In her March 26 Memorandum on Interim Processes for PTAB Workload Management, USPTO Acting Director Coke Morgan Stewart bifurcated the responsibility of IPR and PGR institution decisions by having: (i) the director first decide discretionary considerations; and (ii) then, only if the director finds no discretionary basis for denial, a panel of three administrative patent judges decides merits and non-discretionary statutory issues. The March memo outlined relevant considerations for discretionary denial, including:
- Discretionary considerations from existing board precedent;
- Whether another forum has already adjudicated validity or patentability of the patents;
- New laws or judicial precedents on patentability after the claims issued;
- The strength of the unpatentability challenge;
- Petitioner’s reliance on expert testimony;
- Settled expectations of the parties;
- Compelling economic, public health, or national security interests; and
- Any other discretionary considerations.
Two recent decisions illustrate how the acting director will apply the “settled expectations” discretionary factor.
In the first decision, iRhythm, the acting director denied institution in five related IPRs on the basis that the petitioner’s longstanding knowledge of the patents (as shown by a decade-old information disclosure statement (“IDS”) citation) gave rise to a “settled expectation” that the patents would not be challenged. See iRhythm Techs., Inc. v. Welch Allyn, Inc., No. IPR2025-00377, Paper 10 (P.T.A.B. June 6, 2025). The parties marketed competing heart monitors, were embroiled in parallel district court litigation, and the petitioner “ha[d] an established and public track-record of monitoring existing patents” including the challenged patents. The patent owner sought discretionary denial of the petition, including arguments about the parties’ “settled expectations.”
In denying institution in iRhythm, the acting director noted that several discretionary denial factors, including the traditional Fintiv factors, did not support discretionary denial. The acting director nonetheless found that the 2012 issuance of the earliest challenged patent and petitioner’s 2013 IDS citation evidenced early knowledge of that patent and “failure to seek early review,” which gave rise to an expectation that no challenge would be made. Although the acting director referenced a “holistic assessment of all of the evidence and arguments presented,” the analysis of the “settled expectations” of the parties is the only factor discussed, and so appears to have been critical, if not dispositive.
In the second decision, Dabico, the acting director extended the logic of iRhythm to deny institution on the ground that “the challenged patent has been in force almost eight years, creating settled expectations.” See Dabico Airport Sols., Inc. v. AXA Power ApS, No. IPR2025-00408, Paper 21 (P.T.A.B. June 18, 2025). Unlike in iRhythm, there was no evidence of the petitioner’s longstanding knowledge of the challenged patent, nor were the parties engaged in parallel district court litigation. Notably, in arguing for discretionary denial, the patent owner did not even argue settled expectations (and the petitioner did not raise it in response).
In again denying institution, the acting director noted the public availability of patent applications and issued patents and determined that “[a]s such, actual notice of a patent or of possible infringement is not necessary to create settled expectations.” Further, the acting director interpreted the March memo to put the onus on both parties to identify reasons why a petition should or should not be instituted, and faulted the petitioner for “not provid[ing] any persuasive reason why an inter partes review is an appropriate use of Office resources.”
These recent applications of the “settled expectations” discretionary denial consideration are particularly relevant to Hatch-Waxman litigants, because the branded company is required to list certain relevant patents in the Orange Book after its product is approved by the U.S. Food and Drug Administration. Such listing provides public notice of the patents even beyond that present in Dabico. Generics may argue that unique incentives under the Hatch-Waxman Act create the opposite expectation—that the patents will be challenged several years in the future. In response, branded companies may argue that the USPTO need not expend resources on the review of patents that will almost inevitably be challenged later in district court. In weighing these arguments, will the acting director consider inter partes review of Orange Book-listed patents to be “an appropriate use of Office resources”? This remains to be seen.
Going forward, generics may need to pursue any Patent Trial and Appeal Board (“PTAB”) challenges shortly after Orange Book listing to avoid denial based on settled expectations. Even then, the acting director may still determine that inter partes review is not appropriate because of the unique circumstances of the Hatch-Waxman framework. In the meantime, pharmaceutical patent owners should consider raising this argument in any IPR involving patents that have been issued and listed in the Orange Book for a significant period of time.
