En Banc Federal Circuit Paves the Way for Easier Claim Amendments in Inter Partes Review Before the PTAB
October 4, 2017
On October 4, 2017, the U.S. Court of Appeals for the Federal Circuit issued an en banc decision in Aqua Products, Inc., v. Matal, finding that the petitioner has the burden of proving the unpatentability of claims—even amended claims—entered in an inter partes review (IPR). This decision overrules earlier Federal Circuit decisions finding that the burden rested on the patent owner to prove patentability of amended claims and will force immediate changes to amendment practice in trials at the Patent Trial and Appeal Board (PTAB).
Patent owners in IPRs have an opportunity to amend claims "as of right."1 The notion that claims can be amended has served as the justification for the PTAB's use of the broadest reasonable interpretation (BRI) standard for claim construction in IPRs. However, the opportunity to amend has largely been illusory, since only a small number of motions to amend claims have been granted. One reason as to why so few patent owners have successfully amended claims is that the PTAB has placed the burden on the patent owner to prove the patentability of amended claims.
The PTAB determined that the burden was properly set on patent owners because its motions-practice rules placed the burden on the movant to establish entitlement to the relief requested. The PTAB construed this burden to include showing patentability in motions to amend. Two PTAB decisions—Idle Free and MasterImage—that were subsequently designated as "representative" and "precedential," respectively, compelled this result. The Federal Circuit later found, in a series of cases, that placing the burden on patent owners to prove patentability was not an abuse of discretion.
Thus, patent owners wishing to amend claims had to show that the proposed claims: (1) were responsive to the instituted grounds of unpatentability; (2) neither broadened the scope of the original claim nor introduced new matter; and (3) were patentable over the art of record and known to the patent owner. Idle Free and MasterImage created considerable inconsistency concerning what patent owners needed to show to prove patentability for amended claims.
The Burden Is on the Petitioner to Prove Unpatentability of All Claims Entered into an IPR
The Federal Circuit went en banc in Aqua Products to answer who bears the burden of proving patentability for amended claims and whether the PTAB may raise its own reasons for unpatentability. The court fractured over the first question, issuing five opinions: a very narrow majority, a concurrence, a partial concurrence, and two dissents. The majority opinion agreed that the PTAB's position on the first question was not entitled to deference, but could not agree why. A plurality (five of 11 judges) held that 35 U.S.C. 316(e) unambiguously required the burden of proving unpatentability to remain with the petitioner for all claims so deference is not an issue. Two additional judges were willing to concur that the PTAB position was not entitled to deference because the agency had not properly promulgated its position as a rule. A different majority—made up of the partially concurring judges and the dissenters—held that some procedural burdens that the PTAB imposes on patent owners who seek to amend remain intact, even if the ultimate burden of proof remains with the petitioner. The dissenters would have deferred to the PTAB. As a result of this complicated set of opinions (spread over 148 pages), a petitioner has the ultimate burden of proof for unpatentability for all claims, including amended claims, but the PTAB has properly imposed burdens of production on the moving patent owner to justify entry of the proposed claims into the proceeding.
The plurality also holds that the PTAB must review the amended claims in light of the entirety of the record. This result largely follows previous case law for patent reexaminations that requires the PTAB to consider the entire record in determining patentability rather than simply adopting or rejecting a party's position.
Anticipated Changes to Amendment Practice
The complex web of decisions and potential instability of the holding, given the lack of a single clear majority, may prompt the U.S. Patent and Trademark Office (USPTO) to seek further review at the U.S. Supreme Court. The USPTO may, however, elect to adopt the decision as its practice, in which case, the dissenters would have to defer to the USPTO on its new policy. Adopting the plurality view may also protect the PTAB from the unfavorable publicity and congressional interest its amendment policy has generated.
The decision will apply immediately to cases pending before the PTAB or the Federal Circuit. Parties may wish to seek additional briefing or recalibrate their strategies to take this decision into account. Nevertheless, amendment practice might not change significantly in the short run, as numerous reasons not to amend—including intervening rights, the unlikelihood of success for some inventions, and the cost for some parties—will remain. Moreover, the complexity of the holding may take time to work out in further PTAB and court decisions. Some of the present burdens on the patent owner will remain, including the need to show that the proposed claims address the instituted grounds of unpatentability and do not broaden the scope of the claim or introduce new matter. In addition, the costs of amendment practice are likely to increase to accommodate the increased burden on the petitioner and the risk of estoppel from failing to challenge an amended claim completely. The PTAB will likely have to adjust its schedule, perhaps to give the last word (in the form of a surreply) to the petitioner, who now bears the ultimate burden of proof.
Furthermore, the change in practice may provide new tactical and strategic opportunities for petitioners and patent owners alike. Petitioners will need to address all possible grounds of unpatentability or risk estoppel. The statutory restriction of unpatentability to grounds based on prior art and printed publications will not apply to the amended claims. Conversely, petitioners may have new opportunities to attack the unamended claims by addressing unpatentability of the amended claims in terms that clearly apply to the unamended claims as well. Paradoxically, a patent owner might emerge from an IPR in an even stronger position, since its amended claims will now avoid unpatentability over the instituted grounds and estoppel will shield the claims from challenges (by the petitioner or its privies) for any ground that the petitioner should have raised in opposition to the amendment.
In many ways, the court's fractured holdings will increase uncertainty, rather than decrease it, in the short term. Eventually, the U.S. Supreme Court might step in to provide a coherent resolution, the USPTO might issue rules that provide greater clarity, or parties and the PTAB may be left to work out the details on a case-by-case basis.