PTAB Issues Guidelines for Motions to Amend

By Reza Mollaaghababa
An en banc panel of the Court of Appeals for the Federal Circuit (CAFC) in the case of Aqua Products, Inc. v. Matal recently held that in an inter-partes (IPR) proceeding, the burden of persuasion rests with the challenger to persuade the PATB that substitute claims proposed by a patent owner in a motion to amend are unpatentable.  This is a significant shift from the Board’s practice that had required the patent owner to demonstrate that proposed substitute claims are patentable over the art cited by the challenger and the art known to the patent owner.

The PTAB has issued guidelines regarding motions to amend in light of the Aqua Products decision. The guidelines indicate that consistent with the Aqua Products decision, the Board will not place the burden of persuasion on the patent owner with regard to the patentability of substitute claims presented in a motion to amend.  If the patent owner presents a reasonable number of substitute claims that do not enlarge the scope of the original claims and do not introduce new matter, “the Board will proceed to determine whether the substitute claims are unpatentable by a preponderance of the evidence based on the entirety of the record, including any opposition made by the petitioner.”  In particular, “if the entirety of the evidence of record before the Board is in equipoise as to the unpatentability of one or more substitute claims, the Board will grant the motion to amend with respect to such claims, and the Office will issue a certificate incorporating those claims into the patent at issue.”

The guidelines, however, indicate that a motion to amend must still set forth “written description” support and support for the benefit of a filing date in relation to each substitute claim, and respond to grounds of unpatentability involved in the trial.” The guidelines further emphasize that all parties have a duty of candor and in particular the patent owner has a duty “to disclose to the Board information that the patent owner is aware of that is material to the patentability of substitute claims, if such information is not already of record in the case.”  The rules regarding the types, timing and page limits of briefs remain unchanged.  Further, the patent owner must still confer with the Board before filing a motion to amend.

The recognition that the burden for proving unpatentability rests with the challenger even when the patent owner presents substitute claims can potentially result in more motions to amend to be granted. Nonetheless, a patent owner seeking to amend challenged claims may still consider other venues for presenting such amendments. For example, such a patent owner can present amended claims in an ex-parte reexamination or a reissue proceeding. One advantage of such alternative venues for presenting claims amendments is that, unlike in an IPR proceeding, a third party cannot argue against amendments presented in an ex-parte reexamination or a reissue proceeding initiated by a patent owner.

Federal Circuit Slams PTAB Amendment Policy

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.

Mohawks To The Rescue? Can You Immunize Patents From PTAB Review By Assigning To A Native American Tribe?

By Tom Engellenner
In an unusual move to combat the perceived bias in favor of patent challengers at the U.S. Patent Office’s Patent Trial and Appeal Board (PTAB), the Irish drug company Allergan has decided to warehouse its key patents on the dry-eye drug Restasis with the Saint Regis Mohawk Tribe in upstate New York.  Allergan generates over a billion dollars in revenue annually from sales of Restasis worldwide.  By assigning ownership to the Mohawks, the company believes its patents will be exempt from PTAB review on the grounds of “sovereign immunity.”

Under the deal announced last week, Allergan will pay the tribe $13.75 million.  In exchange, the tribe will claim sovereign immunity should the patents be challenged at the PTAB.  The tribe will also exclusively license the patents back to Allergen and be eligible to receive $15 million in annual royalties for the remaining life of the patents.  According to Mr. Dale White, the general counsel for the 13,000 member tribe, the deal will further the tribe’s goal of being self-reliant.  The New York Times has reported that Mr. White was approached in April by a Dallas law firm that pitch the idea and that the tribe has taken ownership of patent portfolios for other companies as well.

The defense of sovereign immunity has already been accepted by the PTAB in cases where the owner of the patent is a state university. The leading cases are Covidien LP v. University of Florida Research Foundation Inc., IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017). and Neochord, Inc. v. University of Maryland, IPR2016-00208 (PTAB May 23, 2017). (See our analysis of the Covidien case here.)  In both cases the PTAB dismissed IPR proceedings against the universities based upon their claims of sovereign immunity – in particular, the Eleventh Amendment – that bars the proceedings unless the state-entity that owns the patent consents to jurisdiction.

The Eleventh Amendment provides that the “judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another state, or by citizens or subjects for any foreign State.” The Supreme Court has interpreted the Eleventh Amendment as a grant of immunity to the States against certain adjudicative proceedings brought against them by private parties.

The broader doctrine of “Sovereign Immunity” is rooted in common law and likewise prohibits actions against foreign states in federal courts and administrative tribunals. Although somewhat murky, the Supreme Court has held, as recently as 2014 in Michigan v. Bay Mills Indian Community, 572 U.S. 12-515, that native American tribes retain inherent sovereign authority and tribal immunity as “domestic dependent nations” and that such immunity extends beyond reservation land to commercial cases in the absence of Congressional action to the contrary.

The Times also reported on an interview last week with Brent Saunders, the chief executive of Allergan, during which he explained that the company made the move to avoid the “double jeopardy” of having the same issue heard in two venues (e.g., a federal district court and the U.S. Patent Office). “We did this to really make sure that we can defend these patents in only one forum,” he reportedly said.