For many months, lawyers who practice before the Patent Trial and Appeal Board have been asking, when is the Federal Circuit going to rule on motions to amend?
After all, the U.S. Court of Appeals for the Federal Circuit heard en banc oral argument in Aqua Products v. Matal last December. And the issue—which side has the burden of persuasion when a patent owner proposes amending a patent claim during inter partes review—is a hot button for patent owners in a process they complain is stacked against them.
On Wednesday, the reasons for the delay became clear. The court splintered into five different opinions spanning 148 pages, none commanding a majority. Judge Kathleen O’Malley, who appeared to fall one vote short, acknowledged that deciding the case “has not been easy.”
“As frustrating as it is for all who put so much thought and effort into this matter, very little said over the course of the many pages that form the five opinions in this case has precedential weight,” she wrote.
The judges couldn’t even seem to agree on what the Patent Trial and Appeal Board (PTAB) should do when the case is sent back. Judge Jimmie Reyna wrote that one portion of his separate concurrence, which drew the votes of five judges, “sets forth the judgment of this court on what the board may and may not do with respect the burden of production on remand in this case.” O’Malley called Reyna’s concurrence “odd” and wrote that “no questions regarding any burden of production remain.”
Finnegan, Henderson, Farabow, Garrett & Dunner partner James Barney, who argued the case for Aqua Products Inc., is the apparent winner. PTO Solicitor Nathan Kelley argued the case for the agency.
The case started out as routine patent litigation before becoming a cause celebre of patent owners. Aqua Products sued competitor Zodiac Pool Systems Inc., accusing it of infringing its patent on an automated swimming pool cleaner. Zodiac responded by petitioning for inter partes review (IPR) at the Patent Trial and Appeal Board.
During the IPR proceedings, Aqua Products sought to narrow its patent claims. The America Invents Act permits one amendment during an IPR if it narrows the claims and adds no new matter. Patent owners say this provision shows that IPRs are not always meant to be all-or-nothing, but allow for some limited back-and-forth over the breadth of patent claims.
The America Invents Act also requires the PTAB to decide cases in 12 months, and the board has been reluctant to grant amendments. According to O’Malley’s opinion, as of last year the PTAB had turned away 112 of patent owners’ 118 motions to amend.
The PTAB rejected Aqua Products’ amended claims, saying the company hadn’t met its burden of proving the amended claims were patentable. Aqua Products argued that in an IPR, the burden should always fall on the petitioner to prove claims are unpatentable, not the other way around.
Wednesday’s decision evoked comparisons to the Federal Circuit’s fractured 2013 decision in CLS Bank v. Alice, the Section 101 decision that similarly divided the court and led to the Supreme Court taking up the case. But it wasn’t immediately clear Wednesday whether the PTO will seek certiorari or instead try to craft a new regulation that can pass Federal Circuit muster. Further clouding the picture, the PTO is under temporary leadership pending the U.S. Senate confirmation of Irell & Manella partner Andrei Iancu as permanent director.
“That’s an interesting strategic question for them,” said Baker Botts IP partner Eliot Williams, who’s been following the case closely.
Aqua Products poses the kinds of administrative law questions the Supreme Court has shown much interest in lately. But if a majority of the court believe the America Invents Act is clear about motions to amend, it wouldn’t reach those questions, Williams noted.
That was where five of the 11 Federal Circuit judges came out (the 12th member of the court, former Finnegan Henderson partner Kara Stoll, was recused). O’Malley wrote that the AIA text and legislative history make clear that the burden of persuasion should rest on the petitioner. Judges Pauline Newman, Alan Lourie, Kimberly Moore and Evan Wallach concurred.
Those judges then decided that even if the statute is ambiguous, they would not extend Chevron deference to the PTO regulation interpreting the regulation, in part because the PTO hadn’t taken proper steps to adopt it, O’Malley wrote. Judges Reyna and Timothy Dyk concurred in that result.
Moore concurred separately to emphasize that decisions of the Patent Trial and Appeal Board are not the kinds of “regulations” that Congress delegated to the PTO in the America Invents Act.
Judge Richard Taranto dissented, saying the America Invents Act delegated to the PTO the authority to regulate motions to amend. “Aqua Products has presented no sound argument against giving Chevron deference to that regulation,” Taranto wrote. Chief Circuit Judge Sharon Prost and Judges Raymond Chen and Todd Hughes concurred in full, while Dyk and Reyna concurred in part.
Hughes dissented separately, accusing O’Malley’s side of conducting “a hypertechnical review of an agency’s exercise of its discretion.” The proper question was whether the rule adopted by the agency is reasonable, he wrote. Moore had called this approach “squishy.”
Baker Botts’ Williams said the decision seems to mean that the burden of persuasion will lie with petitioners for now, but the door is open for the PTO to try to fashion a new rule that would pass muster with the Federal Circuit judges who didn’t join O’Malley’s opinion. On the other hand, he said, “they may want to take their shot right now” at the Supreme Court.
Scott Graham can be contacted at firstname.lastname@example.org.