Case Study for Avoiding USPTO Director’s Discretionary Denial of Institution in AIA Proceedings

On June 15, 2026, USPTO Director John Squires issued, and designated informative, a decision declining to discretionarily deny institution of a series of seven inter partes review (IPR) petitions filed by Tesla, Inc. See Tesla, Inc. v. Bulletproof Property Mgmt., LLC, IPR2026-00204, etc., Paper 14 (Squires June 15, 2026) (informative) (“Tesla”).

Tesla is worth reading because it provides at least one case study of how to avoid discretionary denial of institution of an IPR by the Director. The Director currently decides all institution decisions himself, and most often in summary notices that provide little to no analysis of the basis for the decision. Thus, Tesla provides some additional insight we do not often see. Notably, Tesla highlights at least five considerations supporting the decision.

No District Court Trial Date

In co-pending litigation, the district court had vacated its originally scheduled trial date, therefore currently leaving no trial scheduled at all. Thus, no evidence existed that the district court might reach the merits of validity before the PTAB could issue a final written decision, as relevant to Fintiv jurisprudence. See Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB March 20, 2020) (precedential May 5, 2020).

“Broad Stipulation” in Relation to System Prior Art

The petitioner, Tesla, stipulated beyond the usual Sotera stipulation in what the decision calls a “broad stipulation.” Specifically, Tesla stipulated it would not advance in the parallel district court litigation any ground that it reasonably could have raised in an IPR (i.e., a regular Sotera stipulation), but also “any other ground based on a combination of system art with any prior art reference asserted as the basis of a ground in each IPR.” Thus, Tesla gave up the option of pursuing invalidity challenges in district court based on “any other ground” based on the patents and printed publications cited in its petition in combination with system prior art.

Interestingly, last year, the Federal Circuit addressed the issue of system prior art and IPR estoppel in Ingenico Inc. v. IOENGINE, LLC, 136 F.4th 1354 (Fed. Cir. 2025). Ingenico held that estoppel under 35 U.S.C. § 315(e)(2) did not impact the ability of a supplier defendant to raise system prior art—even if it was cumulative of or substantially identical to prior art cited in a prior IPR—when alleging the claimed invention was known or used by others, on sale, or in public use. As stated by the Federal Circuit, “IPR estoppel does not preclude a petitioner from relying on the same patents and printed publications as evidence in asserting a ground that could not be raised during the IPR, such as that the claimed invention was known or used by others, on sale, or in public use,” for example based on system prior art. Id. at 1366. Tesla’s stipulation discussed in the informative decision, thus, appears to give up more bases for challenging the patent in district court than required by the IPR estoppel statute—Tesla gave up the ability to raise any arguments in district court based on the patents and printed publications cited in its IPR petitions combined with system prior art.

Examiner Error

Here, although one reference cited in all grounds in the petitions was previously before the examiner during prosecution through an IDS (at least in most of the challenged patents), the examiner did not apply that art in any rejection nor consider any other prior art cited in the petitions. Moreover, the petitioner persuasively argued that the examiner overlooked teachings in that prior art that disclosed the identified allowable subject matter in the claims, i.e., demonstrated a material error by the examiner.

No Settled Expectations for Patents One to Two Years Old

The Director points out that all of the challenged patents had not been in force for a significant period of time because they issued between 2024 and 2025. Thus, “Patent Owner has not developed strong settled expectations that favor discretionary denial as to these patents.”

Petitioner’s Evidence of U.S. Manufacturing

The Director was persuaded by Telsa’s evidence of its manufacturing activities in the U.S., including specifically that it manufactures the accused products in the U.S. The patent owner alleged that the accused products “comprise 30% to 40% of components sourced in foreign countries,” but failed to provide supporting evidence.

It is also of note that this decision appears to be the first that discusses and relies on the Director’s March 11, 2026 memorandum, entitled Additional Discretionary Institution Considerations – U.S. Manufacturing and Small Business Use of AIA Proceedings, in rendering a discretionary decision. As relevant here, one of the discretionary considerations listed in the U.S. Manufacturing memo is “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.” The decision notes that Tesla included specific evidence of its manufacture of the accused products in the U.S. This consideration also is what the Office has highlighted on the PTAB’s precedential and informative decisions website as to why the decision was designated informative.

What To Know

Tesla presents a number of reasons why the petitioner avoided a discretionary denial of institution in these cases. Notably, any one of those reasons may weigh against discretionary denial, as a general matter. Thus, it makes sense for parties on both sides to take all of such considerations into account in their decision-making and briefing. In addition, the reasons discussed in Tesla are consistent with prior guidance and other informative and precedential decisions since March 2025. This could indicate that the landscape of discretionary denial considerations in AIA proceedings is stabilizing somewhat under the current administration. That said, continued and careful monitoring of this administration’s policies by all stakeholders is certainly prudent. For now, however, guidance of this nature provides helpful information for everyone who wants to understand the lay of the land.