By Jonathan Stroud*
In der Beschränkung zeigt sich erst der Meister,
Und das Gesetz nur kann uns Freiheit geben.[1]
-- Johann Wolfgang von Goethe, Das Sonnett[2]
More than a decade ago Congress considered, and rejected, any standing requirements for post-grant proceedings.[3] Congress could hardly have been more explicit. The provisions were debated over a decade.[4] In 2008, statutory standing language was added, and then removed, from the then-pending bill.[5] A standing requirement was explicitly included for the now-sunset covered business methods law.[6] The USPTO itself repeated this understanding via rulemaking.[7] Since then, the district courts,[8] the Federal Circuit,[9] and even the Supreme Court have said so.[10]
To be sure, the organic statute that grants the Office rulemaking power,[11] like other organic statutes before it,[12] explicitly affords some gap-filling discretion to the agency, in particular contexts.[13] But that discretion was circumscribed, applying to the power to join petitioners,[14] to avoid reconsidering arguments and art already presented,[15] to deal with timing related to litigation,[16] and let the agency limit institutions in the first four years, so the agency could avoid being "overwhelmed."[17]
Fast-forward to today. The Office now often argues that, despite those other express grants of discretion, the Office's real power lies in a single word, "may," as in, "may not institute."[18] The Supreme Court, to be sure, has noted that this passage vests with the Office the discretion whether to institute; the Office, in the years following, has repeatedly relied on that uncontroversial observation to expand their already-broad authority over post-grant proceedings,[19] injecting party-driven policy considerations and overlaying them on circumscribed statutory authority to expand their own.[20]
Through the eye of that statutory loophole—"may not"—the agency would slip elephants, placing super-statutory restrictions on filers via some questionable adjudication and policy diktats,[21] the upshot of which are all barriers to the public to petitioning and merits review.[22] By some estimates, half of the thousands of reviews filed each year discuss at length these fraught, inventive requirements—the NHK/Fintiv factors.[23] Those factors serve as a de facto bars that serve to cut off review early in the statutorily prescribed one-year post-suit window.[24] While denials have abated in the past year, the time spent addressing these issues has steadily increased.[25]
Doubling down, the USPTO has written and released an Advance Notice of Proposed Rulemaking (ANPRM)[26] that seeks, in myriad ways, to stretch that word "may" to its breaking point. It proposes a bevy of ideas, not endorsed by the agency, many of which seem to lack Congressional authority to implement. The Office has noted that the proposals come from various "stakeholders," not the Office.[27]
To say the USPTO has already received significant feedback, or that these rules are controversial, is an understatement.[28] Former Senators, Congressmen, USPTO Directors, and the Chief Judge of the Federal Circuit have all commented publicly that most proposals are outside the agency's power; a vast majority of U.S. business, public interest groups, and individual commenters have commented that the changes would embolden NPEs and hurt the US economy and are bad policy. Some 14,000 comments were submitted; to date, the office has posted almost 2,000 of them and counting, more than double what the earlier iterations of Fintiv policymaking provoked. Almost half of those posted comments are from individuals suggesting the changes would embolden non-practicing entities to sue productive American businesses, and the Office should not be considering changes that will raise the cost of litigation and make it more difficult to objectively challenge the merits of patents, as Congress intended. Of all of the ANPRM's wide-ranging proposals, perhaps the most controversial and widely opposed by companies and the public is adding "standing"—so-called in the testimony and writings of the Office—for certain entities.
But standing is just the clearest example of a rule beyond the agency's power to impose. The ANPRM's "laundry list" of proposals also includes an arbitrary six-month "grace period" in which defendants would have unhindered permission to file—something they once enjoyed—the upshot of which is shortening the yearlong window Congress proscribed for defendants sued or threatened with suit.[29] And it proposes stipulation requirements and additional expansions of the legal scope of the limits Congress put on filing; the Office indicates they are all animated by vague if "key" "policy" considerations—explicitly, "the USPTO intends to make policy changes through notice-and-comment rulemaking."[30]
Unfortunately for the agency, as the Supreme Court recently noted, "policy considerations cannot create an ambiguity when the words on the page are clear."[31]
The USPTO lacks the rulemaking authority to legislate most of these changes, which would likely provoke a raft of legal challenges. Congress elucidated timing requirements, the interaction between district courts and the Office, and what the agency asks of the parties and of its decisionmakers. It is for the Courts to interpret them. Even existing legal challenges to the USPTO's controversial Fintiv practice suggest that, were the agency to attempt rulemaking over protests and Congressional opprobrium, courts may find many of these proposals likely exceed the Office's Congressional mandate.[32]
Proposed Standing Bars
The Office proposes that the Board "would"—not may—deny any petition for IPR or PGR filed by any entity that "is a for-profit entity;" "has not been sued on the challenged patent or has not been threatened with infringement of the patent in a manner sufficient to give rise to declaratory judgment standing;" "[i]s not otherwise an entity that is practicing, or could be alleged to practice, in the field of the challenged patent with a product or service on the market or with a product or service in which the party has invested to bring to market;" and "[d]oes not have a substantial relationship with an entity that falls outside the scope of elements (1)-(3).
This overcomplicated new inquiry would require the Office to 1) investigate and confirm entity status, 2) investigate and confirm declaratory judgment standing, 3) investigate and determine hypothetical market status, competition, product or service offerings, and potential investments; and 4) investigate and confirm there is no 'substantial relationship' between the filer and any entity meeting 1-3, another new test found elsewhere in the proposal. The language makes clear it would not be optional for the Board—i.e., it would rob them of the very discretion it claims it embodies.
The language is facially tortured. Double negatives aside, it suggests that wide swaths of the for-profit marketplace could run afoul of the language. Those entities could easily include: generic pharmaceutical companies without current practice or investments in a field; venture-funded start-ups that as yet don't practice or invest in a field; for-profit interest or industry groups like the Texas Association of Realtors or do-gooder organizations working to lower the cost of prescription drug prices;[33] future defendants not practicing in the same field as the challenged patent (whatever that is); and entities owned or controlled by venture capital or litigation funders (i.e., entities quite obviously not practicing in the field). Ironically, membership organizations found to have a substantial relationship with members, would, it appears, not be barred—despite that it appears that it was intended to reach them. The one thing it isn't is easy to implement.
The Office also proposes rewriting and expanding restrictions on filing after filings, ex parte reexams, a District Court judgment, and the like—all things Congress considered and embodied or excluded in their carefully negotiated statutory language. These concerns are captured in the law as interpreted by the Courts. It is not for the Office to usurp their authority.
These Bars Must Come from Congress
It is indisputable that Congress considered, and rejected, any standing requirements for AIA trials.[34] Over a decade of debate, it carefully considered and put in place other limitations on filing, detailing the interaction with district court, ITC, and ex parte reexamination, for instance. Adding new requirements Congress considered and rejected is unlawful.
Congress, for its part, clearly understands this. It has since then debated, and discarded, multiple bills over multiple Congresses (which have garnered little support) that sought to add a standing requirement, one-and-done provisions, or other Congressional rewriting of the requirements. The previous Senate cosponsors of those earlier bills are self-evidently aware that these must come from Congress.
So aware are they that now, in the wake of the 14,000 almost entirely negative comments, they have released PREVAIL Act. (Metadata in drafts of press releases indicate the two were clearly coordinated.) Unfortunately for advocates of weakening the AIA, and for any case to be made those changes make any policy sense, the public has spoken; and any argument that these changes are anything other than draconian rollbacks has been substantially weakened—the fourth iteration of the STRONGER Act appears dead on arrival, given the overwhelmingly negative response to the ANPRM.
But that is tomorrow's debate. What seems unanimous among the bar is that the Office lacks the authority to start ultra vires standing, timing, and filing bars, and endorses them, even tacitly, at its peril. Discretion is not license to legislate. To do so would invite years of obvious legal challenges. It is not up to the administrative state to end-run around Congress and put policies in place it plainly does not have public and Congressional support to otherwise enact.
[1] "Only within limits does mastery show itself; And only the law can give us freedom." (My translation.)
[2] Johann Wolfgang von Goethe, Das Sonnett, available at https://www.projekt-gutenberg.org/goethe/sonette/sonette.html (last visited May 31, 2023).
[3] Compare H.R. 1908, 110th Congress (Sept. 2007) (post grant-review provision with no standing requirement) with S. 3600, 110th Congress (2008) (post-grant review required petitioner to be "a person who has a substantial economic interest adverse to a patent"); and S. 515, 111th Congress (2009) (post-grant review provision with original language allowing anyone other than the patent owner to file).
[4] See, e.g., 157 Cong. Rec. 131 at S5357 (Sept. 7, 2011) (Klobuchar, D.) (noting that the AIA "provides a modernized, streamlined mechanism for third parties who want to challenge a recently issued, low-quality patents that should never have been issued in the first place. Eliminating these potential trivial patents will help the entire patent system by improving certainty"); at 154 Cong. Rec. 155 at S9987 (Sept. 27, 2008) (Kyl, R.) (discussing standing proposals); see generally Patrick Doody, Comprehensive Legislative History of the America Invents Act (compiled, edited, and abridged 2012) (including numerous discussions of third-party filers, their status and import in ex parte reexamination, and the desire of legislators to expand their access to filings).
[5] Compare H.R. 1908, 110th Congress (Sept. 2007) with S. 3600, 110th Congress (2008); and S. 515, 111th Congress (2009).
[6] See § 18(a)(1)(B), 125 Stat. 330 (noting that petitioners may only file for CBM review if sued or threatened with suit).
[7] 37 CFR § 42.101 ("A person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent . . .").
[8] Mizuho Orthopedic Sys, Inc. v. Allen Med. Sys, Inc., 610 F.Supp.3d 362, 364 (D. Mass. 2022).
[9] Apple Inc. v. Qualcomm Inc., 17 F.4th 1131, 1136 (Fed. Cir. 2021) ("IPR petitioners, for example, may lack constitutional standing.") (internal quotations omitted); Consumer Watchdog v. Wisconsin Alumni Rsch. Found., 753 F.3d 1258, 1261 (Fed. Cir. 2014) (interpreting similar language of inter partes reexamination statute)
[10] Cuozzo Speed Techs., LLC v. Lee, 579 U.S. 261, 279 (2016) ("Parties that initiate the proceeding need not have a concrete stake in the outcome; indeed, they may lack constitutional standing."). See also id. at "any third party can ask the agency to initiate inter partes review of a patent claim" and that "[p]arties that initiate the proceeding need not have a concrete stake in the outcome; indeed, they may lack constitutional standing." Id. at 268, 279; see also Return Mail, Inc. v. Postal Service, 587 U. S. ____, 139 S.Ct. 1853, 1860 (2019) ("the 'inter partes review' provision permits "a person" other than the patent owner to petition for the review and cancellation of a patent.") (citing § 311). Indeed, the Supreme Court has explained the soundness of such policy, stating that the "public's . . . paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope" favors the "authoritative testing of patent validity" and the "removal of restrictions on those who would challenge . . . patents." Blonder-Tongue Labs., Inc. v. Univ. of Illinois Found., 402 U.S. 313, 344-45 (1971) (internal quotations omitted).
[11] 35 U.S. Code § 2; see also 35 U.S.C. § 316(a).
[12] See, e.g., Pub. L. 82-593 (1952); Pub. L. 93-596 (1975); Pub. L. 106–113, div. B, § 1000(a)(9) [title IV, § 4712] (1999); Pub. L. 106–400, § 2 (2000); Pub. L. 107–273, div. C, title III, § 13206(a)(1) (2002). Per usage, Congress creates federal agencies only through legislative acts known as "organic" or "enabling" statutes, which tightly circumscribe when and how the agency may issue rulemaking, and over what. See United States v. Grimaud, 220 U.S. 506,517 (1910) (noting that Congress must specifically delegate rulemaking authority to agencies); Richard J. Pierce, Jr. et al, Administrative Law and Process 35,220 (1985) (noting that enabling statutes, also referred to as "organic" statutes, are how Congress conveys powers to agencies).
[13] 35 U.S.C. § 314(a).
[14] See 35 U.S.C. § 315(c) ("the Director, in his or her discretion, may join as a party to [a previously instituted] inter partes review any person who properly files a petition under section 311 that the Director . . . determines warrants the institution of an inter partes review . . . ."). It is worth noting that, even under this circumscribed grant of discretion, Senator Kyl made the following comments during the AIA debates, which suggest Congress and the PTO contemplated additional parties could join existing proceedings as a matter of right:
The Office anticipates that joinder will be allowed as of right—if an inter partes review is instituted on the basis of a petition, for example, a party that files an identical petition will be joined to that proceeding, and thus allowed to file its own briefs and make its own arguments. If a party seeking joinder also presents additional challenges to validity that satisfy the threshold for instituting a proceeding, the Office will either join that party and its new arguments to the existing proceeding, or institute a second proceeding for the patent.
157 Cong. Rec. S.1360, S1376 (March 8, 2011) (statement of Sen. Kyl).
[15] See, e.g., 35 U.S.C. § 325(d).
[16] 35 U.S.C. § 315(b) (stating that an IPR "may not be instituted" after the 1-year statutory bar).
[17] 157 Cong. Rec. S1376-77 (daily ed. Mar. 8, 2011) ("[A] transition from current inter partes reexamination to new inter partes review . . . allow[s] the Director to place a limit on the number of post-grant and inter partes reviews that will be instituted during the first four years that the proceedings are in effect . . . to protect the Office from being overwhelmed").
[18] See Oil States Energy Servs., LLC v. Greene's Energy Grp., LLC, 138 S. Ct. 1365, 1371 (2018) ("The decision whether to institute inter partes review is committed to the Director's discretion."); but see Saurabh Vishnubhakat, Disguised Patent Policymaking, 76 Wash. & Lee L. Rev. (2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3242146 (cautioning that "[USPTO] power has grown immensely in this decade" and arguing "the agency is wielding its power in predictably troubling ways."").
[19] 85 Fed. Reg. at 66503 (Oct. 20, 2020) (quoting Cuozzo Speed Techs., 579 U.S. at 273).
[20] I, too, am guilty of this: I have argued that the one place their discretion is at its zenith is in avoiding regulatory conflict with existing administrative/legislative schemes to litigate patents and resolve disputes, namely, the longstanding Drug Price Competition and Patent Term Restoration (Hatch-Waxman) Act of 1984. Carlos Garcia and Jonathan Stroud, Ships in the Night: Resolving Administrative Conflict Between FDA- and Patent-Related Legislation, 68 Am. U. L. Rev. 1111 (2019) (arguing the Office should deny, at a minimum, inter partes review challenges that conflict with the statutorily imposed, FDA-approval-related litigation framework created by the Hatch–Waxman Act).
[21] SAS Inst., Inc. v. Iancu, 584 US __, 138 S. Ct. 1348, 1358 (2018) (holding "policy considerations cannot create an ambiguity when the words on the page are clear").
[22] See, e.g., Apple v. Fintiv, IPR2020-00019, Paper 11 (Mar. 20, 2019). Note that the district court case on which the Fintiv denial there was based, first filed in 2018, has still, four years later, yet to happen, after trial delays produced in large part by Fintiv itself, who, inter alia, filed an emergency motion prior to a scheduled trial last June that was granted, delaying trial still further. See generally Ryan Davis, Fintiv's Emergency Motion Delays Apple Patent Trial in WDTX, Law360 (June 7, 2022), available at https://www.law360.com/articles/1500531/fintiv-s-emergency-motion-delays-apple-patent-trial-in-wdtx.
[23] The Office receives around 1300 IPR petitions on average each year, down substantially since the advent of the NHK/Fintiv era, with far fewer instituted, going to trial, or not settling. See Patent Trial and Appeal Board Parallel Litigation Study (June 21, 2022) (showing that 50.6% raised the NHK/Fintiv factors); Discretion Dominant: 45% of all 2021 Institutions Analyzed, UNIFIED PATENTS (Mar. 21, 2022), https://www.unifiedpatents.com/insights/discretion-dominant-45-of-all-2021-institutions-analyzed-fintiv]. ("On average, the Board analyzed Fintiv for more than 8 pages in institutions (and more than 11 in denial), representing on average more than 50% of the Board's workload for denials").
[24] See 35 U.S.C. 315(b) (prescribing a one-year window in which to file for current defendants).
[25] In this criticism, "[m]y purpose was simply to diminish that mass of contradictions and abuses which eventually turn legal procedure into a wilderness where decent people hardly dare to venture, and where bandits abound." Marguerite Yourcenar, Memoirs of Hadrian, at 226 (1974). To put it pithily, let's keep it simple.
[26] Dept. of Commerce Patent and Trademark Office, Department of Commerce, Changes under Consideration to Discretionary Institution Practices, Petition Wordcount Limits, and Settlement Practices for America Invents Act Trial Proceedings Before the Patent Trial and Appeal Board, 37 CFR Part 42 (April 21, 2023) [Docket No. PTO-P-2020-0022, RIN 0651-AD47]. This form of stepwise regulation is not unprecedented outside of the patent space; some agencies have adopted this nomenclature in the past, and I have heard it described by representatives of the office as, practically, more serious than a request for comments, which poses open questions, and less final than a Notice of Proposed Rulemaking (NPRM), which is largely the end of the road, as it proposes regulations that almost certainly would issue into the Code of Federal Regulations, if not first withdrawn. More than a question, less than a rule.
[27] U.S. Congress. The House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, "Oversight of the U.S. Patent and Trademark Office." (4/27/23) Text from: Federal Document Clearing House Congressional Testimony, available on ProQuest® Congressional; Accessed 05/31/23, also available at https://judiciary.house.gov/committee-activity/hearings/oversight-us-patent-and-trademark-office (statement of Dir. Vidal confirming that "there is no standing requirement right now for people to engage in the PTAB practice. In the ANPRM, we have made some proposals based on feedback we heard from stakeholders.") (emphases added). Note that even one member of the legislature who voiced support for stricter standing requirements suggested that they "would prefer that the legislative branch handle that" rather than the USPTO "through the rulemaking process." Id. (statement of Rep. Moran). It is worth noting that the ANPRM does not include proposals from huge swaths of stakeholders—many of the comments the Office solicited in 2020 requested repeal of the Fintiv rule, suggested it was unlawful, and noted pending court challenges to the Office's authority; nowhere does ANPRM contemplate that well-supported contingency.
[28] In less than a month during the pre-Congressional recess dead period, the Office has already received upwards of 7,000 comments, a record (as far as I am aware) for any patent-related issue ever before the office. Former Senators, Congressmen, and USPTO Directors have all expressed concerns with the proposals.
[29] The irony of this particular proposal—of shortening a Congressionally prescribed window for review and presenting it with magnanimity, should not be lost on the reader. It seems to tacitly acknowledge that no limits were intended, that limits were then unfairly and unilaterally imposed, and that now the office, in a tacit show of guilt, is willing to return some piece of what it has administratively taken.
[30] Emphasis mine.
[31] SAS Inst., Inc. v. Iancu, 584 US __, 138 S. Ct. 1348, 1358 (2018). The current Court is keen to prevent such administrative policymaking via regulatory fiat.
[32] The ANPRM, for instance, includes an equally arbitrary suggestion of a six-month grace period for Fintiv-type denials, despite the extensive debate that went into the one-year grace period and time bar. It is exactly the arbitrary trial date and average time-to-trial calculations that have so vexed the bar, and led to facial challenges of even the existing rule.
[33] Texas Ass'n of Realtors v. POI Search Sols. LLC, IPR2016-00615 (filed Feb. 11, 2016)
[34] Compare H.R. 1908, 110th Congress (Sept. 2007) (post grant-review provision with no standing requirement) with S. 3600, 110th Congress (2008) (post-grant review required petitioner to be "a person who has a substantial economic interest adverse to a patent"); and S. 515, 111th Congress (2009) (post-grant review provision with original language allowing anyone other than the patent owner to file) see also Apple Inc., 17 F.4th at 1136 ("IPR petitioners, for example, may lack constitutional standing.") (internal quotations omitted); Cuozzo Speed Techs., 579 U.S. at 279 ("Parties that initiate the proceeding need not have a concrete stake in the outcome; indeed, they may lack constitutional standing.")
* Mr. Stroud is General Counsel of Unified Patents.
