USPTO Preliminary Proposals on Discretionary Denial Include Curbing ‘For-Profit, Non-Competitive Entities’ Use of IPR

The U.S. Patent and Trademark Office (USPTO) today published an Advance Notice of Proposed Rulemaking (ANPRM) indicating it is considering changes to America Invents Act (AIA) proceedings before the Patent Trial and Appeal Board (PTAB). Perhaps most notably, one of the proposals it is asking for input on has to do with creating rules that would authorize discretionary denial of inter partes review (IPR) proceedings “to ensure that certain for-profit, non-competitive entities do not use the IPR and PGR processes in ways that do not advance the mission and vision of the USPTO to promote innovation or the intent behind the AIA to improve patent quality and limit unnecessary and counterproductive litigation costs.”

The reference to “certain for-profit, non-competitive entities” seemingly implicates entities like Unified Patents, RPX and other defensive aggregators. While USPTO Director Kathi Vidal made herself available to the press to answer questions on the ANPRM, she told IPWatchdog that neither she nor her staff will be commenting on the substance of the proposals throughout the rulemaking process, and so she would not comment on whether this description does, in fact, refer to such entities. Instead, she said the intent is to strike the right balance.

“On any of the proposals, it really gets back to the USPTO’s mission and intent behind the AIA,” Vidal said. “We’re not targeting any particular type of entity; we want the system to be balanced. The intent was not to favor any particular stakeholder, the intent was to listen to all of the stakeholders in terms of what it is that really mattered to them, and I believe that the proposals out there give us the ability to now shape rules that will be balanced and that will address the issues that have been raised by all the stakeholders we’ve heard from.”

According to Vidal, the ANPRM was compiled based on a Request for Comments (RFC) published in 2020 on discretion to institute trials before the PTAB. The RFC resulted in 822 comments. The USPTO published its views on the comments in 2021.

USPTO documents sent to IPWatchdog in advance outline five key areas the proposals are meant to address:

“Key Area 1: Better ensure our practices align with the USPTO’s mission to promote and protect innovation and investment, and with the congressional intent behind the AIA to provide a less expensive alternative to district court litigation to resolve certain patentability issues while also protecting against patentee harassment

Key Area 2: Enhance and build on existing precedent and guidance regarding exercise of Director’s discretion to determine whether to institute an AIA proceeding

Key Area 3: Provide threshold definitions that apply to one or more categories of petitions subject to discretionary denials, setting forth criteria used to determine “substantial relationship,” “substantial overlap,” and “compelling merits”

Key Area 4: Provide procedural enhancements

Key Area 5: Clarify filing requirements for Settlement Agreements”

As part of Area 1, some of the specific proposals involve restricting the entities that can participate in the IPR process, as already noted above; limiting the impact of AIA proceedings on “under-resourced patent owners that are commercializing their inventions”; imposing limitations on IPR petitions challenging patent claims previously upheld in district court or at the USPTO; and “broaden[ing] USPTO consideration of relationships between petitioners and other entities.”

A further explanation of Key Area 5 indicates that the proposal would require parties to file “all settlement papers when the dismissal of an AIA proceeding is sought, whether settlement occurs before or after a decision on institution.”

This could be a response to the attempts by OpenSky to settle behind the scenes using what Vidal ultimately determined to be sanctionable tactics.

Another potentially controversial proposal comes under Key Area 4, where a backgrounder document sent by the USPTO indicates the Office is considering allowing petitioners to pay a higher fee for higher petition word count limits. This could potentially provide an advantage to well-funded serial petitioners who will no doubt pay as much as needed to get a petition granted and a patent invalidated.

However, Vidal told IPWatchdog this Advanced Notice period will be about narrowing down the ultimate proposals for the NPRM, which will be published after considering comments received between today and June 20, 2023. Thus, not everything in the ANPRM will necessarily make it to the NPRM. Vidal explained further:

“The comment period here is going to be used to get feedback on broader concepts. To the extent comments are specific, we would appreciate those as well. Some of these proposals are things we’re proposing, some came from the public that we want to hear responses on– we’re not necessarily going to move forward on every single thing or in exactly the way it’s articulated. So now is the chance for the public to comment at a high level, conceptually, and the next round of comments are going to be on the rules as drafted.”

Vidal also said that the USPTO does not have as much flexibility to extend the comment period this time, and the Office doesn’t anticipate doing so, “absent extenuating circumstances.”

If It’s Working, We Won’t Fix It

Asked what’s next on her “year of action” agenda, Vidal said the Office will soon be moving forward on the RFC on expanding the patent bar and the concept of a design patent bar, and being responsive to the Unleashing American Innovators Act, which was signed into law last year. But Vidal also said that not all of the RFCs issued in the last year will necessarily result in change:

“We’re looking to take action on what we asked the stakeholders about. Even if that action is making a decision that things are working well the way they are. So, I don’t know where we’re going to land the plane when it comes to 101 guidance [for instance], but we’re taking all of that into consideration and we’re moving forward—but moving forward doesn’t necessarily mean change. It could mean change, it may not—it’s the same with the Robust and Reliable Patent RFC. There was a lot in there; now is the time to dig through and synthesize all that information and decide where we can make surgical changes, and where we think the system is working well the way it is now.”

Timing and Process

All of this seems like a lot to get done on Vidal’s timeline—she has about 18 months before a new administration may be voted in and she is potentially out of office. But she said the Office has no estimated timeline for the Final Rules package, which will come after the 60-day comment period for the NPRM, which won’t be published until after the Office has considered the comments for this initial ANPRM period, which ends June 30. “There’s no timeline,” Vidal said.  “We want to move as swiftly as possible while being thoughtful and deliberate.”

From this point on, those who wish to submit feedback on what proposals should make it to the NPRM, or who want to submit comments on the specific proposed rules during the NPRM period, must do so through the Federal eRulemaking Portal at www.regulations.gov so there is “a very clear public record as to what we relied upon when we move from this stage to the NPRM and shaping those rules,” Vidal said.

The year of listening is over, and the Office will not be debating substance from here on out. Vidal explained:

“To ensure that all stakeholders have equal access and for the USPTO not to be inadvertently shaping the outcome, we are not addressing the substance or reasoning with the press or individuals in stakeholder meetings or otherwise. While we’re in the rulemaking process, the notice in the Federal Register needs to speak for itself. Likewise, we want this process to be as transparent as possible, so all feedback must be submitted via the portal by June 30 – neither me nor my staff is going to be accepting feedback in any other way.”

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Author: aquarius1983men