AIA Review Institution Rate Increases as Vidal Refines Rules on Discretionary Denials

In the third quarter of 2022, the Patent Trial and Appeal Board (PTAB) instituted trial in 67% of the America Invents Act (AIA) review petitions addressed in Q3 2022, up from 53% in the third quarter last year. The institution rate for 2022 through the end of the third quarter was 66%, compared to 58% in that same timeframe in 2021.

That increase came as USPTO Director Kathi Vidal pushed forward on a series of reforms at the PTAB—including changes impacting the Board’s practice of discretionarily denying institution in AIA reviews based on the status of parallel litigation. That practice, known as the NHK-Fintiv rule, has been a frequent point of debate since its inception, with particular criticism focused on a factor allowing the PTAB to consider the proximity of a scheduled district court trial date to the deadline for the Board’s final written decision. That factor was among the points of criticism addressed by Vidal in a June guidance establishing that the PTAB may consider data on actual time to trial, possibly blunting objections that the scheduled dates are too speculative of a metric, among other changes.

In Q3, Vidal used her authority under the post-Arthrex director review program to further define the metes and bounds of the NHK-Fintiv rule. For example, on August 23, Vidal issued a precedential director review decision that addressed the interplay of NHK-Fintiv and the General Plastic factors, which govern the circumstances in which review can be discretionarily denied where multiple IPRs are filed against the same patent. In that decision, Vidal ruled that when the same party has previously challenged the same patent (a circumstance addressed by General Plastic factor one), the Board should generally not deny institution for a follow-on petition when an earlier decision was rejected under NHK-Fintiv instead of on the merits.

Shortly after, Vidal initiated director review, again doing so sua sponte (i.e., on her own initiative, without the request of a party), in another IPR that has raised the issue of whether discretionary denials are appropriate when the district court has invalidated a patent on a basis not available through IPR—specifically, based on patent ineligibility under Alice. Indeed, the parties in the IPR at issue debated whether NHK-Fintiv should even apply here in the first place, since Section 101 is not an available ground for a validity challenge in an IPR proceeding, while other PTAB panels have declined to discretionarily deny institution in similar situations. Yet while acknowledging that “the Fintiv analysis and factors are a poor fit to the circumstances of this proceeding”, the PTAB nonetheless opted to deny institution based on NHK-Fintiv efficiency concerns.

Vidal’s order launching review of that institution decision found that the case “raises issues of particular importance to the Office and the patent community”—and given the popularity of Alice as a defensive tool, petitioner-defendants will undoubtedly be closely watching the outcome of this proceeding.

See RPX’s third-quarter review for more on the PTAB and other trends affecting patent litigation and the patent marketplace.