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Aqua Products and the Federal Circuit's Divergent Views on Motions to Amend

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The long-awaited en banc decision in Aqua Products v. Matal1 demonstrates a deeply divided court on the application of Chevron deference to the U.S. Patent and Trademark Office ("PTO") and the Patent Trial and Appeal Board ("PTAB") for motions to amend patent claims. Decided by eleven of twelve active Federal Circuit judges2, the decision spans five opinions, including Judge O'Malley's controlling opinion, two other concurring-in-part opinions, and two dissents.

At issue was the PTAB's denial of the patent owner's, Aqua Products', motion to amend claims during an IPR. In its controlling opinion, the Federal Circuit found that it was improper to place the burden of persuasion on the patent owner, as the PTAB had done. Several judges dissented. Discussed in each opinion were the judges' bases for reaching those conclusions, including discussion of whether 35 U.S.C. § 316(e) is ambiguous, whether the PTO already proffered a regulation addressing the burden of persuasion in this setting, whether the PTO Director is authorized to address the burden of persuasion issue at all, whether the PTO is entitled to Chevron or Auer deference in this instance, and whether the burden of production should lie with the patent owner.

The following table summarizes the judges' varied stances on these issues:3

Aqua Products V Metak Chart

A summary of each opinion follows:

A. Judge O'Malley's Controlling Opinion

Judge O'Malley's controlling opinion concluded that the panel decision erred in affirming the PTAB's denial of the patent owner's request to amend claims during an IPR. The Board placed the burden of persuasion on the patent owner to prove that its proposed amended claims were patentable. Judge O'Malley concluded that the burden of persuasion should lie with the petitioner, not the patent owner. In this conclusion, the majority of the Federal Circuit judges concurred, albeit for different reasons.

Judge O'Malley came to this conclusion by analyzing the statutory scheme and finding that Section 316(e) unambiguously requires the petitioner to prove all propositions of unpatentability, including for amended claims. Because the majority of the court found that the statute was ambiguous, however, she concluded in the alternative that there was no interpretation of the statute by the Director of the PTO to which the court was required to provide Chevron4 deference. Judge O'Malley vacated the PTAB's decision denying the patent owner's motion to amend and remanded the matter, requiring the PTAB to assess the patentability of the amended claims without placing the burden of persuasion on the patent owner.

B. The Remaining Opinions

1. Judge Reyna's Opinion

Judge Reyna's concurring-in-part opinion disagreed with Judge O'Malley in her conclusion that the statute was unambiguous. This part of his opinion was joined by five other judges, including the three dissenting judges, making it a majority holding. He agreed with the dissent's reading of Section 316(e) as ambiguous and Section 316(a)(9) as authorizing the PTO to prescribe regulations on the burden of persuasion. But unlike the dissenters, Judge Reyna rejected the PTO's argument that, under the current regulatory scheme, the patent owner bears the burden of persuasion.

Judge Reyna stated that he would vacate and remand just like Judge O'Malley, but for entirely different reasons — because the PTO failed to present a fully considered interpretation of the statute governing the burden of persuasion properly promulgated by a rule through notice-and-comment rulemaking. Had the PTO followed such procedure in a way that was compliant with the Administrative Procedure Act, in Judge Reyna's view, it would be entitled to Chevron deference. Therefore, Judge Reyna's opinion, joined by a majority of judges, sets the stage for the PTO to correct its ambiguous regulation - and overcome the controlling holding in Aqua Products - through proper rulemaking procedure.

2. Judge Moore's Opinion

Judge Moore joined Judge O'Malley's majority opinion in its entirety, in its entirety, and also agreed with Judge Reyna's conclusion that the PTO should not be entitled to Chevron deference, but wrote separately to outline a different basis for that conclusion. Judge Moore took issue with the PTO's attempt to extend Chevron deference beyond any prior applications of the doctrine.

The PTO argued that the PTAB decisions discussing the burden issue (Idle Free<5 and MasterImage6) were precedential and should therefore be entitled to Chevron deference. Judge Moore disagreed, concluding that any authority the PTO Director has to adopt a standard regarding the burden of persuasion can only be prescribed through a regulation. She emphasized that PTAB decisions, like Idle Free and MasterImage, were not subject to the same requirements of notice-and-comment rulemaking as PTO regulations. In Judge Moore's view (and distinguishing Judge Hughes's dissent), when Congress expressly delegates to the Director the ability to adopt legal standards by prescribing regulations, the Director can only obtain Chevron deference if it indeed adopts such standards through such regulations — not through precedential PTAB decisions.

3. Judge Taranto's Dissent

Judge Taranto's dissent sets forth two conclusions that are joined at least in part by the majority of the court: (1) Section 316(a) authorizes the PTO Director to address who has the burden of persuasion for substitute claims; and (2) Section 316(e) does not unambiguously bar assigning that burden to the patent owner.

Judge Taranto disagreed with Judge O'Malley's conclusion that the PTO has not issued a regulation governing the burden of persuasion. In Judge Taranto's view, there is such a regulation - 37 C.F.R. § 42.20(c) - and the patent owner did not present a sound argument against giving Chevron deference to that regulation.

4. Judge Hughes’s Dissent

Judge Hughes authored a separate dissent to address the majority's decision to fault the sufficiency of the PTO Director's rulemaking procedure. Judge Hughes noted that this issue was raised for the first time by the Federal Circuit judges without briefing or argument from the parties. In his view, the court should give deference to the PTO Director's "clear and consistent" interpretation of an ambiguous statute that he is entitled to interpret. He questioned the majority's conclusion that the agency's authority is limited to promulgating regulations codified in the Code of Federal Regulations (C.F.R.). To Judge Hughes, this approach is novel and has no support in precedent or in any statute. Judge Hughes also faulted the court by failing to provide clear rules in the five separately-compiled opinions totaling over 100 pages.

Judge Hughes also observed that even if the scope of the PTO’s regulation (37 C.F.R. § 42.20(c)) is ambiguous, the PTO is still entitled to Auer7 deference for its interpretation of its own regulation.

Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. Oct. 4, 2017) (en banc).
2Judge Stoll did not participate.
3Green indicates the decision is controlling.
4Chevron, U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
5Idle Free Sys., Inc. v. Bergstrom, Inc., No. IPR2012–00027, 2013 WL 5947697, at *4 (P.T.A.B. June 11, 2013)
6MasterImage 3D, Inc. v. RealD Inc., No. IPR2015–00040, 2015 WL 10709290, at *2-4 (P.T.A.B. July 15, 2015).
7Auer v. Robbins, 519 U.S. 452 (1997).


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