NHK-Fintiv: reaching the tipping point?

In 2012, Congress enacted the American Invents Act (AIA) for the stated goal of establishing a more efficient and streamlined patent system that would improve patent quality and limit unnecessary and counterproductive patent litigation costs.

Part of Congress’ efforts in achieving that goal was the creation of adversarial, litigation-like, administrative procedures at the US Patent and Trademark Office (USPTO) for challenging patents, such as inter partes review (IPR) and post-grant review (PGR).

Almost a decade later, the USPTO’s Patent Trial and Appeal Board (PTAB)  has come under considerable scrutiny—particularly from frequent petitioners—for exercising its discretion to procedurally deny IPR and PGR petitions where the challenged patent is (as is typically the case) also asserted in parallel litigation.

In so doing, the PTAB’s Administrative Patent Judges (APJs) invoke what has come to be known as the “NHK-Fintiv analysis”, allowing the assigned three-APJ panel to deny the petition on procedural grounds and thus sidestep the merits of the patentability challenge altogether.

This NHK-Fintiv analysis originates from two precedential PTAB decisions,  NHK Spring Co v Intri-Plex Techs, Inc (IPR2018-00752, Paper 8 [Sept 12, 2018]) (precedential, designated May 7, 2019) and  Apple v Fintiv (IPR2020-00019, Paper 11 [March 20, 2020]) (precedential, designated May 5, 2020), which together devised and considered six factors related to the parallel litigations involving the challenged patents, and denied the IPR petitions based solely on those procedural grounds without reaching the merits of the ­­­­­­­­­patentability challenges.

In such cases, the considerable time and legal expenses involved in preparing a detailed petition prove to have been largely wasted, and the  USPTO retains as much as 46% of the $41,500-plus IPR filing fees (42% of the $47,500-plus PGR filing fees) to boot.

Like nearly all judicial decisions, the NHK and Fintiv cases were decided on the particular facts of those cases, and likely were never originally intended by the APJ panels deciding those cases to provide comprehensive guidance for evaluating the impact of parallel litigation on institution decisions for all future petitions. Moreover, the PTAB’s subsequent adoption of the NHK-Fintiv analysis as “precedential” undoubtedly created far more controversy than the PTAB expected.

In the authors’ view, when the PTAB elevated the status of those cases, the board likely did not fully appreciate and evaluate the tremendous impact that the NHK-Fintiv analysis would have on PTAB practice and anticipate the deafening outcry that would be elicited from many stakeholders in the patent community.

Shortly after the elevation of the NHK-Fintiv analysis to precedential status, a group of tech giants filed a complaint against the USPTO in the District Court for the Northern District of California (home to California’s tech mecca, Silicon Valley), challenging the NHK-Fintiv analysis as leading to speculative, unpredictable, and unfair outcomes.

The ‘Big Tech’ companies, often on the petitioner side of the “v”, argued that the PTAB’s application of the NHK-Fintiv rules violate the Administrative Procedures Act’s (APA) requirements for formal rulemaking by the USPTO. While the case remains in its early stages, the presiding federal judge has recently given  initial indications that he has some concerns about the PTAB’s broad application of the NHK-Fintiv factors to discretionarily deny petitions.

In recent studies, the authors have shown empirically that the NHK-Fintiv analysis 1)  is skewed in the consideration and weighing of its six enumerated factors, and 2)  treats parties differently depending on the venue of the parallel litigation. That disparate impact was not part of the AIA’s objectives and is doubtless contrary to Congress’ intent in enacting the IPR and PGR procedures.

Not surprisingly, some stakeholders (eg, patent owners and patent assertion entities) applaud the NHK-Fintiv factor approach as a curb to the PTAB’s nearly decade-long spree of cancelling scores of issued patents—having early on received the pejorative nickname of the “patent death squad”. But the PTAB has now received a tremendous amount of very vocal criticism for this relatively new, non-statutory, and non-regulatory approach to discretionary petition denial.

In an undoubted response to this widespread criticism, last October the USPTO  issued a Request for Comment for its consideration of formally promulgating revised and/or new regulations directed to the PTAB’s discretionary denial of IPR/PGR petitions. In response, the USPTO received a deluge of comments from both sides of the controversy, which presumably are still being sorted through and considered. But despite the passage of several months, the USPTO has not proposed any regulations yet—the ongoing California litigation likely a consideration in that regard.

Presumably, in view of the very vocal and high profile criticism of the NHK-Fintiv analysis, including the California litigation and  letters sent to Congress seeking intervention from Capitol Hill, practitioners are beginning to witness some PTAB retreat from an aggressive application of the NHK-Fintiv analysis. In several recent cases, the APJ panels have instituted the IPR proceeding despite a litigation trial date being scheduled before the IPR’s one-year prescribed conclusion.

Examples of these cases include  SK Hynix v Netlist (IPR2020-01421, Paper 10 [Mar 16, 2021]); HP v Slingshot Printing (IPR2020-01084, Paper 13 [Jan. 14, 2021]); Verizon Business Network Services, v Huawei Techs (IPR2020-01141, Paper 12 [Jan 14, 2021]); and Cizion v Kerr Machine, PGR2020-00065, Paper 10 [Dec 3, 2020]).

The authors predict that the NHK-Fintiv analysis will become less of an impediment to IPR/PGR institution over time, whether through the California litigation, the soon-to-be promulgated USPTO regulations, and/or the pullback by individual APJ panels from vigorously applying those factors—and likely a combination of all three (and perhaps more yet to come).

But for the time being, patent owners remain in possession of a powerful procedural weapon for fending off potentially otherwise meritorious petitions in defence of their patents asserted in litigation. And would-be petitioners who have been sued in that litigation and who choose the alternative PTAB venue to mount a patentability challenge must now successfully run this additional procedural gauntlet in order to have that challenge considered on the merits.

Brent Babcock is partner in the PTAB trials practice group at Womble Bond Dickinson. He can be contacted at:  brent.babcock@wbd-us.com

Tyler Train is an associate in the PTAB trials practice group at Womble Bond Dickinson. He can be contacted at:  tyler.train@wbd-us.com

The entire analyses, comments, and opinions herein are solely the personal views of the authors and should not be attributed in any way to Womble Bond Dickinson or any of its clients.