United States: Trending At The PTAB: Fintiv Is Alive, But With Way Less Zip

As many suspected, there has been a sharp decline in discretionary denials since June 2022, when U.S. Patent and Trademark Office Director Kathi Vidal issued new guidance on the Patent Trial and Appeal Board's precedential 2020 decision in Apple Inc. v. Fintiv Inc.

To date, there have only been four decisions post-guidance where the PTAB exercised its discretion to deny institution based on Fintiv, and three of those decisions were related to the same litigation.

Furthermore, on Feb. 27, Vidal vacated the board's implementation of the Fintiv analysis in CommScope v. Dali Wireless,¹ determining that the compelling merits determination is not a substitute for the Fintiv analysis.

Below we analyze the limited use of Fintiv to deny institution post-guidance and the director's recent instructions in CommScope for a proper compelling merits determination under Fintiv.

And while those four cases prove that Fintiv is still alive and can be useful for patent owners under the right circumstances, Fintiv no longer appears to pack the same punch it once did.

Discretionary Denials Way Down Post-Guidance

In June 2022, Vidal issued interim procedure for discretionary denials in America Invents Act post-grant proceedings with parallel district court litigation.² This guidance primarily instructed the board on four things:

• The Fintiv analysis³ "does not apply to parallel U.S. International Trade Commission (ITC) proceedings";
• The board will not deny institution "where a petitioner presents a stipulation" under its precedential 2020 decision in Sotera Wireless Inc. v. Masimo Corp.,⁴ relevant to Fintiv factor 4;
• In comparing final written decision and district court trial dates, the board will consider "the median time from filing to disposition of the civil trial for the district in which the parallel litigation resides," relevant to factor 2; and
• The board will not deny institution "where a petition presents compelling evidence of unpatentability," relevant to factor 6.

This guidance had an immediate impact on the number of discretionary denials, which dropped off sharply in the second half of 2022. The guidance also led to much higher institution rates in 2022 compared with previous years, as shown in the chart below.⁵

Source: USPTO PTAB Trial Statistics, November 2022

Thus far in 2023, that trend for higher institution rate appears to be continuing. Notwithstanding the clear impact of the June 2022 guidance on discretionary denials and institution rates, Fintiv is not completely dead.

Since the director's guidance, we are aware of two families of inter partes review — four cases total — where the board chose to exercise its discretion to deny based on Fintiv. As described below, the board's post-guidance use of Fintiv has thus far been limited to a particular set of circumstances.

Successful Fintiv Discretionary Denials Post-Interim Guidance

Ericsson v. Godo Kaisha IP Bridge 1 and Nokia v. Godo Kaisha IP Bridge 1

The board issued the first set of post-guidance Fintiv denials in November 2022 in three related cases involving Ericsson Inc. and Nokia of America Corp as the petitioners and Godo Kaisha IP Bridge 1 as the patent owner.⁶

In all three decisions, the board thoroughly evaluated each of the Fintiv factors, finding factors 1, 4 and 6 to be neutral, and factors 2, 3 and 5 favored denial.

In balancing the factors, the board relied heavily on factors 2 and 3 as favoring denial because trial in the parallel district court case was imminent and substantial investment had already been exhausted in the parallel case.

Indeed, perhaps the most important consideration highlighted in the Godo Kaisha IP Bridge 1 decision was the fact the district court trial was scheduled for barely more than one month after board's decision.

The board was not convinced that any of the other Fintiv factors outweighed this imminent trial date. In considering factor 4, the board noted that the petitioners opted for a stipulation under the 2020 decision in Sand Revolution v. Continental Intermodal Group-Trucking⁷ — and not a Sotera stipulation — agreeing to only forgo invalidity grounds raised in the IPR.

The board cited the director's guidance, stating "the Fintiv Memo does not suggest that we should refrain from denying the petition on the basis of Petitioner's stipulation."⁸

In considering factor 6, the board further noted that the petitioners had "not presented a compelling, meritorious challenge" to the patents^.9

Ericsson v. Collison Communications

The second IPR family receiving a post-guidance Fintiv denial came in January 2023 in a case involving a similar set of facts, Ericsson Inc. v. Collison Communications Inc.¹⁰ In this case, the board found factor 1 to be neutral; factors 2, 3, 5 and 6 to favor denial; and factor 4 to weigh against denial.

In balancing these factors, the board again placed great weight on the immediacy of trial — scheduled to take place later that same month — and the current stage of the parallel case in the U.S. District Court for the Eastern District of Texas.

Like the other three Fintiv denials, the board was not convinced that any of the other Fintiv factors outweighed that imminent trial date. Regarding factor 2, the petitioner had argued that the median time to trial in the district court put their case on track for trial several months later, citing the director's guidance on that issue.

But the board dismissed these arguments, explaining that the case appeared to be next up on the district court's docket, and even if the trial date was pushed back by a few months, it would still come well before a final written decision. Regarding factor 4, the board considered the petitioner's stipulation but again noted that it "falls short of a Sotera stipulation, which would have obviated a full analysis of the Fintiv factors."¹¹

CommScope: Compelling Merits Determination Not a Substitute for Fintiv Analysis

On Feb. 27, Vidal issued a decision in CommScope v. Dali Wireless, which determined that "PTAB panels [should] only consider compelling merits if they first determined that Fintiv factors 1–5 favored a discretionary denial."¹²

Vidal acknowledged the June 2022 guidance could have been misread on this point and issued the CommScope decision to clear any confusion.¹³

The director vacated and remanded the board's decision because it improperly reached a compelling merits determination without first determining that Fintiv factors 1-5 favor a discretionary denial.¹⁴ Accordingly, the director emphasized that the compelling merits determination is not a substitute for the Fintiv analysis.

Furthermore, in the limited circumstance in which the board determines that compelling merits overcome Fintiv factors 1-5, Vidal instructed that the board must "provide reasoning sufficient to allow the parties to challenge that finding and sufficient to allow for review of the board's decision."¹⁵

The heightened requirements necessary to find in favor of a compelling merits determination may further discourage such findings by the board in the future.

Takeaways for Patent Owners

It is undeniable the director's guidance on Fintiv has played a role in the decline in discretionary denials and increase in institution rates. As a result, Fintiv is not as powerful for patent owners as it once was.

But that does not mean that they should ignore Fintiv arguments completely. Under the right circumstances, as the Ericsson and Nokia cases illustrate, the board is still willing to issue discretionary denials based on Fintiv considerations.

In particular, patent owners may find some success when they are in a fast-paced court — e.g., Texas courts — where the patent challenger delays in getting its petition on file, and is unwilling to submit a full Sotera stipulation.

On the other hand, it is also important for patent owners to realize that Fintiv may be a much weaker argument in some cases.

Whereas before the director's guidance, it was typical to submit Fintiv arguments in most cases involving a parallel Eastern District of Texas case, patent owners would now be wise to focus instead on other arguments, e.g., on the merits or based on other procedural grounds, if the right circumstances under Fintiv do not present themselves.

Takeaways for Petitioners

Petitioners can take some comfort in knowing that Fintiv is not as troubling as it once was. But that does not mean that petitioners should wait until close to their one-year bar date to file their petition.

Indeed, as the Ericsson and Nokia cases show, Fintiv can still play a role in denying petitioners their day at the PTAB. In both the Ericsson and Nokia cases, petitioners were faulted for not promptly filing petitions.

Therefore, as was the case before the director's guidance, it is still best practice for petitioners to file their petitions as early as possible to avoid any potential Fintiv arguments.

Petitioners may also wish to consider a Sotera stipulation, which is now highly likely to fend off a Fintiv attack under the director's guidance. In the Ericsson and Nokia cases, the board emphasized that, had a full Sotera stipulation been made by petitioner, it would have been compelled the board to not exercise its discretion to deny under Fintiv.

Choosing to stipulate to anything less than a Sotera stipulation will typically leave the petitioner with some uncertainty regarding Fintiv. Therefore, while a Sotera stipulation certainly has consequences for petitioners, it remains one of the most valuable tools in reducing the risk of a discretionary denial based on Fintiv.

Footnotes

1. CommScope Technologies, LLC v. Dali Wireless Inc., IPR2022-01242, Paper No. 23 (PTAB
Feb. 27, 2023).

2. https://www.uspto.gov/sites/default/files/documents/interim_proc_discretionary _denials_aia_parallel_district_court_litigation_memo_20220621_.pdf

3. Apple Inc. v. Fintiv, Inc. , IPR2020-00019, (PTAB Mar. 20, 2020) (precedential).

4. Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, (PTAB Dec. 1, 2020) (precedential).

5. https://www.uspto.gov/sites/default/files/documents/ptab_aia_20221130_trial.pdf.

6. Ericsson Inc. et al v. Godo Kaisha IP Bridge 1 , IPR2022-00725 (PTAB Nov. 2, 2022); Ericsson Inc. et al v. Godo Kaisha IP Bridge 1, IPR2022-00726 (PTAB Nov. 2, 2022); Nokia of America Corporation et al v. Godo Kaisha IP Bridge 1 , IPR2022-00755 (PTAB Nov. 2, 2022).

7. Sand Revolution II, LLC v. Continental Intermodal Group-Trucking LLC , IPR2019-01393, (PTAB June 16, 2020).

8. Ericsson Inc. et al v. Godo Kaisha IP Bridge 1, IPR2022-00725 (PTAB Nov. 2, 2022); Ericsson Inc. et al v. Godo Kaisha IP Bridge 1, IPR2022-00726 (PTAB Nov. 2, 2022); Nokia of America Corporation et al v. Godo Kaisha IP Bridge 1, IPR2022-00755 (PTAB Nov. 2, 2022).

9. Id.

10. Ericsson Inc. et al v. Collison Communications, Inc., IPR2022-01233 (PTAB Jan. 19, 2023).

11. Id.

12. CommScope Technologies, LLC v. Dali Wireless Inc., IPR2022-01242, Paper No. 23 at 4

(PTAB Feb. 27, 2023).

13. Id.

14. Id.

15. Id. at 5.

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