Amendments in IPRs? Welcome back to the future

The industry reaction to Aqua Products v. Matal has been swift. In IPWatchdog’s Industry Roundup blog post, there was broad acclaim: “Aqua Products is a sound decision that helps to add needed balance to post-grant proceedings” said Russell Slifer. “It is good to see the Federal Circuit taking a deeper dive into how the PTAB conducts its reviews,” said Paul Morinville. Others spoke to the probable effect on those challenging patents – hoping that it will provide a incentive against filing IPRs. “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,” says Ed Kwok. “This decision will likely make IPRs less attractive to defendants in district court, who may now prefer to litigate in court rather than give the patent holder the opportunity to make an amendment,” said Ira Schaefer and Anthony Biondo. Aqua Products appears to many to be a welcome break for patent owners and a substantial easing of the restrictions on claim amendments in IPR proceedings.

For those involved with post-grant proceedings before the AIA, however, Aqua Products at most means a return to the amending regime allowed under the previous inter partes post-grant procedure, inter partes reexaminations. Given that IPRs were explicitly designed to extend and amend the previous inter partes reexamination procedures, a comparison of amendment practice under the two procedures makes a number of lessons clear.

IPR me like its 1999

Not surprisingly, there are a lot of similarities between the procedures. Pre-AIA 35 U.S.C.§§311-318 permitted the patent owner to propose amendments and additional claims; Post-AIA §316 provides that the patent owner may file a motion to amend the patent by canceling any challenged patent claim and proposing a reasonable number of substitute claims. The burden of proof is also similar to the rule affirmed in Aqua Products: In the context of inter partes reexam proceedings, the third party requester (or the PTO) needed to establish that newly proposed claims and amendments were not patentable. We’ll assume for a moment that Aqua Products opens the floodgates and allows amendment practice in IPRs similar to what was allowed under the 1999 inter partes reexamination statute. So what does that mean?

Looking back at inter partes reexam proceedings, getting valuable amendments through the process was challenging. Similar to original prosecution, any amendments or additional claims put forth in the context of the inter partes reexam proceeding were usually presumed to be necessary responses to overcome prior art challenges that had been put forth by the third party requester, meaning that all elements of the unamended claim were implicitly admitted to be in the prior art. With the third party requester there to comment on each proposal by the patent owner, it was sometimes easy to find an additional piece of art to “plug the hole” and reestablish invalidity, just this time with an additional reference under §103. Amendments also opened the door for the third party requester to bring in new art, as it would be inequitable to allow new arguments from the patent owner without the opportunity for the third party requester to respond.

In IPRs under Aqua Products, the same dynamic will likely apply. While the PTAB will be unlikely to search out its own prior art to evaluate new or newly amended patents, the petitioner will be there to comment and respond to each submission by the patent owner. As with inter partes reexaminations, amendments will also broaden the scope of the evidence that the petitioner may be able to apply. Given a sufficiently motivated petitioner, amending a patent claim may make establishing validity even harder.

Amendments and Litigation

Amendments also create significant difficulties for co-pending litigation. Patent owners are frequently reluctant to go on the record relative to claim interpretation, preferring to let the claims “speak for themselves” as much as possible. In the context of proving patent infringement, the less said, the better.

Defending amendments, however, can sometimes lead statements that prevent patent owners from establishing infringement. One popular tactic under the inter partes reexamination scheme was the “squeeze play.” If done correctly, the patent owner could preserve patentability by amending the claims – but in a way that precluded infringement in the co-pending litigation. To the extent that amendments become more popular after Aqua Products, we should expect sophisticated patent practitioners to bring the squeeze play out again.

An additional wrinkle sometimes arose under inter partes reexaminations was uncertainty regarding the status of claims that had been amended. Putting aside the issue of intervening rights defenses – which is significant – an amendment can sometimes force the dismissal of litigation. Take for example Ho Keung Tse v. eBay, Inc. et al (N.D.Cal. 3:11-cv-01812). In Tse, the court considered whether a claim that was canceled in an inter partes reexamination proceeding could be asserted in the parallel litigation proceeding. The Tse court wrote:

Only claim 21 of United States patent number 6,665,797 is asserted in this action. A reexamination of the ’797 patent was initiated in July 2007 by defendants in a different district court action, and in July 2009, the United States Patent and Trademark Office issued a final rejection of several claims, including claim 21….

Plaintiff … amended claim 21 in March 2010…. The Board of Patent Appeals and Interferences reversed the rejection as to amended claim 21, but affirmed the rejection of other claims. Plaintiff then appealed the BPAI decision… that appeal remains pending (see Dkt. No. 133).

No reexamination certificate has been issued for the ’797 patent. Thus, the original version of claim 21 has been cancelled, but the amended version has not yet issued. There is no claim 21 at this time, and there is no guarantee that a reexamination certificate eventually will issue with the an amended version of claim 21 in its current form. (Tse v. eBay, Order Dismissing Action, pp. 1-2)

The procedural mechanism in Tse is particularly relevant to amendments under IPRs. In an IPR, the method of amending a claim is canceling the challenged patent claim and proposing a reasonable number of substitute claims. Assuming that the PTAB requires motions to amend to include both the cancellation and the new proposed text, amending any claim that is also in litigation will put a patent owner in the same position as Ho Keung Tse: in posession of a possible claim that could issue at some time in the future, but without anything to assert in the present.

Looking forward, looking back

Now that the Federal Circuit has ruled in Aqua Products, the PTAB will surely be quick to develop any needed procedures relating to patent owner amendments. With all the commonalities between IPRs and inter partes reexaminations, the PTAB may choose to borrow from its own history to establish procedures closer to those used in the pre-AIA era.

Perhaps a number of patent owners would prefer the pre-AIA inter partes reexamination proceedings, with its 68% rate of patents exiting the process with the patent still existing – and in some cases even more enforceable. But consider: the PTO’s final inter partes reexamination statistics show that 61% of all reexamination certificates issued under the program included at least some change to the claims. Given the more limited number of amendment proposals allowed under IPRs, no one expects same percentage to apply.

But the most important lesson to learn from the past is that the ability to amend will probably not be as rosy for patent owners as many appear to be assuming.