How The PTAB And Federal Circuit Have Responded To Aqua Products

The patent bar watched the en banc rehearing decision in Aqua Products Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017), with great interest. This was because the lack of availability to amend claims in an inter partes review has frustrated patent owners and was a somewhat unanticipated consequence of the America Invents Act. When the AIA was enacted in 2012, many practitioners expected post-grant proceedings amendment practice to be available and quite similar to pre-AIA re-examination practice. This expectation was founded in the statutory language and past practice. The AIA states in Section 316(d)(1) of the Patent Act, 35 U.S.C.A. § 316(d)(1), that "the patent owner may file one motion to amend the patent." Furthermore, IPR and post-grant review proceedings were intended to replace inter partes re-examinations to review the patentability of patent claims. Standard inter partes re-examinations—and ex parte re-examinations—allowed the patent owner to amend claims.

However, the Patent Trial and Appeal Board's approach in post-grant proceedings since the AIA was enacted has severely restricted motions to amend by substituting claims.

Through regulations and decisions, the PTAB set forth ground rules for IPR amendment practice. The statute authorizes the Patent and Trademark Office to promulgate rules relating to motions to amend in Section 316(a)(9) of the Patent Act, 35 U.S.C.A. § 316(a)(9). The PTO did so in 37 C.F.R. §42.121, requiring that the motion to amend:

Respond to a ground of unpatentability. Avoid enlarging the scope of the claims. Avoid introducing new subject matter. Propose only a reasonable number of substitute claims. Show written description support for every change in the original disclosure of the patent. Through its decisions, and in reliance on a general procedural regulation placing the burden of proof on the moving party to establish entitlement to the relief requested, the PTAB further established that the burden to show patentability of the proposed substitute claims was on the patent owner.

Aqua Products

In Zodiac Pool Systems Inc. v. Aqua Products Inc., No. IPR2013-159, 2014 WL 4244016 (P.T.A.B. Aug. 22, 2014), the PTAB held all instituted claims unpatentable for anticipation and obviousness and denied Aqua's motion to amend proposing three substitute claims. Although the PTAB found the substitute claims complied with Section 316(d) and 37 C.F.R. §42.121(a), it was "not persuaded that patent owner has demonstrated the patentability of the proposed substitute claims over a ground of unpatentability involving Henkin and Myers." According to the PTAB, the rule relating to motions to amend and the general rule assigning the burden to movants placed the burden on the patentee to show that the proposed amendments would make the claims patentable over the known prior art.1

On appeal, a panel of the U.S. Court of Appeals for the Federal Circuit affirmed the PTAB decision. In re Aqua Products, 823 F.3d 1369 (Fed. Cir. 2016). The Federal Circuit had previously and repeatedly upheld the PTAB's approach to motions to amend.2 The panel in Aqua Products concluded, therefore, "Given our precedent, this panel cannot revisit the question of whether the board may require the patentee to demonstrate the patentability of substitute claims over the art of record."

The court granted a request for en banc rehearing in In re Aqua Products, 833 F.3d 1335 (Fed Cir. 2016), to specifically address the burden on a patent owner that moves to amend its claims under Section 316(d) of the Patent Act.3

The en banc court delivered its opinions in Aqua Products Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017). Judge Kathleen O'Malley wrote a plurality opinion. Four of the 11 judges on the panel joined in the opinion, and two others concurred as to the result it reached. In that opinion, the court held that, under the PTO's current rules and rule-making history, the agency may not place the burden of persuasion regarding the patentability of proposed amended claims on the patent owner:

The only legal conclusions that support and define the judgment of the court are: the PTO has not adopted a rule placing the burden of persuasion with respect to the patentability of amended claims on the patent owner that is entitled to deference; and in the absence of anything that might be entitled deference, the PTO may not place that burden on the patentee.4

The court expressly overruled contrary Federal Circuit precedent as follows: "To the extent our prior decisions in Microsoft Corp. v. Proxyconn Inc., 789 F.3d 1292 (Fed. Cir. 2015); Prolitec Inc. v. ScentAir Technologies Inc., 807 F.3d 1353 (Fed. Cir. 2015)...; 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."5

It also addressed PTAB precedent, saying two of the PTO's previous decisions "do not alter our conclusion that the PTO's regulations do not speak to either Section 316(e) or the ultimate burden of persuasion regarding patentability."

Five judges concluded that the statutory scheme is unambiguous, saying it does not place the burden of proving the patentability of amended claims on the patent owner. Those five judges also concluded that there is no PTO rule identifying which party has the burden to show patentability of proposed substitute claims. Without a rule, there could be no basis for Chevron deference.6 They also rejected the argument that 37 C.F.R. §42.20(c), the general rule placing the burden on movants, applies to a patent owner's motion to amend claims under Section 316(e) of the Patent Act.

Six more judges said the statute is ambiguous, but they disagreed on whether the PTO interpretation deserved deference.

Two of those six, Judges Timothy B. Dyk and Jimmie V. Reyna, believed it did not, which, when added to the five who believed the statute was unambiguous, provided a plurality of seven agreeing to discard the PTO interpretation without deference.

The plurality of seven judges vacated the original...