By Joshua Rich –

On Friday the 13th, the U.S. Court of Appeals for the Federal Circuit issued its decision in Apple Inc. v. Squires, which turned into a Nightmare on Madison Place for Apple’s chances to challenge the use of (now obsolete) NHK/Fintiv factors for IPR institution.  Although the appeal dealt with a narrow administrative law issue – whether the adoption of the factors fell within an exemption from the requirement of notice-and-comment rulemaking – the effect of the decision is far broader.  The Federal Circuit’s opinion suggests that the only limitations on the USPTO Director’s discretion in deciding whether to institute post-grant proceedings will be either Constitutional or self-imposed.  As a result, Apple’s challenge has established as binding precedent the exact opposite of what it wanted – (nearly) absolute discretion for the USPTO Director to deny institution with no formal rulemaking required.

The Apple case started because Director Iancu designated as precedential two Patent Trial and Appeal Board decisions: NHK Spring Co. v. Intri-Plex Techs., Inc., IPR2018-00752, 2018 WL 4373643 (P.T.A.B. Sept. 12, 2018) (made precedential on May 7, 2019) (“NHK“), and Apple Inc. v. Fintiv, Inc., IPR2020-00019, 2020 WL 2126495 (P.T.A.B. Mar. 20, 2020) (modifying NHK, made precedential on May 5, 2020) (“Fintiv“).  As Director Vidal characterized those two decisions (in a prospective interim guidance memorandum regarding considerations for future decisions),[1] the NHK and Fintiv cases identified six non-exclusive factors – referred to as the Fintiv factors – that the PTAB would consider in exercising discretion whether to institute IPRs or PGRs in light of parallel patent infringement litigation:

(1) whether a stay exists in the parallel litigation or would likely be granted if a proceeding is instituted;

(2) proximity of the court’s trial date to the PTAB’s projected statutory deadline for resolution of the post-grant proceeding;

(3) investment in the parallel proceedings by the court and parties;

(4) overlap between issues raised in the petition and in the parallel litigation;

(5) whether the petitioner and the defendant in the parallel litigation are the same party; and

(6) other circumstances that impact the PTAB’s exercise of discretion, including the merits.

Unhappy with the adoption of those factors through an informal process, Apple and several other large high-tech companies sued under the Administrative Procedure Act (“APA”) to prohibit the PTAB from applying them in the absence of notice-and-comment rulemaking, as well as because they exceeded the Director’s statutory authority.

In Apple Inc. v. Iancu,[2] Judge Davila of the U.S. District Court for the Northern District of California dismissed Apple’s Complaint for lack of standing.  Specifically, the District Court found that 35 U.S.C. § 314(d) robbed the asserted challenge of justiciability.  Section 314(d) states, “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”  In two cases since the enactment of § 314(d),[3] the Supreme Court had found that the term “nonappealable” really meant what it said:  in those cases, the Court held that the USPTO Director’s decisions to institute review of unchallenged claims or application of the time bar in § 315(b) simply could not be challenged in litigation.  Analogizing to those cases, the District Court recognized that the Fintiv factors were closely related to the Director’s decision whether to institute inter partes review, and therefore unreviewable.  He could not “deduce a principled reason why preclusion of judicial review under § 314(d) would not extend to the Director’s determination that parallel litigation is a factor in denying IPR,” and therefore would have required inquiry into statutorily unreviewable decisions by the Director.  Because that was forbidden, Judge Davila dismissed Apple’s claims as unreviewable.

Apple appealed.  In Apple Inc. v. Vidal,[4] the Federal Circuit provided Apple with a glimmer of hope that it could challenge the Fintiv factors.  Specifically, although it affirmed the decision that the Director’s decisions could not be reviewed on the basis of exceeding statutory authority, it reversed the finding that the rule establishing the Fintiv factors was unreviewable as a matter of rulemaking without notice and comment under § 553 of the APA.  To be clear, the Federal Circuit did not reach the merits of the question, it just found that the APA challenge would be justiciable because it asserted a procedural question, not a substantive one.  Section 314(d) established a clear bar to substantive review of a Director’s institution decisions, but not necessarily a bar to review of the procedures adopted.  The Federal Circuit therefore remanded the case to the District Court to determine whether notice-and-comment rulemaking was required to adopt the Fintiv factors.

On remand, the District Court found that the Director was not required by the APA to go through notice-and-comment rulemaking to adopt the Fintiv factors.[5]  Generally, the APA requires a government agency to go through the laborious process of notice-and-comment rulemaking when adopting new rules.  But there are exceptions; under § 553(b) of the APA, an agency does not have to engage in that process when adopting (1) interpretative rules; (2) general statements of policy; or (3) rules of agency organization, procedure, or practice.  Basically, the question comes down to whether a rule is “substantive” (and requires notice-and-comment rulemaking) or instead falls into one of the APA’s exceptions.  To make that decision, the District Court considered four factors: whether application of the Fintiv factors (1) affects individual rights and obligations; (2) operates prospectively; (3) leaves the PTAB free to exercise discretion and consider the individual facts before it in a given case; and (4) has binding effects, establishes a binding norm, or is otherwise determinative of any issues or rights.

The District Court found the first, third, and fourth factors weighed against requiring notice-and-comment rulemaking.  On the first factor, because the Director is never required to institute post-grant proceedings (as the Supreme Court had said in SAS Inst., Inc. v. Iancu),[6] there is no individual “right” to review that could be affected.  One the third factor, the District Court admitted struggling.  But the fact that the Fintiv factors were expressly not exclusive, and that the final one allowed consideration of “other circumstances that impact the PTAB’s exercise of discretion,” led Judge Davila to conclude that the PTAB retained discretion to consider the facts of any given case.  In reaching that conclusion, the District Court rejected the Director’s argument that “her own complete discretion to deny institution of IPR means that she may set forth instructions that would require the Board to make specific institution decisions in specific circumstances as a general statement of policy” – an issue that would be handled differently on appeal.  Finally, with regard to the fourth factor, the District Court was persuaded by the Director’s argument that the Fintiv factors are not outcome-determinative.  A strong showing of some other, unidentified factor may overcome showings of the identified factors.  The District Court expressed sympathy for Apple (and its fellow plaintiffs) for their:

[F]rustration that the Board has placed a greater emphasis on efficiency between the combined PTAB and district court systems.  However, although Plaintiffs are doubtless unhappy with the outcomes of their petitions for IPR when those petitions are denied, including where the Board considered the Fintiv factors, Plaintiffs’ claims based on the allegedly unfair or absurd results have been dismissed, and the outcome-based argument does not persuade the Court because the express language of Fintiv, as well as the June 2022 Memo and other guidance from the Director, make clear that the Board undertakes a holistic analysis when determining whether to exercise its discretion in denying or instituting IPR.

Apple again appealed.  But during the pendency of the appeal, there was a change of administrations and with it, a sea change in how IPR institution would be handled.  First, on February 28, 2025, Acting Director Stewart rescinded Director Vidal’s June 22, 2022 memorandum regarding the application of the Fintiv factors.  Second, in March 2025, Acting Director Stewart then issued her own guidance and processes that involved bifurcating the discretionary factors (which would be resolved by the Director in consultation with PTAB judges) and substantive review (which would continue to be done by PTAB judges).  Third, once Direct Squires took office, he issued an October 17, 2025 letter in which he indicated he would personally make institution decisions based on both discretionary and substantive factors.[7]  Thus, the current situation is more extreme than the one that originally gave rise to the Apple litigation:  discretionary denial is not bounded by even the Fintiv factors.

Perhaps because of the change of responsibility from the PTAB to the Director, the Federal Circuit panel (Judges Lourie, Taranto, and Chen) viewed IPR proceedings through a fundamentally different lens than the District Court.  The District Court considered how the Fintiv factors would affect the PTAB in its quasi-judicial role; the appellate panel considered the Fintiv factors (and the 2022 implementing memorandum) as “instructions” from the Director to the PTAB.  That change of focus doomed Apple’s arguments from the start.

Because it viewed the application of the Fintiv factors as “instructions” to the PTAB, the Federal Circuit easily determined that they constituted a “general statement of policy” expressly exempted from the requirement of notice-and-comment rulemaking by § 553(b) of the APA.[8]  The panel found it critically important that “the NHK–Fintiv instructions are not binding on the agency, i.e., on the statutory decisionmaker—the Director.”  Unlike the District Court, the Federal Circuit credited the Director’s argument from below that “her own complete discretion to deny institution of IPR means that she may set forth instructions that would require the Board to make specific institution decisions in specific circumstances as a general statement of policy,” and essentially used that reasoning as the linchpin for its decision.  The panel focused on another point with regard to the first factor that it found important and the District Court did not:  that beyond there being no “right” to institution of post-grant proceedings, there is no alteration of the parties’ legal statuses if post-grant proceedings are not instituted:

A non-institution decision, which is protected as a matter of unreviewable discretion (constitutional issues aside), leaves a patent challenger’s actual legal rights and obligations unchanged—what they would be if Congress had not enacted the IPR regime (which it enacted only with protected Director discretion about institution).  A non-institution decision has no legal effect on the underlying patent rights and obligations.  Challengers are “free to litigate [a challenged patent’s] claims’ validity in [their] own district court case.”  Mylan Laboratories [Ltd. v. Janssen Pharmaceutica, N.V.], 989 F.3d 1375, 1383 [(Fed. Cir. 2021)].  And they may seek reexamination in the PTO under 35 U.S.C. ch. 30, §§ 301–07.

Thus, the Federal Circuit’s decision expanded the importance of the Apple case in two ways.  First, it made it clear that only rules that would bind the Director, not rules he promulgated to the PTAB regarding how to exercise his discretion, could possibly be considered “substantive” rules.  Second, it established that any rules that discouraged institution would always fail the first factor of the test for “substantive” rules because non-institution does not alter a challenger’s legal rights.

The end result of the Apple litigation is that the Director has even more latitude than he did when the case started.  The case established that notice-and-comment rulemaking will not be required for any “instructions” to the PTAB for making institution decisions, far beyond just the Fintiv factors.  In essence, it hands the Director unbounded discretion (short of some Constitutional infirmity) to reject institution.  And while the rules proposed by Director Squires in October might just run afoul of the Constitution,[9] if they are formalized the Federal Circuit has made the USPTO’s defense much easier.

Apple Inc. v. Squires (Fed. Cir. 2026)
Panel: Circuit Judges Lourie, Taranto, and Chen
Opinion by Circuit Judge Taranto

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[1] For more explanation of the 2022 Vidal memorandum, see https://patentdocs.org/2022/06/26/uspto-provides-guidance-on-ptab-discretionary-denials-of-challenges-based-on-parallel-litigation/.

[2] No. 5:20-cv-06128-EJD, 2021 WL 5232241 (N.D. Cal. Nov. 10, 2021).

[3] Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016); Thryv, Inc. v. Click-to-Call Technologies, LP, 140 S. Ct. 1367, 1373 (2020).

[4] 63 F.4th 1 (Fed. Cir. 2023).  Because the action was brought against the USPTO Director as a government official, the name of the defendant changed with the changes in the USPTO Director.

[5] Apple Inc. v. Vidal, No. 20-CV-06128, 2024 WL 1382465 (N.D. Cal. Mar. 31, 2024).

[6] 138 S. Ct. 1348, 1355 (2018) (“The Director, we see, is given . . . the choice ‘whether’ to institute an inter partes review.”).

[7] See https://patentdocs.org/2025/10/19/new-director-overturns-ptab-procedural-precedents-part-i/.

[8] Before reaching the merits, the Federal Circuit had to determine that the intervening actions by Acting Director Stewart and Director Squires did not render the case moot.  Technically, because Director Squires did not revoke the precedential designation of NHK and Fintiv, they could spring back into action if he decided to re-delegate discretionary decisions to the PTAB.

[9] See https://patentdocs.org/2025/10/19/uspto-proposed-new-rules-limiting-the-availability-of-inter-partes-review-but-are-they-legal/.