Will “Compelling Merits” Institution Standard Lead To Rubber Stamp FWDs?

by | Jun 21, 2023 | PTAB News, PTAB Trial Basics, Trial Institution

By John Marlott and Ryan Mueller –

If a PTAB panel finds “compelling merits” of unpatentability when making its initial institution decision, is there any realistic chance that same PTAB panel will reach a different result in the final decision at the conclusion of a post-grant proceeding?  That question bears considering, as the PTAB has proposed formally adopting a “compelling merits” standard for institution of an IPR or PGR under certain circumstances.

As discussed in prior posts, the USPTO is considering sweeping changes to the handling of post-grant proceedings    Among these proposed changes, the USPTO is considering formalizing a “compelling merits” standard to institute an IPR or PGR when the petition would otherwise be subject to the USPTO’s discretionary denial guidance.   See 88 Fed. Reg. 24503 at 24507.

The  PTAB currently analyzes six factors when determining whether to exercise its statutory discretion to deny institution.  See Apple Inv. V. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020) (designated precedential May 5, 2020).  The sixth Fintiv factor requires the PTAB panel to consider other circumstances affecting the decision, including the merits of the challenge.  Id.  The PTAB has relied on this sixth factor to proceed with institution of a proceeding where there was strong evidence of unpatentability, despite other Fintiv factors favoring a discretionary denial.  See, e.g., Illumina Inv. V. Trs. Of Columbia Univ., IPR2020-00988, Paper 20 (PTAB Dec. 8, 2020).  On June 21, 2022, Director Vidal issued a memorandum  clarifying the PTAB’s practice, explaining that “the PTAB will not deny institution based on Fintiv if there is compelling evidence of unpatentability.”  See Interim Procedure 5.  Recently, the USPTO has further clarified that a PTAB panel will only engage in the “compelling merits” inquiry if the other Fintiv factors favor discretionary denial.  See CommScope Techs. LLC v. Dali Wireless, Inc., IPR2022-01242, Paper 23 (PTAB Feb. 27, 2023).

Against this backdrop, the USPTO now proposes to formalize the use of the “compelling merits” standard when a petition is otherwise subject to a discretionary denial.  Under the proposed “compelling merits” standard, a challenger must show its petition is “highly likely to lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence.”  88 Fed. Reg. 24503 at 24507.  The proposed change places this burden on the challenger at the institution stage “to leave 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” to overcome a discretionary denial.  Id.

The adoption and use of a “compelling merits” standard at the institution phase has the potential to exacerbate concerns about prejudging bias, as previously highlighted by Federal Circuit Judge Newman.

The AIA provides that the Director is to determine whether to institute an IPR or PGR proceeding, 35 U.S.C. §§ 314, 324, and if a proceeding is instituted, then a panel of PTAB judges adjudicates the proceeding, weighs the evidence and competing arguments, and issues a final written decision on patentability, 35 U.S.C. §§ 316(c), 326(c). However, the Director delegated the initial institution decision to the PTAB, and the same panel of PTAB judges currently makes both the initial and final determinations.

Judge Newman has observed that “[t]he legislative record shows that these functions were deliberately separated” to avoid “self-review.” Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1340 (Fed. Cir. 2016).  In Judge Newman’s view, “[t]he separation of these roles helps to ensure that the decision of the PTAB is not a rubber stamp of the institution decision, nor a shortcut on ‘an important legal question,’” and she believes “[t]he PTO’s practice of assigning the institution decision to the PTAB is contrary to the statute.”  Id.  In support of her view, Judge Newman pointed to the AIPLA’s objections back in 2014 to this decisional framework:

Currently the same APJs consider an incomplete and preliminary record to decide that the claims being challenged in a petition are likely unpatentable. Those same APJs are then required to make the Final Written Decision — in essence, they are put in the position of defending their prior decision to institute the trial. This creates an actual or perceived bias against the patent owner.

Id.

Judge Newman expanded on these bias concerns in Mobility Workx, LLC v. Unified Patents, LLC, 15 F.4th 1146, 1162-64 (Fed. Cir. 2021).  She cited other public comments about bias or perceived bias “because the administrative patent judges are put in the position of defending their prior decisions to institute the review,” including 2014 comments by the Pharmaceutical Researchers and Manufacturers of America:

The AIA thus separates the responsibility for instituting an IPR or PGR from the responsibility for conducting an instituted IPR or PGR. The PTAB’s role under the AIA is specifically limited to “conduct[ing]” a review that was already “instituted.” Separating the decision to institute on IPR or PGR from the PTAB’s decision on the merits would increase patent owners’ due process protections, reduce perceptions of bias, and more fully meet the requirements of the AIA.

Id. at 1162.  Judge Newman stressed that “[t]he concern is not only the possibility of bias, including unconscious bias, but also the appearance of bias.” Id. at 1163. Judge Newman recounted cognitive research showing that people are more likely to justify past conduct when such conduct reflects on their competence or integrity, and she noted that the AIA “was structured to avoid these concerns by simply separating the threshold investigative function from the adjudicative function, along with the authorities performing them.”  Id. at 1163-64.

Judge Newman (and various public commenters) previously raised these concerns about prejudging bias in the context of institution decisions made under the “reasonable likelihood” standard for unpatentability—the standard for institution expressly stated in the AIA.  The proposed “compelling merits” standard, according to the USPTO, is a “higher standard than the reasonable likelihood required for the institution of an IPR,” it is “higher than more likely than not required for institution of a PGR,” and it is even “higher than the preponderance of the evidence standard” for final determinations of patentability at trial.  88 Fed. Reg. 24503 at 24507-08.  It could be argued that the elevated “compelling merits” institution standard may cause a panel of PTAB judges to adhere even more faithfully to their institution decision in a final patentability determination, exacerbating Judge Newman’s rubber stamp concerns.

The current public comment period on the USPTO’s advance notice of proposed rules, ended on June 20, 2023.  We will see if any public commenters raise the issue of prejudging bias in view of the proposed “compelling merits” provisions.

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John Marlott

Partner at Jones Day
John Marlott brings more than 30 years of intellectual property law experience to his role as lead counsel in IP disputes for Jones Day clients. He focuses on high-stakes district court and ITC patent litigation, post-grant patent proceedings before the PTAB, and appeals to the U.S. Court of Appeals for the Federal Circuit.