HUGE blow to Nintendo: head of U.S. patent office takes RARE step to order reexamination of “summon subcharacter and let it fight in 1 of 2 modes” patent – games fray

The USPTO Director, John A. Squires, has initiated a rare ex parte reexamination of Nintendo's U.S. Patent No. 12,403,397, citing two prior art references, including one from Nintendo itself. This unprecedented move, driven by public concern and the patent system's reputation, is highly likely to result in the patent's revocation, significantly undermining Nintendo's patent assertions against Palworld. This development, following a recent rejection of a related Nintendo patent application by the Japan Patent Office, further weakens Nintendo's legal standing in the ongoing dispute and signals the USPTO's commitment to invalidating weak patents.

Analysis

The USPTO Director, John A. Squires, has initiated a rare ex parte reexamination of Nintendo's U.S. Patent No. 12,403,397, citing two prior art references: one from Konami (2002) and one from Nintendo itself (2019). This unprecedented, Director-initiated order, potentially the first in over a decade, is highly likely to result in the revocation of the '397 patent, which covers game mechanics. The article describes the patent as a "house of cards," indicating a high probability of invalidation.

This development significantly undermines Nintendo's patent assertions against Palworld, marking the second setback in weeks following a Japan Patent Office rejection of a related application. The consistent skepticism from major patent offices regarding Nintendo's claims suggests a weakening legal position in its ongoing litigation. This action, driven by public outrage and a desire to "weed out objectively bad patents," signals a regulatory environment less tolerant of broad patent claims on game rules.

Director Squires' intervention, despite his prior stance of making patent challenges harder, highlights the USPTO's commitment to maintaining the integrity of the U.S. patent system by ensuring patents are "born strong." Nintendo now has two months to respond to the order. While no immediate impact on the Palworld lawsuit is expected this year, decisions from the Tokyo District Court in 2026 are anticipated, with the article suggesting it is "ever more likely that Nintendo will lose."

Key Decisions for Investors

• Investors should closely track Nintendo's response to the USPTO reexamination and the ongoing Palworld litigation, as a patent revocation would significantly weaken its intellectual property enforcement capabilities and potentially impact future revenue streams.
• Evaluate the implications of this regulatory shift for other gaming companies holding or pursuing broad game mechanic patents, as the USPTO's stance signals increased scrutiny and potential invalidation risks for similar claims.
• Recognize that a weakened patent position for Nintendo could reduce barriers to entry for competitors in the gaming market, potentially fostering increased innovation and competition in game development.