By Tom Engellenner
In a proposed rule published in the Federal Register on October 22, 2019, the U.S. Patent and Trademark Office (USPTO) has finally moved to codify a change in the way its Patent Trial and Appeal Board (PTAB) conducts administrative patent challenge proceedings (inter partes reviews, covered business method patent reviews, and post-grant reviews) established by the 2011 America Invents Act (AIA).

Under the proposed rule, the petitioner who initiates a patent challenge will not only have the burden of persuading the PTAB that a patent owner’s claims as issued are invalid but will also have the same burden with regard to new claims that the patent owner may present by amendment during the proceeding.

The proposed new rule is hardly a change in practice since the PTAB has essentially been following this practice for the past two years after the Court of Appeals for the Federal Circuit rejected its old rule placing the burden of proof for amendments on the patent owner.

During the first five years of administrative trials under the AIA, the tactic of amending claims to overcome prior art was largely an illusory exercise in part at least because of the original USPTO rule. However, an en banc Federal Circuit decision in Aqua Products v. Matel, 872 F. 3d 1290 (Fed. Circ. 2017) threw out the original USPTO rule.

The en banc Aqua Products decision was a fractured ruling. In four separate opinions spanning 148 pages, the eleven judges expressed their views on the PTAB amendment practice. Despite differing rationales, it was clear that a majority of the Federal Circuit judges were exasperated by the way the U.S. Patent and Trademark Office (USPTO) has been considering claim amendments in the new administrative trial procedures provided by the AIA.

As Judge O’Malley noted in the plurality opinion, the PTAB had granted only six amendments in inter partes review (IPR) proceedings as of February 2017 – a period of almost five years since the inauguration of IPR proceedings during which over 6500 petitions were filed.

Several of Federal Circuit judges in the Aqua Products decision had concluded that the original USPTO rule was reasonable or at least should be shown deference. Other judges on the court concluded that the USPTO had failed to engage in formal rule making and therefore its allocation of the burden of persuasion to the patent owner was not entitled to deference.

In late 2017 it was unclear whether the USPTO would attempt to resurrect its original rule via formal rule making and seek reconsideration of this issue. However, new USPTO leadership decided instead to changed its practice and follow Aqua Products plurality decision. In fact, earlier this year the PTAB issued a “precedential” opinion in Lectrosonics, Inc. v. Zaxcam, Inc. in IPR2016-01120 (Feb. 25, 2019) explicitly adopting the new practice of placing the responsibility on the petitioner who challenges a patent to also show that any new claims presented by the patent owner by amendment are invalid.

Thus, the new rule is not so much about changing current practice but rather a matter housekeeping – closing out a embarrassing chapter of PTAB history during which many had criticized the USPTO for showing hostility to the amendment process that Congress had clearly authorized when it established the AIA trial procedures. The USPTO can be expected to finalize this rule shortly after the comment period expires on December 23, 2019.

It remains to be seen whether PTAB panels will be more favorably disposed towards amendments based on this shift in burden of proof. Ultimately, the three judge panels must decide whether amended claims meet the standards of novelty and inventiveness.

A recent decision in Mylan Pharmaceutics v. Sanofi-Aventis, IPR2018-01679 (October 18, 2019), is a case in point. Despite the shift in the burden of proof, Sanofi was unable to persuade the PTAB that amendments to its insulin patents would save the claims from being unconsidered invalid.

The proposed rules also address the situation where a petitioner decides for one reason or another to walk away from the proceeding. If a petitioner does not reply to amendments with persuasive arguments as to why the claims remain unpatentable, should the patent owner win by default? Not so fast says the USPTO. The comments accompanying the new rules explain:

Ordinarily, in cases where the petitioner has participated fully and opposed the motion to amend, the office expects that the petitioner will bear the burden of persuasion and there will be no need for the board to independently justify a determination of unpatentability,

To address petitioner defaults, the rules make an exception: The PTAB “may in the interest of justice exercise its discretion to grant or reject a motion to amend for any reason supported by the evidence of record.”