[Federal Register Volume 88, Number 77 (Friday, April 21, 2023)]
[Proposed Rules]
[Pages 24503-24518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08239]


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DEPARTMENT OF COMMERCE

Patent and Trademark Office

37 CFR Part 42

[Docket No. PTO-P-2020-0022]
RIN 0651-AD47


Changes Under Consideration to Discretionary Institution 
Practices, Petition Word-Count Limits, and Settlement Practices for 
America Invents Act Trial Proceedings Before the Patent Trial and 
Appeal Board

AGENCY: United States Patent and Trademark Office, Department of 
Commerce.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The United States Patent and Trademark Office (USPTO or 
Office) is considering modifications to the rules of practice for inter 
partes review (IPR) and post-grant review (PGR) proceedings before the 
Patent Trial and Appeal Board (PTAB or Board) to better align the 
practices with the USPTO's mission to promote and protect innovation 
and investment in the same, and with the congressional intent behind 
the American Invents Act (AIA) to provide a less-expensive alternative 
to district court litigation to resolve certain patentability issues 
while also protecting against patentee harassment. The USPTO is 
considering promulgating rules the Director, and by delegation the 
Board, will use to exercise the Director's discretion to institute IPRs 
and PGRs; to provide a procedure for separate briefing on discretionary 
denial that will allow parties to address relevant issues for 
discretionary denial without encroaching on the pages they are afforded 
to address the merits of a case; to provide petitioners the ability to 
pay additional fees for a higher word-count limit; and to clarify that 
all settlement agreements, including pre-institution settlement 
agreements, are required to be filed with the Board.

DATES: Comments must be received by June 20, 2023 to ensure 
consideration.

ADDRESSES: For reasons of Government efficiency, comments must be 
submitted through the Federal eRulemaking Portal at 
www.regulations.gov. To submit comments via the portal, one should 
enter docket number PTO-P-2020-0022 on the homepage and click 
``search.'' The site will provide search results listing all documents 
associated with this docket. Commenters can find a reference to this 
document and click on the ``Comment'' icon, complete the required 
fields, and enter or attach their

[[Page 24504]]

comments. Attachments to electronic comments will be accepted in 
Adobe[supreg] portable document format (PDF) or Microsoft Word[supreg] 
format. Because comments will be made available for public inspection, 
information that the submitter does not desire to make public, such as 
an address or phone number, should not be included in the comments.
    Visit the Federal eRulemaking Portal for additional instructions on 
providing comments via the portal. If electronic submission of, or 
access to, comments is not feasible due to a lack of access to a 
computer and/or the internet, please contact the USPTO using the 
contact information below for special instructions.

FOR FURTHER INFORMATION CONTACT: Michael Tierney, Vice Chief 
Administrative Patent Judge, and Amber Hagy, Lead Administrative Patent 
Judge, at 571-272-9797.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose

    The United States Patent and Trademark Office (USPTO or Office) is 
charged with promoting innovation through patent protection. U.S. 
Const., art. I, section 8. The patent system fosters technological 
innovation not only by encouraging the public disclosure of ideas, but 
also by providing limited time, exclusive rights to the patented 
innovation and incentivizing research and development and investment in 
the same, as well as the investment necessary to bring that research 
and development to market. The patent system is a catalyst for jobs, 
economic prosperity, and world problem-solving. It works most 
efficiently and effectively when the USPTO issues and maintains robust 
and reliable patents. Patents help protect the funds invested in 
research and development and bring ideas to market. Optimal benefits of 
the patent system are achieved when inventors and assignees granted 
patent rights can efficiently engage in technology transfer and 
licensing (including cross-licensing), obtain funding to bring ideas to 
market, and/or enforce their rights. The patent system works best when 
any disputes as to the validity or infringement of patents are 
addressed efficiently and effectively, and when appropriate steps are 
taken to curb abusive actions that contravene the Office's mission to 
promote innovation. Congress recognized those dynamics when it designed 
the Leahy-Smith America Invents Act (AIA) post-grant proceedings ``to 
establish a more efficient and streamlined patent system that will 
improve patent quality and limit unnecessary and counterproductive 
litigation costs.'' H.R. Rep. No. 112-98, part 1, at 40 (2011), 2011 
U.S.C.C.A.N. 67, 69; see S. Rep. No. 110-259, at 20 (2008).
    In designing the AIA, Congress empowered the Director of the USPTO 
to prescribe regulations related to the implementation of the AIA. 
Under 35 U.S.C. 316(a) and 326(a), the Director shall prescribe 
regulations for certain enumerated aspects of AIA proceedings, and 
under 35 U.S.C. 2(b)(2)(A), the Director may establish regulations that 
``shall govern the conduct of proceedings in the Office.'' 35 U.S.C. 
316 and 326. The Director's discretion is informed by 35 U.S.C. 316(b) 
and 326(b), which require that ``the Director shall consider the effect 
of any such regulation on the economy, the integrity of the patent 
system, the efficient administration of the Office, and the ability of 
the Office to timely complete proceedings instituted under'' 35 U.S.C. 
316 and 326. Sections 314(a) and 324(a) of 35 U.S.C. provide the 
Director with discretion to deny a petition, even when meritorious. 
See, e.g., 35 U.S.C. 314(a) (stating ``[t]he Director may not authorize 
an inter partes review to be instituted unless . . .''); Cuozzo Speed 
Techs., LLC v. Lee, 579 U.S. 261, 273 (2016) (``[T]he agency's decision 
to deny a petition is a matter committed to the Patent Office's 
discretion.''). Congress also provided that in ``determining whether to 
institute [an AIA post-grant proceeding], the Director may take into 
account whether, and reject the petition or request because, the same 
or substantially the same prior art or arguments previously were 
presented to the Office.'' 35 U.S.C. 325(d).
    The changes under consideration would amend the rules of practice 
for IPR and PGR proceedings under the AIA. In proposing these changes, 
the Director has considered the comments received from stakeholders and 
the public, including in response to the Request for Comments on 
Discretion to Institute Trials Before the Patent Trial and Appeal Board 
(85 FR 66502 (Oct. 20, 2020)) (RFC), as well as ``the effect of any 
such regulation on the economy, the integrity of the patent system, the 
efficient administration of the Office, and the ability of the Office 
to timely complete proceedings instituted under'' 35 U.S.C. 316 and 
326.
    The changes under consideration build on and codify existing 
precedent and guidance on Director's discretion to determine whether to 
institute an IPR or PGR. In considering possible changes, it important 
to keep in mind that, as the Supreme Court explained in Cuozzo, ``the 
purpose of the proceeding is not quite the same as the purpose of 
district court litigation.'' Cuozzo, 579 U.S. at 279. As the Court 
stated, ``one important congressional objective'' in establishing IPR 
review is ``giving the Patent Office significant power to revisit and 
revise earlier patent grants.'' Id. at 272. The ``basic purpose[ ]'' of 
the review is ``to reexamine an earlier agency decision''; it ``offers 
a second look at an earlier administrative grant of a patent.'' Id. at 
279. The Court further noted that, under the AIA, ``any third party can 
ask the agency to initiate inter partes review of a patent claim''; 
``[p]arties that initiate the proceeding need not have a concrete stake 
in the outcome; indeed, they may lack constitutional standing.'' Id. at 
268, 279. ``Thus, in addition to helping resolve concrete patent-
related disputes among parties, inter partes review helps protect the 
public's `paramount interest in seeing that patent monopolies . . . are 
kept within their legitimate scope.' '' Id. at 279-280 (quoting 
Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 
324 U.S. 806, 816 (1945)).
    The changes under consideration provide that, in certain 
circumstances in which specific elements are met (and applicable 
exceptions do not apply), the Director, and by delegation the Board,\1\ 
will exercise the Director's discretion and will deny institution of an 
IPR or PGR. The USPTO is also considering broadening the types of 
relationships between petitioners and other entities the Office will 
consider when evaluating discretionary denial in order to ensure that 
entities related to a party in an AIA proceeding are fully evaluated 
with regard to conflicts, estoppel provisions, and other aspects of the 
proceedings. The Office is also considering whether, in certain 
circumstances, challenges presenting ``compelling merits'' will be 
allowed to proceed at the Board even where the petition would otherwise 
be a candidate for discretionary denial (as is the current practice 
under the Director's Memorandum Regarding Interim Procedure for 
Discretionary Denials in AIA Post-grant Proceedings with Parallel 
District Court Litigation of June 21, 2022 (discussed below)). In 
addition, the Office is considering whether to promulgate discretionary 
denial rules to ensure that certain for-profit entities do not use the 
IPR and PGR processes in ways that do not advance the mission and 
vision of the Office to promote

[[Page 24505]]

innovation or the intent behind the AIA to improve patent quality and 
limit unnecessary and counterproductive litigation costs.
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    \1\ Any reference to the ``Board'' refers to actions the Board 
takes by delegation from the Director. Such actions are reviewable 
by the Director.
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    Recognizing the important role the USPTO plays in encouraging and 
protecting innovation by individual inventors, startups, and under-
resourced innovators who are working to bring their ideas to market, 
the Office is considering limiting the impact of AIA post-grant 
proceedings on such entities by denying institution when certain 
conditions are met. The Office is seeking input on how it can protect 
those working to bring their ideas to market either directly or 
indirectly, while not emboldening or supporting economic business 
models that do not advance innovation. For example, the Office seeks 
input on to whether to require identification of anyone having an 
ownership interest in the patent owner or petitioner. The USPTO 
welcomes thoughts on any additional disclosure requirements needed and 
how the Board should consider that information when exercising Director 
discretion.
    The Office is also considering additional measures to address the 
concerns raised by repeated validity challenges to patent claims 
(potentially resulting in conflicting outcomes and overburdening patent 
owners). The USPTO is considering further modifying and clarifying 
circumstances in which the Board will deny review of serial and 
parallel petitions. As to parallel petitions, the Office is also 
considering changes to provide that, as an alternative to filing 
multiple petitions, a petitioner may pay additional fees for a higher 
word-count limit.
    Furthermore, the Office is considering rules related to the 
framework the Board will use to conduct an analysis under 35 U.S.C. 
325(d), which provides that in ``determining whether to institute [an 
AIA post-grant proceeding], the Director may take into account whether, 
and reject the petition or request because, the same or substantially 
the same prior art or arguments previously were presented to the 
Office.''
    In addition, the USPTO is considering a rule clarifying that if 
institution of an IPR is not discretionarily denied in view of any 
other criteria, the Board shall consider whether to deny institution if 
there is a pending district court action involving claims challenged in 
the IPR. In the case of a parallel district court action in which a 
trial adjudicating the patentability of challenged claims has not 
already concluded at the time of an IPR institution decision, the USPTO 
is proposing rules to install Apple v. Fintiv and related guidance, 
with additional proposed reforms. See Apple Inc. v. Fintiv, Inc., 
IPR2020-00019, Paper 11, 2020 WL 2126495 (PTAB Mar. 20, 2020) 
(designated precedential May 5, 2020); Director's Memorandum Regarding 
Interim Procedure for Discretionary Denials in AIA Post-grant 
Proceedings with Parallel District Court Litigation (June 21, 2022) 
(Guidance Memorandum).\2\ The USPTO is considering separate rules for 
instances in which a trial adjudicating the validity of challenged 
claims--in district court or during post-grant proceedings--has already 
concluded at the time of an IPR institution decision.
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    \2\ https://www.uspto.gov/sites/default/files/documents/interim_proc_discretionary_denials_aia_parallel_district_court_litigation_memo_20220621_.pdf.
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    The USPTO is also considering a separate briefing process for 
addressing discretionary denial considerations under 35 U.S.C. 314(a), 
324(a), and 325(d) so that briefing on discretionary denial does not 
encroach on the parties' word-count limits for briefing on the merits.
    Lastly, the USPTO is considering aligning the requirements for 
terminating proceedings pre- and post-institution by requiring that 
pre-institution settlement agreements be filed with the Board to 
support the termination of a proceeding pre-institution.

Background

Development of the Changes Under Consideration

    On September 16, 2011, the AIA was enacted into law (Pub. L. 112-
29, 125 Stat. 284 (2011)), and in 2012, the USPTO implemented rules to 
govern Office trial practice for AIA trials, including IPR, PGR, 
covered business method (CBM), and derivation proceedings pursuant to 
35 U.S.C. 135, 316, and 326 and AIA 18(d)(2). See Rules of Practice for 
Trials Before the Patent Trial and Appeal Board and Judicial Review of 
Patent Trial and Appeal Board Decisions, 77 FR 48612 (Aug. 14, 2012); 
Changes to Implement Inter Partes Review Proceedings, Post-Grant Review 
Proceedings, and Transitional Program for Covered Business Method 
Patents, 77 FR 48680 (Aug. 14, 2012); Transitional Program for Covered 
Business Method Patents--Definitions of Covered Business Method Patent 
and Technological Invention, 77 FR 48734 (Aug. 14, 2012). Additionally, 
the USPTO published a Patent Trial Practice Guide for the rules to 
advise the public on the general framework of the regulations, 
including the structure and times for taking action in each of the new 
proceedings. See Office Patent Trial Practice Guide, 77 FR 48756 (Aug. 
14, 2012). Since then, the USPTO has designated numerous decisions in 
such proceedings as precedential or informative, has issued several 
updates to the Trial Practice Guide, and has issued guidance including 
the June 2022 Guidance Memorandum.

Prior Request for Comments Regarding Discretionary Institution

    On October 20, 2020, the USPTO published an RFC to obtain feedback 
from stakeholders on case-specific approaches by the PTAB for 
exercising discretion on whether to institute an AIA proceeding and 
whether the USPTO should promulgate rules based on these approaches. 
See Request for Comments on Discretion to Institute Trials Before the 
Patent Trial and Appeal Board, 85 FR 66502 (Oct. 20, 2020). The USPTO 
published an Executive Summary in January 2021, encapsulating 
stakeholder feedback received from the RFC.\3\ The USPTO received 822 
comments from a wide range of stakeholders, including individuals, 
associations, law firms, companies, and three United States Senators. 
In view of the comments in response to the RFC and the USPTO's further 
experience with AIA proceedings, the USPTO intends to make policy 
changes through notice-and-comment rulemaking. Such rulemaking is 
consistent with comments received from stakeholders, made in response 
to the RFC as well as in other contexts, expressing a preference that 
key policy changes be made and formalized through rulemaking.
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    \3\ USPTO, Executive Summary: Public Views on Discretionary 
Institution of AIA Proceedings (Jan. 2021). Available at 
www.uspto.gov/sites/default/files/documents/USPTOExecutiveSummaryofPublicViewsonDiscretionaryInstitutiononAIAProceedingsJanuary2021.pdf.
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Director's Discretionary Institution Authority in General

    By way of background, the Board institutes an AIA trial on behalf 
of the Director. 37 CFR 42.4(a). In deciding whether to institute an 
AIA trial, the Board considers, at a minimum, whether a petitioner has 
satisfied the relevant statutory institution standard. Sections 314(a) 
and 324(a) of 35 U.S.C. provide the Director with discretion to deny a 
petition, even when meritorious. See, e.g., 35 U.S.C. 314(a) (stating 
``[t]he Director may not authorize an inter partes review to be 
instituted unless . . .''); Cuozzo, 579 U.S. at 273 (``[T]he agency's 
decision to deny a petition is a matter committed to the Patent 
Office's discretion.''). In addition, 35

[[Page 24506]]

U.S.C. 325(d) provides that ``[i]n determining whether to institute or 
order a proceeding . . . , the Director may take into account whether, 
and reject the petition or request because, the same or substantially 
the same prior art or arguments previously were presented to the 
Office.''
    Under 35 U.S.C. 316(a) and 326(a), the Director shall prescribe 
regulations for certain enumerated aspects of AIA proceedings, and 
under 35 U.S.C. 2(b)(2)(A), the Director may establish regulations that 
``shall govern the conduct of proceedings in the Office.'' The 
Director's discretion to institute review of a patent is informed by 35 
U.S.C. 316(b) and 326(b), which require the Director to ``consider the 
effect of any such regulation [under this section] on the economy, the 
integrity of the patent system, the efficient administration of the 
Office, and the ability of the Office to timely complete proceedings 
instituted under this chapter.''
    Congress designed the AIA to improve and ensure patent quality by 
providing ``quick and cost-effective alternatives to litigation'' for 
challenging issued patents. H.R. Rep. No. 112-98, part 1, at 48 (2011), 
2011 U.S.C.C.A.N. 67, 69; see S. Rep. No. 110-259, at 20 (2008) 
(explaining that the ``post-grant review system . . . will give third 
parties a quick, inexpensive, and reliable alternative to district 
court litigation to resolve questions of patent validity''). In so 
doing, Congress granted the USPTO ``significant power to revisit and 
revise earlier patent grants'' as a mechanism ``to improve patent 
quality and restore confidence in the presumption of validity that 
comes with issued patents.'' Cuozzo, 579 U.S. at 272 (quoting H.R. Rep. 
No. 112-98, part 1, at 45, 48). At the same time, Congress instructed 
that ``the changes made by [the AIA] are not to be used as tools for 
harassment or a means to prevent market entry through repeated 
litigation and administrative attacks on the validity of a patent,'' 
and ``[d]oing so would frustrate the purpose of the section as 
providing quick and cost effective alternatives to litigation.'' H.R. 
Rep. No. 112-98, at 48 (2011).
    To take into account the 35 U.S.C. 316(b) and 326(b) considerations 
of the economy, the integrity of the patent system, and the ability of 
the USPTO to provide timely and cost-effective PGRs, as outlined in the 
AIA, the USPTO has developed factors to consider when determining 
whether to institute an AIA review under several different 
circumstances, including when: (1) additional petitions are filed by 
the same petitioner or sufficiently related parties challenging the 
same patent claims as a first petition after the patent owner has filed 
a preliminary response to the first petition (``serial'' or ``follow-
on'' petitions); (2) a petition relies on substantially the same prior 
art, and/or invokes the same or substantially the same arguments, 
previously addressed by the USPTO in connection with the challenged 
patent (implicating considerations under 35 U.S.C. 325(d)); (3) more 
than one petition is filed by the same petitioner (or privy or real 
party in interest with a petitioner) at the same time as the first 
filed petition or up until the filing of the preliminary response in 
the first filed proceeding (``parallel petitions''); and (4) a petition 
is filed in parallel with an ongoing district court proceeding 
(``parallel proceedings'').
    As noted above, in late 2020, the USPTO received 822 comments in 
response to an RFC on certain discretionary institution considerations 
set forth in precedential Board decisions. Comments from stakeholders 
generally supported discretionary institution rulemaking, although the 
comments differed as to the specifics. The substance of the public 
comments is discussed below in connection with the proposed changes.

Discussion of Changes Under Consideration

    The following is a discussion of the amendments under consideration 
for 37 CFR part 42.

Overview

    In order to create clear, predictable rules where possible, as 
opposed to balancing tests that decrease certainty, the USPTO is 
considering changes that would provide for discretionary denials of 
petitions in the following categories, subject to certain conditions 
and circumstances (and exceptions) as discussed further below:
    1. Petitions filed by certain for-profit entities;
    2. Petitions challenging under-resourced patent owner patents where 
the patentee has or is attempting to bring products to market;
    3. Petitions challenging patent claims previously subject to a 
final adjudication upholding the patent claims against patentability 
challenges in district court or in post-grant proceedings before the 
USPTO;
    4. Serial petitions;
    5. Petitions raising previously addressed prior art or arguments 
(subject to the 35 U.S.C. 325(d) framework);
    6. Parallel petitions; and
    7. Petitions challenging patents subject to ongoing parallel 
litigation in district court.
    The changes under consideration also provide for several threshold 
definitions that apply to one or more of these categories of petitions 
subject to discretionary denials. Those definitions set forth the 
criteria used to determine: (1) what constitutes a ``substantial 
relationship'' between entities sufficient to trigger or avoid 
discretionary denial, (2) when claim sets are deemed to have 
``substantial overlap'' with challenged claims, and (3) what 
constitutes ``compelling merits'' sufficient to trigger an exception to 
discretionary denial.
    Finally, five additional changes are being considered: (1) absent 
exceptional circumstances, requiring petitioners to file a stipulation 
that neither they nor their privy or real parties have filed prior 
post-grant proceedings (PGRs, IPRs, CBMs or ex parte reexaminations) on 
the challenged claims; and that if their post-grant proceeding is 
instituted, neither they nor their privy or real parties in interest, 
will challenge any of the challenged claims in a subsequent post-grant 
proceeding (including PGRs, IPRs and ex parte reexamination); (2) 
requiring petitioners to file a separate paper justifying multiple 
parallel petitions; (3) allowing a potential payment of a fee to 
enhance the word-count limits for a petition to avoid multiple parallel 
petitions; (4) providing for separate briefing on discretionary denial 
issues; and (5) requiring filing of all settlement papers when the 
dismissal of AIA proceedings is sought, whether pre- or post-
institution.
    The USPTO welcomes public comments and feedback on all changes 
under consideration, which are discussed in detail below. The USPTO 
further welcomes any responses that address the effect any of the 
proposals herein would have on ``the economy, the integrity of the 
patent system, the efficient administration of the Office, and the 
ability of the Office to timely complete proceedings instituted under'' 
35 U.S.C. 316 and 326. Some of the changes under consideration are set 
forth as alternative proposals. The USPTO appreciates feedback on the 
relative benefits and drawbacks, if any, of the alternatives proposed. 
The USPTO also invites suggestions on what, if any, additional 
disclosures the USPTO should require and any other considerations the 
USPTO should take into account that would weigh in favor of or against 
discretionary denial.

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Threshold Definitions

``Substantial Relationship'' of Entities
    The USPTO currently applies the common law formulations of ``real 
party in interest'' and ``privy'' to ensure that entities related to a 
party in an AIA proceeding are considered when evaluating conflicts and 
the effect of estoppel provisions. See Consolidated Trial Practice 
Guide, 12-18 (Nov. 2019). For example, relationships based on corporate 
structure, contract, or financial interest are often considered in 
identifying real parties in interest or those in privity with a party 
to the proceedings.
    The USPTO has adopted similar considerations in the discretionary 
denial context. For example, in Valve Corp. v. Electronic Scripting 
Products, Inc., IPR2019-00062, -00063, -00084, 2019 WL 1490575 (PTAB 
Apr. 2, 2019) (precedential) (Valve I), the Board denied institution 
when a party, Valve, filed multiple petitions for IPR after the denial 
of an IPR request of the same claims filed by the party's co-defendant 
in district court, whose accused products incorporated technology 
licensed from Valve. Valve I, 2019 WL 1490575, at *4-5. The Board held 
that when different petitioners challenge the same patent, the Board 
considers the relationship, if any, between those petitioners in 
weighing the factors in General Plastic Co. v. Canon Kabushiki Kaisha, 
IPR2016-01357, Paper 19 (PTAB Sept. 6, 2017) (precedential) (General 
Plastic). Id. The USPTO also explained, in Valve Corp. v. Electronic 
Scripting Products, Inc., IPR2019-00064, -00065, -00085, 2019 WL 
1965688 (PTAB May 1, 2019) (Valve II), that the first General Plastic 
factor applies to a later petitioner when that petitioner previously 
joined an instituted IPR proceeding and, therefore, was considered to 
have previously filed a petition directed to the same claims of the 
same patent. Valve II, 2019 WL 1965688, at *4-5.
    However, the current party relationship concepts applied in the 
discretionary denial context are arguably too limited in certain 
circumstances. Accordingly, the USPTO is considering adopting a 
``substantial relationship'' test to evaluate whether certain entities 
are sufficiently related to a party in an AIA proceeding such that 
discretionary denial is warranted under the criteria set forth in the 
changes under consideration. The substantial relationship test would be 
broadly construed and would encompass, but not be limited to, real 
parties in interest or privies of the party to the AIA proceeding, and 
would also include others that are significantly related to that party, 
including at least those entities as discussed in Valve I and Valve II.
    The USPTO is also considering other proposals for deeming entities 
to be substantially related for purposes of discretionary denials. For 
example, one proposal is to consider those involved in a membership 
organization, where the organization files IPRs or PGRs, as having a 
substantial relationship with the organization. There may be instances 
in which entities may pool their resources to challenge a patent. For 
example, where multiple entities are defending infringement claims in 
district court litigation, or have related interests in challenging the 
patentability of patent claims, they may join together to file a single 
challenge to the subject patent claims before the PTAB. Such activities 
may advance the Office's mission and vision and the congressional 
intent behind the AIA where the entities are in privity with a party or 
are, themselves, real parties in interest, and where their involvement 
in the proceeding is consistent with the statutory provisions or the 
Office's rules, including those related to estoppel or multiple 
challenges to a patent. In the interests of transparency, the Office 
would require disclosure of any such relationships by a party upon 
filing its first paper in an IPR or PGR and would require parties to 
promptly file a supplemental statement if the information changes.
    Another proposal under consideration is requiring a patent owner 
and petitioner to disclose anyone with an ownership interest in the 
patent owner or petitioner, any government funding related to the 
patent, any third-party litigation funding support (including funding 
for some or all of the patent owner's or petitioner's attorney fees or 
expenses before the PTAB or district court), and any stake any party 
has in the outcome of the AIA proceeding or any parallel proceedings on 
the challenged claims. For example, the Office could require parties to 
disclose beneficial ownership interests similar to what the Securities 
and Exchange Commission requires.
``Substantial Overlap'' Between Claim Sets
    As discussed further below, for certain discretionary denial 
decisions the USPTO would consider whether there is ``substantial 
overlap'' between claim sets (for example, those previously adjudicated 
to not be invalid) and the challenged claims. Under the proposed 
changes, the Office is considering a clear, predictable definition in 
which claim sets are deemed to ``substantially overlap'' the challenged 
claims when at least one challenged claim is ``substantially the same'' 
as a claim in a set to which the claim is being compared. For purposes 
of this comparison, claims will be deemed to be ``substantially the 
same'' when any differences between the claims are not material to 
patentability. Alternatively, the Office is open to considering a more 
subjective test in which substantial overlap between claim sets is 
determined on a case-by-case basis.
    The Office requests comments on other possible tests for 
determining when claim sets will be considered to ``substantially 
overlap'' the challenged claims including what degree of overlap (i.e., 
number of claims) would amount to ``substantial overlap'' and whether 
one overlapping claim should be sufficient.
Effect of ``Compelling Merits'' on Discretionary Denials
    The changes under consideration would provide that, in certain 
circumstances, when a challenge presents compelling merits the 
proceeding will be allowed to proceed at the Board even where the 
petition would otherwise potentially be a candidate for discretionary 
denial. A challenge presents ``compelling merits'' when the evidence of 
record before the Board at the institution stage is highly likely to 
lead to a conclusion that one or more claims are unpatentable by a 
preponderance of the evidence. See OpenSky Indus., LLC v. VLSI Tech. 
LLC, IPR2021-01064, Paper 102 at 49 (PTAB Oct. 4, 2022) (Director 
decision, precedential) (describing compelling merits as those that 
``plainly lead to a conclusion that one or more claims are 
unpatentable,'' and noting that such standard can be met only ``if it 
is highly likely that the petitioner would prevail with respect to at 
least one challenged claim''). Under this test, the petitioner has the 
burden of presenting evidence at the institution stage that leaves the 
Board with a firm belief or conviction that it is highly likely that 
the petitioner would prevail with respect to at least one challenged 
claim. Consistent with the intent of the AIA and our mission, it is 
only this high certainty that would compel the Board to review claims 
for the public benefit when other considerations favor discretionary 
denial.
    A compelling merits standard is a higher standard than the 
reasonable likelihood required for the institution of an IPR under 35 
U.S.C. 314(a), and higher than more likely than not

[[Page 24508]]

required for institution of a PGR under 35 U.S.C. 324(a). The 
compelling merits standard is also higher than the preponderance of the 
evidence standard (more likely than not) that applies to final 
determinations of patentability at the close of trial. But because all 
relevant evidence likely will not have been adduced at the point of 
institution, a determination of ``compelling merits'' at the 
institution stage should not be taken as a signal to the ultimate 
conclusion after trial. See OpenSky Indus., IPR2021-01064, Paper 102 at 
49. The Board would provide its reasoning in determining whether the 
merits of a petition are compelling. Further, the Board would not reach 
any issue regarding ``compelling merits'' until all other discretionary 
denial issues have been evaluated and the petition is a candidate for 
discretionary denial.
    The compelling merits test seeks to strike a balance among the 
competing concerns of avoiding potentially conflicting outcomes, 
avoiding wasteful parallel proceedings, protecting against patent owner 
harassment, and strengthening the patent system by allowing the review 
of patents challenged with a sufficiently strong initial merits showing 
of unpatentability. The patent system and the public could benefit from 
instituting challenges with a showing of unpatentability by compelling 
merits. The USPTO is also considering whether the compelling merits 
standard is the most appropriate standard for the Board to apply at the 
institution stage when determining if the merits of a petition are 
sufficiently strong to avoid discretionary denial.
    The Office also requests comments on how the compelling merits 
standard would apply if the patent owner raises a factual question that 
cannot be resolved at institution (e.g., presenting evidence of 
secondary considerations of nonobviousness). In particular, the Office 
seeks feedback on what presumptions should apply and whether pre-
institution discovery would be appropriate. The Office is considering 
whether, in assessing compelling merits, the Office should adopt a test 
whereby (1) the record will be viewed in the light most favorable to 
the patent owner and (2) the Board will draw all reasonable inferences 
in favor of patent owner.
    Lastly, the Office is considering whether the compelling merits 
standard should apply as an exception to all of the bases for 
discretionary denial discussed below and, if not, which ones it should 
and should not apply to. Under current USPTO guidance, the compelling 
merits test does not apply when certain entities are attempting to 
challenge a patent after a final adjudication of patentability in post-
grant proceedings or in district court or when serial challenges are 
being made by the same party or a real party in interest or privy.

Discretionary Denials Under 35 U.S.C. 314(a), 324(a), and 325(d)

    In the AIA, Congress established post-grant proceedings, including 
IPR, PGR, and CBM proceedings,\4\ to improve and ensure patent quality 
by providing ``quick and cost-effective alternatives to litigation'' 
for challenging issued patents. H.R. Rep. No. 112-98, part 1, at 48; 
see also S. Rep. No. 110-259, at 20 (explaining that the ``post-grant 
review system . . . will give third parties a quick, inexpensive, and 
reliable alternative to district court litigation to resolve questions 
of patent validity''). Congress granted the Office ``significant power 
to revisit and revise earlier patent grants'' as a mechanism ``to 
improve patent quality and restore confidence in the presumption of 
validity that comes with issued patents.'' Cuozzo, 579 U.S. at 272 
(quoting H.R. Rep. No. 112-98, part 1, at 45, 48). Given those 
objectives, the changes under consideration, in addition to providing 
clear rules for when the Board would exercise its discretion to deny 
institution, would also clarify that the Office always retains 
discretion to deny institution as a sanction or in response to improper 
conduct or gamesmanship.
---------------------------------------------------------------------------

    \4\ The transitional covered business method patent review 
program expired on September 16, 2020, in accordance with AIA 
18(a)(3). Although the program has sunset, existing CBM proceedings 
based on petitions filed before September 16, 2020, are still 
pending.
---------------------------------------------------------------------------

Limitations on Nonmarket Competitors--Petitions Filed by Certain For-
Profit Entities
    The Office received feedback in the comments responsive to the RFC 
expressing concerns that some petitions are filed by for-profit 
entities who had not been sued for infringement and may not have an 
apparent reason for challenging validity of patent claims. The USPTO is 
likewise concerned that certain for-profit entities may use the IPR and 
PGR processes not to advance the mission and vision of the Office to 
promote innovation or the intent behind the AIA to provide a less-
expensive alternative to district court litigation, but instead to 
advance other interests. To curb the potential for abusive filings, the 
USPTO is considering changes that would limit institution on filings by 
for-profit, non-competitive entities that in essence seek to shield the 
actual real parties in interest and privies from statutory estoppel 
provisions. The changes under consideration would make clear that the 
Board would discretionarily deny any petition for IPR or PGR filed by 
an entity that: (1) is a for-profit entity; (2) has not been sued on 
the challenged patent or has not been threatened with infringement of 
the challenged patent in a manner sufficient to give rise to 
declaratory judgment standing; (3) is not otherwise an entity that is 
practicing, or could be alleged to practice, in the field of the 
challenged patent with a product or service on the market or with a 
product or service in which the party has invested to bring to market; 
and (4) does not have a substantial relationship with an entity that 
falls outside the scope of elements (1)-(3). The Office contemplates 
defining ``for-profit entities'' as entities that do not qualify for 
tax-exempt status with the Internal Revenue Service.
    The USPTO is considering defining ``for-profit'' entities to 
include any entity that is a real party in interest with, or in privy 
with, a for-profit entity. The Office is alternatively considering 
``for-profit'' entities to additionally include any parties with a 
substantial relationship with a for-profit entity.
    The USPTO is seeking feedback on whether it should discretionarily 
deny an IPR or PGR if the patent owner provides a covenant not to sue 
to a for-profit petitioner and its customers prior to initiating 
litigation against those entities. In addition, the USPTO requests 
comments on whether it should consider any other covenant or 
stipulation in determining whether to exercise discretion to deny 
institution.
    As to the second element, ``has not been sued on the challenged 
patent,'' the Office is considering whether the element should be 
further defined such that the Board will not discretionarily deny 
petitions filed by entities that have been threatened with infringement 
of the challenged patent in a manner sufficient to give rise to 
declaratory judgment standing. Alternatively, the Office is open to 
considering whether a petition should be denied where a petitioner 
lacks declaratory judgment standing, but the petitioner has a 
reasonable apprehension of suit based on the prior litigation conduct 
of the patentee asserting the patent or related patents against 
similarly situated companies.
    Regarding the third element, under this proposal the Board is 
considering the metes and bounds of prior attempts to commercialize and 
how to define the term so that it encompasses efforts to bring products 
to market. The Office requests comments on whether and

[[Page 24509]]

when activity by another should inure to the benefit of a petitioner. 
The Office is proposing the language ``field of the challenged patent'' 
to avoid a dispute about whether the petitioner practices the 
challenged claims or patent.
    Regarding the fourth element, the USPTO understands there may be 
instances in which entities may pool resources to challenge a patent. 
For example, where multiple entities are defending infringement claims 
in district court litigation, or have related interests in challenging 
the patentability of patent claims, they may join together to challenge 
the subject patent claims before the PTAB. Such activity may advance 
the Office's mission and vision and the congressional intent behind the 
AIA so long as the entities are real parties in interest or in privy, 
such that the activity does not work to avoid the effect of statutory 
provisions or the Office's rules, including those related to estoppel 
and/or multiple challenges to a patent.
    The USPTO is also considering whether, even if the petitioner is an 
entity satisfying the four elements discussed above, the Office should 
institute petitions where the petitioner satisfies a heightened 
standard of demonstrating compelling merits.
Micro and Small Entities: Protecting Under-Resourced Inventors and 
Petitioners
    The USPTO recognizes that the contributions of startups, small 
businesses, and independent inventors are vital to the development of a 
variety of important American industries. They are the engines that, in 
many cases, drive innovation. The Office also recognizes that such 
entities may have limited resources that are necessarily devoted to 
crucial activities such as research, development, and manufacturing.
    Such limited resources may impact the perceived fairness of post-
grant reviews. For example, some stakeholders in response to the RFC 
expressed concern that under-resourced inventors are unable to afford 
the costs involved in defending patents in post-grant review. Some 
stakeholders advocating for small businesses and individual inventors 
urged the Office to take into account the financial resources of a 
patent owner, and to limit reviews of patents owned by under-resourced 
entities who lack funding to defend challenges to their patents but who 
have sought to bring their inventions to market either themselves or 
through a licensee.
    Because providing support for startups, small businesses, and 
independent inventors is one of the major priorities for the USPTO, the 
Office proposes to limit the impact of AIA post-grant proceedings on 
these patent owners by discretionarily denying petitions for an IPR or 
PGR when certain other conditions are met.
    Specifically, under one proposal, absent compelling merits, the 
status of the patent owner would lead to a denial of institution when: 
(1) the patent owner had claimed micro entity 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 gross income level under 37 CFR 
1.29(a)(3); and (3) at the time the petition was filed, the patent 
owner (or a licensee of the patent that started practicing the patent 
after becoming a licensee) was commercializing the subject matter of a 
challenged claim.
    Under this proposal, to allow for growth between the time the 
patent issued and the filing of the petition, the changes under 
consideration would apply to entities that were micro or small entities 
at patent issuance but are under-resourced (as defined by a gross 
income requirement) at the time of filing the petition. The reduction 
to practice and commercialization requirement is intended to encourage 
the creation of new businesses and competition in the marketplace.
    The USPTO welcomes any other proposals that will provide 
protections for startups, small businesses, and independent inventors, 
and recognizes it is not only those with limited resources that benefit 
our economy. At the same time, the Office wants to address competing 
concerns about spurious litigation and abusive practices. Due to the 
large variety of business models, it is difficult to draw widely 
applicable bright lines. The Office welcomes proposals to protect 
startups, small businesses, and independent inventors beyond those who 
are under-resourced to the extent the remainder of these proposed rules 
do not provide adequate protection. As an example, the Office is 
considering whether a multiplier of eight times the micro entity gross 
income level, or some other multiplier, would be appropriate to help 
the Office to ensure that it is reaching under-resourced individual 
inventors and start-ups (and not those funded or otherwise supported by 
an entity who is neither). The Office also is considering other 
possible approaches, including whether a limited-resource entity should 
be required at the time of the petition to meet the micro or small 
entity provisions under 37 CFR 1.27 and 1.29. The Office welcomes 
comments on how the office should define ``under-resourced'' and 
whether the Office should include other criteria other than income. For 
example, the Office could consider a petitioner under-resourced if, at 
the time of petition filing, the petitioner is a small or micro entity 
not exceeding a specified gross income level and has been accused of 
making, using, selling or offering to sell in the United States, or 
importing into the United States the subject matter of a challenged 
claim. An accused petitioner is a petitioner having declaratory 
judgment standing under 28 U.S.C. 2201(a). See MedImmune, Inc. v. 
Genentech, Inc., 549 U.S. 118 (2007).
    To protect against government-owned or -funded entities using this 
section to attempt to insulate their patents, and/or to avoid abuse, 
for any measure that inures to the benefit of patent owners with 
limited resources, a consideration could include determining whether 
the small or micro entity has government funding. The Office could also 
consider third-party litigation funding support, including funding for 
some or all of the patent owner's attorney fees or expenses before the 
PTAB or district court. The Board could also consider the resources of 
anyone with an ownership interest in the patent owner and anyone with 
any stake in the outcome of the AIA proceeding or any parallel 
proceedings on the challenged claims. For example, a small or micro 
entity requesting denial of institution based on limited resources 
could be required to disclose the identity of any third-party funders, 
including U.S. or foreign government funding; provide a brief 
description of the financial interest of the third-party funder; and 
state whether the funder's approval is required for settlement or any 
positions taken before the PTAB. The PTAB could also inquire into all 
ownership interests to ensure this process is not abused. This 
information would not be used in any way other than to determine if an 
entity is truly under-resourced.
    Other options the Office is considering include excluding from 
consideration the activities of licensees in certain circumstances. The 
Office welcomes comments on whether certain licenses activities should 
be excluded, keeping in mind that the USPTO wants to encourage bringing 
ideas to market whether directly or through technology transfer, 
licensing, or cross-licensing activities.
    Additionally, the Office is considering how to proceed with 
discretionary

[[Page 24510]]

denials where a petitioner is under-resourced. The Office welcomes 
comments on whether the resource status of a petitioner should be a 
consideration when analyzing discretionary denials.
Prior Adjudications Upholding Validity
    Comments by some stakeholders in response to the RFC emphasized 
that if a district court reaches a decision on patentability of a 
patent claim before a final decision can be reached in a parallel IPR 
proceeding, the benefits of the IPR (a cheaper, quicker, more efficient 
alternative to litigation) are not likely to be realized. According to 
these stakeholders, this point is even more salient in instances in 
which a patent claim has already been subject to an adjudication 
upholding the validity of the claim prior to the filing of a petition 
challenging that claim.
    The changes under consideration would provide that prior final 
adjudications by a district court or by the Office in AIA post-grant 
proceedings upholding the validity of claims that substantially overlap 
the challenged claims will result in discretionary denial, except in 
cases in which the petitioner has standing to challenge the validity of 
the claims in district court or intends to pursue commercialization of 
a product or service in the field of the invention of a challenged 
claim, was not a real party in interest or privy to the party 
previously challenging one or more of the challenged claims (unless any 
earlier challenge was resolved for reasons not materially related to 
the merits of the petition, e.g., a post-grant proceeding that was 
discretionarily denied or otherwise was not evaluated on the merits); 
and meets a heightened burden of compelling merits.
    For clarity, the changes under consideration would also add a 
definition of ``final adjudication'' as a decision on the merits by a 
district court that is final within the meaning of 28 U.S.C. 
1295(a)(1). This means that only prior adjudications of invalidity 
challenges in district court that are on the merits and are part of a 
final, appealable judgment would be within the scope of the changes 
under consideration. Similarly, a final adjudication at the Office 
would be a final, appealable decision of the Office. The Board should 
first determine whether a petitioner meets the first three criteria--
standing, intent to commercialize and privy/real party in interest--
before moving to the compelling merits analysis.
    These considerations do not replace other limitations on serial 
petitions or other mechanisms for discretionary denial, or the Fintiv 
analysis itself if there is, additionally, a parallel proceeding 
ongoing, but present an additional, independent basis for discretionary 
denial.
    The Office is also considering whether to extend this proposal to 
including prior adjudications of validity through ex parte 
reexaminations requested by a third party other than the patent owner 
or the patent owner's real party in interest or privy.
Serial Petitions
    Serial petitioning occurs when additional petitions are filed 
challenging at least one claim previously challenged in a first 
petition: (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 37 CFR 42.107(b) or as otherwise 
ordered.\5\ In responding to the RFC, some stakeholders expressed 
concern that duplicative attacks on the same patent through the IPR 
process devalue the patent. The Office is considering revising the 
rules to address serial petitioning.
---------------------------------------------------------------------------

    \5\ See Analysis of multiple petitions in AIA Proceedings 
(December 2020 update), www.uspto.gov/sites/default/files/documents/multiple_petition__mta_study_.pdf (noting that in fiscal year (FY) 
2020, about 2% of AIA challenges (21 out of 938) were serial 
petitions, and a fraction of those (7) were successful); see also 
id. at slides 8 and 9 (describing what led to a successful serial 
petition in FY 2020).
---------------------------------------------------------------------------

    In General Plastic Co. v. Canon Kabushiki Kaisha, IPR2016-01357, 
2017 WL 3917706, at *7 (PTAB Sept. 6, 2017) (precedential), the Board 
referred to the goals of the AIA but also ``recognize[d] the potential 
for abuse of the review process by repeated attacks on patents.'' 2017 
WL 3917706, at *7 (citing H.R. Rep. No. 112-98, part 1, at 48 (2011)). 
To aid the Board's assessment of ``the potential impacts on both the 
efficiency of the inter partes review process and the fundamental 
fairness of the process for all parties,'' General Plastic identified a 
number of non-exclusive factors that the Board will consider in 
exercising discretion in instituting an IPR, especially as to ``follow-
on'' petitions challenging the same patent as challenged previously in 
an IPR, PGR, or CBM proceeding. Id. at *8. The General Plastic non-
exclusive factors include: (1) whether the same petitioner previously 
filed a petition directed to the same claims of the same patent; (2) 
whether, at the time of filing of the first petition, the petitioner 
knew of the prior art asserted in the second petition or should have 
known of it; (3) whether, at the time of filing of the second petition, 
the petitioner had already received a patent owner preliminary response 
(if filed) to the first petition or received the Board's decision on 
whether to institute review in the first petition; (4) the length of 
time that elapsed between the time the petitioner learned of the prior 
art asserted in the second petition and the filing of the second 
petition; and (5) whether the petitioner provides an adequate 
explanation for the time elapsed between the filings of multiple 
petitions directed to the same claims of the same patent. Id. at *7. 
Additional factors include (6) the finite resources of the Board; and 
(7) the requirement to issue a final determination not later than 1 
year after the date on which the Director notices institution of 
review. Id.
    Since General Plastic, the Office has explained that the 
application of the first General Plastic factor is not limited to 
instances in which multiple petitions are filed by the same petitioner. 
For example, in Valve I, the Board denied institution when a party 
filed serial petitions for IPR after the denial of an IPR request of 
the same claims filed by the party's co-defendant. Valve I, 2019 WL 
1490575, at *4-5. The Board held that when different petitioners 
challenge the same patent, the Board considers the relationship, if 
any, between those petitioners when weighing the General Plastic 
factors. Id. The Office also explained, in Valve II, that the first 
General Plastic factor applies to a later petitioner when that 
petitioner previously joined an instituted IPR proceeding and, 
therefore, was considered to have previously filed a petition directed 
to the same claims of the same patent. Valve II, 2019 WL 1965688, at 
*4-5. The relationships between petitioners in serial petition 
scenarios depend on the circumstances. Additionally, ``General Plastic 
factor 1 must be read in conjunction with factors 2 and 3.'' Code 200 
v. Bright Data Ltd., IPR2022-00861, Paper 18 at 5 (PTAB Aug. 23, 2022) 
(Director decision, precedential). ``Where the first-filed petition 
under factor 1 was discretionarily denied or otherwise was not 
evaluated on the merits, factors 1-3 only weigh in favor of 
discretionary denial when there are `road-mapping' concerns under 
factor 3 or other concerns under factor 2.'' Id.
    The USPTO is considering replacing factors 1-7 with the following 
test, which incorporates the USPTO's case law on factor 1. Under the 
proposal, the Board will discretionarily deny--subject to two 
exceptions--any serial IPR or PGR petition \6\ (with at least one

[[Page 24511]]

challenged claim that is the same as a challenged claim in a previously 
filed IPR, PGR, or CBM petition) that is filed by one of the following: 
the same petitioner, a real party in interest or privy to that 
petitioner, a party with a significant relationship to that petitioner 
(as discussed in Valve I \7\), or a party who previously joined an 
instituted IPR or PGR filed by that petitioner (as discussed in Valve I 
\8\). The two exceptions are that the Board will not discretionarily 
deny such a petition when: (1) the earlier petition was resolved for 
reasons not materially related to the merits of the petition (e.g., was 
discretionarily denied or otherwise was not evaluated on the merits); 
or (2) exceptional circumstances are shown. Exceptional circumstances 
may, for example, include (a) situations in which a patentee changes 
the scope of the claims, for example, through amendment or a proposed 
claim construction; (b) situations where, 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 (c) situations 
in which the petitioner raises a new statutory challenge (35 U.S.C. 
101, 112, or 102/103) 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.
    This approach to serial petitions could simplify the process for 
analyzing such petitions and provide greater clarity and certainty to 
the parties regarding whether subsequent petitions will be instituted. 
The Office requests comments on this approach, including how it should 
define ``exceptional circumstances'' and whether it should use the ``at 
least one overlapping claim'' test or whether it should use the 
``substantial overlap'' of claims test.
    The Office is also considering whether to apply the substantial 
relationship test instead of limiting discretionary denial of serial 
petitions to those filed by the same petitioner, a real party in 
interest or privy to that petitioner, a party with a significant 
relationship to that petitioner, as discussed in Valve I, or a party 
who previously joined an instituted IPR or PGR filed by that 
petitioner, as discussed in Valve II. The Office also welcomes thoughts 
on whether the Office should discretionarily deny any serial petition, 
regardless of the relationship to the first petitioner, unless the 
petition meets the compelling merits test. The Office also welcomes 
comments on how the Office should define exceptional circumstances.
35 U.S.C. 325(d) Framework
    Under 35 U.S.C. 325(d), in ``determining whether to institute [an 
AIA post-grant proceeding] the Director \6\ may take into account 
whether, and reject the petition or request because, the same or 
substantially the same prior art or arguments previously were presented 
to the Office.''
---------------------------------------------------------------------------

    \6\ The Board institutes trial on behalf of the Director. 37 CFR 
42.4(a).
---------------------------------------------------------------------------

    In evaluating the exercise of discretion to deny institution under 
35 U.S.C. 325(d), the Board applies the two-part framework set forth in 
the precedential Advanced Bionics decision, which entails: (1) 
determining whether the same or substantially the same art was 
previously presented to the Office or whether the same or substantially 
the same arguments were previously presented to the Office; and (2) if 
either condition of the first part of the framework is satisfied, 
determining whether the petitioner has demonstrated that the Office 
erred in a manner material to the patentability of challenged claims. 
Advanced Bionics, LLC v. Med-El Elektromedizinische Ger[auml]te GmbH, 
IPR2019-01469, Paper 6 at 8 (PTAB Feb. 13, 2020) (precedential).
    In applying the two-part framework, the Board has also considered 
several non-exclusive factors set forth in the precedential Becton, 
Dickinson decision, including (a) the similarities and material 
differences between the asserted art and the prior art involved during 
examination; (b) the cumulative nature of the asserted art and the 
prior art evaluated during examination; (c) the extent to which the 
asserted art was evaluated during examination, including whether the 
prior art was the basis for rejection; (d) the extent of the overlap 
between the arguments made during examination and the manner in which 
the petitioner relies on the prior art or the patent owner 
distinguishes the prior art; (e) whether the petitioner has pointed out 
sufficiently how the examiner erred in its evaluation of the asserted 
prior art; and (f) the extent to which additional evidence and facts 
presented in the petition warrant reconsideration of the prior art or 
arguments. Becton, Dickinson & Co. v. B. Braun Melsungen AG, IPR2017-
01586, Paper 8 at 17-18 (PTAB Dec. 15, 2017) (precedential as to 
section III.C.5, first paragraph).
    Factors (a), (b), and (d) of Becton, Dickinson relate to whether 
the art or arguments presented in the petition are the same or 
substantially the same as those previously presented to the Office. 
Advanced Bionics, Paper 6 at 10. Factors (c), (e), and (f) ``relate to 
whether the petitioner has demonstrated a material error by the 
Office'' in its prior consideration of that art or arguments. Id. Under 
Advanced Bionics, only if the same or substantially the same art or 
arguments were previously presented to the USPTO does the Office then 
consider whether the petitioner has demonstrated a material error by 
the Office. Id.
    Although 35 U.S.C. 325(d) was not the specific focus of the RFC, in 
response to a general question about the Board's use of discretion some 
stakeholders suggested that the Office promulgate rules for evaluating 
whether to proceed with an AIA review in view of 35 U.S.C. 325(d) based 
on the framework set forth in Advanced Bionics and Becton, 
Dickinson.\7\ To promote more consistency, clarity, and efficiency, the 
USPTO is proposing to promulgate rules directed at how the Board will 
conduct an analysis under 35 U.S.C. 325(d). While the considered 
changes reflect many of the underlying principles of Advanced Bionics 
and Becton, Dickinson, the Office intends to further clarify the 
application of 35 U.S.C. 325(d) to supersede the guidance provided in 
these cases in order to implement the intent of the AIA--to improve 
patent robustness and reliability--while providing appropriate 
deference to USPTO decisions on art or arguments previously before the 
Office.
---------------------------------------------------------------------------

    \7\ Response from the American Intellectual Property Law 
Association at 10-11; response from the Intellectual Property Owners 
Association at 6-7.
---------------------------------------------------------------------------

    The USPTO is considering limiting the application of 35 U.S.C. 
325(d) to situations in which the Office previously addressed the prior 
art or arguments. Art or arguments would be deemed to have been 
previously addressed where the Office evaluated the art or arguments 
and articulated its consideration of the art or arguments in the 
record. For example, for the 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 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 on an Information Disclosure Statement (whether 
or not checked off by an examiner), in a Notice of References Cited 
(PTO-892) during prosecution of the challenged patent, or in search 
results would not be considered sufficient to be deemed ``previously 
addressed'' for purposes of 35 U.S.C. 325(d). Requiring that the art

[[Page 24512]]

be previously addressed increases efficiency and lowers the cost of 
proceedings for parties and the Board by providing a clear test that 
reduces unnecessary briefing.
    The Office seeks to clarify that 35 U.S.C. 325(d) applies to art or 
arguments that were previously addressed during proceedings pertaining 
to: (1) the challenged patent; or (2) any parent application or other 
family member application of a challenged patent, but only if the 
claims of the parent application or other family member application 
contain or contained substantially the same limitations as those at 
issue in the challenged claims. If a patent owner makes an argument 
under 35 U.S.C. 325(d) based on art or arguments presented in a related 
application, the patent owner should identify how the claims of the 
related application and the challenged patent are substantially the 
same. For example, the patent owner may show that the challenged claims 
received an obviousness-type double patenting rejection over the claims 
of the parent and a terminal disclaimer was filed to overcome the 
rejection.
    In the current proposal, 35 U.S.C. 325(d) would apply to art or 
arguments from related applications (if the claims are substantially 
the same) but would not apply to art or arguments that were addressed 
in any non-related applications. However, the Office is soliciting 
comments on whether there are benefits to limiting the application of 
35 U.S.C. 325(d) to art or arguments that were previously addressed 
during proceedings pertaining only to the challenged patent (and not to 
any parent or related application, including child applications) or, 
alternatively, expanding the application of 35 U.S.C. 325(d) to non-
related applications that were before the Office prior to the issuance 
of the challenged patent.
    Further, under the proposal, prior art will be considered to be 
``substantially the same'' only if the disclosure in the prior art 
previously addressed contains the same teaching relied upon in the 
petition and that teaching was addressed by the Office, whether it be a 
patent or a printed publication in an IPR or another type of prior art 
available in a PGR. For example, a U.S. national stage filing of a 
Patent Cooperation Treaty (PCT) application under 35 U.S.C. 371 could 
be considered to be ``substantially the same'' art as the PCT 
application if it has the same disclosure that was previously addressed 
in the PCT application. Similarly, two non-patent references could be 
considered to be ``substantially the same'' if they both teach the same 
claim limitation in the same way as the challenged claim.
    The Office also seeks to clarify that 35 U.S.C. 325(d) will apply 
to any proceedings in which the art or arguments were previously 
addressed, including prosecution, reissue, ex parte reexamination, 
inter partes reexamination, and AIA post-grant proceedings, and appeals 
of the same, involving the challenged patent or a related patent or 
application.
    The proposals under consideration provide that if the patent owner 
meets its burden in showing that the same or substantially the same art 
or arguments were previously addressed by the Office, then the Board 
will not institute a trial unless the petitioner establishes material 
error by the Office. Examples of a material error may include 
misapprehending or overlooking specific teachings of the relevant prior 
art where those teachings impact patentability of the challenged 
claims, including experimental evidence demonstrating an inherent 
feature of the prior art or rebutting a showing of unexpected results. 
Another example may include an error of law, such as misconstruing a 
claim term, where the construction impacts the patentability of the 
challenged claims. It will not be considered material error if 
reasonable minds can disagree regarding the purported treatment of the 
art or arguments.
Parallel Petitions
    With regard to parallel petitions 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 
changes under consideration would provide that, when determining 
whether to institute an IPR or PGR, the Board will not institute 
parallel petitions unless the petitioner has made a showing of good 
cause as to why parallel petitions are necessary.
    Based on the USPTO's experience with administering the AIA, the 
Office finds it unlikely that circumstances will arise in which three 
or more petitions filed by a petitioner with respect to a particular 
patent will be appropriate. For example, the Office observed that for 
FY 2021 1,087 out of 1,136 patents challenged (96%) were subject to 
only one or two petitions, and that 49 out of 1,136 patents challenged 
(4%) were subject to three or more petitions. See also Analysis of 
multiple petitions in AIA Proceedings (December 2020 update), 
www.uspto.gov/sites/default/files/documents/multiple_petition__mta_study_.pdf (noting that in FY 2020, 15% of AIA 
challenges (145 out of 938) were parallel petitions, and only 30% of 
those (43) were successful). Further, two or more petitions filed 
against the same patent at or about the same time may place a 
substantial and unnecessary burden on the patent owner and could raise 
fairness, timing, and efficiency concerns. See 35 U.S.C. 316(b), 
326(b).
    Nevertheless, the Office recognizes that there may be circumstances 
in which more than one petition may be necessary, including, for 
example, when there is a dispute about a priority date or two different 
claim constructions, requiring arguments under multiple prior art 
references or mutually exclusive unpatentability theories. See 
Consolidated Trial Practice Guide, 59 (Nov. 2019). In such 
circumstances, one potential outcome of separating the alternative 
theories into different petitions, which would benefit patentees as 
well as petitioners, is that it would allow the Board to deny petitions 
with non-meritorious theories, such that the instituted AIA trial and 
related appeal to the Federal Circuit and the Supreme Court, if any, 
will be focused only on the meritorious theories, thereby eliminating 
the cost and burden of an AIA trial and appeal on rejected theories. If 
all of the theories were presented in only one petition, the Board 
would be required to either institute on all grounds raised in the 
petition or deny the petition in its entirety. SAS Institute Inc. v. 
Iancu, 138 S. Ct. 1348, 1359-60 (2018); PGS Geophysical AS v. Iancu, 
891 F.3d 1354, 1359-62 (Fed. Cir. 2018); Adidas AG v. Nike, Inc., 894 
F.3d 1256, 1258 (Fed. Cir. 2018).
    In responding to the RFC, many stakeholders supported rulemaking to 
provide additional clarity and predictability that would set forth 
specific circumstances in which the Director would consider institution 
of parallel petitions, including, for example, those considerations set 
forth in the 2019 Consolidated Trial Practice Guide, alternative claim 
constructions, a large number of claims asserted in related litigation, 
the complexity of technology, numerous limitations in claims, a large 
number of different claimed embodiments, and a large number of grounds 
per challenged claim(s). Some stakeholders recommended that, given the 
Office's restrictive word-count limits, additional parallel petitions 
are needed, and suggested requiring the petitioner to separately 
justify any second or subsequent parallel petition.
    Additionally, some stakeholders encouraged the Office to 
distinguish parallel-petition situations from serial-petition 
situations to promote consistent

[[Page 24513]]

treatment. Some stakeholders recommended defining parallel petitions as 
two or more petitions filed before a preliminary response is filed 
regarding the earlier petition on the same patent.
    Further, some stakeholders advocated that, with respect to the 
restrictive word-count limit, the Office should allow the petitioner to 
pay additional fees for a higher word-count limit or create a good 
cause exception to the word-count limit. Some stakeholders also 
suggested excluding sections of the petition and the preliminary 
response that address discretionary denial issues from the word-count 
limit.
    The USPTO is considering changes to provide that, instead of filing 
multiple petitions, a petitioner may pay additional fees for a higher 
word-count limit. In particular, the Office could allow, for additional 
fees (e.g., an additional 50% or 100%), higher word-count limits (e.g., 
an additional 50% or 100%) for the petition. If a petitioner pays the 
fees for filing a petition with a higher word-count limit (e.g., an 
additional 50%), the patent owner preliminary response, patent owner 
response, reply to patent owner response, and sur-reply may be filed 
with proportionally higher word-count limits (e.g., an additional 50%) 
at no additional charge to either party. Under this change, a 
petitioner may file effectively two petitions as one long petition 
equal in length to two current petitions. Filing more than one petition 
with a higher word-count limit (i.e., two or more long parallel 
petitions) challenging the same patent by the same petitioner, however, 
would not be permitted.
    The Office also is considering an additional option to provide 
that, when determining whether to institute an IPR or PGR, the Board 
will not institute parallel petitions unless the petitioner has made a 
showing of good cause as to why parallel petitions are necessary. To 
aid the Board in determining whether more than one petition (i.e., a 
parallel petition) is necessary (e.g., whether a showing of good cause 
exists), a petitioner that files two or more petitions challenging the 
same patent would, in a separate five-page paper filed with the 
petitions, identify: (1) a ranking of the petitions in the order in 
which it wishes the Board to consider the merits, if the Board uses its 
discretion to institute any of the petitions; and (2) a succinct 
explanation of the differences between the petitions, why the issues 
addressed by the differences in the petitions are material, and why the 
Board should exercise its discretion to institute additional petitions 
if it identifies one petition that satisfies the petitioner's burden 
under 35 U.S.C. 314(a) or 324(a). The patent owner may file a response 
to the ranking in a separate five-page paper filed with each 
preliminary response.
    The Office also is considering changes that would allow the Board, 
when evaluating the petitioner's good cause showing as to why more than 
one petition is necessary, to consider the following factors: (1) 
whether the patent owner has asserted a large number of claims in the 
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, e.g., the patent owner has not construed the claims or 
provided specific information as to the allegedly infringed claims; (6) 
whether there are a large number of claimed embodiments challenged, 
e.g., composition claims, method of making claims, and method of use 
claims; (7) the complexity of the technology in the case; and (8) the 
strength of the merits of the petition.
    Also under consideration are changes to provide that ``parallel 
petitions'' means two or more petitions that: (1) challenge the same 
patent by the petitioner or by a petitioner who has a substantial 
relationship with another petitioner challenging the same patent; and 
(2) are filed on or before (a) the filing date of a preliminary 
response to the first of two or more petitions, or (b) the due date set 
forth in 42.107(b) for filing a preliminary response to the first 
petition, if no preliminary response to the first petition is filed.
    The Office requests feedback as to whether one petition for 
challenging a patent would be sufficient in most situations, including 
those suggested by the stakeholders in response to the RFC, if the 
petitioner is allowed to purchase higher word-count limits and also 
allowed to submit a separate paper to address discretionary denial 
issues, as discussed below, preserving word count for the merits. The 
Office also seeks feedback on whether the same requirements should or 
should not apply to both IPRs and PGRs. Additionally, the Office 
requests input on any modifications or alternative definitions for 
``parallel petitions'' that would provide further clarity.
Parallel Litigation
    In the case of a parallel district court action in which a trial 
adjudicating the patentability of the challenged claims has not already 
concluded at the time of an IPR institution decision, the USPTO is 
proposing rules to install Apple v. Fintiv and related guidance, with 
additional proposed reforms.
    The AIA contains several provisions that function to minimize 
overlap between district court litigation and AIA proceedings in the 
Office. For example, the AIA provides that a petitioner may not file a 
civil action in district court challenging the validity of a patent 
claim prior to filing a petition asking the Office to institute an IPR 
or PGR of the same patent. See 35 U.S.C. 315(a)(1), 325(a)(1). 
Similarly, an IPR may not be instituted on a petition filed more than 
one year after the date on which the petitioner, a real party in 
interest, or a privy of the petitioner is served with a complaint 
alleging infringement of the patent, except under limited 
circumstances, which the Office is separately reconsidering, where the 
petition is accompanied by a request for joinder. 35 U.S.C. 315(b). 
Further, if a petitioner or real party in interest files a civil action 
challenging the validity of a patent claim after an IPR or PGR is 
instituted, the civil action will be stayed under most circumstances. 
See 35 U.S.C. 315(a)(2), 325(a)(2). In situations in which the 
petitioner is not barred by statute from pursuing an AIA proceeding in 
parallel with district court litigation, district courts have 
discretion to stay the parallel litigation in order to minimize 
duplicative efforts.
    In contrast, the statutory deadlines governing the issuance of 
decisions on institution and final written decisions oftentimes make 
stays of AIA proceedings impractical. See 35 U.S.C. 314(b), 316(a)(11), 
324(c), 326(a)(11). The Office, however, retains discretion under 35 
U.S.C. 314(a) and 324(a) to deny institution of an IPR or PGR in 
circumstances in which parallel proceedings would result in significant 
inefficiency or in which there is gamesmanship or harassment. The 
Office has exercised that discretion to reduce overlap with parallel 
proceedings, particularly when trial in a parallel court proceeding 
would precede a final written decision from the Office. See, e.g., 
Fintiv, 2020 WL 2126495, at *2-7 (summarizing the factors the Office 
has considered when a patent owner argues for discretionary denial due 
to an earlier court trial date).
    As noted, the Office received 822 comments in response to the RFC 
on the Fintiv factors and other aspects of AIA

[[Page 24514]]

proceedings. Comments from stakeholders in response to the RFC 
generally supported rulemaking with respect to discretionary denial, 
although the comments differed as to the specifics. In general, 
proponents of the Fintiv approach argued that petitioners should be 
required to choose a venue to avoid the expense for patent owners, 
especially independent inventors and small businesses, of participating 
in two proceedings addressing the same issues at the same time. They 
also argued that allowing multiple challenges destabilizes the patent 
system and violates the intent of Congress for AIA proceedings to be an 
alternative to district court litigation. These proponents favored 
litigation in district courts because district courts use a higher 
burden of proof, including the presumption of patent validity, and 
provide access to a jury.
    In contrast, those opposed to the Fintiv approach argued that 
Fintiv incentivizes district court forum shopping by encouraging the 
filing of lawsuits in venues in which judges are quicker to schedule 
trials, even if those trial dates may not hold. They also argued that 
Fintiv is contrary to the explicit statutory one-year time frame 
permitted for a petitioner to file a petition after being served with a 
complaint charging infringement. Fintiv opponents further argued that 
the Office should not exercise discretion to deny institution of a 
timely filed, meritorious petition. They favored resolving 
patentability disputes before the PTAB, noting that it is a less 
expensive, more expert forum with legally and technically trained 
judges, and has a lower burden of proof.
    On June 21, 2022, as the Office considered rulemaking on 
discretionary denials, the Director issued the Guidance Memorandum, 
which contains ``several clarifications . . . to the PTAB's current 
application of Fintiv to discretionary institution where there is 
parallel litigation.'' As outlined in the Guidance Memorandum, the 
Board's current practice is not to deny institution of an IPR under 
Fintiv: (1) when a petition presents compelling merits of 
unpatentability; (2) when a request for denial under Fintiv is based on 
a parallel International Trade Commission (ITC) proceeding; or (3) when 
a petitioner stipulates not to pursue in a parallel district court 
proceeding the same grounds as those in the petition or any grounds 
that could have reasonably been raised in the petition. Additionally, 
when the Board applies Fintiv factor 2, concerning the proximity of the 
district court trial date, the Board currently weighs this factor 
against exercising discretion to deny institution if the projected 
district court trial date, based on median time-to-trial data, is 
around the same time as or after the projected statutory deadline for 
the Board's final written decision.
    Even if the Board does not deny institution under Fintiv, it 
retains discretion to deny institution for other reasons under 35 
U.S.C. 314(a), 324(a), and 325(d). For example, the Guidance Memorandum 
makes clear that the Board may deny institution if other pertinent 
circumstances are present, such as abuse of process by a petitioner. 
The Office contemplates that the Board would retain the authority to 
deny institution in such circumstances.
Parallel Proceedings--Denial Unavailable
(1) Parallel PGR and District Court Proceedings
    Congress expressed a premium on the value of PGRs, given the 
ability of those proceedings to explore more patentability issues early 
in patent life. More specifically, PGRs, unlike IPRs, may only be filed 
within nine months from the grant of the patent. 35 U.S.C. 321(c). This 
short-term window for filing a PGR reflects Congress's desire to create 
``a new, early-stage process for challenging patent validity.'' H.R. 
Rep. No. 112-98, part 1, at 48. By setting forth a strict time limit 
with respect to the filing of PGRs, Congress sought to ensure review of 
patents ``early in their life, before they disrupt an entire industry 
or result in expensive litigation.'' 157 Cong. Rec. S1326 (daily ed. 
Mar. 7, 2011) (statement of Sen. Sessions). Congress also sought to 
incentivize the filing of PGRs by allowing petitioners to raise any 
ground related to invalidity under section 282(b) of the Patent Act, in 
contrast to IPRs, in which petitioners are permitted only to raise 
challenges on a ground that could be raised under section 102 or 103 
and only on the basis of prior art consisting of patents or printed 
publications. 35 U.S.C. 311(b), 321(b). As a result, the statutory 
estoppel ensuing from a PGR proceeding is broader than the statutory 
estoppel from an IPR proceeding, lessening the risks of conflicting 
decisions arising between the PTAB and district courts. See 35 U.S.C. 
315(e)(2), 325(e)(2). Additionally, the threshold standard for 
institution of a PGR is higher than that for an IPR, as it requires a 
showing that at least one claim is more likely than not unpatentable 
rather than merely a reasonable likelihood of prevailing. Compare 35 
U.S.C. 324(a) with 35 U.S.C. 314(a).
    Given the clear differences in their statutory requirements, which 
serve to reduce the likelihood of potentially conflicting outcomes in 
parallel PGR and district court litigation, the Office is exploring 
whether different criteria should apply to discretionary denial of PGRs 
versus IPRs. One possibility is a rule providing that the Board will 
not invoke its discretion to deny institution of a PGR based on 
parallel district court litigation. The Office welcomes thoughts on 
whether PGRs should be treated differently than IPRs and, if so, how.
(2) IPR or PGR Proceedings and Parallel ITC Investigations
    Consistent with current USPTO practice, the Office is contemplating 
a rule providing that the Board will not invoke its discretion under 35 
U.S.C. 314(a) or 324(a) to deny institution of an IPR or PGR based on 
the existence or status of parallel ITC proceedings.
    The Office recognizes that important differences distinguish ITC 
investigations from patent invalidity trials in federal district 
courts. Unlike district courts, the ITC lacks authority to invalidate a 
patent, and its invalidity rulings are not binding on either the Office 
or a district court. See Tandon Corp. v. U.S.I.T.C., 831 F.2d 1017, 
1019 (Fed. Cir. 1987). Therefore, an ITC determination cannot 
conclusively resolve an assertion of patent invalidity, which instead 
requires either district court litigation or a PTAB proceeding to 
obtain claim cancellation. Thus, denying institution because of a 
parallel ITC investigation will not necessarily minimize potential 
conflicts between PTAB proceedings and district court litigation. For 
this reason, it is the current practice of the USPTO not to deny 
institution of an IPR or PGR petition based on parallel proceedings in 
the ITC.
Parallel Proceedings--Denial Available
    If neither situation outlined above, if adopted, precludes 
discretionary denial, the Board would then proceed to consider 
discretionary denial of an IPR in view of a parallel district court 
action. The Office is considering two alternatives for applying the 
Director's discretion here: one in which discretionary denial 
determinations are governed solely by a clear, predictable rule, and 
another governed by that clear, predictable rule working, where 
appropriate, in conjunction with a streamlined version of the current 
Fintiv factors. In either option, a set of safe harbor exceptions to 
discretionary denial applies.

[[Page 24515]]

(1) Parallel IPR and District Court Proceedings--Clear, Predictable 
Rules
    The Office notes that concerns regarding overlapping issues and 
duplicative efforts are greatly mitigated when a district court trial 
will not take place until after the Board issues a final written 
decision. Absent unusual circumstances, the Board is required to issue 
a final written decision not more than one year after an IPR is 
instituted. See 35 U.S.C. 316(a)(11). Thus, when a district court trial 
takes place more than one year after the deadline to institute an IPR, 
the estoppel of 35 U.S.C. 315(e)(2) will minimize or eliminate any 
potential overlap. See id. (providing that the issuance of a final 
written decision bars the petitioner from raising in district court 
``any ground that the petitioner raised or reasonably could have raised 
during that inter partes review''). District courts, which are not 
bound by statutory deadlines, are also able to adjust case schedules or 
implement stays, and can thereby avoid expending significant pre-trial 
efforts on issues that will be resolved in an IPR.
    The Office is considering that, unless a safe harbor exception in 
the following section is met, the Board would apply a clear, 
predictable rule and deny institution of an IPR in view of pending 
parallel district court litigation involving at least one of the 
challenged claims if the Board determines a trial in the district court 
action is likely to occur before the projected statutory deadline for a 
final written decision. When analyzing when a district court trial is 
likely to occur, the Board may consider evidence regarding the most 
recent statistics on median time-to-trial for civil actions in the 
district court in which the parallel litigation resides as well as 
additional supporting factors, such as the number of cases before the 
judge in the parallel litigation and the speed and availability of 
other case dispositions.
    As an alternative to determining if a trial in the district court 
action is likely to occur before the projected statutory deadline for a 
final written decision, and to ensure more clarity and certainty, the 
Office is considering whether to adopt a rule providing that the Board 
will not invoke its discretion to deny an IPR petition based on a 
parallel district court proceeding if the IPR petition is filed within 
6 months after the date on which the petitioner, a real party in 
interest, or a privy thereof is served with a complaint alleging 
infringement of the patent, provided that the petitioner, real party in 
interest, or privy did not first file a civil action seeking 
declaratory judgment of noninfringement of any claim of the patent 
before the date on which such complaint alleging infringement was 
filed. The Office recognizes that 35 U.S.C. 315(a)(1) bars institution 
of an IPR only if, before the date on which the petition for such 
review is filed, the petitioner or a real party in interest filed a 
civil action challenging the validity of a claim of the patent, and 
that 35 U.S.C. 315(b) permits a petition to be filed within one year of 
service of such a complaint. An early-filing exception would not, 
however, impose any earlier deadlines. It would instead merely offer an 
incentive for a petitioner to proceed promptly with any IPR petition. 
In the Office's experience, such an incentive is desirable because 
prompt filing of a petition minimizes the potential for overlapping 
issues and duplicative efforts that can result from parallel 
proceedings. For example, prompt filing of an IPR petition could permit 
a district court to consider the possibility of a stay before it has 
invested significant resources into a lawsuit or could allow the court 
to tailor its case management deadlines so that it can take advantage 
of Board decisions on any overlapping issues.
(2) Exceptions--Safe Harbors Under Consideration
    The USPTO recognizes that there are certain situations in which it 
may be inappropriate for the Board to deny institution in view of 
parallel district court litigation and is considering adopting changes 
to the rules that would govern such situations.
    First, the Office is considering a rule providing that the Board 
will not deny institution under 35 U.S.C. 314(a) in view of parallel 
litigation when the petitioner files a stipulation agreeing not to 
pursue potentially overlapping grounds in district court. The Office is 
considering whether the petitioner must show that a stipulation has 
been filed in the district court action as well, and whether, if the 
petitioner is not a party to the district court litigation but a 
district court litigant is nonetheless a real party in interest or in 
privity with the petitioner, a stipulation filed by the party to the 
district court action would suffice under this exception.
    The Office has recognized that when a petitioner stipulates not to 
pursue in a parallel district court proceeding grounds that were raised 
in the petition, the stipulation mitigates concerns related to 
overlapping issues and duplicative efforts. See Sand Revolution, II, 
LLC v. Cont'l Intermodal Grp.--Trucking LLC, IPR2019-01393, 2020 WL 
3273334, at *5 (PTAB June 16, 2020) (applying Fintiv factors and noting 
that the petitioner's stipulation to forgo pursing the ``same'' 
invalidity grounds in district court mitigated concerns regarding 
overlap) (Sand Revolution stipulation). The Office has also recognized 
that a broader stipulation, which also encompasses any ground that 
could have reasonably been raised in the petition, would weigh even 
more strongly against discretionary denial. See Sotera Wireless, Inc. 
v. Masimo Corp., IPR2020-01019, 2020 WL 7049373, at *7 (PTAB Dec. 1, 
2020) (applying Fintiv factors and determining that the petitioner's 
stipulation to forgo pursuing in district court litigation ``any ground 
raised or that could have been reasonably raised in an IPR'' weighed 
``strongly'' against exercising discretion to deny an IPR) (Sotera 
stipulation). In accordance with the Guidance Memorandum, the Board's 
current practice is not to deny institution based on a parallel 
proceeding when the petitioner agrees to a broad Sotera stipulation 
that would prevent it from pursuing in a parallel district court 
proceeding ``the same grounds as in the petition or any grounds that 
could have reasonably been raised in the petition.''
    A significant advantage of a Sotera stipulation is that it 
effectively minimizes concerns related to the overlapping issues and 
duplicative efforts that may result from parallel district court 
litigation. A Sand Revolution stipulation, in contrast, does not 
necessarily prevent a petitioner from using a reference that was not 
raised, but reasonably could have been raised in an IPR, as part of an 
invalidity argument in district court. The estoppel provision of 35 
U.S.C. 315(e)(2) will bar the petitioner from pursuing in district 
court any ground it raised, or reasonably could have raised, in the 
IPR, but only upon the issuance of a final written decision. Because 
this estoppel provision does not apply until the end of an AIA trial, 
it does not eliminate the concerns about overlapping issues and 
duplicative efforts that could arise from allowing petitioners to avoid 
discretionary denial of institution by agreeing merely to a narrower 
Sand Revolution stipulation.
    However, the USPTO also recognizes that there are several potential 
disadvantages of adopting a rule that requires Sotera stipulations. For 
example, after an IPR petition has been filed, a patent owner may amend 
its district court infringement contentions to accuse a petitioner of 
infringing additional claims. In this situation, a Sotera stipulation 
might unfairly limit the defenses a petitioner could raise in district 
court against the newly asserted claims. Accordingly, such a rule could

[[Page 24516]]

incentivize petitioners to challenge more claims than necessary in an 
IPR in order to protect themselves in parallel litigation, thereby 
increasing the Office's workload and the parties' corresponding burden 
and expense. The USPTO recognizes that a narrower stipulation, such as 
a Sand Revolution stipulation, might avoid these undesirable 
consequences. The Office further understands that district courts have 
tools available to manage overlapping issues and minimize duplicative 
efforts, including the ability to limit certain defenses, to grant 
stays, and to provide flexible schedules. These tools arguably mitigate 
the concerns regarding overlapping issues and duplicative efforts that 
would result from a rule that allowed a petitioner to avoid 
discretionary denial of institution by filing a narrower stipulation.
    Based on the foregoing considerations, the USPTO currently believes 
that--should it maintain this exception--the most appropriate approach 
is to maintain the current practice of permitting a petitioner to avoid 
a discretionary denial only by filing a Sotera stipulation. The Office 
would appreciate public comments regarding whether other, narrower 
types of stipulations should be sufficient to permit a petitioner to 
avoid discretionary denial of institution, such as a Sotera stipulation 
that is limited to the specific patent claims challenged in the 
petition, or a Sand Revolution stipulation. The Office would also 
appreciate comments on whether the Sotera stipulation can and should be 
limited to the claims asserted at the time the stipulation is filed.
    The Office is additionally considering removing this exception and 
instead making a Sotera stipulation a necessary but not sufficient 
basis for institution. In other words, to survive a challenge under 
Fintiv, the Petitioner would necessarily need to file a Sotera 
stipulation. The Petitioner would still need to meet the other criteria 
for institution in view of a parallel litigation as expressed in this 
section.
    As an alternative to all of the options discussed above, in the 
interest of creating a bright line test and to reduce uncertainty, the 
Office seeks feedback on whether Fintiv should be replaced entirely by 
a Sotera stipulation requirement where, when a parallel litigation is 
ongoing, the Office will not exercise discretion to deny institution if 
a Sotera stipulation is filed but would otherwise discretionarily deny 
institution without consideration of other circumstances or factors 
discussed above.
    Second, the USPTO recognizes that stays of district court 
proceedings can minimize concerns related to parallel litigation. The 
Office, therefore, is considering a rule providing that the Board will 
not invoke its discretion to deny institution of an IPR based on a 
parallel district court proceeding if the parallel proceeding has been 
stayed and is reasonably expected to remain stayed at least until the 
deadline for the Board's decision regarding whether to institute an 
IPR. Such a rule would be consistent with Board precedent holding that 
a stay of parallel district court litigation ``allays concerns about 
inefficiency and duplication of efforts'' and ``weighs strongly against 
exercising discretion to deny institution.'' Snap, Inc. v. SRK Tech. 
LLC, IPR2020-00820, Paper 15, 2020 WL 6164354, at *4 (PTAB Oct. 21, 
2020) (precedential as to section II.A). Where a district court has 
stayed proceedings and the Board institutes an IPR, the district court 
can avoid overlapping issues by continuing the stay until the Board 
issues a final written decision, at which time the petitioner will be 
barred from asserting in district court ``any ground that the 
petitioner raised or reasonably could have raised during that inter 
partes review.'' 35 U.S.C. 315(e)(2). Alternatively, the district court 
can adopt a schedule that allows it to avoid unnecessary rulings on 
potentially overlapping issues and to take advantage of Board rulings 
while still permitting litigation to move forward.
    The USPTO is considering other exceptions as well. One potential 
exception in relation to parallel IPR or PGR and district court 
proceedings relates to strength of merits. In particular, the Office is 
contemplating that if the circumstances favor a discretionary denial of 
institution, the Board will analyze the merits of the petition, and 
will not discretionarily deny institution if the petition presents 
compelling merits. To further aid the USPTO's consideration of this 
proposal, the Office requests comments on whether a finding by the 
Board that the petition meets the compelling merits standard at 
institution increases or decreases the chance that a parallel district 
court action will be stayed.
(3) Parallel IPR and District Court Proceedings--Additional Factor-
Based Test
    The clear, predictable rule proposed above to govern discretionary 
denial decisions based on parallel district court proceedings is 
intended to provide clarity and certainty for the parties. Recognizing 
that the discretionary issues presented by parallel district court 
litigation can be highly fact-variant, the Office is considering 
whether to additionally provide for a streamlined version of one or 
more of the other current Fintiv factors. The factor-based test would 
be available to the parties and the Board to consider, as appropriate 
and necessary, to avoid effecting an unduly harsh outcome under the 
clear, predictable rule. The Office expects that the clear, predictable 
rule will control the vast majority of discretionary issues in this 
space and make it unnecessary to engage any factor-based test.
    For example, the Office is contemplating a factor-based test that 
would omit Fintiv factor 1 (the likelihood of a stay) because past 
experience has shown it to be difficult to predict a district court's 
future actions. The Office is also contemplating omitting Fintiv factor 
5 (whether the petitioner and the defendant in the parallel proceeding 
are the same party) in favor of considering real parties in interest 
and privies, or alternatively parties that are substantially related.
    The Office is considering three non-exclusive factors that, in 
addition to a clear, predictable rule, would be available, where 
appropriate, to guide the Board's discretion in situations in which the 
petitioner, its real party in interest, or a privy thereof is a party 
to ongoing district court litigation. The factors under consideration 
are:
    (1) Past and future expected investment in the parallel proceeding 
by the district court and the parties;
    (2) The degree of overlap between the issues in the petition and 
the parallel district court proceeding; and
    (3) Any other circumstances that the parties contend are relevant 
to the Board's exercise of discretion.
    The first two factors are similar to Fintiv factors 3 and 4, 
respectively. The third factor above is similar to Fintiv factor 6. The 
exceptions/safe harbors from discretionary denial discussed above would 
apply equally to any discretionary decision rendered by the Board based 
on a factor-based test.
    The Office welcomes thoughts on (1)-(3) above including the 
Office's current application of (3). The Office also welcomes comments 
on whether (1) or (2) are necessary.
    Under the current guidelines, the PTAB weighs under the Fintiv 
analysis any additional circumstances that inform whether institution 
would advance or negatively impact the integrity of the patent system, 
including whether there is an abuse of the process such that the AIA 
proceeding is being used in a way that does not comport

[[Page 24517]]

with the purpose and legitimate goals of the AIA. See OpenSky Indus., 
LLC v. VLSI Tech. LLC, IPR2021-01064, Paper 102 at 44 (PTAB Oct. 4, 
2022) (Director decision, precedential). A party may raise under Fintiv 
as an additional circumstance for denying a petition sought to be 
joined the fact that the party seeking to join would have been time-
barred from filing the petition it seeks to join. Currently, any 
decision by the PTAB granting or denying institution based on this 
paragraph may be challenged on Director review.
    The Office is also considering adopting a rule with regard to 
petitions accompanied by a motion for joinder. To help clarify the 
application of discretionary denial in view of a co-pending district 
court litigation, the joinder petition would be evaluated with respect 
to the timing of any underlying litigation of the earlier-filed 
petition. This means that when a party seeks to join an AIA proceeding, 
the PTAB would conduct the parallel proceeding analysis with respect to 
litigation involving the petitioner for the first-filed petition to 
which joinder is sought, in addition to exercising the Director's 
discretion on joinder consistent with operable rules, precedent, and 
practices.

Stipulation on No Multiple Challenges

    To avoid patent owner harassment, the Office is considering, as a 
condition to not discretionarily denying institution under 35 U.S.C. 
314(a), requiring petitioners to file a stipulation that neither they 
nor their privy or real parties have filed prior post-grant proceedings 
(PGRs, IPRs, CBMs or ex parte reexaminations requested by third 
parties, not by patent owner) as to any of the challenged claims; and 
that if their post-grant proceeding is instituted, neither they nor 
their privy or real parties in interest, will challenge any of the 
challenged claims in a subsequent post-grant proceeding (including 
PGRs, IPRs and ex parte reexaminations requested by third parties, not 
by patent owner). The Office is considering an exception to this rule 
where a petitioner can establish exceptional circumstances. Exceptional 
circumstances may include, for example, situations in which a patentee 
broadens the scope of the claims through a proposed claim construction.

Separate Briefing for Discretionary Denial

    Many commenters who responded to the RFC suggested allowing the 
parties to brief discretionary denial considerations under 35 U.S.C. 
314(a), 324(a), and 325(d) in separate papers (i.e., separate from the 
petition or the patent owner preliminary response), to avoid 
encroaching on the parties' word-count limits for briefing on the 
merits. The Office has found the practice of allowing parties to file 
separate papers addressing the ranking of petitions helpful in 
evaluating parallel petitions while preserving the parties' word count 
to focus on the merits of the challenge. The Office believes a similar 
procedure to allow parties to address all relevant factors for 
discretionary denial in separate briefing would also be helpful.
    The USPTO is considering amending the rules to provide a procedure 
for separate briefing on discretionary denial, in which the patent 
owner would file, prior to the deadline for a preliminary response, a 
separate request for discretionary denial to address any relevant 
factors regarding discretionary denial. This filing would trigger the 
opportunity for the petitioner to file an opposition and for the patent 
owner to file a reply. The page limits for such briefing would be 10 
pages for the patent owner request, 10 pages for a petitioner 
opposition to the request, and 5 pages for a patent owner reply.
    The Office is further considering amending the rules to provide 
that the Board may also, in the interest of justice, raise 
discretionary denial sua sponte, in which case the Board will provide 
the parties with the opportunity for briefing.
    The USPTO also requests feedback on whether the Office should 
require patentees to provide (e.g., in a request for discretionary 
denial or as part of their mandatory disclosures, 37 CFR 42.8) 
additional information as to patent ownership as a precondition for the 
Board considering discretionary denial. For example, the Office 
requests feedback on whether, as a precondition to discretionary 
denial, patent owners should be required to disclose additional 
information relating to entities having a substantial relationship with 
the patent owner (e.g., anyone with an ownership interest in the patent 
owner; any government funding or third-party litigation funding 
support, including funding for some or all of the patent owner's 
attorney fees or expenses before the PTAB or district court; and any 
stake any party has in the outcome of the AIA proceeding or any 
parallel proceedings on the challenged claims).

Settlement Agreements

    For consistency and predictability, the USPTO is considering 
changes to the rules to clarify that parties must file with the Office 
true copies of all settlement agreements, including pre-institution 
settlement agreements (or understandings between the parties, including 
any collateral agreements referred to in such agreements or 
understandings), similar to post-institution settlement agreements. In 
addition, although the USPTO may grant a motion to terminate an AIA 
proceeding prior to or after institution based on a binding term sheet, 
the Office proposes to clarify that parties are required to file a true 
copy of any subsequent settlement agreements between the parties in 
connection with, or in contemplation of, the termination.
    These considered changes align with the policy set forth in the 
Executive Order on Promoting Competition in the American Economy (E.O. 
14036), which encourages Government agencies to cooperate on policing 
unfair, anticompetitive practices. Having a depository of all 
settlement agreements in connection with contested cases, including AIA 
proceedings, in the USPTO would assist the Federal Trade Commission 
(FTC) and the Department of Justice in determining whether antitrust 
laws were being violated. See, e.g., Congressional Record, Senate, 
October 3, 1962, 22041, www.govinfo.gov/content/pkg/GPO-CRECB-1962-pt16/pdf/GPO-CRECB-1962-pt16-5.pdf (explaining that the filing with the 
Patent Office of all agreements in connection with interference cases 
would assist the FTC and the Department of Justice in determining 
whether the antitrust laws were being violated).
    Although 35 U.S.C. 135(e), 317(b), and 327(b) require filing of 
settlement agreements made in connection with, or in contemplation of, 
the termination of a proceeding that has been instituted, these 
statutory provisions do not expressly govern AIA pre-institution 
settlement. See Rules of Practice for Trials Before the Patent Trial 
and Appeal Board and Judicial Review of Patent Trial and Appeal Board 
Decisions, 77 FR 48612, 48625 (Aug. 14, 2012) (final rule) (stating 
that ``35 U.S.C. 135(e) and 317, as amended, and 35 U.S.C. 327 will 
govern settlement of Board trial proceedings but do not expressly 
govern pre-institution settlement''). The Office is considering changes 
to clarify that 37 CFR 42.74(b) ``provides that settlement agreements 
must be in writing and filed with the Board prior to termination of the 
proceeding.''
    Since the inception of AIA trials, the Board has been generally 
uniform in requiring the filing of a settlement agreement prior to 
terminating an AIA proceeding based on a joint motion by the parties, 
pre- or post-institution. Nevertheless, some petitioners have

[[Page 24518]]

recently filed motions to dismiss or withdraw the petition before 
institution, arguing that they should not be required to file a copy of 
the parties' settlement agreements, and some panels in those cases have 
granted the motions and terminated the proceedings without requiring 
the parties to file their settlement agreements. See, e.g., Samsung 
Elecs. Co. v. Telefonaktiebolaget LM Ericsson, IPR2021-00446, Paper 7 
(PTAB Aug. 3, 2021) (Order--Dismissal Prior to Institution of Trial) 
(over the dissent of one Administrative Patent Judge (APJ), granting 
the petitioner's motion to dismiss the petition and terminating the 
proceeding, without requiring the parties to file their settlement 
agreements); Huawei Techs. Co. v. Verizon Patent & Licensing Inc., 
IPR2021-00616,-00617, Paper 9 (PTAB Sept. 9, 2021) (Order--Dismissal 
Prior to Institution of Trial) (same dispute among a panel of APJs); 
AEP Generation Res. Inc. v. Midwest Energy Emissions Corp., IPR2020-
01294, Paper 11 (PTAB Dec. 14, 2020).
    For consistency and predictability, the considered changes would 
ensure that pre-institution settlement agreements, like post-
institution settlement agreements, are filed with the Board. Under the 
considered changes, notwithstanding that an AIA proceeding is in a 
preliminary stage before institution, any agreement or understanding 
between the patent owner and a petitioner, including any collateral 
agreements referred to in such agreement or understanding, made in 
connection with, or in contemplation of, the termination of an AIA 
proceeding, would be required to be in writing, and a true copy of such 
agreement or understanding would be required to be filed in the Office. 
In short, all settlement agreements between the parties made in 
connection with, or in contemplation of, the termination of an AIA 
proceeding would need to be in writing and filed with the Board. 
Parties would not be able to circumvent this requirement by filing 
merely a motion to dismiss or withdraw the petition, as granting such a 
motion would effectively terminate the proceeding.
    In addition, as noted above, although the USPTO may grant a motion 
to terminate an AIA proceeding prior to or after institution based on a 
binding term sheet, the Office could require the filing of a true copy 
of any subsequent settlement agreement between the parties in 
connection with, or in contemplation of, the termination. Under the 
current practice, some panels have accepted a binding term sheet as the 
settlement agreement, while other panels have required a formal 
settlement agreement, not just a binding term sheet. For example, in 
several cases, panels granted a motion to terminate a proceeding based 
on a binding term sheet notwithstanding that a future settlement 
agreement was contemplated. See, e.g., Allergan Inc. v. BTL Healthcare 
Techs. A.S., PGR2021-00022, Paper 17 (PTAB July 6, 2021); Nalu Med., 
Inc. v. Nevro Corp., IPR2021-01023, Paper 14 (PTAB Nov. 24, 2021). In 
several other cases in which the parties filed or executed a binding 
term sheet while contemplating a settlement agreement, the panel held 
the motion to terminate in abeyance until the parties filed the 
settlement agreement, or granted a short extension of time, so the 
parties could avoid the expense of continued preparation of a 
preliminary response or other papers until the parties filed the 
settlement agreement. See, e.g., Textron Inc. v. Nivel Parts & Mfg. 
Co., PGR2017-00035, Paper 15 (PTAB Feb. 2, 2018); AT&T Corp. v. Kaifi 
LLC, IPR2020-00889, Paper 9 (PTAB July 17, 2020).
    The Office is considering changes to amend the rules to provide 
that the parties may file a binding term sheet with their motion to 
terminate a proceeding. Also, the Board may grant the motion to 
terminate based on the binding term sheet if the parties certify in 
their motion that: (1) there are no other agreements or understandings, 
including any collateral agreements, between the parties with respect 
to the termination of the proceeding; and (2) they will file a true 
copy of any subsequent settlement agreement between the parties, 
including collateral agreements, made in connection with the 
termination of the proceeding, within one month from the date that the 
settlement agreement is executed. A failure to timely file the 
subsequent settlement agreement could result in sanctions. See 37 CFR 
42.11(a) and 42.12. The Board may maintain jurisdiction over the 
proceeding and the involved patent to resolve any misconduct issues or 
vacate its decision granting the motion to terminate.
    The Office welcomes any comments on the anticipated benefits and 
costs to individual parties, and the economy as a whole, that may 
result from the proposed actions above on discretionary denial.
    The Office welcomes any other additional comments or proposals on 
discretionary denial.
    Executive Order 12866 (Regulatory Planning and Review): This 
rulemaking has been determined to be significant for purposes of E.O. 
12866 (Sept. 30, 1993).

Katherine K. Vidal,
Under Secretary of Commerce for Intellectual Property and Director of 
the United States Patent and Trademark Office.
[FR Doc. 2023-08239 Filed 4-20-23; 8:45 am]
BILLING CODE 3510-16-P