The Three Precedential Holdings of AQUA


On Wednesday, the en banc Federal Circuit decided Aqua Products, Inc. v. Matal, 2015-1177 (Oct. 4, 2017 Fed. Cir.), which addressed the allocation of burdens when the patent owner in an IPR moves to amend its patent to add substitute claims. The decision is 148 pages long, with three separate opinions and two separate dissenting opinions, no opinion or dissent fully joined by more than five judges, with only two judges signing a single opinion and, instead, most judges agreeing with parts of two or even three separate opinions.

In today’s blog post, we keep it very simple, though, given this blog’s mandate to focus on practical thoughts for the busy practitioner. In this post, we address this:  What in the Aqua decision is precedential, and what does that mean in practice?

Who Joined What Opinions

First, let’s untangle the opinions. Here’s a matrix of which of the 11 judges joined which of the three opinions (O’Malley, Moore and Reyna) and two dissenting opinions (Taranto and Hughes). A check indicates a judge fully joined the opinion, while text indicates that a judge partially joined an opinion and explains that partial joinder.

From this jumble of agreements and disagreements, we can extract three holdings that are precedential—as circled above—meaning at least six of the 11 judges agreed.

The Import of the Three Precedential Holdings

  1. The O’Malley Opinion: The burden of persuasion is on the petitioner. 

The Precedent. Our first precedent comes from Judge Kathleen O’Malley’s opinion, joined by four judges, with two additional judges concurring in the result. Thus, the “result” here is precedential, namely:  When a patent owner proposes an amended claim in an IPR, under the current PTO rules, the burden of persuasion with respect to its patentability is on the petitioner. See Aqua at 59 (“[W]e, along with Judges Dyk and Renya, conclude that the Board erred when it imposed the burden of proving the patentability of its proposed substitute claims on Aqua.”).

The Impact on Practitioners. What does this mean for the practitioner?

This means that after today, the petitioner bears the same burden for amended claims that it has always borne for original claims: to show by a preponderance of the evidence that the claim is unpatentable. Only time will tell whether this will cause a material change at the PTAB. On the one hand, many practitioners have blamed the futility of proposing substitute claims in an IPR on the PTAB having put the burden of persuasion on the patent owner. As the Aqua court notes, as “of April 30, 2016, the Board had completely denied 112 of 118 motions to amend,” and:

“Aqua and its amici contend these statistics are a direct result of the Board’s placement of the burden of proving the patentability of amended claims on the patent owner, its requirement that the patent owner satisfy that burden on the face of a 25-page motion to amend—without regard to the remainder of the record—and its requirement that the patent owner prove patentability, not just in response to the grounds of unpatentability asserted by the petitioner, but on all possible grounds and in light of all prior art known to the patent owner.”

Aqua at 12 (citations omitted). If this is correct, then, with the shifting of the burden to the petitioner, the PTAB may very well end up granting more motions to amend the claims.

On the other hand, regardless of who has the burden, the key evidence remains the same:  the written words of the prior art and the patent being challenged. Thus, the Board’s evaluation of that evidence may very well remain the same regardless of who first hands that evidence to them. Also, at the end of the day, petitioners win instituted IPRs 7 out of 10 times, even with the burden of showing invalidity on them. As a baseline, given the similarities between opposing a claim and opposing a substitute claim, one might expect petitioners to prevail at around the same 70% rate—probably adjusted upwards because, as a general matter, patent owners only propose substitute claims in situations where they see the invalidity writing on the wall.

  1. The Reyna Opinion: The PTO’s current rules on the burden of production remain unchanged.

The Precedent. Our second precedent comes from Part III of Judge Jimmie Reyna’s two-judge opinion, which Part III was joined by four additional judges. In Part III, Judge Reyna held this:  Regardless of which party bears the ultimate burden of persuasion, the patent owner bears the burden of producing evidence to support patentability. In the words of the Renya opinion:

“[T]he patent owner bears the burden of production in accordance with 35 U.S.C. § 316(d). Indeed, the Patent Office has adopted regulations that address what a patent owner must submit in moving to amend the patent. For instance, § 42.22(a) requires a movant to provide in a motion ‘[a] full statement of the reasons for the relief requested, including a detailed explanation of the significance of the evidence including material facts, and the governing law, rules, and precedent.’ … [Thus,] a patent owner is not excused from assisting the Board to perform its statutory obligation to ‘issue a final written decision with respect to the patentability of … any new claim added under section 316(d).’ 35 U.S.C. § 318(a).”

Aqua (Reyna, J., concurring) at 14 (some citations omitted; second brackets in original; second ellipsis in original).

The Impact on Practitioners. What does this mean for the practitioner?

This holding means that a patent owner will still have to present at least a prima facie case for patentability in its motion to amend or risk a finding that it failed to meet this burden of production. Time will tell how the Board chooses to reconcile this holding with the first holding above. Indeed, Judge O’Malley makes this very point, arguing that it appears that keeping the burden of production on the patent owner “create[s] a hole in the very judgment [Judge Reyna] and Judge Dyk endorse today, to say that, as long as the Director calls something a burden of production, the Board can place any substantive burden it chooses on the patent owner’s ability to propose amendments under § 316(d).”  Aqua at 65.

  1. The Taranto Dissent: The PTO is authorized to promulgate a new rule putting the burden of persuasion on the patent owner instead.

The Precedent. Our third precedent comes from the part of Judge Richard Taranto’s four-judge dissent that was joined by two additional judges. That holding is this:  The PTO is authorized to promulgate a new rule regarding the burden of persuasion with respect to the patentability of a proposed amended claim in an IPR, to put that burden on the patent owner instead. In the words of the Taranto dissent:

“Most of this opinion sets forth a full analysis supporting the following two legal conclusions that are joined by a majority of the court—the four Judges signing on to this opinion in full and Judges Dyk and Reyna. First, in an inter partes review (IPR), 35 U.S.C. § 316(a) authorizes the Director of the Patent and Trademark Office (PTO) to address who has the burden of persuasion on the patentability of substitute claims that the patent owner proposes to add to the patent in a motion to amend the patent. Second, 35 U.S.C. § 316(e) does not unambiguously bar assigning that burden to the patent owner.”

Aqua (Taranto, J., dissenting) at 1-2.

The Impact on Practitioners. What does this mean for the practitioner?

This does not mean that we should get ready to tear up all 148 pages of Aqua because the PTO can simply obviate it with a new rule. This precedent only holds that the PTO is authorized to make such a rule, it does not hold that the rule would survive judicial review. The Court was unable to muster six votes on that point. Rather, the judges fractured on this question, which turned on complicated issues regarding the overall statutory framework and the applicability of Chevron deference. As of today, this holding means very little for practitioners, as it merely opens a door for the PTO to create new rules in the future.