Dealing With The Aftermath

• Published date: 08 May 2021
• Subject Matter: Intellectual Property, Patent
• Law Firm: Morrison & Foerster LLP
• Author: Alex S. Yap and Jean Nguyen

In its precedential order in Apple Inc v Fintiv, Inc, the US Patent Trial and Appeal Board (PTAB) clarified its approach to whether to deny institution of a postgrant proceeding under 35 USC section 314 based on a co-pending district court proceeding. The March 2020 Fintiv order was controversial and provoked a spirited response from stakeholders. This included a federal lawsuit in August 2020 by several of Silicon Valley's heavy hitters, who alleged that the so-called "NHK-Fintiv rule"¹ is "procedurally invalid". The US Patent and Trademark Office (USPTO) requested comments on the NHK Fintiv rule and designated two NHK-Fintiv related decisions precedential.

The Fintiv order and its aftermath

The PTAB has discretion under section 314(a) to deny institution of post-grant proceedings. In a May 2019 precedential decision, NHK Spring Co v Intri-Plex Technologies, Inc, the PTAB held that the scheduling of the trial in a parallel co-pending district court proceeding before the PTAB's expected final written decision favoured denying institution. The PTAB expanded upon NHK in its precedential Fintiv order in March 2020, listing six factors (the NHK-Fintiv rule) for assessing whether to exercise discretion to deny institution.

Discretionary denials rose by 60% yearover-year in 2020. Overall, 20% of denials were on procedural grounds, compared to 12.5% in 2019. Of the 228 non-merit denials, 62% were related to the NHK-Fintiv rule.

Block use of the NHK-Fintiv rule

The rise in discretionary denials triggered much commentary about the NHK-Fintiv rule and sparked the Fintiv lawsuit.

On 31 August 2020, four major technology companies filed the Fintiv lawsuit in the Northern District of California to enjoin the USPTO's use of the NHK-Fintiv rule. The plaintiffs argued that the NHK-Fintiv "factors [] appear nowhere in the AIA" and are "arbitrary and capricious because [they] lead to speculative, unpredictable, and unfair outcomes."

The USPTO's recent actions

Subsequent USPTO actions appear to respond to the plaintiffs' arguments in the Fintiv lawsuit and related criticisms. For example, one month after the filing of the Fintiv lawsuit, the USPTO created a new online form that allows stakeholders to nominate a particular PTAB decision for precedential designation. Less than four weeks later, the USPTO solicited comments on its discretionary denials, including the NHK-Fintiv rule.The commentary period was shorter than usual, lasting only one month and ending shortly before...