USPTO Memorandum Bifurcating PTAB Institution Process Signals Shift Toward Increased Discretionary Denials in IPR and PGR
New Interim Process for Patent Trial and Appeal Board Workload Management
The USPTO has fundamentally altered the PTAB institution decision framework through a March 26, 2025, memorandum from Acting Director Coke Morgan Stewart. In a significant departure from existing practice, the memorandum details the Acting Director’s decision to bifurcate discretionary denial determinations from merits-based reviews. This update analyzes the procedural changes and their implications for PTAB practice.
Understanding Discretionary Denial Authority
The Director of the USPTO has long claimed broad statutory authority under 35 U.S.C. §§ 314(a) and 324(a) to deny institution of IPR and PGR proceedings, even when petitioners meet the threshold showing of unpatentability. The US Supreme Court confirmed in United States v. Arthrex (2021) that “Congress has committed the decision to institute inter partes review to the Director’s unreviewable discretion.” This “discretionary denial” power allows the USPTO to decline review for reasons unrelated to the technical merits of the petition — such as parallel district court litigation timing (so-called Fintiv denials), serial petitioning (General Plastic denials), or prior consideration of the same arguments (Advanced Bionics/325(d) denials).
Historically, this discretionary denial authority has been delegated to the three-judge PTAB panel assigned to each petition, which considered both discretionary and merits-based grounds simultaneously when evaluating institution. The Acting Director’s new memorandum fundamentally changes this approach by removing responsibility for decisions on discretionary denial from the PTAB’s panels and vesting it in the Director herself.
The Complex Pre-Institution Timeline Under the New Process
The new bifurcated approach creates a complex pre-institution process with distinct phases for discretionary and merits considerations:
Notably, the statutory three-month clock for the PTAB’s institution decision begins running at the Preliminary Response filing date. This creates an unprecedented scheduling challenge. If the Director must personally decide discretionary issues for more than a hundred petitions monthly, the discretionary review process could take considerable time, even with the assistance of several APJs. This delay in addressing the petition’s merits will likely consume a significant portion of the statutory window between the Petitioner’s discretionary denial brief and the institution decision, leaving the merits panel with limited time to evaluate the case if the Director decides against discretionary denial. (If the Director grants Patent Owner a discretionary denial reply, this time period for evaluation on the merits is shortened even further.) The memorandum provides no guidance on how the PTAB will manage these overlapping timelines or what will happen if the Director’s discretionary review extends too close to the statutory institution deadline, delaying assignment of a case to a merits panel.
Workload Management: Justification and Context
The memorandum explicitly cites “current workload needs of the PTAB” as the driving force behind these procedural changes, with a stated aim to “improve PTAB efficiency, maintain PTAB capacity to conduct AIA proceedings, reduce pendency in ex parte appeals, and promote consistent application of discretionary considerations.” This workload concern appears directly connected to recent federal workforce policies affecting the USPTO.
The Trump administration’s “fork-in-the-road” deferred resignation program, government-wide hiring freeze, and return-to-office mandates have anecdotally led to significant attrition among Administrative Patent Judges (APJs). With approximately a dozen APJs taking the “fork” offer, and others announcing early retirement, a reasonable estimate is that the PTAB has already lost approximately 10 percent of its judge corps in recent months. While the USPTO memorandum characterizes this situation as “temporary,” it is unclear how the situation is likely to improve in the near term. In fact, PTAB Chief Judge Scott Boalick recently notified his organization to prepare for a reduction-in-force (RIF).
However, the Acting Director’s memorandum implementing an entirely new process for evaluating discretionary denials raises questions about how workload benefits will be realized by the PTAB. Realistically, more than three APJs will need to “consult” with the Director to keep pace with the 100-plus petitions filed each month, as it is reasonable to assume that patent owners will seek discretionary denial in almost every, if not every, case. Diverting these APJ resources to a separate discretionary denial process does not appear likely to free up resources to consider the merits of IPR/PGR challenges; rather, it merely moves those resources under the Director’s direct control. The only way the bifurcated process is likely to result in a significant reduction of the PTAB’s workload will be if the new procedure leads to an increase in discretionary denials. Thus, despite the memo’s workload justification, its practical effect will likely be to increase discretionary denials, which will, in turn, reduce the overall institution rate for petitions.
New Discretionary Considerations: Expanded Scope With Little Precedent
The Director’s memorandum also substantially expands the factors that may justify discretionary denial far beyond the established framework. The factors include:
Whether any forum has previously adjudicated the patent claims’ validity.
Post-issuance changes in law or precedent affecting patentability.
The strength of the unpatentability challenge.
The extent of the petition’s reliance on expert testimony.
“Settled expectations” of the parties, including how long the patent has been in force.
Compelling economic, public health, or national security interests.
The PTAB’s workload capacity and ability to meet statutory deadlines.
Unlike the Fintiv, General Plastic, and Advanced Bionics discretionary denial considerations — which developed incrementally through PTAB precedent, with case law citations and regulatory justifications — the new factors appear to be novel and lack traditional statutory or regulatory foundation. This immediate expansion of discretionary considerations with little accompanying commentary leaves practitioners with extremely limited guidance on how these factors will be applied or weighed in practice.
Several considerations may be particularly likely to lead to increased uncertainty. The “settled expectations” factor suggests older patents might be immune from PTAB review based on their age, but the memorandum provides no guidance as to how old a patent needs to be before its validity cannot be subject to IPR. Similarly, the prospect of discretionarily denying a petition because of “the extent of reliance on expert testimony” may make petitioners question whether a detailed, comprehensive expert declaration may counterintuitively lead to denial of the petition. And from an efficiency standpoint, the “strength of the challenge” consideration will require the Director to examine the merits of each petition’s validity grounds, an evaluation which the PTAB merits panel will have to later undertake as well — a potentially inefficient duplication of effort, now built into the process.
Most concerning for stakeholders may be the explicit acknowledgment that the Director may deny institution based solely on PTAB “workload capacity.” If the USPTO begins denying meritorious challenges purely for administrative convenience, this factor risks transforming discretionary denial from a policy-based consideration into a resource management tool. It also may severely diminish the predictability of the Director’s discretionary denial evaluation — it is difficult to see how a prospective petitioner could adequately anticipate the workload demands of the PTAB three to six months in the future, when the Director will be deciding whether to deny a particular petition due to workload capacity.
Immediate Application and Strategic Considerations
The procedures outlined in the Acting Director’s memorandum apply to all IPR and PGR proceedings where the patent owner preliminary response deadline has not yet passed. For cases where the discretionary denial briefing timeline has already elapsed, patent owners have a one-month window from the memo’s date to submit discretionary denial arguments. Practitioners, therefore, must immediately adapt to these changes on behalf of their clients.
Patent owners may wish to capitalize on this shift by attempting creative new discretionary denial arguments that test the limits of the new factors announced by the Director, particularly emphasizing patent age and PTAB workload concerns. Petitioners should carefully evaluate the extent of their reliance on expert testimony and consider challenging the application of any new discretionary denial justifications that are applied without notice. All practitioners should closely monitor early decisions under this framework to identify how the Director weighs these new factors and consider whether alternative forums may now provide more predictable paths for patent challenges.
Finally, it is critical to recognize that decisions whether to institute an IPR or PGR are unappealable, and thus parties will have no opportunity to seek review of the Director’s decision whether to discretionarily deny a petition. Moreover, appellate courts will not have the ability to provide direct feedback to the USPTO on the new discretionary denial doctrines announced in the memorandum. Given that the new bifurcated process and considerations announced by the Acting Director were not the product of traditional notice-and-comment rulemaking as required by the Administrative Procedure Act, this means that the sole opportunity for stakeholders to have a voice in these rapidly developing doctrines is through case-specific briefing during pending IPR or PGR petitions. This context only heightens the importance of strategically developing arguments and counterarguments on discretionary denial under the new briefing process.
While characterized in the memorandum as “temporary,” it is reasonable to expect that these procedures will significantly impact PTAB practice for the foreseeable future. The USPTO has promised a “boardside chat” with PTAB leadership to address implementation questions, which will hopefully provide additional clarity on these sweeping changes. We will continue to monitor the significant changes to the PTAB and provide updates as warranted.
Fintiv Guidelines for Post-Grant Proceedings Involving Parallel District Court Litigation
On March 24, 2025, the US Patent & Trademark Office (PTO) released new guidance that clarifies application of the Fintiv factors when reviewing validity challenges simultaneously asserted at the Patent Trial & Appeal Board and in district court or at the US International Trade Commission.
This guidance follows the PTO’s February 28, 2025, announcement reverting to its previous guidelines for discretionary denials of petitions for post-grant proceedings where district court litigation is ongoing. That announcement rescinded the PTO’s June 21, 2022, memorandum entitled “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation,” which prevented the Board from rejecting validity challenges where there was “compelling evidence of unpatentability.”
Based on the new guidance, the Board is more likely to defer to the district court or the Commission if the Commission’s projected final determination date is earlier than the deadline for the Board’s final written decision. The PTO pointed out that a patent challenger’s stipulation not to raise the same invalidity arguments in other proceedings if the PTO institutes an inter partes review or post grant review is highly relevant but not dispositive.
This change in policy increases the likelihood that the Board will grant discretionary denials in situations involving parallel district court or Commission proceedings.
Impermissible Convoyed Sales Wash Away Damages Award
The US Court of Appeals for the Federal Circuit affirmed a district court’s finding of infringement but vacated its damages award because the award improperly included auxiliary products lacking any functional relationship to the infringed patent claim. Wash World Inc. v. Belanger Inc., Case No. 2023-1841 (Fed. Cir. Mar. 24, 2025) (Stark, Lourie, Prost, JJ.)
Belanger owns a patent related to a spray-type car wash system. A competitor, Wash World, filed for a declaratory judgment that its car wash system did not infringe the patent.
A jury returned a general verdict of infringement and awarded Belanger $9.8 million in lost profit damages. Wash World moved for judgment as a matter of law of noni nfringement based on the positions it previously raised and challenged the damages award. Wash World argued that Belanger failed to prove entitlement to lost profits for convoyed sales. The district court rejected Wash World’s arguments. Wash World appealed, challenging the district court’s constructions of three claim terms that Wash World argued were dispositive to noninfringement and the damages award for improperly including nearly $2.6 million in ineligible convoyed sales.
The Federal Circuit concluded that for two of the three claim terms, the constructions Wash World argued for on appeal were materially different from the constructions it urged the district court to adopt. The Federal Circuit emphasized that while a party is not confined to the precise wording of the constructions it advances at the district court, it must still present essentially the same dispute on appeal. Finding no exceptional circumstances, the Court deemed Wash World’s appellate positions on the two claims to be forfeited. As to the remaining term, the Court found that while Wash World had preserved the issue for appeal, the district court’s interpretation was correct.
On the issue of remittitur, the Federal Circuit first found that Wash World had properly preserved the issue for appeal and that even if it had not, exceptional circumstances would justify reaching the merits. The Court stated that it could discern the precise damages the jury awarded based on convoyed sales, and that the requirements for lost profits on such sales were plainly not satisfied.
The Federal Circuit explained that entitlement to lost profits for convoyed sales exists only where the unpatented products (e.g., dryers sold together with a patented car wash system) and the patented product together constitute a “functional unit,” like parts of a complete machine. The Court found that no evidence in the record could support such a finding and that damages awarded for sales of the unpatented products were thus improper. The Court further rejected Belanger’s argument that the jury’s return of a general verdict insulated the award from further scrutiny. The Court noted that based on the evidence presented, it was overwhelmingly likely that the jury’s verdict included the impermissible damages for convoyed sales. Therefore, the Federal Circuit instructed the district court on remand to remit $2.6 million in damages corresponding to sales of the unpatented components.
When Analyzing Likelihood of Confusion, It’s Not Just Location, Location, Location
The US Court of Appeals for the Fourth Circuit vacated a district court’s decision finding no infringement that focused on only the geographic distance between the physical locations of the two users without considering the factors bearing on any likelihood of confusion. Westmont Living, Inc. v. Retirement Unlimited, Inc., et al., Case No. 23-2248 (4th Cir. Mar. 18, 2025) (Niemeyer, Benjamin, Berner, JJ.)
Westmont Living, a California corporation that operates several retirement communities and assisted living facilities on the West Coast, sued Retirement Unlimited, a Virginia corporation that operates retirement communities and assisted living facilities on the East Coast, for trademark infringement. Westmont, which operates and markets its facilities using the mark WESTMONT LIVING, alleged that Retirement opened a new facility using the name The Westmont at Short Pump for services identical to those provided by Westmont.
The district court entered summary judgment for Retirement. The district court acknowledged that many factors are potentially relevant to determining the likelihood of confusion, but it concluded that because the parties’ physical facilities were located “in entirely distinct geographic markets,” as a matter of law “consumer confusion [was] impossible.” The district court based its holding on the Second Circuit’s 1959 decision in Dawn Donut v. Hart’s Food Stores, which held that when parties use their marks in separate and distinct markets, there can be no likelihood of confusion. Westmont appealed.
The Fourth Circuit found that the district court failed to address the parties’ competitive marketing, the locations from which they solicit and draw their customers, the scope of their reputations, and any of the nine factors for determining likelihood of confusion in the Fourth Circuit under its 2021 decision in RXD Media v. IP Application Dev. The Court explained that while not every factor necessarily needs to be considered in the analysis, the district court erred by relying solely on the fact that the parties’ physical facilities were on opposite coasts, without considering the many other factors that might bear on whether Westmont had shown a likelihood of confusion.
The Fourth Circuit disagreed with the district court’s reliance on Dawn Donut, explaining that the case stands for a narrow principle that where businesses use the same mark in physically distinct geographical markets, and their marketing and advertising are confined to those markets, there won’t be a likelihood of confusion. Given increased potential customer mobility, the internet, and the reduced influence of local radio and newspaper advertising, it is far less likely today that two businesses would operate in such physically distinct geographical markets as when the Dawn Donut rule was promulgated. In this case, both parties advertised nationwide on the internet. The Court noted that it may be especially difficult for a casual consumer to distinguish between the two companies when engaging in online research about retirement living, and the physical distance of the parties’ facilities does not eliminate that risk. The Fourth Circuit concluded that the district court’s reliance on only the geographic distance between the physical facilities of the two companies was simply too narrow an approach and remanded for further proceedings to consider all relevant factors for determining likelihood of confusion.
Crafting Composition Claims: Federal Circuit Reverses ITC on Diamond Polycrystalline Diamond Compact Patent Eligibility
The U.S. Court of Appeals for the Federal Circuit recently reversed an International Trade Commission decision that found certain composition claims for a polycrystalline diamond compact patent ineligible
This ruling provides valuable insights for companies drafting composition of matter claims in materials science, particularly when the claims involve measurable properties that reflect material structure
Companies drafting composition of matter claims should define a specific, non-natural material with measurable parameters, provide detailed specification support for enablement, and link measurable properties to structural features
In a significant decision for the materials science and patent law communities, the U.S. Court of Appeals for the Federal Circuit has overturned a ruling by the International Trade Commission (ITC) that found certain claims of a polycrystalline diamond compact (PDC) patent ineligible under U.S. patent laws. The case, US Synthetic Corp. v. International Trade Commission, decided on Feb. 13, 2025, offers important guidance on the patentability of composition of matter claims involving measurements of natural properties.
US Synthetic Corp. (USS) filed a complaint with the ITC alleging violations of customs laws known as Section 337 based on the importation and sale of products infringing its U.S. Patent No. 10,508,502 (‘502 patent), titled “Polycrystalline Diamond Compact.”
A PDC includes a polycrystalline diamond table bonded to a substrate, typically made from a cemented hard metal composite like cobalt-cemented tungsten carbide. PDCs are manufactured using high-pressure, high-temperature (HPHT) conditions. The process involves placing a substrate into a container with diamond particles positioned adjacent to it. Under HPHT conditions and in the presence of a catalyst (often a metal-solvent catalyst like cobalt), the diamond particles bond together to form a matrix of bonded diamond grains, creating the diamond table that bonds to the substrate.
The ‘502 patent describes several key properties of the PDC. It exhibits a high degree of diamond-to-diamond bonding and a reduced amount of metal catalyst without requiring leaching. The PDC’s magnetic properties reflect its composition, including coercivity, specific magnetic saturation, and permeability.
The patent discloses that USS developed a manufacturing method using heightened sintering pressure (at least about 7.8 GPa) and temperature (about 1400°C) to achieve these properties without resorting to leaching, which can be time-consuming and may decrease the mechanical strength of the diamond table.
ITC’s Initial Determination
The ITC initially found the asserted claims infringed and not invalid under Sections 102, 103, or 112 of U.S. patent laws. However, it determined they were patent ineligible under Section 101, preventing a finding of a Section 337 violation. Specifically, the ITC concluded the asserted claims were directed to the “abstract idea of PDCs that achieve . . . desired magnetic . . . results, which the specifications posit may be derived from enhanced diamond-to-diamond bonding,” and that the magnetic properties are merely side effects of the unclaimed manufacturing process.
Federal Circuit’s Analysis
The Federal Circuit focused its analysis on claim 1 and 2 of the ‘502 patent. Claim 1 recited, “a polycrystalline diamond table, at least an unleached portion of the polycrystalline diamond table including: a plurality of diamond grains bonded together via diamond-to-diamond bonding … a catalyst including cobalt … wherein the unleached portion of the polycrystalline diamond table exhibits a coercivity of about 115 Oe to about 250 Oe; wherein the unleached portion of the polycrystalline diamond table exhibits a specific permeability less than about 0.10 G∙cm3/g∙Oe.” Claim 2, depending from claim 1, further recited, “wherein the unleached portion of the polycrystalline diamond table exhibits a specific magnetic saturation of about 15 G∙cm3/g or less.”
The court emphasized that the claims were directed to a composition of matter, not a method of manufacture. It noted that USS had developed a way to produce PDCs with high diamond-to-diamond bonding and reduced metal catalyst content without leaching, addressing known issues in the field.
The Federal Circuit delved deeper into the relationship between the claimed magnetic properties and the structure of the PDC. The court recognized that coercivity, specific magnetic saturation, and specific permeability provide information about the quantity of metal catalyst present and the extent of diamond-to-diamond bonding, which were key features of the inventive PDC. As the court summarized, “Each of these magnetic properties provides information about the quantity of metal catalyst present in the diamond table and/or the extent of diamond-to-diamond bonding.”
The court also highlighted the importance of the specification’s disclosure, which included comparative data between the claimed PDCs and conventional PDCs. This data demonstrated that the claimed PDCs exhibited significantly less cobalt content and a lower mean free path between diamond grains than prior art examples. The court recognized that the prior art examples “exhibit a lower coercivity indicative of a greater mean free path between diamond grains and thus may indicate relatively less diamond-to-diamond bonding between the diamond grains.”
The Federal Circuit engaged in the two-step analysis established by Alice Corp. v. CLS Bank International. Applying Alice step No. 1, the court determined that the claims were directed to a specific composition of matter having particular characteristics, rather than being directed to an abstract idea and did not reach Alice step No. 2. The court found that, in view of the recitation of “a polycrystalline diamond table, at least an unleached portion of the polycrystalline diamond table,” a “plurality of diamond grains,” a “catalyst including cobalt,” and the limitations of magnetic properties, dimensional parameters, and the interface topography between the polycrystalline diamond table and substrate, the claims are plainly directed to matter.
In so holding, the court found the ITC erred when it concluded that the asserted claims are directed to the “abstract idea of PDCs that achieve . . . desired magnetic . . . results, which the specifications posit may be derived from enhanced diamond-to-diamond bonding.” The court also disagreed with the commission’s apparent expectations for precision between the claimed properties and structural details of the claimed composition. As the court noted, a perfect proxy is not required between the recited material properties and the PDC structure.
The court also affirmed the ITC’s finding that the claims were enabled under Section 112, indicating that the specification provided sufficient information for a person of ordinary skill to make and use the invention without undue experimentation. This determination was based on the detailed manufacturing methods and examples provided in the patent specification.
Takeaways
This decision provides valuable guidance for patent practitioners in the materials science field and reinforces the importance of carefully crafting claims and specifications to withstand Section 101 challenges. Composition of matter claims can remain patent-eligible under Section 101 even when they involve measuring natural properties, as long as they claim a non-naturally occurring composition.
When drafting claims for materials science inventions, practitioners should consider including specific, measurable parameters that distinguish the invention from naturally occurring substances or prior art.
The decision also highlights the importance of providing detailed descriptions in the specifications of how to measure claimed properties and how they relate to the composition’s structure or function.
Detour Ahead: New Approach to Assessing Prior Art Rejections Under § 102(e)
The US Court of Appeals for the Federal Circuit established a more demanding test for determining whether a published patent application claiming priority to a provisional application is considered prior art under pre-America Invents Act (AIA) 35 U.S.C. § 102(e) as of the provisional filing date, explaining that all portions of the published patent application that are relied upon by the US Patent & Trademark Office (PTO) to reject the claims must be sufficiently supported in the provisional application. In re Riggs, Case No. 22-1945 (Fed. Cir. Mar. 24, 2025) (Moore, Stoll, Cunningham, JJ.)
Several inventors who work for Odyssey Logistics filed a patent application directed to logistics systems and methods for the transportation of goods from various shippers by various carriers across different modes of transport (e.g., by rail, truck, ship, or air). PTO rejected the application under § 102(e) in view of Lettich, which claimed the benefit of a provisional application (Lettich provisional), and as obvious in view of Lettich in combination with the Rojek reference.
The inventors appealed the Lettich rejections to the Patent Trial & Appeal Board, arguing that Lettich did not qualify as prior art under § 102(e). The Board initially agreed with the inventors, but the Examiner assigned to the application requested a rehearing, asserting that the Board applied the incorrect standard for § 102(e) prior art. The Board ultimately issued its decision on the Request for Rehearing, stating that it had jurisdiction over the Examiner’s request and that the Examiner’s arguments regarding Lettich’s status as prior art under § 102(e) “[we]re well taken.” The Board amended its original decision “to determine that Lettich is proper prior art against the instant claims.” The Board then reviewed and affirmed the Examiner’s anticipation and obviousness rejections. The inventors appealed.
The Federal Circuit vacated and remanded the Board’s decision. With respect to whether Lettich qualified as § 102(e) prior art, the Court found that the Board’s analysis was incomplete. The Court concluded that the Board correctly applied the test set forth in the Federal Circuit’s 2015 decision in Dynamic Drinkware v. National Graphics by determining that the Lettich provisional supported at least one of Lettich’s as-published claims. However, the Court found that this test was insufficient because all portions of the disclosure that are relied upon by the PTO to reject the claims must also be sufficiently supported in the priority document. Although the PTO asserted that the Board had conducted this additional analysis, the Federal Circuit disagreed and vacated and remanded for the Board to determine whether the Lettich provisional supported the entirety of the Lettich disclosure that the Examiner relied on in rejecting the claims.
The Clear and Unmistakable Standard for Applying Prosecution Disclaimer
The US Court of Appeals for the Federal Circuit found that a district court misconstrued claim terms based on a misapplication of the clear and unequivocal disavowal standard and vacated its noninfringement decision. Maquet Cardiovascular LLC v. Abiomed Inc., Abiomed R&D, Inc., Abiomed Europe GMBH, Case No. 23-2045 (Fed. Cir. Mar. 21, 2025) (Reyna, Taranto, Cunningham, JJ.)
Maquet owns a patent related to a system that provides greater precision in deploying a blood pump to a patient’s circulatory system. The district court construed three patent terms. The district court construed the term “guide mechanism comprising a lumen” to include a negative limitation that the guidewire lumen “is not distal to the cannula.” The court justified this limitation by citing to the prosecution history of a related patent where Maquet disclaimed the broader claim by merely accepting the examiner’s proposed revisions. The district court also construed both guide wire terms in two other claims to include another negative limitation: “the guide wire does not extend through the free space in between the rotor blades.” The district court similarly justified this negative limitation by citing to the parent patent’s prosecution history, finding that Maquet had given up a broader version of the claim. The district court’s construction effectively limited the scope of Maquet’s claims to exclude the accused products, and the parties stipulated to the entry of a final appealable judgment of noninfringement. Maquet appealed.
Maquet argued that the district court erred in its construction of the three terms by misapplying the law of prosecution disclaimer. The Federal Circuit agreed, finding that the district court incorrectly relied on Maquet’s prosecution history to reach its conclusions on claim construction. The district court cited to an amendment made in a different (but related) patent prosecution and a different claim. The Federal Circuit explained that although the prosecution history of a related patent may be relevant, the claim limitations in the two applications must be similar in order for the prosecution disclaimer doctrine to apply. Here, the Court found that the amendment in the related patent was not sufficiently similar to the limitation at issue to constitute a disclaimer for the claim at issue. The related case claim did not claim a guide mechanism, nor did it require the lumen be in a specific position. The Federal Circuit found that the district court erred in its construction by improperly applying prosecution disclaimer.
The Federal Circuit also determined that the district court erred in its construction of the guide wire claim terms by applying prosecution disclaimer and interpreting a restriction on their scope. The Court found that while the prosecution history of the parent patent’s claims was sufficiently similar and thus relevant, Maquet did not disavow either claim’s scope during the relevant prosecution. The Court noted that mere silence in response to a notice of allowance typically does not rise to clear and unmistakable claim disavowal. The Court also observed that statements made during an inter partes review (IPR) proceeding may be used to support a finding of prosecution disclaimer, but they also must meet the clear and unmistakable standard. Here the Court concluded that Maquet’s statements made in the IPR proceeding and throughout prosecution history did not rise to the stringent level required and thus did not limit the scope of the guide wire in the claims.
Hatch-Waxman Litigation Expenses Are Deductible Under Internal Revenue Code § 162(a)
The US Court of Appeals for the Federal Circuit upheld a US Court of Federal Claims ruling that Hatch-Waxman Act litigation expenses are ordinary and necessary business expenses under § 162(a) of the Internal Revenue Code, entitling an abbreviated new drug application (ANDA) filer to deduct litigation expenses incurred defending against a patent infringement lawsuit. Actavis Labs. FL, Inc. v. United States, Case No. 23-1320 (Fed. Cir. Mar. 21, 2025) (Chen, Cunningham, Stark, JJ.)
Actavis filed ANDAs with the US Food and Drug Administration (FDA) seeking approval to market and sell a generic version of a drug already offered for sale in the United States. Per the Hatch-Waxman Act, filing an ANDA is an act of patent infringement where the ANDA holder seeks FDA approval prior to the expiration of the new drug application (NDA) holder’s patent. Following Actavis’s filing, the NDA holder brought a patent infringement lawsuit against Actavis.
Actavis subsequently treated litigation expenses incurred in defending the patent infringement lawsuit as ordinary and necessary expenses. Actavis deducted those litigation expenses on its tax returns for that year. However, the Internal Revenue Service (IRS) considered these expenses to be nondeductible capital expenditures since they were incurred “in pursuit of an intangible capital asset: namely, FDA approval to lawfully market a generic drug product in this country.”
Actavis eventually paid its tax liability but then sued the IRS in the Court of Federal Claims to recover what Actavis considered an overpayment of its taxes. The claims court agreed with Actavis, holding that Hatch-Waxman litigation expenses were deductible as ordinary and necessary business expenses. The IRS appealed.
The Federal Circuit affirmed. When determining whether Hatch-Waxman litigation expenses are deductible under Code § 162(a), the Federal Circuit uses two tests to settle the issue: the “origin of the claim” test and the “most significant benefit” test. However, as the Court emphasized, regardless of which test applied, Actavis prevailed.
The Federal Circuit first explained that Actavis prevailed under either test because patent infringement (not the FDA approval process) is what triggers incurring litigation expenses. Further evidence that the “origin of the claim rests in the patentholder’s decision to sue, and not in the ANDA filer’s decision to seek drug approval from the FDA, is the fact that infringement litigation cannot provide the ANDA filer what it wants – only the FDA can,” the Court stated.
Relying on the Third Circuit’s 2023 decision in Mylan v. Comm’r of Internal Revenue, the Federal Circuit delved into the fairness aspect of allowing Hatch-Waxman litigation expenses to be deductible. Citing Mylan, the Court explained that generic manufacturers defending against patent infringement suits “obtain no rights from a successful outcome. They acquire neither the intangible asset of a patent nor an FDA approval.” The Court also noted that brand-name drug companies in Hatch-Waxman lawsuits may deduct litigation expenses incurred while enforcing their patent rights. “[I]mposing very different tax treatment on the warring sides in an ANDA dispute, as the Commissioner advocates, is at odds with the careful statutory balance [embodied in the Hatch-Waxman Act] of improving access to lower-cost generic drugs while respecting intellectual property rights,” the Court stated.
Lastly, the Federal Circuit discussed the practical issues involved in treating Hatch-Waxman litigation expenses as nondeductible capital expenditures. The Court stated that obviously “[t]he ANDA filer would prefer not to be sued and then to obtain final FDA approval that becomes effective upon the FDA’s completion of its regulatory review, without a 30-month stay and risk of losing the litigation and needing to wait until the expiration of all pertinent patents.” Hence, defending a lawsuit should not be considered a “facilitating step in the FDA regulatory approval process,” which necessarily means that Hatch-Waxman litigation expenses did not “‘facilitate’ Actavis’ pursuit of the intangible asset of effective FDA approval of its ANDA,” the Court explained. As a result, the Court concluded that Hatch-Waxman litigation expenses should not be treated as nondeductible capital expenditures.
Matthew J. Blaney also contributed to this article.
Wyoming Bans Most Non-Compete Agreements
Wyoming just banned most non-compete agreements (Wyo. Stat. § 1-23-108): starting July 1, 2025, most agreements that restrict workers from working in competitive jobs will be void, absent some exceptions for:
High-Level Employees: Non-compete agreements with “executive and management personnel” and “officers and employees who constitute professional staff to executive and management personnel” will still be enforceable. However, the statute does not define these terms, so employers should review those roles carefully.
Sale-of-Business: Sellers and buyers can agree to non-competes when selling or transferring a business.
Trade Secrets: Employers can protect trade secrets through narrowly tailored non-compete agreements that comply with the state’s definition of trade secrets, i.e. “the whole or a portion or phase of a formula, pattern, device, combination of devices or compilation of information which is for use, or is used in the operation of a business and which provides the business an advantage or an opportunity to obtain an advantage over those who do not know or use it.” Wyo. Stat. § 6-3-501(a)(xi).
Recovery of Relocation, Education, and Training Expenses: Employers can contract with employees to recoup training, education, and/or relocation expenses if an employee leaves within 4 years, with varying repayment percentages based on tenure:
Up to 100% if employment lasted less than two yearsUp to 66% if employment was between two and three years
Up to 33% if employment was between three and four years
Special Rules for Physicians
Non-compete agreements for physicians that restrict practice are prohibited. Further, doctors may notify patients with rare disorders about their new practice location and contact information. Notably, the statute clarifies that an agreement that contains an enforceable non-compete against a physician that is otherwise permitted by law will remain enforceable.
Looking Ahead
The statute applies only prospectively to contracts signed on or after July 1, 2025. Wyoming employers and business should consult legal counsel to update or implement restrictive covenant agreements in a timely manner.
GLP-1 Receptor Agonists: Drug Litigation Overview and Trends
The recent uptick and rise in popularity of GLP-1 drugs for addressing weight loss and obesity has led to an increase in U.S. litigation involving this class of drugs. Over the past few years, litigation has focused on a wide range of issues including patent and other IP disputes, product liability, regulatory challenges, importation concerns, and legal issues concerning the availability of compounded versions of GLP-1 drugs in view of the U.S. Food & Drug Administration (FDA)-declared drug shortages.
Compounded Drugs and FDA-Declared Drug Shortages
Due to the increased popularity of GLP-1 drugs for treatment of diabetes and for weight management, many of the FDA-approved drugs have experienced drug shortages over the past few years. In contrast to the FDA-approved GLP-1 drugs, compounded drugs are typically created by licensed pharmacists for individual patient needs and are not subject to the same rigorous FDA review process for safety and efficacy. Entities may only sell compounded drugs that are identical to an FDA-approved drug when that drug is on the FDA drug shortage list. Although compounded drugs may be legally sold during a declared drug shortage, the compounded drugs must still comply with certain other legal and regulatory requirements directed to quality and safety issues.
Finding an inability of brand name GLP-1 manufacturers to keep up with patient demand for approved GLP-1 drugs, the FDA temporarily placed many of the approved GLP-1 drugs on the FDA shortage list, leading to an increase in the availability and sale of compounded drugs containing the active ingredient. This in turn led to significant litigation between brand name GLP-1 manufacturers and groups representing entities selling compounded drugs.
For example, brand name GLP-1 manufacturers have filed numerous lawsuits against entities manufacturing and selling compounded versions of their drugs, alleging a wide range of claims including failure to comply with regulatory requirements, trademark infringement, violation of consumer protection laws, and various allegations directed to mispresenting and deceiving patients as to the regulatory status of the compounded versions.
As brand name manufacturing capacity has increased to meet patient demand, the FDA has removed some of the GLP-1 drugs from the drug shortage list, leading to lawsuits filed by the compounding pharmacies against FDA. For example, FDA removed tirzepatide from the drug shortage list in October 2024. In response, Outsourcing Facilities Association filed a lawsuit against FDA in the Northern District of Texas on behalf of its members, challenging FDA’s decision to remove the drug from the drug shortage list as arbitrary and capricious. The matter was remanded back to FDA for reconsideration, and FDA issued a decision in December 2024 confirming the drug shortage was resolved. Most recently, in March 2025, the district court denied the plaintiff’s motion for a preliminary injunction, finding FDA’s decision to remove tirzepatide from the drug shortage list was proper. That case is now on appeal.
A similar round of lawsuits was filed in 2025 following FDA’s decision to remove semaglutide products from the drug shortage list.
Given the ongoing popularity and high demand for GLP-1 drugs in the U.S., we expect both sides to continue litigating over these issues.
Patent Litigation
To date, patent infringement lawsuits have largely followed the framework under the Hatch-Waxman Act applicable to generic drug manufacturers who seek FDA approval to market generic versions of approved drugs (“reference listed drugs”) by filing Abbreviated New Drug Applications (ANDAs). The ability to even file an ANDA is subject to applicable FDA exclusivity periods. One of the relevant exclusivity periods applies to New Drug Applications (NDA) for approved products containing new chemical entities (NCEs), whereby an ANDA with a paragraph IV certification may not be submitted until four years after the NDA was approved (i.e., the NCE-1 date). Another relevant exclusivity period applies when a previously approved drug is approved for a new patient population based on new clinical studies–any ANDAs directed to that new patient population (NPP) may not be approved for a period of three years.
Because the filing and/or approval of ANDAs is tied to the FDA exclusivity periods granted to the reference listed GLP-1 drugs, the timing of related patent infringement lawsuits brought under the Hatch-Waxman Act varies as well.
For example, liraglutide was first approved in 2010 as Victoza® for treatment of diabetes and later approved in 2014 as Saxenda® for weight loss. All relevant FDA exclusivity periods for liraglutide have expired, with patent litigation against potential generic competitors starting in 2017. FDA approved the first generic drug containing liraglutide in December 2024.
As another example, semaglutide was first approved in 2017 as Ozempic® for treatment of diabetes and later approved in 2021 as Wegovy® for weight management and weight loss. The NCE period for semaglutide has expired permitting the filing of ANDAs, although the three-year NPP exclusivity is still active for Wegovy® through December 2025. Patent litigation has been initiated against at least nine generic competitors, with settlements reported in connection with the first wave of lawsuits filed in 2022. New lawsuits were filed in 2024 against additional generic competitors, which remain ongoing. FDA has not yet approved any generic versions of semaglutide, and it is unclear when any such approved generic drugs may be permitted to enter the U.S. market.
The newest GLP-1 drug, tirzepatide, was first approved in 2022 as Mounjaro® for treatment of diabetes and later approved in 2024 as Zepbound® for obesity. The NCE period for tirzepatide runs through May 13, 2027, which means generic companies may not file an ANDA seeking approval for a generic version of Mounjaro® or Zepbound® until May 13, 2026, with patent infringement lawsuits expected to occur in the following months.
Two additional areas that may be ripe for future patent-related litigation challenges involving GLP-1 drugs include patent infringement claims brought against compounding pharmacies and claims challenging whether patents are properly listed in the Orange Book for certain GLP-1 drugs.
To date, name brand manufacturers of FDA-approved GLP-1 drugs have not appeared to target compounding pharmacies with patent infringement lawsuits, choosing instead to litigate other claims against these entities, as discussed in more detail above. As those litigations wrap up, it is possible that we could see additional patent infringement claims brought against entities making and selling compounded versions of the drugs.
Starting in fall of 2023, the Federal Trade Commission (FTC) announced a new policy expressing concerns over the potential anticompetitive effect of patents that may have been improperly listed in the Orange Book. The FTC followed this announcement with several rounds of letters to name brand manufacturers (including GLP-1 manufacturers), notifying them of FTC’s claim that certain patents were improperly or inaccurately listed. Similar challenges have been raised in U.S. courts (although directed to other drug classes), with the Federal Circuit reaching a decision in Teva Branded Pharm. Prods. R&D, Inc. v. Amneal Pharms. LLC in December 2025. In that case, Amneal filed a counterclaim seeking an order to delist certain device patents from the Orange Book. The Federal Circuit affirmed the district court’s delisting order, finding the device patents were not properly listable because they did not claim a specific active ingredient and instead were only directed to components of the device. Although there are a range of different patents listed in the Orange Book for GLP-1 drugs, it is worth monitoring ongoing FTC investigations and enforcement trends to the extent these may impact future Orange Book listing challenges raised by competitors.
International Trade Commission
Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337) grants the U.S. International Trade Commission (ITC) authority to resolve complaints filed by companies alleging unfair acts in the importation of products into the U.S. Although Section 337 cases typically involve allegations of infringement of various IP rights, including patents, trade secrets and trademarks, the ITC is also empowered to address other violations, including claims based on importation of non-approved drugs and Lanham Act claims based on false advertising and false designation of origin.
In addition to moving more quickly relative to most U.S. district court litigations, ITC cases involve several unique aspects, including a domestic industry requirement whereby the complainant asserting the violation must prove that it has established (or is in the process of establishing) a domestic industry that practices the IP right through a significant investment in various activities, including plant, equipment, labor, capital and/or a substantial investment in research and development or licensing. The remedies that may be awarded for a violation are extremely effective and can include either a limited or general exclusion order, enforced by U.S. Customs and Border Protection, which effectively bar the importation of products in violation of Section 337 from entering the U.S. Limited exclusion orders are limited to only the subject articles imported by named respondents, whereas general exclusion orders are more difficult to obtain and apply generally to all subject articles, regardless of who is responsible for importation. If proven, a general exclusion order can be extremely valuable to companies who are facing competition through importation of infringing or counterfeit articles from multiple entities where the responsible party is difficult to identify or routinely changes names/addresses.
At least one approved GLP-1 manufacturer (Eli Lilly) has filed a complaint with the ITC against various online pharmacies selling compounded drugs containing tirzepatide. Eli Lilly’s claims against the online pharmacies allege importation of unapproved drug products containing tirzepatide along with misuse of the Mounjaro® trademark and false and misleading statements regarding FDA approval and equivalency to the approval Mounjaro® product. In December 2024, the Administrative Law Judge (ALJ) at the ITC issued an Initial Determination partially granting summary determination against several of the accused pharmacies on the trademark, false designation and false advertising claims. In that decision, the ALJ also recommended the ITC issue a general exclusion order banning the importation of all products containing tirzepatide. In January 2025, the ITC issued a notice stating it was not going to review the summary determination order but sought further comments on public interest and remedy. A final decision on remedy is expected in April 2025.
Future Litigation Trends
Just as the U.S. market has adapted to the increase in sales of approved GLP-1 drugs, leading to FDA-declared drug shortages and the availability of compounded versions, the litigation landscape has adjusted as well with recent decisions focusing on FDA’s decision to remove these drugs from the shortage list. Likewise, patent litigation involving GLP-1 drugs is expected to evolve as FDA exclusivity periods expire in the near future, leading to additional challenges raised by potential generic drug competitors. Given the popularity of these drugs, relevant players in the market have adapted their litigation strategies to raise new legal claims, including in additional forums with significant remedies for violation of various IP rights.
USPTO Implements Bifurcated Review Process for Patent Petitions Under New Policy
USPTO Acting Director Coke Morgan Stewart announced that she will personally decide whether to deny each petition challenging a patent on discretionary grounds before the Patent Trial and Appeal Board evaluates the merits.
In a March 26 memo, Acting Director Stewart announced the new policy, which she says was being implemented for “workload needs.” This policy introduces a bifurcated review process for America Invents Act (AIA) petitions. Initially, the USPTO director, alongside at least three PTAB judges, will determine whether a petition should be denied for discretionary reasons. If discretionary denial is deemed inappropriate, the petition will proceed to a three-member PTAB panel for further evaluation based on its merits.
This new system aims to improve efficiency, manage workload obligations, and reduce delays in ex parte appeals, a critical concern given staff reductions and retirements at the PTAB. The policy also allows parties to submit briefs arguing for or against discretionary denial, with specific factors such as prior adjudications, changes in laws, expert testimony reliance, and public interests being considered.
This temporary measure will apply to open cases where deadlines for preliminary responses or discretionary denial briefs have not yet passed. The USPTO has not disclosed how long the interim policy will remain in effect, leaving room for future adjustments based on workload assessments and statutory requirements.
Also, the memo indicated that Fintiv factors still apply, but more guidance will be given to other applicable factors that will be considered and may include:
Whether the PTAB or another forum has already adjudicated the validity or patentability of the challenged patent claims;
Whether there have been changes in the law or new judicial precedent issued since issuance of the claims that may affect patentability;
The strength of the unpatentability challenge;
The extent of the petition’s reliance on expert testimony;
Settled expectations of the parties, such as the length of time the claims have been in force;
Compelling economic, public health, or national security interests; and
Any other considerations bearing on the Director’s discretion.
Two days later, on March 28, the Acting Director issued a decision granting Director’s Review in four pending IPRs, IPR2024-01025-08, which sheds further light on how the PTAB may approach discretionary denials under the recently announced procedure.
The decision is notable in how it approaches Finitiv factors 3 and 4 as well as the overall weighing of all the Finitiv factors. In particular, the Acting Director reversed the Panel’s prior decision to institute 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 (i.e., a stipulation that Petitioner will not pursue in district court any ground it raised or reasonably could have raised in the inter partes review (IPR)) and its potential to reduce overlap with the issues raised in the parallel proceeding.”
The decision noted that the Petitioners’ invalidity position before the District Court were more extensive than those presented in the IPR Petitions, for example, by combining references with unpublished system prior art which were not before the Board. The decision thus found that the Sotera stipulation did not outweigh the substantial investment made by the District Court in advancing the case and “[c]onsidering the Fintiv factors as a whole, the efficiency and integrity of the system are best served by denying review.”
What Does this Mean for Petitioners and Patent Owners?
On one hand, having director-level review will increase the consistency of decisions on discretionary denials. In the past, different panels have reached different decisions on similar discretionary denial reviews.
In addition, as the March 28 Order reflects, this process will allow the Director to quickly implement standards for discretionary denials that take into account the PTAB’s capacity to handle new petitions going forward, a goal expressly articulated in the March 26 memo.
On the other hand, having a fully separate briefing process for discretionary denials will create substantially increased cost if a patent owner wishes to raise both discretionary denial and merits-based arguments at the pre-institution phase.
AI Patent Law: Navigating the Future of Inventorship
As a patent attorney experienced in transformer-based AI architectures and large language models (LLMs), I want to share insights on the evolving landscape of AI-assisted inventions. This is particularly relevant in view of the 2024 publication of the USPTO’s AI Inventorship Guidance (“Inventorship Guidance for AI-Assisted Inventions,” published February 13, 2024, 89 FR 10043, available at https://www.federalregister.gov/documents/2024/02/13/2024-02623/inventorship-guidance-for-ai-assisted-inventions), which provides guidance to inform practitioners and the public about inventorship for AI-assisted patent claims.
To paraphrase the AI Inventorship Guidance, all patent claims must have significant contribution from a human inventor, with each claim requiring at least one natural person inventor who made a significant contribution to the claimed invention. When AI systems are used in claim drafting, practitioners must be particularly vigilant if the AI introduces alternate embodiments not contemplated by the named inventors, as this requires careful reevaluation of inventorship to ensure proper attribution. Additionally, if any claims are found to lack proper human inventorship, where no natural person made a significant contribution, then those claims must be either canceled or amended to reflect proper inventorship by a human.
Human Contribution to Invention
The USPTO requires that at least one human inventor demonstrates significant involvement in the invention process. This contribution must extend beyond presenting a problem to the AI or merely recognizing the AI’s output.
Compliance with Pannu Factors
To qualify as an inventor, a person must meet the Pannu Factors:
Significant contribution to conception or reduction to practice of the invention.*
Contributions that are not insignificant relative to the entire invention.
Activities beyond explaining well-known concepts or reiterating prior art.
Substantial Contribution to the Claimed Invention
The human inventor’s input must be meaningful when evaluated against the complete scope of the claimed invention. Examples of substantial contributions include:
Constructing specific AI prompts designed to solve targeted problems.
Expanding on AI-generated outputs to develop a patentable invention.
Designing or training AI systems tailored for specific problem-solving purposes.
What Constitutes Inventorship in AI-Assisted Innovations?
Several activities can establish inventorship in AI-assisted technologies:
Creating detailed prompts intended to generate targeted solutions from AI systems.
Contributing substantively beyond AI outputs to finalize the invention.
Conducting experiments based on AI results in unpredictable fields and recognizing the inventive outcomes.
Designing, building, or training AI systems to address specific challenges.
What Does Not Constitute Inventorship?
Certain activities fail to meet the threshold for inventorship, such as:
Recognizing a problem or presenting a general goal to the AI.
Providing only basic input without significant engagement in problem-solving.
Simply reducing AI-generated outputs to practice.
Claiming inventorship based solely on oversight or ownership of the AI system.
Practical Strategies for Patent Practitioners
Document Human Contributions: Maintain detailed records of human involvement in the invention process to establish inventorship.
Evaluate Claim Scope: Ensure each claimed element is supported by sufficient human input to meet the USPTO’s requirements.
Correct Inventorship Issues Promptly: Address discrepancies in inventorship to protect the patent’s validity and enforceability.
Drawing from my experience guiding AI-assisted innovations through the patent process, I have seen how vital these strategies are for robust IP protection.
* While the Pannu factors do mention reduction to practice, the Federal Register clarifies that “[t]he fact that a human performs a significant contribution to reduction to practice of an invention conceived by another is not enough to constitute inventorship” (https://www.federalregister.gov/documents/2024/02/13/2024-02623/inventorship-guidance-for-ai-assisted-inventions). Reduction to practice without simultaneous conception (such as in unpredictable arts) is insufficient to demonstrate inventorship. Inventorship continues to require human conception of the invention.