The U.S. Patent and Trademark Office (USPTO) has implemented a significant procedural change that fundamentally alters how patent challenges are evaluated, creating what many experts view as substantial new obstacles for patent challengers.
On March 26, 2025, USPTO Acting Director Coke Morgan Stewart issued a memorandum establishing a bifurcated review process for Inter Partes Review (IPR) and Post Grant Review (PGR) petitions filed under the America Invents Act (AIA). This new approach prioritizes discretionary denial considerations before any substantive review of a petition's merits.
Two-Stage Review Process
Under the new procedure, all patent challenges will now undergo a two-phase evaluation:
- An initial threshold analysis focused exclusively on discretionary denial factors related to parallel proceedings or previously decided issues
- A merits-based review that only occurs if the petition survives the first phase
This represents a significant departure from previous practices where discretionary and merit-based considerations were typically evaluated concurrently. The change effectively elevates procedural grounds for dismissal above substantive patent validity questions.
"This bifurcated approach is temporary in nature," according to the USPTO's announcement, which cites the Patent Trial and Appeal Board's (PTAB) current workload constraints as the primary motivation. The agency has not specified how long the interim policy will remain in effect.
Director-Level Involvement
In a notable shift, Acting Director Stewart will personally participate in discretionary denial decisions alongside at least three PTAB judges. This direct involvement from the USPTO's highest office signals the importance the agency places on managing its review docket.
The March 26 memorandum outlines several factors that will influence discretionary denial decisions, including:
- Whether the PTAB or another forum has already adjudicated the challenged patent claims
- Changes in law or new judicial precedent affecting patentability
- The strength of the unpatentability challenge
- Reliance on expert testimony
- The length of time claims have been in force
- Compelling economic, public health, or national security interests
Impact on Patent Litigation Strategy
The policy shift arrives just weeks after the USPTO rescinded its 2022 Fintiv guidance memorandum on February 28, 2025. That earlier guidance had provided patent challengers with clearer pathways to overcome discretionary denials, particularly for strong petitions facing parallel litigation in fast-track district courts.
Patent attorney Michael Johnson of Intellectual Property Partners noted, "This represents a significant rebalancing of power in patent disputes. Patent owners now have a clearer and potentially earlier path to avoiding PTAB review altogether—without ever having to debate the substantive merits of the challenge."
The change may incentivize patent owners to pursue litigation in "rocket docket" jurisdictions like the Eastern District of Texas, known for setting early trial dates. Under the factors for discretionary denial, a scheduled trial date occurring before the PTAB's final written decision (typically 18 months after petition filing) weighs against institution.
Recent Application of the New Approach
The impact of this policy shift became immediately apparent on March 28, when Acting Director Stewart issued a decision granting Director's Review in four pending IPRs (IPR2024-01025-08). The decision reversed a panel's prior institution decision, finding that the Board "did not give enough weight to the investment in the parallel proceeding and gave too much weight to Petitioner's Sotera stipulation."
The ruling determined that the efficiency and integrity of the patent system were "best served by denying review," even though the petitioner had agreed not to pursue in district court any grounds raised or that reasonably could have been raised in the IPR.
Implications for Stakeholders
For patent challengers, the new process creates a steeper uphill battle. They must now clear an early procedural hurdle just to have the PTAB consider the merits of their case. This may force companies to:
- Accelerate the preparation and filing of IPR petitions
- File petitions even before district court complaints are served in some cases
- Reconsider whether PTAB challenges remain viable given the increased likelihood of discretionary denial
Patent owners, conversely, may find the bifurcated approach advantageous. By addressing purely discretionary issues first, even meritorious petitions challenging valid patents may be denied based on procedural grounds like pending district court litigation with early trial dates.
"While this approach may increase consistency in discretionary denial decisions, it also creates substantially increased costs for patent owners who wish to raise both discretionary and merits-based arguments during the pre-institution phase," explained Sarah Williams, patent litigation counsel at Technology Law Associates.
The USPTO indicates this procedural change aims to improve efficiency, manage workload obligations, and reduce delays in ex parte appeals—critical concerns given staff reductions and retirements at the PTAB. However, the long-term implications for patent quality and litigation strategy remain to be seen as stakeholders adapt to this significant shift in the patent challenge landscape.
