USPTO Adds Three New Factors to Discretionary Denial Considerations

Need to know

When determining whether to institute inter partes review (IPR) and post-grant review (PGR) proceedings, the U.S. Patent and Trademark Office (USPTO) will now consider the parties’ size and investments in manufacturing activities in the U.S., with small businesses and businesses with more extensive domestic manufacturing investments being favored.

On March 11, 2026, USPTO Director John Squires issued a memorandum setting forth three additional factors the Director will consider when determining whether to institute IPR and PGR proceedings:

1. The extent to which any products accused of infringement in a parallel proceeding are manufactured in the U.S. 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 U.S.
3. Whether the petitioner is a small business that has been sued for infringement of the patent at issue

Motivation for these additional factors is explained by the memo, which calls attention to the need to mitigate the longstanding offshoring of the U.S.’s manufacturing base, particularly in the electronics and computer industries. The memo states that while some stakeholders argue that IPR and PGR protect American manufacturers and small businesses, offshoring trends have continued notwithstanding their availability for the past 15 years. Moreover, the memo asserts that many of the most frequent users of IPR and PGR are large companies that lack a significant manufacturing presence in the U.S. and that are not taking steps to invest in American manufacturing. The Director explains that the new factors will help to better account for the interests of entities involved in domestic production.

The memo encourages parties to address the above considerations in their briefs, as well as (1) the extent to which components of a product are made in the U.S. and (2) the extent to which products made in the U.S. are sent for further processing outside the U.S. For method claims, the relevant products for this purpose are the devices used to carry out the method. In determining whether a petitioner is a small business, the Director will consider all relevant facts, including the Small Business Administration’s size standards that would render a party eligible for reduced patent fees.

Takeaways

At a high level, the Office’s new focus on supporting domestic production is line with the Trump administration’s polices aimed at reshoring U.S. manufacturing, particularly in high-tech industries. The Director also couches the need for a more robust domestic manufacturing base in terms of national security, citing studies by the Departments of Commerce and Homeland Security highlighting the significant economic and national security damage offshoring has caused. This sentiment is consistent with Director Squires’ statements during his Senate Judiciary Committee hearing and background in leveraging intellectual property to protect U.S. businesses and manufacturing.

In practical terms, the memo may result in increased pre-institution discovery, motions, and possibly depositions concerning the parties’ relative investments in domestic manufacturing. Notably, the memo does not set specific thresholds for how much U.S. manufacturing investment or activity may sway the Director in his exercise of discretion — only that he will consider it. Practitioners should thus consider monitoring upcoming institution decisions that could provide indicators of success.