On Oct. 1, 2024, the U.S. Patent and Trademark Office (USPTO) issued a final rule governing Director Review of Patent Trial and Appeal Board (PTAB) decisions in contested proceedings brought under the America Invents Act (AIA), Rules Governing Director Review of Patent Trial and Appeal Board Decisions, effective Oct. 31, 2024, as 37 C.F.R. § 42.75. 89 Fed. Reg. 79744 (Oct. 1, 2024).
The U.S. Under Secretary of Commerce for Intellectual Property and Director of the USPTO has utilized interim Director Review procedures to date to set forth binding policy through the designation of certain Director Review decisions as precedential. For example, the director has provided binding guidance to the board, parties and the public as to the application of institution discretion under certain circumstances. The interim procedures have also been used to resolve specific issues in proceedings without establishing binding guidance going forward.
The final rules recently issued by the office are consistent with the interim procedures under which the director has been operating since 2021. As such, Director Review will likely continue to be used similarly, at least for now. However, the newly issued rules provide ample flexibility such that the director may refine and improve Director Review processes, as experience or workload dictates, or such that a future director may alter the processes as they see fit.
Background
Since the AIA went into effect, thousands of AIA petitions for inter partes review, post grant review and derivation proceedings have been filed with the PTAB. In these proceedings, a panel of three administrative patent judges (APJs) initially determines whether the filed petition presents a sufficiently compelling case of invalidity such that a full trial should be conducted. If the panel determines to institute a trial, the case proceeds to a final decision, entered after an opportunity for briefing and evidence from both parties, as well as oral argument. That final decision may be appealed to the U.S. Court of Appeals for the Federal Circuit, but the initial decision whether to institute trial may not be appealed.
In 2021, the U.S. Supreme Court ruled that, to comply with the Constitution’s Appointment Clause, final decisions issued by PTAB APJs in AIA proceedings must be reviewable by the director. The Court explained that “the Director need not review every decision of the PTAB. What matters is that the Director have the discretion to review decisions rendered by APJs.”
To that end, the USPTO enacted interim procedures through which the director could review PTAB final decisions in AIA proceedings. Through the interim processes, Director Review could be requested by a party, or initiated sua sponte, on the director’s own initiative. The office set forth further details, including the processes for submitting a request, the director’s review of the request or decision being considered for sua sponte review, the effect of a decision on Director Review, and the mechanisms for review of such a Director Review decision.
Through these interim procedures, as of Aug. 1, 2024, the USPTO reports that it received 382 compliant requests for Director Review, of which 13 requests remained pending, 24 requests were granted, six requests were withdrawn, 337 requests were denied and two requests were sent to a delegated rehearing panel for review by an alternate panel of judges from PTAB’s senior management ranks. Additionally, the director granted sua sponte review in 36 cases.
Takeaways
The newly issued rules largely mirror the processes the office implemented on an interim basis. At a high level, “[t]his final rule provides that a party to an AIA proceeding may request Director Review in that proceeding of any: (1) decision on institution, (2) final decision, (3) decision granting rehearing of a decision on institution or a final decision, or (4) other decision concluding an AIA proceeding. In addition, the final rule provides that the director may sua sponte (on their own initiative) initiate a review of such decisions. The final rule also sets forth the timing and format of a party’s request for Director Review. The final rule addresses the impact of Director Review on the underlying proceeding at the PTAB, as well as the time by which an appeal to the U.S. Court of Appeals for the Federal Circuit must be filed. The final rule also provides that the Director may delegate a review.”
Here are four key takeaways from the issued final rule.
1. Party-driven with broad AIA scope: Parties retain the ability to initiate the Director Review process. Although not required by the Supreme Court in the 2021 case, the office has formalized the ability of AIA parties to request Director Review and has expanded the scope of decisions for which Director Review is available.
Specifically, in lieu of filing a panel rehearing request, a party to an inter partes review, post-grant review or derivation proceeding may request Director Review. Consistent with the interim process and the office’s previously issued Notice of Proposed Rulemaking, a party may request review of a decision on institution, a final decision or a decision granting rehearing of such a decision.
In this final rule, the office now also explicitly allows for review of “any other decision concluding a proceeding,” such as a decision terminating the proceeding, e.g., due to a grant of adverse judgment or a dismissal of the proceeding. The office explains that review of such a concluding decision “is consistent with the reasoning of [the 2021 case], which requires the Director to be able to review final decisions of the Board in AIA proceedings.”
The director also retains the right to initiate Director Review sua sponte.
2. Clarity with flexibility: Through its final rule, the USPTO formalizes the broad strokes and processes for Director Review, but omits certain “implementation details” and leaves the director with significant “flexibility.” For example, the final rule does not identify the specific standard of review to be applied in Director Review, but leaves that determination open to the director. Other specifically identified areas of flexibility include the designation of Director Review decisions as precedential, the issues for which the director may initiate review sua sponte, delegation of review and the time frame by which Director Review will conclude.
The rule package explains that the office will continue to provide further guidance on certain details of Director Review through the USPTO’s Director Review web page.[1]
3. AIA only: Several NPRM commenters sought an expansion of Director Review to include appeals from ex parte examination, ex parte reexamination and reissue applications, with one commenter “suggest[ing] that the Supreme Court’s [2021] decision requires Director Review of ex parte PTAB decisions.” The office declined to implement such an expansion at this time.
In response to these comments, the office explained that this final rule, promulgated under Chapter 42 of 37 C.F.R., is directed only to trial practice before the PTAB, consistent with the Supreme Court’s consideration of an inter partes review proceeding.
4. Director Review is not the end of the road: The final rule explains that a party may appeal a Director Review decision of a final decision, a decision granting rehearing of a final decision or any other appealable decision concluding a proceeding to the Federal Circuit.
Moreover, although not reflected in the final rule recently issued, the office also continues to allow a party to file one request for rehearing of a Director Review decision. The office explains that “[s]uch requests should be rare, however, and only for very focused purposes. A request for rehearing of a Director Review decision is not an opportunity to raise new issues, reargue issues, or disagree with determinations by the Director. Instead, the rehearing request must specifically identify what matter the Director Review decision misapprehended or overlooked.”[2]
The final rule retains flexibility for the office. The current ability to request rehearing, whether before or in lieu of appeal, is not formalized in the final rule governing Director Review and, as such, may be altered or eliminated in the future. Even if so, a party dissatisfied with the outcome of Director Review is not at the end of the road.
[1] See Revised Interim Director Review Process; see also 89 Fed. Reg. at 79745 n.8 (Revised Interim Director Review Process web page will be replaced by a new Director Review web page after the effective date of this rule).
[2] See Revised Interim Director Review Process at § 5.C.ii.
