USPTO issues final rule regarding process for Director Review

US Patent and Trademark Office (USPTO) Director Kathi Vidal recently issued a new final rule establishing the process for Director Review of some Patent Trial and Appeal Board (PTAB) decisions. This final rule, effective October 31, solidifies the US Supreme Court’s mandate in US v. Arthrex, codifies many aspects of the interim Director Review process, and largely mirrors the USPTO’s April 2024 proposed rule. Additionally, it brings parties clarity to the Director Review process, offers an additional and permanent layer of oversight to PTAB decisions, and grants the director broad latitude and flexibility.

The Arthrex decision and the USPTO’s interim rule on Director Review

In Arthrex, the Supreme Court held that the Appointments Clause of the Constitution was violated by the America Invents Act of 2011 (AIA)’s procedure allowing only the PTAB to grant rehearings of its decisions. Accordingly, the court determined the PTAB’s administrative patent judges needed more oversight from a president-appointed, Senate-confirmed officer when deciding the validity of patents, thereby inviting review of administrative patent judges’ decisions by the director of the USPTO.

In response to Arthrex, the USPTO announced in July 2021 that it would implement an interim rule. Following the promulgation of these interim procedures, Director Review could be requested by a party or initiated sua sponte on the director’s own accord. The interim rule detailed processes for submitting a request for Director Review, the effect of a decision on Director Review, and the mechanisms for appealing a Director Review’s decision. The popularity and success of these interim procedures is demonstrated by the increased number of petitions received by the USPTO: As of August 1, 2024, the USPTO reports receiving nearly 400 requests for Director Review, with almost half of these requests coming after July 2023 – when Director Review Institution Decisions were deemed appealable. Notably, Director Vidal granted sua sponte review in 36 cases, including one case reviewing the appropriateness of PTAB’s sanctions against a party withholding relevant evidence.

The final rule on Director Review

Effective October 31, 2024, the final rule codifies the director’s ability to review a wide range of appeals from AIA proceedings. According to a September 30, 2024 press release issued by the USPTO, the final rule explains that parties may request Director Review of a(n):

1. decision on institution

2. final decision (defined as a final written decision in an inter partes or post grant review proceeding or a final decision in a derivation proceeding)

3. decision granting rehearing of a decision on institution or a final decision

4. other decision concluding an AIA proceeding

Through codifying the practices, procedures, and timing in AIA proceedings, the final rule brings greater clarity to parties as to when and how they can request director rehearing. The final rule defines a “final decision” as both final written decisions under Title 35 of the US Code, Sections 318 and 328 for inter partes review and post grant review proceedings, as well as final decisions for rarely utilized derivation proceedings under Section 135. However, Director Review is limited to AIA trial proceedings, and is not available for ex parte appeals, including appeals from reexamination or reissue applications. Additionally, the final rule sets forth standard procedures for timing and format of a party’s request for Director Review and, notably, simplifies the time by which an appeal to the US Court of Appeals for the Federal Circuit must be filed.

The final rule also expands the director’s authority to review various types of decisions in AIA proceedings, granting power to review not only institution and final decisions, but also adverse judgments, dismissals, and interlocutory decisions on matters like discovery and supplemental evidence. Pursuant to this final rule, the director may delegate a review “subject to any conditions provided by the Director.” The director may also order sua sponte Director Review. While the USPTO explains that sua sponte Director Review is typically reserved for issues of exceptional importance, the director retains the authority to initiate review sua sponte of any issue in the proceeding as they deem appropriate.

The director’s broad authority, although initially creating some uncertainty for parties until the final rule is regularly applied, ultimately grants the director wide latitude and ample flexibility in practice. By omitting certain implementation details, the final rule leaves open the specific standard of review to be applied in Director Review, when Director Review decisions will be designated as precedential, and the overall timeframe for the Director Review process. This flexibility aims to allow the director to refine and improve the Director Review procedures as experience and demand dictates.

Key Takeaways as the USPTO begins to apply the final rule

The new final rule provides some certainty for parties as to the Director Review process in AIA trial proceedings, while still maintaining ample flexibility for the director in reviewing and deciding Director Review requests. Although this flexibility may create initial apprehension until the final rule has been routinely applied in practice, parties maintain the ability to 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.

For more information, please contact the authors.