The Patent Trial and Appeal Board (PTAB) saw a variety of changes under former USPTO Director Andrei Iancu, but perhaps none has attracted quite as much scrutiny (or ink) as the NHK-Fintiv rule. Under NHK-Fintiv, the Board may exercise its discretion to deny institution in an America Invents Act (AIA) review when the deadline for its validity decision falls too close to the scheduled trial date in a parallel district court case. This practice has sparked several challenges since its inception, most recently through a trio of certiorari petitions asking the US Supreme Court to step in and set the rule aside—arguing that the rule undercuts the intent behind the AIA and is procedurally invalid. The Court denied two of those petitions on January 18, suggesting that NHK-Fintiv is here to stay for the immediate future.
Prior Litigation and Cuozzo: Courts Hold that NHK-Fintiv Appeals Are Barred Under Supreme Court Ruling
The procedural postures of the various lawsuits challenging NHK-Fintiv have differed, but lower courts have ended each of them on the same basis: that such litigation is barred by a Supreme Court decision from 2016. In Cuozzo Speed Technologies v. Lee, the Court precluded appellate review of PTAB institution decisions in a ruling that has since been extended to matters “closely related” to institution.
The first court to reject an NHK-Fintiv suit on this basis was the Federal Circuit, which in October 2020 dismissed a series of related appeals filed by Cisco—two of which stemmed directly from NHK-Fintiv denials in inter partes reviews (IPRs) filed by the company. Those denials prompted a dissent from Administrative Patent Judge (APJ) Christopher L. Crumbley, who argued that the approach taken by the Board ran counter to the AIA’s statutory scheme, “‘penalize[s]’ Cisco ‘for timing issues that are outside its control,’ and creates incentives for parties to rush IPR petitions (even before they know the plaintiff’s infringement contentions)”.
Echoing APJ Crumbley’s dissent, Cisco argued on appeal that the NHK-Fintiv rule ran counter to the legislative intent behind the AIA, since “Congress deliberately chose not to hinge the availability of IPR on the progress of a parallel district court action”. By considering the status of parallel litigation under NHK-Fintiv, Cisco argued, the PTAB has exceeded its authority: while acknowledging the broad nature of the Board’s discretion, the company asserted that it “cannot exercise that discretion in ways that violate the statute or negate Congress’s carefully considered choices”. Cisco asserted that appeals resulting from this overreach are therefore consistent with Cuozzo, bolstering its conclusion by citing additional Federal Circuit precedent establishing that “[a]n agency cannot . . . exercise its inherent authority in a manner that is contrary to a statute”. The company also argued that the NHK-Fintiv rule was procedurally invalid, having been implemented without notice-and-comment rulemaking as required under the Administrative Procedure Act (APA).
The Federal Circuit disagreed on the first point, citing Cuozzo in rejecting those appeals as well as a related mandamus petition. Specifically, the Federal Circuit ruled that it lacked jurisdiction to hear them under 35 USC Section 314(d), which establishes the non-appealability of institution decisions (as confirmed in Cuozzo). The court determined that the case at hand did not fall within the two Cuozzo exceptions allowing appeals related to issues of statutory authority or constitutionality. Rather, they concluded that the case involves matters “closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review”, which cannot be appealed under Cuozzo and the Supreme Court’s follow-on decision in Thryv v. Click-to-Call. (The court did not address the company’s procedural challenge.)
The Federal Circuit later clarified the metes and bounds of Cuozzo in its March 2021 Mylan Laboratories v. Janssen Pharmaceutica decision, explaining that appellants face an extremely “narrow” path for challenging NHK-Fintiv denials. In Mylan, the court reaffirmed that Cuozzo precludes direct appeals from such rejections but noted that Section 314(d) is silent as to the availability of mandamus review. The Federal Circuit concluded as a result that it has “jurisdiction to review any petition for a writ of mandamus denying institution of an IPR”. However, the court also determined that “the mandamus standard will be especially difficult to satisfy” in the context of discretionary denials by the PTAB, and that under Cuozzo, mandamus review of such denials will only be available for “colorable constitutional claims”. The Federal Circuit also remarked that “it is difficult to imagine a mandamus petition that challenges a denial of institution and identifies a clear and indisputable right to relief”.
Additionally, November 2021 saw a district court cite Cuozzo in rejecting a lawsuit that challenged the NHK-Fintiv rule itself, rather than through the appeal of a denied PTAB petition. That case—originally filed in August 2020 by Apple, Cisco, Google, and Intel—argued that NHK-Fintiv violates the AIA, is arbitrary and capricious, and is procedurally unsound under the APA. The plaintiffs’ complaint also cited the rule’s practical impact at a higher level, asserting that it “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”. Northern District of California Judge Edward J. Davila granted a motion to dismiss, in response to a motion filed by then-Director Iancu. Judge Davila applied a similar rationale as in Cisco and other cases: he explained that the plaintiffs’ complaint did not fall within the narrow exceptions to Cuozzo’s bar on judicial review, as it involves neither constitutional nor jurisdictional violations; and he held that the NHK-Fintiv factors themselves are “closely related to” the director’s “decision whether to institute”, placing the rule within Cuozzo’s prohibition on appellate review.
Apple’s Petition: NHK-Fintiv Appeals Are Allowed, Particularly When the PTAB Oversteps its Authority
The certiorari petitions that the Supreme Court denied on January 18, however, deal primarily with the Federal Circuit. The first of those was filed by Apple in July 2021, challenging a December 2020 Federal Circuit decision that dismissed its direct appeal of discretionary denials in two IPRs based on Cisco. Apple raised a variety of arguments in response, including that direct appellate review of institution decisions is allowed under 35 Section 1295(a)(4)(A), which “vests the Federal Circuit with appellate jurisdiction over any Board ‘decision … with respect to … inter partes review’”, notwithstanding Section 314(d). Apple also asserted that Cuozzo does not bar all direct appeals, which it argues are possible for claims alleging that a PTAB decision exceeds its statutory authority, “is arbitrary and capricious, or was adopted without the notice-and-comment rulemaking required by the APA”.
Moreover, Apple contended that the Federal Circuit has overextended Cuozzo and Thryv, both of which it alleges were “ordinary dispute[s]” that “merely” involved whether the PTAB “wrongly determined that an institution-related statutory requirement for IPR was satisfied” and did not involve claims that the agency exceeded its authority of the type that would be justiciable under the APA. In contrast, Apple argued, the Supreme Court has previously allowed appeals of ultra vires decisions otherwise related to institution, such as in SAS Institute. Apple further asserted that the Federal Circuit’s approach to mandamus relief in the institution context has been “confused and erroneous”, characterizing as contradictory the manner in which Cisco and Mylan establish that “mandamus is both theoretically available and in practice unattainable”.
Mylan’s Petition Raises Similar Objections
The second petition just denied was filed by Mylan in August 2021 and was another direct appeal from an NHK-Fintiv denial—one that, via mandamus, also led to the Federal Circuit’s March 2021 Mylan v. Janssen ruling. That petition raised many of the same policy objections and legal arguments as did Apple’s, including its claim that SAS Institute shows how Supreme Court precedent allows institution-related appeals where the PTAB has exceeded its authority, that the Federal Circuit was wrong to distinguish between appeals from final written decisions and institution decisions in its interpretation of Section 314(d), and that NHK-Fintiv is procedurally defective under the APA as implemented without notice-and-comment rulemaking.
The US government filed briefs in opposition in the Apple and Mylan Supreme Court appeals, while others filed amicus briefs in support of the first two petitioners—with Roku and groups including ACT | The App Association, the Computer and Communications Industry Association, and Leading Innovators backing Apple, and Intel and the Association for Accessible Medicines backing Mylan. A third petition filed by Intel on December 13, contesting the Federal Circuit’s denial of another direct appeal in light of Mylan, remains pending.
What Comes Next: Congress Scrutinizes NHK-Fintiv
Per its usual practice, the Supreme Court did not explain the reasons behind its denial of the Apple and Mylan petitions. While the Court thus did not specify whether Cuozzo was again the deciding factor, its rejection of these latest petitions indicates that the Cuozzo ruling will remain a bar to subsequent NHK-Fintiv challenges—unless Congress were to intervene.
Ongoing Senate interest in the PTAB—and, in particular, in its discretionary denial practices—could make such intervention a possibility. In September 2021, Senators Patrick Leahy (D-VT) and John Cornyn (R-TX) introduced a reform bill titled the Restoring the America Invents Act that would undo many of the changes implemented by Andrei Iancu. Perhaps the most significant change is the proposed bill’s explicit reversal of the NHK-Fintiv rule, by limiting discretionary denials to circumstances involving multiple invalidity actions as established in 35 USC Section 325(d)—among a variety of changes largely favoring defendants. See RPX’s third-quarter review for more on that proposal.
Yet Congressional interest in NHK-Fintiv has not been limited to legislators opposing Iancu’s reforms. Indeed, Senator Thom Tillis (R-NC), who has often expressed support for most of the changes implemented by the former director, has been outspoken in his opposition to the NHK-Fintiv factor tying institution to scheduled trial dates. In particular, during the confirmation process for USPTO director nominee Kathi Vidal, Senator Tillis was critical of “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”.
See here for details on Vidal’s written answers to questions from Senator Tillis and other members of the Senate Judiciary Committee, including additional issues related to the PTAB—among them, certain procedural issues related to NHK-Fintiv, concerns over PTAB filing practices, and the compensation of PTAB administrative patent judges—as well as Vidal’s commentary on “judge shopping”, SEP licensing issues, and patent eligibility. Further analysis of various other trends that shaped patent litigation in the past year can also be found in RPX’s fourth-quarter report.
