Patent owners continue to express frustration at the inability to amend claims during inter partes review proceedings (IPRs). IPRs are patent validity challenges conducted at the U.S. Patent Office’s Patent Trial and Appeals Board (PTAB) after the patent has issued. These post-grant proceedings have proven to be an effective tool for invalidating patent claims. The Federal Circuit’s decision in Nike, Inc. v. Adidas AG, No. 14–1719 (Feb. 11, 2016) should give patent owners renewed hope that efforts to replace challenged claims with narrower substitute claims during IPRs will be permitted, when appropriate.

When Congress created IPRs, it authorized the Patent Office to prescribe regulations “setting forth standards and procedures for allowing the patent owner to move to amend the patent.” 35 U.S.C. § 316. Those regulations require a motion, and make clear that the moving party has the burden of proof. See 37 C.F.R. § 42.20(a), (c).

The PTAB explained the standard for motions to amend in a subsequent informative decision. The patent owner must “show patentable distinction” of the substitute claims “over the prior art.” Idle Free Sys., Inc. v. Bergstrom, IPR 2012–00027, 2013 WL 5947697, at *4 (PTAB June 11, 2013). This includes the prior art of record in the IPR, and also other prior art known to the patent owner that is not of record. Id. A later PTAB decision clarified that the duty of candor under 37 C.F.R. § 42.11 defines what “other prior art known to the patent owner” needs to be identified and distinguished.See MasterImage 3D, Inc. v. RealD Inc., IPR2015–00040, 2015 WL 4383224 (PTAB July 15, 2015). 

Motions seeking to cancel challenged claims and to substitute amended claims have drawn careful scrutiny from the PTAB. Well over one hundred such motions have been denied to date. A reason the PTAB frequently gives for denying these motions is the patent owner’s failure to meet its burden to establish patentability over the prior art. The PTAB has only granted motions to substitute amended claims in a few IPRs. See International Flavors & Fragrances Inc., v. U.S. Dep’t of Agriculture, IPR2013–00124 (PTAB May 20, 2014); Riverbed Technology v. Silver Peak Systems, Inc.,IPRs 2013–00402 (PTAB Dec. 30, 2014) and 2013–00403 (PTAB Dec. 30, 2014); and Syntroleum Corp. v. Neste Oil Oyj, IPR2014–00192 (PTAB June 5, 2015).  

The Federal Circuit’s Nike decision (authored by Judge Chen, and joined by Judges Mayer and Stoll) should encourage patent owners that motions to substitute claims in IPRs can be successful. Adidas filed an IPR petition challenging all forty-six claims in Nike’s U.S. Patent No. 7,347,011 under either 35 U.S.C. §§ 102 or 103. After the PTAB instituted the IPR, Nike moved to cancel claims 1–46 and to substitute claims 47–50. In its motion, Nike did not bring to the Board’s attention any other prior art under 37 C.F.R. § 42.11, although it did explain how the substitute claims were patentably different from the prior art cited in the Adidas IPR petition. Instead, Nike relied on a representation in its motion that the proposed claims were patented over other known prior art that was not of record:

“The proposed claims are patentable over the prior art, including prior art identified by the Board in its Decision on whether to institute a trial and other prior art known to NIKE.” 

The PTAB’s final written decision denied Nike’s request to enter the substitute claims. The PTAB found the above statement to be “conclusory” and “facially inadequate.” Among the deficiencies identified was Nike’s failure to identify other known prior art (beyond the art cited in the Adidas IPR petition) and to provide a “meaningful” analysis of that art.

The Federal Circuit disagreed and concluded that the PTAB had improperly denied Nike’s motion to amend. Slip Op. at 40. The panel explained that Nike could meet its burden by simply stating that its proposed claims were patentable over other prior art known to Nike. Id. There was no allegation that Nike had violated its duty of candor. Id. Therefore, the patent owner’s statement that the substitute claims were patentable over other prior art known to the patent owner was adequate, absent an allegation of conduct violating the duty of candor.

The Nike decision represents an important development in IPR practice. It is the clearest signal yet that the PTAB’s resistance to substitute claims will be policed by the Federal Circuit. Patent owners must comply with the duty of candor. They must put forward substitute claims that are patentable over the prior art. If they do so, and make an appropriate representation on the record, the motion to amend cannot be dismissed out of hand and may be granted.