Vidal’s Latest Director Review Decisions Fail to Simplify the ‘Compelling Merits’ Analysis
“The Director’s statement in both Commscope and AviaGames that the standard for a ‘compelling merits’ determination is higher than ordinary institution seems like a helpful clarification. In practice however, it remains confusing.”
U.S. Patent and Trademark Office (USPTO) Director Kathi Vidal has been on a tear recently, reviewing sua sponte a number of Patent Trial and Appeal Board (PTAB) decisions and designating others precedential. Many of those decisions have helped to make America Invents Act (AIA) proceedings more rigorous and fair, such as the Director’s decisions correcting the PTAB for relying on conclusory expert statements and putting at least some teeth in the real parties in interest requirement. Her most recent interventions in Commscope Technologies v. Dali Wireless IPR2022-01242 and AviaGames, Inc. v. Skillz Platform, Inc., IPR2022-00530 however, add more confusion than clarity to the Fintiv analysis, and more work for parties and the Board, without improving fairness or efficiency.
‘Compelling Merits’ Confusion Continues
Apple v. Fintiv directs Administrative Patent Judge (APJ) panels to weigh the efficiency and fairness of having parallel district court and PTAB proceedings (summarized in five factors) against other relevant facts (a sixth catchall factor), including whether the petition presents a strong case on the merits. In Commscope, the Board instituted inter partes review (IPR), notwithstanding Fintiv, because, the panel said, the “Petitioner presents compelling unpatentability challenges.” To support this conclusion, the panel pointed to its ordinary merits analysis of the petition. The Director then intervened, vacated the institution decision, and directed the Board to reconsider its Fintiv analysis.
First, the Director’s Commscope opinion faulted the Board for jumping to the “compelling merits” without first addressing the efficiency and fairness factors. The Director also criticized the Board’s “compelling merits” analysis, instructing that “[m]erely pointing to its analysis under the lower institution standard is insufficient to demonstrate that the Petition presents a compelling unpatentability challenge” that would overcome the other Fintiv factors.
Under Commscope, it seems that panels are supposed to first analyze the efficiency and fairness factors, and, only if those weigh against institution, proceed to the “compelling merits” factor. At the “compelling” merits stage, the Board is to apply a higher standard than what is required for institution.
AviaGames is similar. There, a district court found the patent invalid under Section 101 and, since the patent had already been found invalid, the PTAB panel denied institution under Fintiv. The Director vacated the panel decision. She instructed the APJs to conduct a “compelling merits” analysis and institute trial if the merits of the petition were “compelling.”
More Work, Little Effect
Commscope and AviaGames will add uncertainty and more work for IPR practitioners and the PTAB, but likely little else. First, Commscope’s requirement to analyze Fintiv’s fairness and efficiency factors doesn’t seem to accomplish anything. Under the Director’s Fintiv guidance, a “compelling” merits determination “alone demonstrates that the PTAB should not discretionarily deny institution under Fintiv.” Thus, however the efficiency factors come out, the guidance instructs the panel to institute the proceedings when there is a “compelling” case on the merits. Since the “compelling” merits make the fairness and efficiency factors irrelevant, under the guidance, it not clear what panels accomplish by analyzing those factors. Courts usually skip over issues that don’t affect the outcome, and the PTAB should too.
AviaGames is also wasteful of party and judicial resources. There, the patent was already held invalid, and still the Director IPR proceedings might need to go on. The Director argues that the Federal Circuit could reverse the district court and leave the petitioner unable to re-file its IPR if the case were remanded. That would seem to justify a stay of IPR proceedings pending the appeal, not millions of dollars in litigation costs over moot issues. Moreover, even if the Federal Circuit did reverse, the patent owner would be free to raise the issues presented in its petition the district court. Terminating the IPR would not leave the petitioner defenseless in the litigation.
‘Compelling merits’ Are in the Eye of the Beholder
The Director’s statement in both Commscope and AviaGames that the standard for a “compelling merits” determination is higher than ordinary institution seems like a helpful clarification. In practice however, it remains confusing.
According to the Fintiv guidance, a petition is “compelling” and should be instituted regardless of the efficiency and fairness factors, when the “the evidence, if unrebutted in trial, would plainly lead to a conclusion that one or more claims are unpatentable.” (emphasis added). The difficulty is that IPR petitions are one-sided documents drafted by attorneys paid to invalidate the patent. If an unrebutted petition fails to show unpatentability, either the petitioner made a mistake or the patent’s validity is so clear that it is not even arguable. In other words, the Director’s “compelling merits” guidance could be read to mean that all but the weakest petitions are “compelling.”
Commscope, the word “compelling,” and common sense suggest that’s not what the Director meant. However, neither the Guidance nor the Director’s recent decisions provide much clarity about what compelling means. Is “compelling” somewhere in between clear and convincing evidence and preponderance of the evidence? Is it higher than clear and convincing evidence? Practitioners and the PTAB don’t get much guidance. The result is more uncertainty in patent litigation.
Nicholas Matich
Nicholas Matich is a principal in McKool Smith’s intellectual property (IP) practice, representing a broad array of clients in IP disputes both as plaintiffs and defendants and advising clients on […see more]
