A Breakdown of the USPTO’s Proposed Rule Changes at the PTAB

In April 2023, the USPTO announced proposed reforms concerning the PTAB’s discretion to deny petitions for IPR and PGR. The proposed rule would clarify and broaden the PTAB’s discretionary powers.

In April 2023, the USPTO announced an Advance Notice of Proposed Rulemaking related to proposed reforms at the PTAB. The proposed rule is based on feedback the USPTO received through a request for comments it issued in October 2020. Most of the proposed reforms concern the PTAB’s discretion to deny petitions for IPR and PGR. The PTAB’s discretionary power has been hotly debated since the proceedings launched over a decade ago, as it allows the PTAB to deny otherwise meritorious petitions on procedural grounds. The proposed rule would clarify and broaden the PTAB’s discretionary powers.

Petitions filed by certain for-profit entities 

The proposed rule would direct the PTAB to discretionarily deny petitions for IPR and PGR filed by entities that are:

1. For-profit
2. Have not been sued on the challenged patent or been threatened with infringement of the challenged patent
3. Not practicing in the field of the challenged patent with a product or service on the market, and 
4. Does not have a substantial relationship with an entity that falls outside the scope of the above elements. This rule change appears to be aimed at curtailing post-grant challenges by non-practicing entities.

Petitions filed challenging patents held by micro and small entities 

Some commenters expressed concern that small and under-resourced entities cannot afford the costs associated with defending post-grant challenges to their patents, which the USPTO is concerned may impact the perceived fairness of the PTAB. Accordingly, the proposed rule would direct the PTAB to discretionarily deny institutions where — absent compelling merits — the following criteria are met: 

1. The patent owner claimed micro or small entity status at issuance of the challenged patent and timely requested discretionary denial when presented with the opportunity 
2. During the calendar year preceding the filing of the petition, the patent owner did not exceed eight times the micro entity's gross income level 
3. At the time the petition was filed, the patent owner was commercializing the subject matter of a challenged claim.

This provision likely would not apply to government-owned or government-funded entities. 

Prior adjudications upholding validity 

One of the major accusations leveled at the PTAB is that it reduces judicial economy, as many patents challenged through post-grant proceedings are also subject to parallel proceedings in district courts. The proposed rule would direct the PTAB to discretionarily deny institutions where a prior final adjudication by a district court or the USPTO upheld the validity of the claims at issue. This provision would not apply in cases in which the petitioner has standing to challenge the validity of the claims in district court or:

1. Intends to pursue commercialization of a product or service in the field of the invention
2. Was not a real party in interest or privy to the party previously challenging one of the claims, and
3. Meets a heightened burden of compelling merits.

Serial petitions 

Serial petitioning occurs where additional petitions are filed challenging at least one claim previously challenged in a first petition either:

1. After the filing of a preliminary response in a first petition challenging the same claims, or 
2. If no preliminary response to the first petition is filed after the expiration of the period for filing such a response.

Under the proposed rule, the PTAB would discretionarily deny any serial IPR or PGR petition that is filed by one of the following entities: 

1. The same petitioner
2. A real party in interest or privy to that petitioner
3. A party with a significant relationship to that petitioner.

However, there would be two major exceptions to this rule. The PTAB would not discretionarily deny a serial petition where: 

1. The earlier petition was resolved for reasons not materially related to the merits of the petition (e.g., was discretionarily denied), or
2. Exceptional circumstances are shown.

Such “exceptional circumstances” could include situations where a patentee changes the scope of the claims, or at the time of filing of the first petition, the petitioner reasonably could not have known of or found the prior art asserted in the serial petition, or the petitioner raises a new statutory challenge that was not in the prior petition and has a justifiable explanation for why they did not raise the statutory challenge in the earlier petition.

Petitions raising previously addressed prior art or arguments

Under 35 USC § 325(d), when determining whether to institute a post-grant proceeding, the PTAB may consider whether the same or substantially the same prior art or arguments were previously presented to the USPTO. 

In determining whether to exercise its discretion to deny such petitions, the board applies the two-part framework of Advanced Bionics, LLC v. Med-El Elektromedizinische Geräte GmbH, IPR2019–01469, Paper 6 at 8 (PTAB Feb. 13, 2020):

1. Determine whether the same or substantially the same art or arguments were previously presented to the USPTO, and
2.  If so, determine whether the petitioner has demonstrated that the USPTO erred in a manner material to the patentability of the challenged claims.

The proposed rule seeks to limit the application of § 325(d) to art or arguments that the USPTO previously addressed — not necessarily art or arguments that were merely presented. For art to be deemed “previously addressed,” the claims must have been distinguished over the art in the record where the art was the basis of a rejection and where the rejection was withdrawn or overcome by an amendment, was distinguished in a notice of allowance, or was discussed during an examiner interview. The mere citation of a reference during the prosecution of the challenged patent or in search results would not be considered sufficient to be deemed “previously addressed.”

Parallel petitions 

A parallel petition is one that is filed against the same patent by the same petitioner or by a petitioner who has a substantial relationship with another petitioner challenging the same patent. The proposed rule would direct the PTAB to deny such petitions unless the petitioner can show good cause as to why parallel petitions are necessary. To determine whether a petitioner has shown “good cause,” the PTAB may consider the following factors: 

1. Whether the patent owner has asserted a large number of claims in parallel litigation 
2. Whether the petitioner is challenging a large number of claims
3. Whether there is a dispute about a priority date requiring arguments under multiple prior art references
4. Whether there are alternative claim constructions that require different prior art references or mutually exclusive grounds
5. Whether the petitioner lacks sufficient information at the time of filing the petition
6. Whether there are a large number of claimed embodiments challenged
7. The complexity of the technology in the case
8. The strength of the merits of the petition. 

One of the most common reasons petitioners file parallel petitions is because of the USPTO’s strict word-count limits. If the petitioner cannot make all of their arguments in a single petition, they file a parallel petition containing the arguments that would not fit in the first petition. To remedy that situation, the USPTO is also considering allowing petitioners to pay a higher fee for a higher word-count limit. 

Parallel litigation 

Parties accused of patent infringement often use IPR challenges defensively to preemptively invalidate the claims being asserted against them. It is common for patents challenged in IPR to be the subject of parallel litigation in district court. However, this raises questions of judicial economy, as it creates overlap in the issues that both forums are addressing. In cases where the district court litigation is at an advanced stage, there is also a risk that a trial in the district court case will precede a final written decision at the PTAB. 

The proposed rule would essentially incorporate USPTO Director Kathi Vidal’s June 2022 guidance in response to Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020). Under that guidance, the PTAB will not discretionarily deny a petition for IPR of a patent involved in parallel litigation where: 

1. The petition presents compelling merits of unpatentability 
2. The parallel litigation is in the International Trade Commission 
3. The petitioner stipulates not to pursue in a district court proceeding the same grounds as in the petition or any grounds that reasonably could have been raised in the petition. 

The proposed rule would add the following types of cases: 

1. Petitions for PGR of a patent involved in parallel district court litigation 
2. Petitions in which the parallel district court proceeding has been stayed and is reasonably expected to remain stayed at least until the deadline for the PTAB’s institution decision. 

The proposed rule would also establish a “clear, predictable rule” that, absent one of the above exceptions, the PTAB would discretionarily deny the institution of an IPR involved in parallel district court litigation if it PTAB determines that a trial in the district court is likely to occur before the projected statutory deadline for a final written decision. 

The only constant at the USPTO — especially when it comes to PTAB practice — is that it is ever-changing. Don’t be caught off-guard — learn more about how you can take the uncertainty out of your patent practice by scheduling a free demo of Juristat today.