October 5, 2017
On October 4, 2017, the Federal Circuit issued its en banc decision in Aqua Products, Inc., v. Matal, holding that the patent owner does not have the burden to prove the patentability of any substitute claim proposed in an inter partes review (IPR). Rather, it is the petitioner who must show that proposed substitute claims are unpatentable. The Court’s decision reverses a long-standing practice by the Patent Trial and Appeal Board (Board) that required patent owners to prove the patentability of claims when making a motion to amend. The Court, however, left the door open for the USPTO, if it so chooses, to issue a new rule that reassigns the burden regarding patentability of substitute claims back to patent owners.
At issue in Aqua Products was “the proper allocation of the burden of proof when amended claims are proffered during inter partes review proceedings.” No. 15-1177, slip op. at 4 (Fed. Cir. Oct. 4, 2017) (en banc). Several judges called it a “straightforward question” of statutory interpretation. Id. at 67, 130. Nevertheless, the court’s decision contains 5 fractured opinions spanning 148 pages. Judge O’Malley wrote the court’s plurality opinion and lamented that the “process ha[d] not been easy,” that the judges “disagree[d] over a host of issues,” and that it was “frustrating” that so much of the court’s effort produced so little precedent. Id. at 65-66.
In the underlying IPR (IPR2013-00159), the patent owner (“Aqua”) moved, after institution, to substitute three new claims for three challenged claims. The Board denied Aqua’s motion to amend because “Aqua had failed to prove the substitute claims were patentable,” even though “the Board expressly found that Aqua’s amendments complied with” the statutory and regulatory requirements for amending a patent during an IPR. Id. at 6-7. Aqua appealed and a Federal Circuit panel upheld the Board’s decision. Id. at 7.
The Federal Circuit granted en banc rehearing and issued Aqua Products. A majority of the court held that (i) the Patent Office had not interpreted the relevant sections of the IPR statute (i.e., 35 U.S.C. §§ 316(d), 316(e)) such that Chevron deference would apply, and (ii) the most reasonable reading of the statute “is one that places the burden of persuasion with respect to the patentability of amended claims on the petitioner.” Id. at 5, 55, 59, 66.
The court vacated the Board’s final written decision regarding Aqua’s motion to amend and remanded the case for the Board to “assess the patentability of the proposed substitute claims without placing the burden of persuasion on the patent owner.” Id. at 66. The court further ordered that the Board “must follow this same practice in all pending IPRs unless and until the Director engages in notice and comment rulemaking. At that point, the court will be tasked with determining whether any practice so adopted is valid.” Id.
The non-precedential aspects of the decision discussed, among other things, (1) whether the IPR statute unambiguously requires the petitioner to prove all propositions of unpatentability, including for amended claims; (2) whether the Board must consider the entirety of the record when assessing the patentability of amended claims; and (3) whether and to what extent the Board’s case law is or can be entitled to Chevron deference.