Fractured Federal Circuit Holds Patent Owner Does Not Bear Burden of Persuasion in IPR Motions to Amend

In Aqua Products, Inc. v. Matal, Appeal No. 2015-1177, the Federal Circuit, sitting en banc, held that a patent owner does not bear the burden of persuasion with respect to the patentability of amended claims in inter partes review (IPR).

Aqua filed a motion to amend its claims during an inter partes review proceeding. The Board determined that Aqua had failed to demonstrate the patentability of the amended claims and denied the motion. Aqua appealed and a Federal Circuit panel affirmed. Aqua sought rehearing en banc.

Sitting en banc, the Federal Circuit vacated and remanded the Board’s denial of Aqua’s motion to amend. The court instructed the Board to issue a final decision assessing the patentability of the amended claims without placing the burden of persuasion on the patent owner.

The decision to vacate and remand was supported by seven judges. Various judges had different views on the judgment and the rationale supporting that judgment.

Judge O’Malley, joined by four judges, believed that the AIA statute authorizing claim amendments unambiguously requires the petitioner to prove the unpatentability of amended claims, and the PTO’s contrary position placing the burden on the patent owner was not entitled to Chevron deference.

The remaining six judges determined that the statute is ambiguous on the allocation of the burden of persuasion. Judge Taranto, joined by three judges, referred to Rule 42.20(c). This rule places the burden of proof for a motion on the moving party, and the PTO made it clear that this rule applies to motions to amend. Judge Taranto therefore argued that the PTO’s position on the burden for motions to amend belonging to the patent owner was entitled to Chevron deference. Judge Reyna, joined by Judge Dyk, argued that the PTO had not proffered a fully considered interpretation of the statute authorizing amendments, and the PTO’s position was therefore not entitled to Chevron deference.

Part III of Judge Reyna’s opinion instructed the Board to keep the burden of production for amending claims on the patent owner. This portion of Judge Reyna’s opinion was joined by five judges (constituting a majority of the court), and Judge Reyna therefore believed Part III set forth the judgment of the court on the burden of production. Judge O’Malley, joined by four judges, disagreed and believed that Part III of the Reyna opinion was merely dictum because there was no proposed judgment attached to this portion of the Reyna opinion.

Federal Circuit Finds Evidence of Commercial Success and Copying Insufficient to Overcome Strong Showing of Obviousness

In Merck Sharp & Dohme Corp. v. Hospira, Inc., Appeal No. 2017-1115, the Federal Circuit found a claim invalid as obvious, even where the prior art failed to disclose the claimed chemical-formation method’s individual steps, because the method as a whole recited broad, general processing steps that reflect a routine way a skilled artisan would have implemented the prior art teachings.

Hospira filed an ANDA seeking approval to manufacture and sell generic versions of Merck’s Invanz product. Merck sued Hospira for infringing a patented method of formulating the principal component of Ivanz. The district court held that the asserted claim was invalid as obvious over another of Merck’s patents and other prior art. The district court found that, while none of the steps of the claim were individually taught by prior art, the “recipe” for the final formulation was disclosed, and the steps leading to the formulation were conventional manufacturing steps that would have been obvious from the disclosures and were the product of routine experimentation. Merck presented objective evidence of commercial success and copying, but the district court found this evidence insufficient to overcome the strong showing of obviousness based on the prior art. Merck appealed.

The Federal Circuit affirmed and found substantial evidence to support the district court’s conclusion that the claimed process would have been obvious at the time the invention was made. The elements of the process not disclosed in the prior art were only experimental details that would have been utilized via routine experimentation while implementing known principles. The Federal Circuit also found that, although the district court did not give the evidence of commercial success its full weight, such evidence was still insufficient to overcome the showing of obviousness. The Federal Circuit agreed that the evidence of copying of Merck’s second patent could not overcome the obviousness of the claimed process because the claimed process differs from the disclosure of the second patent only in routine details.

Accordingly, the Federal Circuit affirmed the district court’s decision. Judge Newman dissented, arguing that objective considerations should not be used to “rebut” the other three Graham factors. Instead, objective evidence must be considered as part of all the evidence when determining obviousness.

Federal Circuit Reiterates That Apparatus Claims May Contain Functional Language

In MasterMine Software, Inc. v. Microsoft Corporation, Appeal No. 2016—2465, the Federal Circuit held that apparatus claims were not invalid for indefiniteness simply because they included functional language.

MasterMine sued Microsoft Corporation for infringement of two patents describing methods and systems that allow users to mine and report data maintained by a customer relationship management (CRM) application. The district court construed “pivot table” to mean “an interactive set of data displayed in rows and columns that can be rotated and filtered to summarize or view the data in different ways.” The district court also held several of MasterMine’s system claims invalid as indefinite because the claims each covered both an apparatus and a method of using that apparatus. MasterMine appealed the district court’s claim construction and indefiniteness determination.

First, the Federal Circuit affirmed the district court’s construction, holding that it was proper and supported by the intrinsic evidence, including the claim language, specification and prosecution history.

Next, the Federal Circuit addressed MasterMine’s appeal of the district court’s indefiniteness determination. The Federal Circuit explained that it had previously held a single claim covering both an apparatus and a method of use of that apparatus indefinite because claiming both an apparatus and a method of using the apparatus in a single claim made it unclear whether infringement occurs when the apparatus is created or when the apparatus is used in an infringing manner. However, the Federal Circuit had also explained that apparatus claims are not necessarily indefinite for using functional language. In particular, where claims recited an apparatus and a functional capability of the apparatus, the claims were not necessarily indefinite. Here, the Federal Circuit found that, although the claims included active verbs such as “presents,” “receives” and “generates,” the verbs represented permissible functional language used to describe the capabilities of the claimed “reporting module,” rather than activities performed by the user. The Federal Circuit also highlighted that here the functional language was specifically tied to the structure. Accordingly, the Federal Circuit reversed the district court’s indefiniteness determination.