APA Action & Mandamus Petition Simultaneously Challenge PTAB’s NHK/Fintiv Framework

Back in June, I predicted that an APA action against the USPTO and/or a mandamus petition to the Federal Circuit was inevitable given the PTAB’s practice of denying IPR petitions in favor of competing district court trial dates. Well…here we are.

Yesterday,  Director Iancu was sued by a group of large tech companies for allegedly violating the APA by denying IPR petitions on the basis of a competing trial date, and late last week, one of the same companies also filed a mandamus petition seeking to force the agency to consider the merits of a petition denied as a matter of discretion even though it was filed some seven months before the 315(b) deadline.

Never a dull moment at the PTAB.

As these filings make their way through the system, in parallel, a rumored rule package seeking to codify the NHK/Fintiv framework has been ensnared by the Office of Information & Regulatory Affairs (OIRA) for further scrutiny. Seems these developments will almost certainly grind that review process to a halt. With Director Iancu likely moving on from the agency regardless of the election results (my speculation), whether these court-based challenges are successful or not, the next Director could presumably come in and undo these practices anyway.

First, the mandamus petition (here), which may be the first to the finish line. The petition argues that:

In setting the one-year deadline for infringement defendants to seek IPR, Congress chose to work forward from the service of the complaint. 35 U.S.C. § 315(b). The NHK/Fintiv rule, by contrast, works backward from a purely tentative trial date. In contravening the statute’s text in this way, the PTAB has transformed a safe harbor with known and stable boundaries into an unpredictable, de facto time bar triggered by forces outside the petitioner’s control.  .   .   . Even more troublingly, the NHK/Fintiv rule effectively cuts short the one-year petition period Congress believed was vital. In some judicial districts—particularly the “rocket dockets” popular with patent assertion entities (“PAEs”)—trial dates are set for such an early date that, once a complaint is filed, it is already too late to avoid non-institution on NHK/Fintiv grounds.  At best, the rule forces defendants to file petitions immediately upon being sued—well before the plaintiffs have identified, much less narrowed, their infringement contentions and before defendants can properly vet the asserted claims.

Not only does the NHK/Fintiv rule conflict with the substantive provisions of the AIA, but the agency also lacked the authority to promulgate the rule in the way it did. While the agency declared its new rule via Board opinions—later designated precedential by the Director—that course is forbidden by two separate statutes: First, the AIA provides that if the agency wishes to establish new standards governing institution, it must do so via a “regulation” issued by the Director—i.e., via notice-and-comment rulemaking. Second, the APA independently requires agencies to use notice-and-comment rulemaking if they wish to announce broadly applicable, prospective rules.

(internal quotes and citations omitted)

The APA action (here) seeks a declaratory judgment that the discretionary denials are unlawful, and an injunction from the continuation of such practices by the agency. More specifically, the complaint pursues:

Count 1: The NHK-Fintiv rule is final agency action “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right” because it violates the AIA and the Director exceeded his statutory authority in adopting it.

Count 2: The NHK-Fintiv rule is final agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

Count 3: The NHK-Fintiv rule is final agency action undertaken “without observance of procedure required by law.”

In essence the APA complaint argues that Congress provided litigation controls in the statute, and the agency cannot rewrite them (Count 1);  the factors have resulted in inconsistent results (Count 2); and even if the first two counts can be ignored, the agency can only make such rules through traditional notice and comment rulemaking (i.e., regulations).

As noted above, the agency is in the midst of trying to belatedly address Count 3.  I wouldn’t expect that process to continue, and even if it did, certainly not in time to get the rules to final form before current Director likely moves on. Moreover, given these now established discretionary practices, one is left wondering whether public comments of traditional notice-and-comment rulemaking would fall on deaf ears in any case.

Get your popcorn ready, plenty to watch this fall.