Earlier today the United States Court of Appeals for the Federal Circuit issued a narrow ruling in Aqua Products v. Matal, which held that the petitioner in an inter partes review (IPR) proceeding bears the burden of persuasion with respect to demonstrating the unpatentability of any amended claims requested by the patent owner. This en banc decision overrules a number of previous panel decisions. See Federal Circuit decides Aqua Products.
“Aqua Products is pleased with the Federal Circuit’s decision, which is based on a sound interpretation of the IPR statute,” said James Barney, a partner with Finnegan Henderson and the lead attorney for Aqua Products. “Aqua Products is looking forward to continuing to defend its intellectual property rights before the Patent Trial and Appeal Board.”
While there is much to analyze and digest, I’ve asked a distinguished panel of industry experts to provide their instant analysis. What follows is their first-take reaction to this most recent, and important, Federal Circuit decision.
Senior Partner, Polsinelli
The basic outcome, i.e. that the petitioner maintains the burden of proof of proving unpatentability, even in the amendment process, primarily because the PTO didn’t adopt an unambiguous rule to the contrary, seems in keeping with the policy concerns of patent stakeholders, who generally felt the Office’s interpretation was wrong. On the other hand, how they got there……craziness. I don’t think that I’ve ever seen such a collection of procedural somersaults and arcane discussion masquerading as an appellate opinion. This from the main opinion Conclusion seems to have captured the gestalt:
This process has not been easy. We are proceeding without a full court, and those judges who are participating disagree over a host of issues. As frustrating as it is for all who put so much thought and effort into this matter, very little said over the course of the many pages that form the five opinions in this case has precedential weight… All the rest of our cogitations, whatever label we have placed on them, are just that—cogitations. Even our discussions on whether the statute is ambiguous are mere academic exercises.
This also has the potential to get caught up in the rapidly growing debate of whether to reduce or eliminate Chevron deference, now a big policy issue with movement conservatives. See in particular J. Moore’s opinion.
Todd Dickinson has been Chief IP Counsel for two Fortune 50 companies, and served President Bill Clinton as Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office. He is now a Senior Partner with Polsinelli in the firm’s Washinton, DC office.
Principal, Schwegman Lundberg & Woessner
Aqua Products is a sound decision that helps to add needed balance to post-grant proceedings. The Court carefully examined the entire AIA and its legislative history to conclude that “Congress explicitly placed the burden of persuasion to prove propositions of unpatentability on the petitioner for all claims, including amended claims.” Not all patent owners wish to amend claims in an IPR, but for those that choose this approach, the decision properly places the burden of showing that the claims are unpatentable on the Petitioner. The Court was clear that “[i]f the Board decides that an original or entered amended claim overcomes the petitioner’s unpatentability challenge, the claim is “patentable” and treated as a valid claim, regardless of how the claim arose.”
The USPTO should begin to carefully craft new PTAB procedures to accommodate motions for claim amendment. For example, once the Patent Owner files a motion to amend claims that do not impermissibly enlarge the scope of the claims, and do not introduce new subject matter, the Petitioner, and perhaps the Patent Owner, should be allowed to file additional brief(s) focused on how the art cited in the petition applies to the new or amended claims.
The Court did not fully decide whether the PTAB “may sua sponte raise patentability challenges to a proposed amended claim.” Instead, the Court stated that the PTAB “must take account of all the evidence of record” and issue its final decision on the patenability of the claims that is not ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’ I am not sure how to reconcile this part of the decision with the lengthy burden of proof discussion. There is little room for a sua sponte unpatentability decision if, based on the evidence of record, the Petitioner has failed to meet its burden. Here it would be wise for the USPTO and the PTAB to consider limiting all Board decisions wholly to the record developed during the proceeding. Eliminate the opportunity for a panel to issue a sua sponte reason for unpatentability. There is no need for this legal issue to be raised again in a future appeal. The PTAB is charged with deciding contentions set forth in a petition. The PTAB is not tasked with performing its own examination, does not have the appropriate time or tools for independent examination and should not put itself in that position.
Russell Slifer is a Principal at Schwegman Lundberg & Woessner and former Deputy Under Secretary of Commerce for Intellectual Property & Deputy Director of the United States Patent and Trademark Office.
The many opinions today in Aqua Products, Inc. v. Matal reflect the difficulties the Federal Circuit has faced in assessing the PTO’s authority under the America Invents Act (AIA), as well as the Agency’s compliance with the Administrative Procedures Act. The essential question in this case was whether the PTO could place the burden of proving the patentability of a proposed claim amendment on a patent owner in an agency inter partes review (IPR) proceeding. With the court split as to whether the statute was ambiguous, per Chevron, the judges had to assess whether Congress delegated to the PTO the power to fill the alleged statutory gap and whether the PTO in doing so adopted an interpretation through an appropriate mechanism, such as rule making pursuant to notice and comment, that would require deference. The majority of judges agreed that, assuming the statute is ambiguous, the PTO had not promulgated an interpretation to which the court owed deference.
This is a welcome result for patent owners. As Judge O’Malley emphasized in her opinion, Congress and interested parties, including the PTO itself, acknowledged during the adoption of the AIA the importance of permitting patent owners to amend their claims during an IPR. This was largely due to the desire to avoid the win- or lose-all result seen in district court litigation. For five years since the implementation of the AIA, patent owners have seen IPR proceedings evolve in a way that is often inconsistent with the goals of the legislation. The outcome of this case restores the expectation that patent owners will be permitted to amend their claims during an IPR, as intended and promised by the statute.
Melissa Brand is Associate Counsel and Director of Intellectual Property Policy at the Biotechnology Innovation Organization (BIO).
Partner, Berenato & White
It is a sad day indeed that requires an en banc decision of the CAFC to obtain a plain reading of the statute. The right of amendment was clearly contemplated as a vital element in “leveling” the PTAB IPR/PGR/CBM playing field between petitioner and patent owner; and this right has been thoroughly flouted by the PTO administration, the PTAB and, until this decision, most of the CAFC. Sad.
This decision puts neon highlights around what is wrong with the PTAB process as it pursues the political outcome of ridding the system of “troublesome”, aka: “commercially valuable”, patents. The “right to amend” is a fundamental counter balance to BRI claim interpretation. Ie, if the claim can actually be read in such a broad fashion, then a patent owner should reasonably be allowed to adjust or compensate for such an unintended or erroneous reading. As I said: fundamental. Yet ignored. Hopefully this decision will lead to routine amendment in PTAB proceedings.
John White has more than 30 years experience in all aspects of intellectual property, including patent prosecution, litigation, infringement and validity analysis and opinion writing. Mr. White has also served as an expert witness in numerous patent litigation matters, and has taught over half of all patent practitioners how to pass the patent bar exam.
Managing Director, Buford Capital
The real takeaway comes in Judge O’Malley’s conclusion. The Federal Circuit has once again produced a fractured jumble of musings (or “cogitations,” as Judge O’Malley calls them) that provide litigants, lawyers, and the PTO with precious little guidance on the legal questions presented. The Supreme Court must, once again, be called upon to disambiguate the issues. Fortunately, application (or repudiation) of the Chevron doctrine is well within the high Court’s ken.
Nonetheless, Aqua Products v. Matal marks yet another Federal Circuit judgment that, as Judge O’Malley notes, spills much ink over five opinions with little or no precedential value. Chief Justice Marshall famously observed in Marbury v. Madison that it is emphatically the province and duty of the judicial department to say what the law is. Yet time and again, the Federal Circuit seems utterly incapable of plainly announcing the law of patents. One could be forgiven for wondering if the Republic is truly well served entrusting such a tribunal with exclusive jurisdiction over patent appeals.
Ashley Keller co-founded Gerchen Keller Capital and as Managing Director helped steer its growth to $1.3 billion in assets under management prior to its acquisition by Burford. Mr. Keller also served as a law clerk for Judge Richard Posner at the U.S. Court of Appeals for the Seventh Circuit and Justice Anthony M. Kennedy at the Supreme Court of the United States.
In its October 4 en banc Aqua Products decision, the Federal Circuit commendably held that the America Invents Act’s statutory burden, set forth in 35 U.S.C. § 316(e), requires the petitioner in PTAB inter partes reviews (IPRs) to prove all propositions of unpatentability, including for amended claims. The en banc majority also determined that Congress made clear that patent owners may propose amendments to their patents as of right at least once in an IPR.
Although the Aqua Products decision is a positive development, however, it is of limited utility. Four of the eleven judges dissented (Judge Stoll did not participate), and two of the judges who concurred in the result joined the dissenters in part. In short, this en banc decision reveals a close and sharp split within the Federal Circuit on the questions addressed, raising questions about its durability. More fundamentally, the decision does nothing to alter the fundamental fact that PTAB proceedings are (as I and others have pointed out) plagued with due process deficiencies, fundamentally unfair, and of dubious constitutionality. What’s worse, PTAB review undermines American innovation. The Supreme Court should act boldly to strike down PTAB IPRs in the Oil States Energy case. In any event, Congress should eliminate PTAB legislatively as a “good government” measure.
Alden Abbott serves as Deputy Director of Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.
Partner, Erise IP
The Court’s decision that Petitioner bears the burden of unpatentability for amended claims is not surprising. As noted by the Court, this is consistent with Patent Office practice for other proceedings. What is surprising is the apparent dissension amongst the Court’s members. Judge O’Malley’s frankness regarding the difficulty of the Court to agree on a result or a rationale for the result is, without exaggeration, stunning. Such bluntness regarding the Court’s inner workings is unusual and, although refreshing, is also indicative of the difficulties in reconciling IPRs within the patent system of prosecution and litigation. It will be interesting to see if subsequent Board decisions on Motions to Amend influence the Supreme Court and its consideration of Oil States. If the Patent Owner has the ability to amend the claims under a less-severe rubric, then the constitutionality question presented in Oil States seems to be less glaring.
Jennifer Bailey specializes in post-grant review of patents and patent prosecution in the electrical, computer software, and electromechanical arts. Jennifer was lead counsel for Petitioner in the first IPR filed, Garmin v. Cuozzo. Jennifer is also a past president of the Association of Intellectual Property Firms, which is an international association of law firms that devote a majority of their practice to intellectual property law.
Managing Director, US Inventor
It is good to see the Federal Circuit taking a deeper dive into how the PTAB conducts its reviews, even overruling prior decisions. I take this as a sign of hope that the courts will rein in the rogue and unjust PTAB even further in the future. Certainly, the right to amend claims is crucial to helping to bring fairness to PTAB reviews and placing the burden on the petitioner pushes the PTAB slightly closer to the presumed validity required in black letter law. However, amending claims brings with it other problems. I suspect that in most cases once the claims are amended intervening rights will be established. That means back damages will be lost and potentially willful infringement claims compromised.
In my view, this decision is very helpful, but there are still enormous problems with the PTAB that need to be addressed. I continue to believe that the only way to fix the PTAB is to kill it.
Paul Morinville is Managing Director of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups.
In Aqua Products Inc. v. Matal, the Federal Circuit, through the eloquence of Judge O’Malley, has finally affirmed the widely held notion that fundamental principles of equity and fairness, and adherence to the overall statutory structure of Title 35 USC, demands that patentees be allowed to amend claims in an Inter Partes Review proceeding; and that the burden must be on the petitioner to show, not only that one or more of the originally issued claims is likely invalid, but that alternative claims presented by the patentee in that proceeding are likewise unpatentable. In addition to the detailed statutory construction set out by the court, this result aligns with the statute as a whole. Generally, the statute subscribes to the proposition that an inventor is entitled to patent unless it can be shown that the claimed subject matter is not novel, or would have been obvious (among other grounds). The burden of proof for depriving an inventor of the patent right for an invention is upon the government. And now, the burden is likewise on one who would refute the grant by challenging the earlier determination of the U.S. Patent and Trademark Office.
If we are to have faith and confidence in the expertise of the U.S. Patent and Trademark Office, and in the diligent execution of its duties, this is as it should be. We must assume that those duties are competently performed, and where it is shown that they have not been, we must nonetheless fall back on the existing paradigm where it is upon the challenger, not the inventor, to show that the inventor is or is not entitled to the patent grant. This seems especially fitting in a proceeding where the USPTO has determined that there is patentable subject matter, and a patent has been granted, but now the matter is being revisited in the context of the Inter Partes Review. But, as the court noted, the underlying burden of persuasion never shifts. The rights of the patentee remain, and the burden of persuasion should remain upon the challenger. Hopefully, this result will be cause for restoration of confidence in the work of the USPTO, and in the value and durability of the patent assets that it issues.
Brian O’Shaughnessy is president and chair of the board of the Licensing Executives Society, Inc. (USA and Canada) (LES). He is also a partner with Dinsmore & Shohl LLP in Washington, DC.
Partner, VLP Law Group
This decision up the ante for the defendant — levels the playing field for the patent owner, depending on who you represent – as there is a much higher chance that the defendant, not only losing the fight on invalidating the patent, may come out of the IPR with patent claims that are even harder to argue non-infringement.
Edward Kwok is a partner with VLP Law Group. His practice focuses on patent prosecution and Inter Partes adverse proceedings before the U.S. Patent and Trademark Office, and intellectual property litigations in state and federal courts.
Cynthia Lambert Hardman
Partner, Goodwin Procter LLP
The mystery behind the long wait for the Federal Circuit’s en banc decision has now been solved. In a badly fractured opinion, the Court expressly overruled its prior cases holding that patent owners have the burden of proving that proposed amended claims submitted in an IPR are patentable. The Court now holds that it is petitioner who bears the burden of proving that proposed amended claims are unpatentable.
The judges filed five separate opinions, including two dissents. Most of the sparring concerned whether the Court owes Chevron deference to the PTO’s interpretations of its own regulations. Nevertheless, the majority’s opinion should give patent owners some comfort. The majority clearly sought to give more teeth to the amendment process, asserting that a robust amendment process was an important right accorded patent owners in the AIA. Under the majority’s view, once a patent owner meets the procedural requirements for presenting amended claims in a motion to amend, those claims become part of the post-grant proceeding, and it becomes petitioner’s burden to prove that they are unpatentable. The majority states that if a petitioner does not prove an amended claim to be unpatentable, the Board should find it patentable.
This framework suggests that patent owners should have an easier time amending claims–a right which has so far been illusory–leading to more patent owners filing such motions. This may make petitioners think twice before filing petitions. Patent owners may be able to narrow claims in a way that avoids prior art known to petitioners, while still ensnaring the petitioner’s product. Petitioners will also need to grapple with a potentially expanded scope of estoppel, because they may need to rely on additional prior art references to attack the proposed narrowed claims.
Cynthia Lambert Hardman is a partner in Goodwin’s IP Litigation Group and co-chair of the firm’s PTAB Practice. A registered patent attorney, Ms. Hardman also litigates before the U.S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB) in post-grant proceedings such as inter partes reviews (IPRs).
Partner, Pepper Hamilton
For some patent owners (e.g., plaintiffs in patent infringement suits), the Aqua Products decision may not be of strategic importance since amending claims in a post-grant review proceeding can extinguish one’s right to past infringement damages in an underlying federal court litigation. However, for many other patent owners, Aqua Products will certainly change the calculus of how a patent owner responds to a challenge to its patent. One thing for sure, the ability to amend a patent should put to the test the USPTO oft-repeated position that the PTAB’s use of the broadest reasonable interpretation almost never affects the outcome of an AIA proceeding. Patent owners faced with what they consider to be an unreasonably broad interpretation of a claim element will now have an ability to correct the record – and defend their patents on their own terms.
Thomas J. Engellenner is a partner in the Intellectual Property Department of Pepper Hamilton LLP, resident in the Boston office. Mr. Engellenner’s practice includes patents, licensing, trademarks, copyrights and litigation.
Partner, Richardson Oliver Law Group
The 2011 AIA introduced the IPR as a mechanism to allow a faster, cheaper way for a company to challenge a patent’s validity. On faster and cheaper, the AIA and IPRs have delivered. However, the right of the patent owner to amend claims during IPR has been mostly illusory due to rules established by the USPTO.
Todays ruling by the Federal Circuit in Aqua Products should make amendments a reality in IPR. Now, the right to amend guaranteed by statute in the AIA will come into play. Patent owners can amend and the petitioner will have to show that the amended claims are invalid. This will make amendments a more regular part of the IPR process.
All is not clear yet for IPRs: the the Supreme Court will rule on the constitutionality of IPRs later this term. Assuming IPRs continue, the IPR process that will emerge from Aqua Products case will be more robust. For those that have viewed the IPR process as serving as a “death squad” for patents, it is likely that this will prove to be a seismic shift in IPR process and may open new opportunities for both patent owners and challengers.
Erik Oliver counsels clients on patent, licensing and trademark matters. He brings nearly twenty years of patent prosecution, litigation, and licensing experience and a track record of millions of dollars in both patent and technology licensing deals.