Vidal Amicus in Cambridge Case Urges CAFC to Overturn USPTO’s ‘Settled Expectations’ Rule

Last week, former United States Patent and Trademark Office (USPTO) Director Katherine Vidal filed an amicus brief on behalf of the Public Interest Patent Law Institute (PIPLI) with the U.S. Court of Appeals for the Federal Circuit (CAFC) in In re Cambridge Industries USA Inc., urging the court to set aside the USPTO’s recently adopted “settled expectations” rule for discretionarily denying inter partes review (IPR) petitions.

The brief is supporting a mandamus petition filed by Cambridge Industries USA Inc. on October 10, which asked the CAFC to find that the settled expectations doctrine did not apply to its IPR petitions because the doctrine did not exist when the petitions were filed.

The dispute originated from the USPTO’s denial of two of Cambridge’s IPR petitions challenging U.S. Patent Nos. 9,523,826 and 10,042,116, which Applied Optoelectronics, Inc. had asserted against Cambridge in district court litigation. The Patent Trial and Appeal Board (PTAB) denied institution based solely on the new settled expectations rule. On June 27, 2025, former Acting Director Coke Morgan Stewart determined that because the patents “have been in force for nine and seven years, respectively,” the patent owner’s “settled expectations” were “stronger and discretionary denial is appropriate,” according to the decision.

The amicus brief argued that the rule “radically departs from the Congressional mandate of the [America Invents Act] AIA” and was adopted “without notice-and-comment rulemaking, without economic analysis, and without regard to its chilling effect on innovation and competition.” According to the brief, the rule disproportionately insulates older patents from review, even though they are “more likely to be invalid.”

The USPTO’s own data revealed that historically, the USPTO has relied on prior art introduced during the IPR in 93% of its unpatentability findings made in final written decisions, according to the brief. Specifically, 93% of the invalid patents that the USPTO takes off the market were examined without the benefit of the key prior art. In a comprehensive dataset of IPR petitions filed since 2012, for patents that had been in force for more than six years, 82% resulted in the cancellation of at least one claim at the final written decision stage, according to the brief.

The brief also argued that the rule tends to encourage abuse by patent assertion entities (PAEs). Data showed that the average age of non-practicing entity (NPE) patents challenged before the PTAB is 16.3 years, compared to 12.6 years for patents held by operating companies, according to the brief. Under the new settled expectations rule, “the institution rate for petitions against NPEs is now lower than the institution rate against operating companies,” according to the brief.

To highlight the risk, the brief cited VLSI v. Intel. In that case, VLSI, a PAE, asserted two patents against Intel and secured a $2.18 billion jury verdict, one of the largest in history, and the patents were well over six years old. The USPTO initially denied the petitions under Apple v. Fintiv , but later took both patents under review and determined that the challenged claims of both patents were unpatentable. According to the brief, under the settled expectations rule, those same patents would have been categorically unreviewable. The two patents alone would have diverted $2.18 billion from the operations of a leading U.S. semiconductor company and put that money into the hands of a PAE, the brief stated.

NPE litigation costs the economy $712 million per year, just from cases that result in a jury award, based on the median damages award for NPEs of $14.8 million from 2013 to 2017, average legal fees for NPE cases of around $3 million, and an average of 40 NPE damages verdicts per year, according to the brief. This cost does not include settlement amounts or legal fees for the overwhelming number of NPE cases that are settled.

Cambridge’s mandamus petition argued that the USPTO violated due process by retroactively applying the new rule to its IPR petitions, which were filed on January 17, 2025. Cambridge said it paid $41,500 in non-refundable filing fees for each petition.

On March 26, the then-Acting Director issued a memo announcing a new discretionary consideration focusing on the parties’ “settled expectations,” “such as the length of time the claims have been in force,” according to the petition. The memo explained nothing further about that factor, such as what length of time qualified or what support that criterion had in the AIA.

In June 2025, Stewart denied IPR institution for the first time, citing that ‘“the challenged patent has been in force’ too long, ‘creating settled expectations,’” according to the petition. Nine days later, Stewart discretionarily denied Cambridge’s two IPRs for “settled expectations.” By the time the USPTO unveiled its new rule, it was too late for Cambridge to petition when the patents were younger in order to satisfy the rule or to recover its fees filed in reliance on the then-controlling rules, according to the petition.

The petition further argued that the USPTO exceeded its statutory authority under the AIA. The AIA established a single criterion for instituting an IPR of whether there is a “reasonable likelihood that the petitioner would prevail” with respect to at least one challenged claim, according to the petition. The AIA grants the USPTO discretion to deny IPR institution under highly specific criteria, such as redundancy and failing to file within a year of a complaint’s service, but it does not authorize the creation of a new criterion based on patent age, according to the brief.

Congress deliberately chose not to impose a patent-age limit for IPR, even though it did set a nine-month limit for post-grant review (PGR), the brief emphasized. By distinguishing between the two proceedings, Congress made its intent clear. According to the brief, the USPTO’s rule contradicts this legislative choice and usurps Congress’s role. The AIA expressly addresses timing constraints for both IPRs and PGRs, and under the separation of powers, the USPTO has no authority to override that legislative judgment.

Both the mandamus petition and the amicus brief contended that the rule was improperly adopted without the notice-and-comment rulemaking required by the Administrative Procedure Act (APA). The settled expectations rule constitutes a substantive rule because it materially affects the standards for institution of inter partes review and creates a binding criterion for IPR institution, according to the brief.

The PIPLI brief is therefore asking the CAFC to set aside the settled expectations doctrine, and Cambridge is asking the court to vacate the non-institution decisions and direct the USPTO to reconsider institution solely under the statutory criteria, or at a minimum, under the guidance in place when the petitions were filed.

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Author: donscarpo