The Supreme Court calls the PTO's Bluff

On Monday, the Supreme Court declined to hear a case involving a controversial rule imposed by the U.S. Patent and Trademark Office (PTO), a rule with broad implications for U.S. technological leadership for the U.S. economy, and raised genuine questions about administrative procedure. By denying cert in the case, the Court is forcing the PTO to fix its own mistake.  

By way of background, in 2011, Congress passed the America Invents Act. The new law addressed problems presented by patents of dubious validity that block technologies they shouldn’t. It was the most important reform to our patent system in the last 50 years.

One of the AIA’s most important innovations was “inter partes review” — a new, streamlined procedure that enabled parties accused of patent infringement to challenge that patent’s validity before the Patent Trial and Appeal Board (PTAB), a tribunal within the PTO. If PTAB decided a patent was not valid, the party being sued would be spared from spending time and money defending themselves in court.

The system worked. The process is faster and cheaper than going to court. The PTAB has reviewed thousands of patents and has cancelled many bad ones. 

In 2020, however, the PTO adopted a new rule – without any notice and comment as required by the Administrative Procedures Act – that makes these patent reviews unavailable when they are needed most. The Fintiv Rule authorizes the PTAB to refuse to review a patent when a district court case involving that same patent is ongoing. 

The PTO’s approach flies in the face of Congress’s reasons for creating inter partes review in the first place. Congress knew that one of the most important – and prevalent – uses of this review would be to challenge patents that were the subject of district court action. Providing a faster, cheaper forum than district court was what Congress wanted. 

The PTO has now used the Fintiv Rule to deny hundreds of review petitions. Denials are issued even in cases where the PTAB acknowledges the petition raises persuasive challenges. Each time that occurs, the petitioner is denied the streamlined procedure that Congress intended. 

Fintiv also encourages abusive forum-shopping by patent trolls. Since the rule was adopted, the number of infringement suits filed in federal courts in the Western and Eastern Districts of Texas – two jurisdictions with “rocket dockets” that result in quick trial dates – has skyrocketed. Forum shopping is most harmful for technology companies, whose products often incorporate thousands of innovative features. Companies like Intel, the American chipmaker, are frequent targets of these efforts. By filing suit in Texas and obtaining an early trial date, plaintiffs have been able to avoid inter partes review and pursue large jury verdicts based on a single bad patent.     

Federal agency rules like this one are supposed to get judicial review. So why has the Supreme Court refused to take up this issue for the third time, despite the significant impact on U.S. businesses and the administrative law implications posed by the issuance of this rule? The answer quite possibly lies in the fact that the PTO (through the Solicitor General) urged the Court not to take up the case since it claimed it was going to fix the problem itself:

Pending agency proceedings regarding the Fintiv factors provide an additional reason for this Court to deny review.  Petitioner argues that the Director acted without sufficient public notice and comment when he mandated consideration of the Fintiv factors, and that these factors have caused various adverse effects on the inter partes review process.  See Pet. 29-34.  The USPTO has solicited and is currently considering public comments on the Fintiv factors, however, and it will determine whether those factors should be modified based on public input and the agency’s “broad experience as it relates to considerations for instituting” AIA proceedings.

Intel Corp. v. VLSI Tech. LLC, et al., No. 21-888, Br. for Fed. Resp’t in Opp’n, 11 (Feb. 14, 2022), https://www.supremecourt.gov/docket/docketfiles/html/public/21-888.html.

The ball is now firmly in the PTO’s court. A great deal is at stake here. The Fintiv Rule undermines congressional intent in creating inter partes review.  It exceeds the PTO’s authority.  It harms this country’s most innovative companies by curtailing their access to a procedure that was supposed to be available to all. The bottom line is that the Fintiv Rule was a big mistake, and the PTO should move promptly to fix it.

Donald B. Verrilli Jr. served as the Solicitor General of the United States from 2011 into 2016.