USPTO Director Vidal Continues to be Actively Engaged in PTAB Practice, Issuing a Precedential Sua Sponte Director Review in Commscope v. Dali (IPR2022-01242)

On February 27, 2023, Director Vidal reversed and remanded the Patent Trial and Appeal Board (PTAB or Board)’s February 7, 2023, Decision Granting Institution of Inter Partes Review of U.S. Patent No. 11,026,232 to Commscope Technologies, LLC (Commscope). The Board had declined to exercise its discretionary powers to deny instituting an IPR proceeding on the basis of the “compelling merits” of Commscope’s petition against patent owner Dali Wireless, Inc. (Dali). The Director’s reversal was based on the Board’s failure to evaluate the first five Fintiv factors before addressing the “compelling merits” factor per the USPTO Memorandum, Interim Procedure for Discretionary Denials in AIA Post-Grant Proceeding with Parallel District Court Litigation (Guidance Memo).

The Director’s decision clarifies several issues. First, the Director makes clear that the “compelling merits” standard is higher than the statutory standard for instituting IPR. The Guidance Memo lays out that when “the information presented at the institution stage presents a compelling unpatentability challenge, that determination alone demonstrates that the PTAB should not discretionarily deny institution under Fintiv.” The “compelling merits” standard requires that the Board finds it “highly likely” that a challenged claim is unpatentable if the evidence is not rebutted at trial. The Director also clarified that the intention of the Guidance Memo was that the PTAB should not deny instituting IPR for “compelling merits” if the PTAB first determined the other five Fintiv factors favored discretionary denial of instituting the IPR and that a “compelling merits” analysis should not be substituted for a full Fintiv analysis.

Where the Board erred, according to the Director, was not providing “sufficient reasoning” for finding the reasons to deny institution were compelling. The Board must provide “sufficient reasoning” for the discretionary denial so that the parties may challenge the Board’s decision and the decision can be reviewed. Here, the Director faults the Board for simply concluding “the evidence, if unrebutted at trial, demonstrates that ‘it is highly likely that the [P]etitioner would prevail with respect to at least one challenged claim.’” The Director stated that it is not sufficient to point to the lower statutory threshold for institution when making a Fintiv “compelling merits” analysis.

It seems the Board interpreted the Guidance Memo as requiring a full Fintiv analysis unless the Board felt that the petitioner met the “highly likely” threshold required by the “compelling merits” standard. It is likely the Director felt the Board substituted the “compelling merits” standard for the full Fintiv analysis and may have applied the lower statutory standard for institution as well.

The Fintiv factors may be a close call. Dali’s brief to the PTAB conceded that the court-issued stay factor was neutral to Dali. The Board’s expected decision in the IPR, if instituted, would likely be handed down two months after an anticipated trial verdict, so Fintiv factor 2 likely falls Dali’s way as do Fintiv factors 4 and 5 because the same parties are raising the same issues in both proceedings.

Fintiv factor 3, investment in parallel proceedings, may fall Commscope’s way. While the United States District Court for the Western District of Texas issued its Markman ruling on January 20, 2023, before the Board instituted an IPR based on Commscope’s petition, the Board’s decision repeatedly notes that it arrived at the same claim construction as the trial court. This likely makes conflicting outcomes unlikely. The Fintiv ruling also envisions factor 3 as applying to a “looming” trial date or where the petitioner waits to petition for IPR until after the patent owner responds to invalidity claims in the trial proceedings. But Commscope filed its petition for IPR in January 2022, and Dali’s response conceded that Dali’s answer to Commscope’s invalidity claims would not be served until around the time the PTAD issued its decision to institute the IPR.

If the Board does decide to institute IPR based on Commscope’s petition after a full Fintiv analysis, it may mean that the Board likely believes Commscope’s argument is “highly likely” to succeed.