Fintiv Is the New Nhk Springs: New Informative Decisions Sharpen the PTAB’s Focus on Discretionary Denials and Provide Guideposts for Parties

| Alexander D. ZengBenjamin Anger

The PTAB has been grappling with how to manage IPR petitions for patents that are also being challenged in federal district court, particularly when the district court is set to determine the patent validity prior to the PTAB’s final written decision. The PTAB must weigh whether conducting a full IPR trial is a wise use of its resources when the district court will have already reached its own conclusion.

The PTAB’s 2018 Update to the Trial Practice Guide opened the door for patent owners to “address in their submissions” whether factors, such as timing of the district court trial, “may bear on the Board’s discretionary decision to institute or not institute.” Shortly thereafter, the PTAB issued a decision in NHK Springs, later designated as precedential in May 2019, to deny institution of an IPR due, in part, to trial in the parallel district court proceeding being scheduled to take place prior to the statutory due date for the Board’s final written decision. The panel in NHK Springs decided it would be a waste of judicial resources to institute the proceeding if the district court was already expending resources in making the same determination before the panel could issue a final written decision.

NHK Springs, however, lacked significant guidance for practitioners. That decision was mostly about discretionary denial under § 325(d), with a few paragraphs about § 314(a) at the end. Even so, patent owners began citing NHK Springs heavily for the opportunity (even if remote) to kill an IPR petition without the Board ever needing to reach the merits of the challenge. Many of these NHK Springs-type arguments failed because they differed from the NHK Springs specifics; but many also succeeded even if they differed from NHK Springs, as many PTAB panels entertained new factors that were not considered in NHK Springs itself. These discretionary denial cases have been typically decided on their facts, but also were panel dependent.

In May 2020, the PTAB designated as precedential an order in Apple v. Fintiv that authorized supplemental briefing on the NHK Springs issue. In Fintiv the panel consolidated factors from NHK Springs with many that were created subsequently by panels elaborating on NHK Springs, to come up with the following non-exhaustive list of factors for evaluating requests for discretionary denial under § 314(a):

1. whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;

2. proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;

3. investment in the parallel proceeding by the court and the 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.

Apple, Inc. v. Fintiv, Inc., IPR2020-0019 (PTAB Mar. 20, 2020).

More recently, in July 2020, the Board designated two additional decisions as informative that put the new Fintiv factors into practice. It appears that the Board is signaling that Fintiv is the new NHK Springs, and the informative decisions, with diverging outcomes, provide guideposts on applying the Fintiv factors.

The first informative decision, Apple, Inc. v. Fintiv, Inc., IPR2020-0019 (PTAB May 13, 2020), is actually the institution decision stemming from Apple v. Fintiv, where the panel that originally set out the Fintiv factors later applied those factors to deny institution of Apple’s IPR. The panel weighed all six factors, but important to its conclusion was that the district court trial was scheduled for two months prior to a final written decision in the IPR (Factor 2) and the perceived weaknesses in the merits of the validity challenge (Factor 6).

The second informative decision, Sand Revolution II, LLC et al v. Continental Intermodal Group - Trucking LLC, IPR2019-01393 (PTAB June 16, 2020), swung the other way: the panel originally felt compelled to deny institution of the IPR under NHK Springs, but upon a request for rehearing and in view of the intervening designation of Fintiv as precedential, the Board granted institution. In considering Fintiv Factor 2, the Board concerned itself with the uncertain nature of the district court’s scheduled trial date, noting that the court had already moved the trial date more than once and even the current trial date was qualified with a parenthetical of “(or as available).” The parties’ and court’s investment in the parallel proceeding (Factor 3) was seen to be minimal and thus favored institution, and the overlap between issues raised in the petition and the district court (Factor 4) was deemed to be marginally in favor of not exercising discretion to deny institution. Regarding Factor 6, the Board agreed that the merits of the petitioner’s challenge were reasonably strong and thus weighed in favor of institution.

In designating Fintiv as a precedential decision, and then designating subsequent decisions applying the Fintiv factors with divergent outcomes as informative, the PTAB is taking efforts to provide parties and practitioners with needed clarity and guidance in the arena of discretionary denials under § 314(a) when there is a parallel district court proceeding.