By Tom Engellenner
On October 4, 2017, the Court of Appeals for the Federal Circuit, sitting en banc, overruled an earlier panel decision and found that the Patent Trial and Appeal Board (PTAB) had been impermissibly placing the burden of proving the patentability of amended claims on the Patent Owner, rather than the Petitioner. See, Aqua Products v. Matel, 2015-1177.
In four separate opinions spanning 148 pages, the eleven judges expressed their views on the PTAB amendment practice. Despite differing rationales, it is clear that a majority of the Federal Circuit judges were exasperated by the way the U.S. Patent and Trademark Office (USPTO) has been considering claim amendments in the new administrative trial procedures provided by the America Invents Act (AIA).
As Judge O’Malley noted in the plurality opinion, the PTAB had granted only 6 amendments in inter partes review (IPR) proceedings as of February, 2017 – a period of almost five years since the inauguration of IPR proceedings during which over 6500 petitions were filed.
A great deal of the Aqua Products opinion was devoted to the so-called Chevron standard of review. Under Chevron and Aura v. Robbins, 519 U.S. 452 (1997), a court reviewing a federal agency’s construction of a statute must first determine whether the statute is at all ambiguous. If the statute is not ambiguous, the agency’s interpretation is entitled to no weight. On the other hand, if the statute is ambiguous, the agency’s interpretation is reviewed under a “clearly erroneous” standard. To complicate things further, the Chevron standard of review is only applicable if the agency has reached its interpretation via a formal rule-making process, i.e. by notice in the Federal Register and taking public comments into account.
Judge O’Malley, joined by four other judges, concluded that the pertinent sections of the AIA (35 U.S.C. 316(d) and 316(e)) were not ambiguous and Congress clearly intended to give Patent Owners a right to amend their claims in AIA proceedings and that the burden of proving invalidity of the amended claims lay with the Petitioner. Judges Reyna and Dyk concluded that the statute was ambiguous on this point but the USPTO had not engaged in formal rule-making and, hence, no Chevron deference was warranted and the most reasonable interpretation of the statute was that Congress intended that the Petitioner should have the burden of proving amended claims were not patentable. The remaining four judges would have given the USPTO Chevron deference and upheld the PTAB policy of placing the burden of persuasion on the patentability of amended claims with the Patent Owner.
For some patent owners (e.g., plaintiffs in patent infringement suits), the Aqua Products decision may not be of strategic importance. Roughly 85 percent of IPR petitions are filed by defendants who have been sued for patent infringement. Since amending claims in a post-grant review proceeding can extinguish a plaintiff’s right to past infringement damages in an underlying federal court litigation, many patent owners may still be reluctant to amend their claims.
However for other patent owners, Aqua Products may 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.