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PublishedMarch 23, 2023

The Fintiv Rule Heads Back to District Court

A ruling last week by the U.S. Court of Appeals for the Federal Circuit in Apple v. Vidal throws the future of the Patent and Trademark Office’s (PTO) controversial NHK-Fintiv rule into even greater uncertainty. The Federal Circuit affirmed in part and reversed in part the district court’s 2021 dismissal of Apple’s lawsuit challenging Fintiv, reopening the door for the legal challenge to proceed.

Apple et al. originally challenged Fintiv on three grounds: that in enacting Fintiv the PTO Director acted contrary to the patent statute, that Fintiv is arbitrary and capricious, and that Fintiv instructions were issued without compliance to notice-and-comment rulemaking requirements. While the Federal Circuit decision affirmed “the unreviewability dismissal of plaintiffs’ challenges to the instructions as being contrary to statute and arbitrary and capricious,” finding that there was no standing for the first two challenges, the court reversed “the unreviewability dismissal of plaintiffs’ challenge to the instructions as having been improperly issued because they had to be, but were not, promulgated through notice-and-comment rulemaking.”

The case will now head back to the district court in parallel with recent Fintiv developments on the agency side that show the issue is far from settled.

In a June 2022 memorandum, Director Vidal said the Patent Trial and Appeal Board (PTAB) would no longer rely on Fintiv factors to discretionarily deny institution of inter partes review based on parallel district court litigation where a petition for review shows compelling evidence of unpatentability. Then, more recently, Vidal further clarified the PTO’s position in a late February 2023 precedential decision, saying it was not her intent for a compelling merits determination to be used as a substitute for Fintiv analysis and that certain Fintiv factors must be considered before a decision can be reached on compelling merits. It is not clear what impact this new clarification will have on discretionary denial rates moving forward, but it shows a continued focus on Fintiv’s application.

Meanwhile, in a development that is directly relevant to the questions at the heart of the Apple case, on March 9 the PTO submitted a rulemaking proposal to the Office of Information and Regulatory Affairs (OIRA). The contents of that proposal are not public at this point, but it likely means that a rulemaking process related to Fintiv will be proceeding alongside Apple’s legal challenge.

The Fintiv rule has had massive economic consequences and yet was implemented unilaterally, without proper notice and comment rulemaking. It also constitutes a rule that was required by the Congressional Review Act to be provided to Congress, but never was.  Hopefully, Apple v. Vidal being remanded to the District Court for the Northern District of California, and the ultimate ruling in this case, will make it clear that the PTO must go through the proper channels when implementing such significant policy changes. At minimum, the continuation of Apple v. Vidal and ongoing developments at the PTO mean that the debate over Fintiv will persist for the foreseeable future.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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