In Parallel Proceedings, Compelling Merits Matter Last in Fintiv Analysis

On February 27, 2023, the Director of the United States Patent and Trademark Office ("USPTO") issued a precedential sua sponte Director Review Decision in the Inter Partes Review ("IPR") of Commscope Technologies LLC v. Dali Wireless, Inc. ("Commscope"), IPR2022-01242. The decision vacated the Patent Trial and Appeal Board ("PTAB") decision granting institution of the petition and held that when deciding whether to institute an America Invents Act ("AIA") post-grant proceeding^[1] with a parallel district court litigation, the PTAB must first conduct Fintiv^[2] discretionary denial analysis. The PTAB should only consider the compelling merits (or compelling unpatentability challenges) of Fintiv factor 6 if it determines that Fintiv factors 1-5 favor a discretionary denial.

Fintiv factors provide nonexclusive considerations that the PTAB takes into account when determining whether to institute an AIA proceeding in the presence of parallel district court litigation. These factors include: (1) whether the court has granted a stay or there is evidence that a stay may be granted if a proceeding is instituted; (2) the proximity of the court's trial date to the PTAB's projected statutory deadline for a final written decision; (3) the investment in the parallel proceeding by the court and the parties; (4) the overlap between issues raised in the petition and in the parallel proceeding; (5) whether the petitioner and the defendant in the parallel proceeding are the same party; and (6) other circumstances that impact the PTAB's exercise of discretion, including the merits.

Regarding the compelling merits analysis (factor 6), the USPTO Guidance Memo^[3] instructs the PTAB to evaluate whether the petitioner presents challenges that, if unrebutted in trial, would plainly lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence. The compelling merits standard may only be met if it is highly likely that the petitioner would prevail with respect to at least one challenged claim. This is in contrast to the standard for IPR institution set by statute, which requires that evidence presented by the petitioner show a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged.^[4]

In Commscope, the PTAB declined to perform a Fintiv discretionary denial analysis—finding that the petitioner presented compelling unpatentability challenges. The Director, however, held that a compelling merits determination may not substitute for a Fintiv discretionary denial analysis. Instead, in circumstances where the PTAB determines Fintiv factors 1-5 do not favor discretionary denial, there is no need for PTAB even reach the compelling merits analysis. But where Fintiv factors 1-5 favors denial of institution, only then shall the PTAB evaluate the compelling merits factor.

In Commscope, the Director determined that the PTAB failed to provide sufficient reasoning to support its conclusion that the merits are compelling. The PTAB merely pointed to its analysis under the lower institution standard, and the Director found that insufficient to demonstrate that the petition presents a compelling unpatentability challenge. To find compelling interest, the PTAB must provide reasoning to explain and support its determinations as to compelling merits that is sufficient to enable the parties to challenge that finding and allow for review of that decision.

The Director’s review decision makes it more challenging to institute an AIA proceeding when there is parallel district court litigation. Such AIA proceeding is always subject to the Fintiv discretionary denial analysis. Where the AIA proceeding is vulnerable to the Fintiv analysis, the petitioner must present sufficient information and reasonings to meet the higher compelling merits standard.