IP Law Daily, PATENT—P.T.A.B.: Director’s decision vacating PTAB’s denial of IPR challenging e-cigarette patent designated precedential, (May 21, 2025)

By Saurabh Kashyap, B.A., LL.B., LL.M.

PTAB misapplied § 325(d) by failing to consider the applicant’s refusal to assist the examiner in reviewing an oversized IDS.

In a rare precedential order, the United States Patent and Trademark Office (USPTO) Director vacated a decision by the Patent Trial and Appeal Board (PTAB) denying institution of inter partes review (IPR) and remanded the matter for reconsideration of whether to institute review of an e-cigarette patent owned by RAI Strategic Holdings, Inc. The Director found that the Board had improperly applied the discretionary denial framework under 35 U.S.C. § 325(d), failing to account for the applicant’s submission of an unusually large information disclosure statement (IDS) and its refusal to assist the examiner in identifying relevant references. The May 19, 2025, decision was designated precedential the same day, binding future PTAB panels to its reasoning in similar circumstances (Ecto World, LLC v. RAI Strategic Holdings, Inc., IPR2024-01280 (P.T.A.B. May 19, 2025)).

Background. The petitioner, Ecto World, LLC, filed an IPR petition in August 2024 challenging all 30 claims of U.S. Patent No. 11,925,202 B2 (the ’202 patent) assigned to RAI Strategic Holdings, Inc. The '202 patent, titled Aerosol Delivery System, discloses a non-combustible, electronically operated vaporizer designed to deliver nicotine-containing aerosol. The challenged claims pertain to methods and components for generating and modulating the aerosol stream in a way that mimics conventional smoking behavior.

During prosecution, RAI had submitted an IDS listing over 1,000 references. Although the examiner certified having considered the IDS, he separately requested that the applicant identify any references to which he should pay "particular attention." The applicant declined to respond. The '202 patent was ultimately issued without a single prior art-based rejection.

The petitioner challenged the claims under 35 U.S.C. § 103 based on several prior art references—Takeuchi, Kim, Susa, and Pienemann—that had been included in the prosecution IDS but were not substantively applied by the examiner. The petitioner contended that the examiner’s failure to reject the claims based on these references resulted from a lack of substantive consideration, given the applicant’s refusal to assist in triaging the massive IDS. It argued that this context warranted an institution despite the prior presentation of the art.

Board’s denial. On March 6, 2025, the PTAB denied institution of IPR under § 325(d), applying the two-part Advanced Bionics framework (IPR2019-01469, Paper 6 (P.T.A.B. February 13, 2020) (precedential)). Under Part One, the Board determined that the same or substantially the same prior art had been previously presented during prosecution. Relying on the fact that the references appeared in the IDS and were initialed as "considered," the Board concluded that this threshold requirement was satisfied.

Proceeding to Part Two, the Board held that the petitioner had failed to show that the examiner erred in a manner material to patentability. The Board faulted the petitioner for not expressly identifying a material error in the prosecution record and for making only generalized assertions about the strength of the obviousness case. Notably, the PTAB stated that it would not “independently review and assess the merits of a petition’s grounds to conclude whether and how any material error occurred when a petitioner makes no attempt to explain what the alleged material error was”.

Director review. The petitioner sought Director Review, contending that the Board had applied § 325(d) too rigidly and failed to engage with the full context of the prosecution. In particular, it argued that the Board ignored the examiner’s express request for guidance in navigating the oversized IDS and the applicant’s failure to respond. This, it claimed, rendered any presumption of prior consideration under § 325(d) unjustified.

On May 19, 2025, the USPTO Director granted the petition for review and vacated the denial of institution. The Director held that the PTAB had indeed misapplied the Advanced Bionics framework by treating the prior presentation of the art in the IDS as dispositive. While acknowledging that the art had been listed on the IDS, the Director emphasized that “listing a reference” is not synonymous with “considering a reference.” In this case, the applicant had submitted a volume of material that practically precluded effective review, and its refusal to cooperate when prompted by the examiner cast doubt on the examiner’s ability to meaningfully evaluate the art.

The Director clarified that a petitioner must demonstrate examiner error in a manner material to patentability, but that failure by the applicant to assist the examiner may itself create the conditions for such an error. Because the examiner did not issue any rejections based on the asserted art, and because no substantive commentary addressed those references, the presumption of complete examination under § 325(d) could not stand.

The Director also addressed a broader point of procedural consistency. Board panels had differed on whether a petitioner must always present a distinct material error argument when the asserted art appears on an IDS. By designating this decision precedential, the Director resolved the dispute: the petitioner must explain material error under Advanced Bionics Part Two, but the context of a non-engaged examiner and an unmanageable IDS may itself support that showing, especially under Becton, Dickinson factors (c), (e), and (f).

Instructions on remand. Rather than instituting review directly, the Director remanded the case to the Board with instructions to allow additional briefing. The petitioner was directed to elaborate on how the Office erred in a manner material to patentability, taking into account the volume of references and the applicant's silence. The Board was instructed to fully consider whether discretionary denial was warranted in light of the applicant's conduct during prosecution.

Additionally, because the patent was concurrently involved in a pending International Trade Commission (ITC) investigation, the Director instructed the Board to assess discretionary denial under Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (P.T.A.B. March 20, 2020) (precedential), only if § 325(d) no longer justified denial. The Director noted that the PTAB's earlier treatment of Fintiv was impacted by the June 21, 2022 Interim Procedure Memorandum, which was rescinded in a March 24, 2025 Memorandum. The Board was directed to consider further briefing applying current guidance in evaluating the ITC parallel proceedings.

The Case is No. IPR2024-01280.

Attorneys: Ryan C. Richardson (Sterne, Kessler, Goldstein & Fox PLLC) for Ecto World, LLC and SV3, LLC. David M. Maiorana (Jones Day) for Rai Strategic Holdings, Inc.

Companies: Ecto World, LLC; Rai Strategic Holdings, Inc.

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