Is the PTAB’s Apple v. Fintiv decision a fair one for IPR petitioners?

Zachary Silbersher

The PTAB’s decision in Apple, Inc. v. Fintiv, Inc., Case No. IPR2020-00019 (Paper No. 11) has been designated precedential as of May 5, 2020.  The decision outlines the factors that the PTAB will consider when determining whether petitions should be denied under § 314(a) based upon a parallel district court litigation in which the same invalidity arguments have been raised.  The case implicates the balance between patent owners and patent challengers, and who carries the heavier load.

Patents are a strange animal.  Only one federal body is charged with giving them out, but multiple federal bodies have the authority to take them away.  While the USPTO examines and issues patents, it does not have exclusive jurisdiction over invalidating otherwise granted patents.  Both the federal courts and the ITC can also invalidate patents.  Despite this, there is not a fixed hierarchy of administrative or judicial remedies that must first be exhausted before seeking to invalidate a patent before one tribunal versus another.  An entity seeking freedom-to-operate is at liberty to file an IPR at the PTAB at any time (subject to time-bar constraints).  A declaratory-judgment plaintiff need not demonstrate that it first pursued invalidation of the patent before the PTAB before commencing a district court action. 

But what is really a bit awkward, at least relative to many other areas of law, is that there is nothing precluding multiple, parallel proceedings seeking to invalidate the same patent, at the same time, by the same party.  While many other areas of law generally insist on exhaustion of remedies in one forum before pursuit of the same relief in another, or otherwise preclude the same party from seeking the same relief simultaneously before two different tribunals, not so with patents.  Two courts can be reviewing an invalidity challenge to the same patent at the same time brought by the same party.

So, given this, it comes as no surprise that courts, pundits and the PTAB have wrestled with the question over whether and when one tribunal should yield to another.  For instance, Senator Hatch has proposed that, for pharmaceutical patents, a generic should be barred from pursuing parallel challenges to a patent’s validity.  As another example, for a very well-researched and compelling theory on why the PTAB should yield more frequently to district courts for pharmaceutical patents, see here, and our response to that article here. 

In Fintiv, the PTAB has clarified the circumstances under which it will essentially yield to a parallel proceeding within district court.  The decision specifically addresses when the PTAB will exercise its discretion under § 314(a) to deny institution of an IPR in light of a parallel challenge to the same patent in district court.  (This is distinguishable from the PTAB’s discretion to deny institution under § 325(d) because the same or similar arguments to the patent’s validity have previously been raised.)

The PTAB Fintiv decision identifies six factors to considers:  (1) whether a stay exists or is likely to be granted if a proceeding is instituted; (2) proximity of the court’s trial date to the Board’s projected statutory deadline; (3) investment in the parallel proceeding by the court and 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 Board’s exercise of discretion, including the merits, such as how strong or weak the meritorious challenge is to the patent.

Taken together, a major consideration entertained by these factors relates to an interest to avoid duplicative efforts between the courts and the Patent Office.  In particular, some factors lean toward denying institution, and yielding to the district court, when the court has already invested considerable resources in assessing the patent’s validity.  This is no doubt a sensitivity shared by courts.  We previously wrote about a district court that, having undertaken considerable time and resources to investigate and uphold the validity of a patent, refused to essentially vacate its decision simply because the PTAB had arrived at a different result. 

The Fintiv decision has added fuel to the fire on both sides of the patent divide.  Some have argued that Fintiv bolsters the principle that accused infringers should not have two bites of the apple.  Even if there is no statutory preclusion against seeking to invalidate a patent simultaneously in court and in the PTAB, that does not mean that it is a good use of judicial and federal resources.  Nor does it mean it is fair.  Nor does it mean that is generally good for a healthy and thriving patent system.  Rather, perpetuating more degrees of freedom around a patent’s validity only serves to chip away at the ultimate value of any patent.

On the other hand, others see Fintiv as laying a heavy hand on the scales in favor of patent owners.  In this view, the problem with Fintiv, and decisions like it, is that it permits the PTAB to overlook otherwise meritorious challenges.  The direct consequence is for patent owners to game the system by filing in districts, such as the Western District of Texas, that promote speedy scheduling of trials.  Under this view, rather than efficiently weeding out bad patents, the PTAB is indirectly incentivizing more cases to be funneled to patent-friendly districts where, absent review of meritorious challenges at the PTAB, those “bad” patents allegedly survive.

As long as multiple forums continue to exist for simultaneously challenging the validity of a patent, these questions will persist.  Yet, regardless of one’s view, there is a principle that cannot be overlooked:  if you can never quiet title to a piece of property, that in itself liquidates the value of that property.  Likewise, if you can never quiet the question of a patent’s validity, that alone undermines the ultimate value of any patent. 

The Supreme Court’s recent Thryv v. Click-to-Call decision was notable for many reasons.  One reason was Justice Gorsuch’s observations on the number of challenges that the patent owner had to face over the patent’s lifetime.  Some IPR petitioners have taken for granted that if there exists a meritorious challenge to a patent, no matter how dilatory, no matter how duplicative, no matter how late-in-the-game, no matter how parallel with other challenges, then it necessarily should be heard.  But that presumption alone places a heavy-hand on the scales in favor of those challenging patents. 

That type of system converts the statutory presumption of validity to one that, in practice, is a presumption of invalidity.  That hobbles all patents.  As we recently wrote in connection with Intel’s and Apple’s anti-trust lawsuit against Fortress, we are witnessing an era where the biggest and seemingly most “innovative” tech companies in generations appear to be bent on doing just that.