In emails and conversations with a series of IPR specialists this week in the wake of the Court of Appeals for the Federal Circuit’s (CAFC) decision in Aqua Products v Matal, “this is a mess!” was a common response.
The long judgment – all 148 pages of it – with five different opinions from the 11 judges sitting en banc, caused more than one attorney to reference the court’s decision in Alice Corp v CLS Bank, a similarly lengthy ruling with multiple opinions which former CAFC Chief Judge Randall Rader told IAM in a 2014 interview was the greatest judicial failure of his career. The USPTO has until early January to request cert from the Supreme Court and for the sake of clarity there were calls this week for the US’s highest court to take it.
“From the standpoint of a member of the patent bar, it would be better to appeal this to the Supreme Court to get a final answer rather than to keep this issue under a cloud for two more years while the PTO gropes around for some new rule that might pass muster,” commented Aqua Products’ victorious lawyer Finnegan’s James Barney.
Of course, as the Alice decision has shown, there’s no guarantee that SCOTUS will provide such clarity. But Aqua Products did at least offer some good news for patent owners who have complained bitterly about the inequities of all or part of the inter partes review process. In a narrowly constructed opinion a majority of the Federal Circuit judges ruled it is up to the petitioner to persuade a Patent Trial and Appeal Board (PTAB) panel that amended claims in an IPR are unpatentable.
Claim amendments have emerged as one of the flashpoints in the five years since the PTAB came into effect, but were originally construed as a vital part of the IPR process. As Justice O’Malley wrote in the majority opinion in Aqua Products: “Congress deemed the patent owner’s right to amend so important that, in §316(d), it mandated that the patent owner be permitted to amend the patent as of right at least once during the course of an IPR, provided certain specified statutory conditions were met.”
That might be the statutory intent but in practice patent owners have largely failed to successfully amend claims. According to data from RPX, excluding all motions to cancel, 167 PTAB cases have included a motion to amend patents. Of these, 12 were granted or granted in part and 155 (more than 90%) were denied.
The Federal Circuit’s decision means that the case is now sent back to the PTAB for it to consider the patentability of Aqua Products’ proposed substitute claims with the burden of showing that they aren’t patentable falling on the original petitioner, Zodiac Pool Systems. The concern from some members of the patent bar is that the ruling may now place a considerable strain on the PTO and its ability to meet the tight timelines in an IPR.
“This decision creates a real mess for the PTAB because it affects all pending IPRs which, by statute must be decided within one year after institution unless the time period is extended by up to six months for “good cause”,” Michael Weiner, a partner with Marshall Gerstein & Borun commented. “The PTAB will need to establish procedures and likely issue new rules to address the court’s decision, and will probably need to use its authority to extend its deadlines for pending IPRs.”
What is abundantly clear is that if serious consideration of IPR reform were not already right at the top of the to-do list for incoming USPTO Director Andrei Iancu, it should be now. As long as the Senate doesn’t drag its feet on his confirmation process - which can never be entirely discounted - then it appears that Iancu will be in place before the deadline for a cert petition in Aqua Products. He should also be at his desk before the Supreme Court’s decisions in SAS Institutes v Matal and Oil States v Greene’s Energy Group, two IPR cases which focus on claim amendments (SAS) and the overall constitutionality of IPRs (Oil States).
Even if SCOTUS leaves the IPR process intact in Oil States there’s no doubt that the incoming PTO head has a range of choices to consider. Does he, for instance, throw his support behind the off-ramp proposal, an idea which has been circulating for several years and would steer IPR claim amendments back to the PTO’s examiner corps? Might he consider a proposal made on this blog by former Director Todd Dickinson and Andrew Baluch, on how the agency could use existing resources to handle amendments? Or might he introduce a wide-ranging review of all PTAB procedures, involving a broad range of IP stakeholders?
The America Invents Act gave the USPTO Director considerable leeway in determining how IPRs are run; Iancu must work out whether he wishes to use the power he will have and, if he does, to what end. That said, it is quite possible that a pharmaceutical company and a native American Indian tribe may deliver a hammer blow to the PTAB system as it stands. If that is the case, it will probably be Congress that does much of the reforming – with a very different regime emerging at the end of it.