Next Director Likely to Swing the Pendulum Back

PTAB 314(a) discretionary practices have followed the so-called “Fintiv factors” for years now. Under former Director Iancu (Republican appointee) Fintiv denials were so commonplace that overall institution rates dropped almost 10%. Current Director Vidal (Democrat appointee) recalibrated PTAB Fintiv practice via memo, and, as a result, Fintiv denials are relatively uncommon today. As Director Vidal’s memo is not committed to regulation, the next Director is free to swing the pendulum back.

It may seem that the likelihood of any such change is dependent on the outcome of the election given the tug-of-war of Trump/Biden appointees. But, it seems increasingly likely that that such a swing is inevitable regardless of election outcome.

As detailed earlier this week, current Fintiv practices (per the Vidal memo) were omitted from the recent NPRM. This could be for any number of reasons. For example, the memo changes could be argued as beyond the power of the agency to promulgate as a regulation — such as applying a “compelling evidence” standard where the IPR institution is already committed to statute as a “reasonable likelihood of prevailing.” Director Vidal took a significant amount of heat before the House Judiciary Committee on such over-reaching proposals of the ANPRM. Legislators closely aligned with IP policy interests would not be in favor of Fintiv regulations that tread on the province of the legislature. And coming into an election, the rule package needed to be uneventful (unfortunately it’s not) to gain necessary political support.

Those interested legislators no longer include Senator Leahy (retired). You might recall that Senator Leahy was an early supporter of then nominee Vidal. Senator Leahy had an extreme distaste for 314(a) practices, and most anything else that happened under the Iancu administration. Left to fill that considerable void are Senators Coons and Tillis.

Both Senators Tillis (R) and Coons (D) are driving the so-called PREVAIL Act (expected to be pushed yet again in the fall session). These Senators are now the key gatekeepers to the PTO Director seat. Both are firmly aligned with the Bio/Pharma lobby, which is no fan of the PTAB. So, regardless of whether the next nominee is a Democrat or Republican, the mandate of the person put in the Director seat will be coming from Tillis/Coons. As such, I expect the next Director to shift toward more pro-patent policies regardless of the election outcome.

The wildcard on the Fintiv front is the ongoing APA lawsuit.

You might recall that last we heard the Federal Circuit found that Apple had standing to challenge the Director’s June 2022 memo providing guidance to the PTAB regarding institution of an IPR, and specifically that while the Director’s guidance was not – as Apple had argued – arbitrary and capricious, the issue of whether the guidance had been properly noticed was remanded for review to NDCA.

On March 31, 2024, the NDCA rejected Apple’s arguments (here) that the Director had not properly promulgated the 2022 instructions to the PTAB through the proper notice-and-comment rulemaking procedures.

The decision of the Court found that the guidance was a “rule” but that it was an application of “non-exclusive factors.” That is, the Board was free to exercise its discretion on a case by case basis when applying the six Fintiv factors and “the ‘language and structure of the directive’ not only permit but in fact require that the Board exercise its discretion in consideration of the particular facts presented in each case.”

I expect this decision will be appealed, while there are numerous factors involved, some are essentially meaningless. For example, if a case is stayed this means there is no Fintiv analysis. Furthermore, any case that is not stayed that has a trial date before a a FWD will necessarily have an investment of the Court and overlapping issues. This window dressing aside, the analysis comes solely down to timing.

It will be at least 2026 before the next Director gets in the chair to start pulling levers. A lot can happen between now and then. Stay tuned.