Big Tech Firms Continue Challenge to NHK-Fintiv Framework for Lack of Notice-and-Comment Rulemaking

On August 5, a series of Big Tech companies including Apple and Google filed an appellate brief at the U.S. Court of Appeals for the Federal Circuit (CAFC) continuing their challenge to the U.S. Patent and Trademark Office’s (USPTO) NHK–Fintiv rule for discretionary denials of inter partes review (IPR) proceedings at the Patent Trial and Appeal Board (PTAB). The brief argues that NHK–Fintiv, developed through PTAB precedential decision-making, is a substantive rule requiring notice-and-comment rulemaking because it affects private interests and is binding on administrative patent judges (APJs) at the PTAB.

This present appeal follows the second adverse ruling from the Northern District of California from the tech companies’ attempts to nullify the NHK–Fintiv rule. In March 2023, the Federal Circuit affirmed most of the district court’s first dismissal in the case, but found that at least Apple had Article III standing to challenge the USPTO’s lack of notice-and-comment rulemaking as required by the Administrative Procedures Act (APA) and codified at 5 U.S.C. § 553. However, on remand, the Northern California district court granted summary judgment to the USPTO, holding that the NHK–Fintiv rule is a general statement of policy exempt from Section 553’s rulemaking requirements.

NHK–Fintiv’s Binding Nature, Impact on Private Interests Requires Notice and Comment

The tech companies argue that NHK–Fintiv, which established six factors for PTAB APJs to consider for potentially denying IPR petitions based on parallel litigation in district court, features two key attributes shared with other agency rules that require notice-and-comment rulemaking. In depriving petitioners of an avenue to invalidate patent rights through IPR, the USPTO’s discretionary denial rules affect the private interests of infringement defendants, claims the brief. Further, the rule binds the PTAB’s discretion in ways that prevent the Board from instituting IPRs on petitions when the NHK–Fintiv factors point away from institution.

Both the appellate and district courts in this case have acknowledged that the USPTO’s NHK–Fintiv framework have increased denials of IPR petitions that would have otherwise been instituted, the tech companies note. Whereas the Northern California district court ruled that IPR is a discretionary form of relief, Apple and Google cited the Federal Circuit’s 2024 ruling in In re Chestek PLLC and several cases from the D.C. Circuit in which the appellate court recognized that rules affecting the standards by which an agency examines an application for a benefit is subject to notice-and-comment rulemaking if the rule is binding.

According to the tech company appellants, NHK–Fintiv is binding on the PTAB because APJs must consider the framework’s factors in any IPR petition that involves parallel litigation in U.S. district court on the same patent. Both the USPTO and the Federal Circuit have acknowledged that NHK–Fintiv ensures that PTAB institution decisions are made according to the policy preferences of the USPTO Director. Further, cases cited by the USPTO for support that NHK–Fintiv is a general statement of policy involved criteria from which agency decision-makers could deviate to initiate agency review or enforcement actions.

No Meaningful Latitude for APJs to Deviate from Discretionary Denial Factors

Apple and Google argue that the district court mischaracterized the Ninth Circuit’s 1987 holding in Mada-Luna v. Fitzpatrick to determine that the sixth factor of NHK–Fintiv, which requires the Board to consider other circumstances including a petition’s merits, is a catch-all provision allowing deviation from the other factors. The tech companies argue that this factor does not provide the same “great agency latitude and discretion” as the rule at issue in Mada-Luna, which gave immigration officials the ability to consider any individual facts appropriate to a deferred action determination. In practice, the sixth factor in NHK–Fintiv only provides the ability to consider the compelling merits of a petition, and only when the other five factors point toward discretionary denial.

Provisions of the America Invents Act (AIA) further reinforce that notice-and-comment rulemaking is required for the NHK–Fintiv framework to remain effective, the tech companies contend. Under 35 U.S.C. § 316(a), the USPTO Director is responsible for “prescribing regulations” for the institution of IPR proceedings, including sufficient grounds for institution and relationship to other proceedings. Apple and Google argue that Congress expected any rules impacting those regulations would undergo Section 553’s notice-and-comment procedures before being adopted.

Finally, the appellants argue that NHK–Fintiv’s flaws underscore the need for the USPTO to have followed Section 553’s notice-and-comment procedures. Provisions of the AIA recognize that IPRs may take place alongside parallel infringement litigation. Apple and Google also note that original co-sponsors of the AIA publicly expressed disappointment on NHK–Fintiv’s impacts to the one-year time limit for filing an IPR petition following infringement allegations filed in district court. IPR petitioners consulting agency rules without any awareness of the precedential decisions leading to the NHK–Fintiv framework would not know any other timing issues in parallel litigation would be dispositive on institution of an IPR petition, the tech companies contend.

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