In re Aqua Products: The Convergence of Administrative and Patent Law

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Administrative law has permeated virtually every field of federal practice. Interestingly, patent practitioners have avoided this trend for some time. But this appears to be changing. See, e.g., Dickinson v. Zurko, 119 S. Ct. 1816 (1999) (noting that the Administrative Procedure Act provides rules for reviewing PTO actions); Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016) (discussing the PTO’s rulemaking authority and Chevron’s potential role in reviewing PTO interpretations of certain provisions of the AIA); Cutsforth, Inc. v. Motivepower, Inc., 636 Fed. Appx. 575 (Fed. Cir. 2016) (vacating a PTAB decision invalidating claims for failing to articulate the reasoning behind its action). The PTO has recently played a more active role in the resolution of patent disputes. And with no hint that this trend is reversing, the regulatory and adjudicative power of the PTO—an administrative agency—becomes an increasingly important variable of which patent practitioners should be aware.

Last May, the Federal Circuit decided In re Aqua Products, a case which illustrates the growing importance of administrative law in patent practice. In an opinion by Judge Reyna,[1] the court affirmed the PTO’s rigid approach to claim amendment practice during inter partes review proceedings. Of note, the relevant PTO rules required that the patentee prove that its amendments would make the claims-at-issue patentable over the known prior art. In re Aqua Prods., Inc., 823 F.3d 1369, 1373 (2016). Noting that a previous Federal Circuit panel had already approved the regulations at issue, the Aqua Products panel upheld the PTO rule without much discussion.

On August 12, 2016, the Federal Circuit granted Aqua Products’ motion for an en banc hearing. In re Aqua Prods., Inc., 833 F.3d 1335, 1336 (Fed. Cir. 2016).  The Federal Circuit’s order posed two questions for briefing. One of which had a distinct administrative law flavor, asking whether the PTO had properly interpreted the statute which it administers:

(a) When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under 35 U.S.C. § 316(e)?

Id.

On October 26, 2016, the PTO filed its brief to the Federal Circuit. The thrust of the agency’s argument was that the legal provisions at issue are, at the very least, ambiguous. As such, the PTO argued that this ambiguity must be resolved in its favor under Chevron.  Of particular import, the brief made clear that as Congress delegates rulemaking authority to the PTO, the court’s role in interpreting the statute is lessened.

Specifically, the PTO noted that “[w]hen a statute expressly grants an agency rulemaking authority, and does not ‘unambiguously direct’ the agency to adopt a particular rule, the agency may ‘enact rules that are reasonable in light of the text, nature, and purpose of the statute.’” Supplemental Brief for Intervenor Director of the United States Patent and Trademark Office at 7, In re Aqua Prods., Inc, No. 2015-1177 (Fed. Cir. Oct. 26, 2016) (citing Cuozzo Speed Techs., LLC v. Lee, 136 S.Ct. 2131, 2142 (2016)). The PTO went on to state that regulations made under a statutory grant of rulemaking authority must be accepted by the court unless the regulation is unreasonable in view of the statute. Id. at 7-8 (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984)). Concluding, the PTO noted that its reasonable interpretations of its own regulations are also controlling on a reviewing court unless they are plainly inconsistent with the regulation in dispute. Id. at 8 (citing Auer v. Robbins, 519 U.S. 452, 461 (1997)).

Whether the PTO’s brief carries the day is not as significant as the brief’s reliance on bedrock principles of administrative law to uphold the PTO’s regulation that affects the work of patent practitioners around the country. For years, administrative law has not been particularly important to patent practitioners. But that may change. If the PTO’s brief is any indication of the agency’s policies going forward, patent owners, applicants, and lawyers would do well to understand the PTO’s role in the federal administrative state.

The en banc hearing for Aqua Products is scheduled for December 9, 2016.


[1] Sitting with Chief Judge Prost and Chief Judge Stark (District of Delaware, sitting by designation).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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