Reversing the PTAB in a precedential en banc appeal for Aqua Products

Finnegan represented patent owner Aqua Products in a Federal Circuit appeal from an inter partes review (IPR) involving a patent for an automated pool-cleaning system. The opposing party on appeal was the U.S. Patent and Trademark Office (USPTO). During the underlying IPR, Aqua had proposed amended claims under 35 U.S.C. § 316(d), which gives patent owners the right to propose a reasonable number of substitute claims containing amendments that do not broaden the claims or add new matter. In denying Aqua’s proposed amended claims, the Patent Trial and Appeal Board (PTAB) placed the burden on Aqua, the patent owner, to show patentability of the proposed amended claims, rather than on the petitioner to show unpatentability. On appeal, Aqua argued that this violated 35 U.S.C. § 316(e), which unambiguously states that “the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.” Because this provision does not distinguish between original claims and amended claims, the burden to show unpatentability of proposed amended claims should be assigned to the petitioner, not the patent owner. Nevertheless, the Federal Circuit panel affirmed the USPTO’s judgment, holding that it was bound by the court’s earlier decisions in Proxyconn, Nike, and Prolitec, which had affirmed the USPTO’s interpretation of the IPR statute as placing the burden on patent owners to show patentability of proposed amended claims.

Given the importance of this issue to all U.S. patent owners, Finnegan (on behalf of client Aqua) petitioned for rehearing en banc, and the full court granted the petition, posing two questions to be addressed and inviting briefs from amicus curiae. Finnegan, on behalf of Aqua, solicited amicus support from AIPLA, IPO, BIO, PhRMA, HIPLA, and several other prominent organizations and represented Aqua against the USPTO before the full court. The Federal Circuit issued a 148-page decision vacating the PTAB’s decision and remanding “for the Board to issue a final decision under § 318(a) assessing the patentability of the proposed substitute claims without placing the burden of persuasion on the patent owner.” The decision contained five separate opinions presenting a spirited debate among the judges about statutory interpretation, Chevron deference, and agency rulemaking. The decision overruled the court’s prior decisions in Proxyconn, Prolitec, Mentor Graphics, and Nike, to the extent they are inconsistent with the en banc ruling in Aqua Products.