- Settled Expectations Considered for Discretionary Denial: Acting Director Coke Morgan Stewart's March 26 memorandum introduced the concept of settled expectations without limiting it to patent owners or petitioners, expanding the scope of considerations for discretionary denial of inter partes review petitions.
- Initial Settled Expectations Decisions Favored Patent Owners: Early decisions by the Acting Director often favored patent owners by denying institution where challenged patents had been in force for six years or more.
- Petitioners Can Also Have Settled Expectations: Recent PTAB decisions show a new trend in applying settled expectations, recognizing that petitioners' arguments regarding long delays in enforcement, expired patents, prior nonassertion, and successful prior PTAB outcomes can successfully counter discretionary denial.
Former U.S. Patent and Trademark Office Acting Director Coke Morgan Stewart's March 26 memorandum providing interim processes for Patent Trial and Appeal Board workload management identified several new factors that the director now considers in determining whether to discretionarily deny inter partes review petitions, including "settled expectations of the parties."
Stewart, now deputy director of the USPTO, has typically applied this factor in favor of patent owners, frequently exercising discretion to deny petitions challenging patents that have been in force for six or more years due to a patent owner's settled expectations.
Recent decisions, however, illustrate that petitioners are having increased success in asserting that their own settled expectations are sufficient to avoid discretionary denial of institution.
Such settled expectations have come in the form of long delays in a patent owner filing an infringement lawsuit, the patent owner unexpectedly asserting its patent in new industries or technology spaces, or when the petitioner has previously succeeded in challenging a related patent.
This article explores these evolving changes in the PTAB landscape, including cases such as Apple Inc. v. Ferid Allani; Home Depot USA Inc. v. H2 Intellect LLC; DataDome SA v. Arkose Labs Holdings Inc.; and POSCO Co. Ltd. v. ArcelorMittal.
IPR Petitioners Can Have Settled Expectations Too
Stewart's March 26 memorandum did not limit the settled expectations factor to the expectations of either patent owners or petitioners. Early decisions on discretionary denial, however, frequently indicated that patent owners may be considered to have settled expectations tied to the age of the patent.
As more decisions have issued, it has become clear petitioners too may establish settled expectations in certain circumstances, supporting referral of their petitions for consideration by the PTAB on the merits.
Initial Settled Expectation Decisions
In the months immediately following the March 26 memorandum, Stewart typically applied settled expectations in favor of patent owners, particularly when patents had been in force for six years or more.
That approach aligned with prior statements from Stewart tying the doctrine to Title 35 of the U.S. Code, Section 286, which imposes a six-year statute of limitations for recovering infringement damages. In Dabico Airport Solutions Inc. v. AXA Power APS, decided by the PTAB on June 18, the director explained:
Although there is no bright-line rule on when expectations become settled, in general, the longer the patent has been in force, the more settled expectations should be. This approach aligns with other approaches to settled expectations and incentives, for example, for filing infringement lawsuits.
By mid-2025, the settled expectations factor operated primarily as a shield against IPR institution, favoring patent owners. Recent director decisions, however, illustrate a shift: Petitioners are beginning to leverage their own settled expectations successfully, sometimes even against Fintiv considerations that could otherwise support discretionary denial.
Petitioners' Settled Expectations: Recognized, But Not Always Enough
The director's recent decisions reflect a willingness to credit petitioners' reliance on settled expectations arguments, even if they are not always dispositive.
In DataDome SA v. Arkose Labs Holdings, Inc., decided Aug. 14, both parties invoked settled expectations.
The patent owner emphasized that the challenged patents had been in force for 17 and 10 years. The petitioner argued it had relied on the prior owner's failure to assert the patents, pointing to licensing discussions a year or two earlier where the petitioner stated that they did not believe they required a license to the identified patents, indicating they had apparently evaluated the patents.
The director acknowledged that a concession of noninfringement could establish petitioner expectations, but concluded that the petitioner's argument was not enough to outweigh the patent owner's expectations, based on the length of time the patents had been in force.
The petitioners have also argued that they reasonably expected nonassertion where their technology was fundamentally different from the claimed inventions.
In BOE Technology Group Co. v. Optronic Sciences LLC, decided July 29, the petitioner argued that its accused products used a top-gate transistor structure, precisely the opposite of the bottom-gate structure claimed in the challenged patents, such that it therefore had no reason to expect assertion.
The director credited this as weighing against discretionary denial, but ultimately concluded that the patents' 12-year age and the earlier district court trial schedule created stronger settled expectations for the patent owner.
The same line of reasoning surfaced again in Transcend Information Inc. v. Truesight Communications LLC, decided Aug. 4. Transcend argued it reasonably expected no infringement allegations because the patent required a kiosk, which it did not make.
The director acknowledged the argument, citing BOE, but again found that the patent's 10-year duration and the earlier district court trial date overcame Petitioner's settled-expectations argument.
When Petitioners' Settled Expectations Prove Decisive
Other recent cases demonstrate that the petitioner's reliance on settled expectations arguments can be sufficient to avoid denial. These outcomes highlight circumstances in which petitioners can invoke settled expectations effectively.
One theme is delay in enforcement. In Apple Inc. v. Ferid Allani, decided Sept. 5, the patent owner first contacted the petitioner about a license in 2012.
The petitioner declined, stating that it did not need one, and the patent was not asserted until eleven years later, after it had expired. Under these facts, the director found that the petitioner had sufficient settled expectations of nonenforcement to avoid a discretionary denial of institution.
Another important consideration concerns industry expectations. In Home Depot USA Inc. v. H2 Intellect LLC, decided Sept. 4, the patent had been in force for more than 12 years.
The petitioner argued it had no reason to anticipate assertion in its industry because the patent owner had previously targeted smartphones, tablets and watches, but never hardware retail. The director agreed, finding the petitioner's settled expectations more persuasive than the patent owner's and referred the petition.
Petitioners have also succeeded by invoking prior success in challenging related patents. In POSCO Co. v. ArcelorMittal, decided June 25, an ongoing U.S. International Trade Commission investigation suggested denial.
The ITC trial was set to conclude about nine months before the PTAB's projected final written decision date, suggesting that the board's decision would not be issued until after the conclusion of the ITC investigation.
However, the petitioner pointed to its earlier success in invalidating all claims of a parent patent in a previous case — also POSCO Co. v. ArcelorMittal — decided Jan. 5, 2021. The director concluded that it was reasonable for the petitioner to expect the related claims to be vulnerable, and institution was referred despite the parallel proceeding.
Finally, reliance may be persuasive where a patent has already expired or lapsed. In Globus Medical Inc. v. Spinelogik Inc., decided June 12, the patents had been in force for eight years but expired four years earlier due to nonpayment of maintenance fees. The director concluded that the petitioner reasonably expected nonenforcement and referred the petition, notwithstanding the patent owner's arguments to the contrary.
Key Lessons for Practitioners
Taken together, these cases illustrate an evolution in how the settled expectations factor is applied.
As the director's decisions show, petitioners that can demonstrate reliance on license negotiation history, delays in enforcement, industry norms, prior PTAB outcomes or expired rights may avoid denial even when other factors might tend to support denying institution.
No longer the exclusive domain of patent owners, the March 26 memorandum's settled expectations factor now provides petitioners with multiple viable pathways to argue reliance on their own settled expectations to avoid discretionary denial and have their petitions referred to a PTAB panel for consideration on the merits.
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