Vidal Told Director Review Should Address Cases, Not Policy

By: Ryan Davis

Law360 (October 20, 2022, 10:06 PM EDT) — Several legal and industry groups have urged U.S. Patent and Trademark Office Director Kathi Vidal to ensure that her reviews of Patent Trial and Appeal Board decisions are focused on the facts of cases, and are not used to set broad policies for the office.

Wednesday was the deadline to respond to Vidal’s request for comments about the processes she uses to review PTAB decisions, a power granted to the USPTO director by last year’s U.S. v. Arthrex decision by the U.S. Supreme Court.

A number of the organizations that responded expressed concern about director review decisions being used to set USPTO rules, without opportunities for the public to weigh in. Some strongly criticized policies the office adopted under Vidal’s predecessor Andrei Iancu, prior to the creation of director review, through PTAB decisions designated as precedential.

The U.S. Manufacturers Association for Development and Enterprise said director review “must be limited to the kinds of decisions that a PTAB panel makes” and that “this means deciding cases — not creating new policies that are untethered to (and conflict with) existing statutes and regulations.”The group, whose members include Ford Motor Co., Intel Corp. and Samsung Electronics Co. Ltd., said the “elephant in the room” is that “director control of PTAB was grossly abused by the previous director to damage the patent system.”

US MADE said “the worst of these abuses” was the Fintiv decision, which was made precedential under Iancu, and has drawn the ire of patent challengers ever since. It established the PTAB’s discretion to decline to institute an inter partes review if district court litigation would resolve the issues first, and US MADE said that “imposed a new deadline for filing an IPR petition that conflicts with the statutory deadline.”

Fintiv was adopted before Arthrex gave USPTO directors the power to review the board’s decisions, but US MADE said “the new review process should be structured in a way that ensures that it is not used to evade [Administrative Procedure Act] rulemaking and impose new policies by fiat.”

Likewise, the High Tech Inventors Alliance, which represents Google LLC, Inc. and others, said that director reviews “should be limited in their scope and should not be used as a substitute for notice and comment rulemaking.”

“Any change to PTAB rules that is substantive, that affects access to the proceedings, or that is otherwise controversial should be adopted only through the formal rulemaking process,” the group said, adding that if that doesn’t happen, “the policies are illegitimate.”

Rules like Fintiv implemented through precedential opinions rather than rulemaking should therefore be abandoned or promulgated through formal rulemaking, HTIA said.

Askeladden LLC’s comments also took issue with Fintiv, and another Iancu-era precedential opinion known as Valve Corp., which set a policy that an IPR petition could be denied if the patent had previously been challenged by a different party, such as a customer of the petitioner.

Askeladden, a subsidiary of Clearing House Payments Co., which is run by the major banks, said that by blocking some patent challenges when a customer is sued first, Valve “rewards and encourages … abusive behavior” by patent owners, and that the organization would have told the USPTO that if given a chance to submit comments.

Because it was adopted as a precedential opinion, “no debate or consideration took place, the rest of the executive branch was not consulted, and a deeply flawed policy was imposed on the American public,” it said.

Askeladden said the office may sometimes need to adopt a new policy quickly, but said it “proposes that whenever the USPTO adopts a significant policy via an exception to APA procedures, it should do so only on a temporary basis, with a commitment to conduct follow-on notice-and-comment rulemaking.”

Askeladden joined HTIA in calling for the abolition of the Precedential Opinion Panel, which is composed of top USPTO officials and can designate PTAB decisions as precedent, calling it unnecessary with the establishment of director review.

The Computer and Communications Industry Association said that companies challenging patents should be allowed to request director review of the board’s decision not to institute review, which is not currently permitted. It said that since such decisions cannot be appealed, “availability of a second level of review for institution decisions is highly important.”

Going further, the group said every discretionary denial by the board under policies like Fintiv should be reviewed by the director, saying “this additional scrutiny is needed in order to ensure that meritorious proceedings are not being dismissed without strong reasons to do so.”

The American Intellectual Property Law Association said precedential opinions “should be infrequent or even rare” because they address fact-specific cases and “do not provide the same degree of stakeholder input as notice-and-comment rulemaking.”

More generally, AIPLA suggested that when the director reviews the PTAB’s findings, the process “should require the director to provide reasoned rationale for her decision — particularly when reversing or remanding the panel’s decision.” Doing so “will enhance the system and improve public trust and understanding of the PTAB’s decision-making process,” it said.

The current director review process got supportive comments from patent owners, with a few suggestions for improvement. The Intellectual Property Owners Association called for the system to be formalized “largely as-is,” but said it should add a deadline by which the director’s review should conclude.

The existing practice in which the director can choose to make decisions precedential “strikes the right balance,” the group said.

InterDigital, a technology research and development company, also called for “a mandatory (or at least an aspirational) timeline” for the director to complete reviews “to facilitate finality without unnecessary delay.”

Like IPO and AIPLA, the company recommended retaining the Precedential Opinion Panel, saying it lessens the burden on the director and gets additional perspectives from other agency leaders on important issues. Ericsson, another prominent patent owner, was more critical of the current director review process, saying it is inefficient because “it includes too many options for overlapping and redundant reviews and rehearings.”

If a party seeks director review, they should not be able to file other review or rehearing requests, the company said. It also argued against allowing requests for director review of institution decisions, saying that “will disproportionately benefit petitioners and disproportionately burden patent owners.” In contrast, the PTAB Bar Association called for a significant expansion of the availability of requests for director review. It said review should be available after any action by the board, including IPR

institution decisions and decisions of rejections of patent applications.

“The Arthrex mandate is that the buck stops with the director, hence, any agency action affecting the outcome of a final agency action must be open to director supervisory review,” it said.

In addition to around a dozen comments submitted by legal and industry groups, the USPTO also got more than 4,000 largely identical comments from individuals. They echoed the concerns about policies like Fintiv that result in the board declining to review patents based on factors like the timing of district court litigation.

The USPTO “has a responsibility to prevent patents that are likely invalid from being leveraged in destructive infringement lawsuits. It can do this by assessing petitions for PTAB review on the merits of each case, not discretionary factors,” one such comment read. It’s not clear from the filings which organizations encouraged members of the public to submit those comments.