In a recent post grant review, the Patent Trial and Appeal Board considered the need to take discovery related to a petitioner's invalidity challenges in deciding whether to exercise its discretion to deny institution.

Patent owner NCS Multistage Inc. filed patent infringement lawsuits against several companies in the Western District of Texas alleging infringement of U.S. Patent 10,465,445 (the "'445 patent"). These included suits against Nine Energy Service, Inc. (the "Nine litigation") and TCO AS (the "TCO litigation"). On August 8, 2020, TCO filed a petition for post grant review of the '445 patent. At institution, the board considered patent owner's argument advocating for discretionary denial under 35 U.S.C. section 324(a).

As an initial matter, the board addressed whether the factors related to the Director's discretion to deny institution identified in its precedential decision Apple Inc. v. Fintiv, Inc. applied to the present post grant review (PGR). The board found that although Fintiv involved the Director's discretion pursuant to Section 314(a), which concerns inter partes review (IPR), and did not specifically extend its application to Section 324(a), which is the relevant statute that applies to PGR, the pertinent statutory language providing the Director with discretion to deny institution is the same in both sections. Moreover, the policy considerations associated with discretion to deny institution—including inefficiency, duplication of effort and the risk of inconsistent results—apply equally to PGRs. Therefore, the board applied the Fintiv factors to the present PGR.

The board first addressed Fintiv factors 1-5 and concluded that several of those factors favored denial of institution in view of the Nine and TCO litigations. Specifically, the board found that the proximity of the court's trial date to the board's Final Written Decision under factor 2 weighed in favor of denial because the Nine litigation was scheduled to commence four months before the Final Written Decision was due. The board also held under factor 3 that there had been considerable investment in the Nine litigation, with the parties having exchanged infringement and invalidity contentions and substantial document production and the court having held a Markman hearing. Moreover, under factor 4 the board concluded that although the PGR challenged two claims—claims 26 and 56—not involved in the Nine and TCO litigations, the PGR was directed to substantially the same claims, as well as the same grounds, as the parallel proceedings, especially considering patent owner's stipulation that it would not assert claims 26 and 56 against petitioner. The board found that only factor 5, which evaluates whether the petitioner and defendant in the parallel proceeding are the same party, weighed against denial because petitioner was not a party to the Nine litigation.

The board then turned to Fintiv factor 6, which allows it to assess "other circumstances" that impact its exercise of discretion, including the merits. Under this factor, the board considered petitioner's allegation of invalidating prior sales and use of its product, called the TDP-PO plug, by a third-party foreign entity and whether any necessary discovery on that issue might impact the proceeding. The patent owner contended that these allegations involved "highly fact-intensive issues" and argued that the "critical discovery that will need to be conducted to determine if the [alleged sales and public use] qualify as invalidating prior art" weighed in favor of denial. Petitioner countered that no "hypothetical discovery" is needed to decide the prior sales/use issue and that patent owner will have an opportunity to challenge petitioner's evidence and depose its declarant. The board ultimately agreed with patent owner, and in doing so explained that the district court is the better forum to flesh out these "unusual" issues involving third-party discovery.

The board also determined that an initial review of the merits suggested that petitioner's invalidity challenges were weak—weighing in favor of discretionary denial. Specifically, the board found that petitioner's indefiniteness and written description challenges, which questioned the interpretation of the claim term "the rupture disc is . . . configured to rupture when exposed to a rupturing force greater than the rupture burst pressure," were belied by the district court's entry of a construction for that term. The board also held that petitioner's obviousness challenges were flawed because they failed to map the prior art to a claim limitation and did not provide sufficient reasoning to combine the asserted references.

The board ultimately determined that, as a whole, the Fintiv factors suggested that inefficient duplication of efforts was likely and warranted denial of institution.

Practice Tip: When bringing an IPR or PGR, a petitioner should consider whether any of its invalidity challenges raise issues that could require excessive or unique types of discovery, including discovery from a third party or foreign entity. A petitioner should be aware that including such challenges makes the petition more susceptible to discretionary denial.

TCO AS v. NCS Multistage Inc., PGR2020-00077, Paper 16 (PTAB Feb. 18, 2021) (Cocks, Browne, Worth)

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