USPTO Acting Director Takes Over Requests for Discretionary Denial

This afternoon, United States Patent and Trademark Office (USPTO) Acting Director Coke Morgan Stewart sent a memorandum to all Administrative Patent Judges (APJs) of the Patent Trial and Appeal Board (PTAB) detailing a new interim process for workload management. To ensure the PTAB can continue to meet its statutory obligations relating to ex parte appeals, the Director will exercise her discretion under 35 U.S.C. 314(a) and 324(a) to determine whether discretionary denial is appropriate for any petition for inter partes review (IPR) or post-grant review (PGR).

Under this new interim process, decisions on whether to institute an inter partes review (IPR) or a post-grant review (PGR) will be bifurcated between the discretionary considerations that will be addressed by the Director and the merits and other statutory considerations.

Under this interim procedure, the Director will consult with at least three PTAB judges and will determine whether discretionary denial of institution of the IPR or PGR is appropriate. If discretionary denial is appropriate, the Director will issue a decision denying institution. If discretionary denial is inappropriate, the Director will issue a decision on the discretionary denial issue and refer the petition to a three-member panel of the PTAB assigned in accordance with Standard Operating Procedure (SOP) 1 (Rev. 16). From that point forward the assigned three-member panel will handle the case in the normal course, starting with a decision on institution based on the merits and other non-discretionary statutory considerations.

To facilitate this bifurcation approach, the USPTO will permit parties to file separate briefing on requests for discretionary denial of institution. The patent owner will have two months from the date of the notice of filing to file a brief explaining why discretionary denial is appropriate. The petitioner will then be given one month from the filing of the patent owner brief requesting discretionary denial to file its own brief.

The parties will be permitted to address all relevant considerations on the discretionary denial issue, including but not limited to:

1. Whether the PTAB or another forum has already adjudicated the validity or patentability of the challenged patent claims;
2. Whether there have been changes in the law or new judicial precedent issued since issuance of the claims that may affect patentability;
3. The strength of the unpatentability challenge;
4. The extent of the petition’s reliance on expert testimony;
5. Settled expectations of the parties, such as the length of time the claims have been in force;
6. Compelling economic, public health, or national security interests; and
7. Any other consideration bearing on the Director’s discretion.

Acting Director Stewart explains the aim of this change is to improve PTAB efficiency, to better allocate resources to reduce the pendency in ex parte appeals, and to promote consistent application of discretionary considerations in AIA proceedings. There is no doubt this new interim procedure will be widely approved by patent owners as a big step in the right direction.

For most of the time the PTAB has been in existence, patent owners have had little real opportunity to fight back against institution. The PTAB’s decision in Apple v. Fintiv in 2020 did provide help for patent owners above and beyond the 2018 decision in NHK Spring Co. v. Intri-Plex Techs., IPR2018-00752, Paper 8, which was limited to the situation where a district court set a trial date to occur earlier than the PTAB’s statutory deadline to issue a final written decision. In Fintiv, six additional factors relating to issues of judicial economy were applied to the situation where there was an ongoing district court litigation, but the trial would not occur prior to the PTAB statutory deadline. The ruling in Fintiv led to numerous discretionary denials, but the practice was scuttled in 2022 under the Biden Administration. Several weeks ago the USPTO reverted back to the Trump era Fintiv approach. The bifurcation of institution seems to go much further in a very pro-patent owner direction.

Critics of the PTAB have long questioned the extreme and growing use of expert testimony with respect to IPR proceedings. While the statute does contemplate the possibility that expert testimony could be offered by a petitioner, the IPR statute allows the PTAB to review and cancel claims as unpatentable “only on the basis of prior art consisting of patents or printed publications.” 35 U.S.C. 311(b). So, patent owners can be expected to immediately use these non-exclusive factors to challenge the extraordinary use of experts and attempt to focus the Director on the patents and printed publications instead of expert opinion.

Likewise, property rights advocates should be heartened to see that settled expectations of the parties will be considered. After all, if patents are really a property right there is little justification for allowing patents that are a decade or older to be challenged. If patent owners must suffer the indignity of laches after only six years surely challengers who could have challenged the patent earlier must face a similar consequence for failure to seek invalidation earlier.