Examining New Guidance from the USPTO on Discretionary Denials in AIA Post-Grant Proceedings

At A Glance

Recent changes at the US Patent and Trademark Office (USPTO) concerning the Patent Trial and Appeal Board's (PTAB) discretion to deny institution of inter partes reviews (IPRs) or post-grant reviews (PGRs) based on parallel litigation have created uncertainty. On February 28, 2025, the USPTO rescinded the “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation” (the “Interim Procedure”). The Interim Procedure limited the application of the Fintiv factors, and led to a drop off in the use of Fintiv to discretionarily deny IPR and PGR petitions. The rescission of the Interim Procedure signaled a return to the original Fintiv framework. Subsequent memos from Chief Administrative Patent Judge (APJ) Scott Boalick (March 24) and Acting Director Coke Morgan Stewart (March 26) now provide further guidance, and introduce a new bifurcated procedural pathway for handling discretionary denial arguments. This Legal Update examines these developments and their potential implications for practitioners and clients.

Background

The PTAB's authority to deny institution of AIA proceedings is granted under 35 U.S.C. §§ 314(a) and 324(a). The potential for inefficiency arises when parallel proceedings involving the same patent validity challenges occur both at the PTAB and in district court or the International Trade Commission (ITC). The Board’s 2020 precedential decision in Apple Inc. v. Fintiv, Inc. established factors for the PTAB to consider when deciding whether to exercise discretion and deny institution due to parallel litigation. The rescission of the Interim Procedure introduced uncertainty about how the PTAB will apply this discretion. Recent guidance memos from Chief APJ Boalick and Acting Director Stewart clarify the current approach the PTAB will take when considering discretionary denial.

The Fintiv Factors

The Fintiv decision arose from a situation where a parallel district court case involving the same patent had an earlier trial date compared to the PTAB's statutory deadline for a final written decision. In considering discretionary denial, the PTAB sought to balance efficiency, fairness, and patent quality considerations. The Fintiv decision laid out six non-exclusive factors for the Board to weigh holistically when considering discretionary denial due to parallel litigation:

• Stay: Whether the court granted a stay, or if evidence suggests one might be granted if the PTAB proceeding is instituted.
• Proximity of Trial Date: How close the court's trial date is to the PTAB's projected statutory deadline (one year from institution, extendable by six months).
• Investment in Parallel Proceeding: The level of investment by the court and parties in the parallel case.
• Overlap of Issues: The extent of overlap between issues in the petition and the parallel case.
• Petitioner/Defendant Identity: Whether the petitioner and the defendant in the parallel case are the same party.
• Other Circumstances: A catch-all including the merits of the petition.

The Board in Fintiv emphasized a “holistic view” balancing all factors rather than a bright-line rule.

The Interim Procedure (June 21, 2022)

Issued by then-Director Kathi Vidal, this memo provided “interim guidance” intended to clarify the application of Fintiv while the USPTO considered rulemaking. It aimed to balance avoiding conflicting outcomes and overburdening patent owners with strengthening the patent system. Key clarifications included:

• Compelling Merits: The PTAB would not discretionarily deny institution under Fintiv if a petition presented “compelling evidence of unpatentability.”
• ITC Proceedings: Fintiv factors would not apply to parallel ITC investigations, reasoning that the ITC cannot invalidate patents and its rulings not binding on the USPTO or district courts.
• Sotera Stipulations: The PTAB would not deny institution under Fintiv if a petitioner filed a stipulation agreeing not to pursue the same or reasonably similar grounds in the parallel proceeding.
• Trial Date Proximity (Fintiv Factor 2): When assessing trial date proximity, the PTAB should consider median time-to-trial statistics for the relevant district court, not just the scheduled date, which is often unreliable. Proximity alone would not outweigh other factors weighing against denial.

The Interim Procedure was viewed by many as creating a “safe harbor” against Fintiv denials and reducing their frequency. This view has borne out in practice since the Interim Procedure issued in 2022.

The Boalick Memo (March 24, 2025)

Following the February 28, 2025 rescission of the Interim Procedure, Chief APJ Boalick issued guidance to PTAB members. Key points include:

• Applicability: The rescission applies to cases without an institution decision or where rehearing/Director Review requests are pending. Parties can request briefing on the rescission's impact. Decisions where review time has passed will not generally be revisited.
• Restoration of Policy: Policy reverts to pre-Interim Procedure guidance; namely, following the precedential Fintiv and Sotera decisions.
• ITC Proceedings: The Board will apply Fintiv factors even when there is a parallel ITC proceeding. It cites Fintiv’s reasoning that, while ITC invalidity findings aren't preclusive, they create practical difficulties, and parallel proceedings increase duplication and expense. Denial is more likely if the ITC's target date is before the PTAB's final decision deadline.
• Sotera Stipulations: A timely Sotera stipulation is “highly relevant,” but not dispositive. It will be considered as part of the holistic Fintiv analysis. This steps back from the Interim Procedure where such stipulations strongly weighed against discretionary denial.
• Trial Date Proximity (Factor 2): The Board may consider median time-to-trial statistics, along with other evidence parties provide regarding trial date proximity. This differs from the Interim Procedure's stronger emphasis on using median statistics.
• Merits (Factor 6): Compelling merits are part of the balanced assessment but are not dispositive alone. This contrasts with the Interim Procedure's “compelling merits” safe harbor.

The Stewart Memo (March 26, 2025)

Two days after the Boalick Memo, Acting Director Stewart issued a memo outlining “Interim Processes for PTAB Workload Management.” Citing the need to manage ex parte appeal backlogs alongside AIA trial capacity, the memo introduces procedural changes for determining whether exercising discretionary denial is appropriate for IPRs and PGRs. The changes include:

• Bifurcated Institution Decision Process:
• Discretionary Denial: The Director, consulting with at least three PTAB judges, will first determine if discretionary denial (including Fintiv, General Plastic, Advanced Bionics, etc.) is appropriate. If so, the Director issues the denial.
• Merits/Statutory: If discretionary denial is not appropriate, the Director issues that determination and refers the petition to a standard three-judge panel. That panel then decides institution based on merits and other non-discretionary statutory requirements.
• New Briefing Schedule: To facilitate this, separate briefing on discretionary denial is permitted.
• Brief: Due within 2 months of the Notice of Filing Date Accorded. (Word Limit: 14,000).
• Reply Brief (Optional): Limited to 5,600 words.
• Merits briefing schedules remain unchanged.
• Discretionary Factors Briefing: Parties can address all relevant factors, including existing precedent (Fintiv, General Plastic, Advanced Bionics) and other considerations like prior adjudications, changes in law, strength of challenge, reliance on experts, settled expectations, public interest factors, and PTAB workload/pendency goals.

These interim processes apply where the Patent Owner Preliminary Response deadline hasn't passed. A grace period for filing discretionary briefs is provided if the new briefing schedule deadline has already elapsed. The processes are explicitly temporary due to workload needs.

The State of PTAB Discretion

The state of PTAB’s exercise of discretion for IPR or PGR proceedings currently involves applying the original Fintiv factors, as clarified by Sotera and moderated slightly by the Boalick Memo, within the new bifurcated procedural framework set by the Stewart Memo. From a big-picture perspective, it is also suggestive of a pragmatic approach, and perhaps a broader policy shift.

A Pragmatic Approach?

The Stewart Memo explicitly cites PTAB efficiency, capacity, and appeal pendency as justifications. Bifurcating the decision could streamline the process if discretionary issues are clear-cut, potentially saving panel resources. However, the added briefing rounds may increase costs and complexity for parties. Whether this achieves efficiency goals, especially considering potential staffing issues, remains to be seen. It has been speculated that a good number USPTO employees, particularly APJ’s, may leave the Federal Employment system, or retire early based on the USPTO’s return-to-work policy and early retirement offers. Allowing for easier identification of IPR or PGR petitions that may be discretionarily denied pragmatically will ease the PTAB’s workflow.

A Broader Policy Shift?

Rescinding the Vidal Memo and reviving Fintiv’s applicability, particularly regarding ITC cases and removing safe harbors for compelling merits and Sotera stipulations, suggests a potential shift towards broader PTAB discretion to deny institution. This could be viewed as more favorable to patent owners. Nevertheless, outcomes may become less predictable as the Director and individual panels apply the factors under the new procedure. The long-term impact—and whether Fintiv will be applied as rigorously as it was between 2020 and 2022—is unclear.

Considerations for Practitioners

• Increased Focus on Discretionary Denials: Expect Fintiv and other discretionary denial arguments (e.g., General Plastic) to be raised more frequently.
• New Briefing: Parties must adapt to the separate, earlier briefing schedule for discretionary issues. Patent owners need to decide early whether to pursue discretionary denial. Petitioners must be ready to respond quickly.
• ITC Cases: Parallel ITC investigations are now explicit grounds for Fintiv analysis again, potentially leading to more denials in such scenarios.
• Sotera Stipulations: While still “highly relevant,” these stipulations are no longer a a talisman against Fintiv. Their strategic value may need re-evaluation.
• Merits Argument: While compelling merits are no longer a “safe harbor,” arguing the strength of the unpatentability challenge remains a factor under Fintiv Factor 6 and potentially under the Director's broader discretion. Petitioners should still highlight strong merits.
• Trial Dates: Arguments about trial date proximity should include district-specific data and potentially median time-to-trial statistics, although the weight given to scheduled dates versus statistics is less certain than under the Vidal Memo.