AQUA PRODUCTS, INC., Appellant v. Joseph MATAL, Performing the Functions and Duties of the Under Secretary of Commerce for Intellectual Property and Director, U.S. Patent And Trademark Office, Intervenor
2015-1177
United States Court of Appeals, Federal Circuit.
October 4, 2017
872 F.3d 1290
C. Cross-Appeal
BSC cross-appeals the denial of its motion for summary judgment, in which the district court held that it owed royalties to Dr. Jang, if the Express stent were covered by the asserted claims, notwithstanding the PTO‘s eventual cancellation of those claims. We dismiss the cross-appeal because it does not seek to enlarge the district court‘s judgment of non-infringement in its favor. Instead, the cross-appeal merely offers an alternative basis to affirm the judgment. See Howmedica Osteonics Corp. v. Wright Med. Tech., Inc., 540 F.3d 1337, 1343 n.2 (Fed. Cir. 2008) (dismissing “cross-appeal as improper because it did not seek to enlarge the judgment but merely asserted an alternative ground to affirm the judgment“); see also Symantec Corp. v. Computer Assocs. Int‘l, Inc., 522 F.3d 1279, 1294-95 (Fed. Cir. 2008). When an improper cross-appeal is dismissed, we may nonetheless consider the arguments raised as alternative grounds for sustaining the judgment. Symantec, 522 F.3d at 1294. Because we affirm the district court‘s judgment on other grounds, we need not do so here.
CONCLUSION
Based on the foregoing analyses, the district court correctly denied Dr. Jang‘s motion for JMOL of literal infringement of claims 1 and 8 of the ‘021 Patent as substantial evidence supported the jury‘s verdict of no literal infringement. The district court properly vacated the jury‘s finding of infringement under the doctrine of equivalents because it correctly concluded that Dr. Jang did not meet his burden of proving that his doctrine of equivalents theory did not ensnare the prior art as he failed to draft a proper hypothetical claim. The district court consequently entered judgment of non-infringement in favor of BSC, and we affirm that entry of judgment. We dismiss the cross-appeal and need not reach the arguments it raised.
AFFIRMED.
COSTS
No costs.
JAMES R. BARNEY, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC, argued for appellant. Also represented by TIMOTHY P. MCANULTY, DAVID MROZ; ANTHONY A. COPPOLA, ANTHONY J. DIFILIPPI, JEFFREY A. SCHWAB, Abelman Frayne & Schwab, New York, NY.
NATHAN K. KELLEY, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for intervenor. Also represented by FARHEENA YASMEEN RASHEED, MEREDITH HOPE SCHOENFELD, SCOTT WEIDENFELLER; MARK R. FREEMAN, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC.
GREGORY A. CASTANIAS, Jones Day, Washington, DC, for amicus curiae Intellectual Property Owners Association. Also repre-
BRYAN A. SCHWARTZ, Squire Patton Boggs (US) LLP, Cleveland, OH, for amici curiae Case Western Reserve University School of Law Intellectual Property Venture Clinic, The Ohio Venture Association. Also represented by STEVEN M. AUVIL; TIMOTHY J. O‘HEARN, Shaker Heights, OH.
JAMES H. HALL, Blank Rome LLP, Houston, TX, for amicus curiae Houston Intellectual Property Law Association.
JAMES EDWARD TYSSE, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, DC, for amicus curiae Pharmaceutical Research and Manufacturers of America. Also represented by DIANNE B. ELDERKIN, Philadelphia, PA; DAVID EVAN KORN, Pharmaceutical Research and Manufacturers Association of America, Washington, DC.
HANSJORG SAUER, Biotechnology Innovation Organization, Washington, DC, for amicus curiae Biotechnology Innovation Organization. Also represented by Q. TODD DICKINSON, Polsinelli PC, Washington, DC; COLBY BRIAN SPRINGER, San Francisco, CA.
PETER J. AYERS, Law Office of Peter J. Ayers, Austin, TX, for amicus curiae American Intellectual Property Law Association. Also represented by DAVID R. TODD, Workman Nydegger, Salt Lake City, UT; MARK L. WHITAKER, Morrison & Foerster LLP, Washington, DC.
KEVIN J. CULLIGAN, Maynard, Cooper & Gale, PC, New York, NY, for amicus curiae Askeladden, L.L.C. Also represented by JOHN P. HANISH.
JOHN THORNE, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, DC, for amici curiae The Internet Association, Computer & Communications Industry Association, Dell Inc., Garmin International, Inc., Intel Corporation, Red Hat, Inc., Samsung Electronics Co., Ltd., SAP America, Inc., SAS Institute, Inc., Software & Information Industry Association, Symmetry LLC, VIZIO, Inc. Also represented by JOSHUA D. BRANSON. Amicus curiae Intel Corporation also represented by Matthew John Hult, Intel Corporation, Santa Clara, CA.
Before PROST, Chief Judge, NEWMAN, LOURIE, DYK, MOORE, O‘MALLEY, REYNA, WALLACH, TARANTO, CHEN, and HUGHES, Circuit Judges.*
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.
O‘MALLEY, Circuit Judge.
In this appeal, we consider the proper allocation of the burden of proof when
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., 823 F.3d 1369, 1373-74 (Fed. Cir. 2016) (hereinafter “Panel Decision“). The court granted Aqua‘s request for en banc rehearing and vacated the panel decision. In re Aqua Prods., Inc., 833 F.3d 1335 (Fed. Cir. 2016) (en banc) (per curiam).
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
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, 823 F.3d at 1371. The ‘183 patent
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 ‘183 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., 833 F.3d 1335. We proposed two questions in the en banc order:
(a) When the patent owner moves to amend its claims under
(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
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 2145.2 In its statement to the Senate Committee on the Judiciary several years before Congress enacted the AIA, the PTO explained that amendments are a key feature of post-grant proceedings:
The []PTO‘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 Subcomm. 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).
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.R. 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
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 unpatentability 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 section 316(d).”
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.” 2013 WL 5947697, at *4.3 Then, in MasterImage, another Board panel discussed Idle Free‘s holding that “the burden is ... on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner.” 2015 WL 10709290, at *1 (quoting Idle Free, 2013 WL 5947697, at *4) (emphasis altered from original).4 Among other things, the panel emphasized that the ultimate burden of persuasion regarding the question of patentability is on the patent owner. Id.
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 patentability of amendments over the prior art on the patent owner, or have been interpreted as doing so. See Proxyconn, 789 F.3d at 1307-08; Prolitec, 807 F.3d at 1363; Synopsys, 814 F.3d at 1323-24; Nike, 812 F.3d at 1333-34; Panel Decision, 823 F.3d at 1373.
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, i.e., the original claims of the patent 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.
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 [section 316(d)].”
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.” 467 U.S. at 842, 104 S.Ct. 2778. If the answer is yes, the inquiry ends, and we must give effect to Congress‘s unambiguous intent. Id. at 842-43, 104 S.Ct. 2778. If the answer is no, the court must consider “whether the agency‘s answer [to the precise question at issue] is
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. Section 316(d) Does Not Impose Any Burden of Proof Regarding the Patentability of Proposed Amended Claims
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
[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.
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., 477 U.S. 242, 255-56, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
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., 800 F.3d 1375, 1378-81 (Fed. Cir. 2015). In district court, the party asserting invalidity of a patent claim bears the burden of establishing invalidity.
For these reasons, we believe that the only reasonable reading of the burden imposed on the movant in
b. The Unambiguous Language of § 316(e)
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 unpatentability 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 to 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,
Section 316(e) uses the term “unpatentability,” which may refer to either pending or issued claims, rather than the term “invalidity,” which both courts and the PTO apply only to issued claims. See, e.g.,
The Director is instructed by
The terms “patentability” and “unpatentability” do not raise separate inquiries; if they did, Congress would not have placed the burden of proving “unpatentability” on the petitioner in
The introductory clauses of
The location of
For all these reasons, the dissent‘s contention that “Congress was 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 § 316(e) in the Context of the AIA
As noted before, an Act of Congress “should not be read as a series of unrelated and isolated provisions.” Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 570, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995); see also King, 135 S.Ct. at 2489. Because the presence of ambiguity in the meaning of a term “may only become evident when placed in context” within the statute, we next examine how
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
Read in context of the overall statutory scheme, we believe that
When read in conjunction with the directive of
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.
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: § 314
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, 136 S. Ct. at 2144.
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
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
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
The final sentence of
Should the Board elect to continue to a final written decision in this scenario,
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 interest in seeing that patent monopolies ... are kept within their legitimate scope.‘” Cuozzo, 136 S. Ct. at 2144 (quoting Precision Instrument Mfg. Co., 324 U.S. at 816, 65 S. Ct. 993).
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 § 316(e)
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., 426 U.S. 1, 10, 96 S. Ct. 1938, 48 L. Ed. 2d 434 (1976). The clarity of the statutory provision here, both alone and in context, obviates the need to rely on the legislative history of the AIA. The legislative history nevertheless strongly supports our conclusion that the language of
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 unpatentability 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 Kyl 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. The 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 new section 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. Kyl). 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
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 unpatentability 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, 812 F.3d at 1333. The panel in Nike explained that “placing this burden [to show patentability] on the patent owner for its newly formulated claims is appropriate,” as IPRs “are distinctly different from a typical PTO examination or reexamination where a patent examiner performs a prior art search and independently conducts a patentability analysis of all claims, whether newly proposed or previously existing.” Id. The dissent echoes that concern. See Taranto Op. at 1349–50.
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
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 id.
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, 467 U.S. at 843, 104 S. Ct. 2778. If we conclude that the answer to either of the first two inquiries is no, then it is our obligation to interpret the governing statute without deference. See Encino Motorcars, LLC v. Navarro, — U.S. —, 136 S. Ct. 2117, 2127, 195 L. Ed. 2d 382 (2016). Because we conclude that the answer to at least the first question is no, we proceed to analyze the relevant statutory provisions in the first instance.
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. Section 316(a)(9) grants the Director the authority to “set[] forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d) to cancel a challenged claim or propose a reasonable number of substitute claims.” The PTO argues that it is pursuant to this authority that it promulgated Rules 42.20 and 42.121, which the PTO claims place the burden of proving the proposition of the patentability of amended claims on the patent owner. Notably, the PTO does not, as does Judge Taranto, argue that Rules 42.20 and 42.121 unambiguously assign this burden to the patent owner. As discussed below, this is likely because neither rule uses the term “burden of persuasion” or “patentability” and the PTO never indicated to the public in its rulemaking process that either rule was intended to address that substantive issue. Instead, the PTO attempts to back into its request for Chevron deference by arguing that it is entitled to Auer deference for its interpretation of Rules 42.20 and 42.121, including its conclusion that those rules, together, impliedly address the burden of persuasion for amended claims in IPRs and limit the scope of
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, 405 F.3d 1339, 1346-47 (Fed. Cir. 2005); Lockheed Corp. v. Widnall, 113 F.3d 1225, 1227 (Fed. Cir. 1997); Lengerich v. Dep‘t of the Interior, 454 F.3d 1367, 1370 (Fed. Cir. 2006). If the regulatory language is clear and unambiguous, no further inquiry is usually required. Roberto v. Dep‘t of the Navy, 440 F.3d 1341, 1350 (Fed. Cir. 2006). But “[d]eference is undoubtedly inappropriate, for example, when the agency‘s interpretation is ‘plainly erroneous or inconsistent with the regulation.‘” Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155, 132 S. Ct. 2156, 183 L. Ed. 2d 153 (2012) (quoting Auer, 519 U.S. at 461, 117 S. Ct. 905).
Neither
Likewise,
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, 789 F.3d at 1308 (second alteration in original) (quoting Changes to Implement IPRs, 77 Fed. Reg. at 48,705). Like Rule 42.20, Rule 42.121 does not address the underlying issue of where the burden of persuasion lies for the proposed amended claims once entered into the proceeding. The language of Rule 42.121 does not suggest that the Board must deny a motion to amend if a patent owner fails to prove the ultimate patentability of the proposed amended claims in that motion. Both by statute and by its own rules, the Board has only limited grounds for denying a motion to amend: (1) if the amendment “does not respond to a ground of unpatentability involved in the trial,”
We do not read these regulations, separately or together, to say that the patent owner must bear the burden of proving the
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, 546 U.S. 243, 257, 126 S. Ct. 904, 163 L. Ed. 2d 748 (2006) (“Simply put, the existence of a parroting regulation does not change the fact that the question here is not the meaning of the regulation but the meaning of the statute. An agency does not acquire special authority to interpret its own words when, instead of using its expertise and experience to formulate a regulation, it has elected merely to paraphrase the statutory language.“). Of course, “if Congress has directly spoken to an issue then any agency interpretation contradicting what Congress has said would be unreasonable.” Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218 n.4, 129 S. Ct. 1498, 173 L. Ed. 2d 369 (2009).
The PTO‘s decisions in Idle Free and MasterImage 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, 529 U.S. 576, 587, 120 S. Ct. 1655, 146 L. Ed. 2d 621 (2000) (collecting cases and noting, “[i]nterpretations such as those in opinion letters—like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law—do not warrant Chevron-style deference.“); see also Mead, 533 U.S. at 230, 121 S. Ct. 2164 (“It is fair to assume generally that Congress contemplates administrative action with the effect
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 MasterImage. Again, the Board did not purport to interpret any statutory provision in MasterImage. 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., 463 U.S. 29, 48, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983); see also Encino, 136 S. Ct. at 2127. No such cogent explanation has ever been provided by either the Director or the Board. See, e.g., Waterkeeper All. v. EPA, 853 F.3d 527, 530, 534-38 (D.C. Cir. 2017) (vacating an EPA Final Rule and concluding that Chevron Step One ended the inquiry, where the EPA failed to point to any statutory ambiguity authorizing its Final Rule).
If, moreover, as the PTO contends, Idle Free and MasterImage actually concluded that
If an agency purports to rest its authority to act on an express grant of rulemaking 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
In connection with the adoption of its rules governing IPRs, including
Although the Office sought the benefit of public comment, these rules are procedural and/or interpretive. Stevens v. Tamai, 366 F.3d 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 patentability requirements.
Final Rules of Practice, 77 Fed. Reg. at 48,651 (emphasis added). And the Director went on to cite Cooper Technologies Co. v. Dudas, 536 F.3d 1330, 1336-37 (Fed. Cir. 2008), “for the proposition that
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. Section 316(a)(9) is a narrow grant of rulemaking authority to carry out an express congressional goal: to allow the patent owner to move to amend the patent as authorized by
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 MasterImage for the proposition that, by then, it was understood that the PTO was interpreting the reference to burdens of proof in
But neither opinion explains how this post-2012 consideration of the issue can cure the fact that
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 rulemaking is not supposed to be a scavenger hunt. It must, moreover, be tied to the congressional purpose for which that rulemaking 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, 136 S. Ct. at 2126-27. The Supreme Court has vacillated on whether this inquiry is always a threshold inquiry, however, rather than one that falls under Chevron Step Two. Compare id. at 2124-26, with, e.g., Michigan v. EPA, — U.S. —, 135 S. Ct. 2699, 2707-08, 192 L. Ed. 2d 674 (2015) (addressing sufficiency of agency rulemaking at Chevron Step Two).
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 under
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 patentability 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., 318 U.S. 80, 94, 63 S. Ct. 454, 87 L. Ed. 626 (1943) (“[T]he orderly functioning of the process of review requires that the grounds upon which the administrative agency acted be clearly disclosed and adequately sustained.“). That obligation means that the agency must “articulate a satisfactory explanation” of its reasoning; it may not simply provide a conclusion. Taurus Foods, Inc. v. DEA, 259 F.3d 731, 737 (D.C. Cir. 2001) (quoting State Farm, 463 U.S. at 43, 103 S. Ct. 2856); see also In re Lee, 277 F.3d 1338, 1342 (Fed. Cir. 2002) (agency has an obligation “to provide an administrative record showing the evidence on which the findings are based, accompanied by the agency‘s reasoning in reaching its conclusions“).
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, 613 F.3d at 195; see also Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S. Ct. 814, 28 L. Ed. 2d 136 (1971) (“Scrutiny of the facts does not end, however, with the determination that the Sec
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, 707 F.3d 337, 348 (D.C. Cir. 2013) (concluding that the controlling opinion must “represent a common denominator” of a court‘s reasoning, and such a position must “support the judgment” (quoting King v. Palmer, 950 F.2d 771, 781 (D.C. Cir. 1991) (en banc))).
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
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., 256 F.3d 1323, 1344 (Fed. Cir. 2001) (citing Singleton v. Wulff, 428 U.S. 106, 120, 96 S. Ct. 2868, 49 L. Ed. 2d 826 (1976)); see also 19 James Wm. Moore et al., Moore‘s Federal Practice § 205.05, at 205-55 (3d ed. 1997) (“It is a long-standing rule that, in order to be reviewable on appeal, a claim or issue must have been ‘pressed or passed upon below.‘“). “This is because appellate courts are courts of review and [n]o matter how independent an appellate court‘s review of an issue may be, it is still no more than that—a review.” Id. (quoting Sage Prods., Inc. v. Devon Indus., Inc., 126 F.3d 1420, 1426 (Fed. Cir. 1997)).
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 sub
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,
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
VACATED AND REMANDED
COSTS
No costs.
MOORE, Circuit Judge, 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,2 and its precedential decision in MasterImage, represent the agency‘s authoritative determination reached through formal adjudicative processes and are therefore entitled to Chevron deference. The Director explains that designating a Board decision as precedential requires a vote to do so by a majority of the nearly 300-person Board and concurrence with the precedential designation by the Director. See Director Br. 12 n.1. Once designated as precedential, the
In some circumstances, rules articulated in formal agency adjudication have been entitled to Chevron deference. See United States v. Mead, 533 U.S. 218, 230, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001). I am not certain as a general matter whether precedential Board decisions are “formal administrative procedure[s] tending to foster the fairness and deliberation that should underlie a pronouncement of such force.” Id. Accepting without deciding that the precedential Board decision in MasterImage is such a “formal agency adjudication,” I still conclude in light of the statute it is not entitled to Chevron deference.
Chevron explains: “The power of an administrative agency to administer a congressionally 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., 467 U.S. 837, 843, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984) (quoting Morton v. Ruiz, 415 U.S. 199, 231, 94 S. Ct. 1055, 39 L. Ed. 2d 270 (1974)). Chevron continues: “If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation.” Id. at 843-44, 104 S. Ct. 2778. To be sure, Chevron, and later Mead, explains that there can be express or implicit delegation on a particular question by Congress to the agency. See id. at 843-44, 104 S. Ct. 2778; Mead, 533 U.S. at 228-29, 121 S. Ct. 2164. Those arguing for agency deference in this case conclude that Congress expressly delegated in
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 adopted in the exercise of that authority. Delegation of such authority may be shown in a variety of ways, as by an agency‘s power to engage in adjudication or rulemaking, or by some other indication of a congressional intent to create a relatively formal administrative procedure tending to foster the fairness and deliberation that should underlie a pronouncement of such force.
Id. at 226-27, 121 S. Ct. 2164. In this case, Congress did not “generally” delegate authority to the PTO to make rules through either adjudication or rulemaking. Congress specifically and expressly limited the Director‘s authority to fill the gaps in
Chevron and Mead exist to honor the delegation of gap-filling authority from Congress to an agency. In
Congress expressly required the Director to gap fill through “regulations.” Congress expressly required the Director to “consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings.”
and that the agency interpretation claiming deference was promulgated in the exercise of that authority. 533 U.S. at 226-27, 121 S.Ct. 2164. Mead explains that Chevron deference is tied to the delegation of legislative authority, and in particular to the indication of “congressional intent.” Id. at 227, 121 S.Ct. 2164. Congressional intent to give the agency the authority to gap fill regarding standards applicable to allowing the patent owner to move to amend the patent is expressed clearly in the statute itself—the agency may do so by regulation.
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. ___, 136 S.Ct. 2117, 2124, 195 L.Ed.2d 382 (2016), “In the usual course, when an agency is authorized by Congress to issue regulations and promulgates a regulation interpreting a statute it enforces, the interpretation receives deference ....” And the Court in Encino added: “A premise of Chevron is that when Congress grants an agency the authority to administer a statute by issuing regulations with the force of law, it presumes the agency will use that authority to resolve ambiguities in the statutory scheme.” Id. at 2125.
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 classification rulings with the force of law.” 533 U.S. at 231-32, 121 S.Ct. 2164. Likewise, on the face of the statute at issue here, Congress gave no indication that the Director may gap fill standards applicable to allowing the patent owner to move to amend the patent by issuing Board opinions. Congress expressly delegated authority to gap fill to the Director by regulation only. Thus, while in some circumstances, formal adjudication may suffice to entitle an agency to Chevron deference, see Mead, 533 U.S. at 230, 121 S.Ct. 2164, this is not true here where Congress’ delegation expressly articulates the means by which the agency is permitted to gap fill. See also Gonzales v. Oregon, 546 U.S. 243, 258, 126 S.Ct. 904, 163 L.Ed.2d 748 (2006) (”Chevron deference, however, is not accorded merely because the statute is ambiguous and an administrative official is involved. To begin with, the rule must be promulgated pursuant to authority Congress has delegated to the official.“).
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, 546 U.S. at 255-56, 126 S.Ct. 904 (“Deference in accordance with Chevron, however, is warranted only ‘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.‘” (quoting Mead, 533 U.S. at 226-27, 121 S.Ct. 2164)). Where Congress has delegated authority to “prescribe regulations,” I cannot agree that Chevron deference ought to be expanded to encompass other means by which the agency may offer its “rules.” In short, Congress may, by statute, expressly determine upon what and how the Director may promulgate rules.
There are dozens of very specific grants of rulemaking authority by Congress to the Director. In some circumstances, Congress has delegated to the Director rulemaking 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 undergird Congress’ choice between rulemaking achieved through regulation and through adjudication. The promulgation of substantive regulations, consistent with the APA, requires notice of proposed rulemaking 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.5 Id. at 2-3. But precedential Board
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.“).7 It is not for the
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.8 If Chevron deference applies then judicial review is substantially narrowed; we would review the agency‘s statutory interpretation only to determine if it contradicts an unambiguous congressional choice and, if not, whether it is reasonable. In this case, where Congress delegated the agency rulemaking authority to be exercised through regulation, I cannot agree to extend Chevron deference to agency rulemaking achieved through other means. I would thus review the relevant legal question—who has the burden of persuasion—without giving Chevron deference to the agency position articulated in its Board opinions.
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.9 Judge Hughes believes that when the patent statute authorizes the Director “to prescribe regulations” for some things (like legal standards), but permits the Director “to establish procedures” or “to establish rules” for other things, those differences are without meaning. I cannot agree with such a squishy approach to statutory interpretation. I believe that Congress, by authorizing the agency to “prescribe regulations” in
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., 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001). The Board may adopt a legal standard through a precedential decision in an individual case, but that legal standard will not receive Chevron deference when Congress only authorized the agency to prescribe regulations.
CONCLUDING THOUGHTS
Chevron has effected a broad transfer of legislative and judicial function to the executive. See Michigan v. EPA, ___ U.S. ___, 135 S.Ct. 2699, 2712-14, 192 L.Ed.2d 674 (2015) (Thomas, J., concurring) (questioning the constitutionality of Chevron deference under the separation of the powers); Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1149-58 (10th Cir. 2016) (Gorsuch, J., concurring) (Chevron “permit[s] executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.“); Egan v. Del. River Port Auth., 851 F.3d 263, 278-83 (3d Cir. 2017) (Jordan, J., concurring) (“The deference required by Chevron not only erodes the role of the judiciary, it also diminishes the role of Congress.“); Philip Hamburger, Chevron Bias, 84 GEO. WASH. L. REV. 1187, 1189 (2016) (asking, “even where agencies have congressional authority to exercise their judgment about what the law is, how can this excuse the judges from their constitutional duty, under Article III, to exercise their own independent judgment?“); Jeffrey A. Pojanowski, Without Deference, 81 MO. L. REV. 1075, 1079 (2016) (summarizing scholarly critique of the Chevron doctrine). I do not agree with the agency‘s attempts to expand Chevron. We cannot by judicial fiat usurp legislative authority and hand it over to the executive.
REYNA, Circuit Judge, 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 Taranto‘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.
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 § 316(E)
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 Corp., 533 U.S. 218, 236-37, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001). Such an approach requires that we begin this inquiry by looking at the nature of the question at issue and the interpretive method used by the Agency. Barnhart v. Walton, 535 U.S. 212, 222, 122 S.Ct. 1265, 152 L.Ed.2d 330 (2002) (citing Mead, 533 U.S. at 229-31, 121 S.Ct. 2164). Indeed, this case turns on the interpretative method used by the Patent Office. As discussed further below, I conclude that the Patent Office has yet to fully consider the inter partes review statutes,
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 evidentiary 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, 555 U.S. at 521, 129 S.Ct. 1159; Encino, 136 S.Ct. at 2125; Mead, 533 U.S. at 227, 121 S.Ct. 2164.
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, 512 U.S. 267, 271, 114 S.Ct. 2251, 129 L.Ed.2d 221 (1994) (citing Am. Dredging Co. v. Miller, 510 U.S. 443, 454, 114 S.Ct. 981, 127 L.Ed.2d 285 (1994)). The allocation of this burden of persuasion was first addressed in Idle Free Systems, Inc. v. Bergstrom, Inc., where the Patent Trial and Appeal Board, through a panel of six administrative law judges, dismissed a patent owner‘s motion to amend for failure to confer with the Board before filing its motion in violation of
The Board relied on
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., 789 F.3d 1292, 1303-08 (Fed. Cir. 2015). In Proxyconn, this court narrowly addressed the Board‘s interpretation of its regulations,
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, 2015 WL 10709290, at *1 (P.T.A.B. July 15, 2015), stating that under Idle Free, “[t]he ultimate burden of persuasion remains with Patent Owner, the movant, to demonstrate the patentability of the amended claims.” It was a cold embrace. I agree with Judge O‘Malley‘s well-articulated view on this particular point. Arguments presented in Proxyconn did not obligate the court to “engage in any statutory analysis with respect to
In MasterImage, 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 MasterImage as precedential.2 The Patent Office now cites to Idle Free as the underlying authority for the proposition that the patent owner bears the burden of persuasion for showing its substitute claims are patentable over the prior art of record.3
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
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. 555 U.S. at 523, 129 S.Ct. 1159. The agency at issue had relied on a mistaken premise that a Supreme Court decision controlled its interpretation. Id. at 516, 522-23, 129 S.Ct. 1159. The Court remanded to the agency, finding that it failed to reach an independent interpretation in the first instance and that the agency‘s full consideration of the statutory question is required before the Court considers deference. Id.
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. Taranto 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.6 The Patent Office‘s commentary fails to adequately address the importance of
The Patent Office‘s attempt to “construct policy by adjudication is evident.” First Bancorporation v. Bd. of Governors of Fed. Reserve Sys., 728 F.2d 434, 438 (10th Cir. 1984). While I recognize that the choice between rulemaking via adjudication or regulation lies within an agency‘s discretion, “[t]he function of filling the interstices” of the Patent Act “should be performed as much as possible, through the quasi-legislative promulgation of rules to be applied in the future.” SEC v. Chenery Corp., 332 U.S. 194, 202, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947). An agency‘s choice to use adjudication to construct rules of general applicability can amount to an abuse of discretion. NLRB v. Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267, 295, 94 S.Ct. 1757, 40 L.Ed.2d 134 (1974). Rulemaking through adjudication is a nonstarter here, where the subject rule is a significant game change in the inter partes review process by setting out a substantive rule that creates and allocates an evidentiary burden to a party, none of which before existed. See Morton v. Ruiz, 415 U.S. 199, 232-36, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974); see also
Thus, while decisions such as MasterImage may occasionally be designated as precedential, there must be a principled
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., 557 U.S. 167, 177, 129 S.Ct. 2343, 174 L.Ed.2d 119 (2009); see Schaffer v. Weast, 546 U.S. 49, 56, 126 S.Ct. 528, 163 L.Ed.2d 387 (2005). This is because Congress is presumed to draft legislation with these long-standing default rules in mind. Meacham v. Knolls Atomic Power Lab., 554 U.S. 84, 91-92, 128 S.Ct. 2395, 171 L.Ed.2d 283 (2008). Here, as discussed further below,
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, 564 U.S. 91, 100 n.4, 131 S.Ct. 2238, 180 L.Ed.2d 131 (2011) (distinguishing burdens of persuasion from burdens of production); Dynamic Drinkware, LLC v. Nat‘l Graphics, Inc., 800 F.3d 1375, 1378-79 (Fed. Cir. 2015). The other is the assignment of various pleadings or argument duties, i.e., the scope of obligations the Patent Office may impose on the patent owner to address particular patentability issues in its motion to amend. See Veritas Techs., LLC v. Veeam Software Corp., 835 F.3d 1406, 1414-15 (Fed. Cir. 2016) (noting that issue of what patent owner must address in its motion to amend is distinct from the issue of the ultimate burden of persuasion on the evidence). Section
With respect to motions practice outside the inter partes review context, it is well settled that regardless of which party
There is no disagreement that the patent owner bears a burden of production in accordance with
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 MasterImage 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., 841 F.3d 1376, 1379 (Fed. Cir. 2016);
TARANTO, Circuit Judge, 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., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). That conclusion leads the court to vacate the decision of the Patent Trial and Appeal Board, which assigned the burden of persuasion to patent owner Aqua Products. I disagree with the conclusion and therefore the vacatur. In my view, a PTO regulation assigns the burden of persuasion to the patent owner,
I. INTRODUCTION
Under the America Invents Act (AIA),
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 ‘183 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., 823 F.3d 1369 (Fed. Cir. 2016). In affirming the Board‘s denial of the motion to amend, the panel followed several decisions of this court that upheld the PTO‘s assignment to the patent owner of the burden of persuasion on the patentability of proposed substitute claims. See Nike, Inc. v. Adidas AG, 812 F.3d 1326, 1332-35 (Fed. Cir. 2016); Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1323-24 (Fed. Cir. 2016); Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353, 1362-65 (Fed. Cir. 2015), petition for reh‘g pending; Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307 (Fed. Cir. 2015).
III. DISCUSSION
This case involves a familiar pattern under the IPR provisions of the AIA. 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, 467 U.S. at 842-43, 104 S.Ct. 2778; see Encino, 136 S.Ct. at 2125-26. Although the ambiguity determination must consider the statute as a whole, see Nat‘l Ass‘n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666, 127 S.Ct. 2518, 168 L.Ed.2d 467 (2007), Aqua Products’ argument focuses overwhelmingly on
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.6 That record-de
The problem is even more severe under the alternative reading of
In short,
ficiency problem might be addressed in significant part by a burden of production on the patent owner which, importantly, this court today is not restricting the Board‘s authority to impose. See Reyna Op. 1340-42. But the record may remain deficient, and it is uncertain to what extent the Board can itself make up for the deficiencies.7
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.8 For issued claims, it is the petitioner that is seeking such action: a ruling of unpatentability followed by cancellation. For proposed substitute claims, it is the patent owner that is seeking such action: a ruling of patentability followed by addition to the patent of claims not part of the patent when the IPR was filed. That distinction makes it sensible to read
The general rule that governs the allocation of burdens of persuasion is not limited to judicial proceedings. Section 7(c) of the APA,
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
But as Aqua Products acknowledges, the Director did assign such a burden for proposed substitute claims in interference proceedings and other contested cases—which, like the later IPRs, were adjudicatory, oppositional proceedings. See Bamberg v. Dalvey, 815 F.3d 793, 798-99 (Fed. Cir. 2016); Director‘s Suppl. Br. 18; Aqua Products’ Suppl. Reply Br. 19. Indeed, IPRs, like other adjudicatory proceedings, including interference and derivation proceedings, are unlike the typical examination or reexamination, in which a patent examiner performs a prior-art search and independently conducts a patentability analysis of all claims. See Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1327-28 (Fed. Cir. 2013). At a minimum, that disparity in background practices between adjudicatory and examinational proceedings means that there is no basis for inferring the clear congressional prescription that Aqua Products urges for
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.11 There is no basis for attributing the choice of terminology in
c
Aqua Products asserts that
d
That
e
Pointing to the “estoppel” provision of
* * *
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
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, 77 Fed. Reg. at 48,610-20, 48,673. The Director again made clear that the rule “places the burden of proof on the moving party” and that it applies to “requests to amend the patent.” Id. at 48,619.12
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, “[f]or 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, 789 F.3d at 1307, and was reaffirmed in a ruling (which the Director approved as “precedential“) by another special panel of the Board, see MasterImage 3D, Inc. v. RealD Inc., No. IPR2015-40, 2015 WL 10709290, at *1 (P.T.A.B. 2015). And the Director, in preparing for and conducting various rulemaking proceedings, solicited comments on the amendment process and explained why she was not proposing to change the assignment. See, e.g., Request for Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial and Appeal Board, 79 Fed. Reg. 36,474, 36,476 (June 27, 2014); Proposed Rule, Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board, 80 Fed. Reg. 50,720, 50,723-24 (proposed Aug. 20, 2015); Amendments to the Rules of Practice for Trials Before the Patent
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
Section 42.20(c), entitled “burden of proof,” states that “[t]he moving party has the burden of proof to establish that it is entitled to the requested relief.”
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 rulemaking 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, 530 U.S. 392, 412-13 (2000); Silber v. United States, 370 U.S. 717, 718-19 (1962). But I ultimately think it inadvisable to do so here, considering such factors as the interests in full adversarial presentation and the degree of uncertainty in the relevant governing law on the matters not fully developed before us.
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
HUGHES, Circuit Judge, 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—
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, 796 F.3d 1338, 1346 (Fed. Cir. 2015) (en banc) (discussing Chevron framework). At step one, we look to whether “Congress has directly spoken to the precise question at issue” because, “[i]f the intent of Congress is clear, that is the end of the matter.” Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). When the statute is “silent or ambiguous with respect to the specific issue” in dispute, we must proceed to step two. Id. at 843. At this step, we deem that “Congress has explicitly left a gap for the agency to fill,” and our task is simply to determine “whether the agency‘s answer is based on a permissible construction of the statute.” Id.
A
For the reasons discussed by Judge Taranto, 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, 467 U.S. at 843. A permissible interpretation is one that is not “arbitrary or capricious in substance, or manifestly contrary to the statute.” Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44, 53 (2011) (citation and internal quotation marks omitted). Under this deferential standard, even if the agency‘s view is not “the only possible interpretation, nor even the interpretation deemed most reasonable by the courts,” we are obligated to defer to it as long as it is a reasonable interpretation. Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218 (2009) (emphasis in original). Once we determined that the statute is silent or ambiguous, “the question for the court [is] whether the agency‘s answer is based on a permissible construction of the statute.” INS v. Aguirre-Aguirre, 526 U.S. 415, 424 (1999) (quoting Chevron, 467 U.S. at 843). If the agency‘s interpretation is not in conflict with the statute and represents “a reasonable policy choice for the agency to make,” we must defer to it. Nat‘l Cable & Telecomms. Ass‘n v. Brand X Internet Servs., 545 U.S. 967, 986 (2005) (quoting Chevron, 467 U.S. at 845); see also Cuozzo Speed Techs., LLC v. Lee, 136 S.Ct. 2131, 195 L.Ed.2d 423 (2016) (rejecting Cuozzo‘s statutory arguments and concluding that the PTO‘s choice for a claim construction rubric was reasonable under the statute, without considering whether the PTO had evaluated Cuozzo‘s statutory arguments during the rulemaking process).
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 consider[ing] the inter partes review statutes,
The PTO‘s failure to explicitly mention
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 no longer test the rea-
The Supreme Court‘s decision in Negusie v. Holder does not compel a different conclusion. 555 U.S. 511 (2009). In Negusie, the agency mistakenly believed that its interpretation of a statute was compelled by a prior Supreme Court case. Id. at 518. In the context of the Chevron framework, the agency stopped its analysis at step one, believing that it had no discretion to interpret the statute. Id. at 523 (“[I]f an agency erroneously contends that Congress’ intent has been clearly expressed and has rested on that ground, we remand to require the agency to consider the question afresh in light of the ambiguity we see.“) (quoting Cajun Elec. Power Coop., Inc. v. FERC, 924 F.2d 1132, 1136 (D.C. Cir. 1991)). Since the agency stopped at step one, the agency never exercised its Chevron discretion to interpret the statute in question. Thus, the Supreme Court remanded the case for the agency to consider the statute under step two of Chevron. Here, the PTO did reach step two of Chevron and exercised its discretion to pass, using notice and comment procedures, a regulation placing the burden of proof on the movants.
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, 362 F.3d 786, 808-09 (D.C. Cir. 2004) (Roberts, J., concurring in part and concurring in the judgment). “The rationale that animates all Prill2 remands is real and genuine doubt concerning what interpretation the agency would choose if given the opportunity to apply ‘any permissible construction.‘” Id. at 809. Unlike Negusie and Prill, where the agency never had the opportunity to apply any permissible construction of the statute, we know how the PTO would choose to interpret this ambiguous statute because the PTO already reached “its interpretation ... in the course of a purely
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, 519 U.S. at 461; see also Cass R. Sunstein & Adrian Vermeule, The Unbearable Rightness of Auer, 84 U. CHI. L. REV. 297 (2017). While
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, 512 U.S. 504, 512 (1994) (citation and internal quotation marks omitted). Agency interpretations need not be well-settled or long-standing to be entitled to deference, but they must “reflect the agency‘s fair and considered judgment on the matter in question.” Auer, 519 U.S. at 462. Auer deference is warranted even if the agency‘s interpretation first appears during litigation, see Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 203 (2011), unless “the interpretation is nothing more than a convenient litigating position, or a post hoc rationalization advanced by an agency seeking to defend past agency action against attack.” Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012) (citation and internal quotation marks omitted).
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., 789 F.3d 1292, 1307 (Fed. Cir. 2015). The next month, a six-member Board panel issued a “clarification” of Idle Free. MasterImage, 2015 WL 10709290, at *1. In making that clarification, which concerned what subjects the patent owner must address in a motion to amend, the MasterImage panel reaffirmed that “[t]he ultimate burden of persuasion remains with Patent Owner, the movant, to demonstrate the patentability of the amended claims,” citing Proxyconn. Id. The MasterImage order was designated “precedential,” under Standard Operating Procedure 2 (rev. 9), which requires the concurrence of the Director.
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 patentability 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
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, 332 U.S. at 202. Nor is legislative rulemaking a prerequisite for Chevron deference. In United States v. Mead Corp., the Supreme Court explained 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.” 533 U.S. 218, 226-27 (2001). The fact that an agency “reached its interpretation through means less formal than ‘notice and comment’ rulemaking does not automatically deprive that interpretation of the judicial deference otherwise its due.” Barnhart v. Walton, 535 U.S. 212, 221 (2002) (internal citation omitted).
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, 536 F.3d 1330, 1337 (Fed. Cir. 2008). And in Groff v. United States, 493 F.3d 1343, 1348 (Fed. Cir. 2007), we held that the Bureau of Justice Assistance‘s (BJA) legal interpretations announced through adjudication were entitled to Chevron deference. In Groff, the statute allowed the BJA to establish “rules, regulations, and procedures” to administer a benefits program for public safety officers. Id. In that case, we refused to limit the BJA‘s regulatory authority to notice-and-comment rulemaking. Id. at 1350. Instead, we explained that, by authorizing the BJA to establish rules, regulations, and procedures, “Congress intended for the BJA‘s statutory interpretations announced through adjudication to have the force of law, and that those interpretations are therefore entitled to deference under Chevron.” Id.
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 rulemaking. Shalala v. Guernsey Mem‘l Hosp., 514 U.S. 87, 96 (1995) (“The APA does not require that all the specific applications of a rule evolve by further, more precise rules rather than by adjudication.“). Accordingly, the PTO‘s subsequent clarification of its own regulations in MasterImage and Idle Free is at least entitled to Auer deference.4 “Not every principle essential to the effective administration of a statute can or should be cast immediately into the mold of a general rule. Some principles must await their own development, while others must be adjusted to meet particular, unforeseeable situations.” NLRB v. Bell Aerospace Co. Div. of Textron, 416 U.S. 267, 293 (1974). The choice of how to interpret the agency‘s statutes and regulations “lies in the first instance within the [agency‘s]
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.
III
Accordingly, I would affirm. From the contrary judgment of Judge O‘Malley, Judge Moore, and Judge Reyna, I respectfully dissent.
AMGEN INC., Amgen Manufacturing Limited, Amgen USA, Inc., Plaintiffs-Appellees v. SANOFI, Aventisub LLC, Regeneron Pharmaceuticals Inc., Sanofi-Aventis U.S., LLC, Defendants-Appellants
2017-1480
United States Court of Appeals, Federal Circuit.
Decided: October 5, 2017