USPTO Director Squires Adds Three New Discretionary Factors for Institution Decisions

1. The extent to which any products accused of infringement in a parallel proceeding are manufactured in the United States or are related to investments in American manufacturing operations.

2. The extent to which any products made, sold, or licensed by the patent owner that compete with the accused products are manufactured in the United States.

3. Whether the petitioner is a small business that has been sued for infringement of the patent at issue.

Read the Memorandum here.

When addressing manufacturing, the USPTO has directed parties to discuss “not only assembly of the final product in the United States, but also the extent to which components of a product are made in the United States and the extent to which products made in the United States are sent for further processing outside the United States.” To determine whether an entity is a “small business,” the USPTO will consider “the Small Business Administration’s size standards … that would render a person, business, or nonprofit organization eligible for reduced patent fees.” Under the current Small Business Administration regulations, an entity “[w]hose number of employees, including affiliates, does not exceed 500 persons” can be eligible for reduced patent fees. 13 C.F.R. § 121.802.

The memorandum applies immediately to all pending IPRs and PGRs where “the due date for a patent owner discretionary brief has not yet elapsed.”

Justifying these new factors, the Director noted the significant offshoring of American manufacturing — and the associated risks to economic and national security — that has continued despite the availability of IPR and PGR proceedings for 15 years. Additionally, many frequent IPR petitioners are large companies without substantial US manufacturing operations. These conditions have caused the Director to reassess whether the current institution factors adequately support the interests of entities investing in domestic manufacturing.

The Memorandum Makes Available New Arguments for and Against Institution

The memorandum makes available new arguments in favor of the institution. Petitioners can now point to facts such as domestic manufacturing of its accused products and foreign manufacturing of the patent owner’s products as considerations supporting the institution. Additionally, petitioners that qualify as small businesses can also highlight their small business status in opposition to a discretionary denial. 

Conversely, companies that have made investments in domestic manufacturing will leverage this memorandum in arguing for discretionary denial of IPR and PGR petitions filed against their patents. Particularly in instances where companies are asserting their patents against accused products that are manufactured abroad, patent owners will argue that IPR and PGR institution will adversely affect “the economy and the integrity of the patent system” — two considerations emphasized by this memorandum.

New Considerations for Discretionary Briefing

Discretionary briefing will likely become more fact intensive following this memorandum. Briefing the USPTO’s new discretionary factors will necessitate creating a factual record concerning domestic manufacturing investment, manufacturing footprint, and product supply chain. Small businesses may also need to make a showing of its corporate structure, affiliations, and number of employees. To create this factual record, practitioners will likely be relying on employee declarations and business records. Companies that are or will likely be engaged in Patent Trial and Appeal Board (PTAB) activities should consider preemptively collecting supporting documentation in order to meet PTAB deadlines.