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In This Issue
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The
Federal Circuit Shifts Burden Onto Petitioners To Establish Unpatentability
Of Amended Claims In IPRs
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The
Federal Circuit Clarifies The Doctrine Of Inherency In Obviousness Findings
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The Federal Circuit Shifts Burden Onto
Petitioners To Establish Unpatentability Of Amended Claims In IPRs
In Aqua Products., Inc. v.
Matal, the Court of Appeals for the Federal Circuit (“CAFC”) upended the
current motion-to-amend practice before the Patent Trial and Appeal Board
(“the PTAB”), which may reduce the difficulties encountered by patent owners
seeking to amend claims during inter
partes review (“IPR”) proceedings.
Under the PTAB’s current practice, patent owners have faced great
difficulty in successfully amending claims in IPR proceedings, but that may
change in light of the Aqua Products ruling, wherein a fractured CAFC sitting
en banc shifted the burden of
persuasion to establish the unpatentability of amended claims proffered by
patent owners during IPRs onto petitioners.
The CAFC’s opinions leave open the possibility that the Patent and
Trademark Office (“PTO”) may attempt to promulgate regulations re-imposing
the burden of persuasion on patent owners.
Five of the CAFC panelists, however, indicated that any such
regulation would be foreclosed by the America Invents Act (“AIA”). Whether
patent owners would now seek to take greater advantage of the opportunity to
amend may also depend on other factors, such as the PTAB’s overall
receptivity to motions to amend and the amendment’s implications for the
recovery of damages in any parallel litigation.
This dispute arose in 2003 when Zodiac Pool Systems, Inc. (“Zodiac”)
filed an IPR petition challenging certain claims of Aqua Products’ U.S.
Patent No. 8,273,183, and after institution, Aqua Products proposed amended
substitute claims. In its final written decision, the PTAB held both the
challenged and proposed substitute claims unpatentable and denied Aqua
Products’ motion-to-amend concluding that Aqua Products had not carried the
ultimate burden of persuasion of showing patentability with respect to the
proposed substitute claims. Aqua Products appealed the PTAB’s denial of the
motion-to-amend.
The CAFC, on appeal, affirmed the PTAB’s ruling that the patent
owner had not established that the proposed substitute claims were
patentable. Aqua Products subsequently
sought rehearing en banc to
challenge the burden of persuasion to show proposed substitute claims
patentable as impermissible under 35 U.S.C. § 316(e), which reads “In an inter partes review instituted under
this chapter, the petitioner shall have the burden of proving a proposition
of unpatentability by a preponderance of the evidence.” The en
banc CAFC vacated the initial decision and granted rehearing en banc on August 12, 2016.
After the rehearing, the en
banc CAFC voted 6-5 to vacate the PTAB’s final written decision denying
Aqua Products’ motion-to-amend, and remanded the matter to the PTAB to issue
a final decision assessing the patentability of the proposed substitute
claims “without placing the burden of persuasion on the patent owner.” A
majority of the participating judges concluded that 35 U.S.C. § 316(e) is
ambiguous as to the allocation of the burden of persuasion, and a differently
constituted majority then held that the CAFC was not required to defer to any
interpretation of the statute by the PTO. In the absence of any required
deference, the majority then found the most reasonable reading of the AIA is
one that places the burden of persuasion with respect to the patentability of
amended claims on the petitioner.
The question of the appropriate burden of proof, however, deeply
divided the en banc panel, which
disagreed whether the applicable statute—the AIA—clearly addressed the issue,
and whether the PTO’s interpretation of the AIA was entitled to
deference. This disagreement resulted
in five separate opinions, none of which garnered enough votes to serve as
the opinion of the Court.
The lead opinion, authored by Judge O’Malley, commanded five votes
falling one vote short of the majority.
The lead opinion is based on the plain language of the statute and the
relevant legislative history, and concludes that Ҥ 316(e) unambiguously
requires the petitioner to prove all propositions of unpatentability,
including for amended claims;” and that 35 U.S.C. §§ 316(a)(9) and 316(d) do
not shift the burden of persuasion regarding the patentability of amended
claims to the patent owner. The opinion continued that these provisions
merely set forth that the patent owner must satisfy the “statutory criteria”
and any “procedural obligations” “before the amendment is entered into the
IPR.” Holding the relevant statutory provision to be § 316(e), the opinion
reasoned that the provision applies equally to both issued and proposed
substitute claims, and explained that § 316(e) is unlike other sections of
the AIA, in that it “applies to all claims in an IPR—whether existing or
proposed to be amended.” Indeed, it
“uses the term ‘unpatentability,’ which may refer to either pending or issued
claims, rather than the term ‘invalidity,’ which both courts and the PTO
apply only to issued claims.”
The lead opinion acknowledged that the remaining six members of the en banc panel—hence, the
majority—believed the statute to be ambiguous on this point, and accordingly,
analyzed whether the PTO had validly interpreted the AIA’s statutory scheme
with respect to the burden of persuasion of amended claims to warrant
judicial deference. The five-judge
plurality concluded that the PTO did not promulgate any rulemaking governing
the burden of persuasion, so no judicial deference was appropriate. Therefore, even assuming statutory
ambiguity, the lead opinion would have held that the burden of persuasion for
the amended claims rests with the petitioner.
The two additional votes to reverse the PTAB ruling were supplied by
Judges Reyna and Dyk in a separate opinion that concluded that the PTO “does
not possess the statutory authority to issue through adjudication a
substantive rule that creates and allocates a burden of persuasion,” as
opposed to through formal notice-and-comment rulemaking. The Judges would accordingly have applied
the “ordinary default rules of evidence” on the allocation of the burden of
persuasion (which forms the background to the AIA), and held that “the
default rule is that the patent owner does not bear the burden of persuasion
on the patentability of its proposed amended claims.”
The remaining four judges dissented. In the principal dissent, Judge
Taranto stated that he would have held that the AIA is ambiguous with respect
to who bears the burden of persuasion on the amended claims, and that “a PTO
regulation assigns the burden of persuasion to the patent owner.” Judges Hughes and Chen joined Judge
Taranto’s opinion but also wrote separately to note that, even if the PTO’s
regulations regarding the burden of persuasion were ambiguous, they would
have deferred to the PTO’s interpretation of these regulations under the
principle of Auer v. Robbins, 519
U.S. 452 (1997).
Because the participating en
banc judges had different views, both as to the judgment and the
underlying rationale, the Aqua Products
holding appears fairly narrow. The CAFC held that, at least in the absence of
any future rulemaking by the PTO, the burden of persuasion with respect to
the patentability of amended claims in IPR proceedings resides with the
petitioner. The members of the en banc
panel disagreed, however, whether that outcome was mandated by statute (as
five judges would have held) or was the result of the PTO not having gone
through a proper notice-and-comment process (as two other judges concluded).
As a result, the CAFC’s opinions here leave open the possibility that the PTO
may attempt to promulgate regulations re-imposing the burden of persuasion on
the patent owner. The PTO, however, may be reluctant to embark upon that
process, given five members of the CAFC are now on the record that any such
regulation would be foreclosed by the AIA. For the foreseeable time being,
therefore, the burden of persuasion in IPR proceedings will be governed by Aqua Products and reside with the
petitioner.
It remains to be seen, however, whether patent owners will seek to
take greater advantage of the opportunity to amend, and how Aqua Products will affect pending AIA
trials involving motions to amend. While the shift in the burden may make it
easier for patent owners to move to amend claims, the PTAB may still reject
the amended claims if it concludes that they are not distinguished from the
prior art. In addition, patent owners seeking to amend their claims should be
mindful of the implications of such amendments for any parallel infringement
litigation. The doctrine of intervening rights may potentially prevent patent
owners from recovering past damages in litigation if the claims of the
patent-in-suit are amended.
Finally, the different Aqua
Products opinions illuminate the different approaches that members of the
Federal Circuit apply to questions of statutory interpretation and
administrative deference. As the opinions illustrate, some members of the CAFC
are more willing to defer to the PTO’s interpretation, whereas other members
are more inclined to construe the governing statute themselves. CAFC judges
also have divergent views on the degree of formality required of the PTO’s
rulemaking before the agency receives judicial deference.
The Federal
Circuit Clarifies The Doctrine Of Inherency In Obviousness Findings
In the appeal from the PTAB finding of unpatentability of claims
1-42 under 35 U.S.C. § 103 in an inter
partes reexamination under inherency in Southwire Co. v. Cerro Wire LLC, the CAFC affirmed the PTAB’s
ruling holding that substantial evidence supported the PTAB’s determinations
regarding (1) obviousness, and (2) lack of factual support and nexus for the
objective evidence of long-felt need, even though the PTAB got the inherency
analysis wrong.
The claim language at-issue related to providing a lubricant on an
electrical cable during manufacture such that the force required to pull the
cable through drilled wooden blocks in which it would be installed was
reduced “about . . . 30%.” The
original patented claims had survived two previous ex parte reexams (during which amendments were made and claims
were added). In the end, all 42 claims
were held unpatentable based on a two-reference combination with one
reference teaching the use of a friction reducing additive that would migrate
to the surface of the cable jacket of a fiber optic cable. While the prior art didn’t refer to the 30%
reduction in force recited by the claims, the examiner adopted the third-party
requestor’s view that such a reduction would be “an inherent result of the
cable being made in accordance with the method steps” disclosed by the
reference. The CAFC held that although this inherency determination by the
PTAB was wrong under existing law, the error was harmless because the PTAB
had otherwise made all the findings required to support its determination of
unpatentability.
The CAFC first quoted its law regarding “inherency” as follows:
• The use of inherency in the context of
obviousness must be carefully circumscribed because ‘[t]hat which may be
inherent is not necessarily known’ and that which is unknown cannot be
obvious.
• While “[w]e have recognized that
inherency may supply a missing claim limitation in an obviousness analysis,”
we have emphasized that “the limitation at issue necessarily must be present”
in order to be inherently disclosed by the reference.
The CAFC then held that the PTAB erred in the inherency analysis by
concluding that because the reference teaches reducing the coefficient of
friction using a lubricant, it would have been “obvious to have selected
[lubricant] amounts” that achieve that result. The CAFC, however, held that the PTAB’s rejection
was sustainable because the PTAB correctly found that the claimed method
simply applies the same process for the same purpose as disclosed in the
reference—i.e., to reduce the pulling force on a cable for ease of
installation. In doing so, the CAFC
finessed the “about 30%” reduction of force limitation in the following manner:
First, there was “no evidence that the claimed
30% reduction in pulling force would have been unexpected or unattainable
from the process disclosed” in the reference.
Second, there was no evidence that the process
disclosed in the reference did not produce an “at least . . . 30% reduction”
in pulling force. The CAFC observed
that where “all process limitations . . . are expressly disclosed by [the
prior art reference], except for the functionally expressed [limitation at
issue],” the PTO can require an applicant “to prove that the subject matter
shown to be in the prior art does not possess the characteristic relied on.” Per the CAFC, “In the absence of any
evidence that the claimed 30% reduction would have been unexpected in light
of the [the reference] disclosure, there is no indication that the limitation
is anything other than mere quantification of the results of a known
process.”
Third, the CAFC pointed out that the 30%
reduction limitation was added to the claim by amendment in a previous reexamination
to overcome the prior art. Other than
a single mention that, under a certain test, “lubricated specimens” (the
details of which are undisclosed) yielded a 50% reduction in pulling force
compared to non-lubricated standards, the written description provides no
discussion regarding the amount of reduction in pulling force; it merely
teaches that one can reduce the pulling force by incorporating certain
lubricants into the cable sheath. “Neither the patent itself nor any evidence
proffered by Southwire during the reexamination provides any indication that
the ‘at least about a 30% reduction’ limitation was something other than an
observed result of an old process, written into the claim in an attempt to
avoid the prior art process.”
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