Northern District of California Dismisses Challenge to PTAB’s Fintiv Factors

On Nov. 10, 2021, the Northern District of California granted the United States Patent and Trademark Office’s (USPTO) motion to dismiss a lawsuit brought by Apple and co-plaintiffs challenging the Patent Trial and Appeal Board’s (PTAB) use of the Fintiv factors in deciding whether to institute inter partes review (IPR). Apple Inc. et al. v. Andrei Iancu, No. 20-cv-6128-EJD (N.D. Cal.).

Apple and its co-plaintiffs filed the lawsuit in 2020, alleging that the use of the Fintiv factors—non-exclusive factors relating to parallel district court litigation that the PTAB considers in deciding whether to institute IPR—have resulted in the denial of numerous IPR petitions, including petitions filed by plaintiffs, and should be set aside. In their challenge, plaintiffs asserted three claims under the Administrative Procedure Act (APA). In particular, they argued that the court must hold the Fintiv factors unlawful because (1) the Director exceeded his statutory authority in adopting the Fintiv factors, (2) the factors are “arbitrary, capricious, and violate[] the AIA,” and (3) the factors were issued without notice and comment.

The USPTO moved to dismiss the lawsuit for lack of standing and because the issue was not justiciable. As to standing, the USPTO argued that plaintiffs suffered no “injury-in-fact” since plaintiffs have no right to IPR under the AIA. In other words, plaintiffs cannot argue that they are harmed by the Fintiv factors when the Director possesses unreviewable discretion over institution decisions. The court disagreed, finding that plaintiffs had established injury-in-fact because the Fintiv factors deprived them of the “benefits” of IPR, and therefore harmed plaintiffs or presented a substantial risk of harming them. The court also found that the causation and redressability requirements of standing were met, and that plaintiffs therefore had standing.

The court, however, concluded that the issue of whether the Fintiv factors violate the APA is not justiciable. The court held that the Supreme Court’s rulings in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) and Thryv, Inc. v. Click-to-Call Technologies, LP, 140 S. Ct. 1367 (2020) made clear that plaintiffs’ challenge to the Fintiv factors is barred under 35 U.S.C. § 314(d). The court explained that under Section 314(d), “[t]he determination by the Director whether to institute an inter partes review…shall be final and unappealable.” The Court in Cuozzo determined that the grounds for challenging the Director’s institution decision were “closely tied” to the application and interpretation of statutes related to the decision to institute, and accordingly, Section 314(d) applied to bar appeal. The Court in Thryv determined that the Director’s application of Section 315(b)’s one-year time bar to file a petition after being served with a complaint alleging patent infringement is “integral to, indeed a condition, on institution” and is therefore final and unappealable under Section 314(d), as it is closely related to the decision to institute review.

In view of the Supreme Court’s rulings, the court concluded the Fintiv factors are “closely related” to the Director’s decision whether to institute IPR, and it could not “deduce a principled reason why preclusion of judicial review under § 314(d) would not extend to the Director’s determination that parallel litigation is a factor in denying IPR.” Slip Op. at 10. The court held that, in order to inquire into the “lawfulness” of the Fintiv factors, it would have to analyze questions that are “closely tied” to the application and interpretation of statutes related to the Director’s decision to institute IPR — precisely what Cuozzo “forbids.” Id. at 10-11. It therefore granted defendant’s motion to dismiss for lack of subject-matter jurisdiction.

Apple and Mylan have petitions for writs of certiorari currently pending before the Supreme Court that rehash similar challenges to the Fintiv factors. The United States and USPTO filed briefs shortly before the N.D. Cal decision, urging the Supreme Court to pass on both petitions for reasons similar to those in the district court’s decision. 

The Fintiv factors also have come under recent fire in the post-grant review (PGR) context. In August 2021, two pharmaceutical companies, Daiichi Sankyo and AstraZeneca, filed a complaint in the Eastern District of Virginia challenging the PTAB’s use of the Fintiv factors in denying PGR. Daiichi and AstraZeneca argue that a string of PTAB decisions extending use of the Fintiv factors to PGR proceedings are contrary to congressional intent, and have led to arbitrary and unpredictable denials of PGR institution. The USPTO’s response to the complaint is due this week.