Bearing the burden

The US Court of Appeals for the Federal Circuit’s decision in Aqua Products v the US Patent and Trademark Office has ruffled many feathers, as the burden of proof in an inter-partes review begins to shift to the petitioner

In October, the US Court of Appeals for the Federal Circuit ruled that the burden of persuasion should not be placed on patent owners when they seek to amend claims in inter-partes review (IPR) proceedings.

The federal circuit’s decision came in the Aqua Products case against the US Patent and Trademark Office (USPTO), in which Aqua challenged USPTO rules, arguing that the proper allocation of the burden of proof should rest with the petitioner in these cases.

The original IPR revolved around a patent for a pool cleaner developed by Aqua and challenged by Zodiac Pool Systems—a case that has since been settled.

The Patent Trial and Appeal Board (PTAB) denied Aqua’s motion to amend various claims of one of its patents during the IPR.

Aqua appealed, and the federal circuit vacated the PTAB’s decision, “insofar as it denied the patent owner’s motion to amend the patent”.

It remanded the case back to the PTAB for a final decision assessing the patentability of Aqua’s proposed substitute claims, without placing the burden of proof on Aqua.

But, the federal circuit’s decision in the case had not been an easy one. In an en banc panel, only seven of the 11 judges agreed to the ruling.

Judge Kathleen O’Malley, who wrote the majority opinion, recognised that it had not been an easy process and said the case was proceeding “without a full court”, adding that “those judges who are participating disagree over a host of issues”.

O’Malley said that very little said over the course of the many pages that formed the five opinions in this case actually had precedential weight.

However, many intellectual property attorneys are saying that, despite a lack of precedential value, the decision in the case will make a mess for the PTAB, not in the least because it will affect all pending IPRs, which the US Patent Act holds must be decided within one year after institution unless the time period is extended by six months for a “good cause”.

Michael Weiner, partner at Marshall, Gerstein & Borun, claims that the decision will force the PTAB to “establish procedures and likely issue new rules to address [it]”.

He adds that the PTAB “will probably need to use its authority to extend its deadlines for pending IPRs”.

But, Weiner recognises that, practically, a change in the burden of proof will not have much of an effect on the PTAB, as the board generally denies nearly all motions to amend.

Justin Oliver, partner at Fitzpatrick Cella Harper & Scinto, adds: “The immediate impact likely will be on recent decisions by the board in which it predicated denial of a motion to amend on the patent owner not proving patentability.”

“For recently-appealed cases with that situation, that will mean some remands in which the board will issue a new decision in which the burden rests with the petitioner, not the patent owner.”

“The change in burden has the potential to be outcome determinative but may not mandate a ruling in favor of the patent owner.”

The USPTO could issue new rules to shift the burden back to the patent owner, but Weiner says that any new rules will “probably place the burden on the petitioner, consistent with the court’s decision”.

He adds: “Perhaps the rules would be changed to permit the patent owner to file amended claims, followed by briefing on the petitioner’s challenge to patentability of the amended claims. So, rulemaking would appear to be appropriate even if the USPTO does not intend to shift the burden back to the patent owner.”

The closeness of the decision in the federal circuit’s ruling could affect the way the USPTO approaches its rulemaking.

Weiner explains: “In the 11-judge en banc court, five judges have the view that the statute unambiguously places the burden for proving unpatentability of amended claims on the petitioner, and six judges have the view that the statute is ambiguous on which party has the burden.”

“If new rules are issued and challenged in a future case, the en banc court may be split 6-6 on whether the statute is ambiguous; or the court might vote 7-5 that the statute is ambiguous, and defer to the agency’s future rulemaking on the issue.”

He adds: “If new rules place the burden on the petitioner and proper rulemaking procedures are followed, then all 11 judges would likely agree to uphold such rules. This is one reason why the USPTO will probably issue rules consistent with keeping the burden on the petitioner—such rules would likely be upheld by the court.”

Alternatively, Weiner sees a potential USPTO appeal to the US Supreme Court later down the line and says the Supreme Court may even grant certiorari in the case.

But, he contends: “If the Justice Department is looking for an appropriate case in which to challenge the application of Chevron v Natural Resources Defense Council to agency rulemaking, it may decide that Aqua Products is not the best case in which to raise such a challenge.”

“Chevron issues more commonly come up in cases involving other agencies.”

Oliver adds that the USPTO will be carefully considering new rules which place the burden on the patent owner.

“I would not expect the USPTO to await the outcome of any appeal to the Supreme Court to make that decision,” he says. “The closeness of the decision, and the basis for the majority decision, certainly suggests that the USPTO may be able to obtain a different outcome in the future if it places the burden on the patent owner through regulations, rather than through board case law.”

“All eyes are on the USPTO to see if it decides to go that route.”

Overall, the shift in burden will be a good thing for patent owners, says Cyrus Morton, partner and chair of the patent office trials group at Robins Kaplan.

He says patent owners “often feel they need all the help they can get to survive an IPR”.

He concludes: “For a petitioner, when you file you are now taking on the burden of keeping any new claims from coming out.”

“You want prior art at the ready that would render anything in the entire specification, which could be added to a claim, unpatentable.”
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