Federal Circuit decides Aqua Products, says patentability burden of amended claims on Petitioner

By Gene Quinn
October 4, 2017

Moments ago the United States Court of Appeals for the Federal Circuit issued its much anticipated decision in Aqua Products, Inc. v. Matal, addressing en banc whether the patent owner has the burden of proving patentability with respect to submitted amended claims during an inter partes review (IPR) proceeding. Previous panels of the Federal Circuit had ruled that the burden of persuasion to demonstrate patentability was with the patent owner, not with the challenger. Sitting en banc the Federal Circuit issued a narrow ruling saying that the burden of persuasion must remain at all times on the petitioner, including with respect to demonstration of unpatentability of amended claims.

The ruling of the court was described to be “narrow” by Judge O’Malley, who wrote for the majority, because there was no consensus among the Judges with respect to the judgment that should be reached and the rationale that should be employed. The lack of consensus would explain it took the Federal Circuit ten-months after the oral arguments in this case to issue a decision.

Judge O’Malley did, however, explain that the majority of the Federal Circuit found the statute on this point to be ambiguous and, therefore, no deference was given to any interpretation of the United States Patent and Trademark Office (USPTO) under Chevron, U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984).

The entirety of the Aqua Products decision covers some 135 pages, with concurring opinions and dissents. Obviously, much more detailed analysis will be required to parse this decision in the coming days and weeks. Stay tuned as we will have much more to say. For the time being, for those interested in understanding the Federal Circuit’s decision in a nutshell, Judge O’Malley provides a nice summary of the Federal Circuit’s decision. Judge O’Malley’s majority was joined by Judges Newman, Lourie, Moore, and Wallach, with Judges Dyk and Reyna concurring in the result.

Upon review of the statutory scheme, we believe that § 316(e) unambiguously requires the petitioner to prove all propositions of unpatentability, including for amended claims. This conclusion is dictated by the plain language of § 316(e), is supported by the entirety of the statutory scheme of which it is a part, and is reaffirmed by reference to relevant legislative history. Because a majority of the judges participating in this en banc proceeding believe the statute is ambiguous on this point, we conclude in the alternative that there is no interpretation of the statute by the Director of the Patent and Trademark Office (“PTO”) to which this court must defer under Chevron, U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). And we believe that, in the absence of any required deference, the most reasonable reading of the AIA is one that places the burden of persuasion with respect to the patentability of amended claims on the petitioner.1 Finally, we believe that the Board must consider the entirety of the record before it when assessing the patentability of amended claims under § 318(a) and must justify any conclusions of unpatentability with respect to amended claims based on that record.

Because the participating judges have different views—both as to the judgment we should reach and as to the rationale we should employ in support of that judgment, as explained below, today’s judgment is narrow. The final written decision of the Board in this case is vacated insofar as it denied the patent owner’s motion to amend the patent. The matter is remanded for the Board to issue a final decision under § 318(a) assessing the patentability of the proposed substitute claims without placing the burden of persuasion on the patent owner.

The footnote from the above quotation reads:

To the extent our prior decisions in Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 2015); Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353 (Fed. Cir. 2015), petition for reh’g pending; Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016); and Nike, Inc. v. Adidas AG, 812 F.3d 1326 (Fed. Cir. 2016), are inconsistent with this conclusion, we overrule those decisions.

Also of great interest, in pages 37 to 40 of the majority decision, Judge O’Malley tackles the issue of whether Congress intended to allow patent owners the right to amend. Judge O’Malley explained: “Congress made clear that patent owners may propose amendments to their patents as of right at least once in an IPR.”

And then on page 40, Judge O’Malley further explained: “By reading too much into § 316(d) and too little into § 316(e), the PTO effectively injects illogic into that framework and undermines its function and purpose.”

Ultimately, the precedential ruling is quite narrow, as Judge O’Malley explicitly explains on pages 65 to 66. What is clear, however, is that the PTAB must assess proposed substitute claims without placing the burden of persuasion on the patent owner. Furthermore, O’Malley wrote:

The Board must follow this same practice in all pending IPRs unless and until the Director engages in notice and comment rulemaking. At that point, the court will be tasked with determining whether any practice so adopted is valid.

Stay tuned!

UPDATED: Wednesday, October 4, 2017 at 12:19 pm ET to add discussion of pages 37, 40, 65, and 66.

 

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 9 Comments comments. Join the discussion.

  1. Night Writer October 4, 2017 1:20 pm

    A surprise. The different groupings of the circuit judges is interesting.

  2. Bemused October 4, 2017 1:38 pm

    This fractured opinion just begs for SCOTUS review.

  3. Anon October 4, 2017 1:43 pm

    Two items (before I dive into the long decision of no real decision):

    1) majority of the Federal Circuit found the statute on this point to be ambiguous and, therefore, no deference was given to any interpretation of the United States Patent and Trademark Office (USPTO) under Chevron, U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984).

    Um, is it not a prerequisite to applying Chevron that ambiguity must be present? If there is no ambiguity, then there would be no reason to apply Chevron to the administrative agency’s desired version of the situation.

    2) Sorry Gene, but your “of interest” note (with caveat that I have not read the case yet) speaks OPPOSITE of what you have long wanted.

    to wit: “Also of great interest, in pages 37 to 40 of the majority decision Judge O’Malley tackles the issue of whether Congress intended to allow patent owners to the right to amend. Judge O’Malley explained: “Congress made clear that patent owners may propose amendments to their patents as of right at least once in an IPR.”

    Proposing is simply not the same as having by right.

    Propose as you may want – that just does not mean that you MUST get what you propose – there was, is, and remains NO ability to have an amendment by right.

    As I (and others) have pointed out, the plain text is that patentees get the right to ask – nothing more.

  4. step back October 4, 2017 3:05 pm

    Bemused @2

    What are the chances that SCOTUS will let this curtailment on PTAB death squads stand?

    I would guess very low. 🙁

  5. step back October 4, 2017 3:08 pm

    Anon @4

    I believe the majority explains that the right to propose cannot be rendered illusory and totally meaningless. The words of the statute have to be given a modicum of meaning.

  6. Dan Hanson October 4, 2017 3:08 pm

    Here is a reminder of some exchanges that took place when Cuozzo was argued to the Supreme Court in April of 2016:

    JUSTICE SOTOMAYOR: I might be moved by your argument [that Congress did not provide wide liberty to amend claims] if Congress had not given any right for the Board to amend, because that would be consistent with practices in the district court, where district court can’t amend under any circumstance. But basically, Congress here said you can amend once. I’m not sure that that supports your proposition.
    MR. BEENEY [on behalf of Cuozzo]: I think Justice Sotomayor, I think there is a distinction between allowing a party to make a motion to amend and the absolute right to amend even once. And Congress did not provide any right to amend in inter partes review. It provided only an extremely limited ability to seek to amend. And, in fact, in practice, that opportunity to seek to amend is almost always denied.
    ***
    MR. GANNON [Assistant to the Solicitor General]: Well, we –­­ we do think that the reason why this ultimately ends up being more like a Board proceeding or a PTO proceeding [instead of a court proceeding] is because there’s the ability to make claim amendments. You’re not, at the end of the process, just stuck with having to adopt a saving construction of the patents. The ­­– the patent owner can come in and say, look, I can fix that problem. I can keep this from being obvious.
    CHIEF JUSTICE ROBERTS: Well, are you saying in the IPR proceeding?
    MR. GANNON: In the IPR that’s–
    CHIEF JUSTICE ROBERTS: Well, that’s happened six times ever.
    MR. GANNON: It’s — it — the — out of — yes, it’s a small number so far.

  7. EG October 4, 2017 4:21 pm

    Hey Anon:

    OK, 316(d)(1) says expressly that “the patent owner may file 1 motion to
    amend the patent,” but says nothing about the standard for accepting/denying such a motion. In fact, as pointed out in O’Malley’s initial opinion, all that PTO Rule 42.121 says it that the “first motion to amend need not be authorized
    by the Board” and that.”[t]he motion will be entered so long as it complies with the timing and procedural requirements.” So what does compliance with the “timing and procedural requirements” mean? It hardly suggests that the motion to amend can be denied unless the amended (substitute) claim is proved to be patentable by the patent owner. In fact, O’Malley’s opinion, and in particular, Reyna’s opinion suggest that the USPTO created this “evidentiary standard” for when a motion to amend would be accepted out of a mere adjudicatory ruling by PTAB that wasn’t even denominated as precedential but only informative. In other words, this “evidentiary standard” never even met the minimum APA requirement of being promulagated as rule with “notice and comment.”

  8. Anon October 4, 2017 4:21 pm

    step back,

    There is nothing “illusory” in providing a right to ask that is not concomitant with an actual right to amend.

    The two simply are not the same.

    (please note that I have not yet been able to break away to read the opinion – your point may be strong and reflect well the case, as the case in its fractured state may be)

  9. Eric Berend October 5, 2017 9:14 am

    The nose of wax begins to soften, just a tiny bit, in the increased heat of this examination. Ten months and 135 pages to a narrow, “fractured” decision, following oral arguments?

    Oh! How the minions do scurry about, striving to bring some sort of color to the magic invisible threads of this Emperor’s New Clothes!

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