Codifying Discretionary Denial of IPR Petitions

by Dennis Crouch
The USPTO recently released yet another Notice of Proposed Rulemaking (NPRM) — this one focusing on codification of IPR/PGR rules associated with non-merits based “discretionary denials” of institution as well as termination due to settlement.  This is a controversial area because of that word ‘discretion.’  Unrestricted discretion by government officials is concerning because of the potential for arbitrary or biased decisions, lacking transparency and accountability.  In that frame, these rules are beneficial because they structure and limit discretion – hopefully making the outcomes more predictable and justifiable.  A key note – the rules here focus primarily on procedure (separate briefing for discretionary denials) and substantive issues relating to parallel, serial, and cumulative petitions. Although this is an important step, they do not address discretionary denials associated with parallel litigation (or other outside factors) under Fintiv and subsequent director guidance. This is likely the most controversial area of discretionary denials that is being left out for now.
Congress clearly intended the USPTO to have substantial discretion in denying when to institute IPR proceedings.  Although the law sets a floor for institution (reasonable likelihood of success), the statute does not require institution in those cases.  Discretion is further indicated by providing the Director unreviewable authority at the institution stage, unlike the trial stage where the PTAB must issue a final written decision that is then appealable.  Although not in the statute, after losing in Arthrex , the USPTO was forced to create an additional  post-trial discretionary layer known as director review that was the subject of an earlier NPRM.  Although having this level of discretion seemingly powerful, it tends to make administrators uncomfortable because it opens themselves up to criticism and can become resource intensive to  repeatedly make up the playbook.
In 2023, the Office released an ANPRM (advanced NPRM) that included more aggressive rules that were perceived as more anti-patent-owner — especially compared to the approach taken under Dir. Iancu.  That notice received more than 14,000 comments, and the USPTO dropped a number of the more controversial proposals in these new proposed rules.

2023 ANPRM
2024 NPRM

The USPTO is seeking comments on the proposed rules through June 18, 2024.










Separate Briefing Process for Discretionary Denial Issues
The most important aspect of the NPRM is the creation of a separate briefing process to address discretionary denial issues. Under the proposal, a patent owner may file a request for discretionary denial separate from its preliminary response. This request would be limited to addressing applicable discretionary denial factors, distinct from arguments on the merits of unpatentability. The petitioner would then have the opportunity to file an opposition, and the patent owner could file a reply.
Word counts are a big deal in IPR briefing, and this separate briefing process would not count against the word count limits for the main merits briefs.  One problem though is that this briefing process suggests that it be entirely separate from the merits considerations — while the PTAB regularly consider merits as part of the discretionary denial process.  Further, the discretionary denial briefing typically does not arise until the patent owner’s preliminary response (POPR) to the institution decision — and that is a document that often does have additional space available for briefing.  So, in the end, this process appears to favor petitioner by giving them automatic separate space to argue against discretionary denial.
The NPRM also proposes that the Board itself may raise discretionary denial sua sponte , in which case the parties will receive an opportunity to provide their own briefing.
Discretionary Denial Factors for Parallel and Serial Petitions
In addition to this procedural change, the NPRM proposes to codify discretionary denial factors for parallel petitions, serial petitions, and petitions raising art or arguments previously considered by the Office.
For parallel petitions – defined as petitions challenging the same patent filed on or before the deadline for a patent owner preliminary response – the USPTO proposes that the Board will not institute multiple petitions absent a showing of good cause as to why more than one petition is necessary. Petitioners would need to provide information relevant to the good cause determination as well as ranking the petitions in their preferred order of consideration, explaining material differences between petitions, and identifying which (if any) challenged claims have been asserted in litigation.
Serial petitions are similar but with a slightly different timing.  These are petitions challenging overlapping claims of a patent after filing of a patent owner preliminary response to an earlier petition – the USPTO proposes that the Board may deny institution upon considering factors such as the petitioner’s knowledge of the prior art at the time of filing the first petition, the timing of the petitioner’s receipt of a patent owner preliminary response or institution decision on the first petition, the time elapsed between the petitioner learning of the prior art and filing the second petition, and whether the petitioner adequately explained that elapsed time.[6]
For petitions previously considered arguments, implicating 35 U.S.C. § 325(d), the Board may deny institution if the same or substantially similar art or arguments were previously “meaningfully addressed” by the Office unless the petitioner demonstrates a “material error” in the Office’s prior consideration. The NPRM clarifies that “meaningfully addressed” requires more than mere appearance in the record, such as an initialed information disclosure statement.
Alignment of Termination Requirements for Settlement
Finally, the NPRM proposes changes to align the requirements for terminating proceedings in view of settlement, whether before or after institution. Specifically, the USPTO proposes amending the rules to clarify that settlement agreements supporting pre-institution termination must be filed with the Board, similar to the existing requirement for post-institution settlement agreements.  This proposal springs from an identified inconsistency in PTAB practice, where some pre-institution termination requests have been granted without submission of the underlying settlement agreement. The NPRM notes this change will also further the USPTO’s ability to coordinate with other agencies in support of the whole of government approach to promoting competition and policing anticompetitive conduct.  Thus, although the documents might be filed “under seal” – they may still be shared with the DOJ, FTC, or other US governmental branches.  Of all the proposals, this is the one most likely to receive legal challenge – with parties arguing that the USPTO lacks authority to require submission of settlement agreements reached prior to institution.
An additional point of clarity will need to focus on whether discretionary denial decisions will be subject to immediate Director Review in the same way that institution decisions will be reviewed. It seems that the answer should be yes, but that is not clear from the documents.