Federal Circuit Holds Party Can Challenge PTAB Rulemaking

by | Mar 27, 2023 | PTAB News, Trial Institution

By Anthony Bautista and Matt Johnson –

In Apple, Inc. v. Katherine K. Vidal, the Federal Circuit ruled that Apple and the other plaintiffs could continue their suit on a lone surviving challenge to the PTAB Director’s rulemaking procedures regarding institutional discretion. Apple Inc. v. Vidal, No.5:20-cv-06128-EJD, at 3 (Fed. Cir. Mar. 13, 2023).

The underlying suit began on August 31, 2020 when “Apple and three other companies filed suit in the Northern District of California, seeking to challenge the [PTAB’s precedential decision] Fintiv instructions on three grounds under the APA: (1) that the Director acted contrary to the IPR provisions of the patent statute, see 5 U.S.C. § 706(2)(C); (2) that the Fintiv instructions are arbitrary and capricious, see 5 U.S.C. § 706(2)(A); and (3) that the Fintiv instructions were issued without compliance with the notice-and-comment rulemaking requirements of 5 U.S.C. § 553.” Id. at 11.

In 2020, the PTAB’s Apple Inv. v. Fintiv, Inc. decision was designated precedential and instructive on “how the Board is to exercise the Director’s institution discretion.” Id. at 8. Under Fintiv, in deciding whether to institute an IPR in parallel with an overlapping court case, the PTAB is required to assess six factors relating to evidence of a possible issued stay by the court, the trial date, investment in the parallel proceeding, overlap of issues, the similarity of the parties in the parallel proceedings, and “other circumstances that impact…exercise of discretion.” Id. at 8-9. On June 21, 2022, the Director issued a PTAB memo with updated instructions on how to incorporate the Fintiv in deciding whether to deny institution. The plaintiffs in Apple challenged the content of the Director’s instructions – arguing that 35 U.S.C. § 315(b)’s outer time limit on filing a petition for an IPR “where the petitioner or its privy or the real party in interest has been sued on the patent in court, implies that the Director is forbidden, when determining whether to institute, to consider the timing of the petition within that limit and the stage of development of the court case.” Id. at 14. As part of  the plaintiffs’ challenge to the content of the Director’s instructions, the plaintiffs also argued that the Fintiv instructions were arbitrary and capricious because the instructions were “’not reasonable and reasonably explained.’” Id. The plaintiffs’ challenged the content of the Director’s instructions because it would “likely lead to non-institution determinations that will harm them.” Id. at 18 n.6.

On November 10, 2021, the district court granted the government’s motion to dismiss and held that the plaintiff’s challenges “were to Director actions that were not reviewable.” Id. at 12. The district court cited 35 U.S.C. § 314(d) which states “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable” and Supreme Court cases, Thryv, Inc v. Click-To-Call Technologies, LP and Cuozzo Speed Technologies, LLC v. Lee, which hold that the Director has unreviewable discretion over the decision to institute inter partes reviews. Id.

On appeal, the Federal Circuit affirmed the dismissal of the plaintiffs’ first two challenges to the content of the Director’s institution instructions. Id. at 13. The court noted that while the present case involves a challenge to the Director’s instructions regarding institution discretion rather than a petition-specific challenge as in Thryv and Cuozzo, the IPR statute’s preclusion of review encompasses “preclusion of review of the content-focused challenges to the instructions at issue.” Id. at 17. The Federal Circuit noted that “the Director must be able to give guidance in the form of instructions to her delegate(s)—the Board )or Board panels)—about how to make the institution determinations on her behalf” and “[i]f the congressional preclusion of review of the decision to institute is to be respected in the inevitable system of delegation, it must extend to the substance of such instructions.” Id. at 17-18.

The Federal Circuit reversed the dismissal of the plaintiffs’ third challenge, which asserted that the Director failed to properly issue the institution instructions through notice-and-comment rulemaking procedures. Id. at 19. The court highlighted that the government did not show “that anything in  § 314(d) or elsewhere in the IPR statute supplies clear and convincing evidence that there was to be no judicial review of the choice of announcement procedure.” Id. at 20. Furthermore, the court stated that there was “no sufficient justification for a conclusion that the high standard of [5 U.S.C.] § 701(a)(2) for inferring a preclusion of review is met for this distinct issue” and there was no “persuasive justification for concluding that the use or non-use of notice-and-comment rulemaking procedures is a matter ‘committed to agency discretion by law.” Id.

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Matthew Johnson

Partner at Jones Day
Matt Johnson is one of the Firm's primary contacts on practice before the PTAB. Currently co-chairing the Firm's PTAB subpractice and involved in proceedings at the Board since the first day of their availability in September 2012, Matt regularly represents clients as both petitioners and patent owners at the Board. He further works as an advocate for clients in appeals from Board proceedings at the Federal Circuit.