The Patent Trial and Appeal Board (PTAB) recently addressed both the timing requirements and procedures for filing a Sotera stipulation before the Board in, BMW of North America LLC v. Northstar Systems LLC, IPR2023-01017 (P.T.A.B. June 9, 2023). In granting institution, the Board held that a petitioner’s Sotera stipulation should not be disregarded “because of its timing.” See id., Paper 12, at 10. In support of its conclusion, the Board noted that “Patent Owner has not brought to our attention any binding precedent that establishes a time limit by which a Sotera stipulation must be submitted before we enter our decision on institution, and we are not aware of any such precedent,” and that the patent owner had not identified any prejudice by the timing of the stipulation. Id.

Factual Background: BMW of North America LLC v. Northstar Systems LLC

BMW and Northstar were parties to multiple district court proceedings involving the contested patent. E.g., NorthStar Sys. LLC v. Bayerische Motoren Werke AG, No. 2:22-cv-00496-JRG (E.D. Tex.); BMW of N. Am., LLC v. NorthStar Sys. LLC, No. 6:23-cv-00456-ADA (W.D. Tex.). BMW’s initial inter partes review (IPR) filing did not include a stipulation asserting that the petitioner would forego any invalidity challenges in the parallel district court proceedings. In the Patent Owner’s Preliminary Response (POPR), Northstar argued that the petition should be discretionarily denied under 35 U.S.C. § 314(a) in view of the Fintiv factors. IPR2023-01017, Paper 7, at 20.

After the filing of the POPR, BMW emailed the Board requesting authorization to file a preliminary reply to the POPR to address the patent owner’s §314(a) “Fintiv” arguments, specifically noting that “the factual circumstances before the district court have changed since the Petition’s filing date.” The Board granted the request, following which BMW submitted its preliminary reply, accompanied by a Sotera stipulation asserting that if IPR is instituted, it would not pursue in the related district court proceedings “any ground that [petitioner] raised or reasonably could have raised” in the IPR. IPR2023-01017, Paper 8, at 1

In its subsequent preliminary sur-reply, Northstar asserted that the “belated” Sotera stipulation should not be given effect because it had “come at the eleventh hour.” Id., Paper 11, at 3.

The Board’s Institution Decision

In instituting the IPR and declining to exercise its discretion under § 314(a), the Board noted the policy set forth in the USPTO Director’s June 21, 2022, memorandum establishing that when a petitioner submits a Sotera stipulation, the Board will not discretionarily deny institution under §314(a). Id., Paper 12, at 9-10. In other words, under the mandatory Fintiv guidance promulgated by Director Vidal, a Sotera stipulation is dispositive as to discretionary denials.

Moreover, the Board did not find persuasive the patent owner’s argument that the petitioner “should not be credited with this stipulation as it has come at the eleventh hour.” The Board noted that:

Patent Owner has not brought to our attention any binding precedent that establishes a time limit by which a Sotera stipulation must be submitted before we enter our decision on institution, and we are not aware of any such precedent.

Id. at 10. The Board further remarked that the patent owner did not allege that it had been prejudiced by the timing of the stipulation. Id.

In a footnote, the Board commented further on the timing requirements of a Sotera stipulation, stating:

As a practical matter, of course, a petitioner would need to submit a Sotera stipulation well in advance of the Board’s deadline for entering its institution decision, in order to ensure that the Board has the opportunity to consider it.

Id. at 10 n.11.

Important Considerations in the Timing of Sotera Stipulations

This decision does not establish any bright-line rule regarding the timing and manner of submitting stipulations, whether a Sotera-type stipulation or otherwise. At least the panel in this decision did not believe that any such stipulation was required to be filed with the petition to be given effect, as long as the stipulation is filed “well in advance” of the Board’s deadline for entering its institution decision and does not prejudice the opposing party.

Here, BMW filed its preliminary reply nearly two-and-a-half months before the institution decision. However, it may not always be certain what constitutes “well in advance” of the institution decision deadline, especially since institution decisions can be issued any time after the parties’ preliminary filings are complete. At least in this case, the Board accepted a Sotera stipulation provided by way of a Board-approved petitioner preliminary reply to the POPR.  

One potentially important consideration to keep in mind is whether the Board will allow  additional evidence to be submitted into the record after the petition and POPR are filed, especially since no rule allows for any such additional filings as a matter of right. While BMW was afforded the opportunity to file a preliminary reply in this instance without any prohibition on accompanying it with evidence/exhibits, such authorization is within the discretion of the Board and the petitioner’s requests can be denied in the absence of a showing of “good cause.”  See, 37 C.F.R. § 42.108(c). (“A petitioner may seek leave to file a reply to the preliminary response in accordance with §§ 42.23 and 42.24(c). Any such request must make a showing of good cause.”) Thus, if a petitioner does not file a stipulation with the petition, there is no guarantee that it will be allowed to file belatedly, as BMW was allowed to do in this case. It is possible that a petitioner’s indication that it seeks to file a stipulation would effectively lead to authorization to do so, but there is no dispositive rule to this effect as of yet.

Finally, while the decision in this case relied on the apparent lack of prejudicial impact on the patent owner in accepting the belated stipulation, this may not always be the case. It might be possible for a patent owner to identify some form of prejudice from a late-filed stipulation, which could weigh against acceptance of a stipulation filed later in the proceeding.

In addition, it is unclear if the outcome would have been the same had the stipulation been something less than the Sotera-type stipulation at issue here. For example, a Sands Revolution-type stipulation is not dispositive as to the Board’s § 314(a) discretionary denial analysis (see, e.g., Samsung Electronics Co. Ltd. et al. v. Staton Techiya, LLC, IPR2022-00302, Paper 13, at 16-17 (P.T.A.B. July 11, 2022) (“The breadth of such a stipulation affects the weight it is given in the discretionary denial analysis.”), and this fact could less heavily favor accepting such a stipulation if it is only submitted later in the proceeding and not with the petition.

While BMW was able to file its stipulation in this case and have it given its intended effect in the Fintiv analysis, the decision stops short of promising the same result in all circumstances. Given that petitioner preliminary replies are not allowed as a matter of right — and even when allowed, the filing of new evidence or exhibits may be precluded — petitioners should take caution in the timing of filing any stipulation in the proceeding. To be safe, petitioners should always consider filing stipulations at the earliest opportunity — i.e., with the initial petition. On the other hand, patent owners must appreciate that such filings may be allowed even after the POPR, and remain cognizant of any prejudicial effects resulting from any such belated filing.  

Last week marked the first time that USPTO Director Vidal acted under the  Revised Interim Director Review Process  to order a Delegated Rehearing Panel to review a decision denying institution of inter partes review (IPR). In July, the USPTO  established a Delegated Rehearing Panel process  by which the Director may delegate for further consideration Director Review requests of Institution Decisions and Final Written Decisions. Last week, she did just that in  DK Crown Holdings Inc. v. Diogenes Limited, IPR2023-00268, Paper 11 at 2 (PTAB Aug. 8, 2023).

The Board issued its initial decision denying institution of IPR in August. Id., . In September, DK attorneys requested Director Review. Id., . They argued that the majority decision was an abuse of discretion because the Board (1) improperly imported claim limitations to avoid prior art; (2) construed claim language more narrowly than a dependent claim; and (3) characterized the prior art inaccurately or contrary to its disclosure. Id.

After reviewing the record, Director Vidal determined that “the Decision warrants review by an independent Delegated Review Panel (“DRP”) to review the fact-intensive issues presented in this case.” Id., Paper 11 at 2. She delegated Director Review of the decision to a DRP to “review the case and to determine whether to grant rehearing” by determining “whether the record demonstrates that the Decision misapprehended or overlooked any issue raised in the Director Review request.” Id. The Director also indicated that she will not participate in the further analysis, with the DRP independently authorized to issue a decision or remand to the Board for further proceedings. Once the DRP issues its decision or remands, neither party may request further Director Review of the decision or the Board on remand. See . However, the Director maintains authority to review any DRP decision on sua sponte Director Review. Id.

The Director’s order also instructs the Board to issue an order specifying the members of the DRP for this review. The PTO’s guidance indicates that:

The DRP shall be selected from the Chief Judge, Deputy Chief Judge, Vice Chief Judges, and Senior Lead Judges, excluding judges who served on the original Board panel for the case under review or otherwise have a conflict with the case.

See  The guidance further states that the paneling of members onto the DRP will follow . 

While the ultimate outcome of this Institution Decision challenge remains uncertain, the Director has now shown a willingness to exercise the authority granted by the new interim Director Review and Delegated Rehearing Panel processes.