USPTO’s ANPRM Sets the Stage for Latest Revamp of the Discretionary Denial Process

“Whether, after all of this process, there will in fact be greater clarity, without jeopardizing the availability of proceedings that were supposed to improve and ensure patent quality and provide a quick and cost-effective alternative to district court litigation, remains unknown.”

discretionary denialBetween the precedential Fintiv decision in March of 2020 and Director Vidal’s Guidance Memo regarding the application of Fintiv in June of 2022, the discretionary denial rates of inter partes review (IPR) institution decisions under 35 U.S.C. § 314(a) plummeted from 40-50% to 11-16%. Coupled with the order issued by the Chief Judge of the Western District of Texas in July of 2022 declaring that all new patent cases filed in the Waco Division will be randomly assigned among the 12 judges in the district, the substantial decline in denials based on Fintiv in 2022 was not surprising.

At the time of issuance in June of 2022, the Guidance Memo seemed quite clear that “the PTAB will not rely on the Fintiv factors to discretionarily deny institution in view of parallel district court litigation where a petition presents compelling evidence of unpatentability.” The Guidance Memo also stated that “the PTAB will not discretionarily deny institution in view of parallel district court litigation where a petitioner presents a stipulation not to pursue in a parallel proceeding the same grounds or any grounds that could have reasonably been raised before the PTAB.” In addition, the Guidance Memo provided, “The plain language of the Fintiv factors is directed to district court litigation and does not apply to parallel U.S. International Trade Commission (ITC) proceedings ….”  The guidance was concrete, if not universally popular, particularly among patent owner plaintiffs.

Twists and Turns Leading to the Proposed Rules

In February 2023, Director Vidal issued a clarification that PTAB panels must first conduct a Fintiv analysis before assessing compelling merits and that the compelling merits standard is a higher standard than the standard for institution. See CommScope Techs., LLC v. Dali Wireless, Inc., IPR2022-1242, Paper No. 23 (PTAB Feb. 27, 2023). The distinction between “compelling merits” and the statutory standard of “reasonable likelihood” that the petitioner would prevail, however, was not entirely clear: “The compelling merits test seeks to strike a balance among the competing concerns of avoiding potentially conflicting outcomes, avoiding wasteful parallel proceedings, protecting against patent owner harassment, and strengthening the patent system by allowing the review of patents challenged with a sufficient strong initial merits showing of unpatentability.”

Less than two months later, amid speculations that Fintiv denial rates will increase once again, the USPTO recently announced a set of proposed rules in an Advance Notice of Proposed Rulemaking (ANPRM), including the following:

  • Expanding categories of petitions subject to discretionary denial: petitions by for-profit entities not sued for infringement (e.g., Unified Patents, RPX); petitions challenging under-resourced patent owner patents where patentee has or is attempting to bring products to market; petitions involving previously adjudicated patent claims; serial/parallel petitions; petitions raising previously addressed prior art or arguments; petitions challenging patents subject to ongoing parallel district court litigation;
  • Discretionarily denying IPR if the patent owner provides a covenant not to sue to a
    for-profit petitioner and its customers prior to initiating litigation;
  • Allowing denial as sanctions for misconduct;
  • Separating briefing on discretionary denials outside of petition and patent owner preliminary response;
  • Allowing greater word count with additional fee payment;
  • Expanding disclosure requirements from real-parties-in-interest (RPI) to anyone with an ownership interest and any third-party litigation funding;
  • Requiring stipulations that RPIs will not challenge claims in subsequent post-grant proceeding;
  • Requiring all settlement agreements to be filed with PTAB whether before or after institution decision.

The 2020 precedential Fintiv decision effectively reduced the availability of IPR proceedings, as well as shortening the one-year time limit under 35 U.S.C. § 315(b) for a petitioner to file an IPR petition, depending on the projected trial date in the parallel district court case.  Apple and four other companies filed suit in the Northern District of California, seeking declaratory and injunctive relief that the Fintiv decision countermanded the AIA.  The June 2022 Guidance Memo appeared to address these issues. In March of 2023, the Federal Circuit reversed and remanded the district court’s dismissal of Apple’s challenge to the Fintiv discretionary denial framework, but only as to the procedure of the rulemaking, not the substance. See Apple v. Vidal, 63 F.4th 1, 6 (Fed. Cir. 2023).  The Federal Circuit noted in that decision, “Neither side has suggested mootness of this challenge[] based on the June 2022 [Guidance] Memo or subsequent clarifications,” which were also not put in place through notice-and-comment rulemaking under 5 U.S.C. § 553. See id. at 17 n.7.

While the proposed changes to discretionary institution practices in the ANPRM may be intended “to create clear, predictable rules … as opposed to balancing tests that decrease certainty,” the questions as to how to define terms such as “compelling merits,” “substantial relationship” between entities, “substantial overlap” with challenged claims, and “prior attempts to commercialize” seem diametrically opposed to that goal.

Further Complications

One week after the USPTO’s issuance of the ANPRM for potential PTAB reform, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held an oversight hearing, on April 27, 2023, during which Director Vidal drew criticism that the proposed rules may be contravening Congressional lawmaking authority. Concerns that the proposed rules would effectively change the substance of the America Invents Act, such as the statutory deadline for filing a PTAB petition, who can file a petition, and the standard for instituting review, have been raised by organizations such as the Public Interest Patent Law Institute, Public Innovation Project, Consumer Technology Association, Computer and Communications Industry Association, and High-Tech Inventors Alliance.

Where We Go from Here

The ANPRM references the Supreme Court’s guidance in Cuozzo, 579 U.S. at 279, that “the purpose of the [IPR] proceeding is not quite the same as the purpose of district court litigation.” Whether, after all of this process, there will in fact be greater clarity, without jeopardizing the availability of proceedings that were supposed to improve and ensure patent quality and provide a quick and cost-effective alternative to district court litigation, remains unknown.

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Join the Discussion

7 comments so far.

  • [Avatar for Anon]
    May 8, 2023 03:52 pm

    Mr. Malone,

    Each in turn:

    effect on the economy,

    No measures (or measuring protocols) provided, and in any individual case, it may even be said to be NOT measurable.

    Congress screwed the pooch here, as this is a nonsense ‘rationale.’

    the integrity of the patent system,”

    Arguably, the best position AGAINST ANY institution (outside of a clear and blatant error. Bottom line here is that MOST ALL cases of institution (outside of those clear and blatant error cases) detracts from the integrity of the patent system precisely because a granted patent HAS — as one stick in the bundle of property rights — a clear and convincing standard of being presumed valid.

    Outside of that legislative taking AT the point of institution, the meeting of any challenge TO a C&C level would (at least) start approaching the meaningful “integrity of the patent system” bar.

    Congress COULD (easily) ratchet back the Patent Office on this prong.

    and “the efficient administration of the Office”.

    Unfortunately, Congress ALSO screwed the pooch on this one as well.

    Given that Congress did NOT have any “in-the-field-warranty-aspect-tied-back-to-production” mechanism AND provides that the Office makes money ON BOTH ENDS, it is eminently “efficient” for the Office to grant as many patents as possible that will also be easily deemed invalid in post grant proceedings.

  • [Avatar for David Lewis]
    David Lewis
    May 8, 2023 12:13 pm

    Amazing. Vidal has just tripled to quintipled the rate at which filing an IPR will be effective in invalidating a patent. Stated differently, the firing squad just at least tripled its fire-power – all with one simple rule change.

  • [Avatar for Josh Malone]
    Josh Malone
    May 8, 2023 08:15 am

    Anon, Congress gave the Director discretion on which cases to take, based on the “effect on the economy, the integrity of the patent system, and the efficient administration of the Office”. IPR was supposed to be alternative to litigation, not an addition.

  • [Avatar for Anon]
    May 7, 2023 07:47 pm

    Sadly, Mr. Malone, Congress wrote an entirely different statute.

  • [Avatar for Josh Malone]
    Josh Malone
    May 7, 2023 07:32 pm

    The Director should never institute a duplicate proceeding, that is crazy. Unless the judge in the first-filed case issues a stay, a petition by the same party or their RPI must be denied. Can we restore a little common sense.

  • [Avatar for Anon]
    May 7, 2023 03:45 pm


    I cannot see your suggestion coming to pass, as the long-stated reason for “removing bad patents” has nothing to do with whether the holder of any such bad patent agrees (or not) to enforce something they should not have in the first place.

  • [Avatar for Alan]
    May 7, 2023 03:11 pm

    Of the proposals, I am most in favor of: Discretionarily denying IPR if the patent owner provides a covenant not to sue to a
    for-profit petitioner and its customers prior to initiating litigation. I think entities such as RPX and Unified Patents are going to be barred based on Fed. Circuit case law. But the workaround for defendants who do not have a right to petition for an IPR (e.g., under Click-to-Call or if 1-year bar has passed) is to get (wink, wink) another company that is not barred to file the petition. Oftentimes, the patent owner has no interest in asserting against this other company. This would be a good way to prevent institution under these circumstances.