PTAB Reverses Course in Code200 IPR Under Director’s ‘Compelling Evidence’ Memo

Last week, the U.S. Patent and Trademark Office’s (USPTO’s) Patent Trial and Appeal Board (PTAB) decided to institute inter partes review (IPR) in Code200, UAB v. Bright Data, Ltd., IPR2022-00861, following a sua sponte Director Review decision ordering the Board to reconsider its original ruling denying institution.

USPTO Director Kathi Vidal issued a precedential sua sponte Director Review Decision in the case in August, clarifying the application of Gen. Plastic Indus. Co. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper 19 (PTAB Sept. 6, 2017) when denying decisions to institute IPRs.

In its denial of the IPR on July 25, 2022, the PTAB explained that the General Plastic factors weighed in favor of denial, in part due to the petitioner’s failure to offer a stipulation agreeing not to raise the grounds asserted in the IPRs in related district court litigation, as per Sand Revolution II IPR2019-01393.

In her Director Review decision, Vidal “respectfully disagree[d]” with the Board’s analysis, explaining that the PTAB’s reasoning in its recent decision in Intel Corp. v. VLSI Tech. LLC, IPR2022-00366, Paper 14 (June 8, 2022), 9–10 should govern instead:

“As the Board recently held, ‘allowing [a petitioner] the opportunity to pursue a decision on the merits’ in a second-filed petition, when the first-filed petition was not evaluated on the merits, ‘best balances the desires to improve patent quality and patent-system efficiency against the potential for abuse of the review process by repeated attacks on patents.’

General Plastic’s first factor must be read in conjunction with factors 2 and 3, said Vidal. If a first-filed petition is discretionarily denied, factors 1-3 of General Plastic should only weigh in favor of denial if there are “road-mapping” concerns under factor 3 or other concerns under factor 2, she continued. “Road-mapping” suggests “multiple, staggered petitions challenging the same patent and same claims,” which Vidal said there was no evidence of here.

The PTAB also found that General Plastic factors 2, 4 and 5 had “limited relevance” in the case, but that factor 7,  “the requirement under 35 U.S.C. § 316(a)(11) to issue a final determination not later than 1 year after the date on which the Director notices institution of review,” weighed strongly in favor of denial because the petitioner’s request to be joined to IPR2021-01492 and IPR2021-01493 upon institution would have a “negative impact on the schedule in the 1492 IPR that would affect whether the one year deadline could be met.” Vidal disagreed, noting that the Board has acknowledged “the one year statutory time period may be adjusted for a joined case under 35 U.S.C. § 316(a)(11).”

On remand, the PTAB reconsidered the petition under Vidal’s June 21, 2022, Director’s Memorandum, which says “the PTAB will not rely on the Fintiv factors to discretionarily deny institution in view of parallel district court litigation where a petition presents compelling evidence of unpatentability.” The Board also reversed course on its decision regarding joinder, explaining that joining the petition to the 1492 and 1493 IPRs is the only option for considering the merits of the case. The PTAB wrote:

“As discussed above, we determine that the merits of this action present a compelling unpatentability challenge. Absent joinder, a one-year bar would apply to Petitioner, and, again, the merits presented in this challenge would not be reached by the Board in a final written decision. Under these specific circumstances, we determine joinder is appropriate in the interests of justice.”

The petition relates to Bright Data’s U.S. Patent No. 10,257,319 for a “System Providing Faster and More Efficient Data Communication.”

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Author: zager