USPTO Acting Director Coke Morgan Stewart's 26 March memorandum fundamentally altered the institution framework for IPRs and PGRs by removing the PTAB's authority to decide discretionary denial issues. Now, the director personally decides discretionary issues before PTAB panels may evaluate petition merits—a dramatic shift that early evidence suggests will significantly increase denial rates.
The changes create immediate strategic implications for practitioners, from navigating expanded discretionary factors to managing compressed response timelines. Early decisions reveal a focus on parallel litigation timing while giving less weight to traditional tools like Sotera stipulations.
Looking forward, questions remain about whether these "temporary" procedures will become permanent features through federal rulemaking, potentially enshrining uncertainty into the patent validity challenge process.
Expanding discretionary denial factors
Under Stewart's memorandum, decisions on whether to institute proceedings are bifurcated between discretionary considerations and merits-based statutory considerations, with the director either denying institution outright or referring approved petitions to three-member panels for standard merits review. The memorandum establishes a new briefing schedule that runs in parallel with existing PTAB merits briefing, allowing patent owners to request discretionary denial by filing a 14,000-word brief within two months of the PTAB giving the petition a filing date. Petitioners may then file 14,000-word opposition briefs within one month of the patent owner's filing. The USPTO has stated that it expects to issue the director's decision on discretionary denial within one month of receiving all briefs.
The memorandum substantially expands the factors that may justify discretionary denial beyond established precedent. While continuing to recognise existing PTAB precedent including Fintiv, General Plastic and Advanced Bionics, the new framework permits parties to address additional considerations including:
- whether the PTAB or another forum has already adjudicated the patent claims' validity;
- changes in law or judicial precedent since patent issuance;
- the strength of the unpatentability challenge;
- the extent of the petition's reliance on expert testimony;
- "settled expectations" of the parties, including how long the claims have been in force;
- compelling economic, public health or national security interests; or
- the PTAB's ability to comply with pendency goals and statutory deadlines.
The memorandum explicitly cites "current workload needs of the PTAB" as justification, referencing the board's need to maintain capacity for both America Invents Act proceedings and ex parte appeals while managing significant staffing challenges.
FAQ clarifications of procedural ambiguities
Stewart's initial memorandum left several procedural details ambiguous, prompting the USPTO to release a comprehensive FAQ document that supplements and clarifies the original guidance. The FAQ addresses critical timing issues, confirming that when patent owners file discretionary denial requests early, petitioner response deadlines remain fixed at the statutory three-month date rather than floating based on when the discretionary denial brief is filed.
The FAQ provides particularly important clarification regarding expert testimony considerations. While the memorandum listed "the extent of the petition's reliance on expert testimony" as a discretionary factor, it provided no guidance on how the director would evaluate this factor. The FAQ clarifies that extensive reliance on expert testimony may weigh toward discretionary denial for efficiency reasons, while failure to provide focused expert testimony may weigh against institution on the merits.
The FAQ also establishes that parties should generally not address discretionary denial issues in their merits briefs, so petitioners no longer need to address discretionary denial arguments in their petitions preemptively.
Early decisions focus on parallel litigation
The acting director issued her first decisions under the new framework on 16 May, providing initial insights into how the bifurcated process operates in practice. Of the four decisions issued, two granted discretionary denial while two referred cases to panels for merits determinations. All four decisions focused on parallel district court litigation timing.
These initial decisions suggest that parallel litigation timing remains a primary consideration for discretionary denial under the new framework. The outcomes indicate that the director is primarily focused on which proceeding will reach a validity decision first and giving less weight to other established factors such as whether the petitioner has offered a Sotera stipulation.
Strategic implications for practice
The new framework creates immediate strategic considerations for both patent owners and petitioners. Patent owners can now capitalise on expanded discretionary denial opportunities by crafting lengthy briefs addressing the newly enumerated factors. The "settled expectations" factor may provide the best opportunities for older patents, though the acting director hasn't provided guidance on relevant age thresholds.
Petitioners face increasingly complex strategic calculations. The expert testimony factor creates major challenges—while comprehensive expert declarations may increase the odds a petition will be found meritorious, that same reliance on expert testimony may sink the petition under discretionary denial. Practitioners must strike a careful balance between technical thoroughness and perceived over-reliance on expert testimony.
The compressed timeline for responding to discretionary denial requests—typically just one month—demands rapid strategic decision-making. Petitioners must prepare comprehensive responses while simultaneously developing district court stay arguments, recognising that traditional approaches to parallel litigation may need recalibration.
Most critically, the bifurcated process means that even petitions with strong merits may never reach substantive review if they cannot survive the initial discretionary screening. This shifts strategic focus toward addressing procedural and policy considerations that were previously secondary to technical validity arguments.
Systemic questions and future outlook
The new framework raises questions about predictability and efficiency in patent validity challenges. While characterised as "temporary" due to workload pressures, there are indications these changes may become permanent features of patent review practice. The USPTO has suggested it intends to engage in federal rulemaking, potentially enshrining the bifurcation process in regulation and making it no longer "temporary".
The director's explicit consideration of PTAB "workload capacity" as a discretionary factor creates uncertainty for petitioners about the predictability of the institution process. Unlike most traditional discretionary denial factors, the parties are generally unaware of the workload capacity of the PTAB six months in the future and cannot easily predict how the director might weigh this consideration.
Factors like "settled expectations" and the appropriate level of expert testimony reliance may also increase uncertainty in the near term, as they lack established benchmarks, requiring practitioners to develop strategies based on limited guidance and emerging patterns from early decisions.
Finally, while a party may ask the director to reconsider a discretionary denial decision, the unappealable nature of institution decisions means that these rapidly evolving discretionary denial doctrines will develop without supervision by the courts.
Conclusion
The PTAB's discretionary denial landscape continues evolving at unprecedented speed. From the March memorandum through FAQ clarifications to the first substantive decisions, practitioners must adapt strategies rapidly while monitoring emerging patterns.
Corporate counsel and patent attorneys should closely monitor PTAB institution rates in coming months, as these metrics will provide early indicators of whether this "temporary" framework permanently alters America's primary venue for patent validity challenges.
Originally Published by IAM
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