Hunton Retail Law Resource

Retail and consumer products companies in the United States face a constant threat of patent infringement lawsuits and—for reasons described herein—that threat could soon increase. These lawsuits can be costly and disruptive, exposing companies to significant legal fees, discovery expenses, and the risk of large damages awards or injunctions.

In 2011, Congress enacted the Leahy-Smith America Invents Act (AIA), providing accused infringers with a way to challenge the validity of issued patents, called inter partes review (IPR). The stated intent behind the creation of the IPR process was to improve patent quality by providing a faster, less expensive, and more efficient administrative alternative to federal court litigation for challenging patent validity. As part of this process, the AIA created the Patent Trial and Appeal Board (PTAB), a tribunal within the US Patent and Trademark Office (USPTO), to handle IPRs.

Companies facing infringement lawsuits quickly saw many benefits of the IPR process. The costs of an IPR were far less than litigating a patent case to final judgment in federal court, and the standard of proof for invalidating a patent in an IPR proceeding was much lower than in federal court (preponderance of the evidence versus a clear and convincing standard). In addition, many district courts would agree to stay patent lawsuits while IPRs were pending, leading to even greater cost savings. The success rate for instituted IPR proceedings has been overwhelmingly favorable to patent challengers, with nearly 80% of challenged claims being found invalid when the PTAB issued a final written decision.

The AIA provides that an IPR may not be instituted unless the petition “shows there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.” This provision has been interpreted to provide the Director of the USPTO with complete discretion to deny institution.

Historically, the Director delegated this authority to the PTAB; the PTAB would assess the merits of an IPR petition and institute an IPR proceeding in more than 60% of the cases. However, beginning in 2020, the PTAB started considering non-merits factors and increasingly exercising its discretion to deny institution of IPRs.

In April 2025, the interim Director of the USPTO revoked the delegation of authority to consider discretionary issues from the PTAB, and restored that authority with the Director. By mid-2025, the IPR institution rate had dropped to approximately 35%. After the new permanent Director was confirmed in September 2025, he further consolidated power and issued a memorandum stating that the Director would make all IPR institution determinations in summary fashion without providing any supporting reasoning.

Under the new procedures, the IPR institution denial rate is now near 100%. Industry groups, including the National Retail Federation, have sent letters to government officials opposing these changes, and unsuccessful IPR petitioners have filed mandamus challenges, but, thus far, those efforts have not altered the USPTO’s policies.

In light of these changes, we expect to see an uptick in patent litigation against retail and consumer products companies, as patent owners become less fearful of IPR challenges.

However, there is another defensive strategy. Accused infringers should consider the ex parte reexamination (EPR) process as an alternative to IPRs, which will become less advantageous. The EPR process was established in 1981 and allows for a post-grant review of validity before the USPTO.

EPRs offer some of the benefits of IPRs, but also come with some disadvantages. On the plus side, EPRs are not subject to any discretionary denial risk, leading to a near 95% grant rate. EPRs typically cost a fraction of an IPR, largely because, once filed, the requester no longer participates in the process. And like IPRs, an EPR proceeding can lead to a stay of district court litigation, although the stay rate is lower for EPRs because the EPR process takes longer. On the other hand, EPRs have a lower successful rate of invalidation, and provide the patent owner with the opportunity to amend the patent claims during the process, which can impact litigation strategy.

In light of this quickly changing landscape, retail and consumer products companies facing patent infringement claims should discuss with their patent counsel the pros and cons of these two administrative patent challenge processes early in any litigation for the best chance for success.