PTAB's Evolving Approach to Discretionary Denial: Insights from SAP America, Inc. v. Cyandia, Inc.

Introduction

In the ever-evolving landscape of patent litigation, the Patent Trial and Appeal Board (PTAB) continues to refine its approach to discretionary denials under 35 U.S.C. § 314(a). The recent decision in SAP America, Inc. v. Cyandia, Inc., Case IPR2024-01432, Paper 14 (PTAB Apr. 7, 2025), presents a significant development in how the PTAB applies the Fintiv factors when considering whether to institute an inter partes review (IPR) proceeding. This decision arrives at a pivotal moment in patent practice, following several months of uncertainty and shifting policies regarding discretionary denials at the PTAB.

The SAP v. Cyandia decision reflects the PTAB's nuanced application of discretionary denial principles in a post-Vidal era, where practitioners have witnessed a pendulum swing in USPTO policy. Under former Director Kathi Vidal, the PTAB had moved toward limiting discretionary denials through guidance that emphasized the "compelling merits" standard. More recently, under Acting Director Coke Morgan Stewart, we've seen indications of a return to more robust application of the Fintiv factors, potentially increasing the likelihood of discretionary denials when parallel district court proceedings are advanced.

This blog post analyzes the SAP v. Cyandia decision, extracts key principles, and offers practical guidance for both petitioners and patent owners navigating the increasingly complex terrain of PTAB proceedings in the shadow of parallel district court litigation.

Background: The Evolution of Discretionary Denial Under Fintiv

Before diving into the specifics of the SAP v. Cyandia decision, it's worth taking a moment to understand the evolution of the PTAB's discretionary denial jurisprudence. In March 2020, the PTAB designated as precedential its decision in Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020), which established a six-factor test for determining whether to deny institution of an IPR when a parallel district court case is pending:

1. Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted

2. Proximity of the court's trial date to the Board's projected statutory deadline for a final written decision

3. Investment in the parallel proceeding by the court and the parties

4. Overlap between issues raised in the petition and in the parallel proceeding

5. Whether the petitioner and the defendant in the parallel proceeding are the same party

6. Other circumstances that impact the Board's exercise of discretion, including the merits

The application of these factors has been inconsistent, leading to criticism about the unpredictability of PTAB institution decisions. In June 2022, then-Director Kathi Vidal issued a memorandum clarifying that the PTAB would not discretionarily deny institution when petitioners agreed to a broad Sotera stipulation (agreeing not to pursue in district court any ground that was raised or reasonably could have been raised in the IPR) or when the petition presented a "compelling unpatentability challenge."

However, in February 2025, the USPTO rescinded the 2022 Fintiv memorandum, effectively reinstating the broader discretionary framework of the early Fintiv era. This rescission created new uncertainty for IPR petitioners, who must now navigate the original six-factor *Fintiv* test without the bright-line rules previously afforded.

The SAP America, Inc. v. Cyandia, Inc. Decision

The SAP v. Cyandia decision represents an important application of this evolving discretionary denial framework. In this case, SAP filed an IPR petition challenging patents owned by Cyandia, Inc. The challenge came in the context of ongoing district court litigation in the Eastern District of Texas, where Cyandia had sued SAP for patent infringement in February 2024.

The PTAB's analysis in Paper 14 provides significant insights into how the Board is now approaching the Fintiv factors following the rescission of the 2022 guidance.

Procedural Posture

The case emerged from a typical pattern in patent litigation: Cyandia filed a patent infringement lawsuit against SAP in the Eastern District of Texas, a venue historically favorable to patent owners. SAP, seeking to challenge the validity of Cyandia's patents, filed an IPR petition. Cyandia responded by urging the PTAB to exercise its discretion under § 314(a) to deny institution based on the advanced state of the parallel district court proceeding.

The PTAB's Analysis

The PTAB's decision in Paper 14 demonstrates a thorough and systematic approach to the Fintiv factors. The Board began with a comprehensive assessment of all six factors, rather than skipping directly to a compelling merits analysis—a methodology that aligns with recent precedential guidance.

Factor 1: Likelihood of a Stay

The PTAB found this factor to be neutral. While no stay had been granted in the district court proceeding, the Board noted that the Eastern District of Texas has historically been reluctant to stay litigation pending IPR proceedings. The Board acknowledged that this reluctance, however, is not determinative, as each case must be evaluated on its own merits.

Factor 2: Proximity of Trial Date

This factor weighed in favor of discretionary denial. The district court had set a trial date that fell before the statutory deadline for the PTAB's final written decision. The Board gave credence to the scheduled trial date, noting the Eastern District of Texas's reputation for maintaining its trial schedules. The Board did not rely solely on the scheduled date but also considered the court's track record and the specific judge's history of adhering to scheduled dates.

Factor 3: Investment in the Parallel Proceeding

The Board found that this factor weighed moderately in favor of discretionary denial. By the time the IPR petition was filed, the parties had already exchanged infringement and invalidity contentions, completed claim construction briefing, and participated in a Markman hearing. The district court had also issued its claim construction order. This substantial investment in the parallel proceeding, particularly the completion of claim construction, weighed in favor of allowing the district court case to proceed without the potentially duplicative IPR proceeding.

Factor 4: Overlap of Issues

This factor presented a more complex analysis. SAP had included a conditional stipulation in its petition, agreeing that if the IPR were instituted, it would not pursue in the district court litigation any ground that it raised or reasonably could have raised in the IPR. While such "Sotera stipulations" have historically weighed against discretionary denial, the Board noted that the stipulation here was conditional upon institution.

The Board conducted a comparative analysis of the invalidity grounds in the IPR petition versus those presented in the district court litigation. Despite the conditional stipulation, the Board found sufficient overlap in the issues to weigh slightly in favor of discretionary denial.

Factor 5: Identity of Parties

This factor clearly weighed in favor of discretionary denial. SAP, the IPR petitioner, was also the defendant in the district court litigation, creating a clear party identity between the two proceedings.

Factor 6: Other Circumstances, Including Merits

Here is where the Board's analysis became particularly instructive. Under the previous Vidal guidance, a "compelling merits" showing could effectively trump the other *Fintiv factors. However, in light of the February 2025 rescission of that guidance, the Board approached this factor differently.

The Board conducted a detailed claim-by-claim analysis of SAP's unpatentability arguments, finding them to present reasonably strong, but not necessarily compelling, challenges to Cyandia's patent claims. Importantly, the Board did not treat this factor as dispositive but rather as one element in a holistic analysis of all six factors.

The Board's Decision and Reasoning

After evaluating all six Fintiv factors, the PTAB in SAP v. Cyandia exercised its discretion to deny institution of the IPR. The Board emphasized that it reached this conclusion based on a "holistic view" of all factors, rather than any single dispositive factor. Crucially, the Board noted that even when a petition presents strong invalidity arguments, those arguments must be "compelling" to overcome the efficiency considerations that arise when parallel district court proceedings are advanced.

The Board clarified its understanding of the "compelling merits" standard, explaining that a challenge is "compelling" only if it is "highly likely" that at least one claim will be found unpatentable. This standard is higher than the "reasonable likelihood" standard typically applied at the institution stage. The Board found that while SAP's petition presented reasonable arguments for unpatentability, these arguments did not rise to the level of being "compelling" under this heightened standard.

This reasoning aligns with recent precedential guidance from the Director's office, which has emphasized that the "compelling merits" analysis should only be conducted after the Board has first determined that Fintiv factors 1-5 favor discretionary denial. The Board's decision thus reflects a return to a more structured application of the Fintiv framework, one that gives appropriate weight to considerations of efficiency and the advanced state of parallel district court proceedings.

Key Takeaways from the Decision

The SAP v. Cyandia decision offers several important lessons for practitioners navigating the post-2022 guidance landscape at the PTAB:

1. Renewed Emphasis on All Six Factors: The PTAB is now returning to a more comprehensive analysis of all six *Fintiv* factors, rather than allowing compelling merits alone to overcome concerns about parallel proceedings.

2. Structured Approach to Analysis: The Board has adopted a two-step process: first assessing factors 1-5, and only if those factors favor denial, conducting a compelling merits analysis under factor 6.

3. Heightened Standard for Compelling Merits: The Board has clarified that the "compelling merits" standard requires a showing that it is "highly likely" that at least one claim will be found unpatentable—a standard higher than the "reasonable likelihood" typically required for institution.

4. Conditional Stipulations May Not Be Enough: While *Sotera* stipulations remain important, the Board will scrutinize conditional stipulations carefully and may still find that factor 4 weighs in favor of denial despite such stipulations.

5. Detailed Reasoning Required: The Board's decision demonstrates the importance of providing detailed reasoning for each factor, sufficient to allow for meaningful review of the Board's decision.

Implications for Patent Owners

The SAP v. Cyandia decision offers several strategic considerations for patent owners facing potential or actual IPR challenges:

1. Early and Aggressive Case Management in District Court

Patent owners should pursue aggressive case schedules in district court litigation, particularly in venues like the Eastern District of Texas that have historically maintained ambitious trial schedules. The earlier a trial date is set, and the more progress is made in the district court case before an IPR petition is filed, the stronger the patent owner's argument will be for discretionary denial under Fintiv factors 2 and 3.

Patent owners should seek to complete significant pre-trial activities—especially claim construction—before the defendant files an IPR petition. The SAP v. Cyandia decision shows that completion of a Markman hearing and issuance of a claim construction order can significantly strengthen the case for discretionary denial.

2. Challenge the Sufficiency of Stipulations

Patent owners should scrutinize any stipulations offered by petitioners, particularly conditional stipulations that only take effect if the IPR is instituted. As demonstrated in the SAP v. Cyandia decision, the Board may not give full weight to conditional stipulations under factor 4. Patent owners should argue that such stipulations do not fully mitigate the concern about overlapping issues.

3. Focus on Factual Development for Factors 1-5

Since the compelling merits analysis only comes into play if factors 1-5 favor denial, patent owners should focus their preliminary responses on developing strong factual records to support these factors. This includes:

- Providing evidence of the district court's history regarding stays (factor 1)

- Documenting the reliability of the scheduled trial date (factor 2)

- Detailing the investment already made in the parallel proceeding (factor 3)

- Analyzing the overlap between IPR and district court invalidity contentions (factor 4)

- Confirming the identity of parties between the proceedings (factor 5)

4. Address the Merits Strategically

While patent owners should certainly respond to the merits of the petitioner's unpatentability arguments, the SAP v. Cyandia decision suggests that they need not establish that the petition is frivolous. Rather, they need only demonstrate that the petition does not present "compelling" unpatentability arguments that would make it "highly likely" that at least one claim would be found unpatentable. This is a more manageable standard than trying to defeat the petition on the merits at the preliminary stage.

5. Present a Holistic Narrative

Finally, patent owners should frame their arguments around the efficiency considerations that underlie the Fintiv analysis. The SAP v. Cyandia decision emphasizes the PTAB's concern about duplicative proceedings and the efficient use of resources. Patent owners should weave these themes throughout their preliminary responses, highlighting how a denial of institution would best serve these efficiency goals.

Implications for IPR Petitioners

For those on the other side of the "v," the SAP v. Cyandia decision presents challenges but also offers guidance on how to navigate the post-2022 guidance landscape:

1. Act Promptly with IPR Filings

The decision underscores the importance of filing IPR petitions early in the life of a parallel district court proceeding. Waiting until after significant milestones in the district court case (particularly claim construction) increases the risk of discretionary denial under factors 2 and 3. Petitioners should consider filing IPR petitions as soon as practicable after being served with a complaint, rather than waiting until near the one-year statutory bar date.

2. Offer Unconditional Stipulations

In light of the Board's treatment of SAP's conditional stipulation, petitioners should consider offering broader, unconditional *Sotera* stipulations. An unconditional stipulation—one that takes effect immediately upon filing rather than being conditioned on institution—may carry more weight in the Board's analysis of factor 4. While this strategy carries risks if the IPR is not instituted, it may significantly increase the chances of institution in the first place.

3. Seek Stays Aggressively

Although factor 1 was neutral in the SAP v. Cyandia case, petitioners should aggressively pursue stays of district court litigation pending IPR. Even in venues historically reluctant to grant stays, a well-supported stay motion can help demonstrate to the Board that a stay is at least possible, potentially neutralizing factor 1 rather than having it weigh in favor of denial.

4. Focus on the "Compelling Merits" Standard

Since the "compelling merits" analysis now only comes into play if factors 1-5 favor denial, petitioners must ensure that their invalidity arguments are not merely reasonable but truly compelling. This requires going beyond the statutory threshold for institution and demonstrating that it is "highly likely" that at least one claim will be found unpatentable. Petitioners should consider:

- Presenting their strongest prior art and arguments in the petition

- Using expert testimony to strengthen their technical case

- Addressing potential counterarguments preemptively

- Focusing on clear, straightforward invalidity theories rather than complex, multi-reference combinations

5. Challenge Trial Date Reliability

The SAP v. Cyandia decision shows that the Board gives weight to scheduled trial dates. Petitioners should be prepared to challenge the reliability of trial dates, particularly in busy districts. This might include providing statistics on the average time to trial in the district, identifying other cases that have taken precedence on the judge's docket, or highlighting complexities in the case that might necessitate schedule adjustments.

6. Address Each Factor Methodically

Finally, petitioners should address each Fintiv factor methodically in their petitions and replies to patent owner preliminary responses. Simply focusing on the merits is no longer sufficient; petitioners must engage with the efficiency considerations that underlie the Fintiv analysis and demonstrate why institution would not result in duplicative or inefficient proceedings.

The PTAB's Evolving Approach to Discretionary Denial

The SAP v. Cyandia decision exemplifies the PTAB's evolving approach to discretionary denial in the wake of policy changes at the USPTO. This evolution can be understood through several key developments:

The Initial Fintiv Framework

When the PTAB first designated Apple v. Fintiv as precedential in 2020, it established a framework that gave the Board significant discretion to deny institution based on parallel district court proceedings. The six-factor test was designed to promote judicial efficiency by avoiding duplicative proceedings, but its application proved inconsistent and unpredictable.

The Vidal Guidance

Under Director Kathi Vidal, the USPTO issued guidance in June 2022 that significantly curtailed discretionary denials. This guidance established two paths around discretionary denial: compelling merits and *Sotera* stipulations. The guidance emphasized that "compelling merits alone demonstrate that the PTAB should not discretionarily deny institution under Fintiv," effectively elevating the merits above other efficiency considerations.

The Recent Policy Shift

In February 2025, the USPTO rescinded the 2022 Fintiv guidance, signaling a return to a more balanced approach to discretionary denial. Recent Director review decisions have emphasized that the compelling merits analysis should only occur after the Board has determined that factors 1-5 favor denial, and that compelling merits alone are not dispositive.

The SAP v. Cyandia decision reflects this new approach. The Board conducted a methodical analysis of all six factors, gave appropriate weight to the advanced state of the district court proceeding, and only considered the merits as one component of a holistic analysis. This approach restores the balance between merit-based considerations and efficiency concerns that was at the heart of the original Fintiv framework.

Future Implications for PTAB Practice

Looking forward, the SAP v. Cyandia decision suggests several trends that will likely shape PTAB practice in the coming years:

1. Increased Importance of District Court Scheduling

As the PTAB returns to giving appropriate weight to the scheduled trial date and the progress of parallel district court proceedings, we can expect to see increased attention to district court scheduling in IPR strategies. Patent owners will push for aggressive schedules, while petitioners will file IPRs earlier and challenge the reliability of trial dates more vigorously.

2. More Sophisticated Stipulation Strategies

The Board's treatment of SAP's conditional stipulation suggests that the effectiveness of stipulations may depend on their scope and conditions. We can expect to see more nuanced stipulation strategies from petitioners, possibly including tiered stipulations that take partial effect immediately and expand in scope if the IPR is instituted.

3. Renewed Focus on Venue Selection

Given the increased importance of district court scheduling and stay practices, venue selection will take on added significance. Patent owners may increasingly favor venues with fast schedules and histories of declining stays, while accused infringers may seek declaratory judgments in venues more amenable to stays pending IPR.

4. More Detailed Board Decisions

The SAP v. Cyandia decision reflects a trend toward more detailed reasoning in institution decisions, particularly regarding discretionary denial. This trend is likely to continue, with the Board providing thorough analyses of each Fintiv factor and explicit explanations of how it weighs those factors in its holistic analysis.

5. Potential Legislative or Regulatory Intervention

The back-and-forth on Fintiv policies has created uncertainty for practitioners and raised concerns about the predictability of PTAB proceedings. This uncertainty may eventually prompt legislative or regulatory intervention to provide more stable guidelines for discretionary denial practices.

Conclusion: Navigating the Post-SAP v. Cyandia Landscape

The SAP v. Cyandia decision marks an important milestone in the PTAB's approach to discretionary denial under Fintiv. By returning to a balanced, holistic analysis of all six factors, the Board has signaled that efficiency considerations remain central to the IPR institution decision, even as the strength of the petition's merits remains an important factor.

For practitioners, the key takeaway is the need for a comprehensive strategy that addresses all aspects of the Fintiv analysis:

For Patent Owners:

- Pursue aggressive district court schedules

- Build a strong record on the investment already made in district court

- Challenge the sufficiency of petitioner stipulations

- Focus preliminary responses on factors 1-5 before addressing merits

- Present a cohesive narrative about judicial efficiency

For Petitioners:

- File IPR petitions early in the life of parallel litigation

- Consider broader, unconditional stipulations

- Pursue stays aggressively, even in historically reluctant venues

- Ensure that invalidity arguments meet the "highly likely" standard for compelling merits

- Address each *Fintiv* factor methodically in petitions and replies

The pendulum of PTAB discretionary denial policy continues to swing, and practitioners must adapt accordingly. The *SAP v. Cyandia* decision provides valuable guidance on how to navigate this evolving landscape, offering a roadmap for both petitioners and patent owners as they develop their IPR strategies.

By understanding the nuances of the Board's analysis in this case, practitioners can better position themselves for success in future PTAB proceedings, whether seeking institution or defending against it. The decision ultimately reminds us that while the specific policies may change, the fundamental principles of efficiency, fairness, and substantive merit remain at the heart of the PTAB's mission.