A multivenue district court battle over the Patent Trial and Appeal Board’s (PTAB’s) controversial NHK-Fintiv rule took a new turn last week when District Judge Rodney Gilstrap dismissed a Texas lawsuit filed by inventors’ advocacy group US Inventor (USI). On July 13, Judge Gilstrap granted the USPTO’s motion to dismiss, agreeing that USI lacked standing to challenge NHK-Fintiv—which governs discretionary denials of America Invents Act (AIA) review petitions—partly because the organization had not shown it had suffered a sufficient injury. Rather, Judge Gilstrap took the organization to task for what amounted to a backdoor attempt to undermine the PTAB itself, as USI had sought to halt the institution of all AIA reviews until its procedural objections had been satisfied. The dismissal has spilled over into a parallel California lawsuit brought by a coalition of tech plaintiffs, as the USPTO has now cited Judge Gilstrap’s ruling in support of its pending motion to dismiss that case.
The NHK-Fintiv rule, as established by a pair of PTAB decisions designated as precedential in 2019 and 2020, expanded the circumstances in which the Board may exercise its discretion to deny AIA review petitions to include the status of parallel district court litigation. Among the factors the PTAB may consider is whether the district court has scheduled a trial that is too close to the date when the Board’s final written decision is due. This factor has become a focal point in the debate over the rule’s application because it limits the window within which IPRs can be filed as a practical matter. The reason is that a district court defendant may only file an IPR petition within one year of getting served with an infringement complaint. Since defendants often do not learn what claims are asserted against them until later in litigation, IPRs are often filed toward the end of that window—a window that can become even narrower if that defendant is sued in a district like the Western District of Texas that prioritizes relatively quick time to trial. Such defendants wishing to avoid a discretionary denial by the PTAB under the NHK-Fintiv rule may therefore find themselves in a race of sorts against the district court’s trial date to file a PTAB petition.
In August 2020, Apple, Cisco, Google, and Intel filed a lawsuit against the USPTO director challenging the NHK-Fintiv rule in the Northern District of California (5:20-cv-06218), citing those concerns—asserting that the rule “has dramatically reduced the availability of IPR, regardless of the weakness of the patent claims being challenged, thereby undermining IPR’s central role in protecting a strong patent system”. The plaintiffs further assert that the rule conflicts with the America Invents Act and is arbitrary and capricious. Additionally, they argue that it is procedurally unsound—also raising their own concerns over the rule not having been “adopted through notice-and-comment rulemaking” under the Administrative Procedure Act (APA), on which grounds they seek to set the rule aside.
USI then waded into the dispute by seeking to intervene in the California lawsuit in September 2020, and weeks later moved to enjoin the PTAB from instituting trial in any AIA reviews until the USPTO puts forth rules in compliance with the notice-and-comment provisions of the APA. Both the USPTO and the plaintiffs filed briefs in opposition: the Patent Office argued that USI’s injunction request “lacks merit at every level”, while the plaintiffs—beyond their immediate substantive objections—asserted that USI was seeking “to transform this case into an entirely different lawsuit”. Those filings had the desired effect, as District Judge Edward J. Davila denied USI’s motion to intervene in early February—emphasizing that the plaintiffs had already defined the scope of the lawsuit, and holding that USI “cannot now by intervention radically alter that scope to create a much different case”.
USI then filed its own lawsuit in Texas a few days later (2:21-cv-00047), again challenging the NHK-Fintiv rule on the same administrative grounds and seeking the same injunctive relief. Acting USPTO Director Drew Hirschfeld moved to dismiss in April, arguing that the court lacked subject matter jurisdiction because USI did not have standing to challenge the rule and had failed to adequately state a claim for relief.
Judge Gilstrap granted that motion on July 13, rejecting each of USI’s arguments as to standing. First, he held that the plaintiff had not shown that the procedures allegedly being violated “would protect some underlying concrete interest”, as opposed to one that is “speculative and abstract”. As a general matter, Judge Gilstrap noted, there is no substantive right implicated by the PTAB’s institution decisions because there is no right to institution or the denial thereof. “For patentees, the notion of a concrete interest in discretionary denials of AIA petitions is particularly tenuous”, he continued. Since discretionary denials inherently take place only when the PTAB has the authority to institute, while it is undisputed that the Board may exercise that discretion, the NHK-Fintiv factors are neither “dispositive nor exclusive”. Further underscoring that point, Judge Gilstrap noted that patentees suffer no harm through a discretionary denial “because the proceeding ends and the patent rights are unaffected; the status quo is maintained”.
Moreover, Judge Gilstrap rejected the other harms alleged by USI—the need to respond to AIA review petitions, the notion that “lawful regulations” would make petitions “more clearly deniable”, the cost of PTAB trials, the need to face IPRs in the absence of an infringement suit, PTAB judges’ allegedly deficient technical expertise, and “decreased confidence in the patent system”—as having “no nexus either to the Director’s alleged failure to seek notice and comment or to the relief requested in this suit”. Without such a nexus, these purported injuries were insufficient to establish standing.
Rather, Judge Gilstrap stated, “[t]he tenor of the Amended Complaint suggests that Plaintiffs take issue with the PTAB and the AIA procedures in general”, as “confirmed by the broad relief sought by Plaintiffs”. “It appears plain that Plaintiffs are ultimately complaining about the system which Congress established. That complaint is best addressed by Congress—not the Courts”.
Second, Judge Gilstrap rejected USI’s claim that it had organizational standing as an “advocacy, education and public outreach” organization, which the plaintiff argued it had because it had needed to spend “time and resources” advancing a responsive agenda, including advising its members, collecting stakeholder comments, publishing commentary, and filing a rulemaking petition. Unlike the applicable DC Circuit caselaw, which required that an organization’s expenditures be related to activity outside its normal purpose to establish standing, Judge Gilstrap found that USI “is essentially arguing that it has been effectively harmed by pursuing its recognized mission and organizational purpose. US Inventor merely updated its website to inform its members and the public about PTAB developments, provided its opinions on those developments, and took action to seek changes that it favored”. The plaintiff had not shown any of these activities were outside its normal operations, nor had it shown what impact, if any, USI’s proposed changes would have on its “posture and position”.
Additionally, Judge Gilstrap found that USI had failed to establish that it had suffered an informational injury, under which it alleged that it had been deprived of information—the agency regulations it sought to establish—that Congress requires be disclosed. There is no statutory mandate in the AIA requiring the USPTO director to issue any such guidance on discretionary denials, explained Judge Gilstrap, nor was there anything “unclear or opaque” about the panel decisions issued in the absence of such guidance.
Having thus found that USI lacked standing, the court then dismissed the case without prejudice and denied USI’s request for a preliminary injunction.
The following day, the USPTO filed a notice of supplemental authority in the tech plaintiffs’ California suit that cited Judge Gilstrap’s decision. That motion to dismiss, filed in November, contends that the plaintiffs lack standing, arguing “the Director’s unreviewable discretion over IPR institution decisions means that Plaintiffs can establish neither an injury in fact nor redressability”. The USPTO further asserts that the plaintiffs’ claims are not justiciable under the APA for three reasons: first, the APA provides no cause of action where Congress has clearly prohibited appellate review, as it has done for AIA review institution decisions per the Supreme Court’s Cuozzo decision; second, because the APA bars courts from reviewing decisions committed to an agency’s discretion and those that require a “balancing of priorities” within the agency’s expertise; and third, because the NHK-Fintiv factors govern institution decisions, which are non-dispositive, they are not final agency actions—the only type of actions subject to review under the APA.
For more on the tech plaintiffs’ California litigation, see “NHK-Fintiv Challenge Sees Growing Stakeholder Interest as Judge Rejects USPTO Stay Request” (December 2020).
