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Federal Circuit Holds That Petitioner Bears Burden of Persuasion on Amended Claims in IPR Proceedings

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Today, the Federal Circuit issued a divided en banc opinion (7-4) in Aqua Products, Inc. v. Matal, No. 2015-1177 (Fed. Cir. Oct. 4, 2017). The controlling opinion, authored by Judge O'Malley, held that the statute unambiguously requires the petitioner to prove all propositions of unpatentability, including for amended claims. Alternatively, the opinion held that if the statute is ambiguous, it need not defer to the USPTO's interpretation, and the most reasonable reading of the statute places the burden of persuasion for amended claims on the petitioner. This decision reverses earlier Federal Circuit precedent and the PTAB's practice of placing the burden of proving patentability of amended claims on the patent owner during IPR proceedings.

Section 316(e) of the America Invents Act (AIA) states that in an instituted IPR proceeding, "the petitioner shall have the burden of proving a proposition of unpatentability." Section 316(d) allows a patent holder to file one motion to amend, by either cancelling claims or proposing a reasonable number of substitute claims, so long as the amendment "[does] not enlarge the scope of the claims of the patent or introduce new matter." The controlling decision rejected the PTO's argument that § 316(d) unambiguously places the burden of persuasion on the patent owner, as the movant. Rather, it held that the only reasonable reading of the burden imposed on the movant in § 316(d) is that it must satisfy that statutory criteria for motions and the PTO's procedural obligations. Slip Op. 24.

In placing the burden of persuasion on the petitioner, the controlling decision relied instead on the unambiguous language of § 316(e). The parties did not dispute that § 316(e) placed the burden of persuasion for already issued, challenged claims on the petitioner. The decision noted that both the statute and the PTO's directives require any proposed amendment to seek to cancel or propose a substitute for a challenged claim, and to be sufficiently narrower than the challenged claim to overcome the instituted grounds of unpatentability. Id. at 24-25. The decision also noted that § 316(e) does not reference "claims" but "unpatentability," and therefore "reaches every proposition of unpatentability in the proceeding." Id. at 25-26. Because Congress did not distinguish between proposed amended claims and originally challenged claims in § 316(e), the controlling decision presumed Congress to have acted intentionally when it made that distinction in other sections of the AIA. Id.

Although Judge O';Malley's opinion found the statute unambiguous, only 5 of the 7 judges who joined her opinion agreed the statutory scheme was unambiguous. Id. at 42. A majority of the judges therefore alternatively analyzed whether the PTO's interpretation of the statute was entitled to deference under step two of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). In that portion of the decision (joined by 7 judges), the court concluded that the PTO had not adopted a rule or regulation governing the burden of persuasion on amended claims, and the most reasonable reading of the statutory scheme places the burden of persuasion on the petitioner. Slip Op. 43-45, 59-60.

The voluminous commentary in this 148-page decision includes two concurring decisions, authored by Judges Moore and Reyna, and two dissenting decisions, authored by Judges Taranto and Hughes. Judge Taranto’s dissent primarily argues that § 316(a), which authorizes the PTO Director to prescribe regulations governing IPRs, authorizes the Director to address who has the burden of persuasion for amended claims, and § 316(e) does not unambiguously bar assigning that burden to the patent owner. Slip Op. 1-2. His dissent also argues that, contrary to the majoritys opinion, the PTO has prescribed a regulation assigning the burden to the patent owner, 37 C.F.R. § 42.20(c), which states that any movant bears the burden of proof to establish that it is entitled to its requested relief. Id. at 2.

Judge Hughes's dissent points out that the majority of judges (6 of 11) agreed that the statute is ambiguous, which mandates deference to the Director's interpretation of the statute. Slip Op. 1-2. Therefore, his dissent argues that today's decision contravenes traditional rules of administrative law when faced with an ambiguous statute, which is to determine whether the PTO's interpretation was reasonable. Id. at 2. His dissent also proposes that even if the PTO';s regulation offered by Judge Taranto, 37 C.F.R. § 42.20(c), is ambiguous, the PTO is also entitled to deference for its interpretation of its own regulation under Auer v. Robbins, 519 U.S. 452 (1997). Id. at 3.


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