2019-00963. The PTAB exercised discretion to deny institution of each petition under § 314 (a), relying on the related litigation’s anticipated trial date in July 2020 versus the PTAB’s statutory deadline in October 2020. IPR2019-00961 and IPR2019-00962, Paper 10, pp. 14-16; IPR2019-00963, Paper 8, pp. 13-14. But the trial date was pushed back to July 2021 due to the COVID-19 pandemic.

•  Apple, Inc. v. Fintiv, Inc. – The trial date relied on in Fintiv itself is delayed and scheduled to occur months after the PTAB’s statutory deadline.

 Fintiv asserted U.S. Patent 8,843,125 against Apple in December 2018. See Fintiv, Inc. v. Apple, Inc., 1:19-cv-01238-ADA (W.D. Tex. 2018). In October 2019, Apple filed an IPR petition challenging validity of the patent. IPR2020-00019, Paper 1. The PTAB exercised discretion to deny institution of the petition under § 314 (a), relying on the related litigation’s anticipated trial date in March 2021 versus the PTAB’s statutory deadline in May 2021. Id., Paper 15, pp. 12-13. But again, due to COVID-19, the trial date was pushed back – this time to October 2021.

• Ethicon, Inc. v. Board of Regents, The University of Texas System – Institution is denied based on an “expectation” of trial within a year but knowledge of delay; the trial date relied on is delayed over a year.

The University of Texas (“UT”) asserted U.S. Patents 6,596,296 and 7,033,603 against Ethicon in November 2017 (serving the complaint in December 2017). See Board of Regents, The University of Texas System et al. v. Ethicon, Inc. et al., 1:17-cv-01084-LY (W.D. Tex. 2017). In December 2018, Ethicon filed IPR petitions challenging validity of the patents. See IPR2019-00406; IPR2019-00407. The IPRs were suspended for about a year pending the Federal Circuit’s decision in Regents of the University of Minnesota v. LSI Corp., Case No. 2018-1559, addressing the applicability of sovereign immunity to IPRs. IPR2019-00406 and IPR2019-00407, Paper 11. After the suspension was lifted, UT filed a preliminary response in the 00406 proceeding without addressing the merits, arguing only that the Board should exercise discretion to deny institution under § 314 (a). IPR2019-00406, Paper 26. And the Board did just that, even though it was aware the related litigation’s June 2020 trial date had already been continued due to COVID-19, relying on the litigation court’s “emphasis that the parallel litigation should proceed as if still set for June 22, 2020,” “expectation of holding a bench trial within a year,” and expected final written decision issuance date of June 2021. Id., Paper 27, pp. 9-10. But trial did not occur and instead, a bench trial is scheduled for September 2021.

Interestingly, the same Board panel instituted the 00407 proceeding on the same day the 00406 denial issued. IPR2019-00407, Paper 29. The 00407 decision did not address Fintiv, but UT did not file a preliminary response in that proceeding. Id. UT disclaimed all challenged claims of the patent at issue after institution and the Board entered adverse judgement in June 2021. Id., Paper 33.

• Cisco Systems, Inc. v. Ramot at Tel Aviv University Ltd. – Institution is denied based on trial date that is now uncertain, but litigation is stayed pending Ex Parte Reexaminations filed after the denial.

Ramot sued Cisco, asserting U.S. Patents 10,270,535 and 10,033,465 in June 2019, and adding U.S. Patent 10,461,866 in an amended complaint in December 2019. See Ramot at Tel Aviv University Ltd. v. Cisco Systems, Inc., 2:19-cv-00225-JRG (E.D. Tex. 2019). Cisco filed IPR petitions challenging the ’535 and ’465 patents in November 2019, and another petition challenging the ’866 patent in January 2020. IPR2020-00122; IPR2020-00123; IPR2020-00484. The PTAB exercised discretion to deny institution of each petition under § 314 (a), relying on the related litigation’s anticipated trial date in December 2020 versus the PTAB’s statutory deadlines in May 2021 and August 2021. IPR2020-00122, Paper 15, pp. 7-8; IPR2020-00123, Paper 14, pp. 7-8; IPR2020-00484, Paper 10, pp. 7-8. But after denial, Cisco filed Ex Parte Reexaminations at the U.S. Patent and Trademark Office (USPTO) challenging validity of the patents in suit, and after reexamination was ordered, office actions issued rejecting all asserted claims.  Ramot, Dkt. 235, pp. 1-3. Thus, the litigation court granted a stay pending resolution of the reexaminations in January 2021. Id. When the stay issued, trial had been delayed from December 2020 to March 2021. The case is currently still stayed, with the trial date uncertain.

According to the U.S. Patent and Trademark Office, the average reexamination pendency from filing to certificate is just under 26 months. See https://www.uspto.gov/sites/default/files/documents/ex_parte_historical_stats_roll_up_21Q1.pdf. Here, Cisco filed its reexaminations in June 2020 and November 2020 for each patent.  Ramot, Dkt. 235. Thus, the reexaminations are estimated to conclude in August 2022 and January 2023. These dates are over a year past what would have been the PTAB’s statutory deadlines in May 2021 and August 2021, had the IPRs been instituted. IPR2020-00122, Paper 15, pp. 7-8; IPR2020-00123, Paper 14, pp. 7-8; IPR2020-00484, Paper 10, pp. 7-8.

Conclusion

Due to the likelihood that litigation trial dates change, the PTAB’s reliance on such dates to deny institution of post-grant proceedings under the NHK Spring/Fintiv framework has had unintended consequences, denying petitions (and an examination of the merits) when trial ends up occurring months after when a final written decision would have issued. The PTAB’s analysis of litigation trial dates under the NHK Spring/Fintiv framework should therefore not take litigation schedules at face value; instead, a more nuanced approach is needed that considers circumstances such as the current stage of litigation, issues that remain in litigation, and whether (and to what extent) extensions to deadlines and/or changes to the trial date have been requested and granted.

DOJ's 2015 Business Review Letter for IEEE and 2020 Supplemental Response

By: John Pierce — Legal Intern, Unified Patents

Standard Essential Patents (SEP’s) consist of patents covering technologies that are unavoidable (thus “essential”) in the implementation of new technologies under a standard. Said differently, an SEP is a fundamental piece of an advancing technology that all innovators must use to further develop the technology in accordance with a standard set by the industry. Standard Development Organizations (SDO’s) identify which pieces of an advancing technology will become a SEP. Each owner of a SEP is asked to provide assurance to license the technology under F/RAND (Fair, Reasonable, and Non-Discriminatory) terms. This assurance commits the owner to provide access to their fundamental technologies so that the advancing technology can be further innovated by other members of its tech sector. This method of standardized licensing contracting hopefully provides an increase in continuity and a decrease in patent infringement litigation.

In 2013, the Department of Justice and the U.S. Patent & Trademark Office issued a policy statement on the remedies available for SEP’s that are encumbered by a F/RAND licensing commitment. The policy statement focuses on “patent hold-up” by patent holders. Patent hold-up can occur when an owner of a technology included in a standard gains market power. This increased market power can cause delays in licensing negotiations because the patent owner can potentially gouge the licensee for a higher price because alternative technologies are difficult to implement due to the standard. In summary, this policy statement does not specifically attempt to limit or increase the remedies available to patent owners with SEP’s subject to F/RAND licensing commitments, instead, the policy statement attempts to offer guidance on what important public policy considerations govern when an injunction or exclusion order should be granted. The Department of Justice does however give examples of hypothetical situations where injunctions should or should not be given. However, The Department of Justice seems to stray from this sentiment in the future and specifically attempts to limit the remedies available to patent owners involved in SEP’s with F/RAND licensing commitments.

IEEE is an example of an SDO and the development of IEEE standards and the use of patents is overseen by the IEEE-SA Standards Board. In 2007 the IEEE-SA updated its policy in an attempt to clarify the IEEE RAND Commitment. This update gave technology owners an option to disclose their most restrictive licensing terms. In 2013, the patent committee chair of the IEEE-SA formed an ad hoc committee to address the wide discrepancy held by industry leaders in the meaning of “reasonable rates” for SEP’s as well as other important issues that had come up since the policy’s rollout. IEEE subsequently asked the Department of Justice for a Business Review Letter, analyzing their recent change in policy concerning SEP’s. The Department of Justice determined that IEEE’s changes did not warrant antitrust enforcement.  One of the important policy changes made by IEEE’s policy update was to limit prohibitive orders that could be sought from patent owners. The Department of Justice agreed that limiting prohibitive orders from patent owners could help add clarity and allow parties to reach agreement more quickly. Over the next five years, the Department’s Business Review Letter was cited and applied continually by industry members. Concurrently, the Department of Justice became more involved in pending litigations on the subject. The Department, however, did not endorse the stance it seemingly took in the 2015 Business Review Letter. Specifically, when the Department of Justice became involved in litigations from 2017-2020, it continually stood by the patent owner and did not limit the prohibitive orders that a patent owner could seek. The Department of Justice attempted to clear up this seemingly contradictory behavior in 2020 with a “Supplemental Response” on its Business Review Letter from 2015.

The 2020 response essentially vacated the stance the Department of Justice held in its 2015 Business Review Letter. This stance was consistent with the way the Department of Justice had conducted itself since the Business Review Letter. However, seven months later, the Department of Justice reclassified the Supplemental Response as “advocacy” rather than “formal guidance.” This action effectively recertifies IEEE’s Business Review Letter as good policy. The motion to re-adopt the 2015 Business Review Letter coincides with the Biden administrations tougher antitrust stance.

What does this history mean for us now?

Currently, it is not clear how exactly the current administration will handle antitrust issues with SEP’s. The way the Department of Justice has handled the 2015 Business Review Letter for IEEE is an indication of how uncertain the future is for this area of regulation. Not only substantively but also procedurally, giving many a reason to call into question the BRL process. Specifically, the 2015 BRT prohibits the holding up of the licensing process by patent owners by limiting the prohibitive orders they can receive while the 2020 supplement turned its gaze towards the holding up of the licensing process by licensees. For now, it seems the Department of Justice is taking a tougher stance on antitrust issues involving SEPs, but until there is a new exclamation of the current state of the law, the question remains: Will the Department of Justice intervene and act according to the 2020 supplement or sit on the side line and stand by the 2015 BRT? In this connection, on July 9, 2021, White House issued an executive order, asking the Attorney General and the Secretary of Commerce to “consider whether to revise their position on the intersection of the intellectual property and antitrust laws.”  July 9, 2021 Executive Order on Promoting Competition in American Economy, Section 5(d).  In particular, the executive order asked them to consider “whether to revise the Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued jointly by the Department of Justice, the United States Patent and Trademark Office, and the National Institute of Standards and Technology on December 19, 2019.”  Id.  Despite uncertainty, interesting developments are anticipated in this area.