USPTO Director Issues Memorandum Adding Discretionary Denial Factors Focused on U.S. Manufacturing and Small Businesses for AIA Proceedings
In a Memorandum issued on March 11, 2026, John A. Squires, Director of the USPTO, identified three new discretionary denial factors that will be considered when determining whether to institute IPR and PGR proceedings. The first two new factors relate to assessing the extent to which products accused of infringement in parallel proceedings, or patent owner’s own competitive products, are manufactured in the United States. The new third factor relates to whether the petitioner is a small business sued for patent infringement. See Memorandum at 2. The Memorandum applies to all AIA proceedings where the due date for discretionary denial briefs has not elapsed. See Memorandum at 3.
Factors (1) and (2) – Extent of Manufacture in the United States
Factor (1): “the extent to which any products accused of infringement in a parallel proceeding are manufactured in the United States or are related to investments in American manufacturing operations.” Memorandum at 2.
Factor (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 United States.” Memorandum at 2.
Analysis: Director Squires explained that in evaluating the level of manufacturing or investments in manufacturing in the United States, he will consider whether the final product is assembled in the United States, the extent to which components of a product are made in the United States, and the extent to which the products made in the United States are subject to further processing outside of the United States. See Memorandum at 2-3. Director Squires further explained that for method claims, “the relevant products are the devices used to carry out the method.” See Memorandum at 3.
Rationale: Director Squires explained that he has a statutory obligation to consider the effect of AIA proceedings’ institution standards on the economy, citing 35 U.S.C. §§ 316(b), 326(b). Director Squires provided the following rationales for assessing the extent of manufacture in relation to considering economic impacts:
- Over the last few decades, large segments of the United States’s existing manufacturing base, specifically in the electronics and computer industries, have moved overseas, causing significant economic and national security damage and threatening America’s leadership in innovation (see Memorandum at 1 citing Department of Commerce and Department of Homeland Security, Assessment of the Critical Supply Chains Supporting the US. Information and Communications Technology Industry (Feb. 24, 2022)); and
- The most frequent users of AIA proceedings are companies that admitted that they do not have a significant existing manufacturing presence in the United States and are not taking steps to invest in American manufacturing (see Memorandum at 1-2, citing Study of High-Volume Filers and Domestic University-Related Patentees in District Court Litigation at the PTAB (Oct. 2025).
Director Squires explained that these discretionary denial factors will assist the USPTO in evaluating the extent to which AIA proceedings give a tactical advantage to companies that do not manufacture or make manufacturing investment in the United States. See Memorandum at 2.
Factor (3) – Small Business Entities:
Director Squires identified, as a third new factor, assessing “whether the petitioner is a small business that has been sued for infringement of the patent at issue.” Memorandum at 2.
Analysis: With respect to small business status, Director Squires said that he would consider all relevant facts that parties raise, including whether the petitioner meets the Small Business Administration’s size standards, described in 13 C.F.R. §§ 121.801-805 and 37 C.F.R § 1.27(a), which are used when determining whether a person, business, or nonprofit organization is eligible to pay lower patent fees. See Memorandum at 3.
Rationale: Director Squires explained that while some stakeholders assert that the availability of AIA proceedings help protect small businesses, the most frequent filers are large companies. See Memorandum at 2, citing Study of High-Volume Filers and Domestic University-Related Patentees in District Court Litigation at the PTAB (Oct. 2025). Director Squires encouraged small businesses sued for infringement to identify themselves “to assist the Office in understanding how frequently small businesses use IPRs and PGRs to defend against claims of infringement.” See Memorandum at 2.
Takeaway
Director Squires’s newly identified discretionary denial factors will require parties in AIA proceedings to disclose information relating to business size and product origin, indicating that the extent of U.S. manufacture of accused products, and patent owner competitors thereto, will play an increased role in institution decisions.