United States: Expanded PTAB Panel Explains Exercise Of Discretion On Second-Bite Petitions

A rare expanded panel (including the chief judge) of the Patent Trial and Appeal Board (PTAB or Board) issued an precedential decision denying requests for rehearing of decisions denying institution in five inter partes reviews (IPRs). In doing so, the PTAB underscored its reliance on the Nvidia factors as a threshold test in deciding whether to institute review of follow-on petitions. General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha, Case Nos. IPR2016-01357; -01358; -01359; -01360; -01361 (McShane, APJ).

General Plastic (GP) filed a first set of IPR petitions against two patents asserted by Canon in an International Trade Commission investigation in which GP was named as a respondent. The PTAB denied institution of trial for each petition based upon the merits of the asserted prior art positions. Nine months after the filing of the first set of petitions, GP filed multiple follow-on petitions against each of the same patents. The PTAB denied institution for each new petition, citing its discretion under 35 USC § 314(a) and relying on its 2016 Nvidia seven-factor test. GP requested rehearing, seeking review by an expanded panel. 

According to GP, in denying the follow up petitions, the PTAB erred by relying on § 314(a) instead of § 325(d), since only the latter specifically refers to follow-on petitions. GP also alleged that the PTAB relied too heavily on "the perceived burdens that would be imposed on to the Patent & Trademark Office and Patent Owner" and that the legislative history of § 314(a) requires the PTAB, when considering follow-on petitions, to give more weight to whether it can issue a final determination within one year of institutions than to any other factor.

GP also alleged that the PTAB abused its discretion by finding that certain prior art "should have been known" at the time the initial petitions were filed. According to GP, the Nvidia factor on which the PTAB relied for that conclusion was self-defining to be adverse to petitioners in every instance, and therefore was not properly a factor "analyzed" by the PTAB. Because an IPR petition can only be based on "prior art consisting of patents or printed publications," and because the US Court of Appeals for the Federal Circuit in In re Lister held that to qualify as such prior art, a reference must be locatable by a reasonably diligent search, it therefore followed—per GP's syllogism—that any prior art reference that is properly citable in a second petition necessarily could have been found by a reasonable prior art search performed prior to filing the first petition. Accordingly the PTAB's reliance on § 314(a) and misapplication of the Nvidia factors created a de facto bar against all follow-on petitions.

Addressing GP's arguments, the PTAB explained that § 314(a) specifies that institution is at the Director's discretion, which in turn has been delegated to the PTAB. The PTAB clarified that there is no per se rule precluding the filing of follow-on petitions, and that when exercising its discretion under § 314(a), it has consistently considered the equitable factors of the Nvidia test. Recognizing Congress' concern of avoiding the use of America Invents Act proceedings as "tools for harassment" against patent owners, the PTAB explained that "we are concerned here by the shifts in the prior art asserted and the related arguments in follow-on petitions," as "[m]ultiple, staggered petitions challenging the same patent and same claims raise the potential for abuse." The PTAB cautioned that "[t]he absence of any restrictions on follow-on petitions would allow petitioners the opportunity to strategically stage their prior art and arguments in multiple petitions, using our decisions as a roadmap, until a ground is found that results in the grant of review." Because of the permissive language in both § 314(a) and § 325(d), the PTAB disagreed that § 325(d) was intended to be the sole factor for the PTAB to consider when reviewing follow-on petitions. The PTAB also noted that, although the legislative history reflects recognition of a desire for a "safety valve" to alleviate backlog, it does not limit the exercise of discretion under § 314(a) to circumstances in which there is a high volume of pending proceedings.

Revisiting the denials of the second set of petitions, the PTAB found that six of the seven Nvidia factors weighed against institution. Regarding the issue of whether GP "should have known" of the prior art relied on in the follow-on petitions, the PTAB explained that the relevant issue was not whether the prior art references constituted printed publications, but whether they could have been found with reasonable diligence. According to the PTAB, "a petitioner is free to explain why a reasonably diligent search could not have uncovered the newly applied prior art," but GP had not given any such explanation, nor had it argued that there were any changed circumstances that reasonably justified its new prior art searches and associated filing of follow-on petitions. Finally, the PTAB reiterated that "multiple, staggered petition filings, such as those here, are an inefficient use of the inter partes review process and the PTAB's resources."

Practice Note:

The PTAB cited its 2015 decision in Apotex v. Wyeth ( IP Update, Vol. 18, No. 10), describing what a reasonably diligent petitioner "could have raised," as including "prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover."

Expanded PTAB Panel Explains Exercise of Discretion on Second-Bite Petitions

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