The USPTO May Not Require Patent Owners To Prove Patentability Of Proposed Amended Claims In IPRs

  • October 11, 2017
Aqua Prods., Inc. v. Matal, No. 15-1177 (Fed. Cir. Oct. 4, 2017) (en banc)

In Aqua Prods., the en banc Federal Circuit reversed a decision of the Patent Trial and Appeals Board in an inter partes review denying a motion by Aqua Products to amend its patent claims. The Federal Circuit held that, contrary to established PTAB practice, the burden of persuasion regarding the patentability of proposed substitute claims in an IPR proceeding rested with the petitioner, not the patentee.

Aqua Products held a patent covering self-propelled, automatic pool cleaners. Aqua Products sued Zodiac Pool Systems, Inc. for infringement of its pool cleaner patent. Zodiac responded by filing a petition for inter partes review. After institution of review, Aqua Products moved to amend its claims. The Board denied Aqua Products’ motion because, according to PTAB practice, motions to amend claims in IPR proceedings were not permitted unless the patentee was able to show that the amended claims were patentable over all art known to the patentee. The PTAB issued a final written decision holding all claims initially challenged in the IPR and the proposed substitute claims to be unpatentable. A panel of the Federal Circuit affirmed. Aqua Products petitioned for en banc review.

Section 316 of the Patent Act gives patent owners an opportunity to amend their claims in IPR as a matter of right. The Board promulgated rules that required the patentee to make its motion to amend within 25 pages, demonstrating that the proposed substitute claims are patentable over all known prior art. Only 6 out of 118 motions to amend in IPR had been granted by the Board.

An agency’s interpretation of its own statute is entitled to Chevron deference. The court considers whether Congress has directly spoken on the precise question at issue, and if not, whether the agency’s answer to that precise question is based on a permissible reading of the statute. If it is, the agency’s interpretation controls. A related concept called Auer deference gives deference to the agency’s interpretation of its own regulations.

The en banc Federal Circuit filed five opinions, with a seven judge majority voting to reverse. The majority held that Section 316 was ambiguous as to which party bore the burden of persuasion regarding patentability of proposed amended claims. However, the Board’s interpretation of the statute was not entitled to deference both because the majority determined Congress did not intend to permit the Patent Office to resolve that question, and because the Patent Office had promulgated no rules expressly shifting the burden of persuasion to the patentee. Thus, the majority used traditional principles of statutory construction to hold that the Patent Act intended the burden of persuasion to always rest with a Petitioner in IPR, and the Board’s amendment practice improperly placed that burden on the Patentee.

Judge Moore, joined by Judges Newman and O’Malley, concurred but wrote separately to argue that decisions by the Board, even decisions designated “precedential,” are not entitled to Chevron deference because they have not undergone the traditional rule making process under the Administrative Procedure Act.

Judge Reyna, joined by Judge Dyk, and joined in part by Judges Prost, Taranto, Chen and Hughes concurred separately to argue that the burden of production – the burden of establishing a prima facie case that the patentee’s amendment should be allowed – could be placed upon the patent owner, so long as the burden of persuasion remained with the petitioner.

Judge Taranto, along with Judges Prost, Chen and Hughes, with some portions joined by Judges Dyk and Reyna, dissented from the majority opinion, and would have affirmed the panel decision upon a finding that Section 42.20(c) of the Patent Office’s regulations did shift the burden of persuasion to the patentee on motions to amend, and thus, the Patent Office’s interpretation of the Patent Act should be entitled to Chevron deference.

Finally, Judges Hughes and Chen dissented from the judgment and argued that the Board’s interpretation of its own regulations, and particularly Section 42.20(c), were entitled to Auer deference. Because the Board interpreted that section as shifting the burden of persuasion on a motion to amend to the patent owner, and because that interpretation was reasonable, the dissent would have affirmed. The dissent also responded to Judge Moore’s concurrence, arguing that the term “regulation” was broader than just what was codified in the Code of Federal Regulations. Thus, the Board’s precedential opinions should be entitled to deference.

Key Takeaway:

The PTAB’s standards for evaluating motions to amend the claims of a patent in inter partes review impermissibly shifted the burden of persuasion to the patentee. Amendments to patents in IPR will likely become more attainable as a result. Although it is unclear how the Board will implement this decision.


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