Closing the PTAB Loophole: Targeting Real Threats to U.S. Innovation Without Overreaching

Protecting American innovation from foreign threats is a national priority—particularly in strategic sectors like semiconductors, AI, and defense technologies. The United States has long relied on robust economic sanctions and export controls to protect national security and safeguard intellectual property (IP) from foreign adversaries. Despite these measures, a significant vulnerability persists: entities from sanctioned or embargoed nations can exploit a critical loophole to access the Patent Trial and Appeal Board (PTAB), an administrative body that plays a pivotal role in challenging the validity of U.S. patents.

Although agencies like the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) impose strict restrictions on interactions with hostile foreign entities, the PTAB remains accessible—even to those tied to adversarial governments. This loophole exposes U.S. technological leadership to potential foreign threats. If we are to defend U.S. IP effectively, we must avoid sweeping measures that could provoke unnecessary retaliation and harm U.S. innovators.

Rather than broadly blocking entire nations from the U.S. patent system, we should focus on restricting only those entities with proven ties to national security threats—based on evidence and established designations like the U.S. Entities List and OFAC sanctions.

What We Need: Precision, Not Overreach

As recent congressional hearings have highlighted, there is broad consensus that foreign intellectual property theft—particularly by China—poses a grave threat to U.S. competitiveness. Congressman Darrell Issa (CA-48) has been clear:

“Our longstanding, broad-based science and technology collaboration with the PRC has failed to further our national interests and has instead promoted the advantage of our top global competitor. The United States has no use for a partnership where technology shared means technology stolen, and that’s why we need answers as we weigh the future of this one-sided relationship that has put our national security at risk and allowed for the exploitation of both our legal system and innovators.”

Congressman Issa is right to highlight the risks. Recent legislative efforts reflect growing recognition of the need for precision in addressing these threats. The Prohibiting Adversarial Patents Act, introduced in 2023 by Congressman Scott Fitzgerald (WI-05), alongside Chairmen Mike Gallagher (WI-08), Darrell Issa (CA-48), and Blaine Luetkemeyer (MO-03), directly targets patent protections for entities posing national security threats. This legislation would prohibit the issuance of U.S. patents to individuals or entities identified on key national security watch lists, including the U.S. Entity List, the Non-SDN CMIC List, and the FCC’s Section 2 List, while also rendering previously granted patents to these entities unenforceable. Furthermore, it introduces new transparency measures, requiring disclosure of state-sponsored affiliations in patent applications.

This legislative approach aligns with the broader effort to close PTAB loopholes without overreach, ensuring that national security threats are addressed while preserving the integrity of the U.S. innovation system.

The PREVAIL Act: An Opportunity for Smart Reform

The bipartisan PREVAIL Act offers an opportunity to strengthen U.S. patent law and better protect national security. Initially focused on improving fairness and efficiency at the PTAB, the Act can—and should—address the specific issue of PTAB access by hostile foreign actors.

However, any new restrictions should target entities that are already recognized as threats (See the Comprehensive List of U.S. Federal Sanctions and Watch Lists appendix below), including:

• Entities on the OFAC Specially Designated Nationals (SDN) List
• Entities on the Commerce Department’s Entity List
• Entities restricted under Export Administration Regulations (EAR)
• Entities restricted by legislative authority, such as TikTok Divestment Legislation (Passed in 2024/2025), and the Restricting the Emergence of Security Threats that Risk Information and Communications Technology Act, if passed into law.

This evidence-based approach ensures that we are targeting those who pose real, documented risks—without alienating legitimate foreign patent holders or sparking unnecessary retaliation against U.S. companies operating abroad.

Why a Tailored Approach Is Best for Protecting U.S. Innovation

1. Prevents Weaponized Patent Challenges by Bad Actors

Entities that have been identified as security threats should not be able to use the PTAB to undermine U.S. patents. A targeted restriction would prevent hostile foreign firms from strategically attacking American IP in critical sectors like AI, biotech, and 5G.

2. Closes the PTAB Loophole Consistent with U.S. Sanctions and Trade Policy

If a company is barred from accessing U.S. technology through export controls, they should not be able to use the PTAB to attack the patents that protect those very technologies. Aligning PTAB access rules with existing national security designations closes this dangerous gap.

3. Focusing on Real Threats Avoids Retaliation

By limiting PTAB access based on verified designations, we avoid unnecessary, broad attacks on entire countries’ innovators—many of whom do not pose a national security risk. Overreaching could invite retaliatory measures against U.S. companies and weaken our global IP leadership.

Specific Examples of the Threat—and Why Precision Matters

Chinese-backed companies like ByteDance, Huawei, and ZTE have used the PTAB to challenge U.S. patents, including in high-stakes fields like telecommunications and AI. These companies have known ties to the Chinese state and military, and many are already on U.S. sanctions or restricted lists (See Appendix 2 below showing Timeline of Huawei & ZTE Sanctions/Watch List Status vs. PTAB Activity). Targeting such entities is logical and necessary.

However, lumping all Chinese or foreign innovators into one category would be a mistake. Not every foreign patent holder is a national security risk—and treating them as such could lead to dangerous retaliation, damaging U.S. businesses and innovation efforts globally.

Addressing Legal and Constitutional Concerns Thoughtfully

Some may raise due process concerns about excluding foreign entities from the PTAB. But as an administrative, not judicial, body, the PTAB does not grant constitutional protections like a court of law. Just as we limit access to U.S. markets or technologies for sanctioned entities, we can—and should—limit PTAB access when national security is at stake.

A measured, evidence-based approach also reduces the risk of legal challenges. If we align PTAB restrictions with existing designations already upheld in U.S. law, we stand on strong constitutional and policy ground.

Recommendations for the PREVAIL Act

To strike the right balance—being tough on real threats but not reckless—Congress should consider adding these targeted reforms within the PREVAIL Act:

• Prohibit PTAB petitions from entities on the OFAC SDN List, the Commerce Entity List, and other sanctioned lists.
• Bar proxy entities from filing on behalf of these sanctioned companies.
• Clarify that national security-based PTAB denials are final and not subject to APA challenges.
• Mandate coordination between the USPTO, BIS, and OFAC to maintain an up-to-date list of barred entities.

A Strong, Smart Path Forward

The United States must protect its innovators from foreign entities that seek to undermine American IP for competitive or strategic advantage without broadly attacking entire nations’ patent owners—which risks harming the very innovation ecosystem we aim to protect and could invite damaging retaliation.

Instead, we should focus on those entities already identified as national security risks—using evidence, due process, and existing legal frameworks. This targeted approach strengthens U.S. IP protections without compromising our leadership as a global innovation hub.

Congress has a critical opportunity with the PREVAIL Act to close this loophole the right way—smartly, surgically, and in alignment with national security priorities. Let’s make sure we do it right.

Appendix 1.  Comprehensive List of U.S. Federal Sanctions and Watch Lists

1. Department of the Treasury – Office of Foreign Assets Control (OFAC)

2. Department of Commerce – Bureau of Industry and Security (BIS)

3. Department of State

4. Department of Defense (DoD)

5. General Services Administration (GSA)

6. Department of Justice (DOJ)

7. Department of Homeland Security (DHS)

8. Federal Bureau of Investigation (FBI)

9. Financial Crimes Enforcement Network (FinCEN)

Consolidated Resource

Appendix 2.  Timeline of Huawei & ZTE Sanctions/Watch List Status vs. PTAB Activity

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Author: stuartmiles
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