Andy Zappia, Nick Gallo, and Bryan Smith explore recent shifts in discretionary denial practice at the Patent Trial and Appeal Board.
In this episode of the Post-Grant Podcast, Troutman Pepper Locke Partner Andy Zappia is joined by Counsels Nick Gallo and Bryan Smith to explore recent shifts in discretionary denial practice at the Patent Trial and Appeal Board (PTAB). They discuss the implications of these changes for patent owners and petitioners, highlighting strategies for navigating the increased unpredictability in discretionary denial practice. The episode also discusses the PTAB's increasing focus on workload challenges and how that is impacting post-grant procedures.
Patents: Post-Grant Podcast — Navigating PTAB's New Approach to IPR and PGR Discretionary Denial
Host: Andy Zappia
Guests: Nick Gallo and Bryan Smith
Recorded: April 7, 2025
Aired: May 6, 2025
Andrew Zappia:
Greetings and welcome to Troutman Pepper Locke's Post-Grant Podcast series. My name is Andy Zappia, and I'm joined today by my colleagues, Bryan Smith and Nick Gallo. In this installment, we're going to take a look at the changing landscape of discretionary denial practice at the PTAB and how that's going to impact strategy for patent owners in particular, but it can impact strategy for petitioners as well.
Just to set the table a little bit, at the PTO in February, the memo issued by former director Vidal providing guidance on PTAB discretionary denial was withdrawn, and a new memo was issued last month. This has created a lot of activity and changes in strategy when it comes to discretionary denial.
But before we get into that, I think it'd be helpful to discuss what this discretionary denial issue is in PTAB practice and how we got to that guidance memo in 2022 that Director Vidal issued that has now been rescinded. Bryan, I was hoping maybe you could talk a little bit about what this discretionary denial practice is at the PTAB and some of the rules that developed around it.
Bryan Smith:
Sure. Thanks, Andy. Section 314 allows the PTAB discretion as to whether to institute trials in our inner party's review proceedings. This initially became an issue with the NHK Spring case which established that parallel proceedings could be used as a basis for that discretionary denial. For example, if a parallel district court case was set to come to a conclusion prior to the date of the final decision in the IPR proceeding, NHK Spring determined that that could be used as a basis for discretionary denial.
Once that case was in place, the PTAB then issued guidance in the Fintiv decision that further fleshed out the circumstances under which the discretionary denial would be used for a parallel proceeding and quickly go through those Fintiv factors because those are going to actually become more important because as we'll discuss later, the new memos that are coming out are resulting in a return to a more fulsome application of those factors in coming to denial decisions.
The first factor that the PTAB considers is whether the court granted a stay or whether there is evidence to suggest that the court will grant a stay. That might relate to new actual decisions that have come down from that trial court. The second factor is the proximity of the court's scheduled trial date to the projected statutory termination of the IPR proceeding itself. That's the PTAB's final written decision is due one year from the institution date. The third factor is the investment that the parties have made in the parallel proceeding before the district court.
The fourth factor is the overlap between the issues that have raised in the petition and the issues that are pending before the district court. The fifth factor relates to whether it's the same parties involved in the district court proceeding as in the IPR petition. Finally, the sixth factor relates to other circumstances that may impact the PTAB's exercise of discretion. One of those factors is the merits of the petition, which became very important on where Vidal's prior guidance but will become less important in just a sole factor, as we'll discuss a bit later.
Andrew Zappia:
Thanks, Bryan. One thing just for clarification is that this almost always comes up in the context of IPR proceedings because the vast majority of petitions filed are IPRs, like 95-plus percent. But this also technically applies in post-grant review as well.
Bryan Smith:
Yes, that's correct.
Andrew Zappia:
Yes. But there just aren't very many of those, which I think we've discussed why in a prior podcast. As far as the impact of Fintiv, a lot of petitions are getting denied on these factors over the course of time, and discretionary denial is an argument being made a lot. Let's talk a little bit about Director Vidal's 2022 guidance. How did that adjust Fintiv or add to Fintiv? You might as well pick up this one because you just talked through the Fintiv factors.
Bryan Smith:
Sure. Yes. As you mentioned, Andy, after the NHK and Fintiv decisions, there was a large uptick in the numbers of discretionary denials that were being issued by the PTAB resulting from this issue of the parallel proceedings. I think Director Vidal's guidance was, one, to reduce the number of discretionary denials and provide some further clarity to both patent owners and petitioners, and also to reduce some of the issues related to forum selection.
For example, if you were to choose a district court that was very quick, some of the rocket dockets that are known, you would be more likely to avoid a discretionary denial as the patent owner. Director Vidal provided some guidance that was meant to take some of the discretion out of the discretionary denial. In particular, there were three categories that were a little bit more certainty was provided. Those categories include when the petitioner provided a stipulation, often referred to as a Sotera stipulation, that it would not pursue and disregard the same invalidity grounds that were raised or could have been raised in the IPR petition. Under Director Vidal's guidance, filing of a Sotera stipulation became determinative and could avoid discretionary denial.
Second, Director Vidal found that parallel proceedings of the ITC would not impact discretionary denials based on the limited impact of the ITC's holding on validity. Third, Director Vidal provided a category of petitions that should avoid discretionary denial, where the petition itself presents compelling evidence of unpatentability, which is inherently subjective standard but gave some definitive statements as to how a petition would be decided when based on the strength of the merits itself.
Andrew Zappia:
Yes. Thanks for the summary. Just from PTAB practice myself, I can say that the Vidal memo did provide certainty, right? Because you do this Sotera stipulation. You would take discretionary denial off the table if it had the wording that the memo required, right? Same thing, if you had an advanced ITC proceeding, you wouldn't have to worry about discretionary denial because that didn't count anymore.
The compelling merits, I don't know how much that changed things because that's a murky standard anyways. What's compelling merits? But certainly, if you made an argument that, "Hey, my position is really strong, so don't deny it," that was a basis under that guidance to avoid discretionary denial. We've been operating under this guidance for a while. Then we come to a change to it, right? Nick, maybe talk a little bit about the explanation that came out from the current Chief Administrative Patent Judge about why it was withdrawn.
Nicholas Gallo:
Yes. Sure, Andy. I don't know if you'll find this reasoning persuasive. But basically, the Chief Administrative Patent Judge said, "Here we are three years later." Vidal’s guidance was meant to be interim, but it was never codified. Basically, on that basis, he decided to rescind the memo and restore policy to the prior guidance, which, of course, is the presidential Fintiv ruling.
Andrew Zappia:
Yes. I can mention there was a proposed rule to a regulation on this whole Fintiv, but it was never adopted. It did track Fintiv pretty closely, but it didn't advance. Now that we're back on Fintiv standard, in part, because we'll talk about the next thing that happened. But now that we're kind of back on Fintiv, does that mean that the standards that were in the 2022 memo don't matter anymore?
Nicholas Gallo:
No, not exactly. Those are still relevant. The Chief Administrative Patent Judge provided more guidance on those factors that were in Vidal’s memo, so relating to the ITC and the Sotera stipulations and the compelling merits. Basically, the judge said that those are still relevant factors, but not just positive as Vidal set forth in her memo. If you think about the ITC, basically his view is, well, it's practically difficult to assert patent claims that the ITC has determined are invalid in a remedial order, even though the ITC is not authorized to invalidate a patent. That is now a relevant factor where it wasn't for several years under the Vidal memo.
I can talk about the Sotera stipulations, too. Those are still relevant, not just positive on their own. Judge Boalick said that they are highly relevant to the discretionary denial analysis. Same thing with compelling merits, still part of a balanced assessment. We think that Sotera stipulations still have their place and should be used when appropriate.
Andrew Zappia:
It seems to me, just to look at it at a high level, is that they're just handing a lot of discretion back to the panel on discretionary denial, right? Because the memo set out certain rules. If you did X or Y, you don't have to worry about discretionary denial. Now, they're saying, "Well, you can still do the stipulation, but it's not this positive. ITC can be a basis for denial. You can make an argument based on it. The merits issue has always been there under Fintiv and the guidance." Am I reading this right? Basically, the panels on individual proceedings, they're kind of back to where they can sort of make the call on it.
Nicholas Gallo:
Yes, I think that's right. There's just less predictability, more discretion. I think that's by design. I think Judge Boalick is concerned about workload at the PTAB, and having more discretion to deny IPRs allows the PTAB judges to more appropriately balance that workload.
Andrew Zappia:
Yes. Because if you looked at, for example, in the 2022 Vidal memo, time to trial seemed like the biggest important thing, right? It really emphasized that. Is that a little different now? That was sort of the – where I used to read it. If you still had to worry about discretionary denial, for example, you didn't do a Sotera stipulation. A lot of times, you had to hang your hat on time to trial if you want to have a safe position on discretionary denial.
Nicholas Gallo:
Yes. I think that may be the most important Fintiv factor. Of course, it gives rise to all the prior issues relating to the rocket documents but –
Andrew Zappia:
Maybe it drives more cases into those fast venues because you had a better chance of getting petitions denied.
Nicholas Gallo:
Yes, I think that's right. ITC, as we know, is very fast as well. I'm not sure if it drives cases there. But more IPRs with parallel ITC actions will likely be denied under the new discretion rules.
Andrew Zappia:
Yes. Then I view the ITC change, kind of the PTO going back to this efficiency thought because, yes, the ITC can't invalidate. They can't cancel patents or claims.
Nicholas Gallo:
Right.
Andrew Zappia:
Right. It seems like they're emphasizing the whole efficiency thing because they're saying, “Look, it doesn't make sense for the ITC to go through and find an exclusion order and the patents that are found invalid elsewhere,” right? They're basically saying it's just double work. It doesn't really matter whether the ITC can actually cancel a claim.
Bryan Smith:
Yes. I think that's right. The current chief judge is very focused on practicality in that regard.
Andrew Zappia:
Yes. Well, you know, Bryan, we were just starting to get our heads around this whole world again, and then another thing came out. Acting Director Stewart then issued a memo. Tell us about this new from Acting Director. What does this new memo say? How does it change things?
Bryan Smith:
The new memo from Director Stewart created a bifurcated process to deal with the increased discretionary denials that are likely to come out of these change in policy. Basically, what it sets up is a mechanism for the PTAB to look at discretionary denial issues before getting into the merits of the case. Based on the new memo, discretionary denial issues will be first reviewed by the director herself and at least three PTAB judges to determine if they warrant discretionary denial. The discretionary denial decision will be determined at the outset as opposed to jumping into the merits. It'll be interesting to see how much a merits-based discussion comes into play, given its listing among the Fintiv factors. But certainly, this new memo sets out a discretionary denial analysis that will occur before any actual decision on institution.
Andrew Zappia:
It goes to somebody different, right? It goes to the director and a specific group of judges.
Bryan Smith:
That's correct. It'll be a very large workload increase for the director to deal with all of these discretionary denial issues, personally based on the number of IPRs that are filed each year.
Andrew Zappia:
How about the mechanics of this? Are there some new mechanics in there, right? Timing and page word limits and stuff?
Bryan Smith:
Yes, exactly. The memo set up basically a briefing scheduled to allow this issue to be dealt with in the forefront. Patent owners seeking discretionary denial can file a brief of up to 14,000 words explaining why discretionary denial is appropriate. The timing for that is within two months of the filing date that's accorded to the petition. The petitioners then get an opportunity to respond in an opposition brief of up to 5,600 words that's due one month later.
According to the memo, the rest of the briefing will remain unchanged, but it remains to see how this initial briefing on discretionary denial will impact the initial patent owner preliminary response, which would be due at the same time as the petitioner's opposition briefing.
Andrew Zappia:
Got you. Fourteen thousand words, that's the same as the preliminary response word limit, right?
Bryan Smith:
That's correct.
Andrew Zappia:
You can put a lot of arguments in there for discretionary denial if you have that many words.
Bryan Smith:
Yes. It’s assumed that these briefings would follow the Fintiv factors, at least initially until some clear guidance is developed through cases handled by the board or perhaps rejected by the director under discretionary denial.
Andrew Zappia:
Did the acting director talk about why the bifurcated approach at all?
Bryan Smith:
There's some indication from the actual title of the memo, and it's called Interim Processes For PTAB Workload Management. Reading behind that, it provides some significant insight that this is directed to allowing discretionary denial in more cases and at an earlier outset to preserve PTAB resources. Question whether it'll do that with the initial workload that's required to evaluate these discretionary denial briefings, but it should at least allow for easy cases on discretionary denial to be dealt with in an earlier fashion before the PTAB judges have to dive into the merits of the case.
Andrew Zappia:
Yes. Because I guess the way it works is this discretionary denial briefing would be done at the same time that the preliminary response would be filed by the patent owner, right?
Bryan Smith:
The briefing should actually be finalized before, on the date that the POPR is due.
Andrew Zappia:
Right. Theoretically, this panel that looks at discretionary denial, they're going to be doing that before the merits panel digs in on the merits of the petition because they could issue their decision. If they deny institution based on the discretionary denial factor, then the merits panel doesn't have to do the work of digging into the merits. That's presumably how it's going to work, right?
Bryan Smith:
Yes, that's correct. Unfortunately, it doesn't ease the burden on the parties who now have to brief this issue, in addition for patent owners, prepare their preliminary response because they won't have a determination on discretionary denial at that stage.
Andrew Zappia:
That's completely right. Do you think, Bryan, that some of the stuff that's going on at the federal government, some of the layoffs and downsizings and budget cutting was a factor in this new guidance from Acting Director Stewart?
Bryan Smith:
I think that's a reasonable conclusion. The PTAB, specifically Judge Boalick, has acknowledged that PTAB staff reduction is expected, which would reduce the PTAB judge head count potentially significantly. In view of the statutory requirements that are placed on the PTAB in order to finalize these proceedings within the timeframe laid out in the statute, the reduced workforce could be a significant issue. Certainly, it seems that increasing the options for eliminating cases based on discretionary denial would help the PTAB to deal with that workload issue.
Andrew Zappia:
Right. From a petitioner perspective, is there any way for a petitioner to feel secure now that they're in a good position on discretionary denial? Or is it a lot of uncertainty on that now?
Bryan Smith:
It's very uncertain at this time. There’s just these memos have really eliminated some very surefire ways that [inaudible 0:18:22] could go about avoiding discretionary denial. They've also introduced some additional factors into the analysis that it's unclear exactly how those are going to play out. For example, the memos mentioned diving into issues of whether expert testimony is required. It's unclear exactly how that will go into the calculation of whether a discretionary denial should be issued.
We'll see quickly as these discretionary denial decisions start to come out and what factors they have looked at primarily. But for right now, there is clearly a lot of uncertainty as to how these factors will be analyzed, and it's unclear whether there's any way for petitioner to know whether they're likely to get denied based on workload issues. I mean, certainly they can monitor the number of IPRs filed in a given year, but it's hard to come to any conclusion based on that as to whether the PTAB is overloaded with work and might be inclined to issue a discretionary denial on that basis.
Andrew Zappia:
Right. Nick, is there any practical guidance you could give to our listeners whether they're on the petitioner’s side or the patent owner’s side?
Nicholas Gallo:
Yes. I think there are some takeaways here. For patent owners, district courts with faster dockets are more attractive, again, as they were previously. The ITC, as we stated before, may see increasing popularity. Time to determinations for the ITC tend to be around 16 to 18 months, which is pretty quick and faster than most district courts. An IPR petitioner would have to file relatively quickly to have any chance of asserting that the IPR will conclude before a panel ITC action.
For petitioners, filing as early as possible remains the best strategy to avoid discretionary denial. To be able to do that, preparation is key. Petitioners want to think about if a dispute is percolating, let's identify the [inaudible 0:20:28] we might use to invalidate grounds. Let's get an expert on board. Try to do all that before the complaint is served to accelerate the petition filing. Sotera stipulations still remain the best tool, as far as we can tell from the most recent guidance to avoid discretionary denial. As long as the [inaudible 0:20:48] is tolerable, and attached to an institution as compared to a final written decision, those should still be useful to avoid discretionary denial.
In particular, if the merits are strong and the likelihood of institution on all claims is high, but other Fintiv factors weigh in favor of denial, the Sotera stipulation should be strongly considered. Basically, I would say the bottom line is we expect less predictability, more discretionary denials, all of which would benefit patent owners.
Andrew Zappia:
Yes. I'll just give an example from my own practice. This could be beneficial to any listeners who are in a similar circumstance. We had some IPRs where we already put in our preliminary response. But because some of these changes we had, we now had a discretionary denial argument that we didn't have before. We went to the board and said, "Hey, can we put in a supplemental submission on discretionary denial?” They very promptly said yes. If any of our listeners are in that circumstance where they're patting on their counsel and they've already put in their preliminary response, but they didn't make this argument because of the old rules, the board, at least in my proceedings, said, “Fine, yes. Go ahead and put in the supplemental submission.”
Nicholas Gallo:
I think that indicates an eagerness to dispose of the IPR.
Andrew Zappia:
I think my client would hope yes, but we'll see what the board wants to do. Well, look, guys, this was great. It's very interesting, and it's a changing landscape. Maybe we'll revisit this next year and see how it panned out, and we'll look at some of the stats. But I think it's safe to assume we are going to see more discretionary denials. Thanks, Nick. Thanks, Bryan.
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