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District Court Finding of Invalidity Does Not Excuse Applying Fintiv Factors For Discretionary Denial

On Behalf of | Jun 22, 2023 | Firm News |

On May 2, 2023, in Volvo Penta of the America’s, LLC v. Brunswick Corp., Case No. 2022-1366 et al., Paper 15 (PTAB May 2, 2023), Director Vidal sua sponte vacated a PTAB decision denying IPR institution due to a district court finding of invalidity.  Director Vidal held that the district court’s invalidity finding was not a final adjudication and therefore did not excuse applying the Fintiv test. Id. at 6. Accordingly, Director Vidal determined that the PTAB had authority to institute review and remanded the case for further consideration under FintivId. at 4.

The PTAB had denied institution of five IPR petitions because in a co-pending district court case, Brunswick Corp. v. Volvo Penta of the Americas, LLC, C.A. No. 1:22-cv-00108, Dkt. No. 45 (E.D. Va. Nov. 10, 2022), Judge T.S. Ellis III had held that claim 1 of each of the challenged patents was ineligible under 35 U.S.C. § 101. Because the appeal of the district court decision was still pending, Director Vidal held that the PTAB conclusion that the claims of the patents had been finally adjudicated was error. Volvo Penta, Paper 15 at 6. Consequently, Director Vidal remanded the matters for evaluation of Fintiv factors 1–5.  Id. at 8. She further ordered that if the Fintiv factors 1–5 favor discretionarily denying institution, then the PTAB should further consider whether the merits of the IPR petitions are compelling, consistent with her Guidance Memo of June 21, 2022. Id. at 4.

Director Vidal noted that the PTAB’s decision denying institution may have borrowed from collateral estoppel principles.  Volvo Penta, Paper 12 at7–8 (citing Pharmacia & Upjohn Co. v. Mylan Pharma., Inc., 170 F.3d 1373, 1381 (Fed. Cir. 1999) (quoting SSIH Equip. S.A. v. U.S. Int’l Trade Comm’n, 718 F.2d 365, 370 (Fed. Cir. 1983) (“[T]he pendency of an appeal has no effect on the finality or binding effect of a trial court’s holding.”))).  The equitable doctrine of collateral estoppel, also known as issue preclusion, can shield a party from having to litigate issues that have already been fully and fairly tried in a previous action and decided adversely to that party.  Pharmacia, 170 F.3d at 1379.  Director Vidal, however, noted that collateral estoppel, and the principles discussed by the cited cases regarding its application to private parties in district court litigation, does not address an “appropriate interpretation of § 311(b).” Volvo Penta, Paper 15 at 5. Additionally, she noted that the PTAB did not determine that Volvo Penta should be collaterally estopped. Id. at 5-6.

Instead, Director Vidal noted that the PTAB interpreted Fintiv to be “limited to [the] exercise of discretion in view of an ongoing parallel district court litigation where a final judgment has not yet been entered.” Volvo Penta, Paper 12 at 12 (citing Guidance Memo 1–2). Because the PTAB did not consider the district court litigation to be ongoing during the pendency of the appeal, it did not apply Fintiv. Id. at 11–12. Accordingly, Director Vidal vacated the Board’s § 314(a) analysis and remanded for the Board to determine whether discretionary denial was appropriate under Fintiv. Volvo Penta, Paper 15 at 8.

In addition, Director Vidal noted that AviaGames, Inc. v. Skillz Platform, Inc., IPR2022-00530, Paper 14 (PTAB Mar. 2, 2023) “recognizes that a Fintiv analysis should be conducted in scenarios where a district court has rendered a non-final invalidity determination that some or all of the claims challenged in an IPR petition are invalid, even on grounds that cannot be raised in that IPR. See AviaGames, Paper 14 at 3 (citing Fintiv, Paper 11 at 12–13).” Volvo Penta, Paper 15 at 8. Director Vidal pointed out that “should trials be instituted and the district court’s invalidity judgment of some of the claims be upheld on appeal, then the PTAB may consider whether to continue or terminate the parallel IPR proceedings on the remaining claims based on Guidance [Memo]and precedent existing at that time.” Id.

The Director’s decision seems counterintuitive as Fintiv Factor 2—the proximity of the district court’s trial date to the Board’s statutory deadline for a final written decision—embodies the principle that the Board should not invest resources in a proceeding where the challenged patent will be adjudicated in a district court before it will be adjudicated by the Board. Thus, while the Director holds that the Board has authority to institute review of claims that have not been finally adjudicated on appeal, it would seem that Factor 2 should weigh strongly in favor of discretionary denial under §314(a) in a situation where the district court has already adjudicated the challenged claims to be invalid. As such, the Board likely reached a proper outcome albeit for the wrong reasons. The Director’s decision, however, is a further signal that Fintiv Factor 2 carries less weight under the Director’s Guidance Memo and the decision may lead to even fewer discretionary denials.