Federal Circuit Removes the Burden of Proving Patentability of Amended Claims During IPR Proceedings from Patentee

On October 4, 2017, in Aqua Products, Inc. v. Matal, No. 2015-1177 (Fed. Cir. Oct. 4, 2017) (en banc), a divided en banc court for the Federal Circuit issued a significant ruling that has the potential to make it far easier, and more common, for patent owners to amend their claims during inter partes review (“IPR”) proceedings. Specifically, the Federal Circuit held that the PTAB may not place on the patentee the burden of persuasion of proving patentability of amended claims submitted in an IPR, absent a USPTO rule directed to the issue.

The America Invents Act (“AIA”) specifies that during an IPR a patentee has the right under 35 U.S.C. § 316(d)(1) to propose amended substitute claims to the originally issued claims.

At issue in Aqua were two seemingly contradictory provisions—one regulatory and one statutory.

First, 37 C.F.R. 42.20(c) dictates that when a party files a motion in an IPR, the “moving party has the burden of proof to establish that it is entitled to the requested relief.”

Second, 35 U.S.C. § 316(e) specifies that in an IPR, the petitioner challenging the claims of the patent has the burden of proving unpatentability of the claims.

With respect to a patentee’s motion to submit amended claims in an IPR, the PTAB had been placing the burden of proving the patentability of proposed amended claims on the patentee, because submitting substitute claims require a motion, and motions under 42.20(c) require the moving party to carry the burden.

The PTAB reasoned that it was the patentee’s burden under 42.20(c) to prove patentability of the proposed amended claims to gain entry into the IPR, and if and when that motion to enter the amended claims was successful, it would be the petitioner’s burden under 35 U.S.C. § 316(e) to prove unpatentability of the proposed substitute claims. However, in most IPRs where the patentee moved to submit substitute claims, the proposed amended claims would never survive the first step. Indeed, the PTAB’s interpretation was resulting in an alarmingly low number of proposed-substitute-claims motions being successful. Specifically, since the AIA was passed, only eight motions to amend had been granted.

In an IPR involving Aqua’s patent, U.S. Patent No. 8,273,183 (“the ‘183 Patent”), the result was no different. After having its claims challenged in an IPR, Aqua submitted a motion to enter proposed substitute claims that were more narrow than the originally issued claims of the ‘183 Patent. However, the PTAB denied the motion, finding that Aqua had failed to meet its burden under 42.20(c) to prove that the proposed amended claims were patentable. Aqua appealed the PTAB’s denial of its motion for new substitute claims, but a panel of the Federal Circuit rejected the appeal. Aqua then requested and was granted rehearing en banc of the panel’s decision.

In order to make a decision, the en banc court looked to the long-standing holding of Chevron, U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The first step outlined in Chevron requires that if Congress has spoken directly on a controversial issue, a government agency (and courts) must give effect to the unambiguously expressed intent of Congress. Id. at 842-43. Six of the eleven judges of the en banc court found that the conflict between 42.20(c) and 35 U.S.C. § 316(e) was ambiguous, thus requiring the panel to turn to step two of Chevron.

Step two of Chevron asks whether an agency’s rule on the issue is based on a permissible construction of the relevant statute or statutes. If an agency such as the USPTO has promulgated a rule, the rule must be given deference if it is based on a permissible interpretation of the statute or statutes. However, the court found that the USPTO had not made any sort of rule to address the ambiguity between 42.20(c) and 35 U.S.C. § 316(e). The USPTO was simply giving weight to 42.20(c) and putting the burden of proving patentability on the patentee if the patentee submitted substitute claims during an IPR.

In absence of any USPTO rule addressing the conflict, the court looked at the most reasonable interpretation of 37 C.F.R. 42.20(c) and 35 U.S.C. § 316(e). Among other reasons, the court ultimately found that putting the burden on the patentee to prove patentability of substitute claims would render the § 316(d)(1) substitute claim process during an IPR meaningless. Thus, the majority concluded the PTAB had erred by putting the burden on Aqua, the patentee, for proving patentability of substitute claims. The en banc court remanded the case to the PTAB to address whether Aqua’s substitute claims were patentable, without putting the burden of proving patentability on Aqua.

Ultimately, because the USPTO has not adopted any sort of rule which places the burden of proving patentability of amended claims on the patent owner, the Federal Circuit concluded that there is no USPTO rule which the court must give deference under Chevron. And in absence of a rule which must be given deference, the Federal Circuit held that the PTAB may not place the burden of proving patentability on the patentee. It remains to be seen whether the USPTO now will move to adopt such a rule, and if so, whether it would survive scrutiny at the Federal Circuit.

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