In a set of astonishing identical Director Review decisions, the Acting USPTO Director discretionarily denied five IPR petitions whose proceedings would have concluded over seven months before the underlying patent infringement suit would have gone to trial. The Acting Director reasoned that the petitioner waited too long to file its IPR petitions because, even though it knew about the patents years earlier, the petitioner waited until after the patent owner sued for infringement to file the petitions. Never mind that the patent owner waited almost as long to sue the petitioner after the petitioner’s products received FDA approval.
The Litigation
The Patents Issued Before the Petitioner Went Into Business
In requesting discretionary denial of the five petitions, the patent owner spent the first 28 pages of its 36-page brief attacking the merits, including arguing the petitioner’s allegedly unclear grounds for IPR institution; the petitioner’s allegedly unclear claim construction; the petitioner’s overreliance on expert testimony; and the petitioner’s alleged reliance on non-prior art documents. The patent owner spent the last six pages arguing other Fintiv factors that govern the exercise of discretion. In between all this, the patent owner argued that the petitioner’s knowledge of the patents at least as early as 2013 required discretionary denial because of the patent owner’s expectations that no one was going to challenge the validity of the patents.
The Petitioner Was in Business Long Before the Patent Owner Sued
In opposing discretionary denial, the petitioner filed a 38-page brief, spending the first 32 pages opposing the patent owner’s first several arguments attacking the merits, and the last five pages arguing other Fintiv factors; and a little over a page arguing that the parties’ “expectations” were not settled, because the patent owner did not attempt to enforce of any of the patents until 2024, despite the petitioner’s products receiving their first FDA approval in 2012. The petitioner argued that its own “expectations” were that it did not need to worry about the patents unless and until the patent owner tried to enforce them, which it finally did in 2024.
The Acting Director Bought the Arguments in the Middle
In a very brief decision, the Acting Director acknowledged that the IPRs would be done before the district court trial; that the parties had not yet invested very much in the district court case; and that there was a high likelihood that the district court would stay the litigation upon institution. Normally, these are very strong arguments for institution of an IPR. The Director also dismissed the patent owner’s arguments about overreliance on expert testimony, a circumstance which could favor discretionary denial.
Nevertheless, the Acting Director accepted the patent owner’s argument that the length of time that the petitioner waited to file the IPRs created a settled expectation for the patent owner that its patents would be free from attack. The Acting Director relied on this factor, apparently far more than any other, in discretionarily denying the petitions. There was no mention of the patent owner’s waiting years to file the lawsuit which justified the cost of the IPR petitions, and that the patent owner’s delinquent enforcement of the patents would have created the opposite expectation for the petitioner, that is, that the patents would not be enforced.
What About the Cost of “Early Review”?
The petitioner did not explain the length of time that the patent owner should have known that the petitioner was in a competing business. However, the patent owner touted itself as a market pioneer; in contrast, at the time the patents began to issue, the petitioner was not yet in business. The petitioner was still just a startup by the time the most recent patent issued.
It may have been relevant that the petitioner did not cite to any documentary evidence substantiating its date of entry into the competing business. Further, the petitioner did not emphasize that the cost involved in an early challenge of the patents was not justified in the absence of patent infringement litigation, which the patent owner waited a very long time to initiate.
Indeed, for a relatively young startup company, the cost of unilateral action would have been prohibitive. The USPTO fees alone for the five IPR petitions would have been at least $120,000, and as much as $200,000. The attorneys’ fees and expert witness fees would have been some fair multiple of that. Moreover, the startup would also have had to spend money to determine, of all the patents that may be considered potentially relevant to a product, which patents should be the subject of IPR, not necessarily limited to the patent owner’s patents here.
What About the Delay in Filing a Lawsuit?
The petitioner mentioned its own expectation that, having gone several years in business without being sued, the patent owner was not going to take any action.
It is common for patent owners to wait to sue a company until there are substantial damages to recover. With the lower likelihood of injunctive relief in recent years, threat of significant damages can be the best lever to get a competitor out of the business.
In the litigation, the patent owner charged the petitioner with willful infringement. The petitioner moved the court successfully to have the willful infringement charges dismissed. Accordingly, in an amended complaint, filed in February 2025 (two months after the petitioner filed the IPR petitions), the patent owner added a fifth patent, but deleted the charges of willful infringement.
The court’s order to remove the willful infringement charges gives rise to a very reasonable conclusion that the petitioner was right to wait for litigation to seek to have the patents declared invalid. The petitioner’s opposition to the discretionary denial request did not come until over two months after the second amended complaint. The petitioner could have mentioned the court’s order, but for some reason did not.
Conclusion – Do Not Shortcut Arguments Opposing Discretionary Denial
A key lesson for petitioners to take away is this: Never give discretionary denial arguments short shrift. There were some very interesting and helpful facts that petitioner could have substantiated here, including the patent owner’s court-ordered withdrawal of willful infringement allegations again the petitioner, which might have resulted in a different outcome.
It is surprising that the Acting Director appears to have based discretionary denial on about four percent of the total discretionary denial briefing, despite finding that a majority of the briefing (and a majority of the Fintiv material factors) favored letting the IPR petitions go forward. Equally surprising is the Acting Director’s “doubling down” on this position in her recent remarks before the Intellectual Property Business Congress (IPBC).
The Acting Director’s decision and subsequent comments essentially instruct prompt filing of petitions for IPR upon becoming aware of the existence of potentially relevant patents, irrespective of whether the company is a defendant in a patent infringement suit on that patent. This effective requirement would vitiate the one-year grace period afforded under § 315(b) for an accused infringer to go to the PTAB to invalidate a patent-in-suit. Moreover, because of the difficulty in predicting which patent owners might sue for patent infringement, potential defendants could be forced to file more IPRs rather than fewer, thereby undergoing even more expense, and increasing the PTAB’s workload still further. The effects of the USPTO’s position would appear to run counter to the Acting Director’s stated desire to reduce PTAB workload.
Moreover, the Acting Director’s instruction to potential petitioners does not take into account recent Federal Circuit decisions in Allgenesis, Platinum Optics, and Incyte, requiring a petitioner to have reasonable apprehension of potential infringement liability in order to have Article III standing to appeal a PTAB decision unfavorable to the petitioner.
Watch this space for continuing analysis of this new and rapidly developing area of PTAB practice.