In Part I of this set of blogs, we discussed the impact of the rescission of former USPTO Director Vidal’s Guidance Memorandum for handling discretionary denials in inter partes review proceedings before the Patent Trial and Appeal Board. We also discussed Chief Judge Boalick’s Guidance Memorandum on the rescission.

In Part II, we examine a new interim procedure, instituted March 26, 2025, for briefing of discretionary denials. This new procedure radically changes how a patent owner whose patent is the subject of an IPR or post-grant review petition can raise discretionary denial issues prior to the PTAB’s decision whether to institute a proceeding. The new procedure bifurcates discretionary denial issues, including Fintiv issues, from merits and non-discretionary denial issues, and delegates to the USPTO Director the determination of whether to discretionarily deny a petition.

The Old Procedure

Previously, petitioners and patent owners would include discussion of discretionary denial issues as a small (sometimes very small) part of their 14,000 word limit for petition and preliminary response, with the remaining words devoted to the substantive merits or demerits of the petition. The petitioner would try to anticipate the patent owner’s arguments for discretionary denial. From time to time, the PTAB would grant the parties limited additional briefing on discretionary denial issues where, for example, the patent owner raised discretionary denial issues that the petitioner had not anticipated.

The New Procedure

Under the new interim procedure, a patent owner has 14,000 words (the same as in any IPR petition or responsive brief) to argue that discretionary denial is proper. The petitioner has 14,000 words to respond. The patent owner’s discretionary denial brief is due two months after the PTAB issues a Notice of Filing Date Accorded to the petition, and one month before the patent owner’s preliminary response (another 14,000 word paper) is due. The petitioner’s response (also 14,000 words) is due one month after the patent owner’s discretionary denial brief.

In the discretionary denial briefing, the parties are allowed to address all discretionary denial considerations as reflected in PTAB precedential decisions, including Fintiv(involving a parallel district court case), General Plastic(involving multiple petitions), and Advanced Bionics(involving previous prior art and/or arguments in the USPTO regarding the patent). The discretionary denial briefing also may include consideration of denial issues under 35 U.S.C. § 325(d).

In addition, discretionary denial considerations may include (Interim Procedure, p. 2):

• 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 (the PTAB has said that this factor is under consideration, and that guidance will be forthcoming);
• 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.

The first bullet point is similar to Fintiv Factor 3 (how much work have the district court and the parties done on the validity of the claims in the IPR). The third bullet point is similar to Fintiv Factor 6 (which includes consideration of the merits of a petition). While the PTAB has not (yet) specifically commented on the fourth bullet point factor, this factor appears somewhat similar to Fintiv Factor 4 (overlap between issues raised in the petition and in the parallel proceeding).

In a recent discretionary denial of institution of an IPR petition in Motorola v. Stellar, the Acting Director found the Board erred in weighing the Fintiv factors, noting among other things that the petitioner’s invalidity expert report in the accompanying district court litigation basically repeated all of the arguments in the petition. This overlap in arguments was of concern because of the possibility that much of the work that would be done in the IPR to adjudicate validity would not alleviate the validity workload. For example, some of the invalidity positions in district court relied on prior art combinations in the IPR petition, plus some additional system art. The district court and the parties had done a lot of work on the case, having taken expert depositions and proceeded through claim construction and what appeared to be overlapping expert reports. Consequently, even though petitioner submitted a Sotera stipulation, the Acting Director denied institution.

The USPTO Director will work with three senior PTAB judges to decide whether to discretionarily deny a petition. If denied, no proceeding is instituted. If not denied, then a different PTAB panel will consider the petition on its merits, based on the petition and the patent owner’s preliminary response.

The Acting USPTO Director intends that this bifurcation of discretionary denial and merits considerations will reduce the PTAB’s workload.

No Briefing, No Discretionary Denial

At a Boardside Chat on April 17, 2025, the PTAB said that in order to have the Director decide whether to issue a discretionary denial, the patent owner must file a discretionary denial brief. Otherwise, the PTAB will proceed to determine whether to institute a proceeding on the merits. If the patent owner does not file a discretionary denial brief, the petitioner does not have to file one. Also, the Director will not address any discretionary denial factor (for example, any of the Fintiv factors) that the patent owner does not raise in its brief.

What About Merits?

At the Boardside Chat, the PTAB said that the discretionary denial briefing opportunity is not to be used for doubling up on merits briefing, even though merits consideration is one of the Fintiv factors. In the discretionary denial brief, it would be appropriate for the patent owner to comment briefly on merits — for example, to identify weaknesses in the petitioner’s case — and then refer to the forthcoming Patent Owner Preliminary Response (POPR) for more detailed discussion of the merits. Given the timing of petitioner reply to a discretionary denial brief and the POPR, it is expected that the Director will have recourse to merits briefing from both parties before deciding whether to discretionarily deny a petition. Patent owners should not necessarily count on the PTAB seeing any discussion of merits in the discretionary denial brief, so the patent owner’s preliminary response should contain all of the merits arguments that patent owners plan to make.

What About Timing?

There are two timing points of interest. One is that, if the patent owner files its discretionary denial brief before the two-month deadline, petitioner’s response deadline moves up accordingly. A second is that, if a petitioner wants to use the presence of a Sotera or a Sand stipulation as an argument against discretionary denial, the petitioner should file the stipulation within one month of the Notice of Filing Date Accorded. This early filing allows the patent owner to have a meaningful opportunity to address the stipulation in its discretionary denial brief.

What About Fee Refunds to Petitioner in the Event of Discretionary Denial?

Also at the Boardside Chat, the PTAB said that it still is discussing how to handle fee refunds in the event of discretionary denial.

What Recourse Do the Parties Have in Challenging Decisions on Discretionary Denial and/or Merits?

During the Boardside Chat, the PTAB identified three possible paths of recourse for parties to challenge institution (or non-institution) decisions:

• Merits: Panel Rehearing Request
• Discretionary Denial: Director Review Request
• Merits + Discretionary Denial: Director Review Request

Takeaways

In addition to the items discussed here and in Part I of this blog, there have been significant resignations of APJs from the PTAB. In addition, the PTAB has been ordered to accelerate its work on appeals to the USPTO by over 40 percent. Since some PTAB judges handle both IPRs/PGRs and appeals, there will be an adverse impact on capacity to generate IPR decisions. As a result of all this, it seems likely that there will be more discretionary denials of IPR and PGR petitions going forward, and thus fewer merits decisions. In the short term at least, this approach may help with the Board’s workload. Longer term, it remains to be seen whether the increase in discretionary denials will continue as a part of Patent Office policy. A continued increase in discretionary denials could have a chilling effect on a patent infringement defendant’s willingness to file an IPR petition.