Apple Inc. v. Iancu

Background

The plaintiffs challenged the Patent and Trademark Office’s adoption of the NHK-Fintiv standard. The standard arose from two Patent Trial and Appeal Board decisions, NHK and Fintiv, that addressed whether the Board should discretionarily deny a petition to begin an inter partes review when parallel district-court patent litigation was at an advanced stage. The Director designated those decisions as precedential, making them binding Board authority in later matters involving similar facts or issues.

The Fintiv decision identified six factors related to parallel litigation, including whether the district court case had been stayed, the proximity of the trial date, the investment in the district-court proceeding, the overlap between issues, whether the parties were the same, and other circumstances affecting the Board’s discretion. Fintiv also recognized that other circumstances could affect institution decisions. A June 2022 memorandum further clarified circumstances in which the Board would not deny institution under Fintiv, including when a petition presented compelling evidence of unpatentability.

The plaintiffs brought three Administrative Procedure Act claims. The Court previously dismissed all three claims for lack of jurisdiction. The Federal Circuit affirmed as to two claims but reversed and remanded the claim asserting that the NHK-Fintiv standard should have been adopted through notice-and-comment rulemaking. The cross-motions for summary judgment concerned that sole remaining claim.

Legal standard

Under the Administrative Procedure Act, an agency generally must provide notice and an opportunity for public comment when adopting a substantive, or legislative, rule. The Act excludes general statements of policy from that requirement. A substantive rule changes existing law or policy or affects individual rights and obligations. A general statement of policy tells the public how an agency proposes to use discretionary authority, while leaving officials free to consider the facts of individual cases.

The court explained that summary judgment in this type of Administrative Procedure Act case is a way to decide, as a matter of law, whether the agency action complied with the statute. The court acts much like an appellate court, and the case is treated as a legal question rather than a dispute over material facts.

Court’s analysis

The court first found that the challenged agency action was the Director’s designation of the NHK and Fintiv decisions as precedential, not the Standard Operating Procedure governing the designation process itself. The court then considered whether the NHK-Fintiv standard affected individual rights and obligations, operated prospectively, preserved the Board’s discretion, and had binding or determinative effects.

The court held that the standard does not alter individual rights or obligations. Congress gave the Director discretion over whether to institute an inter partes review; there is no circumstance in which the Director is required to authorize institution. The standard therefore did not create or impose rights or obligations merely by reducing the likelihood that a petition would be instituted. The court also rejected the argument that the standard conflicted with the statutory one-year period for filing an inter partes review petition, noting that the Federal Circuit had already affirmed dismissal of that claim.

The parties agreed that the precedential designations operated prospectively. The court therefore found that the standard satisfied the prospective-operation requirement for a general statement of policy.

The court next held that the standard preserved the Board’s discretion. Although the Board must consider the identified factors when presented with an argument based on parallel district-court litigation, the factors are nonexclusive and must be weighed as part of a balanced assessment of all relevant circumstances. The standard also allows the Board to consider other circumstances, including the merits of the petition and circumstances unrelated to parallel proceedings.

Finally, the court found that the standard was not outcome-determinative. The Fintiv factors may weigh for or against institution, but they do not compel a particular result. The Board could find that factors concerning parallel litigation favored denial yet conclude that the petition’s merits favored institution. The court rejected the plaintiffs’ reliance on increased denial rates because the language of Fintiv and later guidance required a holistic, case-specific analysis.

Holding and disposition

The court held that the NHK-Fintiv standard is a general statement of policy, not a substantive or legislative rule. The Director therefore was not required to use notice-and-comment rulemaking before designating the NHK and Fintiv decisions as precedential, and the absence of that rulemaking did not make the standard unlawful under the Administrative Procedure Act.

The court DENIED the plaintiffs’ motion for summary judgment and GRANTED the Director’s motion for summary judgment. The order stated that it disposed of the plaintiffs’ sole remaining claim and that the court would enter judgment against the plaintiffs and in favor of the Director.