Since 2020, the United States Patent and Trademark Office’s (USPTO) has been denying requests for post-grant validity challenges based on a controversial set of factors known as the Fintiv rule. On March 13, 2023, the United States Court of Appeals for the Federal Circuit (“the Federal Circuit”) revived a challenge against the Fintiv rule, at the request of Apple Inc. The Federal Circuit found that the Fintiv rule was issued without proper compliance to the notice-and-comment rulemaking requirements of the U.S. Code, and reversed in part the decision of the District Court.
The America Invents Act (AIA) established post-grant proceedings to allow anyone to challenge the validity of patents issued by the Patent Trial and Appeal Board (PTAB). There are essentially 3 types of post-grant proceeding: post grant review (PGR), inter partes review (IPR), and covered business method review (CBM).
The objective of these post-grant proceedings was to “establish a more efficient and streamlined patent system” as an alternative to a District Court review of a patent’s validity. However, parallel proceedings in the District Courts and the PTAB involving the same parties and invalidity issues can increase, rather than, limit, litigation costs. In order to minimize potential conflicts between PTAB and District Court proceedings, the USPTO uses the Fintiv factors from the precedential decision of Apple Inc. v. Fintiv, Inc.
The Fintiv factors are a set of 6 non-exhaustive factors that are considered in determining whether an AIA post-grant proceeding should be instituted when there is a parallel district court litigation. The factors include:
- Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
- Proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
- Investment in the parallel proceeding by the court and the parties;
- Overlap between issues raised in the petition and in the parallel proceeding;
- Whether the petitioner and the defendant in the parallel proceeding are the same party; and
- Other circumstances that impact the Board’s exercise of discretion, including the merits.
Technology companies that are often sued for patent infringement rely on the inter partes review (IPR) process to challenge the validity of asserted patents. These companies have long criticized the Fintiv rule, as it allows the Board to refuse an IPR if the matter has already been involved in a district court litigation, leaving companies with no alternatives to avoid potentially costly and lengthy litigations.
Challenging the Fintiv Rule
Apple Inc. and three other companies brought this action against the Director of the USPTO, challenging the Fintiv rule and asserting that the rule “allow[s], and encourage[s] or even require[s], denial of [inter partes review requests]”. The action was brought under the Administrative Procedure Act (APA) based on three grounds:
- That the Director acted contrary to the IPR provisions of the patent statute;
- That the Fintiv rule was arbitrary and capricious; and
- That the Fintiv rule was issued without compliance with the notice-and-comment rulemaking requirements of the U.S. Code.
The District Court dismissed the case, ruling that while the plaintiffs had standing, the Director’s actions were unreviewable. The statutory text of the U.S. Code states that “the determination by the Director whether to institute an inter partes review under shall be final and non-appealable”.
Federal Circuit Decision
The Court of Appeals for the Federal Circuit (“the Federal Circuit”) affirmed in part the dismissal of Apple’s content-based claims but reopened the notice-and-comment procedural claim. The Federal Circuit clarified that the present case did not involve a petition-specific challenge (i.e., a challenge to a Director determination whether to grant an inter parties review) but rather, “a challenge to the Director’s instructions to the Board, as a delegatee, regarding how to exercise the Director’s discretion.” Differentiating between the procedure and the underlying substance of the Fintiv rule, the Federal Circuit found that a separate analysis of reviewability should be used to determine whether the proper notice-and-comment procedure was followed by the Director.
The Federal Circuit noted that Apple was a “repeat player” and “on a regular basis, for many years, it has been sued for infringement (giving it a concrete stake)”. Given the company’s history of litigation, the Federal Circuit found a genuine possibility that had the proper notice-and-comment rulemaking procedure been followed, the Fintiv rule would have provided a more favourable outcome to Apple. This possibility was confirmed by the fact that the Director announced favourable clarifications in a memo, in response to comments. For these reasons, the Federal Circuit concluded that Apple had standing to assert the rule was improperly put in place without notice-and-comment rule-making, and remanded the case back to the District Court.
In between the District Court decision and this appeal, the Director of the USPTO issued a memorandum clarifying that (1) the Fintiv rule would not apply in cases with a parallel proceeding at the International Trade Commission; (2) the Board should not deny institution under the Fintiv rule if the petitioner provides “compelling” evidence of unpatentability; and (3) the proximity-to-trial factor should not be enough to deny institution when other relevant factors weigh in favor of instituting an IPR or are neutral. While this Fintiv Guidance has not yet been codified, it has definitely softened the application of the rule and resulted in a significant decrease in discretionary denials. For more information on U.S. proceedings or to obtain IP protection for your assets, please contact a patent professional at PCK Intellectual Property.
 Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020)
 5 U.S.C. §§ 701–706
 The Administrative Procedure Act (APA) sets out specific requirements for notice-and-comment rulemaking that federal agencies must follow when they formulate, amend, or repeal rules. Under the APA, the Federal agency must issue a notice of the proposed rule and provide an opportunity for public comment before publishing the final rule (5 U.S.C. §§ 701–706).
 35 U.S.C. § 314(d)
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