Sotera Stipulations Less Likely Given Vidal Memo on PTAB Discretion

As we reported yesterday, U.S. Patent and Trademark Office (USPTO) Director Kathi Vidal issued a memorandum on the “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation” clarifying current Patent Trial and Appeal Board (PTAB) practice on discretionary denials of inter partes review (IPR) and post grant review (PGR) proceeding institutions. The memo and corresponding press release explain that the PTAB “will not deny institution of an IPR or PGR under Fintiv (i) when a petition presents compelling evidence of unpatentability; (ii) when a request for denial under Fintiv is based on a parallel ITC proceeding; or (iii) where a petitioner stipulates not to pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could have reasonably been raised in the petition.”

Farewell Forever, Fintiv?

“The new guidance memo from Director Vidal makes it virtually impossible to raise a successful Fintiv argument,” explained James Carmichael, former Administrative Patent Judge and founder of Carmichael IP, a law firm nationally recognized as being one of the top performing IPR firms on behalf of patent owners year after year. “In fact, raising a Fintiv argument is probably even counterproductive.”

The guidance issued by the USPTO states that “compelling, meritorious challenges” will not be denied under Fintiv.  The wrinkle, however, is the guidance purports to distinguish “compelling, meritorious challenges” from those that are “merely sufficient to meet the statutory institution threshold,” a difference characterized as “razor thin” by Carmichael. The reason: The USPTO memo defines “compelling, meritorious challenges” as “those in which the evidence, if unrebutted in trial, would plainly lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence.”  This is the same as the statutory institution threshold, with the addition of just one word: “plainly.”

This view of the USPTO memo conflicts with the analysis of the memo published by Law360, Carmichael acknowledges. “The recent Law360 article suggests that the ‘compelling, meritorious challenges’ language is the least important part of the memo; I disagree,” explained Carmichael.

“Because the difference is so slight, the PTAB could easily find petitions that meet the statutory threshold raise ‘compelling, meritorious challenges’,” Carmichael explained. “After committing to such a finding, a panel may be less open to confirming patentability of independent claims after trial. Therefore, it might be counterproductive for a patent owner to raise Fintiv at all.”

Sotera: Now Even Less Enticing

Carmichael also disagreed with the consensus from the Law360 article that the likely result of the USPTO memo will be more Sotera stipulations, which are filed to obviate a Fintiv argument by having the petitioner agree not to raise in the district court any unpatentability ground it could have raised in the PTAB, thereby preventing duplicative work in parallel forums, and two bites at the same apple, so to speak.

“But Sotera stipulations are already more than 96% successful,” Carmichael pointed out, “so the memo nudging it to 100% changes nothing.”

Petitioners are reluctant to use Sotera stipulations because they limit invalidity options in district court proceedings. Will petitioners be any more likely to file Sotera stipulations now than they have been previously, given the limited additional benefit? Carmichael thinks no.

“Now, with the ‘compelling, meritorious challenges’ standard as a get-out-of-Fintiv-free card, there is less reason to submit a Sotera stipulation, not more,” Carmichael predicts.

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