USPTO Discretion: PTAB Memo Considers American Manufacturing Operations and Investment
On March 11, 2026, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office John A. Squires released a Memorandum outlining additional discretionary institution considerations for inter partes review (IPR) and post-grant review (PGR) proceedings (Memo, p. 1).
The directive—Additional Discretionary Institution Considerations - U.S. Manufacturing and Small Business Use of AIA Proceedings—focuses heavily on American manufacturing operations, domestic investments, and the use of Patent Trial and Appeal Board (PTAB) proceedings by small businesses (Memo, p. 1).
The guidance introduces new factual inquiries for practitioners preparing petitions and preliminary responses.
Still, based on the memo and its context, a discretionary denial feels all-but-presumed at the PTAB right now.
Petitioners will likely hesitate to file IPRs unless they are able to pull together a clever narrative demonstrating that they are worthy of Director Squires’ discretionary institution.
Statutory Authority and Economic Rationale
The America Invents Act (AIA) explicitly governs the evaluation of institution standards. The statute “requires that the Director consider the effect of these standards on the ‘economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings’” (Memo, p. 1).
Citing 35 U.S.C. §§ 316(b) and 326(b), the Memorandum roots the new policy in these statutory requirements to justify a sharper focus on domestic industry (Memo, p. 1).
Director Squires observes that “[o]ver the past several decades, substantial segments of the United States’s existing manufacturing base particularly in the electronics and computer industries have moved overseas” (Memo, p. 1). The policy document references studies by the Departments of Commerce and Homeland Security to connect this shift to negative outcomes, stating these reports have “highlighted the significant economic and national security damage this trend has caused, including its threat to America’s innovation leadership” (Memo, p. 1).
Specific reports cited include the Bureau of Industry and Security’s 2023 assessment of the microelectronics industrial base and a 2022 joint assessment of critical supply chains for the Information and Communications Technology industry (Memo, p. 1). The Memorandum concludes that such developments “bear directly on the Director’s statutory obligation to consider the effect of institution standards on the economy and the integrity of the patent system” (Memo, p. 1).
Past commentary from the legal community has suggested that IPR and PGR availability protects American manufacturers and small businesses (Memo, p. 2). The Memorandum counters this assertion, noting that “the off-shoring trends discussed above have continued, notwithstanding the broad availability of IPR and PGR proceedings for fifteen years” (Memo, p. 2).
The document further states that “many of the most frequent users of IPR and PGR proceedings are large companies that have stated in public financial disclosures that they do not have a significant, existing manufacturing presence in the United States, nor are they taking concrete steps to invest in American manufacturing” (Memo, p. 2).
These data points “raise a legitimate question about whether the current institution framework appropriately weighs the interests of entities that invest in domestic production” (Memo, p. 2).
The New Discretionary Factors
The USPTO now asks parties to provide relevant facts in their discretionary briefing regarding American manufacturing and investment. The goal is “[t]o assist the Office in gathering data about the extent to which AIA proceedings give a tactical advantage to companies that neither manufacture in the United States, nor are making American manufacturing investment” (Memo, p. 2).
The Office “encourages petitioners who are small businesses that have been 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” (Memo, p. 2).
When determining whether to institute IPR or PGR proceedings, the Director will consider three new factors:
“(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;” (Memo, p. 2)
“(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; and” (Memo, p. 2)
“(3) whether the petitioner is a small business that has been sued for infringement of the patent at issue.” (Memo, p. 2)
The evaluation of manufacturing extends beyond final product assembly. The Director will consider “not only assembly of the final product in the United States, but also the extent to which components of a product are made in the United States and the extent to which products made in the United States are sent for further processing outside the United States” (Memo, pp. 2-3).
For method claims, the Memorandum specifies that “the relevant products for the purposes of this memo are the devices used to carry out the method” (Memo, p. 3).
The guidance provides an example: “for claims directed to a method of operating a computer, the relevant product would be the computer” (Memo, p. 3).
Regarding the third factor, the Director will weigh “all relevant facts that the parties raise, including the Small Business Administration’s size standards set forth in 13 C.F.R. §§ 121.801 through 121.805 and 37 C.F.R § 1.27(a) that would render a person, business, or nonprofit organization eligible for reduced patent fees” (Memo, p. 3).
Benefits, Challenges, and Risks
Patent practitioners must carefully evaluate how these new considerations alter PTAB litigation strategies. A thorough analysis reveals a mixture of strategic opportunities and potential vulnerabilities for IP owners, in-house counsel, and inventors.
The Memorandum presents a distinct advantage for patent owners with substantial domestic operations. Linking discretionary institution to American manufacturing creates a potential shield against patent challenges from foreign manufacturers or entities heavily reliant on off-shored supply chains. In-house counsel for domestic producers can leverage these factors to increase the likelihood of defeating a petition at the institution stage.
Small businesses facing patent infringement lawsuits gain a clear tactical benefit. The explicit inclusion of small business status as a factor weighing against discretionary denial provides a dedicated pathway for under-resourced entities to challenge questionable patents efficiently. Inventors and smaller research institutions that license their technology to domestic manufacturers might find their patents better insulated from post-grant challenges.
When a patent owner can demonstrate that their licensees build competing products stateside, the PTAB may be less inclined to institute a review brought by an overseas competitor.
Applying these factors introduces evidentiary demands during the preliminary stages of an IPR or PGR. Parties must gather and present intricate supply chain data within the restrictive page limits of a petition, preliminary response, or discretionary brief. Defining the “extent” of manufacturing for highly integrated global products, such as microelectronics or automotive components, requires factual development.
A product might feature components fabricated in Asia, assembled in North America, and packaged in Europe. Determining whether this satisfies the domestic manufacturing threshold presents a heavy analytical burden for practitioners and the Board. Respondents will face aggressive timelines to accumulate the necessary evidence. The short window between a petition filing and the preliminary response deadline leaves little room for extensive fact-finding regarding a competitor’s manufacturing footprint.
In-house counsel must proactively maintain detailed, up-to-date records of their own supply chains and component sourcing to deploy this defense successfully.
The introduction of economic and geographic factors into validity proceedings carries inherent risks of unpredictability. The Director and Board’s primary expertise lies in technical and legal analysis regarding patentability over prior art, not necessarily in evaluating international supply chain logistics or corporate investment strategies.
This divergence may lead to inconsistent institution decisions across different panels. Additional time and resources will be invested. Prior to initiating licensing campaigns or enforcement actions, patent owners should conduct thorough due diligence regarding a potential infringer’s manufacturing footprint and corporate size. Assessing whether a target can leverage these new institution criteria, either independently or through a defensive organization, will be a necessary step in evaluating the likelihood of facing a fortified IPR challenge.
A heavy reliance on these discretionary factors introduces the possibility of gamesmanship. Large corporations might establish nominal assembly operations domestically to evade unfavorable discretionary denials, masking a supply chain that remains predominantly foreign.
The PTAB will need to develop sophisticated metrics to differentiate genuine domestic investment from superficial compliance.
Lastly, prioritizing domestic manufacturing within a quasi-judicial patent tribunal could attract scrutiny under international trade agreements, such as the TRIPS agreement, which generally mandates non-discriminatory treatment of patent rights regardless of where the invention is produced.
Impact on Defensive Patent Organizations
Defensive organizations, such as Unified Patents or RPX, used to frequently file IPRs to challenge patents asserted by non-practicing entities. These organizations aggregate member resources to invalidate questionable patents. They typically do not manufacture products themselves. Lacking domestic manufacturing operations and not being small businesses sued for infringement, they cannot invoke the new favorable discretionary factors directly. As a result, member-based organizations face an effectively elevated risk of discretionary denial under the centralized institution framework.
In response, defensive organizations might alter their filing strategies. Instead of filing as the sole petitioner, these groups might coordinate with specific members who meet the Memorandum’s criteria.
When a non-practicing entity asserts patents against a small business member, or a member with substantial American manufacturing, the defensive organization might support the member in filing the IPR as the named petitioner.
This strategic shift introduces immediate complications regarding real party in interest (RPI) and privity doctrines. Naming a member as the petitioner alongside funding or control from the defensive organization will invite intense discovery and disputes over RPI status.
Patent owners will assert that the defensive organization is the true petitioner attempting to exploit the small business or domestic manufacturing exceptions. Patent practitioners representing member organizations must carefully structure these relationships to survive RPI scrutiny at the PTAB.
Conclusion
The policies outlined in the Memorandum take immediate effect, as the directive “applies to all IPRs and PGRs in which the due date for a patent owner discretionary brief has not yet elapsed” (Memo, p. 3).
Patent practitioners should view this development within the context of recent structural changes at the USPTO.
In October 2025, Director Squires issued an “Open Letter” and a binding Memorandum that reclaimed the authority to institute trials, ending the practice of delegating this power to the PTAB. Since taking effect on October 20, 2025, this centralization has effectively created a presumption of denial, placing an exceptionally high burden on petitioners.
The United States Court of Appeals for the Federal Circuit reinforced the Director’s broad discretion over the institution docket in the December 2025 Ethanol Boosting Systems decision.
The new focus on domestic industry and small businesses appears to offer a recalibration. The pendulum has swung heavily toward discretionary denials over the past few months. Introducing new weight for American manufacturing may act as an appeasement to stakeholders concerned about restricted access to PTAB trials. This certainly aligns with themes and messaging from the White House.
Patent counsel representing petitioners or patent owners in pending or future AIA proceedings should immediately audit their clients’ manufacturing footprints, supply chain data, and small business standing to prepare for these new factual inquiries.
Disclaimer: This is provided for informational purposes only and does not constitute legal or financial advice. To the extent there are any opinions in this article, they are the author’s alone and do not represent the beliefs of his firm or clients. The strategies expressed are purely speculation based on publicly available information. The information expressed is subject to change at any time and should be checked for completeness, accuracy and current applicability. For advice, consult a suitably licensed attorney and/or patent professional.