A Rare Binding PTAB Decision: Guidance On Multiple Petitions

The recent decision in General Plastic Industrial Co. v. Canon Kabushiki Kaisha denying the petitioner’s requests for a rehearing provided a “baseline” of factors to be considered as to the limited circumstances when second — or “follow-on” — petitions are likely to be successful in Patent Trial and Appeal Board trials.

A recent decision denying the petitioner’s requests for a rehearing provided a “baseline” of factors to be considered as to the limited circumstances when second — or “follow-on” — petitions are likely to be successful in Patent Trial and Appeal Board trials.

The petitioner in General Plastic filed two inter partes review petitions, each challenging one patent. The PTAB denied institution on the merits. The petitioner then sought rehearing, which was denied. The petitioner filed further petitions several months later with newly discovered art, challenging the same two patents based in part on the new references.

The decision, rendered by an “expanded” panel including Chief Judge David P. Ruschke, is significant both procedurally — because the decision was rendered by an expanded panel — and substantively — because it provided greater clarity to all parties in an area of PTAB trials processes that had previously been somewhat inconsistent, and recently was designated “precedential,” a rare status indicating it is binding on future PTAB decisions unless replaced or undone.

To date, less than half of follow-on petitions have been instituted, showing the PTAB’s reservations about them. However, there was great disparity in the prior PTAB decisions on this topic, including whether all seven factors laid out in NVIDIA v. Samsung Electronics were addressed. The varied outcomes led commentators and practitioners alike to wonder whether initiation of a given follow-on petition was dependent on the particular panel drawn by petitioner.

Thus, the decision to render the decision via an expanded panel and label the case as precedential likely represents a recognition of the inconsistency of the PTAB decisions in follow-on petitions, and stands as a statement that the analysis in the General Plastic decision should be followed by the PTAB on a going-forward basis.

Substantively, the decision by the expanded panel describes how multiple challenges to the same patent will be evaluated. It made clear that the seven NVIDIA factors — which the PTAB stated should, at minimum, serve as a baseline moving forward — likely will limit the number of challenges that a patent ultimately goes through, which could be encouraging for patent owners.

The seven NVIDIA factors are:

  1. The finite resources of the PTAB;
  2. The requirement to issue a final determination not later than one year after institution;
  3. Whether the same petitioner previously filed a petition directed to the same claims of the same patent;
  4. Whether, at the time of the filing of the first petition, the petitioner knew or should have known of the prior art asserted in the later petition when it filed its earlier petition;
  5. Whether, at the time of filing of the later petition, the petitioner already received the patent owner’s preliminary response to the first petition or received the PTAB’s decision on whether to institute review in the earlier petition;
  6. The length of time that elapsed between when the petitioner learned of the prior art asserted in the second petition and the filing of the second petition; and
  7. Whether the petitioner provides adequate explanation for the time elapsed between the filing of multiple petitions directed to the same claims of the same patent.

The PTAB said, however, that “additional factors may arise” — essentially leaving open the door for panels to consider other factors outside the seven NVIDIA factors. In its decision denying the requests for rehearing, the Board noted that both 35 U.S.C. § 314(a) and § 325(d) made institution of review “discretionary.” Indeed, the discretionary nature of the institution decision might be the reason the PTAB opted to leave open a door for such “additional factors,” thereby allowing panels rendering future decisions to follow the guidance of General Plastic to the letter, while maintaining some discretion via possible additional factors not discussed in General Plastic.

However, the limits of the Board’s discretion is being called to question in SAS Institute v. Lee, which the Supreme Court will hear this term, in which SAS argues that the USPTO cannot partially institute IPR proceedings, since 35 U.S.C. § 318(a) says the PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” In the past, the Board has taken its interpretation of its discretion to an extreme, e.g., in Shaw Industries Group v. Automated Creel Systems, arguing that the statute only articulates the negative of when the trial may not be instituted, but that institution is never compelled. If SAS prevails, however, the decision could impose new limits on the Board's discretion.

While the Board stated that the NVIDIA factors would serve as a “baseline” going forward, a few factors in particular stood out in the General Plastic decision as holding more weight than others. Factor 1, “PTAB resources,” was articulated in the decision as: “the Board’s resources would be more fairly expended on initial petitions, rather than follow-on petitions.” If this is the way the PTAB is interpreting factor 1, it is likely to always weigh in favor of the patent owner, i.e., if the PTAB is favoring initial petitions over follow-on ones.

In addition, factors 5 and 7 seemed particularly important, as each addresses some aspect of the timing of the follow-on petition: whether a patent owner preliminary response and/or institution decision has been issued in the first petition, i.e., whether two and five months have elapsed, respectively, from the notice of a filing date (factor 5), and whether the petitioner has provided an adequate explanation of the time elapsed between petition filings (factor 7). Here, the second petitions were filed a few months after the institution decisions in the prior petitions and no adequate rationale was provided — so both of these weighed against the petitioner.

Factor 6 (time elapsed since knowledge of art in the second petition) seemed less important than did factor 4, as it was a relatively short timeframe that the art in the second petition actually was known to the petitioner, since it came from a prior art search performed after the institution decision in the first cases. However, there was no clear reason why the new art could not have been found/applied previously (i.e., it “should have” been known) — which weighed in the patent owner’s favor for factor 4.

Takeaways and Implications

On the whole, the decision provides patent owners some comfort that no true “second bite at the apple” — i.e., a new petition challenging the same claims of the same patent after the PTAB has issued an institution decision — is likely to be allowed unless truly changed circumstances justify the second petition (factor 5). Considering the seven factors, such attempted “second bites” of this type likely would mean at least four factors (factors 1, 3, 5 and 6) — and possibly more — weigh in favor of denying institution. The expanded panel in General Plastic echoed this sentiment in cautioning against using a first institution decision as a road map for follow-on petitions, noting that second petitions are not a time for modifying challenges to cure the board-identified deficiencies of the prior petition.

Many commentators have pointed out that patent owners should be pleased with the decision. Although the expanded panel indicated that “there is no per se rule precluding the filing of follow-on petitions” and that “there may be circumstances where multiple petitions by the same petitioner against the same claims of a patent should be permitted,” most read this language as followed by an implied “however”: e.g., however, the institution of follow-on petitions is reserved for exceptional circumstances.

For petitioners, the expanded panel decision provides some clarity when seeking to file follow-on petitions — specifically, as to how to bolster their chances of success in getting them instituted. In particular, petitioners should attempt to file any follow-on petition before the institution decision is rendered in the first petition, and before the patent owner preliminary response if possible. Furthermore, petitioners need to articulate a strong rationale justifying any delay in filing the second petition.

What the General Plastic decision makes clear is that petitioners seeking a true “second bite at the apple” — in which a petitioner tries to remedy the shortcomings of the earlier petition, especially those noted by the PTAB in the institution decision in the first petition — are almost certain to be unsuccessful. This aspect alone should provide some comfort to patent owners who face challenges to their patent via PTAB trials, who previously were uncertain as to what limits existed for such challenges. Although it might seem limiting to petitioners, the General Plastic decision does provide guidance that will help prevent petitioners wasting time, cost and resources filing second petitions when they are almost certain to be unsuccessful.

The upcoming SAS case may shed light on whether the Board has been applying the right amount of discretion to its institution decision, including the application of the seven NVIDIA factors in General Plastic. By asking the Supreme Court to interpret 35 U.S.C. § 318(a), the SAS case will require the justices to interpret the language of the America Invents Act to determine what level of discretion the Board may apply. It seems likely that the absolute discretion that the Board has argued is not the correct standard, especially without explanation of the underlying rationale, for precisely the reasons Judge Moore cautioned against during oral arguments in Shaw, when she likened the Board’s institution inconsistencies to throwing darts while blindfolded.

In particular, of the seven NVIDIA factors, the most problematic may be factor 1 (PTAB resources), since it seems to favor denial of institution without analysis beyond convenience for the PTAB. The one other AIA section noted by the Board that provides possible guidance as to second petitions is 35 U.S.C. § 325(d), which allows the Director to “reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.” This statue seems related to NVIDIA factors 4, 6 and 7. It seems likely that the SAS decision may place some limits on the Board's institution discretion, including whether the NVIDIA factors will continue to serve as a “baseline” going forward.

The Board recently designated three decisions as informative, underscoring the difficulty of challenging patents using arguments that were previously rejected during patent prosecution. All three cases — Unified Patents Inc. v. John L. Berman, Hospira Inc. v. Genentech Inc., and Cultec Inc. v. StormTech LLC — were denied institution on the holding that the art and/or the arguments were the same or similar to those previously presented to the USPTO.

Originally published in Law360 on November 8, 2017 (subscription required).