Parties Agreeing to Limit District Court-PTAB Overlap Increasingly Likely to Avoid NHK-Fintiv Denials

USPTO Director Kathi Vidal recently released a guidance clarifying the metes and bounds of the NHK-Fintiv rule, which governs the Patent Trial and Appeal Board’s (PTAB’s) use of discretionary denials in America Invents Act (AIA) reviews. While the PTAB limited the rule’s application in some key respects, it also endorsed some practices that have already developed—including one letting defendants avoid an NHK-Fintiv denial by agreeing to limit subsequent invalidity arguments raised in district court. A companion USPTO study on the application of NHK-Fintiv outcomes indicates that the result has been a drop in NHK-Fintiv denials for such petitions.

More specifically, Vidal gave her seal of approval to the PTAB’s practice of allowing parties to stipulate around NHK-Fintiv factor four, under which the Board may deny a petition if it contains the “same or substantially the same claims, grounds, arguments, and evidence” as a district court invalidity challenge. That practice has arisen as a result of two key PTAB decisions, as noted in RPX’s first-quarter report.

In Sand Revolution II v. Continental Intermodal Group – Trucking (issued May 2020; designated as informative that July), the PTAB granted institution after the petitioner agreed not to assert the same invalidity grounds in district court that it did in its IPR petition. That same December, the Board accepted an even broader type of stipulation in its Sotera Wireless v. Masimo decision (designated as precedential two weeks later), after the petitioner informed the district court that it would not pursue “any ground raised or that could have been reasonably raised in an IPR” after institution. Vidal endorsed the latter category (calling them “Sotera [s]tipulations”, described in related materials as “Sand/Sotera stipulations”), explaining that these “mitigate[] concerns of potentially conflicting decisions and duplicative efforts between the district court and the PTAB”. As a result, Vidal stated that “the PTAB will not discretionarily deny institution of an IPR or PGR in view of parallel district court litigation where a petitioner stipulates not to pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could have reasonably been raised in the petition”.

The USPTO’s NHK-Fintiv study quantified the impact of the Sand/Sotera stipulations endorsed in Vidal’s guidance, showing that challengers agreeing to such estoppel in district court are now much more likely to have their petitions instituted. In particular, the data show that for institution decisions that noted such stipulations, the grant rate has increased significantly—going from 61.3% in Q1 2021 (the first full quarter since the Sotera decision was designated as precedential) to 97.1% in Q4. The statistics also reflect a corresponding increase in the number of institution decisions noting such stipulations.

For more on the PTAB, the NHK-Fintiv rule, and other key patent litigation and marketplace trends, see RPX’s Q2 in Review.