USPTO Acting Director Coke Morgan Stewart announced that she will personally decide whether to deny each petition challenging a patent on discretionary grounds before the Patent Trial and Appeal Board evaluates the merits.

In a March 26 memo, Acting Director Stewart announced the new policy, which she says was being implemented for “workload needs.” This policy introduces a bifurcated review process for America Invents Act (AIA) petitions. Initially, the USPTO director, alongside at least three PTAB judges, will determine whether a petition should be denied for discretionary reasons. If discretionary denial is deemed inappropriate, the petition will proceed to a three-member PTAB panel for further evaluation based on its merits.

This new system aims to improve efficiency, manage workload obligations, and reduce delays in ex parte appeals, a critical concern given staff reductions and retirements at the PTAB. The policy also allows parties to submit briefs arguing for or against discretionary denial, with specific factors such as prior adjudications, changes in laws, expert testimony reliance, and public interests being considered.

This temporary measure will apply to open cases where deadlines for preliminary responses or discretionary denial briefs have not yet passed. The USPTO has not disclosed how long the interim policy will remain in effect, leaving room for future adjustments based on workload assessments and statutory requirements.

Also, the memo indicated that Fintiv factors still apply, but more guidance will be given to other applicable factors that will be considered and may include:

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

Two days later, on March 28, the Acting Director issued a decision granting Director’s Review in four pending IPRs, IPR2024-01025-08, which sheds further light on how the PTAB may approach discretionary denials under the recently announced procedure.

The decision is notable in how it approaches Finitiv factors 3 and 4 as well as the overall weighing of all the Finitiv factors. In particular, the Acting Director reversed the Panel’s prior decision to institute finding that the “Board did not give enough weight to the investment in the parallel proceeding and gave too much weight to Petitioner’s Sotera stipulation (i.e., a stipulation that Petitioner will not pursue in district court any ground it raised or reasonably could have raised in the inter partes review (IPR)) and its potential to reduce overlap with the issues raised in the parallel proceeding.”

The decision noted that the Petitioners’ invalidity position before the District Court were more extensive than those presented in the IPR Petitions, for example, by combining references with unpublished system prior art which were not before the Board. The decision thus found that the Sotera stipulation did not outweigh the substantial investment made by the District Court in advancing the case and “[c]onsidering the Fintiv factors as a whole, the efficiency and integrity of the system are best served by denying review.”

What Does this Mean for Petitioners and Patent Owners?

On one hand, having director-level review will increase the consistency of decisions on discretionary denials. In the past, different panels have reached different decisions on similar discretionary denial reviews.

In addition, as the March 28 Order reflects, this process will allow the Director to quickly implement standards for discretionary denials that take into account the PTAB’s capacity to handle new petitions going forward, a goal expressly articulated in the March 26 memo.  

On the other hand, having a fully separate briefing process for discretionary denials will create substantially increased cost if a patent owner wishes to raise both discretionary denial and merits-based arguments at the pre-institution phase.