Federal Register, Volume 88 Issue 77 (Friday, April 21, 2023)

[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.

[[Page 24507]]

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]
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