Aqua Products, Inc. v. Matal

Aqua Products v. Matal, decided October 4th, 2017. Sitting en banc, the Federal Circuit splintered — five opinions, and no majority. Only a narrow rule commands a majority: the Patent Office has not adopted, through proper rulemaking, any rule placing the burden of proving the patentability of amended claims on the patent owner; and absent such a rule, that burden stays with the petitioner under Section 316(e). The court vacated and remanded. Here's the brief.

Aqua Products owns U.S. Patent No. 8,273,183, directed to an automated swimming-pool cleaner. While Aqua was litigating that patent against Zodiac Pool Systems in district court, Zodiac petitioned the Board for inter partes review, and the Board instituted on obviousness grounds.

Aqua then moved, under Section 316(d), to substitute three amended claims. The Board found that the amendments met Section 316(d)'s formal requirements — no broadening, no new matter — but denied the motion, concluding that Aqua had failed to prove the substitute claims were patentable. In other words, the Board placed the burden of persuasion on the patent owner.

A panel affirmed, bound by prior decisions — Proxyconn, Prolitec, and Nike — that had upheld that allocation. The full court then granted rehearing en banc and vacated the panel decision, taking up two questions: whether the Patent Office may make the patent owner bear the burden on amended claims, and which burdens Section 316(e) permits.

The relevant provisions sit in a single statutory section.

Section 316(d) gives the patent owner the right to file one motion to amend, proposing a reasonable number of substitute claims that neither enlarge scope nor add new matter. The very next subsection, Section 316(e), sets the evidentiary standard: in an instituted IPR, the petitioner bears the burden of proving unpatentability by a preponderance of the evidence.

The question was whether that command reaches amended claims — or whether the statute's silence about amendments left room for the Patent Office to assign the burden to the patentee, and, if it did, whether the agency's approach was entitled to Chevron deference.

The court fractured badly. Judge O'Malley wrote the lead opinion for a plurality; Judges Dyk and Reyna concurred in the result; and Judges Moore, Reyna, Taranto, and Hughes each wrote separately.

O'Malley's plurality read Section 316(e) as unambiguously keeping the burden on the petitioner for all claims, original or amended. But that reading did not command a majority — six of the eleven participating judges thought the statute ambiguous. What did assemble a majority was narrower, and rested on administrative law: whatever the statute means, the Patent Office had never adopted, through notice-and-comment rulemaking entitled to deference, a rule putting the burden on the patent owner. The Board's practice traced to adjudicatory decisions — the Idle Free and MasterImage rulings — not a properly promulgated rule. Absent a rule owed deference, the court read the statute in the first instance and declined to place the burden on the patentee.

O'Malley was candid that little of the reasoning survived as precedent.

Judge Taranto, joined by three colleagues, dissented from the judgment, arguing that a Patent Office regulation already assigns the burden and deserves Chevron deference. On remand, the Board must assess patentability on the entire record, without placing the burden of persuasion on Aqua.

Aqua Products stands for a deliberately narrow proposition: absent a validly promulgated rule, the patent owner does not bear the burden of persuasion on the patentability of amended claims in an IPR — that burden remains with the petitioner. The court invited the Patent Office to fill the gap through rulemaking, and the agency did, first with guidance and later with a notice-and-comment rule on motions to amend. The decision is also a study in fractured precedent: what binds is the judgment and the two conclusions that support it, not the competing rationales — a point the lead opinion itself made express. For that reason its reach is confined to the burden question it resolved, and its scattered reasoning on Chevron and statutory ambiguity carries no precedential force.

Aqua Products, Inc. v. Matal, 872 F.3d 1290, Federal Circuit, en banc, decided October 4th, 2017. I'm Kyle Coleman. Thanks for watching.