Aqua Products, Inc. v. MatalAqua Products, Inc. v. Matal
Lead Opinion
Newman, Lourie, Moore, and Wallach join, and in which Circuit Judges Dyk and Reyna concur in result.
Opinion filed by Circuit Judge Moore, in which Circuit Judges Newman and O’Malley join.
Opinion filed by Circuit Judge Reyna, in which Circuit Judge Dyk joins, and in which Chief Judge Prost and Circuit Judges Taranto, Chen, and Hughes join in part.
Opinion .filed by Circuit Judge Taranto, in which Chief Judge Prost and Circuit Judges Chen and Hughes join, dissenting from the judgment, and in which Circuit Judges Dyk and Reyna join in part in other respects.
Opinion dissenting from the judgment filed by Circuit Judge Hughes, in which Circuit Judge Chen joins.
In this appeal, we consider the proper allocation of the burden of proof when amended claims are proffered during inter partes review proceedings (“IPRs”) under the Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112-29, § 6(a)-(c), 125 Stat. 284-341 (2011) (provisions creating inter partes review codified in ch. 31 of Title 35,
A panel of our court concluded that the Board did not abuse its discretion in denying Appellant Aqua Products, Inc.’s (“Aqua”) motion to amend various claims of U.S. Patent No. 8,273,183 (“the ’183 patent”) during the course of an IPR. In re Aqua Prods., Inc.,
Upon review of the statutory scheme, we believe that
Because the participating judges have different views—both as to the judgment we should reach and as to the rationale we should employ in support of that judgment, as explained below, today’s judgment is narrow. The final written decision of the Board in this case is vacated insofar as it denied the patent owner’s motion to amend the patent. The matter is remanded 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.
I. Procedural History
Automated swimming pool cleaners, such as those disclosed in the ’183 patent, typically propel themselves in a swimming pool using motor-driven wheels, water jets, suction, or a combination thereof. Panel Decision,
The parties began litigating questions of infringement and validity related to this patent in district court. Aqua Prods., Inc. v. Zodiac Pool Sys., Inc., No. 12-09342 (S.D.N.Y.). While that litigation was pending, Zodiac Pool Systems, Inc. petitioned the Board for inter partes review on claims 1-14, 16, and 19-21 of the T83 patent, asserting invalidity under
Aqua then moved to substitute claims 1, 8, and 20 of the ’183 patent with proposed claims 22, 23, and 24, respectively. Id. Aqua asserted that substitute claims 22-24 complied with
The Board denied Aqua’s motion to amend. Although the Board' expressly found that Aqua’s amendments complied with the requirements of
On appeal, Aqua argued that it did not bear the burden of proving the patentability of its proposed substitute claims. Aqua relied on the plain language of
We granted Aqua’s petition for en banc rehearing. In re Aqua Prods., Inc.,
(a) When the patent owner moves to amend its claims under35 U.S.C. § 316(d) , may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under35 U.S.C. § 316(e) ?
(b) When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim? If so, where would the burden of persuasion, or a burden of production, lie?
Id. We have jurisdiction over this appeal under
II. The Context in Which the Questions Presented Arise
With its enactment of the AIA in 2011, Congress created IPRs to provide “quick and cost effective alternatives to litigation.” H.R. Rep. No. 112-98, pt. 1, at 48 (2011). In an IPR, a third party may petition the Director to review previously-issued patent claims in an adjudicatory setting. To initiate an IPR, a petitioner must show a reasonable likelihood that it would prevail with respect to at least one of the claims challenged. See
In Cuozzo, the Supreme Court emphasized that the patent owner’s opportunity to amend its patent in IPRs is what justifies the Board’s use of the broadest reasonable interpretation standard in IPRs:
The patent holder may, at least once in the process, make a motion to do just what he would do in the examination process, namely, amend or narrow the claim.§ 316(d) (2012 ed.). This opportunity to amend, together with the fact that the original application process may have presented several additional opportunities to amend the patent, means that use of the broadest reasonable construction standard is, as a general matter, not unfair to the patent holder in any obvious way.
Id. at 2145.
The [jPTO’s proposal is thus designed to put review of the propriety of patent claims that the public regards as important in the hands of senior, legally qualified officials with experience in dispute resolution. It is designed to be more efficient than litigation, while preserving enough of the full participation accorded to parties in litigation that challengers will be willing to risk being bound by the result. By providing for the possibility of amendment of challenged claims, the proposed system would preserve the merited benefits of patent claims better than the win-all or lose-all validity contests in district court.
Patent Quality Improvement: Post-Grant Opposition: Hearing Before the Sub-comm. on Courts, the Internet, and Intellectual Property of the H. Comm, on the Judiciary, 108th Cong. 10 (2004) (hereinafter “PTO Gen. Counsel Toupin Statement”) (emphasis added) (statement of PTO General Counsel James A. Toupin).
Indeed, the PTO has more than once acknowledged that use of the broadest reasonable interpretation standard is only appropriate when patent owners have the opportunity to amend. The PTO has explained that, “[s]ince patent owners have the opportunity to amend claims during IPR, [post-grant review and covered business method (“CBM”)] trials, unlike in district court proceedings, they are able to resolve ambiguities and overbreadth through this interpretive approach, producing clear and defensible patents at the lowest cost point in the system.” Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48764 (Aug. 14, 2012). Simply put, the patent owner’s right to propose amended claims is an important tool that may be used to adjust the scope of patents in an IPR. See
Congress deemed the patent owner’s right to amend so important that, in
The House Report for the AIA, in its “Section-by-Section” explanation of the bill as finally enacted, states that the statute provides that:
The patent owner may submit one amendment with a reasonable number of substitute claims, and additional amendments either as agreed to by the parties for settlement, for good cause shown in post-grant review, or as prescribed in regulations by the Director in inter partes review.
H. Rep. No. 112-98, pt. 1, at 76 (2011) (emphasis added). In this report, several representatives noted with approval the high rate of “modification or nullification” of patent claims in inter partes reexamination and their desire to retain this feature in IPRs. Id. at 164. In other words, Congress saw the amendment process in IPRs as analogous to narrowing reissues, albeit prompted by a third-party challenger.
Despite repeated recognition of the importance of the patent owner’s right to amend during IPR proceedings—by Congress, courts, and the PTO alike—patent owners largely, have been prevented from amending claims in the context of IPRs. A February 2017 study noted that the Board has only granted eight motions to amend in post-issuance review proceedings (six in IPRs and two in CBM proceedings). Binal J. Patel et al., Amending Claims at the PTAB—A Fool’s Errand?, Managing Intellectual Property (Feb. 24, 2017), http:// www.managingip.com/Article/3663698/ Amending-claims-at-the-PTABa-fools-errandhtml. The PTO’s statistics confirm that patent owners have consistently failed to obtain their requested relief on motions to amend. As of April 30, 2016, the Board had completely denied 112 of 118 motions to amend made by patent owners in IPRs, and partially denied motions to amend in four of the six remaining trials. USPTO, PTAB Motion to Amend Study, 2-4 (Apr. 30, 2016), https://www.uspto.gov/sites/ default/files/documents/2016-04-30% 20PTAB% 20MTA% 20study.pdf. Aqua and its amici contend that these statistics are a direct result of the Board’s placement of the burden of proving the patenta-bility 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. MasterImage 3D, Inc. v. RealD Inc., No. IPR2015-00040,
We now assess whether the Board’s current practice of placing the substantive burden of proving patentability on the patent owner with regard to claim amendments proffered in IPRs may be employed in pending IPRs. We conclude it may not.
III. Relevant Statutory and Regulatory Schemes
The AIA provides that a patent holder in an IPR “may file 1 motion to amend the patent,” either by cancelling any challenged patent claim or by “propos[ing] a reasonable number of substitute claims.”
In the same statutory section that discusses motions to amend, the following subsection appears:
(e) Evidentiary Standards.—In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpa-tentability by a preponderance of the evidence.
When an IPR is instituted and not dismissed subsequently, the Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under
The AIA delegates authority to the Director to “prescribe regulations ... establishing and governing inter partes review” and, relevant to this appeal, to “set[ ] forth standards and procedures for allowing the patent owner to move to amend the patent” under
The Director promulgated
While these rules do not say so expressly, the PTO claims in this appeal that the Board has interpreted Rules 42.20 and 42.121 to place the burden of persuasion on a patent owner to demonstrate, by a preponderance of the evidence, that any proposed amended claims are patentable, that it must do so in light of prior art not already part of the IPR, and that the Director has endorsed that interpretation. Specifically, in Idle Free, a six-member panel of the Board held that the patent owner must show why the proposed amended claims are patentable over not only the prior art at issue in the IPR, but also “over prior art not of record but known to the patent owner.”
None of the specifics set forth in these two panel decisions regarding a patent owner’s burden are set forth in either Rule 42.20 or Rule 42.121 and none were discussed in the 2012 Federal Register comments relating to the promulgation of those Rules. And neither opinion was published in the Federal Register.
IV. Our Prior Decisions
As in this case, prior panels of this court have endorsed the Board’s practice of placing the burden of demonstrating the pat-entability of amendments over the prior art on the patent owner, or have been interpreted as doing so. See Proxyconn,
In Proxyconn and Prolitec, given the parties’ arguments, we did not engage in any statutory analysis—with respect to
It was not until Synopsys and Nike that we had occasion to address
Section 316(e) does not alter our analysis. ... The introductory phrase referring to an “inter partes review instituted under this chapter” makes clear that this provision specifically relates to claims for which inter partes review was initiated, ie., the original claims of the patént that a party has challenged in a petition for review. Inter partes review was not initiated for the claims put forward in the motion to amend.
Id. at 1323-24.
We revisited
We, thus, have had limited opportunity or cause to address the first question posed and fleshed out in this en banc proceeding. We now examine these earlier holdings in light of the language of
V. Discussion
A. The Petitioner Bears the Burden to Prove All Propositions of Unpatentability
Our first en banc question asks whether the PTO may require the patent owner to bear the burden of persuasion or a burden of production regarding the patentability of amended claims, given the language of
The parties do not dispute that Congress delegated authority to the Director to promulgate regulations “setting forth standards and procedures for allowing the patent owner to move to amend the patent under [
Chevron requires a court reviewing an agency’s construction of a statute it administers to determine first “whether Congress has directly spoken to the precise question at issue.”
1. Chevron Step One
Thus, we begin our examination of
We believe Congress explicitly placed the burden of persuasion to prove propositions of unpatentability on the petitioner for all claims, including amended claims. This interpretation is compelled by the literal text of
a.
The PTO claims that
The PTO’s reading of
Second, the PTO contends that, because
The PTO’s argument begs the question: what is the relief sought by the “motion” authorized in
The “request” made by a motion to amend is—in the PTO’s own words—for “entry” into the IPR, not for entry of an amended claim into the patent. Once entered into the proceeding, the amended claims are to be assessed for patentability alongside the original instituted claims. The PTO acknowledged this structure in its explanation of final Rule 42.121:
[T]he first motion to amend need not be authorized by the Board. The motion will be entered so long as it complies with the timing and procedural requirements. Additional motions to amend will require prior Board authorization. All motions to amend, even if entered, will not result automatically in entry of the proposed amendment into the patent.
Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 Fed. Reg. 48,680, 48,690 (Aug. 14, 2012) (hereinafter “Changes to Implement IPRs”) (emphases added). Thus, any propositions of substantive unpatentability for amended claims are assessed following entry of the amended claims into the IPR proceeding, under the standards that apply to all claims in the proceeding. The PTO justifies the burden it seeks to impose on the mov-ant under
To conclude otherwise would conflate two concepts that are traditionally treated as distinct: the use of motions to raise evidentiary issues in adversarial proceedings versus the overall allocation of evidentiary burdens to the respective parties when rendering decisions on such motions. For example, although the movant has the burden to file a well-supported summary judgment motion before a court will consider it, if the underlying burden of persuasion rests with the other party, that underlying burden never shifts. See Anderson v. Liberty Lobby, Inc.,
We have noted that the “shifting burdens ... in district court litigation parallel the shifting burdens ... in inter partes reviews.” Dynamic Drinkware, LLC v. Nat’l Graphics, Inc.,
For these reasons, we believe that the only reasonable reading of the burden imposed on the movant in
b. The Unambiguous Language of
We have explained that, “[i]n an inter partes review, the burden of persuasion is on the petitioner to prove ‘unpatentability by a preponderance of the evidence,’
An instituted proposition of unpatenta-bility is considered throughout the IPR. It is only finally determined when the Board issues a final written decision. Both by statute and by the PTO’s own directives, any proposed amendment must seek to cancel a challenged claim and/or propose a substitute for a challenged claim, and it must do so by responding tp an instituted ground of unpatentability. See
Contrary to other provisions of Chapter 31, which repeatedly make distinctions between original and amended claims, the “proposition of unpatentability” referenced in
In contrast,
The Director is instructed by § 318(a) to issue a final decision on the patentability of both “any patent claim challenged by the petitioner and any new claim added under
The terms “patentability” and “unpa-tentability” do not raise separate inquiries; if they did, Congress would not have placed the burden of proving “unpatenta-bility” on the petitioner in
The introductory clauses of
The location of
For all these reasons, the dissent’s contention that “Congress wás writing a rule only for the class of claims that it recognized as necessarily having been challenged as unpatentable by a ‘petitioner’ ” in
c. Reading
As noted before, an Act of Congress “should not be read as a series of unrelated and isolated provisions.” Gustafson v. Alloyd Co., Inc.,
The Supreme Court has instructed us to look to “[t]he text of the ... provision [at issue], along with its place in the overall statutory scheme, its role alongside the Administrative Procedure Act [ (“APA”) ], the prior interpretation of similar patent statutes, and Congress’s purpose in crafting inter partes review” to interpret each provision of the AIA. Cuozzo,
Read in context of the overall statutory scheme, we believe that
When read in conjunction with the directive of § 318, we believe that the Board must assess the patentability of all claims in the proceeding, including amended claims that have been entered into the proceeding after satisfying the requirements outlined in
i. Petitioner Controls the Scope of the IPR: §§ 311-13
Section 311(a) provides that a person “not the owner of a patent” may file a petition to institute an inter partes review.
Section 312 sets forth the various statutory requirements to which each petition challenging the validity of a patent must conform before the PTO may institute an inter partes review.
Section 313 further explains that the patent owner has the right, but not the obligation, to file a preliminary response to the petition. Id. § 313 (“[T]he patent owner shall have the right to file a preliminary response to the petition .... ” (emphasis added)). This provision makes sense in context because the patent owner has no burden to overcome a petitioner’s assertions.
Given the statutory and regulatory requirements for amending claims in an IPR, amendments cannot and do not create new and different claims for consideration. Amendments cannot add new claim scope or new matter; they are in fact prohibited from doing so by the requirements of
ii. Institution:
Relevant to this appeal,
It is only after the institution decision that the patent owner may elect to adjust the scope of its patent grant by proposing narrowing amendments to protect its patentable subject matter. In this way, IPR functions as a process for refining and limiting patent scope, similar to the inter partes reexamination process. See Cuozzo,
iii. Application of Estoppel to IPRs: § 315
Section 315 describes how an IPR interacts with other patent-related proceedings, including examination, administrative review, and federal court litigation. Section 315(e) provides that, where institution occurs and the proceeding results in a final written decision under § 318(a), the petitioner, real-party in interest, or privy of the petitioner are all estopped with respect to “any ground that the petitioner raised or reasonably could have raised during that inter partes review” against that claim.
This provision is only consistent with the remainder of the AIA if the petitioner bears the burden to prove all propositions of unpatentability. Where the petitioner bears the -burden, it is logical to estop the petitioner from raising that ground in the future, whether related to originally challenged claims or entered amended claims. If the patent owner were to bear the burden to demonstrate the patentability of proposed amended claims and to do so by reference to prior art not addressed in the IPR, it would be illogical to say that the petitioner is thereafter estopped from anything as to those claims.
iv. The Impact of Settlements: §§ 317-18
Section 317, the section of the statute immediately following Congress’s express statement in
If a settlement occurs and the IPR is terminated, no certificate incorporating the amendment into the patent ever issues. Section 318(b) makes clear that no certificate either reaffirming a challenged claim or substituting an amended claim for a challenged one issues unless and until the Board chooses to issue a final judgment under § 318(a) in which it'assesses the patentability of both categories of claims. In the absence of a final written decision, the patent survives as originally written, subject to any narrowing agreements or covenants not to sue between the original parties. And, it survives subject to any later IPR or court challenges it might face.
The final sentence of § 317(a) gives the Board the option to proceed to final judgment in any proceeding where the original petitioners choose not to continue their challenge. The Board might do this for any number of reasons. For example, the Board may decide that the showing of unpatentability with respect to the challenged claims is so strong that the public is better served by a cancellation of those claims; it may decide that even the narrower, amended claims are unpatentable in the face of the prior art on which the IPR was predicated and that confirmation of that fact is important; or it may decide that the amended claims are patentable in the face of the prior art challenges precisely because they are narrower than the original claims, and that it is important for the patent to be amended to reflect that fact so the public can benefit from that narrowing.
Should the Board elect to continue to a final written decision in this scenario, § 318(a) requires the Board to undertake a patentability analysis on all original and amended claims in the proceeding. Thus, it is at that point, and not earlier, that the statute contemplates consideration of an amended claim’s patentability. As the Supreme Court recognized in Cuozzo, where the challenger ceases to participate in the IPR and the Board proceeds to final judgment, it is the Board that must justify any finding of unpatentability by reference to the evidence of record in the IPR. See
v. The Overall AIA Framework
Read in their entirety and collectively analyzed, the statutory provisions of the AIA lay out an internally consistent, logical, and unambiguous structure for the conduct of IPRs. Understanding the statutory structure in this way is consistent with the concept that “inter partes review helps protect the public’s ‘paramount in-' terest in seeing that patent monopolies ... are kept within their legitimate scope.’ ” Cuozzo,
There is a legitimate scope for properly-crafted patent protection. The goal underlying the AIA is twofold: (1) eliminating patents that foster abusive litigation; and (2) affirming and strengthening viable patents. The legislative history reflects these dual objectives. As early as 2006, Senator Leahy explained that the AIA:
[I]s not an option but a necessity. ... I also want to ensure the delicate balance we have struck in the post-grant review process and make certain that the procedure is both efficient and effective at thwarting some strategic behavior in patent litigation and at promoting a healthier body of existing patents.
152 Cong. Rec. 16834 (2006) (statement of Sen. Leahy on S. 3818) (emphasis added). Allowing narrowing amendments during an IPR helps strengthen and clarify patents. As the PTO itself testified before Congress, providing a patent owner with a meaningful opportunity to amend subject to minimal statutory and regulatory criteria helps “preserve the merited benefits of patent claims better than the win-all or lose-all validity contests in district court.” PTO Gen. Counsel Toupin Statement, at 10.
The AIA achieves these dual goals through a defined mechanism allowing for a limited category of challenges—an adversary proceeding where the Board is the arbiter of, rather than a party to, challenges asserted under only
d. Legislative History of
While legislative history generally carries little weight when interpreting the text of issued statutes, “[w]hen aid to construction of the meaning of words, as used in the statute, is available, there certainly can be no rule of law which forbids its use, however clear the words may appear on superficial examination.” Train v. Colo. Pub. Interest Research Grp., Inc.,
As noted, Congress made clear that patent owners may propose amendments to their patents as of right at least once in an IPR. The congressional record reflects Congress’s desire to protect the patent owner’s right to propose amendments by placing the burden of proving the unpa-tentability of amended claims entered into an IPR on the petitioner.
Earlier drafts of
A Senate Report on the Patent Reform Act of 2009 explains that the burden of proving unpatentability in post-grant proceedings is always on the challenger.
The examinational model places the burden on the PTO to show that a claim is not patentable, and requires a series of filings, office actions, and responses that make this system inherently slow. By contrast, in an oppositional system, the burden is always on the challenger to show that a claim is not patentable.
S. Rep. No. 111-18, at 57 (2009) (emphasis added). The comparison to examination proceedings—which necessarily relate to proposed new claims—is telling. It indicates that Congress viewed the petitioner’s unwavering burden broadly, as covering all claims in the IPR.
In the March 2011 Senate debates involving the replacement of inter partes reexamination with the AIA’s IPRs, Senator Kyi articulated Congress’s intention to create an adjudicative proceeding where the petitioner bore the burden of showing unpatentability:
One important structural change made by the present bill is that inter partes reexamination is converted into an adjudicative proceeding in which the petitioner, rather than the Office, bears the burden of showing unpatentability. ... In the present bill,section 316(a)(4) gives the Office discretion in prescribing regulations governing the new proceeding. Thé Office has made clear that it will use this discretion to convert inter partes into an adjudicative proceeding. This change also is effectively compelled by newsection 316(e) , which assigns to the petitioner the burden of proving a proposition of unpatentability by a preponderance of the evidence.
157 Cong. Rec. 3386 (2011) (emphasis added) (statement of Sen. Kyi). Again, there is no indication in this language that the drafters intended
Indeed, in earlier versions of the AIA, Congress considered language regarding the burden of proof that looked a great deal like the language the PTO wants us to read into Rule 42.20(c). See, e.g., H.R. 1908,110th Cong. (2007) (“§ 328 Proof and Evidentiary Standards (b) Burden of Proof—The party advancing a proposition under this chapter shall have the burden of proving that proposition by a preponderance of the evidence.”); see also H.R. 1260, 111th Cong. (2009) (same). But Congress changed its language on the burden of proof to state explicitly both that the petitioner bears the burden of proof in the enacted version and that the standard of proof is by a preponderance of the evidence. See
As noted, the AIA outlines a logical framework for the PTO’s adjudication of these proceedings. By reading too much into
e. There Is No Potential for Issuance of “Untested” Amended Claims
Despite the AIA’s clear framework and placement of the burden of proving unpa-tentability for all claims onto the petitioner, at least one of our earlier decisions expressed concern about the potential issuance of “untested” amended claims. See Nike,
Respectfully, both the Nike decision and the dissent overstate the likelihood that an untested amended claim might issue. During oral argument, the parties agreed that amended claims are virtually never uncontested. Oral Arg. at 25:15-23, 47:11-21, http://oralarguments.cafc.uscourts.gov/ default.aspx?fl=2015-1177_1292016.mp3. When a petitioner does contest an amended claim, the Board is free to reopen the record to allow admission of any additional relevant prior art proffered by a petitioner or to order additional briefing on any issue involved in the trial. See
More importantly, amended claims added to an -IPR are neither untested nor unexamined. The ' original claims issued following an examination under all criteria set forth in Title 35. Because proposed amended claims must be narrower in scope and cannot add new matter, they necessarily were subjected to that same earlier examination and are reassessed to determine whether they are supported by the patent’s written description.
Even when a petitioner ceases participation in the IPR, we see little potential for harm from “untested” claims. In a scenario where the Board reviews the record presented in the IPR, including any entered amended claims, and concludes that those entered amended claims are not unpatentable, the “worst” possible outcome is that a patent issues in which the previously-examined claims have been narrowed and clarified in such a way that the petitioner does not fear its ability to continue to make, use, or sell its own product, and the public is put on notice of exactly how to innovate around those claims in the future. See
Accordingly, while we recognize that our views on this question have not garnered a majority of the available votes, we believe that Congress intended that the petitioner bear the burden of persuasion as to all claims in an IPR, whether original or amended. Because we believe that “the intent of Congress is clear” in
2. Chevron Step Two
We believe there is no need to consider whether deference to any interpretation of
As discussed above, we think Congress was clear that it wanted to place the burden of persuasion for all propositions of unpatentability on the petitioner. If, as our colleagues urge, however, Congress’s failure to mention amended claims expressly in
Because we are forced to assume a scenario in which there is an ambiguity in the statute with respect to the substantive burden of persuasion on motions to amend that is irresolvable, we must determine: (1) whether the PTO has adopted a rule or regulation through APA-compliant procedures that have the force and effect of law; (2) if so, whether that rule is within the scope of the PTO’s rulemaking authority; and (3) if so, whether that rule is based on “a permissible construction of the statute.” Chevron,
The PTO’s argument that it is entitled to Chevron deference is primarily based on its misinterpretation of
The PTO turns to a regulatory argument only as a fallback.
a. The PTO Has Not Adopted a Rule or Regulation Governing the Burden of Persuasion on the Patentability of Proposed Amended Claims
We use the same interpretive rules to construe regulations as we do statutes; we consider the plain language of the regulation, the common meaning of the terms, and the text of the regulation both as a whole and in the context of its surrounding sections. Tesoro Haw. Corp. v. United States,
Neither Rule 42.20 nor Rule 42.121 addresses the burdens of proof or persuasion with respect to propositions of unpatentability once an amended claim has been entered into the IPR. Rule 42.20 is a general provision establishing procedures for motion practice in IPRs. As noted previously, when the patent owner files a motion to amend claims during an IPR, the patent owner’s “requested relief’ under Rule 42.20 is the Board’s permission to enter a reasonable number of substitute claims into the IPR. That is the “motion” practice contemplated and, indeed, spelled out in
Likewise, Rule 42.121(a)(2)(i) merely requires the patent owner to show that its proposed amendment is responsive to at least one ground of unpatentability at issue in the IPR.
As the PTO explained, [Rule 42.121(a)(2)(i) ] is meant to “enhance efficiency of review proceedings .... [A]ny amendment that does not respond to a ground of unpatentability most likely would cause delay, increase the complexity of the review, and place additional burdens on the petitioner and the Board.”
Proxyconn,
We do not read these regulations, separately or together, to say that the patent owner must bear the burden of proving the patentability of amended claims or to require satisfaction of that burden on the face of the motion to amend. These regulatory requirements simply do not address the ultimate relief sought by the petitioner in the IPR: a determination of unpatenta-bility, leading to the cancellation of challenged patent claims—as originally issued or amended—after a final written decision. They address preconditions to entry of the amended claims into the IPR. Auer deference does not permit the PTO to write words into a regulation, or to interpret a regulation in ways that are not supported by the very language employed in the regulations. See, e.g., Christopher,
More fundamentally, the PTO’s contention that its regulations actually address and interpret the scope of
Auer cannot be invoked to substitute for an agency’s failure to analyze the relevant statutory provisions in the first instance. See Gonzales v. Oregon,
The PTO’s decisions in Idle Free and Masterlmage do not alter our conclusion that the PTO’s regulations do not speak to either
First, the Idle Free decision is not entitled to deference. It has been designated as an “interpretive” nonbinding discussion not approved by the Director, and later redesignated as a “representative” non-binding discussion. Such musings are not sufficient to command Chevron or Auer deference of any sort. See, e.g., Christensen v. Harris County,
Second, Idle Free just does not say what the PTO reads into it. There, a panel of the Board examined
The PTO next points to Masterl-mage. Again, the Board did not purport to interpret any statutory provision in Mast-erlmage. While the Board provided policy explanations for its practice of requiring the patent owner to provide patentable distinctions over a broad range of prior art, it did not explain how that interpretation is consistent with, or supported by, the governing statutes. The Board did not analyze the PTO’s rulemaking authority under
To be entitled to Chevron deference, “an agency must cogently explain why it has exercised its discretion in a given manner.” Motor Vehicle Mfrs. Ass’n of United States, Inc. v. State Farm Mut. Auto. Ins. Co.,
If, moreover, as the PTO contends, Idle Free and Masterlmage actually concluded that Rule 42.20 requires the assignment of the burden of persuasion to the patent owner regarding the ultimate patentability of amended claims—despite the texts of
If an agency purports to rest its authority to act on an express grant of rulemak-ing authority—as the PTO suggests it may do here—then it may only act consistently with its obligations under the APA. One such obligation is to inform the public of the substance of the subjects its rulemak-ing purports to address.
In connection with the adoption of its rules governing IPRs, including Rule 42.20, the PTO defended its choice not to employ all of the rulemaking procedures under the APA by explaining, repeatedly, that nothing it was doing in its rules was substantive and nothing in its rules would impact final decisions on patentability. The Director stated:
Although the Office sought the benefit of public comment, these rules are procedural and/or interpretive. Stevens v. Ta-mai, 366 F3d. [sic] 1325, 1333-34 (Fed. Cir. 2004) (upholding the Office’s rules governing the procedure in patent interferences). The final written decisions on patentability which conclude the reviews will not be impacted by the regulations, adopted in this final rule, as the decisions will be based on statutory patenta-bility requirements.
Final Rules of Practice,
As Judge Moore explains in her concurrence, moreover, improperly characterizing a rule regarding burdens of proof as “procedural” does not excuse failure to comply with the Director’s obligations under the APA.
On this point, Judge Hughes conflates the broader rulemaking authority granted under
Judges Taranto and Hughes separately say that the PTO’s post-2012 consideration of the issue supports their view that the PTO’s interpretations of its own regulations are both clear and entitled to deference. Specifically, they, cite to the Board decisions in Idle Free and Masterlmage for the proposition that, by then, it was understood that the PTO was interpreting the reference to burdens of proof in Rule 42.20 to include the burden of persuasion on patentability for amended claims. Tar-anto Op. at 1355; Hughes Op. at 1363. They then cite to some roundtables and solicitation of comments from 2014, saying these together were informative about where the Director thought Rule 42.20 placed the burden of proof. They finally cite to Federal Register commentary from 2015, where the Director confirmed that she did not intend to “change her practice” of placing the burden of persuasion of proving the patentability of amended claims on the patent owner, as proof that she must have always understood that to be the practice.
But neither opinion explains how this post-2012 consideration of the issue can cure the fact that Rule 42.20 never mentions the burden of persuasion, never addresses any of the relevant statutory provisions, was described by the PTO as purely a procedural—not a substantive— rule, and was publicly characterized by the PTO as a rule that applied when a determination was being made about whether to enter an amendment into an IPR and had nothing to do with the Board’s patentability determinations. While the Board’s view of how it wished to deal with amendments authorized by
Once more, those, commentaries lack any substantive consideration of any regulation and do not purport to analyze what Congress intended when it contemplated an amendment as of right in
To the extent the PTO’s 2015 commentary relied on this court’s endorsement of its practices in Proxyconn, as discussed above, Proxyconn never considered
In sum, the PTO has failed to make any determination on the ambiguity of either
We do not, as Judge Hughes claims, purport to require “magic words” in either the PTO’s regulations or its interpretations of those regulations. We require that the PTO comply with its obligations under the APA and make clear to the public both what it is doing and why what it is doing is permissible under the statutory scheme within which it is operating. Agency rule-making is not supposed to be a scavenger hunt. It must, moreover, be tied to the congressional purpose for which that rule-making authority was granted. We conclude that, even if we were to find
b. Is A Rule Regarding the Burden of Persuasion on Patentability Within the Rulemaking Authority of the PTO?
Judge Taranto concludes that
First, the PTO’s regulations may not countermand the express burden of proof set forth in
Even if we were to accept the proposition that there is an ambiguity in the statutory scheme that is irresolvable by normal tools of statutory construction, it is not clear to us that the phrase “standards and procedures” in
Assuming the PTO were permitted to regulate the substantive burden of proof or persuasion regarding the patentability of amended claims under the “standards and procedures” language of
c. De Novo Statutory Analysis Places the Burden of Proof on the Petitioner
With nothing to which we must defer for our interpretation of
For these reasons, we, along with Judges Dyk and Reyna, conclude that the Board erred when it imposed the burden of proving the patentability of its proposed substitute claims on Aqua. We reach this conclusion today by following two different analytical paths: we address this issue as part of a Chevron Step Two analysis, while Judges Dyk and Reyna follow the approach laid out in Encino, where the Supreme Court treated the question of whether the agency had engaged in the type of regulatory action to which deference would be due as a threshold inquiry. Once it concluded that the agency actually had not analyzed the statute or explained why the statute should be interpreted in a given way, the Supreme Court dispensed with further reference to Chevron-, it ordered the court of appeals to interpret the statute in the first instance. Encino,
Because we believe a thorough discussion of the statutory scheme at the outset lends context to the deference inquiry, and because we ultimately must interpret the statutory scheme either way, we address deference at Step Two. Judges Dyk and Reyna chose the alternative route. But, we end up in the same place under either approach: (1) there is no considered statutory interpretation that has been undertaken by the agency to which we must defer; and (2) in the absence of regulatory action to which we must defer, the burden of proving the unpatentability of all claims in an IPR—both original and amended—is on the petitioner.
B. The Board Must Base Its Patentability Determinations on the Entirety of the Record Before It
Our en banc order also asks whether the Board may sua sponte raise patentability challenges to a proposed amended claim. Having fully considered the record, however, we conclude that the record does not present this precise question. We believe it should be reserved for another day, as, apparently, do the other members of the court. The record and the panel decision in this case, however, directly pose a different question: whether the Board may base its patentability determinations with respect to amended claims solely on the face of the motion to amend, without regard to the remainder of the IPR record. The panel decision in this case answered that question in the affirmative. We do not.
Section 318(a) provides that, where it proceeds to a final written decision, the Board is to issue a decision on the patenta-bility of both originally issued, challenged claims and any amended claims. That final substantive decision must be based on the entirety of the record. Basic principles of administrative law compel this conclusion.
First, an agency must explain why it decides any question the way it does. SEC v. Chenery Corp.,
Second, an agency’s refusal to consider evidence bearing on the issue before it is, by definition, arbitrary and capricious within the meaning of
Neither of these obligations is one the Director may obviate by rule, moreover. “Reasoned decisionmaking is not a procedural requirement.” Butte County,
In the context of this case, accordingly, we believe that the Board’s decision, to reject Aqua’s proposed amended claims without consideration of the entirety of the IPR record was an abuse of discretion which provides an independent basis for our judgment vacating and remanding this matter to the Board. While our colleagues do not address this question, we believe it is a fairly uncontroversial proposition under the APA.
C. Part III of Judge Reyna’s Concurrence
Before closing, we address the final section of Judge Reyna’s concurrence. We find it odd on a number of levels.
First, though it has no proposed judgment attached to it, all four dissenters “join” Part III of Judge Reyna’s concurrence. Indeed, not only is no proposed judgment attached to this section, but the dissenters disagree with the only judgment Judges Dyk and Reyna believe is the correct one—that the matter must be vacated and remanded for the Board to place the burden of persuasion on the petitioner with respect- to the patentability of the proposed amended claims. Where written words are not in support of any judgment, they cannot logically serve as an opinion of the court or any of its members. Certainly, they cannot serve as a collective opinion of those who disagree on the judgment. See, e.g., United States v. Epps,
Second, that section of Judge Reyna’s concurrence expressly concedes that the entire discussion is dictum. It leads off by pointing out what “Aqua has not challenged” and then proceeds to discuss those very issues. And the concurrence ends by citing to and discussing PTO Rule 42.22, while noting that rule is not at issue in this case. Indeed, not once in these proceedings—here or below—has any party or any of the many amici involved relied upon Rule 42.22 or its accompanying commentary for any reason; it appears nowhere in any of the briefing and was not mentioned during oral argument. While Judge Reyna calls this section a “judgment” of the court describing what the Board may do “regarding the burden of production on remand in this case,” that, respectfully, cannot be true. Only two of the six judges who join in that conclusion have concurred in the judgment vacating the Board’s decision denying Aqua’s motion to amend and ordering a remand; that is the only judgment this court enters today. And, on remand, no questions regarding any burden of production remain. As noted, in its final written decision, the Board expressly concluded that the proposed substitute claims satisfied all statutory and rule-based production requirements applicable to them, were not indefinite, and satisfied all written description requirements. The only question that remains is whether the amended claims are patentable over the asserted prior art. It is that question which the Board must reconsider.
Disparate members of the court cannot come together and purport to rule on the' applicability or validity of any rule that has never been briefed or argued to us and on which the Board did not rely below. Indeed,- it is elemental that an appellate court must avoid ruling on matters neither presented nor passed upon below. Interactive Gift Express, Inc. v. Compuserve Inc.,
Third, the discussion of Rule 42.22 appears contrary to everything else said by Judge Reyna today. He seems to opine that a rule that (1) does not mention motions to amend, (2) never considers
Finally, it appears that the purpose of .Judge Reyna’s closing dictum is to create a hole in the very judgment he 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
VI. Conclusion
This process has not been easy. We are proceeding without a full court, and those judges who are participating disagree over a host of issues. As frustrating as it is for all who put so much thought and effort into this matter, very little said over the course of the many pages that form the five opinions in this case has precedential
weight. The only legal conclusions that support and define the judgment of the court are: (1) the PTO has not adopted a rule placing the burden of persuasion with respect to the patentability of amended claims on the patent owner that is entitled to deference; and (2) in the absence of anything that might be entitled deference, the PTO may not place that burden on the patentee. All the rest of our cogitations, whatever label we have placed on them, are just that—cogitations. Even our discussions on whether the statute is ambiguous are mere academic exercises.
The final written decision of the Board in this case is vacated insofar as it denied the patent owner’s motion to amend. The matter is remanded 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 Board must follow this same practice in all pending IPRs unless and until the Director engages in notice and comment rulemak-ing. At that point, the court will be tasked with determining whether any practice so adopted is valid.
VACATED AND REMANDED
Costs
No costs.
with whom Circuit Judges Newman and O’MALLEY join.
This case involves one straightforward question of statutory interpretation: Does
I join Judge O’Malley’s opinion in its entirety and agree with Judge Reyna’s conclusion that the agency actions at issue are not entitled to Chevron deference. I write separately to address problems with the Director’s attempt to extend Chevron deference beyond any prior applications of the doctrine. In this case, the Director argues, not for the first time, that Board decisions are entitled to Chevron deference. The Director argues that the Board’s informative decision in Idle Free,
In some circumstances, rules articulated in formal agency adjudication have been entitled to Chevron deference. See United States v. Mead,
Chevron explains: “The power of an administrative agency to administer a con-gressionally created ... program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.” Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,
Regulations. —The Director shall prescribe regulations—
(9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d) ....3
Even assuming that the Director has the authority to adopt a standard placing the burden of persuasion upon the patentee to prove the patentability of its proposed amended claims, Congress only delegated the Director the authority to do so through regulations. On this point there is no ambiguity in the statute. The clear and undisputed language of the statute is that the Director may fill this gap, the need for standards and procedures related to allowing the patent owner to move to amend the patent, but must do so through regulations.
The Supreme Court explained in Mead: We granted certiorari in order to consider the limits of Chevron deference owed to administrative practice in applying a statute. We hold that administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.
In light of Congress’ clearly expressed intent, we do not assume that Congress also implicitly gave the agency every other known means to gap fill. As the Supreme Court explained in Encino Motorcars, LLC v. Navarro, — U.S. -,
In Mead, the Supreme Court held, “On the face of the statute; to begin with, the terms of the congressional delegation give no indication that Congress meant to delegate authority to Customs to issue elassifi-, cation rulings with the force of law.”
Chevron transfers to the executive the function of interpreting statutes and filling gaps in law from the judicial and legislative branches which are normally accorded these functions. Chevron deference stems from a delegation by the legislature to the executive of specific rulemaking authority. See Gonzales,
There are dozens of very specific grants of rulemaking authority by Congress to the Director. In some circumstances, Congress has delegated to the Director rule-making authority without specifying the means of enactment. See, e.g.,
It is not for courts to second guess Congress’ decision that the Director must effect such rulemaking through regulation. Nonetheless, I note that there are certainly procedural differences which may un-dergird Congress’ choice between rule-making achieved through regulation and through adjudication. The promulgation of substantive regulations, consistent with the APA, requires notice of proposed rulemak-ing published in the Federal Register and an opportunity for comment before the rules may take effect.
Agency adjudication, as this case highlights, can take many forms. The informative decision in Idle Free which the Director claims ought to be given Chevron deference appears to have none of the formal indicia associated with substantive rulemaking. Board decisions are designated informative by the Chief Judge “for any reason.” PTAB Standard Operating Procedure 2 (Rev. 9), at 3. The majority of the Board does not vote on the opinion or the designation, the Director need not approve it, and the decision is, according to the Board, still “not binding authority.” Id. at 3-4. Making a Board decision precedential, in contrast, requires a majority vote of the Board judges and approval by the Director, and the decision then becomes binding on the Board in subsequent matters.
Assuming
Congress here gave the agency the authority to “prescribe regulations” on standards and procedures related to allowing the patent owner to move to amend the patent. If this rulemaking authority gives the Director authority to place the burden of persuasion on the patentee in motions to amend, it is not surprising that Congress purposefully limited the exercise of that rulemaking to APA-compliant regulations. The delegation of rulemaking authority to the Director has traditionally been quite narrowly proscribed by Congress. See John M. Golden, Working Without Chevron: The PTO as Prime Mover, 65 Duke L.J. 1657, 1691 (2016) (“[T]he PTO’s powers remain significantly limited, particularly with respect to its ability to bind courts to an agency interpretation of substantive provisions of the Patent Act.”); Joseph Scott' Miller, Substance, Procedure, and The Divided Patent Power, 63 Admin. L. Rev. 31, 32-33 (2011) (“It is settled that Congress has given the Patent Office the power to issue procedural rules for patent examination at the Office, not substantive rulemaking power of the sort federal agencies typically possess.”).
This is not to say that the agency cannot, absent regulation, adopt a position and apply it to an individual case in the course of its adjudication. Of course it can, and does. But it is a distinct question whether Chevron deference ought to be extended to such a statutory interpretation, as Mead and other authorities make clear. Courts generally review questions of statutory interpretation de novo.
Judge Hughes argues that when Congress enacts legislation that says “The Director shall prescribe regulations ...” it does not really mean regulations. According to Judge Hughes, the term regulation is “generic.” Hughes Op. at 1364. According to Judge Hughes, it includes agency rules apparently without regard to how they are adopted.
Unlike Judge Hughes, I conclude that when Congress expressly delegates to the Director the ability to adopt legal standards and procedures by prescribing regulations, the Director can only obtain Chevron deference if it adopts such standards and procedures by prescribing regulations. “Congress ... does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” Whitman v. Am. Trucking Ass’ns, Inc.,
Concluding Thoughts
Chevron has effected a broad transfer of legislative and judicial function to the executive. See Michigan v. EPA, — U.S. -,
joined by Circuit Judge DYK; and in which Chief Judge PROST and Circuit Judges TARANTO, CHEN, and HUGHES join only to Part III.
Summary
My colleagues today join one of two thorough and well-reasoned opinions, Judge O’Malley’s opinion and Judge Tar-anto’s dissent. Both opinions begin and end with a Chevron analysis. They operate under the premise that whether Chevron deference is warranted is a yes-or-no question. I disagree with that premise and chart a different course.
The course of this opinion takes three turns. First, I concur in Judge Taranto’s reading of
In conclusion, although I do not join her opinion, Judge O’Malley and I agree to vacate and remand this matter, but for entirely different reasons. I would vacate and remand with instruction for the Agency to review the underlying motion to amend by applying only a burden of production on the patent owner, as
I. Ambiguity of
The Supreme Court has rejected an all- or-nothing view of deference in favor of a nuanced approach that accounts for the full spectrum of an agency’s action. United States v. Mead,
The question before the court is whether, under
II. Patent Trial and Appeal Board’s General Discussion
I now turn to whether the Patent Office has set forth an interpretation of the evi-dentiary burdens codified in the inter partes review statute to which Chevron deference would apply. Here, I depart from Judge Taranto and Judge O’Malley, both of whom engage in a Chevron two-step analysis. The Patent Office has yet to proffer a fully considered interpretation of the inter partes review statute directed to the evidentiary burdens for motions to amend necessary for Chevron deference, and its attempt to promulgate a rule through ad hoc adjudication is too procedurally defective to receive Chevron deference. Negusie,
The nature of this question involves an administrative agency’s authority to assign a burden of persuasion—a substantive rule. Dir., Office of Workers’ Compensation Programs, Dep’t of Labor v. Greenwich Collieries,
The Board relied on 37 C.F.R. §. 42.20— a general regulation that provides that “[t]he moving party has the burden of proof to establish that it is entitled to the requested relief.” Idle Free’s, “general discussion” did not consider the text of the America Invents Act statute, how various statutory sections interrelate, whether the Board had the statutory authority to issue substantive rules for motions to amend through adjudication, or whether the statute is inconsistent with the Board’s interpretation of
Idle Free was designated informative, which the Chief Judge of the Board can do “for any reason.” PTAB Standard Operating Procedure 2 (Rev. 9). Informative decisions provide “Board norms on recurring issues,” “guidance on issues of first impression,” and “guidance on Board rules and practices.” Id. at 3. Idle Free’s dicta thus became nonbinding guidance. This nonbinding guidance was never converted into a regulation.
Review of Idle Free first reached this court in Microsoft Corp. v. Proxyconn, Inc.,
Despite this dearth of statutory interpretation, the Patent' Office embraced Proxyconn as a ringing endorsement of Idle Free in MasterImage 3D, Inc. v. RealD Inc., No. IPR2015-00040,
In Masterlmage, the Board adopted Idle Free’s guidance that the patent owner bears the burden of persuasion to show its proposed substitute claims are patentable and clarified the scope of prior art to be “prior art of record and prior art known to the patent owner.” Id. at *1. The decision relies heavily on Proxyconn for the proposition that “[t]he ultimate burden of persuasion remains with the Patent Owner, the movant, to demonstrate the patentability of amended claims,” but fails to acknowledge that Proxyconn was limited to reviewing the Patent Office’s interpretation of its regulations, primarily
On May 10, 2016, almost a year after it was issued, the Patent Office designated Masterlmage as precedential.
Given this important aspect of the “full spectrum” of the Agency’s action, we should not ignore that the Patent Office’s thinking on the allocation of the burden of persuasion in a motion to amend is the Idle Free dicta. I do not accept these dicta to be an interpretation of
In Negusie, the Court held that where an agency fails to fully consider the statutory question presented, courts should not reach the question of Chevron deference.
Here, like Negusie, the Board has not addressed the statutory question of how
I also conclude that the Patent Office does not possess the statutory authority to issue through adjudication a substantive rule that creates and allocates a burden of persuasion. If at all, it can only do so through the promulgation of a regulation consistent with the APA,
Nor should the Patent Office be permitted to effect an end-run around the APA’s rulemaking process. Judge Taranto’s opinion thoroughly considers the notice-and-comment periods for proposed amendments for the rules of practice for trials before the Board following Idle Free. Tar-anto Op. 28-29. But those attempts clearly fell short of a proper rulemaking on a burden of persuasion; no final regulation issued on that subject.
The Patent Office’s attempt to “construct policy by adjudication is evident.” First Bancorporation v. Bd. of Governors of Fed. Reserve Sys.,
Thus, while decisions such as Masterl-mage may occasionally be designated as precedential, there must be a principled legal reason for doing so. There is no reason to conclude that Congress intended “to create a Chevron patchwork of [adjudicative decisions], some with force of law, some without.” Mead,
Where a statute is silent on the allocation of an evidentiary burden and there is no agency action that earns Chevron deference such as a wholesome interpretation of the question at hand, the court’s review of the agency’s choices typically begins with the ordinary default rules of evidence. Gross v. FBL Fin. Servs., Inc.,
III. Burden of Production
It is important to note that Aqua has not challenged two important aspects of the Board’s practice pertaining to the burden of production. First, the obligations the Patent Office may impose on the patent owner to produce evidence pertinent to the required assessment of patentability. See Microsoft Corp. v. i4i Ltd. P’ship,
With respect to motions practice outside the inter partes review context, it is well settled that regardless of which party bears the ultimate burden of persuasion, the movant bears a burden of production. For example,
There is no disagreement that the patent owner bears a burden of production in accordance
In the event that a patent owner files a motion to amend the claims, the patent owner must include a statement of the precise relief requested and a full statement of the reasons for the relief requested, including a detailed explanation of the significance of the amended claims (e.g., a statement that clearly points out the patentably distinct features for the proposed new or amended claims). See § 42.22.
IV. Conclusion
With respect to the burden of persuasion, my colleagues’ willingness to dive headlong into a Chevron two-step analysis without initially considering whether the Patent Office’s position in Idle Free and Masterlmage is an interpretation of the inter partes review statute fails to account for the Supreme Court’s nuanced approach that reviews the full spectrum of an agency’s actions. I decline to extend Chevron deference to the Patent Office until it has fully considered the statutory question. Until then, there is nothing to review, the Agency action is a nullity.
Given the foregoing, I would hold that the Agency action under consideration in this case to be contrary to law. Unwired Planet, LLC v. Google Inc.,
Notes
. To the extent our prior decisions in Microsoft Corp. v. Proxyconn, Inc.,
. We also have recognized this fact when endorsing the use of the broadest reasonable claim interpretation standard in other areas of PTO review. See, e.g., In re Rambus, Inc.,
. The Board designated the Idle Free decision “representative.” According to the PTO, representative opinions "provide a representative sample of outcomes on a matter” but are not binding authority.
. The Board designated Masterlmage as a “Precedential Decision.” To designate a Board decision as precedential, the full Board is given the opportunity to review and vote on the opinion and the Director must approve the designation.
. We are unanimous in this conclusion. None of the other opinions endorse the PTO's conclusion that
. This interpretation also makes IPRs consistent with other PTO-based proceedings. There is no evidence that Congress intended to deviate from this well-established rule or that it intended to permit the PTO to do so. Other PTO-based proceedings have (or had) the same distribution of burdens. In pre-AIA inter partes reexamination proceedings, "the examiner retain[ed] the burden to show invalidity.” In re Jung, 637, F.3d 1356, 1365-66 (Fed. Cir. 2011). In pre-AIA interference proceedings, a party challenging an existing claim bore the burden of showing that “the claims of the ... application were unpatentable.” Velander v. Garner,
. Judge Taranto’s contention that it is meaningful that these initial sections do not discuss a petitioner's obligations vis-á-vis proposed amendments is perplexing. Of course they do not. The statutory sections relating to IPRs are ordered in temporal fashion. Sections 311-13 deal with showings that must be made prior to institution or as part of the institution process. Proposed amendments come after and in response to the grounds on which institution is granted. The PTO acknowledges this fact in its briefing. PTO Suppl. Br. 24 (“The petition phase of a review, of course, does not involve amended claims—a patent owner cannot seek to amend in an inter partes review unless the petitioner has first filed a petition for inter partes review.” (emphasis in original)). It is notable that it is only after laying out all steps of the IPR procedure, other than those dealing with what the Director must do to resolve an IPR, that Congress outlines the nature and placement of the burden of proof regarding propositions of unpatentability in the IPR.
. Here, the Board found that all these requirements were satisfied. Zodiac Pool Sys., Inc., v. Aqua Prods., Inc., No. IPR2013-00159,
. Aqua argued before the panel that the PTO lacked authority to require that any proposed amendment "respond to a ground of unpa-tentability” involved in the IPR. We conclude, however, that this procedural requirement fits within the Director’s delegated authority to "set[ ] forth standards and procedures for allowing the patent owner to move to amend the patent,”
. Even the PTO does not suggest in its briefing to us that anything in any of its Federal Register commentaries supports its position.
. We do not accept Judge Taranto’s suggestion that our analysis of Chevron should be less thorough. The Chevron question developed slowly in this case. In its initial brief, Aqua argued that the PTO could not resort to a request for Chevron deference because
. This opinion is limited to addressing the PTO’s claim that its Board opinions are entitled to Chevron deference for the statutory interpretation and gap filling performed therein because Congress authorized it to do so in
. I have trouble understanding how the pronouncement in Idle Free fits within even the agency's own claims for Chevron deference as that opinion is designated "informative,” not precedential, and was not voted upon by the full Board or approved by the Director, and is not binding on future panels’
.
. Certain rules, including rules on procedure, are exempt from the notice-and-comment rulemaking requirements of
. On May 16, 2017, the PTO Director explained that she intends to expand agency adjudication through precedential decision making and streamline the procedure for such decision making. See Bryan Koenig, PTAB Not Mowing Down Patents, USPTO Head Says, Law360 (May 16, 2017), https:// www.law360.com/articles/924461/ptab-not-mowing-down-patents-uspto-head-says; see also Director Michelle K. Lee, Keynote Address at the George- Washington University School of Law (May 16, 2017), https://www. uspto.gov/about-us/news-updates/remarks-director-michelle-k-lee-george-washington-university-school-law.
. In fact, the opinion can be designated prec-edential without even the parties to the case being given any opportunity for comment. The Board's procedure allows any member of the public to request that an opinion be designated precedential, but neither that person, nor the interested public has the opportunity for any further input into the Board's determination.
.
. An agency interpretation not entitled to Chevron deference may nonetheless be entitled to Skidmore deference which the Supreme Court describes as follows: "Such a ruling may surely claim the merit of its writer's thoroughness, logic, and expertness, its fit with prior interpretations, and any other sources of weight.” Mead,
. Because the Supreme Court stated in Cuoz-zo that
.Judge Hughes suggests that since three decisions have given Chevron deference to something other than a regulation even where the statute delegated authority to regulate, we’ should too. See Hughes Op. at 1365 (citing Cooper Techs. Co. v. Dudas,
. Two years passed before the Board proposed a rationale. Proposed Rule, Amendments to the Rule of Practice for Trials Before the Board, 80 Fed. Reg. 50720-01, 50723 (Aug. 20, 2015) (codified at 37 C.F.R. pt. 42).
. Designating a decision as precedential requires each Board member to vote on the opinion and the Director's concurrence. PTAB Standard Operating Procedure 2 (Rev. 9) 2. Precedential opinions are “binding authority in subsequent matters involving similar facts or issues.” Id. at 3.
. See, e.g., Br. for Intervenor - Dir. of the United States Patent and Trademark Office, Symantec Corp. v. Veeam Software Corp., No. 2015-1894,
. In National Cable & Telecommunications Ass’n v. Brand X Internet Services, the Supreme Court reversed a Ninth Circuit decision for failure to apply Chevron deference to the Federal Communications Commission’s interpretation of Title II of the Communications Act.
. The Proxy conn decision suggests that the Patent Office may possess such adjudicatory rulemaking power for motions to amend.
. The APA's mandate states that “an agency shall afford interested persons general notice of proposed rulemaking and an opportunity to comment before a substantive rule is promulgated.” Chrysler,
. On this point, I agree with Judge O’Malley’s view solely to the extent that
. This same reasoning applies to the second question presented: whether the Board can sua sponte raise patentability issues if the petitioner does not raise a patentability argument. The Patent Office has not fully considered whether the inter partes review statute can be reasonably interpreted to give the Board this kind of broad discretion, in particular where, as here, the petitioner remains in the inter partes review proceeding.
Dissenting Opinion
joined by PROST, Chief Judge, and CHEN and HUGHES, Circuit Judges, dissenting from the judgment, and joined in part in other respects by DYK and REYNA, Circuit Judges.
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),
On the other hand, I disagree with a conclusion drawn by a differently constituted majority—Judge O’Malley, the four Judges joining her opinion, and Judges Dyk and Reyna—regarding the assignment to the patent owner of the burden of persuasion regarding patentability of proposed substitute claims. The majority has concluded that the PTO has not made that assignment through action that warrants deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
I. Introduction
Under the America Invents Act (AIA), Pub. L. No. 112-29, 125 Stat. 284 (2011), the PTO may revisit the patentability of patent claims that have been challenged on statutorily specified grounds by way of a petition for an IPR. The PTO’s Director may institute such a review upon determining that “there is a reasonable likelihood that the petitioner would prevail” as to at least one of the challenged claims.
Congress has directed the Board to adjudicate patentability in IPRs, including the patentability of “any new claim added under section 816(d).”
Aqua Products contends that Congress foreclosed that choice through
Aqua Products’ only remaining contention amounts to a narrow argument for why the Chevron framework should not apply here. I would reject that argument. The assignment to the patent owner of the burden of persuasion regarding proposed substitute claims has from the outset of the IPR program rested on
I do not address other potential objections to the applicability of the Chevron framework. No such other objections, including objections to the deficiency of the PTO’s rulemaking consideration of the relevant issues, have been raised by Aqua Products or meaningfully briefed by the parties. If the PTO is to assign the burden of persuasion to the patent owner, it will need to launch a new rulemaking—which can obviate objections to the adequacy of the Director’s process and reasoning to date.
II. Background
In 2013, pursuant to
Soon thereafter, pursuant to
With respect to the motion to amend, the Board concluded that the proposed substitute claims were unpatentable based on two of the three prior-art references, i.e., Henkin and Myers, that it had invoked in determining that the issued claims were unpatentable. Id. at *12-17, 29-30. The Board simply concluded that Aqua Products had not carried the ultimate burden of persuasion of showing patentability of the proposed substitute claims. Id. at *27, 30. In ruling that the patent owner had that burden of persuasion, the Board relied on one of the Director’s 2012 regulations,
On appeal to this court, Aqua Products appealed only the denial of the motion to amend, not the rejection of the issued claims of the T83 patent. After Aqua Products filed its opening brief, the Director intervened to defend the Board’s decision; and not long afterwards, appellee Zodiac withdrew from the appeal. A panel of this court concluded that the Board did not err in holding proposed substitute claims 22-24 unpatentable. In re Aqua Prods., Inc.,
Aqua Products sought en banc rehearing to challenge the burden-of-persuasion assignment regarding proposed substitute claims as impermissible under the statute—specifically, as incompatible with
III. Discussion
This case involves a familiar pattern under the IPR provisions of the ALA. An IPR was instituted to review claims in an issued patent based on a petitioner’s challenge. While contesting the challenge to the issued claims, the patent owner also filed with the Board, under
It is undisputed that, under
I conclude that the Director has answered that question, by assigning the burden of persuasion regarding patentability of proposed substitute claims to the patent owner, in a regulation adopted through notice-and-comment rulemaking in August 2012 in preparation for the September 2012 launch of the IPR program—
I do not think that the burden of persuasion falls outside the Director’s
Aqua Products’ chief argument is that the Director’s authority to answer this particular question is superseded by a clear answer given directly by Congress elsewhere in the IPR provisions, namely, in
In addressing that dispute, I follow the Chevron framework, which the parties accept with only a brief challenge by Aqua Products. Under Chevron’s Step One, the question is whether Congress has “directly spoken to the precise question at issue,” answering it “unambiguously.” Chevron,
I conclude that the suggested statutory bar,
Aqua Products, while predominantly arguing within the Chevron framework that the statute unambiguously forbids the Director’s position, makes a brief argument against the applicability of the Chevron framework. It asserts that
A
1
Within the Chevron framework, the Step One question here focuses on
Aqua Products argues that it does. Aqua Products relies almost entirely on a simple, textual argument: that, when a petitioner (like Zodiac in this IPR) opposes addition of a proposed substitute claim on the ground that the claim is unpatentable, the petitioner is asserting “a proposition of unpatentability” covered by
Applying Chevron’s Step One standard, I would reject Aqua Products’ textual argument and conclude that the text admits of being read to apply only to issued claims. The crucial textual fact is
I begin with what
Rather,
The provisions governing IPRs make that distinction between issued and proposed substitute claims clear. As to issued claims: An IPR may not be instituted sua sponte by the Director, but only upon a petitioner’s filing of a petition under
In contrast, Congress made plain its recognition that any new substitute claims proposed by the patent owner during an IPR might well go unchallenged by any petitioner. The provisions of chapter 31 that lay out the framework for a petitioner’s challenge to issued claims (
Yet Congress expressly demanded that the Board adjudicate the patentability of proposed substitute claims under
Accepting Aqua Products’ and others’ suggested contrary readings of
As I read it, Judge O’Malley’s opinion agrees that the first, automatic-grant alternative is not tenable under the statute: the Board must assess patentability of proposed substitute claims on the record of the IPR, even if no petitioner opposes the proposed claims. O’Malley Op. 1296, 1309, 1314. But that view leaves an evident problem: if no petitioner opposes a motion to amend, or the opposition is inadequate in the Board’s view, the record may not contain readily available prior art or arguments that were immaterial to the issued claims but that would render the substitute claims unpatentable.
It is not necessary to explore in detail the alternatives to assigning to the patent owner the burden of persuasion on proposed substitute claims. It is enough to say that
That interpretation also accords with a general background rule regarding burdens of persuasion in adjudications. A party that is requesting an affirmative action by a tribunal to alter the pre-proceeding status quo generally has the burden of persuasion to show entitlement to have the tribunal take the requested action.
The general rule that governs the allocation of burdens of persuasion is not limited to judicial proceedings.
In short, the reference to “petitioner” and “a proposition of unpatentability” in
2
Nothing else in the statute or legislative history justifies a different conclusion about the absence of a clear prohibition on the Director’s position on the assignment of the burden of persuasion on substitute claims.
a
PTO practice involving proposed claims outside the IPR context does not negate a reading of
b
Aqua Products points to the fact that
Aqua Products cites nothing in the legislative history stating that coverage of proposed claims was the reason for using the word “patentability.” And, in fact, there is a readily available explanation for the choice of language that has nothing to do with a desire to reach beyond issued claims to proposed claims. At the time of the America Invents Act, “patentability,” as opposed to “validity,” was the standard terminology used when the PTO, as opposed to a court, determined compliance with various statutory requirements for patenting; and that usage was standard (if not quite universal) even for already-issued claims, as in reexamination proceedings.
Aqua Products correctly notes that the special Covered Business Method Review provision of the AIA refers to “validity,” not “patentability.” AIA § 18(a)(1),
c
Aqua Products asserts that
d
That
e
Pointing to the “estoppel” provision of
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For all of the foregoing reasons, the authority of the Director, under
B
Aqua Products’ only remaining contention is a brief challenge to the applicability of the Chevron framework here. This contention focuses on
I would reject the first of Aqua Products’ contentions, based on an independent judicial interpretation of the regulation—a conclusion that makes the second of Aqua Products’ contentions immaterial. That is, without reliance on deference to agency regulatory interpretations, I conclude that
A procedurally proper regulation that is within the Director’s authority under
1
In February 2012, preparing for the September 2012 launch of the IPR and related programs created by the AIA, the Director proposed various regulations pursuant to various grants of rulemaking authority, including the
As proposed (and adopted),
Burden of proof. The moving party has the burden of proof to establish that it is entitled to the requested relief.
Id. at 6909. In proposing
In August 2012, after receiving comments from the public, the Director adopted the provision as proposed. 2012 Final Rule,
Although I rely here solely on the 2012 regulation independently construed, I note again that, in 2013, a special six-member panel of the Board concluded that, “[flor a patent owner’s motion to amend,
In subsequent years, the burden-of-persuasion assignment was applied in numerous IPRs, was approved by this court, see Proxyconn,
Those PTO actions show the consistency of the PTO regarding the interpretation of
2
For the Director’s position on the assignment of the burden of persuasion regarding proposed substitute claims to trigger application of the Chevron framework, it suffices that her formally promulgated regulation,
Aqua Products correctly accepts that
Of course, the Board may “enter” the motion before deciding whether to grant it. See Final Rule, Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 Fed. Reg. 48,680, 48,-692 (Aug. 14, 2012). But as the PTO stated, what is “entered” into the IPR proceeding is the “motion,” not the proposed substitute claims. Id. at 48,690. And such a procedural step does not change what the motion requests, which is addition of the proposed substitute claims to the patent, not addition to the roster of claims at issue in the IPR. From the outset of the IPR program, granting (as opposed to entering) the motion has meant adding the substitute claims to the patent. By its plain terms, then,
Aqua Products is therefore wrong in its only real argument against reading
For those reasons, I conclude, without relying on any deference to the agency, that the Director’s formally promulgated regulation,
3
Aqua Products makes no other objection to applying the Chevron framework, despite the Director’s repeated invocations of that framework, and
Reflecting the fact that Aqua Products did not raise such arguments about the applicability of Chevron here, the government has not developed responsive arguments. As a result, it has not presented arguments that address, for example, whether the present adjudication is a proper vehicle for challenging the adequacy of the Director’s reasoning in the 2012 rule-making proceeding, whether the Director had to engage in more statutory analysis than the 2012 rulemaking discloses, and whether for a rule like the one at issue here—which, unlike the rule in Encino, reverses no previous rule—the comments filed in the rulemaking proceeding circumscribe what agency reasoning is necessary.
Those kinds of issues about Chevron’s applicability do not affect this court’s jurisdiction, so we are not obliged to raise them sua sponte. I do not suggest that there is a rigid bar to our addressing such matters, though raising issues sua sponte is generally disfavored. See, e.g., Arizona v. California,
In these circumstances, I would apply the Chevron framework in this case—under which, as already concluded, the Director’s position is valid.
IV. Conclusion
For the foregoing reasons, I would uphold the burden-of-persuasion assignment to Aqua Products. Having rejected Aqua Products’ legal challenge to that assignment, I would reinstate the panel opinion, which affirms the Board’s denial of Aqua Products’ motion to amend for failure to carry the burden. Accordingly, although I agree with the majority’s resolution of the legal questions about the scope of
. Those regulations relied on the Director’s rulemaking authority under
. I agree with Judge Reyna's discussion in Part III of his opinion that nothing in today's decision casts doubt on the PTO's authority or prescriptions regarding the burden of producing evidence or duties to address specified matters in pleadings or other filings. See Reyna Op. 1340-42.
. The burden of persuasion, for its part, is "procedural” enough that the Administrative Procedure Act (APA) contains a provision,
. That regulation refers to the Board because, as noted, the Director has delegated institution authority to the Board.
. Section 317 recognizes that, after institution, one or all petitioners may drop out of the proceeding. But that possibility does not contradict the premise, implied in the IPR regime as just indicated, that a petitioner did challenge all of the issued claims subject to the instituted IPR—and, indeed, made a record before institution sufficiently strong to support a determination that unpatentability is at least reasonably likely.
. A proposed substitute claim by definition is different from the issued claims and, under
. It is at present unclear to what extent the Board may sua sponte introduce evidence or arguments into the record—and rely on them after giving notice and opportunity to be heard—even in adjudicating the patentability of issued claims, much less in assessing proposed substitute claims. IPRs, as the PTO has accepted in briefs to our court, are "adjudications” under
. Schaffer ex rel. Schaffer v. Weast,
. IPR proceedings are adjudications subject to
. As to amended claims in those examina-tional contexts, see In re Jung,
. See, e.g.,
. The language of § 42.20(c) is nearly identical to
. The Board panel in Idle Free also cited
Dissenting Opinion
joined by CHEN, Circuit Judge, dissenting from the judgment.
We took this case en banc to resolve the seemingly straightforward question of whether the statute at issue unambiguously requires the burden of persuasion for motions to amend to remain with the petitioner. A clear majority of the court has decided that it does not. That conclusion alone should resolve the case and require deference'to the Director’s clear and consistent interpretation of an ambiguous statute that he is entitled to interpret, as evidenced by the Director’s regulatory interpretation of the statute and further definitive interpretations of that regulation. But rather than following traditional rules of administrative law when faced with an ambiguous statute, i.e., determining whether the agency’s interpretation is reasonable, we find fault in the sufficiency of the Director’s rulemaking procedure—an issue raised for the first time by judges of. this court without briefing or argument from the parties.
We err in our role as an appellate court to provide clear rules. Rather, we have compiled five separate opinions numbering over one-hundred pages that provide varying reasons for affirmance or reversal. Reasonable minds can differ about the core issue of this case—plain meaning or not—but the complicated reasons of the majority for the judgment of vacatur do a serious disservice to the issue at hand, and to a stable interpretation of the law. For the reasons set forth below, I concur in part, and respectfully dissent from the judgment of vacatur.
I fully join Judge Taranto’s opinion, which concludes that the statutory language at issue does not dictate who bears the burden of proof on motions to amend claims under
I write separately for two reasons. First, to note that even if the scope of the PTO’s regulation—
Second, to address the notion that Congress’s use of the word “regulation” in a statute delegating authority to an agency limits that agency’s authority to promulgating regulations codified in the Code of Federal Regulations (CFR). This is a novel approach to administrative law, without support in precedent or in any statute. The term “regulations” has routinely been found to cover other forms of agency authority. By suggesting that delegation statutes using the word “regulation” narrowly confine agency action to the CFR, this court may “make the administrative process inflexible and incapable of dealing with many of the specialized problems which arise.” SEC v. Chenery Corp.,
I
The question of who bears the burden of proof on motions to amend is guided by the well-established two-step Chevron framework. Suprema, Inc. v. Int’l Trade Comm’n,
A
For the reasons discussed by Judge Tar-anto, I agree that the statute is sufficiently ambiguous for the PTO to clear the first step of Chevron. At step two, we are assessing whether the agency’s interpretation “is based on a permissible construction of the statute.” Chevron,
The PTO’s regulation regarding where the burden of proof lies on motions,
B
Despite the preceding, Judge O’Malley and Judge Reyna find that the PTO has not done enough to warrant deference under Chevron. See O’Malley Op. at 1316-22; see also Reyna Op. .at 1335 (faulting the agency for not “fully considering] the inter partes review statutes,
The PTO’s failure to explicitly mention 35' U.S.C.
As best I can tell, my colleagues’ conclusion would force an agency to use specific magic words before its exercise of discretion can receive deference. In other words, Chevron step two would be transformed into a de novo review of the agency’s choices, where we ho longer test the reasonableness of the agency’s conclusion but examine in detail its mode of reasoning. This will turn agency rulemaking on its head, and the facts of today’s case illustrate the herculean task we are placing on agencies. In 2012, when the PTO proposed placing the burden of proof for motions to amend on movants, not a single eommen-ter raised concerns that
The Supreme Court’s decision in Negusie v. Holder does not compel a different conclusion.
Moreover, while I believe the PTO exercised its discretion and sufficiently explained its reasoning, even if it had not, I question the wisdom of remanding this case back to the agency solely because of the mistaken belief that the PTO failed to adequately explain its reasoning. See, e.g., PDK Labs. v. DEA,
C
Moreover, even if the burden of proof regulation was unclear in the scope of its application, in accordance with Auer, we would still be required to affirm the PTO’s interpretation here. Auer,
Under Auer, an agency’s interpretation of its own regulation is given “controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Thomas Jefferson Univ. v. Shalala,
Accordingly, if we have doubts regarding the applicability of
The inter partes regulations were promulgated by the PTO in 2012. In adopting
This interpretation is also not a convenient litigating position or a post-hoc rationalization of the PTO’s decisionmaking. The PTO has consistently enforced this position since 2012. In 2013, the PTAB concluded that
In the spring of 2014, the PTO conducted various “roundtables” with the public, making presentations and receiving informal comments on practice under the new rules. In at least some of the roundtables, the PTO showed a slide on “Motions to Amend” that listed the “need to show patentable distinction” and cited Idle Free. See U.S. Patent & Trademark Office, AIA Trial Roundtables, slide 35, (April 15, 2014), available at https://www.uspto.gov/ ip/boards/bpai/ptab_roundtable_slides-may_update_20140503.pdf (April 15, 2014).
In June 2015, we held that it was permissible to assign'to the patent owner the burden of persuasion on patentability of a proposed substitute claim. Microsoft Corp. v. Proxyconn, Inc.,
In August 2015, when issuing her 2015 Proposed Rule, the Director confirmed that the burden of persuasion rested on the patent owner and set forth reasons why this assignment of the burden serves important policy objectives. She stated that she would not shift the assignment of “the ultimate burden of persuasion on pat-entability of proposed substitute claims from the patent owner to the petitioner.” Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board, 80 Fed. Reg., 50,720, 50,723 (proposed Aug. 20, 2015).
The Director reaffirmed that the patent owner bears the burden of persuasion as to amendments in her final regulatory amendments in 2016. Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board, 81 Fed. Reg. 18,750,18,754-55 (April 1, 2016).
Thus, the PTO has consistently, since 2012, maintained that the burden of proof for motions to amend falls on the movant. As such, this position is neither a convenient litigating position nor a post-hoc rationalization of the PTO’s decisionmaking. And if there is any ambiguity regarding the applicability of
II
Finally, I am deeply - troubled by the suggestion that, by using the word “regulation” in a statute, Congress intended to foreclose all means of statutory or regulatory interpretation other than notice and comment rulemaking. O’Malley Op. at 1319-20; Moore Op. at 1329-31. This position would severely curtail the PTO’s authority to regulate its own proceedings by forcing the agency to codify rules on every procedural issue, even those that are interpretations of existing regulations. This remarkable proposition contradicts both the Supreme Court and our own precedent, and drastically changes administrative law as we know it. Thus, I disagree that
I start with the general principle that agencies, including the PTO, have wide discretion in choosing how to regulate. The Supreme Court has long recognized that “[a]ny rigid requirement” for legislative rulemaking “would make the administrative process inflexible and incapable of dealing with many of the specialized problems which arise.” Chenery,
Here, the statutory scheme indicates that Congress intended to give broad discretion to the PTO to regulate IPR proceedings.
Of course, Congress may limit the agency’s discretion by statute. Judge O’Malley and Judge Moore argue that Congress did so by using the word “regulation” in
Moreover, our own precedent confirms that “regulations” is not limited to rules codified in the CFR. For example, we held that Congress’s delegation of authority to “establish regulations” to govern proceedings at the PTO meant that we would afford Chevron deference to an interpretative rule published in the Federal Register, even though it did not result in a regulation codified in the CFR. Cooper Techs. Co. v. Dudas,
Likewise, other regional circuits have afforded Chevron deference to legal interpretations not codified in the CFR, even though the delegating statutes use the word “regulation.” For example,
As another example, the Federal Food, Drug, and Cosmetic Act (FDCA) gives the FDA authority to “promulgate regulations for the efficient enforcement” of the statute.
I could not find a definition of “regulation” limiting it to codified agency pronouncements appearing in the CFR and I have not been able to find any support in the AIA or APA for such a narrow interpretation. Nor, apparently, have my colleagues, since their opinions do not explain how they derived their interpretation of “regulation” other than to state their conclusion based, presumably, on their plain language interpretation of the term “regulation.” Contrary-to their position, the PTO has broad discretion over how it regulates IPR procedures. And the word “regulation” in
Aside from the fact that
To the extent these regulations fail to address a specific factual scenario, the PTO can clarify or interpret its own regulations without resorting to additional rule-making. Shalala v. Guernsey Mem’l Hosp.,
If my colleagues believe that “regulations” in
This new approach to administrative law has ramifications far beyond this case. For example, consider the PTO’s regulation that a motion to amend cannot “introduce new subject matter” to the patent.
Ill
Accordingly, I would affirm. From the contrary judgment of Judge O’Malley, Judge Moore, and Judge Reyna, I respectfully dissent.
. I agree with Judge Reyna that the patent owner bears the burden of production on motions to amend claims. I therefore join Part III of his opinion.
. In Prill v. NLRB,
. For the reasons expressed in Judge Taran-to's opinion, which explains how a motion to amend, per
. Judge O’Malley and Judge Moore’s opinions do not reach the question of whether the Board’s opinions in Masterlmage and Idle Free are entitled to Auer deference. However, I believe that a proper application of Auer should lead this court to defer to the Board's legal interpretations in those decisions and affirm the decision below, even under my colleagues’ narrow interpretation of the term "regulation.”