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Fifth Circuit Denies Patent Owners’ Attempt To Formalize PTAB’s Discretionary Denials

On Behalf of | Oct 20, 2022 | Firm News |

In 2021, an organization of patent owners and various patent-holding companies sued the USPTO in the Eastern District of Texas.  The patent owners sought to force the USPTO Director to engage in notice-and-comment rulemaking regarding the standards for discretionary denials under 35 U.S.C. § 314(a).  Such rulemaking would formalize the six-factor test for discretionary denials based on parallel district court litigation under Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020) (designated precedential May 5, 2020).  The district court dismissed the case for lack of standing.  See US Inventor al. v. Hirshfeld, 549 F. Supp. 3d 549 (E.D. Tex. 2021).  The Fifth Circuit affirmed per curiamSee US Inventor Inc. et al.  v. Vidal, No. 21-40601, 2022 U.S. App. LEXIS 27454 (5th Cir. Sept. 30, 2022).  On appeal, the patent owners argued that they had both individual standing and organizational standing to bring the underlying suit.  The Fifth Circuit affirmed the lower court’s lack of standing holding that the type of concrete and particularized injury necessary to establish a “case” or “controversy” under Article III of the U.S. Constitution had not been shown.  Id.

The Fifth Circuit held that to have Article III individual standing, a plaintiff must demonstrate that he or she “‘(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.’ Gill v. Whitford, 138 S. Ct. 1916, 1929 (2018) (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016)).”  Id. at *7.  To show an injury in fact, a plaintiff must also establish that the injury is “‘(a) concrete and particularized” and “(b) actual or imminent, not conjectural or hypothetical.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (internal quotation marks and citations omitted).’”  Id.  Although a concrete injury may be imminent when derived from the failure of an agency to engage in notice-and-comment rulemaking, the “mere probability of a disfavored outcome does not suffice to create a legally cognizable injury, Ctr. for Biological Diversity v. EPA, 937 F.3d 533, 538–39 (5th Cir. 2019).”  Id.  Rather, the injury itself must be certainly impending, not speculative.  Id. 

The patent owners argued that the possible harm of future IPR proceedings that might not be discretionarily denied was sufficient to satisfy the “case” or “controversy” requirement.  The Fifth Circuit found that projections of a “speculative chain of possibilities” was not concrete and particularized and actual or imminent for standing.  Id. at *10-11.

In regard to “organizational standing,” the patent owners argued that diverting resources from a lobbying organization’s ongoing efforts to counteract the government’s allegedly unlawful actions was sufficient to establish organizational standing.  The Fifth Circuit, however, held that resource diversion, i.e., redirection of resources toward litigation and legal counseling, is insufficient, citing La. ACORN Fair Hous. v. LeBlanc, 211 F.3d 298, 305 (5th Cir. 2000).  Id. at *13.

The patent owners’ suit was the mirror image of a suit filed by a group of large technology companies under the Administrative Procedure Act challenging the PTAB’s discretion to deny inter partes review.  The Northern District of California dismissed the technology companies’ case for lack of subject-matter jurisdiction.  See Apple Inc. v. Iancu, No. 5:20-cv-06128-EJD, 2021 U.S. Dist. LEXIS 218143 (N.D. Cal. Nov. 10, 2021).  The case is now on appeal.  See Apple Inc. v. Vidal, No. 2022-1249 (Fed. Cir.).  Ultimately, however, it appears that the courts are unwilling to intervene in the battles that have erupted over the PTAB’s discretion to institute or not institute inter partes review under Fintiv.  Thus, any changes to the application of Fintiv will likely need to come from the USPTO itself.