Fed Circuit Determines Apple Can Proceed With Challenge to U.S.P.T.O Inter Partes Review Policy

On March 13, 2023, the Federal Circuit, in Apple Inc. v. Vidal, determined that Apple has standing to challenge the United States Patent and Trademark Office’s (USPTO) inter partes review (IPR) institution standards. Under this ruling, Apple has the ability to challenge the Director’s precedential designations of NHK and Fintiv as violating the Administrative Procedure Act for failure to use notice-and-comment rulemaking procedures prior to promulgation.

Fintiv Background

In March 2020, the USPTO designated Apple Inc. v. Fintiv Inc. precedential in efforts to increase efficiency and minimize potential conflict and gamesmanship between PTAB proceedings and parallel district court proceedings. This decision enumerated a number of factors (Fintiv factors) for the Panel to consider when determining whether to institute an IPR with parallel district court litigation:

1. Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
2. Proximity of the court’s trial date to the Panel’s projected statutory deadline for a final written decision;
3. Investment in the parallel proceeding by the court and the parties;
4. Overlap between issues raised in the petition and in the parallel proceeding;
5. Whether the petitioner and the defendant in the parallel proceeding are the same party; and
6. Other circumstances that impact the Panel’s exercise of discretion, including the merits.

On June 21, 2022, Director Vidal released a memorandum (“Director’s memo”) providing guidance for discretionary denials of IPRs with parallel district court litigation. Under this guidance, after determining whether a petition is sufficient to meet the statutory institution requirement under 35 U.S.C. 314(a)—i.e., the petition “shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition”— then the Panel has authority to discretionarily deny institution upon consideration of the Fintiv factors. However, the guidance further provides that if the petition presents a compelling meritorious unpatentability challenge, the Panel should not exercise its discretion to deny institution under Fintiv.

Apple Inc v. Vidal Decision

Under the America Invents Act (AIA), Congress gave the USPTO Director the authority to discretionarily determine whether to institute an IPR.¹ Congress also protected the Director’s decisions from judicial review, making them final and nonappealable.² From the inception of the IPR program, however, the Director has delegated institution authority to the Panel. Previous Directors have used their authority to provide guidance to the Panel regarding whether to institute IPRs with overlapping district court litigation by designating NHK and Fintiv as precedential. More recently, Director Vidal clarified the applicability of the Fintiv factors in her June 2022 Director’s memo.

In Apple Inc. v. Iancu³, Apple and three other companies sought to challenge the Director’s standard for discretionarily instituting an IPR as a violation of the Administrative Procedure Act (APA). The District Court dismissed the case, holding that such decisions were unreviewable under 35 U.S.C. 314(d) because the court “would have to analyze questions that are closely tied to the application and interpretation of statutes” that govern institution decisions.

However, on appeal, in Apple v. Vidal⁴, the Federal Circuit reversed the District Court’s decision with regard to whether the Director’s IPR institution instructions provided in the June 2022 memo were properly issued. Although the Director’s IPR institution decision is not subject to judicial review, such authority does not extend to choice of announcement procedure. The Federal Circuit determined that the Director’s procedural instructions, outlined in the June 2022 memo, are not committed to agency discretion by law, noting that “[t]he rulemaking provision of the APA, 5 U.S.C. 553, may itself provide ‘law to apply’ for reviewing agency procedures, even if there is otherwise no jurisdiction to review the substance of the agency decision.” As a result, the Federal Circuit remanded the case to the District Court to allow Apple to assert that the Director’s guidance was improperly implemented without the requisite notice-and-comment rule-making under the APA.

CommScope Techs. LLC v. Dali Wireless, Inc. Decision

Prior to the Apple v. Vidal decision, Director Vidal issued a number of decisions in effort to further clarify her June 2022 IPR guidance. Most recently, on February 27, 2023, she issued a precedential Decision sua sponte, CommScope Techs. LLC v. Dali Wireless, Inc., IPR2022-01242.

In the CommScope IPR, CommScope Technologies filed a petition, challenging claims 1-20 of U.S. Patent No. 11,026,232 owned by Dali Wireless. The ’232 patent discloses a reconfigurable distributed antenna system which serves as a connection between base stations and remote radio head units used for wireless communication. On February 7, 2023, the Panel instituted an inter partes review. The Panel found that CommScope Technologies had presented compelling unpatentability challenges. More specifically, the Panel found Dali Wireless’s claim interpretation insufficient because it lacked support from the Specification. Additionally, the Panel found Dali Wireless’s reliance on arguments made in a related inter partes review (IPR2020-01430) and an inter partes review discussing an overlapping prior art source (IPR2020-01466) insufficient to overcome CommScope Technologies’ obviousness arguments. In reliance on the Director’s memo, however, the Panel did not conduct an analysis under Fintiv, which triggered the Director’s sua sponte Decision in this case.

Director Vidal’s Sua Sponte Decision

In the PTAB’s initial Commscope decision, the Panel interpreted the Director’s June 2022 guidance memo as not requiring a Fintiv analysis upon finding compelling merits. However, the Director’s clarifying precedential Decision held that (i) if Fintiv factors 1-5 do not support discretionary denial, the Panel should not consider compelling merits; and (ii) compelling merits are a means of overcoming discretionary denial after consideration of Fintiv factors 1-5. 

Pursuant to the Director’s precedential Decision, when the Panel assesses compelling merits, it must provide sufficient reasoning for its finding in accordance with the standard enumerated in OpenSky—the petition must demonstrate that “it is highly likely that the petitioner will prevail with respect to at least one challenged claim.” The Panel did not provide reasoning for determining that the merits of the petition were compelling in accordance with the Director’s memo. Rather, the Panel stated its conclusion and pointed to its analysis of obviousness and claim construction under the threshold statutory institution standard of 35 U.S.C. 314(a), without assessing if and how the merits of the petition were deemed compelling following an evaluation of Fintiv factors 1-5.

As a result, the earlier PTAB decision in Commscope was vacated and remanded to the Panel for further proceedings consistent with Director Vidal’s sua sponte Decision.

Takeaways

Prior to the Director’s precedential Decision, the Panel was finding that petitioners provided compelling unpatentability challenges without providing any reasoning or support for such a finding. This practice made it difficult for petitioners and patent owners to determine what types of arguments would constitute compelling challenges. Additionally, the Panel was not routinely describing its Fintiv analysis or how institution of an IPR with a parallel district court proceeding is in the interest of judicial efficiency. Institution determinations became inconsistent in their disclosure regarding analysis of the Fintiv factors.  

The Director’s Decision provides the Panel with a roadmap in its determination of whether to discretionarily deny institution of an IPR. This clarification may help advance USPTO goals of avoiding conflicting outcomes, preserving judicial efficiency and strengthening the patent system. However, the potential impact of the Apple v. Vidal decision on IPR institutions is yet to be seen.