In an era of heightened discretionary denial of inter partes review (IPR) petitions, petitioners have latched onto the second prong of the Advanced Bionics[1] framework to navigate the U.S. Patent and Trademark Office’s (USPTO’s) evolving discretionary denial threshold.[2] Decided five years before the surge of discretionary denial decisions in 2025, the second prong of Advanced Bionics requires the Director to determine “whether the petitioner has demonstrated that the Office erred in a manner material to the patentability of challenged claims” when the same or substantially the same art or arguments previously were presented to the Office.

One important lesson from the 2025-2026 discretionary denial decisions is that persuasive evidence of material error by the Office can be a significant factor in the Director’s holistic discretionary denial analysis, and may outweigh other factors that otherwise favor denial, including Fintiv factors 1-5 and settled expectations.[3] This insight is succinctly summarized by USPTO Director John Squires in Magnolia Medical Technologies, Inc. v. Kurin, Inc., IPR2026-00097, Paper 17 (Director May 14, 2026), where the Director reinforced the paramount importance of correcting examination error in the institution analysis.

This lesson aligns with prior USPTO guidance recognizing that “the PTAB will not deny institution based on Fintiv if there is compelling evidence of unpatentability.”[4] In Magnolia, the Director also emphasized that America Invents Act (AIA) review must serve the public interest and operate as an alternative to, not a continuation of, a district court litigation.[5] The Director explained that “the central purpose of IPRs is to determine whether the patent at issue may have been improvidently granted and whether and to what extent that right should continue to be recognized at all.” The Director further stated that the Office institutes review “to reconsider its own decision and correct a possible error in the original patent grant.”

Over the past year, petitioners have developed creative ways to show that the Office erred in a manner material to the patentability of the challenged claims. Their arguments have been guided by the nonexclusive Becton, Dickinson factors,[6] MPEP § 904, Advanced Bionics, and more recent Director decisions, including Ecto World.[7] Categories of material error that have persuaded the Director not to exercise discretion to deny institution include overlooked references, inadequate prior art searches, allowance timing, and misapprehension of a reference’s teachings.

A. Examiner Errors Presented by Petitioners

At the beginning of the current era of heightened discretionary denial of IPR petitions, the Director typically provided a written opinion for each discretionary denial decision. That changed in October 2025, when the Director began issuing summary decisions that simply listed the cases that will be reviewed for the merits and non-discretionary considerations in a Notice of Decisions on Institutions. Because the Director typically no longer provides a detailed rationale for each decision, the following discussion summarizes a variety of Examiner error arguments that have been presented by petitioners. Some of these arguments have been expressly credited by the Director in various written decisions, while others remain developing theories that petitioners have advanced but that the Director may not yet have expressed a view on.

1. Overlooking References

A primary category of material error involves showing that the Examiner overlooked relevant prior art; whether the art appeared on an Information Disclosure Statement (IDS); was cited during prosecution of a related U.S., PCT, or foreign application; was addressed in related Patent Trial and Appeal Board (PTAB) proceedings; or has never appeared in the record. In opposing discretionary denial, petitioners have developed several pathways for showing overlooked prior art, including attacking the quality of the Examiner’s prior art search, showing that another Examiner identified or applied the reference or the same Examiner applied the reference in a later prosecution on related claims, demonstrating that the reasons for allowance conflict with prior PTAB or Federal Circuit determinations, pointing to insufficient consideration of a voluminous IDS, or highlighting unusually abbreviated prosecution (allowance timing).

• Quality of Prior Art Searches. The Examiner’s prior art search is frequently scrutinized for material error arguments. Petitioners have identified a wide range of specific deficiencies, including inadequate search time; flawed text and classification searches that excluded relevant classification codes; omitted or misspelled critical claim terms; overly narrow proximity constraints; focus on irrelevant classification codes; unduly narrow search parameters limited to certain technological classes; failure to search alternative configurations or the full breadth of the claims; failure to perform keyword searches on allegedly novel features; failure to search the U.S. publication database; and disregard of search strategies and results from counterpart applications.[8] Some petitioners have relied on expert testimony submitted with the IPR petition to further demonstrate the nature of the material error according to PTO search procedures.[9]
• Reference Identified by Another Examiner. Another powerful argument involves showing that during the prosecution of a different application in the same patent family either in the U.S. or abroad, another Examiner or the same Examiner identified and applied the overlooked prior art.[10]
• Voluminous IDS Submissions. Petitioners have also argued that relevant references were effectively buried in a voluminous IDS, with no indication of substantive consideration beyond the Examiner’s initials.[11] In one case, the overlooked references appeared among more than 1,000 IDS items, which is more than 40 times the size of a typical submission, and the applicant did not identify relevant references when asked. In another case, the IDS contained more than 400 references. Petitioners have also relied on a failure to initial an IDS or a failure to disclose related PTAB proceedings to further support a material-error theory.[12]
• PTAB Proceedings. Some petitioners established that the Examiner’s stated reason for allowance is contradicted by the teachings of the prior art or conflicts with prior PTAB or Federal Circuit determinations involving related patents directed to similar subject matter.[13]
• Timing of the Notice of Allowance. Petitioners have relied on early allowance as circumstantial evidence of insufficient examination scrutiny.[14] In particular, a first-office-action allowance, a short prosecution timeline, improper reliance on examination of a parent application, or the absence of any rejection during prosecution were used to support an inference that the Examiner did not fully evaluate the challenged claims against the most relevant art.
• Priority Issues. Petitioners have relied on the Examiner’s failure to properly determine the priority date of challenged claims to support arguments that relevant prior art references were overlooked during prosecution. For example, one petitioner asserted that the Examiner erred by failing to identify new references relied upon by petitioner because the Examiner had not recognized that a feature added during prosecution lacked support in the priority documents.[15] In another case, a petitioner argued that the Examiner erred by improperly disqualifying two proper references based on an incorrect priority date determination.[16] In a third case, a petitioner noted that the Examiner erroneously relied on references that did not qualify as prior art based on the correct priority date of the challenged claims.[17]

2. Misapprehending the Teachings of a Reference

When a reference was squarely before the Examiner, petitioners have established material error by demonstrating that the Office failed to appreciate or misunderstood the reference’s teachings.[18] The strongest arguments identify the exact teachings the Examiner missed and explain, limitation by limitation, how those teachings map onto the challenged claims.

B. Examiner Errors Expressly Credited by the Director

Among the theories petitioners have advanced in opposing discretionary denial, the Director has most clearly credited the following as bases for referring petitions to the Board for further consideration. The most persuasive reason credited by the Director is that the Examiner overlooked or misapprehended specific teachings of a prior art reference.

• Overlooking the Teachings of a Reference. When a reference was squarely before the Examiner, the Director declined to exercise discretion to deny institution where the Examiner overlooked or misunderstood specific teachings of that reference.[19] This was the most persuasive category of Examiner error credited by the Director. In one case, the Director found discretionary denial appropriate for four (4) of five (5) petitions based on settled expectations, but not for the fifth, even though that “challenged patent had [also] been in force for fifteen years” because the petitioner provided “persuasive reasoning, supported by evidence,” that the Examiner overlooked teachings in a reference of record that appeared to disclose the features the Examiner believed were missing from the prior art.[20] In another case, the Director declined to deny institution even though the challenged patents had been in force for nine (9) years because the Examiner overlooked the teachings of a prior art reference cited in an IDS during prosecution that expressly teaches the features that the Examiner asserted were not taught by the prior art.[21]
• Terms of Art. The Director has also credited evidence suggesting that the Examiner misunderstood the claimed technology. For example, the Director credited evidence that an Examiner misunderstood a term of art or relied on the wrong reference to allow claims.[22] In one example, the Director declined to deny institution where the Examiner had maintained the same prior art from an ancestor application through the prosecution of six (6) child applications, even though those child applications were directed to different technologies.[23]
• Insufficient Prosecution History. Some decisions from the Director have suggested that abbreviated prosecution histories may be beneficial to the petitioner as well, perhaps suggesting an inadequate review by the Examiner. Some indicators of such an abbreviated prosecution history include first-office-action allowances; notices of allowance issued without substantive prior art rejections; and failure to address a reference during prosecution. For example, in two related cases, the Director declined to deny institution even when the challenged patents had been in force for seventeen (17) and eighteen (18) years. In those cases, the Director summarily concluded that the “[p]etitioner persuasively explains that the patent [E]xaminer erred by overlooking the teachings” of the prior art reference.[24] Interestingly, despite the limited explanation for this finding, the Director noted that the Examiner had issued a first action allowance, suggesting this was a factor in the Director’s decision.[25] The Director also declined to deny institution of another challenged patent that had been in force for fifteen (15) years because “the patent [E]xaminer [had] overlooked certain teachings in [the prior art reference] that appear to disclose the claimed features that the patent [E]xaminer indicated were not taught by the prior art of record.”[26]
• Voluminous IDS. The Director also credited arguments that a voluminous IDS prevented substantive consideration of relevant references. Specifically, an IDS containing “over 1,000 references, which is over 40 times the size of a typical IDS,” combined with an applicant’s failure to identify the most relevant references “may demonstrate that discretionary denial under § 325(d) is not warranted.”[27] On remand in one such case, the Board agreed that “other than initials on a lengthy IDS, nothing in the record indicates that the Examiner substantively considered the references.”[28]
• PTAB Proceedings. The Director has credited arguments based on the Examiner’s failure to “apply any art or reference during prosecution despite the existence of PTAB proceedings of related patents that could impact the challenged claims,” as well as cases where the Examiner’s reasoning contradicted prior Board or Court determinations.[29] For example, the Examiner found that the challenged claims of child applications were entitled to the priority date of the priority document even if the Board had previously determined that granted claims of the parent application were not entitled to that priority date; and that decision was affirmed by the Federal Circuit.[30] In another case, the Examiner allowed challenged claims without applying any prior art rejection “despite the existence of PTAB proceedings of related patents.”[31] In that case, the relevant prior art references were applied in previous PTAB proceedings.
• Reference Identified in Another Application Within the Same Family. Another persuasive showing credited by the Director is that another Examiner, or the same Examiner, identified and applied the overlooked art during prosecution of another application in the same family but failed to similarly apply it in the challenged patent. In one case, the Examiner allowed the challenged claims based on an alleged new feature but subsequently rejected claims of a pending child application of the challenged patent for being unpatentable because the prior art taught the previously allowable feature.[32] In another case, the Examiner applied a reference during the prosecution of a parent application but failed to apply that reference during the prosecution of the challenged patent, which included similar claim limitations.[33]

C. Key Takeaways for Practitioners

The following ten (10) principles distill the current state of the Director’s material error jurisprudence into actionable guidance.

1. Identify material error that can overcome other denial factors, including Fintiv. Correction of examination errors has been deemed of paramount importance even for patents that have been in force for 15-18 years.
2. Mine the prosecution history. Review the Examiner’s search queries, methodology, time spent, classification codes, and keyword terms to identify deficiencies that led to prior art being overlooked. Compare the Examiner’s search queries and methodology with counterpart PCT or EPO search results to identify gaps. Any deficiency that can be tied to the Examiner’s failure to locate the prior art strengthens the material error argument.
3. Check related applications. Prosecution histories of child applications, parent applications, and PCT counterparts are fertile ground for finding that another Examiner identified art the original Examiner missed.
4. Compare U.S. prosecution with foreign prosecution. If the EPO or another foreign office applied more rigorous examination to counterpart applications, highlight the contrast to underscore the insufficiency of the USPTO’s review.
5. Scrutinize voluminous IDSs. Mere initialing by the Examiner does not constitute substantive consideration. It is unlikely that an Examiner had substantively reviewed over 200 references. According to the USPTO, 87% of applications have 50 or fewer references.[34]
6. Show specific teachings. Do not merely assert that the Examiner overlooked the art. Demonstrate precisely what the reference teaches and how it maps onto the claim limitations. This is perhaps the most fact-intensive category of material error, but it is also among the most compelling.
7. Leverage the notice of allowance. Conclusory reasons for allowance, or reasons that contradict prior PTAB or Federal Circuit findings, are strong indicators of material error.
8. First-office-action allowances and early allowances are red flags. Document the timeline from filing to allowance. An unusually short prosecution, particularly where no prior art was applied, supports an inference that the Examiner did not conduct a thorough review. These circumstances significantly ease the petitioner’s burden of showing material error.
9. Use expert declarations to bridge evidentiary gaps. When the prosecution history alone does not clearly reveal the error, expert testimony can establish what the art teaches and how the Examiner’s evaluation was deficient.
10. Track developing case law. Many petitions that survived the discretionary denial threshold on material error grounds were not instituted on the merits, and those that were ultimately instituted are expected to reach final written decisions in late 2026 or early 2027. Their outcomes may further shape this rapidly developing area of PTAB practice. We will continue to monitor these developments.

For companies navigating parallel litigation, portfolio enforcement, or PTAB strategy, these decisions underscore the importance of developing a record that addresses both discretionary-denial considerations and the merits from the outset.

For more information on how these developments may affect your patent portfolio or litigation strategy, please contact the authors or your Â鶹ֱ˛Ą & Lardner attorney.

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[1] Advanced Bionics, LLC v. MED-EL Elektromedizinische Geräte GmbH, IPR2019 01469, Paper 6 at 8 (PTAB Feb. 13, 2020) (precedential)

[2] Interim Processes for PTAB Workload Management, at 1 (Mar. 26, 2025) (bifurcating the decision to institute an IPR or a post-grant review (PGR) into two processes “(i) discretionary considerations and (ii) merits and other non-discretionary statutory considerations.”)

[3] iRhythm Tech. v. Welch Allyn, Inc., IPR2025-00363, Paper 10, at 3 (June 6, 2025) and Paper 7, at 29–1 (granting Patent Owner’s request for discretionary denial and denying Institution of inter partes review because the Petitioner’s decades-long delay to seek review of the challenged patents created an implicit expectation and an acquiescence of the validity of the challenged claims.)

[4] Commscope Tech. LLC v. Dali Wireless, Inc. IPR2022-01242 Paper 23 at 4 (PTAB Feb 27, 2023) (precedential) (citing USPTO Memorandum, Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation (“Guidance Memo”) at 5 (June 21, 2022)).

[5] Denying institution of inter partes review because the Director viewed the petition as falling outside the purpose of AIA reviews. Specifically, the petitioner had filed an IPR to relitigate the same issues raised in district court after a jury found the patent not invalid. Id. at 9–10.

[6] Becton, Dickinson & Co. v. B. Braun Melsungen AG, IPR2017-01586, Paper 8 (PTAB Dec. 15, 2017) (precedential as to § III.C.5, first paragraph).

[7] Ecto World LLC v. Rai Strategic Holdings Inc., IPR2024-01280, Paper 13 at 7n3 (PTAB May 19, 2025) (Granting director review, vacating the decision denying institution, and remanding to the Board for further proceedings; and clarifying that a petitioner cannot simply rely on the unpatentability contentions articulated in the IPR petition. Rather, petitioners must explain how the Examiner erred “even when the asserted prior art is on an IDS, but the Examiner did not apply the reference.”)

[8] Taiwan Semiconductor Manufacturing Co. Ltd. v. Marlin Semiconductor Ltd., IPR2025-01082, Paper 7, 2–11, and 3n1 & Paper 10 (PTAB Dec. 18, 2025); Samsung Elecs Co., Ltd. v. Wilus Institute of Standards and Tech., Inc., IPR2025-01043, Paper 9, 20–27; Samsung Elecs. Co. Ltd. v. Wilus Institute of Standards and Tech Inc., IPR2025-00934, Paper 9 at 3 and 17–32 (PTAB Oct. 10, 2025); Samsung Elecs. Co. Ltd. v. Wilus Institute of Standards and Tech Inc., IPR2025-01044, paper 9, at 21–29; IPR2025-01069, Paper 9 at 20–25; Samsung Elecs. Co. Ltd. v. Wilus Institute of Standards and Tech Inc., IPR2025-01110, Paper 10, at 8–9; Samsung Elecs. Co. Ltd. v. Wilus Institute of Standards and Tech Inc., IPR2025-01111, Paper 9, at 7–8; Anthony, Inc. v. ControlTec, LLC, IPR2025-00559, Paper 12 (PTAB, Jul. 16, 2025); ASUSTeK Computer Inc. v. Nokia Techs. Oy, IPR2025-01153, Paper 11, at 9 (Oct. 7, 2025) and Paper 13 (PTAB Nov. 20, 2025) (the following proceedings will be reviewed for merits and non-discretionary considerations); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00204, Paper 9, at 13–17 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00205, Paper 9, at 12–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00219, Paper 9, at 12–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00222, Paper 9, at 13–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00227, Paper 11, at 10–14 ; (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00228, Paper 11, at 9 and 12–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00229, Paper 11, at 12–16 (April 27, 2026); Samsung Electronics Co., Ltd. v. Wilus Institute of Standards, IPR2025-00935, Paper 11, 21–24 (Sept. 02, 2025); and Taiwan Semiconductor Manufacturing Co. Ltd. v. Marlin Semiconductor Ltd., IPR2025-00200, Paper 8, at 2–8; Yealink Network Technology Co., Ltd. v. Barco N.V., IPR2025-00491, Paper 15, at 6–9 (failure to cite examples of well-known unified communication systems and software).

[9] IPR2025-01082, Paper 7, at 3n1.

[10] Samsung Elecs. Co. Ltd. v. Wilus Institute of Standards and Tech Inc., IPR2025-00934, Paper 9 at 3 and 17–32 (PTAB Oct. 10, 2025); ASUSTeK Computer Inc. v. Nokia Techs. Oy, IPR2025-01153, Paper 11, at 8–14 (Oct. 7, 2025) and Paper 13 (Squires Nov. 20, 2025; Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00204, Paper 9, at 10 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00205, Paper 9, at 12–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00219, Paper 9, at 12–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00222, Paper 9, at 1 and 15–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00227, Paper 11, at 15 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00228, Paper 11, at 9 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00228, Paper 11, at 16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00229, Paper 11, at 15–16 (April 27, 2026); Western Digital Technologies, Inc. v. Godo Kaisha IP Bridge 1, IPR2025-00701, Paper 8, at 2 (July 16, 2025); Harbor Freight Tools USA Inc. v. Champion Power Equipment, Inc., IPR2025-00805, Paper 14, at 29–35 (Aug. 29, 2025).

[11] Ecto World LLC v. Rai Strategic Holdings Inc., IPR2024-01280, Paper 15 at 5–7 (June 2, 2025); Alliance Laundry Systems, LLC v. Payrange LLC, IPR2025-00573, Paper 7, at 13–16, and 23–26 (July 07, 2025).

[12] ASUSTeK Computer Inc. v. Nokia Techs. Oy, IPR2025-01153, Paper 11, at 11 (Oct. 7, 2025); Paper 13 (Squires Nov. 20, 2025); Alliance Laundry Systems, LLC v. Payrange LLC, IPR2025-00573, Paper 7, at 15 and 23–26 (July 07, 2025).

[13] Alliance Laundry Systems, LLC v. Payrange LLC, IPR2025-00573, Paper 7, at 15 and 26 (July 07, 2025); Padagis US LLC v. Neurelis, Inc., IPR2025-00464, Paper 10, 16–19 (June 16, 2025).

[14] Anthony, Inc. v. ControlTec, LLC, IPR2025-00559, Paper 9, at 16 (PTAB, Jul. 16, 2025) (asserting that the Examiner allowed the claims without issuing a prior art rejection. “[T]he Examiner erred materially by failing to evaluate the prior art thoroughly. Had the Examiner evaluated the prior art thoroughly, he would not have allowed the challenged claims to issue without a single prior art rejection.”); Samsung Elecs. Co. Ltd. v. Wilus Institute of Standards and Tech Inc., IPR2025-01069, Paper 9 at 18–20 (application allowed with no prior art rejections); USAA Federal Savings Bank v. PACid Technologies, LLC, IPR2025-00697, Paper 8, at 3 and 24 (PTAB Aug. 14, 2025) (claims were allowed four months after filing with little to no scrutiny, and without any prior patentability challenge and without a single prior art rejection). See also, IPR2025-00751, paper 8, at 3, and 24–25; IPR2025-00752, paper 8, at 3 and 24; IPR2025-00753, paper 8, at 3 and 24–25; IPR2025-00754, page 8 at 3 and 24; and IPR2025-00755, page 8 at 3 and 24; Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00204, Paper 9, at 10–12 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00222, Paper 9, at 1, 10 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00227, Paper 11, at 10 and 14 (April 27, 2026); Alliance Laundry Systems, LLC v. Payrange LLC, IPR2025-00573, Paper 7, at 13–16, and 23–26 (July 07, 2025); Microsoft Corp. v. Partec Cluster Competence Cent. GmbH, IPR2025-00318, Paper 8, at 11–12 (allowance after a single Office action).

[15] Samsung Elecs Co., Ltd. v. Wilus Institute of Standards and Tech., Inc., IPR2025-01110, Paper 10, at 7–8 (challenging the priority date of the challenged patent based on intervening prior art references); IPR2025-01111, Paper 9, at 6–7 (also citing IPR2025-00933, Paper 2, at 2; IPR2025-01043, Paper 2, at 2–4; IPR2025-00935, Paper 2,at 2–3; IPR2025-00936, Paper 2, at 2–3; and IPR2025-01110, Paper 2, at 5–12).

[16] Padagis US LLC v. Neurelis, Inc., IPR2025-00464, Paper 10, at 16–19 (June 16, 2025) and Paper 12, at 2–3 (Director, July 16, 2025) (Informative) (finding that the petition raises “the same priority issue” that was previously adjudicated in IPR2019-00451 and affirmed by the Court of Appeals for the Federal Circuit).

[17] Alliance Laundry Systems, LLC v. Payrange LLC, IPR2025-00573, Paper 7, at 13n3 (July 07, 2025).

[18] Samsung Elecs Co., Ltd. v. Wilus Institute of Standards and Tech., Inc., IPR2025-01043, Paper 9, 18–20; IPR2025-00933, Paper 11 at 3–4 (PTAB Oct. 10, 2025) and paper 9, at 3 and 18–31; IPR2025-00934, Paper 11 at 4 (PTAB Oct. 10, 2025); IPR2025-00988, paper 9, at 19–26; Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00222, Paper 14 (PTAB June 15, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00205, Paper 9, at 10–12 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00219, Paper 9, at 10–12 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00222, Paper 9, at 1, 12–16 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00227, Paper 11, at 12 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00228, Paper 11, at 9–11 (April 27, 2026); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00229, Paper 11, at 11–12 (April 27, 2026); Harbor Freight Tools USA Inc. v. Champion Power Equipment, Inc., IPR2025-00805, Paper 14, at 29–38 (Aug. 29, 2025); Samsung Electronics Co., Ltd. v. Wilus Institute of Standards, IPR2025-00935, Paper 11, 17–21 (Sept. 02, 2025); Taiwan Semiconductor Manufacturing Co. Ltd. v. Marlin Semiconductor Ltd., IPR2025-00847, Paper 11, 3–4 (Director Sept. 3, 2025)(Paper 10, Petitioner’s Opposition to Patent Owner’s Request for Discretionary Denial of Institution is not publicly available); Xencor, Inc. v. Merus N.V., IPR2025-00604, Paper 8, at 14–17, and Paper 12, at 2–3 (PTAB July 17, 2025); Microsoft Corp. v. Partec Cluster Competence Cent. GmbH, IPR2025-00318, Paper 8, at 11–12 and Paper, 12 at 2–3 (PTAB June 12, 2025); Yealink Network Technology Co., Ltd. v. Barco N.V., IPR2025-00491, Paper 15, at 6–9.

[19] Samsung Elecs Co., Ltd. v. Wilus Institute of Standards and Tech., Inc., IPR2025-00933, Paper 11 at 3–4 (PTAB Oct. 10, 2025); IPR2025-00934, Paper 11 at 4 (PTAB Oct. 10, 2025)( referring IPR2025-00988, IPR2025-01043, IPR2025-01044, IPR2025-01069, IPR2025-01110, and IPR2025-01111 to the Board); Tesla, Inc. v. Bulletproof Property management, LLC., IPR2026-00204, 00205, 00219, 00222, 00227, 00228, and 00229, Paper 14 (PTAB June 15, 2026) and Paper 11 (May 19, 2026); Harbor Freight Tools USA Inc. v. Champion Power Equipment, Inc., IPR2025-00805, Paper 20, at 2–3 (Sept. 19, 2025); Samsung Electronics Co., Ltd. v. Wilus Institute of Standards, IPR2025-00935, Paper 12, 2–3 (Sept. 26, 2025); IPR2025-00847, Paper 11, 3–4 (PTAB Sept. 3, 2025 (finding discretionary denial of institution inappropriate in one out of five cases); Xencor, Inc. v. Merus N.V., IPR2025-00604, Paper 12, at 2–3(PTAB July 17, 2025) (referring the Petitions to the Board even if the challenged patent had been in force for nine years because petitioner presented persuasive evidence that a prior art cited in the IDS during prosecution teaches the allowable limitation); Microsoft Corp. v. Partec Cluster Competence Cent. GmbH, IPR2025-00318, Paper 9, at 2–3 (June 12, 2025); Yealink Network Technology Co., Ltd. v. Barco N.V., IPR2025-00491, Paper 18, at 2–3 (PTAB June 25, 2025).

[20] IPR2025-00847, Paper 11, 3–4 (IPR2025-00847, Paper 10, Petitioner’s Opposition to Patent Owner’s Request for Discretionary Denial of Institution is not publicly available and IPR2025-00847, Paper 1, Petition for Inter Partes Review, does not refer to Chien et al. (US Pat. 6,815,770, Nov. 9, 2004 (Ex. 1037); reference was only disclosed in IPR2025-00847, Paper 8, filed August 15, 2025).

[21] Xencor, Inc. v. Merus N.V., IPR2025-00604, Paper 12, at 2–3 (PTAB July 17, 2025).

[22] Yealink Network Technology Co., Ltd. v. Barco N.V., IPR2025-00491, Paper 18, at 2–3 (PTAB June 25, 2025); USAA Federal Savings Bank v. PACid Technologies, LLC, IPR2025-00697, Paper 9, at 3 (PTAB Aug. 14, 2025) (allowed claims of a child application directed to one technology based on the prior references cited in the parent application, which was directed on a different technology)

[23] IPR2025-00697, Paper 9, at 3 (PTAB Aug. 14, 2025)

[24] Anthony, Inc. v. ControlTec, LLC, IPR2025-00559, Paper 12, at 2 (PTAB, Jul. 16, 2025)

[25] Id.

[26] IPR2025-00847, Paper 11, 3–4 (Director Sept. 3, 2025).

[27] Ecto World LLC v. Rai Strategic Holdings Inc., IPR2024-01280, Paper 13 at 7 (PTAB May 19, 2025); and Paper 16, at 11–15 (PTAB June 25, 2025, on remand) (denying institution of inter partes review on remand under 35 U.S.C. § 314(a))

[28] Id. Paper 16, at 13.

[29] Alliance Laundry Systems, LLC v. Payrange LLC, IPR2025-00573, Paper 9, at 2 (PTAB July 17, 2025); Padagis US LLC v. Neurelis, Inc., IPR2025-00464, Paper 12, 3 (Director July 16, 2025) (Informative).

[30] IPR2025-00464, Paper 12, 3 (Director July 16, 2025) (Informative).

[31] IPR2025-00573, Paper 9, at 2 (PTAB July 17, 2025).

[32] Western Digital Technologies, Inc. v. Godo Kaisha IP Bridge 1, IPR2025-00701, Paper 9, at 2 (PTAB Aug. 14, 2025)

[33] Harbor Freight Tools USA Inc. v. Champion Power Equipment, Inc., IPR2025-00805, Paper 20, at 2–3 (Sept. 19, 2025).

[34] Ecto World LLC v. Rai Strategic Holdings Inc., IPR2024-01280, Paper 13 at 5–6 (PTAB May 19, 2025)

Recent SAT Publications on Fraudulent CFDIs – Immediate Risks for Your Business

Nuevos criterios para auditorĂ­as y devoluciones: mayor certidumbre fiscal para su empresa

The Tax Administration Service (SAT) continues to audit taxpayers as part of the new expedited domiciliary audit procedure, through which it can determine whether the digital tax invoices (CFDI) issued by such taxpayers are fraudulent. Note that on August 15, 2026, the SAT published the names of several taxpayers for these purposes in the Mexican Official Gazette for the third occasion, following the publications of July 10 and August 7, 2026. As a result, all CFDIs issued by the listed companies are deemed fraudulent and have no tax effect for those who received them. This means that if your company conducted transactions with any of these taxpayers, it faces significant tax, operational, and criminal exposure. Tax, operational, and criminal consequences for recipients of these invoices If companies that received invoices from the listed taxpayers fail to reverse the tax effects within the 30-day period, they will face, among others, the following consequences: – Temporary Suspension of Digital Seal Certificate. This entails CFDI receipts cannot be issued and, consequently, business operations are suspended from the moment the authenticity of the transactions covered by those receipts has not been verified. – Assessment of Tax Liabilities. The non-deductibility of expenses covered by such receipts and the disallowance of the corresponding VAT credit will empower the tax authority to initiate audit procedures and assess tax liabilities, including surcharges and penalties. – Criminal Consequences. The use of CFDIs covering nonexistent transactions may constitute tax fraud and, as applicable, the crime of transactions involving proceeds of unlawful origin, punishable by up to nine years of imprisonment. We recommend that you immediately review whether your accounting records include any transactions with taxpayers listed in the publications issued by the SAT pursuant to its new expedited audit authority, as the SAT will periodically publish taxpayers whose CFDIs are deemed fraudulent. It is essential to monitor these publications closely in order to promptly identify any risks that may affect your business. Â鶹ֱ˛Ąâ€™s tax practice has successfully represented numerous taxpayers in proceedings related to the presumption of nonexistence of transactions covered by CFDIs. Should you require advice and assistance regarding this matter, please contact our team directly for a confidential assessment of your exposure. This document is for informational purposes only and does not constitute legal advice. For a specific evaluation of your situation, please consult our specialists.

El Servicio de AdministraciĂłn Tributaria (SAT) continĂşa revisando a contribuyentes respecto de la nueva visita domiciliaria exprĂ©s, procedimiento mediante el cual puede determinar la falsedad de los comprobantes fiscales digitales por Internet (CFDI) emitidos por dichos contribuyentes. Cabe señalar que el 15 de agosto de 2026 el SAT publicĂł a diversos contribuyentes por estos motivos en el Diario Oficial de la FederaciĂłn por tercera ocasiĂłn, en adiciĂłn a las realizadas el 10 de julio y el 7 de agosto del presente año. Como consecuencia, todos los CFDIs emitidos por las empresas señaladas se consideran falsos y carecen de efectos fiscales para quienes los recibieron. Esto significa que si su empresa realizĂł operaciones con alguno de esos contribuyentes, enfrenta un riesgo fiscal, operativo y penal significativo. Consecuencias fiscales, operativas y penales para quienes recibieron esos comprobantes Si las empresas que recibieron comprobantes fiscales de los contribuyentes señalados no revierten sus efectos fiscales dentro del plazo de 30 dĂ­as, enfrentarán, entre otras, las siguientes consecuencias: – SuspensiĂłn temporal del Certificado de Sello Digital. Esto implica la imposibilidad de emitir CFDIs y, en consecuencia, la paralizaciĂłn operativa del negocio desde el momento en que no se haya acreditado la autenticidad de las operaciones amparadas por dichos comprobantes. – DeterminaciĂłn de crĂ©ditos fiscales. La no deducibilidad de los gastos amparados en dichos comprobantes y el no acreditamiento del IVA correspondiente facultarán a la autoridad fiscal para iniciar procedimientos de comprobaciĂłn y determinar adeudos fiscales, incluyendo recargos y multas. – Consecuencias penales. La utilizaciĂłn de CFDIs que amparan operaciones inexistentes puede configurar el delito de defraudaciĂłn fiscal y, en su caso, el delito de operaciones con recursos de procedencia ilĂ­cita, con penas de hasta 9 años de prisiĂłn. Recomendamos revisar de manera inmediata si dentro de su contabilidad existen operaciones vinculadas con los contribuyentes comprendidos en las publicaciones emitidas por el SAT en ejercicio de su nueva facultad exprĂ©s, dado que se estarán publicando periĂłdicamente a los contribuyentes cuyos CFDIs se consideran falsos. Es fundamental mantenerse atento a estas publicaciones para identificar oportunamente cualquier riesgo que pudiera afectar a su empresa. La práctica fiscal de Â鶹ֱ˛Ą ha representado exitosamente a diversos contribuyentes en procedimientos relacionados con la presunciĂłn de inexistencia de operaciones amparadas en CFDI. Si requiere asesoramiento y asistencia respecto de este procedimiento, contacte directamente a nuestro equipo para una evaluaciĂłn confidencial de su exposiciĂłn. Este documento es Ăşnicamente informativo y no constituye asesorĂ­a legal. Para una evaluaciĂłn particular de su situaciĂłn, consulte a nuestros especialistas.

Summary:

• Medicare has steadily expanded the services that Federally Qualified Health Centers can bill outside the Prospective Payment System, creating new reimbursement opportunities beyond traditional patient encounters.
• As Medicare continues to carve out exceptions to the Prospective Payment System methodology, FQHCs should reassess their billing, coding, and compliance strategies to capture available reimbursement for non-face-to-face services and care management programs.

Federally Qualified Health Centers (FQHCs) are primarily reimbursed by Medicare through the Prospective Payment System (PPS), which pays a per-visit rate to cover a typical bundle of medically necessary services provided during a patient encounter. Increasingly, however, FQHCs have opportunities to bill certain care management services to Medicare outside the PPS bundle. The steady expansion of these services over the last decade is one of the most significant changes to Medicare FQHC reimbursement since the Affordable Care Act (ACA).

The ACA reformed Medicare FQHC reimbursement by shifting from an individualized cost-based methodology to a national, encounter-based rate.

Before the ACA, Medicare paid for FQHC services using a cost-based system under which an FQHC’s all-inclusive rate (AIR) was calculated based on its own historical costs, subject to productivity standards and an upper payment limit.[1] In 2010, the ACA directed the Centers for Medicare & Medicaid Services (CMS) to develop the PPS methodology for FQHC services beginning October 1, 2014.[2] This represented a fundamental transformation of Medicare FQHC reimbursement.

Under the Medicare PPS methodology, an FQHC is paid based on the lesser of its actual charges or a national encounter-based rate, adjusted for the FQHC’s geography, but not based on its individual costs.[3] The national rate is set based on aggregate FQHC cost data, updated annually by an inflation factor. [4] Initially, there were only rare exceptions to reimbursement through the single PPS rate, such as separate rates for new patients and patients receiving yearly preventive services.

CMS has gradually authorized separate Medicare FQHC reimbursement for a range of care management services billed outside of the PPS.

The core Medicare PPS reimbursement covers face-to-face encounters between an FQHC patient and practitioner.[5] However, in the years following the development of the PPS methodology, CMS has gradually introduced billing codes for non-face-to-face care management services. Separate payment for these services is generally justified by the theory that while they are critical for patient care, they are not cleanly captured through the PPS rate. The brief timeline below details the history of these changes.

2016. The first non-face-to-face service added outside the PPS was chronic care management (CCM). Beginning January 1, 2016, FQHCs could receive separate payment for providing at least 20 minutes of qualifying care management services to Medicare beneficiaries with two or more chronic conditions that met certain criteria, such as placing the patient at significant risk of death or decline.[6]

2018. For 2018, CMS authorized separate Medicare FQHC payment for two additional non-face-to-face services: general behavioral health integration (BHI) and psychiatric collaborative care model (CoCM).[7]

• BHI is a team-based, collaborative approach to care that focuses on integrative treatment of patients with primary care or behavioral health conditions.[8] BHI services are appropriate for patients presenting with new or pre-existing behavioral health or psychiatric conditions.
• Psychiatric CoCM is a model of collaborative care provided by a care team that includes both a primary care provider and a health care manager who collaborates with a psychiatric consultant.[9]

In 2018, CMS also introduced HCPCS code G0511, which was used to standardize FQHC billing for a range of general care management services until CMS made further changes in the 2025 Physician Fee Schedule Final Rule.[10]

2019.  For 2019, CMS authorized FQHCs to be paid separately from PPS for virtualcommunication services, including communication technology-based services and remote evaluation services.[11] These services include brief communications (e.g., five minutes) with an FQHC practitioner to determine whether a visit is necessary.[12] Separate payment is unavailable when the service originates from a related billable visit or leads to a billable visit within the next 24 hours.[13]

2021.  For 2021, CMS authorized FQHCs to submit and receive Medicare payment under the separate codes for Principal Care Management (PCM) services, which are available for patients who have one high-risk chronic condition.[14] Patients who qualify for PCM services have a serious chronic condition expected to last between three months and one year, or until the death of the patient, and which may have led to a recent hospitalization or placed the patient at significant risk of death or functional decline.[15]

2023.  For 2023, CMS authorized FQHCs to receive separate Medicare payment for chronic pain management (CPM) services when, during a calendar month, at least 30 minutes of qualifying services are furnished for a beneficiary.[16] To qualify for CPM services, a beneficiary must have a diagnosis of pain that has lasted more than three months.[17]

2024.  CMS significantly expanded the monitoring and care coordination services for which FQHCs could receive separate Medicare payment in 2024, adding half a dozen new categories. At the time, payment for most of these services was made through the HCPCS G0511 general care management code.[18]

CMS authorized separate Medicare FQHC payment for Remote Physiologic Monitoring (RPM) and Remote Therapeutic Monitoring (RTM) under the general care management code.[19] These services involve the collection and transmission of data and the analysis and interpretation of data that occurs outside of a standard office visit. RPM is focused on digitally collected physiologic data, whereas RTM services focus on monitoring of respiratory system status, musculoskeletal system status, therapy adherence, and therapy response.

CMS also authorized separate Medicare FQHC payment through the general care management code for Community Health Integration (CHI) and Principal Illness Navigation (PIN) services to help patients with serious illnesses navigate the health care system.[20] CHI services, including coordination of care, facilitation of access to services, and communication between settings, are typically performed by auxiliary personnel, such as a community health worker, and help address a patient’s social determinants of health.[21] PIN services involve non-face-to-face services, including the creation of a treatment plan, for a serious, high-risk disease expected to last at least three months that places the patient at significant risk of hospitalization or nursing home placement, acute exacerbation or decompensation, functional decline, or death.[22] CMS confirmed that FQHCs could also receive payment for related PIN-Peer Support (PIN-PS) services.

FQHCs became eligible for separate Medicare payment for intensive outpatient program (IOP) services for individuals with acute mental illness.[23] These services are intended to improve or maintain the patient’s condition and prevent relapse or hospitalization. FQHCs may be paid for IOP services at the hospital IOP rate.[24]

2025.  CMS increased the complexity of Medicare care management coding and billing for FQHCs in 2025 by sunsetting the use of G0511, which had been a general-purpose care management code. It began requiring FQHCs to bill for a wide variety of care management services through the more nuanced code set used by other physician practices.[25]

CMS also introduced coding and payment policies for Advanced Primary Care Management (APCM) services, which combine elements of several existing care management and communication technology-based services into a per-calendar-month bundle.[26]

2026. The CY 2026 Medicare Physician Fee Schedule Final Rule gives FQHCs additional opportunities to bill and receive payment for care coordination and communication technology-based services that historically were paid through FQHC-specific bundled codes.

Starting January 1, 2026, FQHCs may use three HCPCS codes — G0568, G0569, and G0570 — as APCM add-on codes for BHI or CoCM.[27] FQHCs must bill the specific CPT/HCPCS codes for CoCM services rather than use an all-in-one code. For communication technology-based and remote evaluation services, CMS discontinued G0071.[28] Instead, FQHCs must bill the specific code for the service furnished:

• HCPCS G2010 — remote evaluation of patient images or video.
• HCPCS G2250 — remote assessment of recorded patient information.
• CPT 98016 — a “virtual check-in” code for a brief communication technology-based service.

CMS also finalized a policy under which care management services established and paid under the Medicare Physician Fee Schedule will typically also be reimbursable to FQHCs separately from the PPS, subject to CMS guidance.[29]

Takeaways

The ACA promoted a streamlined vision for Medicare FQHC reimbursement: a uniform per-visit rate set based on national data with minimal adjustments. Over the last decade, CMS has deviated from that vision in ways that complicate Medicare FQHC billing and reimbursement, particularly for non-face-to-face care management and care coordination services. FQHCs now must understand the range of Medicare billing options available outside the PPS rate.

Â鶹ֱ˛Ą is here to help you navigate the complexities of FQHC reimbursement. Please reach out to the authors, your Â鶹ֱ˛Ą relationship partner, or our Health Care Practice Group with any questions.

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[1] Ctrs. for Medicare & Medicaid Servs., Final Policy and Payment Changes for the New Medicare Prospective Payment System (PPS) for Federally Qualified Health Centers Beginning October 1, 2014, available at .

[2] Medicare Claims Processing Manual, Ch. 9, § 30.1.

[3] Id.

[4] 89 Fed. Reg. 61,596, 61,780 (proposed July 31, 2024).

[5] 42 C.F.R. § 405.2463(b)(1).

[6] 80 Fed. Reg. 70,886, 70,918, 71,080-81 (Nov. 16, 2015).

[7] 82 Fed. Reg. 52,976, 53,169–80 (Nov. 15, 2017).

[8] Id.

[9] Id. at 53,171-72.

[10] See 89 Fed. Reg. 97710, 97998-99 (Dec. 9, 2024).

[11] 83 Fed. Reg. 59,452, 59,685 (Nov. 23, 2018). 

[12]Id.

[13] Medicare Benefit Policy Manual, Ch. 13, § 240; 90 Fed. Reg. 49,266, 49,555–56 (Nov. 5, 2025).

[14] 84 Fed. Reg. 62,568, 62,692 (Nov. 15, 2019).

[15] Id.

[16] 87 Fed. Reg. 69,404, 69,737 (Nov. 18, 2022).

[17] Id. at 69,737.

[18] 89 Fed. Reg. 97999 (Dec. 9, 2024).

[19] 88 Fed. Reg. 78,818, 79,073 (Nov. 16, 2023).

[20] 88 Fed. Reg. 78,818, 79,073 (Nov. 16, 2023).

[21] Medicare Benefit Policy Manual, Ch. 13, § 230.2.7.

[22] 88 Fed. Reg. 78,818, 79,073-74.

[23] 88 Fed. Reg. 81,540, 81,838 (Nov. 22, 2023).

[24] Medicare Benefit Policy Manual, Ch. 13, § 250; 42 C.F.R. §§ 405.2462(j), 405.2468(g)(2).

[25] 89 Fed. Reg. 98000-98010 (Dec. 9, 2024).

[26] 89 Fed. Reg. 98012 (Dec. 9, 2024).

[27] Ctrs. for Medicare & Medicaid Servs., FQHC/RHC News & Announcements, CMS.GOV, available at .

[28] 90 Fed. Reg. 49,266, 49,554 (Nov. 5, 2025).

[29] See id. at 49,558.

Autonomy started with cars. The same perception, decision, simulation, and control challenges now apply across robots, drones, and AI-enabled machines operating in the physical world. Understanding the taxonomy of these inventions is the first step toward protecting them.

The Original AV Patent Taxonomy: Where It Started

The self-driving vehicle industry has always been, at its core, a patent story. Every autonomous vehicle on the road today represents the convergence of hundreds (sometimes thousands) of patented inventions working together. In 2019, the European Patent Office mapped this innovation landscape in a comprehensive study, Patents and Self-Driving Vehicles, identifying and categorizing every major technology subsector required to make a car drive itself. While the study focused on European filings, its taxonomy has become a globally recognized framework, and one that is directly relevant to U.S. patent practitioners and companies building patent portfolios at the USPTO.

The taxonomy broke the self-driving technology stack into four principal layers:

1. Perception & Sensing: lidar, radar, cameras, and ultrasonic sensors (the system’s “eyes”) that detect and interpret the physical environment;
2. Communication: vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) data exchange that allows the system to “see” beyond its own sensors;
3. Data Processing & AI: the onboard computing and machine learning that make sense of all that sensor data in real time; and
4. Vehicle Control: the path planning, steering, and braking systems that translate decisions into physical action.

For U.S. companies, these layers map directly to the types of utility patent applications filed daily at the USPTO, and to the claim drafting challenges that patent practitioners navigate under Alice and Section 101.

That technology taxonomy is complemented by the SAE J3016 standard, the most widely cited classification system in the industry and one routinely referenced by U.S. regulators, courts, and patent examiners. SAE J3016 defines six levels of driving automation, from Level 0 (no automation; a conventional car) through Level 5 (full automation, where no human driver is needed, anywhere, anytime). The critical dividing line sits between Level 2 and Level 3. At Levels 1 and 2 (think adaptive cruise control, lane-keeping assist), the human driver remains in charge of monitoring the road. At Levels 3 through 5, the automated driving system itself takes over the entire driving task (perceiving, deciding, and acting) within its defined operating conditions.

Why does this matter for patent strategy? Because the level of automation directly correlates with the density and complexity of patentable innovation. The jump from Level 2 to Level 3 is where the truly novel inventions live, and where U.S. patent filings have surged. This layered classification gave patent practitioners, investors, and business leaders a shared vocabulary for identifying where innovation was occurring and where patent protection could be most strategically deployed.

What the Patent Landscape Says Now

The patent landscape for transportation innovation has changed dramatically since 2019, and the data are striking. WIPO’s Technology Trends 2025: Future of Transportation report found that over 1.1 million patent families related to the future of transportation were published between 2000 and 2023, growing at a compound annual growth rate of 11%. To put that in perspective, traditional transportation technologies grew at only 4% over the same period. The report identified two driving megatrends (Sustainability and Digitalization) and organized the patent landscape into four technology trend clusters: Sustainable Propulsion, Automation and Circularity, Communication and Security, and Human-Machine Interface.

Notably, land transport patents dominate, with over 3.5 times the number of patents compared to sea, air, and space transport modalities combined. The top five inventor locations (China, Japan, the United States, the Republic of Korea, and Germany) account for over 90% of all inventions. These data points confirm that the original AV innovation ecosystem has matured, but they also reveal something equally important: the same digitalization technologies (communication, security, automation) that drive autonomous vehicle innovation are now being deployed across every mode of transportation and every category of autonomous physical system.

This trend is global. At the EPO, AI-related inventions and battery technologies were identified as key growth areas in 2024. At the USPTO, autonomous driving and AI patent filings have grown exponentially, with top assignees including not only traditional automakers (Ford, GM, Toyota) but also technology companies (Waymo, NVIDIA, Baidu). The convergence of AI, sensor fusion, and physical control systems is not slowing; if anything, the patent data suggest it is accelerating and broadening. The United States remains one of the most active and strategically important filing jurisdictions.

The Physical AI Expansion

The term “physical AI” has emerged as the unifying concept for this broadening. At CES 2026, NVIDIA CEO Jensen Huang described the moment as “the ChatGPT moment for physical AI—when machines begin to understand, reason and act in the real world.” Physical AI in this context refers to AI systems that perceive, reason, and act in real-world environments, enabling machines to anticipate behavior rather than simply react to it. At GTC 2026, NVIDIA announced major expansions to its physical AI platform spanning autonomous vehicles, industrial robots (through partnerships with FANUC and ABB), and humanoid robotics foundation models.

This is not merely a rebranding exercise. The underlying technical challenges are structurally identical to those mapped by the EPO’s original AV taxonomy. Consider the parallels:

AV Technology Layer (EPO 2019)	Physical AI Equivalent (2026)
Perception & Sensing (lidar, radar, cameras)	Multimodal perception for robots, drones, surgical systems
Communication (V2V, V2X)	Multi-agent coordination, swarm protocols, fleet messaging
Data Processing & AI (onboard ML, decision-making)	Edge inference, world models, sim-to-real transfer
Vehicle Control (path planning, actuation)	Manipulation, locomotion, multi-DOF control loops
Simulation & Testing (scenario generation)	Digital twins, hardware-in-the-loop, synthetic data
Safety & Redundancy (fault detection, fail-safe)	Runtime monitoring, formal verification, FDIR systems

The taxonomy that began with self-driving vehicles now applies to warehouse robots navigating dynamic environments, surgical systems performing precision manipulation, agricultural drones adapting to weather and terrain, defense platforms coordinating in contested airspace, and humanoid robots interacting with humans in unstructured settings. In each case, the same fundamental engineering questions arise: how does the system perceive its environment, how does it decide what to do, how does it execute that decision in the physical world, and how does it fail safely when something goes wrong?

From Taxonomy to Strategy

Understanding this expanded taxonomy is not an academic exercise. It is the predicate for any meaningful IP strategy in the autonomous systems space. A company developing autonomous warehouse robots, for example, must identify which layers of the technology stack contain its most competitively differentiated innovations. Is the company’s advantage in its perception pipeline (sensor fusion, object detection)? In its control algorithms (grasping, navigation in dynamic environments)? In its simulation infrastructure (digital twins, scenario generation for safety validation)? Or in its data pipeline (proprietary labeling, active learning, federated fleet data)?

Each layer presents distinct considerations for patentability, for the trade-off between patent disclosure and trade secrecy, and for where and when to file. In the United States, AI-related claims must be drafted with particular care to satisfy the post-Alice eligibility framework under 35 U.S.C. § 101. The good news for autonomous systems companies is that claims tying AI innovations to concrete physical-world improvements (such as better sensor accuracy, faster real-time control, or reduced computational load for edge processing) tend to fare well under the USPTO’s 2024 guidance on AI subject matter eligibility. The key is connecting the software innovation to a specific, technical improvement in how the machine operates in the real world. Internationally, the EPO, China, Japan, and South Korea each apply different (and in some cases more permissive) eligibility frameworks for AI-related inventions, which creates opportunities for companies building global portfolios.

The taxonomy also informs defensive strategy. As WIPO’s data confirm, the transportation patent landscape is heavily concentrated among a small number of jurisdictions and companies. Companies entering adjacent physical AI markets (robotics, drones, agtech, defense) should anticipate that incumbent AV patent holders may assert their portfolios broadly, particularly where claim language is drafted at a level of abstraction that captures perception, planning, and control innovations regardless of the specific physical platform.

Setting the Stage

The expansion of the autonomy taxonomy from vehicles to physical AI systems has a straightforward implication for companies, investors, and IP leaders: the playbook that AV startups developed for patent strategy between 2015 and 2022 must now be generalized. What to patent, where to file, and how to align IP activity with product development and funding milestones are questions that every autonomous systems company must answer deliberately and early.

In our next article, we will address exactly that: a comprehensive IP strategy framework for autonomous systems companies, covering the protection of proprietary competitive information, IP ownership considerations, a detailed taxonomy of patentable subject matter across the full autonomous systems stack, jurisdictional filing strategy, and the alignment of patent filings with product and funding milestones. The taxonomy established here (perception, AI/ML, control, edge computing, simulation, safety, human-machine interface, fleet management, and data infrastructure) provides the foundation on which that strategy is built.

For autonomous systems companies, the first strategic question is not “should we file patents?” It is “do we understand which layers of the autonomy stack contain our defensible innovation, and are we protecting them deliberately?” The answer requires a taxonomy. The rest requires a strategy.

DISCLAIMER: The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

The Business Court of Texas recently issued its first published opinion interpreting the Texas Securities Act (TSA). In Thompson v. Anchor Capital GP LLC, 2026 Tex. Bus. 41 (1st Div. July 1, 2026), the court granted defendants’ motion for partial summary judgment on the plaintiffs’ TSA claim after holding that a secured promissory note was not a security. See id. ¶¶ 1–2, 27–32, 62–63. The opinion offers a roadmap for litigating whether debt instruments fall within the TSA and for structuring private-credit, family-office, and private-equity transactions in Texas.

The Case: A Private-Credit and Family-Office Dispute

The dispute arose out of a business relationship between Jean Thompson, the president of Thompson Petroleum Corporation — a family business that manages the Thompson family’s assets — and Michael Mann, the founder and CEO of Anchor Capital GP LLC — a private equity investment brokerage. Id. ¶¶ 4–7. After Thompson invested millions in Anchor-managed funds, Mann asked Thompson to loan Anchor money to buy out one of Anchor’s partners. Id. ¶¶ 7–8. Thompson agreed, contingent on Mann providing a personal financial statement and guaranty. Id. ¶ 8. The parties executed a Secured Promissory Note and other instruments, which they later amended when Mann sought more funds to buy out another partner. See id. ¶¶ 8–9. After disputes arose over collateral-inspection and financial-information rights, Thompson declared an event of default, accelerated the loan, and sued, including a claim under the TSA. See id. ¶¶ 10–14, 27–32.

The Court’s Analysis

The court began with the TSA’s broad definition of “security” and the rule that whether a document is a TSA security is a question of law. Id. ¶¶ 30–32. Because the TSA closely mirrors the federal Securities Act of 1933, the court looked to federal decisions and Texas appellate court opinions for guidance and applied the U.S. Supreme Court’s “family resemblance” test from Reves v. Ernst & Young, 494 U.S. 56 (1990) in lieu of other tests. See id. ¶¶ 32, 40–43.

Under the family resemblance test, a note with a term of more than nine months is presumed to be a security, but that presumption can be rebutted if the note is an enumerated non-security (e.g., a consumer financing note) or bears a strong family resemblance to one. See id. ¶¶ 37–38, 43. The court rejected defendants’ threshold argument that the note was a short-term note secured by a lien on a small business or its assets because the note had a four-year maturity. See id. ¶¶ 45–47. The court therefore proceeded to the four Reves factors to determine if the note resembled an enumerated security: the parties’ motivations, the plan of distribution, the investing public’s reasonable expectations, and the presence of risk-reducing measures. See id. ¶¶ 44, 48.

On the first factor, the court found mixed motives. Thompson was entitled to interest, but she had agreed to below-market, borrower-friendly terms — suggesting profit was not her primary motivation. See id. ¶¶ 49–51. Mann, however, used the funds to raise capital for Anchor, avoid dilution of an equity investor, and pay salaries and other business expenses, which weighed in favor of security status. See id. ¶¶ 52–53. The plan-of-distribution factor supported defendants because plaintiffs conceded it. See id. ¶ 48.

The remaining factors carried the day for defendants. The note was titled “Secured Promissory Note,” the documents referred to the funds as a loan, there was no evidence the note was advertised as an investment, and the parties were sophisticated businesspersons represented by adept counsel. See id. ¶¶ 54–58. The court also emphasized the transaction’s risk-reducing protections: collateral, Mann’s personal guaranty, extensive representations, warranties, and covenants, collateral-inspection rights, and financial-information rights. See id. ¶¶ 59–61. Although the first factor leaned toward security status, the court held as a matter of law that the note was not a TSA security and granted partial summary judgment. See id. ¶¶ 62–63.

Why the Opinion Matters for Business Court Securities Litigation

For litigators and businesses in the Texas Business Court, Thompson is important because it applies federal note-as-security doctrine to the TSA in a fact pattern common to private-credit, family-office, and private-equity transactions. Here are a few practical lessons:

1. Labels matter, but they are not dispositive. The court considered the note’s title, terminology, and absence of investment language, but it did not stop there. Parties seeking loan treatment should use consistent loan terminology — borrower, lender, principal, interest, collateral, guaranty, covenants, and repayment — while recognizing that a court will still evaluate the full transaction under Reves (assuming the term is longer than nine months).

2. Risk-reducing protections can be outcome-determinative. Collateral, personal guaranties, inspection rights, and other negotiated lender protections helped show that securities-law protections were not necessary. In private-credit and family-office lending, those protections should be drafted with both credit enforcement and potential TSA characterization issues in mind.

3. Purpose and distribution remain critical facts. The court found the motives factor mixed because the borrower used the funds for business-capital purposes, while the lender accepted below-market, borrower-friendly terms. Evidence about why money was advanced, how the instrument was marketed, whether it was broadly distributed, and who could hold it will be central in future TSA disputes over notes and other debt instruments.

4. The Business Court may decide the security-status question early. The court treated whether the note was a TSA security as a question of law and resolved the TSA claim on partial summary judgment. For defendants, that creates a potential early-disposition path where the transaction record supports loan treatment. For plaintiffs, it underscores the need to develop evidence showing investment-like features, expectations, distribution, and the absence of risk-reducing protections.

Key Takeaways

The Thompson opinion is significant since it gives market participants a concrete example of how the Texas Business Court will analyze whether a private note is a security. The decision does not mean every secured promissory note is outside the TSA. It does, however, show that a carefully documented, privately negotiated loan can fall outside the TSA’s definition of “security.”

For lenders, borrowers, family offices, private-equity sponsors, and litigators handling debt-related disputes, Thompson is a reminder that securities characterization can turn on deal architecture and the evidentiary record. Parties structuring private loans should consider TSA issues at the drafting stage and parties litigating them should build the record around each Reves factor. Â鶹ֱ˛Ą & Lardner’s Texas litigation and securities attorneys can help clients evaluate whether a note or other debt instrument may implicate the TSA, structure transactions to reduce characterization risk, and develop litigation strategies when securities-act claims arise.

On July 1, 2026, Florida House Bill 797 (CS/CS/HB 797) took effect, modernizing Chapter 617 of the Florida Statutes (the state’s primary body of law governing nonprofit corporations) and renaming it the “Florida Nonprofit Corporation Act.” HB 797 touches governance fundamentals, including fiduciary standards, conflicts of interest, meeting procedures, and more. Given these changes, Florida nonprofits should be reviewing their articles of incorporation and bylaws to ensure conformity with the revised statutory framework. Rather than attempting to catalog every change the bill makes to Chapter 617, this article highlights select provisions most likely to require Florida nonprofits to review and amend their organizational documents.

Background

Chapter 617 had not been comprehensively updated since 1990. Formerly, it used “not for profit” terminology, imposed a three-director minimum on all organizations regardless of size, and lacked modern governance tools that have been standard in other states’ nonprofit statutes and in Florida’s own Business Corporation Act (Chapter 607). Critical areas, including conflicts of interest, standards of conduct, and entity transactions like mergers and conversions, were either underdeveloped or absent from the statute.

Key Changes

Governance and Board Mechanics

One of the governance reforms in HB 797 is the reduction of the minimum board size from three directors to one for most nonprofit corporations. The three-director minimum is retained only for organizations exempt under Section 501(c)(3) of the Internal Revenue Code. The bill also establishes a default one-year director term when the articles of incorporation or bylaws are silent on the subject, with incumbent directors continuing to serve until a successor takes office.

HB 797 modernizes meeting mechanics in several respects. The bill broadens who may call board meetings to include the chair, the president or similarly situated officer, or 20% of directors then in office. Furthermore, special member meetings may now be called by the board, persons authorized in the articles or bylaws, or by members holding at least 10% of voting power (raised from 5%). This change eliminates the former statutory list of specific officers authorized to call meetings in favor of deference to each organization’s governing documents. Board meeting notice provisions are consolidated so that regular board meetings may be held without notice of date, time, place, or purpose, while special meetings require at least two days’ notice. Finally, a new provision was introduced, permitting a director to withdraw written consent by delivering a signed revocation before all unrevoked consents are received.

Standards of Conduct, Conflicts of Interest, and Liability

HB 797 rewrites the standards of conduct applicable to nonprofit directors, bifurcating fiduciary duties into a “decision-making function” and an “oversight function.” The revised framework provides expanded reliance provisions, permitting directors to rely on officers, employees, legal counsel, accountants, and board committees reasonably believed to be competent and reliable. In a parallel development, the bill creates a new statutory standard for officers, requiring that they act in good faith, exercise appropriate care, and report material information to superiors or the board.

The bill also introduces a revised conflict-of-interest framework, defining key terms such as “director’s conflict of interest transaction,” “fair to the corporation,” and “family member,” along with specific burden-of-proof allocations and detailed approval procedures. Additionally, the director and officer liability shield, previously limited to organizations recognized under Section 501(c)(3), (c)(4), (c)(5), or (c)(6) of the Internal Revenue Code, is extended to directors and officers of all nonprofit corporations, with a new carve-out for recklessness or bad-faith conduct in proceedings brought by non-members.

Meetings, Remote Participation, and Membership

HB 797 revises written-consent procedures so that member action without a meeting is effective when signed by members entitled to cast the required number of votes and delivered to the corporation. The bill adds a new requirement that nonvoting members entitled to notice of proposed corporate action receive proper notice after written-consent authorization is obtained. In an important practical development, the bill also eases prerequisites for remote member participation: board authorization is no longer a strict prerequisite for virtual attendance, though the board must still implement reasonable verification and participation measures for remote attendees, proxies, and attorneys-in-fact.

Historically under Chapter 617, a member could not transfer a membership or any right arising from membership, whereas membership interests may now be transferred, provided that the corporation’s governing documents authorize such transfers. The bill also addresses repurchase rights, prohibiting 501(c)(3) corporations from purchasing membership interests while allowing other types of nonprofits to do so, to the extent their organizational documents allow.

Board Vacancies and Director Removal

Under the revised statute, vacancies (including those created by an increase in the number of directors) may be filled by a majority of the remaining directors, even if less than a quorum. Previously, vacancies could only be filled by the sole remaining director or through circuit court application. The term of a director filling a vacancy now runs to the end of the unexpired term being filled, rather than expiring at the next annual meeting. HB 797 also makes director removal provisions uniform across all nonprofits, eliminating a prior carve-out applicable only to Section 501(c) organizations, and creates a new judicial removal remedy allowing a court to remove a director for fraudulent conduct, gross abuse of position, or intentional harm to the corporation.

Amending the Articles of Incorporation

HB 797 revises the statutory process for amending the articles of incorporation by requiring the amendment to first be adopted by the board and then approved by the members; the board must recommend approval unless conflicts of interest or other special circumstances warrant proceeding without a recommendation. If no members are entitled to vote, the amendment may be adopted by a majority of directors then in office. Furthermore, the board may adopt certain non-substantive amendments without member approval.

What This Means for Nonprofits / Next Steps

The bill took effect on July 1, 2026. Here’s what Florida nonprofits should do:

• Review and update governing documents for provisions that track old statutory defaults and update them to reflect the new framework or to affirmatively opt into desired governance structures.
• Audit cross-references to repealed sections. HB 797 repeals several provisions that may still be cited in existing bylaws, including former Section 617.07401 (derivative actions), Section 617.0822 (board meeting notice), and Sections 617.1301 and 617.1302 (distributions). Remove or update these outdated cross-references.
• Update terminology from “not for profit” to “nonprofit” for consistency with the renamed statute.
• Read the full bill. This article highlights only select changes most likely to affect governing documents. HB 797 makes far broader changes to Chapter 617 that may be relevant to your organization.

If you have questions about how HB 797 affects your organization’s governing documents or governance practices, please contact the authors listed below.

Â鶹ֱ˛Ą Summer Associate Sydney Nwuli contributed to this article.

Chicago has become the latest city to push back against new data center development. On August 11, 2026, Chicago Mayor Brandon Johnson signed Executive Order 2026-5, titled “Protecting Chicagoans’ Clean Water, Clean Air, Energy Affordability, and Quality of Life.” The Order establishes an enhanced regulatory framework for data center development in Chicago. In the Order, the Mayor calls on the City Council to enact a temporary moratorium on new data center construction and material expansions of existing facilities.

Key Takeaways from the Order

• Immediate Regulatory Action: Within 90 days of the Order’s effective date (approximately November 9, 2026, subject to potential extension by the Mayor), the Chief Sustainability Officer (CSO) must publish data center air pollution rules and noise rules under Section 8-32-090 of the Municipal Code. New air permit conditions will be addressed through annual certificates of operation.
• Moratorium Request: The Mayor has called on City Council to enact a temporary moratorium on new data center development and material expansion.
• Task Force Recommendations Due March 2027: The Data Center Task Force will develop comprehensive regulatory recommendations, including proposed Municipal Code amendments, by March 15, 2027.

Provisions of Executive Order 2026-5

• Sections 1 and 2 (Air Pollution and Noise Control): The CSO may impose conditions on air pollution control permits for regulated data center equipment and areas, and must review the noise framework under Section 8-32-090 of the Municipal Code. Within 90 days of the Order’s effective date (approximately November 9, 2026, subject to extension by the Mayor), the CSO must publish air pollution and noise rules through the applicable public notice process. Compliance with new air permit conditions will be addressed in annual certificate of operation applications under Section 11-4-660 of the Municipal Code.

• Section 3 (Enhanced Planned Development Review): For every proposed Planned Development that includes a data center, the Department of Planning and Development (DPD) must notify the Commissioners of Buildings, Business Affairs and Consumer Protection, Environment, and Water Management. Each has 60 days to provide written recommendations and proposed conditions, which DPD must include in any proposed Planned Development ordinance submitted to City Council. The review must consider projected electricity demand, water consumption, emergency and backup power generation, air emissions, noise impacts, cumulative environmental impacts, transportation impacts, emergency response capacity, and impacts on neighboring communities. Section 3 automatically rescinds when a City Council ordinance establishing a temporary moratorium on new data centers or material expansions becomes effective.

• Section 4 (Data Center Task Force): The Interdepartmental Data Center Environment and Community Protection Task Force (Data Center Task Force) is co-chaired by the CSO and the Mayor’s Chief of Police and includes representatives from Building, Environment, Planning and Development, Technology and Innovation, and Water Management, plus other designated City personnel. It will evaluate and, where appropriate, implement the Sustainable Data Centers Working Group’s recommendations, engage residents, subject-matter experts, and stakeholders, and provide recommendations and proposed Municipal Code amendments and rules to the Mayor by March 15, 2027 (or another date approved by the Mayor consistent with any moratorium timing), addressing permitting, impact controls, licensing, zoning, and reporting.

What does this mean to you?

Existing operators: Review current air pollution permits and prepare for new conditions at the next annual certificate of operation renewal.

If you have pending PD projects: Projects awaiting final City Council approval should expect enhanced cross-departmental review and possible delays if a moratorium is enacted.

For patent attorneys, few technology areas demand closer attention right now than artificial intelligence (“GenAI”). Two reports from the World Intellectual Property Organization (“WIPO”) bracket a two-year window: the published in 2024 (the “2024 Report”) and the published in 2026 (the “2026 Report”). Together, they offer a data-driven view of how AI patenting has evolved and what that evolution means for innovators and the attorneys who advise them.

The 2026 Report highlights the accelerating pace of global AI patenting, a pace that commands the attention of attorneys advising technology-adjacent clients. WIPO’s 2026 Report updates the 2024 Report, documenting a field that has entered what it calls “a new phase of technological maturity and commercial urgency.”[1] GenAI inventions roughly doubled between 2024 and 2025, rising from approximately 18,862 published patent families to 37,808 total[2], more than 56,000 new GenAI patent families were published in 2024 and 2025 alone,[3] exceeding the entire cumulative output of the preceding decade.[4] GenAI now accounts for 8.7% of all AI patent activity, up from 6.1% in 2023. These are not speculative filings. While patent filings do not equate to enforceable IP rights, and many of these applications will face validity challenges before they mature into granted patents, the sheer volume reflects genuine trends in inventiveness. This is a technology area where companies are actively innovating, building IP portfolios, and signaling their intent to compete at the frontier.[5]

Geography Matters[6]

The geographic story is the one that matters most for strategic planning. China remains firmly at the forefront, with over 43,000 patent families published in 2024 and 2025 alone, more than its entire cumulative output over the preceding decade. But the growth is becoming more global. Japan has risen dramatically to third place among inventor locations, overtaking the Republic of Korea, driven largely by SoftBank’s extraordinary filing activity. The United States posted a 92% compound annual growth rate between 2023 and 2025, with patent families rising from about 1,185 in 2023 to over 4,380 in 2025. Among companies, the most striking shift is that SoftBank has emerged as the single largest GenAI patent holder with nearly 3,000 families, virtually all filed in 2023 and published in 2025. The traditional Chinese leaders, Tencent, Ping An, and Baidu, remain among the largest cumulative holders, while Alphabet has become the leading U.S.-based patent owner with 1,083 families. The sheer concentration of activity in East Asia signals that companies operating primarily in Western markets should be asking hard questions about their competitive positioning.

It is worth noting what the 2026 Report’s data reveals about the nature of these filings. International patent families, meaning patents filed in two or more jurisdictions, remain a small fraction of total GenAI activity, accounting for approximately 9% of all filings in 2025. The Report attributes this partly to the geographic composition of the landscape: Chinese applicants typically file most of their patents domestically, and the relatively young age of many GenAI portfolios means applicants have not yet extended protection internationally. This raises a forward-looking question that is underappreciated: as Chinese and Japanese companies mature their portfolios and begin nationalizing applications in commercially significant jurisdictions, companies that have not built competitive IP in overlapping technology spaces may face meaningful exposure through licensing demands, design-arounds, or outright freedom-to-operate challenges.

The Importance of Data Strategy[7]

According to the 2026 Report, “the most widely discussed GenAI trend of 2025 has been the rise of agentic artificial intelligence (agentic AI), or systems that can autonomously plan, execute multi-step tasks and adapt their behavior based on real-time feedback loops, with minimal human oversight.”[8] What sets agentic AI apart from earlier GenAI tools? Rather than simply responding to a single prompt, these systems break down complex goals into step-by-step actions, tap into external tools and data, and refine their own outputs along the way. The field is still young, but early patent filings are already emerging, with Alphabet (Google) and Nvidia among the first movers. As agentic AI matures, expect it to claim a growing share of the GenAI patent landscape.[9]

One practical consequence of this multimodal evolution is that the value of diverse training data becomes more critical, not less, as systems grow more capable. The 2026 Report documents how the emergence of highly efficient models from companies like DeepSeek has demonstrated that competitive reasoning performance can be achieved at a fraction of the costs previously assumed, while the broad release of open-weight models has democratized access to frontier-level GenAI. But having access to model architecture in the abstract is not the same thing as holding defensible rights to high-quality, domain-specific datasets suited for a particular commercial application, especially in life sciences and health care. Indeed, we may still be in something of a data gold rush: the computational infrastructure exists, the model architectures are increasingly commoditized, and the differentiator for any given AI application increasingly comes down to whether the developer holds access to proprietary, curated, and legally defensible training data. For patent counsel, this means that IP strategy cannot stop at the model layer. Clients need to think about how they protect and control the data pipelines that feed these systems. It is worth noting, however, that the legal tools for protecting training data remain imperfect. Trade secret protection, while often the most natural fit for proprietary datasets, presents novel enforcement challenges and requires planning to identify and protect the secrets well before they are misappropriated. Companies should consider approaching data protection as a layered strategy combining trade secret protocols, contractual restrictions, and technical access controls, recognizing that no single legal theory provides complete coverage.

The Life Sciences Story[10]

With respect to life sciences and health care, one of the most telling data points in the 2026 Report is how little space the sector occupies in an otherwise comprehensive analysis. The molecules, genes, and proteins data mode, which most directly captures life sciences innovation, showed uneven recent growth: 523 patent families in 2023, a dip to 397 in 2024, and a recovery to 766 in 2025. The Report notes that while this remains a relatively small category, it “continues to reflect the growing application of GenAI in drug discovery, protein design and the life sciences more broadly[11].” Looking forward, the Report observes that “the integration of GenAI into sectors such as healthcare, manufacturing, finance and energy is likely to expand the diversity of actors filing patents in this field.”[12] Patent activity in this space has not collapsed, but it has not kept pace with the explosive growth seen in text-based and image-based AI applications.

Life sciences AI patenting remains an area worth watching rather than a dominant theme in the current landscape. The connection to multimodal systems and data quality is direct and consequential for this sector: in healthcare and drug discovery, the stakes of flawed or biased training data are exceptionally high. As multimodal models increasingly integrate clinical records, imaging, genomic data, and literature within single architectures, the provenance and quality of each data source compounds in importance. For life science applications, where a biased algorithm could misdirect a drug candidate or misclassify a patient population, the quality and provenance of training data is critical.[13] While these risks are logical and well-grounded in the technical realities of multimodal AI, it should be noted that courts and regulators have not yet addressed data quality failures in AI-driven life sciences through enforcement actions or published liability findings. The legal theories under which such failures might give rise to actionable claims remain undeveloped, making this an area where the practical risk outpaces the legal framework.

Strategic Implications

For patent attorneys advising clients in this environment, strategic imperatives are straightforward but urgent. The 2026 Report states plainly that “the patent landscape is evolving faster than ever, and the strategic decisions being made now, about where to file, what to protect and how to navigate an increasingly crowded field, will shape competitive positions for years to come.”[14] Counsel should be benchmarking client portfolios against the competitive landscape described above, paying particular attention to whether claim language drafted around older GAN-specific architectures still captures the way innovation is actually happening now that LLMs and multimodal systems have become dominant.

Of particular consideration for U.S. innovators is the fact that patenting AI technologies is significantly more challenging in the United States than in many other jurisdictions due to the restrictions imposed by 35 U.S.C. § 101.[15] Under the Alice/Mayo framework, AI-related inventions face heightened scrutiny for patent eligibility, with claims frequently characterized as directed to abstract ideas implemented on generic computer hardware. The Federal Circuit has not drawn a clear line for AI method claims, and patent examiners apply the two-step eligibility test inconsistently. This creates an asymmetry: while Chinese, Japanese, and Korean innovators can secure patent protection for AI inventions under comparatively more permissive eligibility standards, U.S. applicants face a materially higher bar. Indeed, USPTO Director John Squires has acknowledged that “categorically excluding AI innovations from patent protection in the United States jeopardizes America’s leadership in this critical emerging technology.”[16] The result is a potential competitive disadvantage for U.S. innovators who limit their patent strategy to domestic filings. If the only patents in your portfolio are those that survived § 101 scrutiny in the United States, you may be leaving significant protection on the table in jurisdictions where those same inventions would be patentable without difficulty.

As a consequence, international filing strategy deserves fresh and urgent attention. While international patent filings remain only 9% of total GenAI filings, many portfolios have not yet been extended internationally. Filing in key jurisdictions before prior art density increases represents a genuine window. For U.S. companies in particular, global patent planning is not merely optional, it is a strategic necessity. Innovators who do not plan globally risk finding themselves unable to enforce against competitors in the very markets where AI patents are most readily obtainable, while simultaneously facing freedom-to-operate challenges from foreign portfolios that mature and enter Western jurisdictions. And for any client whose AI application depends on proprietary datasets, counsel should be advising on the full spectrum of protections available for that data, from trade secret protocols to contractual restrictions on downstream use, because in a landscape where model architectures are converging, proprietary data represents a significant competitive advantage.

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[1] 2026 Report at Introduction

[2] .2026 Report at page 11.

[3] 2026 Report at page 20.

[4]  2026 Report at page 7.

[5] Id.

[6] 2026 Report at pages 13-16.

[7] 2026 Report at page 10.

[8] Id.

[9] Id.

[10] 2026 Report at 19.

[11] Id.

[12] 2026 Report at 20.

[13] See Abulibdeh et al., , PMC (2025) (finding that 95.5% of 691 FDA-cleared AI/ML devices lacked demographic transparency and only 1.6% had randomized trial evidence).

[14] 2026 Report at 8. See also, Congressional Research Service, , IF12563 (updated Jan. 16, 2026) (noting that “some stakeholders worry that AI inventions may be at risk under the current framework because they may be characterized as methods of organizing human activity, mental processes, or mathematical concepts”).

[15] See HGF, (2025) (comparing the EPO’s “technical character / technical effect” approach with the U.S. abstract-idea exclusion at the eligibility stage). 

[16] See