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Discretionary denial at the PTAB continues to evolve, and a recent decision by the USPTO Director adds another important dimension. In denying institution of an IPR, the Director concluded that foreign governments are not “persons” eligible to seek IPR and that even minority government ownership can raise threshold eligibility concerns. Read together with the Director’s October 2025 decision restoring strict real‑party‑in‑interest disclosure requirements, the ruling underscores that access to PTAB review increasingly turns on who is behind the petition, not just the merits of the challenge.

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Return Mail Applied to Foreign Governments

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The <a href="https://www.uspto.gov/sites/default/files/documents/IPR2025-01579Paper12.pdf" target="_blank" rel="noreferrer noopener">decision</a> arose from an inter partes review (IPR) petition filed by Tianma Microelectronics Co., Ltd. challenging a patent owned by LG Display Co., Ltd. LG Display sought discretionary denial based on real‑party‑in‑interest (RPI) issues, arguing that Tianma was partially owned by entities ultimately controlled by the Chinese government and that those entities were not disclosed as RPIs.

The Director agreed and addressed an issue not previously resolved. Relying on Return Mail, Inc. v. United States Postal Service, where the Supreme Court held that the U.S. government is not a “person” eligible to file an IPR petition, the Director concluded that the same rule applies to foreign sovereigns.

The decision emphasizes symmetry. Allowing foreign governments to challenge U.S. patents through PTAB proceedings while barring the U.S. government from doing so would create an imbalance. The Director also rejected the notion that a foreign sovereign could proceed indirectly through a corporate petitioner, explaining that such an approach would undermine Return Mail itself.

Minority Ownership and the Burden of Proof

One of the more consequential aspects of the decision is the ownership level at issue. LG Display showed that an entity affiliated with Aviation Industry Corporation of China, a Chinese state‑owned enterprise, owned “10% or more” of Tianma’s stock. While the Director emphasized that ownership percentage alone is not dispositive, he concluded that this showing was sufficient to place RPI status in dispute.

Once that occurred, the burden shifted to Tianma to demonstrate that no foreign sovereign had the ability to control or direct the IPR. Tianma did not meet that burden. Rather than producing shareholder agreements, governance documents, or other evidence clarifying control rights, Tianma relied primarily on a declaration denying foreign government involvement. The Director found that insufficient.

The decision thus signals that minority foreign government ownership, particularly when combined with other indicia of state involvement, may be enough to block institution unless a petitioner can affirmatively establish the absence of control.

The decision also rests on an independent ground. The Director made clear that even if the legal analysis under Return Mail were incorrect, he would still deny institution as a matter of discretion.

Citing recent Federal Circuit authority, the decision reiterates that institution determinations are committed to the Director’s discretion and are largely unreviewable. Considerations such as resource allocation, system integrity, and the risk of exploitation of PTAB proceedings are sufficient on their own to support denial.

This decision reflects the continued expansion of discretionary denial at the PTAB. Institution is no longer limited to assessments of prior art strength, timing, or parallel litigation. The identity of the petitioner and the interests behind the petitioner now play a central role.

For petitioners, even minority foreign government ownership may require careful attention. For patent owners, RPI challenges remain a viable threshold tool. And for PTAB practitioners more broadly, the decision underscores that discretionary considerations increasingly shape whether review will be instituted at all.

Read alongside the Director’s recent decisions addressing parallel proceedings, manufacturing activity, and real‑party‑in‑interest disclosure, this decision confirms that discretionary denial has become a central feature of PTAB institution practice rather than a narrow exception.

When 10% Is Enough: Director Denies IPR Over Foreign Sovereign Ownership Interest