Legal Alert: USPTO Issues Proposed Rules on Discretionary Denial in PTAB Proceedings

One year ago, the United States Patent and Trademark Office (USPTO) issued an Advance Notice of Proposed Rulemaking (ANPRM) that set forth several ideas related to America Invents Act (AIA) proceedings before the Patent Trial and Appeal Board (PTAB). On Friday, the Office published a Notice of Proposed Rulemaking (NPRM) that proposes to transform some of those ideas into rules of practice before the Board. Unlike the ANPRM, which sought comment on a range of possible proposals for AIA proceedings, the NPRM focuses on proposed rules relating to the Director’s discretion during AIA proceedings and settlement practices before the Board.  

The ANPRM was both the product and source of extensive input from stakeholders and the public. Many ANPRM provisions were derived from comments responding to an October 2020 Request for Comments (RFC) on discretionary denial. Those and other provisions were the source of extensive commentary, as over 14,500 comments were received by the close of the comment period on the ANPRM in June 2023.  

The NPRM, in keeping with its name, offers notice of proposed rules, but it also has a comment period. Comments must be made in writing through the Federal eRulemaking Portal. The comment period closes on June 18, 2024.   

Below is a summary of the proposed rules. 

New briefing process for discretionary denial issues  

The proposed rules would significantly alter existing practices for briefing discretionary denial issues. Under current rules, discretionary issues are primarily briefed directly in the petition and the patent owner’s preliminary response (POPR). This practice has typically required one or both of the petitioner or patent owner to dedicate a substantial portion of the limited words available in the petition or POPR to discretionary denials issues at the expense of words that could otherwise be directed to arguments on the merits.  

To address this problem, the ANPRM solicited comments on potential procedures that would allow parties to brief discretionary issues outside the petition and POPR. The NPRM states that “most commenters favored separate briefing … noting that it would free up space in the petitions and patent owner responses to address the merits and allow more fulsome discussion of discretionary denial issues.”   

Considering feedback received in response to both the October 2020 RFC and the ANPRM, the NPRM proposes rules that would establish a new process for briefing discretionary denial issues. The new process allows for the filing of three additional papers before institution without prior Board authorization:  

1. The patent owner can file a request for discretionary denial limited to 10 pages within two months of the Board issuing a notice granting a filing date to the petition;  
2. The petitioner can file an opposition to the patent owner’s request for discretionary denial limited to 10 pages and due within one month of the patent owner’s request; and  
3. The patent owner can file a reply in support of the request for discretionary denial limited to five pages within two weeks of the petitioner’s opposition. 

The proposed rules would not preclude petitioners from presenting discretionary arguments in the petition, although the rules do require patent owners to address discretionary arguments outside of the POPR, unless otherwise authorized by the Board.  

The patent owner’s request can address any applicable basis for discretionary denial, including those under 35 U.S.C. §§ 314(a) and 325(d), except for arguments regarding parallel petitions. Under the proposed rules, and consistent with current practice, petitioners would still be permitted to file a separate five-page ranking paper alongside a parallel petition to address reasons that it believes justify the parallel petition, and patent owners would still be permitted to file a five-page response to the ranking paper to voice their objections.   

The proposed rules are also clear that parties are not to address merits issues through the new briefing process — even if merits issues are intertwined with a party’s discretionary denial arguments. The NPRM instead states that “parties may direct the Board’s attention to the petition and [POPR] for discussion of the merits as contained in those documents.”   

Finally, the proposed rules provide that the Board may raise discretionary denial issues sua sponte. In that case, the parties will be provided with the opportunity for briefing on the relevant factors.   

Factors for discretion relating to serial and parallel petitions  

The proposed rules initially include definitions for both “serial petition” and “parallel petition.” A “serial petition” is a petition that (1) challenges overlapping claims of the same patent that have already been challenged by the petitioner, the petitioner’s real party in interest, or a privy of the petitioner; and (2) is filed after (a) the filing of a POPR to the first petition; or (b) the expiration of the period for filing such a response, or as otherwise ordered, if no preliminary response to the first petition is filed. “Parallel petitions” are two or more petitions that (1) challenge the same patent and (2) are filed by the same petitioner on or before (a) the filing of a POPR to any of the petitions, or (b) the due date for filing a POPR to the first petition (if no POPR to the petitions is filed). 

Notably, these definitions indicate that the analysis for both “serial petitions” and “parallel petitions” will be focused on the same petitioner, the petitioner’s real party in interest, or a privy of the petitioner. The discussion of these definitions indicates that the Office specifically avoided inclusion of the “significant relationship” analysis discussed as a possibility for inclusion in the ANPRM. Noting that there were questions about the scope of what constitutes a “significant relationship,” the Office instead sought to adopt "the established common-law concepts of real party in interest and privity (see Taylor v. Sturgell, 553 U.S. 880 (2008)),” which “provides a body of case law from which the PTAB and the public can draw when assessing whether the relationship between the parties is sufficiently significant to warrant discretionary denial.” Further, the NPRM asserts that the “significant relationship” analysis presented in Valve Corp. v. Electronic Scripting Products, Inc., IPR2019-00062, Paper 11 (PTAB Apr. 2, 2019), is “consistent with privity concepts,” suggesting that the analysis in Valve may still be useful but is likely to be limited in its applicability to instances of similar facts and other fact patterns that are similarly consistent with privity concepts.  

Factors for serial petitions  

In considering whether to exercise its discretion to deny “serial petitions,” the proposed rules provide that the Board will consider a subset of the factors originally set forth in the precedential General Plastic decision. Specifically, when assessing “serial petitions,” the Board will consider:  

1. 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
2. Whether, at the time of filing of the second petition, the petitioner had already received the POPR to the first petition or had received the Board’s institution decision for the earlier petition 
3. 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  
4. Whether the petitioner provided an adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent  

The NPRM notes that these are factors (2) through (5) from the General Plastic precedential decision. Factor (1) from General Plastic is incorporated into the proposed rule’s definition of a “serial petition,” and factors (6) and (7) are not included in the proposed rule because “parties lack sufficient information to opine on the finite resources of the Board and the Board’s ability to issue a final determination within one year.”   

Factors for parallel petitions  

The proposed rules state that the Board will not institute parallel petitions absent a threshold showing of good cause as to why more than one petition is necessary. In considering whether good cause exists for multiple “parallel petitions,” the proposed rules provide that the Board will consider various factors, including:  

1. A petitioner’s ranking of their parallel petitions in the order in which petitioner wishes the Board to consider the merits 
2. An explanation of the differences between parallel petitions
3. The number of claims challenged by the petitioner and asserted by the patent owner 
4. Whether the parties dispute the priority date of the challenged patent  
5. Whether there are alternative claim constructions requiring different prior art  
6. Whether the petitioner lacked information at the time of filing the petition, and  
7. The complexity of the technology in the case, as well as any other information believed to be pertinent to the good cause determination 

These factors generally align with those in the Board’s 2019 Consolidated Trial Practice Guide and past Board decisions evaluating parallel petitions. The petitioner is expected to address these factors in either the petition or a separate five-page ranking paper filed concurrently with the petition, consistent with present practice.  

Petitions raising previously presented prior art or arguments  

Under § 325(d), the Director may exercise discretion to deny a petition to institute a post-grant AIA proceeding if the challenge to the patent set forth in the petition is based on “the same or substantially the same” prior art or arguments that “previously were presented to the Office.” 

To guide administrative patent judges (APJs) on the application of § 325(d), the Board issued several precedential decisions, most notably Advanced Bionics, LLC v. Med-El Elektromedizinische Geräte GmbH, IPR2019-01469, Paper 6 at 7 (PTAB Feb. 13, 2020) (precedential). Advanced Bionics set forth a two-part framework for APJs deciding requests from patent owners to exercise discretion to deny institution under § 325(d):   

• First, APJs determined whether the same or substantially the same art or arguments were previously presented to the Office, and  
• Second, if the first part of the framework was satisfied, APJs determined whether the petitioner had demonstrated that the Office erred in a manner material to the patentability of challenged claims.  

Advanced Bionics also provided that § 325(d) applies to the record of any proceeding involving the challenged patent — including prosecution, reissue, reexamination, appeals, and post-grant AIA proceedings — but did not answer the question of whether § 325(d) applies to the records of applications and patents in the same family as the challenged patent.  

In response to the ANPRM, many stakeholders and commentors approved of the Advanced Bionics framework. But they diverged on the meaning of “previously presented” in part one of the framework. Some commentors supported a proposed rule that would consider all prior art and arguments that were made of record “previously presented” — including those references listed in an Information Disclosure Statement (IDS). But others preferred to limit “previously presented” to prior art and arguments that had been applied in a rejection or otherwise substantively discussed during prosecution.  

In the NPRM, the USPTO agrees with those commentors advocating for a stricter approach to discretion under § 325(d), stating that “the application of section 325(d) should be limited to situations in which the prior art or arguments were meaningfully addressed by the Office.” In this way, the NPRM appears to substitute the “previously presented” requirement of § 325(d) with a “meaningfully addressed” requirement. The NPRM also clarifies that the relevant record for determining whether prior art or arguments were “previously presented to the Office” includes the record of the challenged patent and a related patent or application, so long as the related patent or application has substantially the same claims as the challenged patent.   

The proposed rules supersede the Advanced Bionics framework in two important ways.   

The proposed rules limit the application of § 325(d) to cases where the Office “meaningfully addressed” the prior art or arguments   

The proposed rules state that “art or arguments are deemed to have been meaningfully addressed when the Office has evaluated the art or arguments and articulated its consideration of the art or arguments in the record.” Notably, the mere presence of a prior art reference on a signed IDS will no longer qualify as previously presented for § 325(d).  

In addition, for the “meaningfully addressed” standard to apply under the proposed rules, the petition must use the “same prior art” reference “for a factual proposition that directly contradicts a finding made by the Office when the reference was previously meaningfully addressed.” Put differently, it appears that the petition must seek to apply the same prior art reference in a way that directly conflicts with prior Office findings. Similarly, “substantially the same prior art” must contain “the same teaching as that relied on in the petition.”   

The proposed rules place the burden on the patent owner to show in a request for discretionary denial that the same or substantially the same prior art or arguments were meaningfully addressed by the Office. Under those circumstances, the Director “may” deny under § 325(d). This appears to be a significant change from Advanced Bionics, where the Board would deny if the petitioner had not demonstrated material error.  

The proposed rules clarify that the Office can look to the record of the challenged patent or the application from which it issued, as well as to the record of a “related” patent or application having “substantially the same” claims    

The proposed rules clarify that “previously presented to the Office” includes Office proceedings involving not only the challenged patent, but also proceedings involving a “related” family member application or patent that has “substantially the same” claims of the challenged patent. Under the rules, an application or patent is “related to the challenged patent if it claims priority to a common application or is a parent application or parent patent of the challenged patent.” Even so, the Office must have meaningfully addressed the prior art or arguments before issuance of the challenged patent.  

The rules place the burden on the patent owner to identify in a request for discretionary denial where the prior art or arguments were meaningfully addressed. And if the “where” is in a related application or patent, then the patent owner also has the burden to show that the prior art or arguments were evaluated with respect to “substantially the same” claims as the claims in the challenged patent.  

The proposed rules do not define “substantially the same” with respect to claims, and the NPRM does not provide examples. It is hard to imagine a scenario where a patent owner would admit to having “substantially the same” claims over separate patents not linked via a terminal disclaimer. Thus, we expect that § 325(d) will mainly be limited to proceedings involving the actual patent challenged in the petition.  

Petitioner’s opposition  

The proposed rules provide that the petitioner may file an opposition “to argue that the same or substantially the same prior art or arguments were not previously meaningfully addressed by the Office and/or to argue that there was material error by the Office.” Thus, it appears that a petitioner has multiple avenues to attack a patent owner’s request for discretionary denial under § 325(d): 

• Argue that the prior art or arguments are not the “same” or “substantially the same” under the definitions provided in the rules. 
• Argue that that the prior art or arguments were not “meaningfully addressed.” 
• In a related patent or application, argue that the claims of that patent or application are not “substantially the same” as the claims in the challenged patent. 
• Argue that there was a material error in the Office’s previous consideration of the prior art or arguments.  

The rule does not define “material error.” At this time, it is unclear whether the Advanced Bionics standard — that “it will not be considered material error if reasonable minds can disagree regarding the purported treatment of the art or arguments” — will remain.  

Discretionary denial considerations for joinder petitions  

The proposed rules address certain discretionary denial issues related to joinder petitions. Specifically, the Board will not consider arguments on discretionary considerations relating to parallel petitions or § 325(d) where the petition(s) sought to be joined was instituted and those discretionary considerations were available in the already instituted petition. The NPRM notes that, “[i]n the scenario in which a joinder petitioner seeks to join multiple instituted IPRs, the need to justify multiple IPR trials is implicated by the already instituted petitions.” Similarly, “[a]rguments under section 325(d) were available to the patent owner in the context of the already instituted petition,” and therefore are considered to have already been addressed in the institution of the petition to which joinder is sought.  

Settlement agreements  

The proposed rules would require parties to file pre-institution settlement agreements with the Office on the same basis as post-institution settlement agreements. The language of 37 C.F.R. § 42.72 and § 42.74 would be updated to provide that joint motions for termination due to a settlement agreement before or after institution must be accompanied by the written settlement agreement. The Office would also set up a depository for the written settlement agreements, which would allow the USPTO to assist the Federal Trade Commission and Department of Justice in determining if antitrust laws are violated. This change would prevent parties from avoiding the filing of written settlement agreements pre-institution when a motion to dismiss or withdraw the petition is pursued rather than a motion to terminate.  

For more insights related to discretionary denial and other issues at the PTAB, please see our coverage of the April 2023 ANPRM here.