March 6, 2020 – PTAB’s Precedential Opinion Panel Asked to Overrule Holding that the Advanced State of a Parallel District Court Proceeding Involving Similar Invalidity Issues Warrants Discretionary Denial of an IPR Under § 314(a)

Sand Revolution II, LLC is asking the PTAB to reconsider its decision denying institution of inter partes review of a patent that Continental Intermodal Group is asserting against Sand in a pending district court action and to set the rehearing before the Precedential Opinion Panel (“POP”).  The PTAB’s decision, from which one panel judge dissented, explains that the PTAB has discretion under 35 U.S.C. § 314(a) to deny institution under certain circumstances, even if it finds that a reasonable likelihood that Petitioner would prevail with respect to at least one of the challenged claims has been shown, and that such circumstances are present in the case before it. Sand Revolution II, LLC v. Continental Intermodal Group – Trucking LLC, IPR 2019-01393, Paper 12 at 2 (PTAB Feb. 5, 2020).  The PTAB majority then relied on NHK Spring Co. v. Intri-Plex Technologies, Inc., IPR 2018-00752, Paper 8 (PTAB Sept. 12, 2018) (precedential), which involved an issue of advanced-stage parallel district court litigation and the exercise of the PTAB’s discretion under each of § 325(d) and § 314(a) to deny institution. Id. at 15-19.  The PTAB’s denial of institution in NHK pursuant to § 314(a) was based on these facts: (1) district court litigation over the same patent at issue in the IPR and between the same parties was well underway and scheduled to close discovery and hold a jury trial during the IPR proceeding, before a final written decision would be due under the statute; (2) the same claim construction standard applied in the district court and IPR proceedings because the patent at issue expired; (3) the district court already construed the claims; and (4) the prior art and related arguments in the two proceedings were the same. Id. at 15.  The PTAB majority in Sand compared the facts regarding the stage of the district court action to NHK and found that, despite some differences (e.g., Continental’s patent was not expiring anytime soon), the facts before it “are similar enough to those in the precedential NHK decision that NHK governs the outcome of this case.” Id. at 17.  

Sand argues that the POP should reconsider and overrule NHK’s holding “that the advanced state of a parallel district court proceeding involving similar invalidity issues as an IPR petition warrants a discretionary denial under § 314(a) because institution under such circumstances would be an inefficient use of Board resources.” Sand Revolution II, IPR 2019-01393, Paper 15 at 1 (Mar. 6, 2020).  Sand contends that the NHK holding “is inconsistent with the IPR statutory scheme and congressional intent, leads to inconsistent decision-making, encourages forum-shopping for infringement lawsuits, and significantly curtails the availability of IPRs as an alternative forum for challenging patent validity.” Id.  Sand further argues that the panel majority misconstrued NHK and that, contrary to the majority’s alleged view, NHK did not hold that a parallel district court action can be the primary or sole reason to decline review, but, rather, held that a parallel district court action can, under certain circumstances, support a decision to deny institution if there is another independent basis supporting denial. Id. at 2, 4 (noting that in NHK the PTAB also found denial proper under § 325(d), which is an independent basis for denial).  Sand asserts that the panel majority did not provide any reason beyond the parallel district court action for denying institution and that the denial of institution cannot be sustained, even under NHK. Id.