USPTO Unleashes Wave of PTAB Rule Proposals

The US Patent and Trademark Office (USPTO) published an Advance Notice of Proposed Rulemaking (ANPRM) on April 20 seeking comments on proposed changes to America Invents Act trial proceedings before the Patent Trial and Appeal Board (PTAB). The ANPRM includes a wide range of proposals relating to rules the USPTO director will use in exercising discretion to institute post-grant review proceedings, including discretionary denials under 35 USC 314(a), 324(a), and 325(d).

RETOOLED DISCRETIONARILY DENIAL RULES

To purportedly make the rules clearer and more predictable (as opposed to what the USPTO identifies as complicated balancing tests that can require substantial legal analysis), the USPTO is considering changes that would provide for categorical denial of institution based on certain conditions and circumstances (and exceptions), such as the following:

• Petitions filed by certain for-profit entities
• Petitions challenging under-resourced patent owners (e.g., micro and small entities) where the patentee has or is attempting to bring a product to market
• Petitions challenging patent claims previously subject to a final adjudication upholding the patent claims against patentability challenges (either in another forum or in a different post-grant proceeding before the PTAB)
• Serial and parallel petitioning, petitions raising previously addressed prior-art arguments, and petitions challenging patents subject to parallel district court litigation

Regarding the last point about multiple petitions and parallel proceedings, the USPTO is also proposing a narrower scope of circumstances that would trigger grounds for discretionary denial of post grant reviews (PGRs) than for inter partes reviews (IPRs), noting the clear differences in the statutory requirements and congressional goals for each set of proceedings.

Further, the USPTO is proposing a change to exclude investigations at the International Trade Commission (ITC) from the scope of parallel proceedings considered for discretionary denial purposes, noting the important distinctions of ITC investigations, including the fact that rulings in such investigations are not binding on either the USPTO or district courts proceedings.

REPACKAGING THE FINTIV TEST

Morgan Lewis has been closely following developments at the USPTO related to the Fintiv test for discretionarily denying petitions where there is parallel district court litigation, with a LawFlash on the director’s memorandum in June 2022 and a subsequent LawFlash on a case applying the director’s guidance to a petitioner’s stipulation.

The USPTO is considering two options for making the Fintiv rule more workable from its perspective, one that would streamline the analysis by providing more bright line rules about when a particular district court proceeding would trigger a discretionary denial of an IPR petition, and another that would require Sotera stipulations.

NEW DEFINITIONS FOR PROPOSED RULE CHANGES

Such changes may include providing several threshold definitions setting forth criteria to determine (1) what constitutes a “substantial relationship” between entities sufficient to trigger (or avoid) discretionary denial, (2) when claims sets are deemed to have “substantial overlap” with challenged claims, and (3) what constitutes “compelling merits” sufficient to trigger an exception to discretionary denial. Further information can be found in the ANPRM.

‘Substantial Relationship’ of Entities

The USPTO currently applies common law formulations of “real party in interest” and “privy” to ensure entities related to a party are considered when evaluating conflicts and the effect of estoppel provisions. Although the USPTO has adopted similar considerations in the discretionary-denial context, such party relationships have been perceived as too limited in certain circumstances.

Therefore, the USPTO is considering adopting a broader “substantial relationship” test that would apply to certain relationships that would not fall within the common law definitions. For example, one proposal is to consider those involved in a membership organization that files IPRs or PGRs as having a substantial relationship with the organization.

In the interest of transparency, the USPTO is also considering requiring disclosure of such relationships upon the filing of a party’s first paper in an IPR or PGR and promptly filing supplemental statements thereafter about changes to such information.

‘Substantial Overlap’ of Claim Sets

The USPTO is also considering setting out a clear, predictable definition for when claim sets “substantially overlap.” Specifically, under the proposed changes, claim sets would be deemed to overlap for discretionary denial purposes when at least one challenged claim is “substantially the same” as a claim set to which the claim is being compared. In performing the comparison, claims would be deemed to be “substantially the same” when any differences between the claims are not material to patentability.

‘Compelling Merits’

While the PTAB is considering several rule changes that could broaden the scope of discretionary denials in a more categorical and predictable fashion (as summarized above), it is also considering allowing challenges that would otherwise be candidates for discretionary denial based on the broadened standard outlined in the ANPRM to proceed when a challenge presents “compelling merits” at the institution stage such that institution would be highly likely to lead to a conclusion that one or more claims of the challenged patent are unpatentable.

It is important to note that meeting the compelling-merits standard would require the petitioner to meet a higher evidentiary standard at the institution stage, and a higher standard regarding the likelihood of unpatentability than is required to institute an IPR under 35 USC 314(a) or a PGR under 35 USC 324(a).

ADMINISTRATIVE CHANGES TO THE PETITIONING PROCESS

The USPTO is also considering some other changes to the petitioning process to purportedly smooth inconsistencies that can result from current administrative rules for post-grant proceedings. The proposals include the following:

1. Requiring petitioners to file a stipulation that neither they nor their privy or real parties have filed or will continue existing challenges to challenged claims in a subsequent post-grant proceeding
2. Requiring petitioners to file a separate paper justifying multiple petitions (this would codify currently PTAB practices via formal rulemaking)
3. Allowing PTAB petitioners to pay additional fees to have higher word count limits in petitions to institute post-grant proceedings
4. Providing a separate opportunity to petitioners for briefing on discretionary-denial issues
5. Requiring filing of all settlement papers when seeking dismissal of post-grant proceedings (either before or after institution of such proceedings)

The USPTO indicates that the proposed rule changes align with the goals of the America Invents Act, such as allowing disputes regarding the validity of patents to be addressed efficiently and effectively. To the extent that any petitioners or patent owners disagree, they should consider submitting comments in response to the ANPRM. Stakeholders may submit comments in response to the ANPRM until June 20, 2023.

CONCLUSION

In any event, petitioners and patent owners should understand these proposals as indicating potential directions that the USPTO will take soon and plan accordingly.

On May 9, 2023, at 12:00 pm EST, the USPTO will be hosting a webinar information session about the ANPRM, during which the director will be providing information about the USPTO’s reasoning for proposing the rule changes. The webinar is open to all and is part of a larger PTAB Boardside Chat series that the USPTO is hosting to address best practices before the PTAB.