United States: If You Need A Second Bite At The IPR Apple, Take It Quickly

In a decision denying a second petition for inter partes review (IPR), the Patent Trial and Appeal Board (PTAB) elucidated the factors weighing against granting the petitioner's request. The decision underscores the PTAB's concern regarding serial attacks against a patent owner. Nautilus Hyosung Inc. v. Diebold, Inc., Case No. IPR2017-00426 (PTAB, June 22, 2017) (Benoit, APJ).

Diebold had earlier filed both a district court action and a US International Trade Commission (ITC) complaint against Nautilus, alleging infringement of the challenged patent. The patent was directed to methods for sensing magnetic ink character recognition lines on financial checks, such as those typically used by automated teller machines (ATMs). Nautilus filed a first IPR petition against the asserted claims, but the PTAB declined institution. Nautilus then filed a second IPR petition against the patent. In its preliminary response to the second IPR petition, Diebold claimed that the second petition represented a serious inequity, allowing Nautilus the opportunity to adjust its positions based on Diebold's preliminary response to the first petition and the PTAB's prior institution decision, as well as the initial determination from the ITC investigation. According to Diebold, the second petition should be dismissed for equitable reasons under 35 USC § 314(a), and under 35 USC § 325(d) as being based on prior art and arguments that were substantially the same as those previously presented to the PTAB. Nautilus sought and received permission to file a response addressing the patent owner's inequity argument. According to Nautilus, the patent owner's statutory interpretation was "tantamount to an outright prohibition on subsequent petitions, which is inconsistent with Congressional intent and the Board's precedent." 

In considering the arguments, the PTAB observed that the petitioner had already challenged the same claims of same patent. The PTAB noted that the parallel ITC investigation, in which petitioner was a respondent, involved the same prior art asserted in the second petition. The PTAB found, based on evidence from the ITC investigation, that at the time of the filing of the first petition, the petitioner was aware of three of the four prior art references asserted in the second petition and that the petitioner had not given an explanation for why the arguments and evidence relied upon in the second petition were not included in the first petition.

The PTAB was particularly concerned with the timing of the second petition. The PTAB noted that the second petition was filed seven months after Diebold filed its preliminary response to the first petition and more than three months after the first petition was denied. According to the PTAB, because of this hiatus, Nautilus "had sufficient time to take advantage of Patent Owner's and the Board's responses to the First Petition when filing its Second Petition."

Rejecting the petitioner's tantamount-to-a-prohibition argument, the PTAB cited the US Court of Appeals for the Federal Circuit's Harmonic opinion stating "the PTO is permitted, but never compelled, to institute an IPR proceeding." The PTAB emphasized that it was "not saying that multiple petitions against the same claims of the same patent by the same petitioner are never permitted." Instead, it examines the particular circumstances of each proceeding, "including what rationale a petitioner offers for filing multiple petitions and for the time elapsed between those filings." The PTAB did not reach Diebold's § 325(d) argument. 

Practice Note: This decision underscores how critical it is for an IPR petitioner to file a "second bite" petition—due to page count considerations or the like—quickly after the first petition. Having the benefit of the patent owner's preliminary response and the institution decision from the first IPR are factors that weigh against institution of the second IPR. This decision also underscores that a petitioner should offer a suitable explanation for why the arguments and evidence in the second petition were not included in the first petition, such as a statement that the cited prior art was not "known or available" at the time of filing of the initial IPR petition.

If You Need a Second Bite at the IPR Apple, Take It Quickly

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