Earlier this month, the US Senate Judiciary Committee held a confirmation hearing for Kathi Vidal, President Joseph R. Biden Jr.’s nominee for USPTO director. While the hearing was a largely friendly affair, Vidal—a managing partner at Winston & Strawn’s Silicon Valley office—was pressed by Senator Thom Tillis (R-NC) on her support for some of the Patent Trial and Appeal Board’s (PTAB’s) most hotly debated reforms from the prior administration. Vidal has now detailed her positions on those changes and other issues in written responses provided to the committee. Although Vidal’s answers were high-level or open-ended on many issues, they nonetheless provided a glimpse into her views on a variety of hot-button topics, including discretionary denials by the PTAB in America Invents Act (AIA) reviews, parallel AIA review petitions, Section 101 jurisprudence, and patent ownership transparency.

PTAB Issues: NHK-Fintiv, Filing Strategies, and Systemic Concerns

One of the most significant topics raised by the committee members was the PTAB’s exercise of discretion to deny institution in AIA review trials for reasons other than the merits. Over the past few years, the Board has expanded the circumstances in which it will wield this discretion through a growing body of internal precedent—most controversially, through a pair of rulings known together as the NHK-Fintiv rule. Under NHK-Fintiv, the PTAB may deny institution in an AIA review based on the status of a parallel district court case asserting the same patent based on several factors—including one under which the PTAB may reject a petition if the district court’s scheduled trial date falls too close to the deadline for the Board’s final validity decision.

Senator Tillis further pressed Vidal for her views on NHK-Fintiv in his written questions, reiterating that his vote hinged on whether she would commit to the changes made to the PTAB more generally under former Director Andrei Iancu. While she gave a qualified “yes” to that general proposition, with respect to NHK-Fintiv itself she merely committed to studying stakeholder feedback on the issue, in the form of comments received in response to a broader October 2020 request for comments (RFC) on the topic of discretionary denials. Vidal also deferred when asked more explicitly by Senator John Cornyn (R-TX) if she viewed the exercise of non-merits discretionary denials to be “inappropriate” or “consistent with the text and spirit of” the AIA, in both cases citing her intent to consider the comments submitted in response to the October 2020 RFC, noting that those included some “divergent views” on the statutory intent issue.

While Senator Tillis reiterated his broader support for NHK-Fintiv in another written question, he also expressed concerns about the NHK-Fintiv factor related to trial date proximity (as he also did in the hearing)—in particular, with respect to “the PTAB’s historical practice of crediting unrealistic trial schedules”, a reference to the fact that scheduled district court trial dates are often pushed back. Beyond the notion that this practice departs from the “policy underpinnings of the Fintiv rule”, Senator Tillis explained, he argued that this factor “has also created harmful incentives for forum shopping and inappropriate judicial behavior” and asked Vidal if she would commit to “undertake a study and review of this matter and consider whether Fintiv should be modified to account for unrealistic trial scheduling”. Vidal answered that she would do so if confirmed.

Additionally, Senator Christopher Coons (D-DE) asked Vidal for her views on a procedural issue raised by certain stakeholders challenging the NHK-Fintiv rule in litigation—the propriety of doing so without first undergoing notice-and-comment rulemaking under the Administrative Procedure Act. In particular, Senator Coons asked Vidal when she would “consider it appropriate to make significant changes without undergoing” such a process. Her answer returned to the themes of transparency and public input from several other answers she gave the committee, but appeared to preserve the possibility that notice-and-comment “may not be the best course when the key consideration is the expediency of the needed change or providing transparency in an expedient manner”. However, she clarified that should such interim changes should then be followed by a former rulemaking process. Vidal also argued that the PTAB’s designation of certain internal decisions as precedential is further consistent with the APA: when asked by Senator Cornyn if precedential designations may issue without APA notice-and-comment rulemaking, Vidal answered in the affirmative. She asserted that “PTAB decisions are not themselves rules within the meaning of the APA and the decision to deem a PTAB decision as precedential is not a rule within the meaning of the APA, so notice and comment rulemaking is not required to make the precedential designation”.

Meanwhile, Senator Chuck Grassley (R-IA) asked Vidal for her take on certain AIA review filing practices, in particular the filing of “multiple challenges against the same patent”. In response, Vidal cited the General Plastic factors, a precedential decision allowing the PTAB to exercise its discretion to deny such overlapping petitions, and noted that the October 2020 RFC sought public comments on that practice along with other discretionary factors. Vidal committed to consider the resulting stakeholder feedback on the issue, and to work with Congress “to assess whether further reform is necessary and what form that might take”.

Vidal also fielded questions on the PTAB’s broader impact, including some from Senators Grassley, Ted Cruz (R-TX), Josh Hawley (R-MO), and John Kennedy (R-LA) on whether AIA reviews disproportionately impact smaller businesses. In her responses, Vidal cited her overarching, general belief that “any litigation, whether at PTAB or in other tribunals, can disadvantage parties with limited means, which is often the situation with small and individual inventors”. That said, Vidal referred again to the General Plastic factors as a way to “ameliorate[]” concerns over smaller entities being “harassed” by petitioner filing behavior. Vidal also cited the potential for further reform based on a review of the October 2020 RFC.

An arguably more narrow issue raised by Senator Kennedy was the issue of how the PTAB’s Administrative Patent Judges (APJs) are compensated—asking Vidal, in particular, how bonuses are determined for APJs and to “describe any conflicts that [she] believe[s] may arise as a result”. (Vidal responded that she would have to investigate this and “report back”.) This question appears to relate to recent allegations raised by entities including patent owner Mobility Workx, LLC that the PTAB’s leadership and compensation structure creates an unconstitutional financial bias in favor of instituting non-meritorious AIA reviews. Mobility Worx asserted before the Federal Circuit that APJs are purportedly incentivized to do so because instituting AIA reviews earns them “decisional units” used as a performance metric—which allegedly helps their performance reviews and resulting bonus compensation. But in October, as detailed in RPX’s coverage, the Federal Circuit issued a precedential decision rejecting that argument, holding that any financial incentives present were “too remote” under applicable precedent to constitute a due process violation.

Additionally, Vidal deferred when asked by Senator Cornyn if she supported their sweeping PTAB reform bill that he introduced this fall with Senator Patrick Leahy, the Restoring the America Invents Act, which seeks to eliminate the NHK-Fintiv rule and make various other changes largely favoring defendants. Vidal’s answer more narrowly expressed agreement with a statement from the senators’ press release announcing the draft bill—that “[b]y ensuring there is a less expensive and more transparent option than drawn-out litigation, we can protect valid patents and prioritize innovation”.

Vidal was more direct in expressing her support for the overall AIA review regime when asked by Senator Cornyn whether district court defendants should be able to seek such relief, answering “[y]es” and explaining that such a “reasonable opportunity” is provided by the statutory framework of the AIA itself. However, Vidal also reiterated her intent to work with stakeholders and the Committee “ensure that the AIA proceedings function as an efficient and effective mechanism for addressing patentability challenges as Congress intended and to determine whether and what additional reform is warranted”.

Section 101 Issues: A Litigator’s Take on Alice Reform

Among Vidal’s most specific responses were to questions from Senator Thom Tillis (R-NC) on patent eligibility. With respect to the current state of Section 101 caselaw, which Senator Tillis deemed an “abysmal shambles”, Vidal noted that in her work as a litigator she has “been on all sides of this issue[,] including arguing the SAP v. InvestPic appeal (supporting a finding of unpatentability) for which certiorari was sought and petitioning the Supreme Court for certiorari in Chamberlain v. [Techtronic Industries] (opposing a finding of unpatentability)”. Vidal further agreed with Senator Tillis that “the current jurisprudence provides neither clarity nor consistency”.

Additionally, Vidal expressed support for “the views of the Solicitor General in response to Calls for the View of the Solicitor General (CVSG’s), urging the Supreme Court to find the proper vehicle for providing much-needed clarity in this area of law”. (This may be a reference to briefs filed by former Solicitor General Noel Francisco in Berkheimer and Hikma, among other Alice appeals.) However, in light of the “myriad of technologies and fact patterns from which patent eligibility issues arise”, Vidal also expressed doubt that the Supreme Court would be able to find such an “optimal vehicle to clarify all aspects of the law as it relates to all technological fields”.

Pressed on whether she would support legislative reform, Vidal reiterated the above comment on the difficulty of finding a suitable Supreme Court appeal and acknowledged that “Congressional action may be the most efficient and effective way to impart clarity and certainty into this area of law”. Senator Tillis has been a key player in prior legislative reform efforts, but as RPX recently detailed, the tech and biopharma industries remain divided on the proper measures to take—a divide that undermined the last full push for eligibility reform in Congress.

That said, Vidal deferred on certain other specific 101-related questions from Senator Tillis, including whether business or financial methods should be “per se eligible” and whether there should be “a technicity or ‘field of technology’ requirement” as a prerequisite for eligibility—though as to the latter, Vidal argued that “the law needs to move away from the line-drawing the ‘directed to’ language of Alice and Mayo has invited and provide more concrete criteria for determining what should, or should not be, patent eligible”.

Other Hot-Button Issues: Judge/Forum-Shopping, Litigation Funding, Patent Ownership, and SEP Licensing

Among the other issues raised by Senator Tillis pertained to “judge shopping” and “forum shopping”. Senator Tillis observed that in “some judicial districts”, litigants may file cases in their preferred jurisdiction, effectively enabling them to select their judge—leading “to individual judges engaging in inappropriate conduct to attract certain types of cases or litigants”, and to a concentration of litigation before “just one of the more than 600 district court judges in the country”. Vidal agreed that judge shopping and forum shopping are “problematic to the extent that they encourage abuses of our intellectual property system”, and that fairness and impartiality are essential, but otherwise deferred as to specifics.

Senator Tillis’s question was a direct reference to District Judge Alan D. Albright of the Western District of Texas, as his district’s divisional filing rules enable the judge selection process that he described. Moreover, as detailed in RPX’s latest quarterly report, Judge Albright has indeed openly sought out patent cases, in part by establishing rules designed to streamline and speed up litigation in his courtroom—contributing to his current status as the nation’s top patent judge by filing volume. In November, Senators Tillis and Leahy reportedly sent a letter to Supreme Court Chief Justice John Roberts complaining of this “unseemly” practice, decrying the extreme concentration of patent litigation in one district” that has resulted.

Senator Tillis also asked Vidal for her views on several other issues impacting the patent space, including one question related to the rise of third-party litigation finance in patent litigation. Specifically, Senator Tillis asked Vidal if she is concerned by “the rise in investor-funded patent litigation and the impact this has on American manufacturing and ultimately American innovation”. Vidal responded that she is “concerned that new patent markets create and incentivize opportunities for abuses of the system, impose a tax on American manufacturing and ultimately American innovation, and divert innovators”, promising to work with stakeholders and Congress to “strengthen patents” and find ways to “provide more clarity and certainty to reduce the opportunities for abuse”.

The impact of outside financing on patent litigation has indeed been sweeping. As detailed in RPX’s extensive coverage of this issue, litigation finance firms have experienced record fundraising in recent years, with private equity firms and hedge funds seeking opportunities to invest in uncorrelated assets that can withstand, or even perform well in, the next economic downturn. This trend continued into the third quarter of 2021, when multiple litigation finance players announced large fundraises, signaling a continued interest in this asset class. NPEs have reaped the benefits, including several that launched new campaigns financed by third parties in Q3, including an established litigation finance firm as well as a hedge fund.

In addition, both Senators Leahy and Tillis asked Vidal about another bill that they recently introduced, the Pride in Patent Ownership Act, that would require patent owners to record patent transfers. Should a party fail to record an acquired interest in a patent, they would be unable to recover enhanced damages upon asserting it in litigation. Senator Leahy’s question was more narrowly tailored, noting after a description of the bill that the USPTO’s database of ownership information “does not allow adequate searching” and asking merely if she would commit to “fixing that database”—to which Vidal responded with a commitment to investigate the issue. However, Senator Tillis asked Vidal more broadly if she supported “efforts to increase transparency in patent ownership”, describing the bill as one example, and she answered that yes, she supported such efforts.

Senator Tillis also asked Vidal about remedies in standard essential patent (SEP) licensing disputes, a topic of heightened stakeholder interest following the Biden administration’s December 6 announcement of a new draft policy statement on SEPs. That statement, released by the Department of Justice (DOJ), the National Institute of Standards and Technology (NIST), and the USPTO, walks back certain key aspects of a prior joint policy statement released by those same agencies in December 2019 under previous leadership. Perhaps most notably, the new proposal asserts that injunctions should not be issued in SEP cases when monetary damages are available—whereas the 2019 statement argued in favor of such injunctive relief.

Senator Tillis’s question on this topic referred to the July 2021 executive order from President Biden that directed those agencies to revisit the 2019 statement, and asked if she would commit to upholding that prior statement’s endorsement of SEP injunctions:

Can you assure this Committee that in any review of that Policy Statement, you will work with NIST and DOJ to ensure that injunctive relief and other exclusionary remedies will remain available to SEP owners against infringers that are unwilling licensees or who refuse or constructively refuse to enter into licenses on FRAND terms and conditions, at least to the same extent that such remedies are available to other patent holders?

Vidal’s response was narrowly tailored, merely committing that she would work with the DOJ and NIST to “ensure that any finalized statement related to SEPs accurately reflects the patent law” as expressed in the Federal Circuit’s 2014 decision in Apple v. Motorola decision and the Supreme Court’s 2006 eBay v. MercExchange opinion, which are cited in both the 2019 and 2021 statements. Additionally, Vidal stated that she would ensure that the resulting policy is “informed by the public comments received, and ensures continued incentives to innovate in the standards setting context”.

For more on the 2021 draft SEP licensing policy statement, see “Biden Administration Releases Draft of SEP Policy Revamp” (December 2021).