Kathi Vidal was sworn in as the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (“USPTO”) on April 13, 2022. In the months since then, she has begun to make a significant mark on the agency, particularly at the Patent Trial and Appeal Board (“PTAB”). Highlights of some of the most significant changes under Director Vidal’s leadership include:
- Director review.
The USPTO put in place a relatively new program called “Director review” shortly after the Supreme Court issued its decision in United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021). Arthrex held that the Director must have the authority to review final written decisions in PTAB trials to ensure that PTAB judges did not have more authority than the Constitution permits, based on how PTAB judges are appointed. Under the Director review program, a dissatisfied party in a PTAB trial may request Director review of the final written decision in the trial. The Director may also decide to review any PTAB decision herself, even without a request from a party.
Drew Hirshfeld, then-Commissioner for Patents, was performing the functions and duties of the Director when the USPTO put the Director review program in place, so he issued the first Director review decisions. (The Federal Circuit has twice determined that he appropriately exercised that power as delegated to him, even though his appointment was similar to that of PTAB judges.) Director Vidal has used the process much more aggressively, though, using it to implement her policy preferences. Her Director review matters include:
- OpenSky Industries, LLC v. VLSI Technology LLC, No. IPR2021-01064, and Patent Quality Assurance, LLC v. VLSI Technology LLC, No. IPR2021-01229. In these controversial cases, the Director has repeatedly granted Director review to evaluate the proceedings and to consider, and then to award, sanctions against petitioners OpenSky and Patent Quality Assurance (“PQA”).
- VLSI sued Intel in the U.S. District Court for the Western District of Texas for patent infringement of two patents, and Intel responded by filing petitions for inter partes review (“IPR”) of those patents with the PTAB. The PTAB denied those petitions under the Board’s Fintiv doctrine, which permits the PTAB to deny petitions where the record indicates that a district court may reach a decision before the PTAB (more on the Fintiv doctrine below). The district court case went to trial, and the jury awarded VLSI $2.175 billion in damages.
- Shortly after the jury verdict, OpenSky and PQA filed petitions for IPR challenging VLSI’s patents. The petitions were nearly identical to Intel’s petitions, and they relied on the same expert declarations. Because OpenSky and PQA had not been sued for infringement of the patents, the Fintiv doctrine did not bar their institution, and the PTAB determined that at least one petition challenging each patent satisfied the standard for granting institution of an IPR.
- Both OpenSky and PQA appear to have engaged in discussions with VLSI and/or Intel seeking compensation in association with the pending IPRs. When this came to light, Senators Tillis and Hirono sent a letter to the Director alleging that the petitions were abusive. The Director agreed to review the institution decisions and ordered discovery from OpenSky and PQA about the allegations. Meanwhile, Intel filed its own IPR petitions (again), along with a motion to join the instituted proceedings, and the PTAB joined Intel to the pending proceedings.
- On December 22, 2022, the Director issued decisions sanctioning both OpenSky and PQA for abusing the IPR system. She terminated both OpenSky and PQA from the IPRs, but she determined that the petitions presented “compelling merits” and therefore permitted Intel to remain as a petitioner in the IPRs. She ordered PQA to show cause as to why it should not have to pay monetary sanctions, and she left open the possibility of further sanctions against OpenSky. She also ordered VLSI to show cause as to why it should not be sanctioned for making misrepresentations of fact and law in support of its attempt to have Intel terminated from the OpenSky proceeding. The IPR proceedings, which had been stayed, will continue to final written decisions, likely with further review at that point.
- Code 200, UAB v. Bright Data Ltd., Nos. IPR2022-00861, -00862. In another significant case, the Director overturned PTAB decisions denying institution of and joinder to IPRs where the petitioner had, like Intel, had previous petitions denied under the Fintiv doctrine. The Director focused on the Board’s mission to improve patent quality and concluded that the mission outweighed concerns about agency resources and fairness to patent owners, the latter of which had been the focus of former Director Iancu.
- Nested Bean, Inc. v. Big Beings USA Pty Ltd., No. IPR2020-01234. The Director granted Director review in this case to resolve a question of first impression. Nested Bean filed a petition challenging claims 1-16 of Big Beings’ patent. The patent includes two independent claims (claims 1 and 2) and 14 multiple dependent claims (claims 3-16) that depend from either claim 1 or claim 2. The PTAB determined that Nested Bean had not proven claim 1 unpatentable, but that it had proven claim 2 unpatentable. The PTAB concluded that claims 3-16 were unpatentable because they depended from an unpatentable claim, even though they also depended from a patentable claim. The Director granted Director review to resolve whether such dependent claims should be patentable or unpatentable.
- Boehringer Ingleheim Animal Health USA Inc. v. Kansas State University Research Foundation, No. PGR2022-00021. The Director granted Director review of this decision denying institution of a post-grant review (“PGR”) “because this case raises issues of particular importance to the Office and the patent community.” The PTAB denied the petition largely under 35 U.S.C. § 325(d), which permits the USPTO to deny a petition where “the same or substantially the same prior art or arguments previously were presented to the Office.” The petition challenged the patent on written description and enablement grounds under 35 U.S.C. § 112, as well as obviousness grounds under 35 U.S.C. § 103. The PTAB determined that the Examiner had made written description rejections during prosecution, but had not rejected the allowed claims. The PTAB also determined that the enablement ground was “largely redundant to” the written description ground. Therefore, the PTAB chose to use its discretion not to institute on those particular grounds. Finally, the PTAB determined that the obviousness ground did not meet the standard for institution of a PGR. The Director will address the merits of these determinations in the coming weeks.
- NXP USA, Inc. v. Impinj, Inc., No. IPR2021-01566. The PTAB had denied institution of the IPR based on the Fintiv doctrine. After the denial, petitioner had offered a stipulation not to raise certain arguments in the district court if the PTAB granted institution of the IPR, which is a consideration in the Fintiv analysis. The PTAB panel determined that the offer of a stipulation had come too late ̶ it must be offered before the decision on institution. The Director granted Director review to affirm that decision and make it precedent binding on the PTAB.
Director Vidal’s aggressive use of Director review may not continue, however. She has expressed interest in finding new avenues to address PTAB decisions that do not require her personal involvement, indicating that her current approach may not be “sustainable” in the long term. The USPTO is expected to engage in rulemaking to establish future review processes, including Director review.
2. Guidance memoranda.
Director Vidal has also used guidance memoranda to undo (at least in part) measures put in place by her predecessor, Director Iancu. These memoranda set forth policy positions that are binding on PTAB panels, much like precedential decisions, although they tend to be more broadly focused on policy instead of the facts of a particular case.
- Fintiv. Director Iancu’s most controversial act was designating as precedential the PTAB decision setting forth factors for the PTAB to consider before instituting an IPR or PGR when proceedings in other tribunals were scheduled to reach a result before the PTAB final written decision. Director Iancu reasoned that Congress intended IPR and PGR proceedings to be a faster, less expensive alternative to litigation in district courts and the International Trade Commission (“ITC”). Thus, Congress’s goal would not be reached if the other tribunal would reach a result before the PTAB.
- Many disagreed with this reasoning, and several lawsuits were filed challenging the Fintiv doctrine. Shortly after assuming her new role, Director Vidal issued a memorandum reining in the doctrine, with four main features:
- Regardless of the timing of the parallel litigation, the PTAB will institute an IPR or PGR where the petitioner presents “compelling evidence of unpatentability,” or what the Director has later referred to as “compelling merits.” This is a higher standard than the standard for institution of an IPR or PGR, but if the petitioner can satisfy it, the PTAB will go forward to address apparently strong arguments of unpatentability, in support of its role of ensuring patent quality.
- The PTAB will no longer consider ITC proceedings under the Fintiv doctrine. ITC decisions regarding patent validity have no preclusive effect on the PTAB or district courts, while PTAB decisions regarding unpatentability result in canceling claims from the patent, so the PTAB will proceed to address patentability even if the ITC does so at the same time.
- A stipulation by the petitioner that it will not challenge the patent using the same grounds raised in the IPR or PGR petition, or those that it could reasonably have raised in the petition, will avoid the Fintiv analysis completely. This is a so-called Sotera stipulation, based on the PTAB’s precedential decision holding that such a stipulation is an important factor in the Fintiv analysis. The memorandum makes it dispositive.
- The PTAB will consider evidence beyond a district court’s scheduling order when determining whether the district court will reach a decision before the PTAB. Many criticized Fintiv for relying on trial dates set in a scheduling order, when such dates frequently are not met (including in the Fintiv case itself). Therefore, Director Vidal indicated that the PTAB should consider the median time-to-trial in the district, rather than just a date set in a scheduling order.
- Applicant-admitted Prior Art (“AAPA”). Director Iancu issued guidance limiting the PTAB’s ability to rely on AAPA in IPRs in August of 2020, based on the statute’s requirement that an IPR petition be based “only on the basis of prior art consisting of patents or printed publications.” Qualcomm challenged the PTAB’s (pre-Iancu guidance) reliance on AAPA in a final written decision that it appealed to the Federal Circuit, and the Federal Circuit remanded the case for reconsideration of its approach to AAPA.
- After the remand, Director Vidal issued a memorandum superseding Director Iancu’s guidance. In the guidance, she explained that AAPA must be used in conjunction with other prior art consisting of patents or printed publications, but she expressed her view that AAPA can otherwise be widely used:
- It can be used to supply missing claim limitations.
- It can be used to support a motivation to combine.
- It can be used to demonstrate the knowledge of a person of ordinary skill in the art.
After this guidance, petitioners will have broad authority to use AAPA in support of their petitions.
3. Federal Register notices.
Director Vidal has issued two Federal Register notices, and she has indicated that she intends to engage in rulemaking in several areas. She has been slower than Director Iancu in the rulemaking process, as he rapidly changed the PTAB’s claim construction standard from the “broadest reasonable interpretation” standard to the standard used by district courts, but that seems ripe for change. Director Vidal has issued two Requests for Comments in the Federal Register:
- PTAB Review Processes. Director Vidal asked for comments on the interim Director review process, the existing Precedential Opinion Panel (“POP”) process under the PTAB’s Standard Operating Procedure 2, and the PTAB’s processes regarding internal circulation and review of draft decisions. The last has been called into question by the Government Accountability Office (“GAO”), which has issued reports indicating that PTAB judges feel pressure from their supervisors to revise their decisions. The PTAB has announced certain changes to the internal review process, and the USPTO has indicated that it is reconsidering its interim approach to Director review and the necessity for the POP.
- Robustness and Reliability of Patent Rights. The USPTO has received inquiries from the President and Members of Congress regarding patents covering pharmaceutical products. In response, the Director asked for comments broadly (not limited to pharmaceutical products) about the USPTO’s approach to examination, including:
- Whether prior art searching by examiners should be enhanced.
- Whether continuation applications in large families of patent applications should receive greater scrutiny under the written description and enablement requirements of 35 U.S.C. § 112.
- Whether the USPTO should impose limitations on practice involving Requests for Continuing Examination.
- Whether the USPTO should change its practices regarding obviousness-type double patenting, including its use of restriction requirements and patent applicants’ use of terminal disclaimers.
Director Vidal has shown great interest in reconsidering the USPTO’s policies in a wide range of areas. We expect further significant developments under her tutelage in the coming years. Stay tuned.