Aqua Products, Inc. v. Matal , 872 F.3d 1290 ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
AQUA PRODUCTS, INC.,
Appellant
v.
JOSEPH MATAL, PERFORMING THE FUNCTIONS
AND DUTIES OF THE UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR, U.S. PATENT AND TRADEMARK
OFFICE,
Intervenor
______________________
2015-1177
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2013-
00159.
______________________
Decided: October 4, 2017
______________________
JAMES R. BARNEY, Finnegan, Henderson, Farabow,
Garrett & Dunner, LLP, Washington, DC, argued for
appellant. Also represented by TIMOTHY P. MCANULTY,
DAVID MROZ; ANTHONY A. COPPOLA, ANTHONY J. DIFILIPPI,
JEFFREY A. SCHWAB, Abelman Frayne & Schwab, New
York, NY.
2 AQUA PRODUCTS, INC. v. MATAL
NATHAN K. KELLEY, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA,
argued for intervenor. Also represented by FARHEENA
YASMEEN RASHEED, MEREDITH HOPE SCHOENFELD, SCOTT
WEIDENFELLER; MARK R. FREEMAN, Appellate Staff, Civil
Division, United States Department of Justice, Washing-
ton, DC.
GREGORY A. CASTANIAS, Jones Day, Washington,
DC, for amicus curiae Intellectual Property Owners
Association. Also represented by DAVID B. COCHRAN,
Cleveland, OH; JOHN MARLOTT, Chicago, IL; JACLYN
STAHL, Irvine, CA; MARK W. LAUROESCH, Intellectual
Property Owners Association, Washington, DC; STEVEN
W. MILLER, Global Legal Department, Procter & Gamble
Company, Cincinnati, OH; KEVIN H. RHODES, 3M Innova-
tive Properties Company, St. Paul, MN.
BRYAN A. SCHWARTZ, Squire Patton Boggs (US) LLP,
Cleveland, OH, for amici curiae Case Western Reserve
University School of Law Intellectual Property Venture
Clinic, The Ohio Venture Association. Also represented by
STEVEN M. AUVIL; TIMOTHY J. O'HEARN, Shaker Heights,
OH.
JAMES H. HALL, Blank Rome LLP, Houston, TX, for
amicus curiae Houston Intellectual Property Law Associa-
tion.
JAMES EDWARD TYSSE, Akin, Gump, Strauss, Hauer
& Feld, LLP, Washington, DC, for amicus curiae Pharma-
ceutical Research and Manufacturers of America. Also
represented by DIANNE B. ELDERKIN, Philadelphia, PA;
DAVID EVAN KORN, Pharmaceutical Research and Manu-
facturers Association of America, Washington, DC.
AQUA PRODUCTS, INC. v. MATAL 3
HANSJORG SAUER, Biotechnology Innovation Organi-
zation, Washington, DC, for amicus curiae Biotechnology
Innovation Organization. Also represented by Q. TODD
DICKINSON, Polsinelli PC, Washington, DC; COLBY BRIAN
SPRINGER, San Francisco, CA.
PETER J. AYERS, Law Office of Peter J. Ayers, Austin,
TX, for amicus curiae American Intellectual Property Law
Association. Also represented by DAVID R. TODD, Work-
man Nydegger, Salt Lake City, UT; MARK L. WHITAKER,
Morrison & Foerster LLP, Washington, DC.
KEVIN J. CULLIGAN, Maynard, Cooper & Gale, PC,
New York, NY, for amicus curiae Askeladden, L.L.C. Also
represented by JOHN P. HANISH.
JOHN THORNE, Kellogg, Hansen, Todd, Figel & Freder-
ick, P.L.L.C., Washington, DC, for amici curiae The
Internet Association, Computer & Communications
Industry Association, Dell Inc., Garmin International,
Inc., Intel Corporation, Red Hat, Inc., Samsung Electron-
ics Co., Ltd., SAP America, Inc., SAS Institute, Inc.,
Software & Information Industry Association, Symmetry
LLC, VIZIO, Inc. Also represented by JOSHUA D.
BRANSON. Amicus curiae Intel Corporation also repre-
sented by Matthew John Hult, Intel Corporation, Santa
Clara, CA.
______________________
Before PROST, Chief Judge, NEWMAN, LOURIE, DYK,
MOORE, O’MALLEY, REYNA, WALLACH, TARANTO, CHEN,
and HUGHES, Circuit Judges. *
* Circuit Judge Stoll did not participate.
4 AQUA PRODUCTS, INC. v. MATAL
Opinion filed by Circuit Judge O’MALLEY, in which Circuit
Judges NEWMAN, LOURIE, MOORE, and WALLACH join, and
in which Circuit Judges DYK and REYNA concur in result.
Opinion filed by Circuit Judge MOORE, in which Circuit
Judges NEWMAN and O’MALLEY join.
Opinion filed by Circuit Judge REYNA, in which Circuit
Judge DYK joins, and in which Chief Judge PROST and
Circuit Judges TARANTO, CHEN, and HUGHES join in part.
Opinion filed by Circuit Judge TARANTO, in which Chief
Judge PROST and Circuit Judges CHEN and HUGHES join,
dissenting from the judgment, and in which Circuit
Judges DYK and REYNA join in part in other respects.
Opinion dissenting from the judgment filed by Circuit
Judge HUGHES, in which Circuit Judge CHEN joins.
O’MALLEY, Circuit Judge.
In this appeal, we consider the proper allocation of the
burden of proof when amended claims are proffered
during inter partes review proceedings (“IPRs”) under the
Leahy-Smith America Invents Act (“AIA”), Pub. L. No.
112-29, § 6(a)–(c), 125 Stat. 284–341 (2011) (provisions
creating inter partes review codified in ch. 31 of Title 35,
35 U.S.C. §§ 311–19 (2012)). Specifically, we consider
how the AIA’s statutory language in 35 U.S.C. § 316(e),
which places “the burden of proving a proposition of
unpatentability by a preponderance of the evidence” onto
the petitioner in an IPR, applies to claim amendments
authorized by 35 U.S.C. § 316(d), and whether the Patent
Trial and Appeal Board’s (“Board”) current practices with
respect to amendments accord with that application.
A panel of our court concluded that the Board did not
abuse its discretion in denying Appellant Aqua Products,
Inc.’s (“Aqua”) motion to amend various claims of U.S.
Patent No. 8,273,183 (“the ’183 patent”) during the course
of an IPR. In re Aqua Prods., Inc., 823 F.3d 1369, 1373–
AQUA PRODUCTS, INC. v. MATAL 5
74 (Fed. Cir. 2016) (hereinafter “Panel Decision”). The
court granted Aqua’s request for en banc rehearing and
vacated the panel decision. In re Aqua Prods., Inc., 833
F.3d 1335 (Fed. Cir. 2016) (en banc) (per curiam).
Upon review of the statutory scheme, we believe that
§ 316(e) unambiguously requires the petitioner to prove
all propositions of unpatentability, including for amended
claims. This conclusion is dictated by the plain language
of § 316(e), is supported by the entirety of the statutory
scheme of which it is a part, and is reaffirmed by refer-
ence to relevant legislative history. Because a majority of
the judges participating in this en banc proceeding believe
the statute is ambiguous on this point, we conclude in the
alternative that there is no interpretation of the statute
by the Director of the Patent and Trademark Office
(“PTO”) to which this court must defer under Chevron,
U.S.A. Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984). And we believe that, in the absence
of any required deference, the most reasonable reading of
the AIA is one that places the burden of persuasion with
respect to the patentability of amended claims on the
petitioner. 1 Finally, we believe that the Board must
consider the entirety of the record before it when as-
sessing the patentability of amended claims under
§ 318(a) and must justify any conclusions of unpatentabil-
ity with respect to amended claims based on that record.
1 To the extent our prior decisions in Microsoft
Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 2015);
Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353 (Fed.
Cir. 2015), petition for reh’g pending; Synopsys, Inc. v.
Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016);
and Nike, Inc. v. Adidas AG, 812 F.3d 1326 (Fed. Cir.
2016), are inconsistent with this conclusion, we overrule
those decisions.
6 AQUA PRODUCTS, INC. v. MATAL
Because the participating judges have different
views—both as to the judgment we should reach and as to
the rationale we should employ in support of that judg-
ment, as explained below, today’s judgment is narrow.
The final written decision of the Board in this case is
vacated insofar as it denied the patent owner’s motion to
amend the patent. The matter is remanded for the Board
to issue a final decision under § 318(a) assessing the
patentability of the proposed substitute claims without
placing the burden of persuasion on the patent owner.
I. PROCEDURAL HISTORY
Automated swimming pool cleaners, such as those
disclosed in the ’183 patent, typically propel themselves in
a swimming pool using motor-driven wheels, water jets,
suction, or a combination thereof. Panel Decision, 823
F.3d at 1371. The ’183 patent discloses a jet-propelled
pool cleaner with controlled directional movement and
without an electric drive motor. ’183 patent, col. 10, l. 41–
col. 11, l. 3; id. col. 18, ll. 11–20.
The parties began litigating questions of infringement
and validity related to this patent in district court. Aqua
Prods., Inc. v. Zodiac Pool Sys., Inc., No. 12-09342
(S.D.N.Y.). While that litigation was pending, Zodiac Pool
Systems, Inc. petitioned the Board for inter partes review
on claims 1–14, 16, and 19–21 of the ’183 patent, assert-
ing invalidity under 35 U.S.C. § 102 and § 103 in light of
several prior art references. The Board instituted an IPR
on claims 1–9, 13, 14, 16, and 19–21 of the ’183 patent,
but not on claims 10–12. Panel Decision, 823 F.3d at
1372.
Aqua then moved to substitute claims 1, 8, and 20 of
the ’183 patent with proposed claims 22, 23, and 24,
respectively. Id. Aqua asserted that substitute claims
22–24 complied with 35 U.S.C. § 316(d) because they did
not enlarge the scope of the original claims or introduce
new matter. Id. Aqua further argued that the substitute
AQUA PRODUCTS, INC. v. MATAL 7
claims responded to and were patentable over the obvi-
ousness combinations at issue in the IPR. Id.The Board denied Aqua’s motion to amend. Although
the Board expressly found that Aqua’s amendments
complied with the requirements of § 316(d) and 37 C.F.R.
§ 42.121(a)(2)(i)–(ii) (2015), the Board concluded Aqua
had failed to prove the substitute claims were patentable.
Aqua timely appealed that decision to this court.
On appeal, Aqua argued that it did not bear the bur-
den of proving the patentability of its proposed substitute
claims. Aqua relied on the plain language of § 316(e)—
which we discuss below—for its contention. The panel
rejected Aqua’s argument based on this court’s precedent,
which “has upheld the Board’s approach of allocating to
the patentee the burden of showing that its proposed
amendments would overcome the art of record.” Panel
Decision, 823 F.3d at 1373 (citing Proxyconn, 789 F.3d at
1307–08; Prolitec, 807 F.3d at 1363; and Nike, 812 F.3d at
1333–34). The panel declined to “revisit the question of
whether the Board may require the patentee to demon-
strate the patentability of substitute claims” and held
that “the burden of showing that the substitute claims
were patentable rested with Aqua.” Id. The panel also
rejected Aqua’s objection to the Board’s failure to consider
the entirety of the record before it when assessing the
patentability of the amended claims. Aqua specifically
objected to the Board’s refusal to consider: (1) certain
arguments Aqua made in its motion to amend;
(2) arguments made in its reply to the petitioner’s chal-
lenge to its motion to amend; (3) substantial evidence in
the IPR record that the cited prior art did not teach the
limitations it sought to add by amendment; and
(4) substantial evidence in the record of objective indicia
of non-obviousness. Id. at 1373–74. Aqua sought rehear-
ing en banc of that panel decision.
8 AQUA PRODUCTS, INC. v. MATAL
We granted Aqua’s petition for en banc rehearing. In
re Aqua Prods., Inc., 833 F.3d at 1336. We proposed two
questions in the en banc order:
(a) When the patent owner moves to amend its
claims under 35 U.S.C. § 316(d), may the PTO re-
quire the patent owner to bear the burden of per-
suasion, 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)?
(b) When the petitioner does not challenge the pa-
tentability of a proposed amended claim, or the
Board thinks the challenge is inadequate, may the
Board sua sponte raise patentability challenges to
such a claim? If so, where would the burden of
persuasion, or a burden of production, lie?
Id. We have jurisdiction over this appeal under 28 U.S.C.
§ 1295(a)(4)(A) and 35 U.S.C. § 141(c).
II. THE CONTEXT IN WHICH THE
QUESTIONS PRESENTED ARISE
With its enactment of the AIA in 2011, Congress cre-
ated IPRs to provide “quick and cost effective alternatives
to litigation.” H.R. REP. NO. 112-98, pt. 1, at 48 (2011). In
an IPR, a third party may petition the Director to review
previously-issued patent claims in an adjudicatory set-
ting. To initiate an IPR, a petitioner must show a reason-
able likelihood that it would prevail with respect to at
least one of the claims challenged. See 35 U.S.C. § 314(a).
Following institution by the Director and a trial before
the Board, the Director may “cancel any claim that the
agency finds to be unpatentable” under 35 U.S.C. § 102and § 103, based on cited prior art consisting of patents or
printed publications. Cuozzo Speed Techs., LLC v. Lee,
136 S. Ct. 2131, 2136 (2016). The Board reaches its
conclusions based on a preponderance of the evidence and,
AQUA PRODUCTS, INC. v. MATAL 9
in doing so, employs the broadest reasonable interpreta-
tion of the challenged claims for unexpired patents. Id. at
2144–46.
In Cuozzo, the Supreme Court emphasized that the
patent owner’s opportunity to amend its patent in IPRs is
what justifies the Board’s use of the broadest reasonable
interpretation standard in IPRs:
The patent holder may, at least once in the pro-
cess, make a motion to do just what he would do
in the examination process, namely, amend or
narrow the claim. § 316(d) (2012 ed.). This oppor-
tunity to amend, together with the fact that the
original application process may have presented
several additional opportunities to amend the pa-
tent, means that use of the broadest reasonable
construction standard is, as a general matter, not
unfair to the patent holder in any obvious way.
Id. at 2145. 2 In its statement to the Senate Committee on
the Judiciary several years before Congress enacted the
AIA, the PTO explained that amendments are a key
feature of post-grant proceedings:
The []PTO’s proposal is thus designed to put re-
view of the propriety of patent claims that the
2 We also have recognized this fact when endorsing
the use of the broadest reasonable claim interpretation
standard in other areas of PTO review. See, e.g., In re
Rambus, Inc., 753 F.3d 1253, 1256 (Fed. Cir. 2014) (find-
ing that, in inter partes reexamination, “the sole basis for
the ‘broadest reasonable interpretation’ rubric is the
ability to amend claims” (quoting 1 Patent Off. Litig.
§ 4.70)); In re Prater, 415 F.2d 1393, 1404–05 (CCPA
1969) (holding that claims are given their broadest rea-
sonable interpretation during examination “since the
applicant may then amend his claims”).
10 AQUA PRODUCTS, INC. v. MATAL
public regards as important in the hands of sen-
ior, legally qualified officials with experience in
dispute resolution. It is designed to be more effi-
cient than litigation, while preserving enough of
the full participation accorded to parties in litiga-
tion that challengers will be willing to risk being
bound by the result. By providing for the possibil-
ity of amendment of challenged claims, the pro-
posed system would preserve the merited benefits
of patent claims better than the win-all or lose-all
validity contests in district court.
Patent Quality Improvement: Post-Grant Opposition:
Hearing Before the Subcomm. on Courts, the Internet, and
Intellectual Property of the H. Comm. on the Judiciary,
108th Cong. 10 (2004) (hereinafter “PTO Gen. Counsel
Toupin Statement”) (emphasis added) (statement of PTO
General Counsel James A. Toupin).
Indeed, the PTO has more than once acknowledged
that use of the broadest reasonable interpretation stand-
ard is only appropriate when patent owners have the
opportunity to amend. The PTO has explained that,
“[s]ince patent owners have the opportunity to amend
claims during IPR, [post-grant review and covered busi-
ness method (“CBM”)] trials, unlike in district court
proceedings, they are able to resolve ambiguities and
overbreadth through this interpretive approach, produc-
ing clear and defensible patents at the lowest cost point in
the system.” Office Patent Trial Practice Guide, 77 Fed.
Reg. 48756, 48764 (Aug. 14, 2012). Simply put, the patent
owner’s right to propose amended claims is an important
tool that may be used to adjust the scope of patents in an
IPR. See 35 U.S.C. § 316(d)(3) (entitled “Scope of
claims.”); see also Cuozzo, 136 S. Ct. at 2144 (quoting
Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co.,
324 U.S. 806, 816 (1945)).
AQUA PRODUCTS, INC. v. MATAL 11
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. 35 U.S.C.
§ 316(d)(1); see also S. REP. NO. 110-259, at 22 (2008)
(stating that, “[d]uring the proceeding, the patent holder
has one opportunity as a matter of right to amend the
claims . . .” (emphasis added)); 154 CONG. REC. 22626
(2008) (statement of Sen. Kyl on S. 3600) (concluding that
written institution decisions would be desirable because
they give the “patent owner a sense of what issues are
important to the board and where he ought to focus his
amendments”). Four Congresses considered the post-
grant review procedures that eventually became the AIA
with little debate or controversy on the issue of amend-
ment. Compare, e.g., S. 3818, 109th Cong. § 318 (2006),
with H.R. 1249, 112th Cong. § 326 (2011). The right to
amend actually was given added emphasis during this
time. In the Patent Reform Act of 2006, the language
authorizing amendments shifted from “entitled to re-
quest” to the present text providing for the opportunity for
amendment as of right through a motion to amend.
Compare H.R. 2795, 109th Cong. § 327 (2005), with
S. 3818, 109th Cong. § 318 (2006). The Senate report on
S. 1145 stated that patent owners would be given “one
opportunity as a matter of right to amend the claims.”
See, e.g., S. REP. NO. 110-259, at 22 (2008).
The House Report for the AIA, in its “Section-by-
Section” explanation of the bill as finally enacted, states
that the statute provides that:
The patent owner may submit one amendment
with a reasonable number of substitute claims,
and additional amendments either as agreed to by
the parties for settlement, for good cause shown in
post-grant review, or as prescribed in regulations
by the Director in inter partes review.
12 AQUA PRODUCTS, INC. v. MATAL
H. REP. NO. 112-98, pt. 1, at 76 (2011) (emphasis added).
In this report, several representatives noted with approv-
al the high rate of “modification or nullification” of patent
claims in inter partes reexamination and their desire to
retain this feature in IPRs. Id. at 164. In other words,
Congress saw the amendment process in IPRs as analo-
gous to narrowing reissues, albeit prompted by a third-
party challenger.
Despite repeated recognition of the importance of the
patent owner’s right to amend during IPR proceedings—
by Congress, courts, and the PTO alike—patent owners
largely have been prevented from amending claims in the
context of IPRs. A February 2017 study noted that the
Board has only granted eight motions to amend in post-
issuance review proceedings (six in IPRs and two in CBM
proceedings). Binal J. Patel et al., Amending Claims at
the PTAB—A Fool’s Errand?, Managing Intellectual
Property (Feb. 24, 2017),
http://www.managingip.com/Article/3663698/Amending-
claims-at-the-PTABa-fools-errand.html. The PTO’s
statistics confirm that patent owners have consistently
failed to obtain their requested relief on motions to
amend. As of April 30, 2016, the Board had completely
denied 112 of 118 motions to amend made by patent
owners in IPRs, and partially denied motions to amend in
four of the six remaining trials. USPTO, PTAB Motion to
Amend Study, 2–4 (Apr. 30, 2016),
https://www.uspto.gov/sites/default/files/documents/2016-
04-30%20PTAB%20MTA%20study.pdf. Aqua and its
amici contend that these statistics are a direct result of
the Board’s placement of the burden of proving the pa-
tentability of amended claims on the patent owner, its
requirement that the patent owner satisfy that burden on
the face of a 25-page motion to amend—without regard to
the remainder of the record—and its requirement that the
patent owner prove patentability, not just in response to
the grounds of unpatentability asserted by the petitioner,
AQUA PRODUCTS, INC. v. MATAL 13
but on all possible grounds and in light of all prior art
known to the patent owner. MasterImage 3D, Inc. v.
RealD Inc., No. IPR2015–00040, 2015 WL 10709290, at
*2–4 (P.T.A.B. July 15, 2015) (clarifying Idle Free Sys.,
Inc. v. Bergstrom, Inc., No. IPR2012–00027, 2013 WL
5947697, at *4 (P.T.A.B. June 11, 2013)).
We now assess whether the Board’s current practice
of placing the substantive burden of proving patentability
on the patent owner with regard to claim amendments
proffered in IPRs may be employed in pending IPRs. We
conclude it may not.
III. RELEVANT STATUTORY AND REGULATORY SCHEMES
The AIA provides that a patent holder in an IPR “may
file 1 motion to amend the patent,” either by cancelling
any challenged patent claim or by “propos[ing] a reasona-
ble number of substitute claims.” 35 U.S.C. § 316(d)(1).
Additional joint motions to amend may be permitted to
“materially advance the settlement of a proceeding under
section 317.” Id. § 316(d)(2). Section 316(d)(3) dictates
that an amendment “may not enlarge the scope of the
claims of the patent or introduce new matter.” Id.
§ 316(d)(3).
In the same statutory section that discusses motions
to amend, the following subsection appears:
(e) Evidentiary Standards.—In an inter partes re-
view instituted under this chapter, the petitioner
shall have the burden of proving a proposition of
unpatentability by a preponderance of the evi-
dence.
Id. § 316(e). This subsection immediately follows the
provision describing a patent owner’s right to propose
substitute claims in lieu of those challenged in an IPR.
When an IPR is instituted and not dismissed subse-
quently, the Board “shall issue a final written decision
14 AQUA PRODUCTS, INC. v. MATAL
with respect to the patentability of any patent claim
challenged by the petitioner and any new claim added
under section 316(d).” Id. § 318(a). The statute provides
that, following the final written decision and any subse-
quent appeal, the Director shall incorporate “in the pa-
tent . . . any new or amended claim determined to be
patentable.” Id. § 318(b).
The AIA delegates authority to the Director to “pre-
scribe regulations . . . establishing and governing inter
partes review” and, relevant to this appeal, to “set[ ] forth
standards and procedures for allowing the patent owner
to move to amend the patent” under § 316(d). Id.
§§ 316(a)(4), (a)(9). Invoking this authority, the Director
promulgated 37 C.F.R. § 42.121, which sets forth several
procedures for amending claims during an IPR. This
regulation permits a patent owner to file one motion to
amend after conferring with the Board but “no later than
the filing of a patent owner response” unless the Board
has provided an alternative due date. 37 C.F.R.
§ 42.121(a)(1). Under this regulation, the Board may
deny a motion to amend if the amendment does not satis-
fy the requirements of § 316(d)(3)—i.e., if it expands the
claim scope, introduces new matter, or if it “does not
respond to a ground of unpatentability involved in the
trial.” Id. § 42.121(a)(2). The patent owner is also re-
stricted to proposing a “reasonable number of substitute
claims.” Id. § 42.121(a)(3).
The Director promulgated 37 C.F.R. § 42.20 to govern
all motion practice before the Board. In relevant part,
Rule 42.20(a) requires that any “[r]elief, other than a
petition requesting the institution of a trial, must be
requested in the form of a motion.” Rule 42.20(c) states
additionally that “[t]he moving party has the burden of
proof to establish that it is entitled to the requested
relief.”
AQUA PRODUCTS, INC. v. MATAL 15
While these rules do not say so expressly, the PTO
claims in this appeal that the Board has interpreted Rules
42.20 and 42.121 to place the burden of persuasion on a
patent owner to demonstrate, by a preponderance of the
evidence, that any proposed amended claims are patenta-
ble, that it must do so in light of prior art not already part
of the IPR, and that the Director has endorsed that inter-
pretation. Specifically, in Idle Free, a six-member panel of
the Board held that the patent owner must show why the
proposed amended claims are patentable over not only the
prior art at issue in the IPR, but also “over prior art not of
record but known to the patent owner.” 2013 WL
5947697, at *4. 3 Then, in MasterImage, another Board
panel discussed Idle Free’s holding that “the burden is . . .
on the patent owner to show patentable distinction over
the prior art of record and also prior art known to the
patent owner.” 2015 WL 10709290, at *1 (quoting Idle
Free, 2013 WL 5947697, at *4) (emphasis altered from
original). 4 Among other things, the panel emphasized
that the ultimate burden of persuasion regarding the
question of patentability is on the patent owner. Id.None of the specifics set forth in these two panel deci-
sions regarding a patent owner’s burden are set forth in
either Rule 42.20 or Rule 42.121 and none were discussed
in the 2012 Federal Register comments relating to the
3 The Board designated the Idle Free decision “rep-
resentative.” According to the PTO, representative opin-
ions “provide a representative sample of outcomes on a
matter” but are not binding authority.
4 The Board designated MasterImage as a “Prece-
dential Decision.” To designate a Board decision as
precedential, the full Board is given the opportunity to
review and vote on the opinion and the Director must
approve the designation.
16 AQUA PRODUCTS, INC. v. MATAL
promulgation of those Rules. And neither opinion was
published in the Federal Register.
IV. OUR PRIOR DECISIONS
As in this case, prior panels of this court have en-
dorsed the Board’s practice of placing the burden of
demonstrating the patentability of amendments over the
prior art on the patent owner, or have been interpreted as
doing so. See Proxyconn, 789 F.3d at 1307–08; Prolitec,
807 F.3d at 1363; Synopsys, 814 F.3d at 1323–24; Nike,
812 F.3d at 1333–34; Panel Decision, 823 F.3d at 1373.
In Proxyconn and Prolitec, given the parties’ argu-
ments, we did not engage in any statutory analysis—with
respect to § 316(d), § 316(e), or otherwise. We also did not
analyze whether the Board either did or properly could
impose the burden of proving the ultimate patentability of
amended claims on the patent owner.
It was not until Synopsys and Nike that we had occa-
sion to address § 316(e). In Synopsys, Mentor objected to
the denial of its motion to amend, which the Board predi-
cated on Mentor’s failure to prove patentability over prior
art references not at issue in the IPR—and over all other
prior art of record. Synopsys, 814 F.3d at 1323. Relying
on Proxyconn, we concluded that the scope of the burden
imposed by the Board was not unreasonable. Id. We then
turned to Mentor’s argument that Proxyconn was distin-
guishable because—unlike the patent owner in Proxy-
conn—Mentor objected to bearing the burden of proving
the patentability of its proposed amended claims, relying
on § 316(e). Id. We rejected Mentor’s argument in one
paragraph:
Section 316(e) does not alter our analysis. . . . The
introductory phrase referring to an “inter partes
review instituted under this chapter” makes clear
that this provision specifically relates to claims for
which inter partes review was initiated, i.e., the
AQUA PRODUCTS, INC. v. MATAL 17
original claims of the patent that a party has chal-
lenged in a petition for review. Inter partes re-
view was not initiated for the claims put forward
in the motion to amend.
Id. at 1323–24.
We revisited § 316(e) in Nike. There, we read § 316(e)
narrowly for the reasons cited in Synopsys. Nike, 812
F.3d at 1334. We also relied on the Director’s authority
under § 316(a)(9) to set “standards and procedures . . .
ensuring that any information submitted by the patent
owner in support of any amendment entered under sub-
section (d) is made available to the public.” Id. at 1333
(quoting 35 U.S.C. § 316(a)(9)). On these grounds, we
concluded that Nike’s “attempt to undo our conclusion in
Proxyconn . . . is not persuasive.” Id. at 1334.
We, thus, have had limited opportunity or cause to
address the first question posed and fleshed out in this en
banc proceeding. We now examine these earlier holdings
in light of the language of § 316(d) and § 316(e) and the
governing statutory scheme of which they are a part.
V. DISCUSSION
A. The Petitioner Bears the Burden to
Prove All Propositions of Unpatentability
Our first en banc question asks whether the PTO may
require the patent owner to bear the burden of persuasion
or a burden of production regarding the patentability of
amended claims, given the language of 35 U.S.C. § 316(d)
and § 316(e). In re Aqua Prods., 833 F.3d at 1336.
The parties do not dispute that Congress delegated
authority to the Director to promulgate regulations “set-
ting forth standards and procedures for allowing the
patent owner to move to amend the patent under
[§ 316(d)].” 35 U.S.C. § 316(a)(9). It is upon this authori-
ty and its own reading of § 316(d) that the PTO claims it
18 AQUA PRODUCTS, INC. v. MATAL
predicates its practices regarding motions to amend in
IPRs and the attendant burdens it imposes in that con-
text. We review the PTO’s regulations and statutory
interpretation pursuant to Chevron and Auer v. Robbins,
519 U.S. 452 (1997).
Chevron requires a court reviewing an agency’s con-
struction of a statute it administers to determine first
“whether Congress has directly spoken to the precise
question at issue.” 467 U.S. at 842. If the answer is yes,
the inquiry ends, and we must give effect to Congress’s
unambiguous intent. Id. at 842–43. If the answer is no,
the court must consider “whether the agency’s answer [to
the precise question at issue] is based on a permissible
construction of the statute.” Id. at 843. The agency’s
“interpretation governs in the absence of unambiguous
statutory language to the contrary or unreasonable reso-
lution of language that is ambiguous.” United States v.
Eurodif S.A., 555 U.S. 305, 316 (2009) (citing United
States v. Mead, 533 U.S. 218, 229–30 (2001)). When 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.” Cuozzo, 136 S. Ct. at 2142 (citing Mead, 533
U.S. at 229, and Chevron, 467 U.S. at 843). When the
PTO does adopt rules, moreover, “[w]e accept the [Direc-
tor’s] interpretation of Patent and Trademark Office
regulations unless that interpretation is plainly erroneous
or inconsistent with the regulation.” In re Sullivan, 362
F.3d 1324, 1326 (Fed. Cir. 2004) (citing Auer, 519 U.S. at461–62, and Bowles v. Seminole Rock & Sand Co., 325
U.S. 410, 414 (1945) (internal quotations omitted)).
1. Chevron Step One
Thus, we begin our examination of § 316(d) and
§ 316(e) with the language of the statute. Hughes Aircraft
Co. v. Jacobson, 525 U.S. 432, 438 (1999) (“As in any case
AQUA PRODUCTS, INC. v. MATAL 19
of statutory construction, our analysis begins with the
language of the statute.” (internal quotation marks and
citation omitted)). In considering that language, we must
assure ourselves that we have employed all “traditional
tools of statutory construction” to determine whether
Congress intended to resolve the issue under considera-
tion. Chevron, 467 U.S. at 843 n.9. We also “must read
the words ‘in their context and with a view to their place
in the overall statutory scheme.’” King v. Burwell, 135 S.
Ct. 2480, 2489 (2015) (quoting FDA v. Brown & William-
son Tobacco Corp., 529 U.S. 120, 133 (2000)).
We believe Congress explicitly placed the burden of
persuasion to prove propositions of unpatentability on the
petitioner for all claims, including amended claims. This
interpretation is compelled by the literal text of § 316(e),
the overall statutory scheme for IPRs set forth in the AIA,
and its legislative history. We believe, moreover, that this
interpretation is consistent with the language and pur-
pose of § 316(d).
a. Section 316(d) Does Not Impose Any Burden of Proof
Regarding the Patentability of Proposed Amended Claims
The PTO claims that § 316(d)(1) unambiguously plac-
es the burden on the patent owner to prove the patenta-
bility of any proposed amended claim. Its statutory
argument is twofold. First, the PTO argues that the fact
that § 316(d)(1) states the patent owner may “propose”
substitute claims unequivocally allows the Board to deny
any motion at its discretion. Specifically, the PTO be-
lieves that Congress’s use of the words “may” and “pro-
pose” indicates not that a patent owner is given a
discretionary choice about whether to amend in the
circumstances described, but rather that the Board has
the unfettered discretion to refuse an amendment. This,
the PTO believes is true even where the amendment falls
within the statutorily-authorized categories of amend-
ments and where the amendment satisfies the require-
20 AQUA PRODUCTS, INC. v. MATAL
ments of § 316(d)(3)—i.e., is non-broadening and does not
introduce new subject matter.
The PTO’s reading of § 316(d)(1) is contravened by the
plain language of the statute: § 316(d)(1) says “the patent
owner may” move to amend, not that the Board may or
may not allow such a motion regardless of its content. It
is also inconsistent with the purpose of § 316(d) which, as
noted above, was to provide a patent owner with the
ability to amend a challenged claim at least once as a
matter of right, so long as the proposed amended claim
conforms to the statutory requirements and any reasona-
ble procedural rules. Indeed, the PTO’s reasoning would
render the amendment process virtually meaningless,
rather than make the possibility of amendment the cen-
tral feature of the IPR process it was intended to be. We
are charged with construing statutes, “not isolated provi-
sions.” King, 135 S. Ct. at 2489 (quoting Graham County
Soil & Water Conservation Dist. v. United States ex rel.
Wilson, 559 U.S. 280, 290 (2010)); United States v. Mor-
ton, 467 U.S. 822, 828 (1984) (“We do not, however, con-
strue statutory phrases in isolation; we read statutes as a
whole.”).
Second, the PTO contends that, because § 316(d)(1)
says the patent owner may seek to amend by “motion,”
the amendment process unequivocally puts the burden of
persuasion regarding the patentability of the amendment
on the patent owner because movants bear the burden of
proof on motions. For these reasons, the PTO contends
that § 316(e) is not even relevant to the amendment
process. Specifically, the PTO asserts: “Contrary to Aqua
Products’ argument, the statute providing for motions to
amend in inter partes review proceedings places the
burden of showing patentability on the patent owner
when it states, ‘the patent owner may file one motion to
amend the patent,’ as the movant bears the burden on a
motion.” PTO Intervenor Br. 19 (quoting 35 U.S.C.
§ 316(d)) (emphasis in original). It claims that, because
AQUA PRODUCTS, INC. v. MATAL 21
§ 316(d) says proposed amendments may be introduced by
motion, the substantive burden of persuasion on the
patentability of that amendment must be imposed on the
movant. We reject that contention. 5
The PTO’s argument begs the question: what is the
relief sought by the “motion” authorized in § 316(d)(1)?
As noted, the patent owner may proffer amendments that
propose to cancel any challenged claim and propose a
reasonable number of substitute claims as long as the
substitute claims (1) do not impermissibly enlarge the
scope of the claims, and (2) do not introduce new subject
matter. 35 U.S.C. § 316(d)(1), (d)(3). These requirements
describe a threshold showing the Board must deem satis-
fied before the amended claims can be considered in—i.e.,
“entered into”—an IPR. This showing by the patent
owner is not the same as the burden of proof on the ques-
tion of patentability.
The “request” made by a motion to amend is—in the
PTO’s own words—for “entry” into the IPR, not for entry
of an amended claim into the patent. Once entered into
the proceeding, the amended claims are to be assessed for
patentability alongside the original instituted claims.
The PTO acknowledged this structure in its explanation
of final Rule 42.121:
[T]he first motion to amend need not be author-
ized by the Board. The motion will be entered so
long as it complies with the timing and procedural
requirements. Additional motions to amend will
require prior Board authorization. All motions to
5 We are unanimous in this conclusion. None of the
other opinions endorse the PTO’s conclusion that § 316(d)
unambiguously answers the burden of persuasion ques-
tion; they only conclude that the statutory scheme is
ambiguous with respect to that question.
22 AQUA PRODUCTS, INC. v. MATAL
amend, even if entered, will not result automatical-
ly in entry of the proposed amendment into the pa-
tent.
Changes to Implement Inter Partes Review Proceedings,
Post-Grant Review Proceedings, and Transitional Pro-
gram for Covered Business Method Patents, 77 Fed. Reg.
48,680, 48,690 (Aug. 14, 2012) (hereinafter “Changes to
Implement IPRs”) (emphases added). Thus, any proposi-
tions of substantive unpatentability for amended claims
are assessed following entry of the amended claims into
the IPR proceeding, under the standards that apply to all
claims in the proceeding. The PTO justifies the burden it
seeks to impose on the movant under § 316(d)(1) by mis-
characterizing the nature of the relief sought by a motion
made under that provision. Once the motions at issue are
properly characterized, the PTO’s statutory argument
falls apart.
To conclude otherwise would conflate two concepts
that are traditionally treated as distinct: the use of
motions to raise evidentiary issues in adversarial proceed-
ings versus the overall allocation of evidentiary burdens
to the respective parties when rendering decisions on such
motions. For example, although the movant has the
burden to file a well-supported summary judgment mo-
tion before a court will consider it, if the underlying
burden of persuasion rests with the other party, that
underlying burden never shifts. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255–56 (1986); Celotex Corp. v.
Catrett, 477 U.S. 317, 322–23 (1986).
We have noted that the “shifting burdens . . . in dis-
trict court litigation parallel the shifting burdens . . . in
inter partes reviews.” Dynamic Drinkware, LLC v. Nat’l
Graphics, Inc., 800 F.3d 1375, 1378–81 (Fed. Cir. 2015).
In district court, the party asserting invalidity of a patent
claim bears the burden of establishing invalidity. 35
U.S.C. § 282(a). That burden of proof never shifts to the
AQUA PRODUCTS, INC. v. MATAL 23
patent owner. Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348,
1359–60 (Fed. Cir. 2007). Cuozzo explains that the bur-
den of proof in an IPR is one of the “adjudicatory charac-
teristics” of an IPR that “make these agency proceedings
similar to court proceedings.” 136 S. Ct. at 2143. Con-
gress expressly considered the degree of proof in IPRs and
made clear in § 316(e) that it is to be by a preponderance
of the evidence—unlike that required in district court
proceedings. Congress knew how to create distinctions
between trial proceedings and IPRs when it so chose;
Congress chose not to do so when allocating the burden of
proving unpatentability. 6
6 This interpretation also makes IPRs consistent
with other PTO-based proceedings. There is no evidence
that Congress intended to deviate from this well-
established rule or that it intended to permit the PTO to
do so. Other PTO-based proceedings have (or had) the
same distribution of burdens. In pre-AIA inter partes
reexamination proceedings, “the examiner retain[ed] the
burden to show invalidity.” In re Jung, 637 F.3d 1356,
1365–66 (Fed. Cir. 2011). In pre-AIA interference pro-
ceedings, a party challenging an existing claim bore the
burden of showing that “the claims of the . . . application
were unpatentable.” Velander v. Garner, 348 F.3d 1359,
1369–70 (Fed. Cir. 2003). In ex parte reexaminations, the
PTO bears the burden to demonstrate unpatentability.
See 35 U.S.C. § 305. And in reissue proceedings, the
patent owner is not required to come forward with affirm-
ative evidence showing that it has not added new matter;
instead, the PTO must evaluate this question. See 35
U.S.C. § 251. When enacting the AIA, Congress acted
against this backdrop. “[A] fair reading of statutory text”
includes recognition that “‘Congress legislates against the
backdrop’ of certain unexpressed presumptions.” Bond v.
24 AQUA PRODUCTS, INC. v. MATAL
For these reasons, we believe that the only reasonable
reading of the burden imposed on the movant in § 316(d)
is that the patent owner must satisfy the Board that the
statutory criteria in § 316(d)(1)(a)–(b) and § 316(d)(3) are
met and that any reasonable procedural obligations
imposed by the Director are satisfied before the amend-
ment is entered into the IPR. Only once the proposed
amended claims are entered into the IPR does the ques-
tion of burdens of proof or persuasion on propositions of
unpatentability come into play. It is at that point, accord-
ingly, that § 316(e) governs, placing that burden onto the
petitioner.
b. The Unambiguous Language of § 316(e)
We have explained that, “[i]n an inter partes review,
the burden of persuasion is on the petitioner to prove
‘unpatentability by a preponderance of the evidence,’ 35
U.S.C. § 316(e), and that burden never shifts to the pa-
tentee.” In re Magnum Oil Tools Int’l, Ltd., 829 F.3d
1364, 1375 (Fed. Cir. 2016) (quotation marks and citation
omitted). The parties do not dispute that § 316(e) places
the burden of persuasion for already issued, challenged
claims on the petitioner. Based on the plain and unam-
biguous language of this provision, we believe that
§ 316(e) applies equally to proposed substitute claims.
An instituted proposition of unpatentability is consid-
ered throughout the IPR. It is only finally determined
when the Board issues a final written decision. Both by
statute and by the PTO’s own directives, any proposed
amendment must seek to cancel a challenged claim and/or
propose a substitute for a challenged claim, and it must
do so by responding to an instituted ground of unpatenta-
bility. See 35 U.S.C. § 316(d)(1); see also 37 C.F.R.
United States, 134 S. Ct. 2077, 2088 (2014) (quoting
EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991)).
AQUA PRODUCTS, INC. v. MATAL 25
§ 42.121(a)(2)(i). The structure of an IPR does not allow
the patent owner to inject a wholly new proposition of
unpatentability into the IPR by proposing an amended
claim. The patent owner proposes an amendment that it
believes is sufficiently narrower than the challenged claim
to overcome the grounds of unpatentability upon which
the IPR was instituted. When the petitioner disputes
whether a proposed amended claim is patentable, it
simply continues to advance a “proposition of unpatenta-
bility” in an “inter partes review instituted under this
chapter.” 35 U.S.C. § 316(e).
Contrary to other provisions of Chapter 31, which re-
peatedly make distinctions between original and amended
claims, the “proposition of unpatentability” referenced in
§ 316(e) is not tethered to only one type of claim. For
example, §§ 316(a)(9) and 316(d) distinguish a “challenged
claim” from “substitute claims.” Similarly, § 314(a) only
applies to “claims challenged in the petition.” In § 318(a),
Congress distinguished between “any patent claim chal-
lenged by the petitioner” and “any new claim added under
section 316(d).” And in § 318(b), Congress explained the
procedure for issuing a certificate confirming the patenta-
bility of claims “and incorporating in the patent . . . any
new or amended claim determined to be patentable.” In
§ 318(c), Congress provided for intervening rights with
respect to “proposed amended or new claim[s] determined
to be patentable” and incorporated into the patent follow-
ing an IPR.
In contrast, § 316(e) does not reference “claims” at all,
nor does it use the broader term “patent” to limit its
scope. And, contrary to the dissent’s reading of it, there is
no language in § 316(e) that confines its application to
original claims for which an IPR has been instituted
under § 314(a). Section 316(e) reaches every proposition
of unpatentability at issue in the proceeding. Congress
could have distinguished between proposed amended
claims and originally challenged claims in § 316(e), but it
26 AQUA PRODUCTS, INC. v. MATAL
did not. Congress is presumed to have acted intentionally
when it made the distinction between challenged and
amended claims in multiple parts of the AIA statutory
scheme, yet declined to do the same in § 316(e). See Bates
v. United States, 522 U.S. 23, 29–30 (1997) (“[W]here
Congress includes particular language in one section of a
statute but omits it in another section of the same Act, it
is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion.”
(quoting Russello v. United States, 464 U.S. 16, 23
(1983))).
Section 316(e) uses the term “unpatentability,” which
may refer to either pending or issued claims, rather than
the term “invalidity,” which both courts and the PTO
apply only to issued claims. See, e.g., 35 U.S.C. § 282(a)
(explaining that a “presumption of validity” attaches to
issued patent claims and assigning “[t]he burden of estab-
lishing invalidity of a patent or any claim thereof” to the
challenger); In re Cyclobenzaprine Hydrochloride Extend-
ed-Release Capsule Patent Litig., 676 F.3d 1063, 1080 n.7
(Fed. Cir. 2012) (“[I]n the litigation context, validity,
rather than patentability, is the issue.”); MPEP § 706 (9th
ed. Rev. 7, Nov. 2015) (explaining that “issues pertinent to
patentability” arise in “the course of examination and
prosecution,” while “validity” is applicable after the claims
issue). Congress’s use of “unpatentability,” rather than
“invalidity,” in § 316(e) to assign the burden of proof to
the petitioner in IPRs is significant—Congress’s choice
reflects its intention that the burden of proof be placed on
the petitioner for all propositions of unpatentability
arising during IPRs, whether related to originally chal-
lenged or entered amended claims.
The Director is instructed by § 318(a) to issue a final
decision on the patentability of both “any patent claim
challenged by the petitioner and any new claim added
under section 316(d).” Id. § 318(a) (emphasis added).
And § 318(b) uses “patentable” in connection with both
AQUA PRODUCTS, INC. v. MATAL 27
issued claims and amended claims. See id. § 318(b). If
the Board decides that an original or entered amended
claim overcomes the petitioner’s unpatentability chal-
lenge, the claim is “patentable” and treated as a valid
claim, regardless of how the claim arose. See id. § 318(a)
(referring to determining “the patentability of any patent
claim challenged by the petitioner and any new claim
added under section 316(d)” (emphasis added)); accord id.
§ 318(b). Whether a claim is “patentable” or “unpatenta-
ble” depends on the content of the claim, not who carried
the burden of persuasion. See id. § 318(b) (characterizing
an original claim as “unpatentable” when a cancellation
certificate issues or “patentable” when a confirmation
certificate issues, even though the petitioner has the
burden of persuasion in both instances).
The terms “patentability” and “unpatentability” do
not raise separate inquiries; if they did, Congress would
not have placed the burden of proving “unpatentability”
on the petitioner in § 316(e) and then required the Board
to issue a decision on “patentability” in § 318(a) as if that
were a disparate concept. Read together—which is how
related statutory sections should be read—§ 316(e) and
§ 318(a)–(b) explain that, if the petitioner does not prove a
claim (whether original or amended) to be “unpatentable,”
the Board should find the claim to be “patentable.” See,
e.g., Coit Indep. Joint Venture v. Fed. Sav. & Loan Ins.
Corp., 489 U.S. 561, 573 (1989); see also Brown & Wil-
liamson, 529 U.S. at 133.
The introductory clauses of § 316(e) (“In an inter
partes review instituted under this chapter”), § 316(d)(1)
(“During an inter partes review instituted under this
chapter”), and § 318(a) (“If an inter partes review is
instituted and not dismissed under this chapter . . .”) lend
further support to our reading of § 316(e). All of these
clauses use essentially the same introductory language.
If the introductory clause in § 316(e) were limited to only
original claims—as we concluded in Synopsys and Nike—
28 AQUA PRODUCTS, INC. v. MATAL
the introductory clauses of § 316(d)(1) and § 318(a) also
would have to be so limited. See Sorenson v. Sec’y of the
Treasury, 475 U.S. 851, 860 (1986) (“The normal rule of
statutory construction assumes that ‘identical words used
in different parts of the same act are intended to have the
same meaning.’” (quoting Helvering v. Stockholms En-
skilda Bank, 293 U.S. 84, 87 (1934) (quoting Atl. Cleaners
& Dyers, Inc. v. United States, 286 U.S. 427, 433 (1932))).
This conclusion would make little sense, however; as
discussed above, the plain language of § 316(d)(1) and
§ 318(a) refers to both original and amended claims.
“[I]nterpretations of a statute which would produce ab-
surd results are to be avoided if alternative interpreta-
tions consistent with the legislative purpose are
available.” Griffin v. Oceanic Contractors, Inc., 458 U.S.
564, 575 (1982). A patent owner may only file a motion to
amend as part of an already-instituted IPR. Because
proposed amended claims are “entered into” and become
part of the “inter partes review instituted under this
chapter” so long as the patentee shows that they are non-
broadening, supported by the specification, and respon-
sive to a ground already at issue in the IPR, it would be
illogical to construe these introductory clauses in an
inconsistent fashion.
The location of § 316(e) within § 316 itself further in-
dicates that this provision applies to all claims in an
IPR—whether existing or proposed to be amended.
Section 316(e) is one of the five subsections in § 316,
entitled “Conduct of inter partes review.” Section 316(e)
immediately follows the subsection discussing the re-
quirements for amended claims in IPRs. The lack of any
reference to a burden of persuasion in the amendment
subsection of § 316(d), while including an express refer-
ence to it one subsection later, indicates that Congress
intended § 316(e) to apply to all claims considered in an
IPR, including those authorized in the immediately
preceding subsection. See 35 U.S.C. § 316. None of the
AQUA PRODUCTS, INC. v. MATAL 29
other provisions in § 316 limit the application of § 316(e)
in IPRs, nor are any of these subsections meant to be read
in isolation—they describe the conduct of the proceeding
as a whole. Indeed, Congress did not speak to burdens of
proof or persuasion in IPRs anywhere else in the AIA;
§ 316(e) stands as its only command on that issue.
For all these reasons, the dissent’s contention that
“Congress was writing a rule only for the class of claims
that it recognized as necessarily having been challenged
as unpatentable by a ‘petitioner’” in § 316(e) is untenable.
Taranto Op. at 13. To accept that proposition, one would
have to divorce consideration of proposed amended or
substitute claims from the issued and challenged claims
which they, by right, seek to modify or replace. But, both
by virtue of the text of § 316(d) and the plain language of
Rule 42.121, that cannot be done; the very unpatentabil-
ity challenges by the petitioner are the same unpatenta-
bility challenges to which any proposed amendment must
respond and which continue throughout the proceeding.
These are not different “classes” of claims.
c. Reading § 316(e) in the Context of the AIA
As noted before, an Act of Congress “should not be
read as a series of unrelated and isolated provisions.”
Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 570 (1995); see
also King, 135 S. Ct. at 2489. Because the presence of
ambiguity in the meaning of a term “may only become
evident when placed in context” within the statute, we
next examine how § 316(e) fits within the overall statuto-
ry framework of the AIA. King, 135 S. Ct. at 2489 (cita-
tion omitted).
The Supreme Court has instructed us to look to “[t]he
text of the . . . provision [at issue], along with its place in
the overall statutory scheme, its role alongside the Ad-
ministrative Procedure Act [(“APA”)], the prior interpre-
tation of similar patent statutes, and Congress’s purpose
in crafting inter partes review” to interpret each provision
30 AQUA PRODUCTS, INC. v. MATAL
of the AIA. Cuozzo, 136 S. Ct. at 2141. The ultimate
meanings of § 316(d) and § 316(e) must be “compatible
with the rest of the law.” Util. Air Regulatory Grp. v.
EPA, 134 S. Ct. 2427, 2442 (2014).
Read in context of the overall statutory scheme, we
believe that § 316(e) does not permit placing the burden of
persuasion on the patent owner. Based on the require-
ments outlined in §§ 311–13, the petitioner defines the
scope of the IPR through the petition, similar to how a
plaintiff uses traditional pleadings to define the scope of
litigation before federal courts. These sections make clear
that amendments do not create a “new” claim for the
Board’s consideration; they merely respond to at least one
ground of unpatentability originally raised by the peti-
tioner. Sections 314 and 316, when read together, explain
that the patent owner may use amendment as a tool to
narrow claim scope in an effort to ensure its patentable
subject matter remains properly protected. The provision
of the AIA relating to the estoppel effect of IPRs, § 315(e),
is consistent with the remainder of the statute only if the
petitioner bears the burden to prove its propositions of
unpatentability for all claims. And, §§ 316(d)(2) and 317,
in combination, contemplate the use of amendments as a
settlement tool, indicating that Congress contemplated
narrowing amendments which would relieve a petitioner
of any threat of infringement, while allowing the patent,
as amended, to survive.
When read in conjunction with the directive of § 318,
we believe that the Board must assess the patentability of
all claims in the proceeding, including amended claims
that have been entered into the proceeding after satisfy-
ing the requirements outlined in § 316(d), and must do so
through the lens of § 316(e).
AQUA PRODUCTS, INC. v. MATAL 31
i. Petitioner Controls the Scope
of the IPR: §§ 311–13
Section 311(a) provides that a person “not the owner
of a patent” may file a petition to institute an inter partes
review. 35 U.S.C. § 311(a). Section 311 also limits the
scope of the proceeding to grounds that “could be raised
under section 102 or 103 and only on the basis of prior art
consisting of patents or printed publications.” Id.§ 311(b).
Section 312 sets forth the various statutory require-
ments to which each petition challenging the validity of a
patent must conform before the PTO may institute an
inter partes review. Id. § 312(a) (“A petition filed under
section 311 may be considered only if—” (emphasis add-
ed)). The petition must identify, “in writing and with
particularity, each claim challenged, the grounds on
which the challenge to each claim is based, and the evi-
dence that supports the grounds for the challenge to each
claim . . . .” Id. § 312(a)(3). This provision confirms that
the petitioner, not the patent owner, controls the scope of
the IPR. The language of § 311 and § 312 tracks the
language of § 316(e)—all reference the “grounds or propo-
sitions of unpatentability” that carry throughout the
proceeding.
Section 313 further explains that the patent owner
has the right, but not the obligation, to file a preliminary
response to the petition. Id. § 313 (“[T]he patent owner
shall have the right to file a preliminary response to the
petition . . . .” (emphasis added)). This provision makes
sense in context because the patent owner has no burden
to overcome a petitioner’s assertions.
Given the statutory and regulatory requirements for
amending claims in an IPR, amendments cannot and do
not create new and different claims for consideration.
Amendments cannot add new claim scope or new matter;
they are in fact prohibited from doing so by the require-
32 AQUA PRODUCTS, INC. v. MATAL
ments of § 316(d). And, per the PTO’s regulatory re-
quirements in Rule 42.121, proposed amended claims
must respond to a ground of unpatentability raised by the
petitioner and upon which the IPR was instituted. The
ground must carry through the entire proceeding; other-
wise, amendments adding limitations to the challenged
claims to “overcome” an asserted challenge would make
no sense. 7
ii. Institution: § 314
Relevant to this appeal, § 314(a) explains that the Di-
rector must determine that “there is a reasonable likeli-
hood that the petitioner would prevail with respect to at
least 1 of the claims challenged in the petition,” based on
the petition and any patent owner response under § 313.
35 U.S.C. § 314(a).
7 Judge Taranto’s contention that it is meaningful
that these initial sections do not discuss a petitioner’s
obligations vis-à-vis proposed amendments is perplexing.
Of course they do not. The statutory sections relating to
IPRs are ordered in temporal fashion. Sections 311–13
deal with showings that must be made prior to institution
or as part of the institution process. Proposed amend-
ments come after and in response to the grounds on which
institution is granted. The PTO acknowledges this fact in
its briefing. PTO Suppl. Br. 24 (“The petition phase of a
review, of course, does not involve amended claims—a
patent owner cannot seek to amend in an inter partes
review unless the petitioner has first filed a petition for
inter partes review.” (emphasis in original)). It is notable
that it is only after laying out all steps of the IPR proce-
dure, other than those dealing with what the Director
must do to resolve an IPR, that Congress outlines the
nature and placement of the burden of proof regarding
propositions of unpatentability in the IPR.
AQUA PRODUCTS, INC. v. MATAL 33
It is only after the institution decision that the patent
owner may elect to adjust the scope of its patent grant by
proposing narrowing amendments to protect its patenta-
ble subject matter. In this way, IPR functions as a pro-
cess for refining and limiting patent scope, similar to the
inter partes reexamination process. See Cuozzo, 136 S.
Ct. at 2144.
iii. Application of Estoppel to IPRs: § 315
Section 315 describes how an IPR interacts with other
patent-related proceedings, including examination, ad-
ministrative review, and federal court litigation. Section
315(e) provides that, where institution occurs and the
proceeding results in a final written decision under
§ 318(a), the petitioner, real party in interest, or privy of
the petitioner are all estopped with respect to “any ground
that the petitioner raised or reasonably could have raised
during that inter partes review” against that claim. 35
U.S.C. § 315(e).
This provision is only consistent with the remainder
of the AIA if the petitioner bears the burden to prove all
propositions of unpatentability. Where the petitioner
bears the burden, it is logical to estop the petitioner from
raising that ground in the future, whether related to
originally challenged claims or entered amended claims.
If the patent owner were to bear the burden to demon-
strate the patentability of proposed amended claims and
to do so by reference to prior art not addressed in the IPR,
it would be illogical to say that the petitioner is thereafter
estopped from anything as to those claims.
iv. The Impact of Settlements: §§ 317–18
Section 317, the section of the statute immediately fol-
lowing Congress’s express statement in § 316(e) regarding
the proper burden of persuasion for all claims, contem-
plates, in conjunction with the opportunity for additional
uncontested amendments under § 316(d)(2), the possibil-
34 AQUA PRODUCTS, INC. v. MATAL
ity that the amendment process will be used as a settle-
ment tool in IPRs. This too makes sense; a petitioner in
an IPR may decline to maintain a challenge to a narrower
amended claim if the patent owner agrees not to seek to
enforce any claim scope broader than the scope of the
proposed amendment. The first sentence of § 317(a)
states that the PTO must terminate the participation of a
particular petitioner, in a particular IPR, based on the
filing of a joint motion and settlement by that petitioner
and the patent owner. At that point, either (1) the patent
owner is the only party remaining in the IPR, and the
PTO can terminate the review or proceed to a final writ-
ten decision as described in § 318(a); or (2) other petition-
ers are still participating in the IPR, and the IPR moves
forward as usual.
If a settlement occurs and the IPR is terminated, no
certificate incorporating the amendment into the patent
ever issues. Section 318(b) makes clear that no certificate
either reaffirming a challenged claim or substituting an
amended claim for a challenged one issues unless and
until the Board chooses to issue a final judgment under
§ 318(a) in which it assesses the patentability of both
categories of claims. In the absence of a final written
decision, the patent survives as originally written, subject
to any narrowing agreements or covenants not to sue
between the original parties. And, it survives subject to
any later IPR or court challenges it might face.
The final sentence of § 317(a) gives the Board the op-
tion to proceed to final judgment in any proceeding where
the original petitioners choose not to continue their chal-
lenge. The Board might do this for any number of rea-
sons. For example, the Board may decide that the
showing of unpatentability with respect to the challenged
claims is so strong that the public is better served by a
cancellation of those claims; it may decide that even the
narrower, amended claims are unpatentable in the face of
the prior art on which the IPR was predicated and that
AQUA PRODUCTS, INC. v. MATAL 35
confirmation of that fact is important; or it may decide
that the amended claims are patentable in the face of the
prior art challenges precisely because they are narrower
than the original claims, and that it is important for the
patent to be amended to reflect that fact so the public can
benefit from that narrowing.
Should the Board elect to continue to a final written
decision in this scenario, § 318(a) requires the Board to
undertake a patentability analysis on all original and
amended claims in the proceeding. Thus, it is at that
point, and not earlier, that the statute contemplates
consideration of an amended claim’s patentability. As the
Supreme Court recognized in Cuozzo, where the challeng-
er ceases to participate in the IPR and the Board proceeds
to final judgment, it is the Board that must justify any
finding of unpatentability by reference to the evidence of
record in the IPR. See 136 S. Ct. at 2144. This accords
with traditional requirements of agency adjudication
under the APA. There is no reason dictated by either the
language or the logical structure of the statute, or by
Cuozzo’s recognition of the Board’s obligations when a
petitioner absents itself from an IPR, to conclude that this
burden does not apply equally to amended claims. In-
deed, as we noted before, the language in § 318(a) mirrors
that of § 316(e).
v. The Overall AIA Framework
Read in their entirety and collectively analyzed, the
statutory provisions of the AIA lay out an internally
consistent, logical, and unambiguous structure for the
conduct of IPRs. Understanding the statutory structure
in this way is consistent with the concept that “inter
partes review helps protect the public’s ‘paramount inter-
est in seeing that patent monopolies . . . are kept within
their legitimate scope.’” Cuozzo, 136 S. Ct. at 2144 (quot-
ing Precision Instrument Mfg. Co., 324 U.S. at 816).
36 AQUA PRODUCTS, INC. v. MATAL
There is a legitimate scope for properly-crafted patent
protection. The goal underlying the AIA is twofold:
(1) eliminating patents that foster abusive litigation; and
(2) affirming and strengthening viable patents. The
legislative history reflects these dual objectives. As early
as 2006, Senator Leahy explained that the AIA:
[I]s not an option but a necessity. . . . I also want
to ensure the delicate balance we have struck in
the post-grant review process and make certain
that the procedure is both efficient and effective at
thwarting some strategic behavior in patent litiga-
tion and at promoting a healthier body of existing
patents.
152 CONG. REC. 16834 (2006) (statement of Sen. Leahy on
S. 3818) (emphasis added). Allowing narrowing amend-
ments during an IPR helps strengthen and clarify pa-
tents. As the PTO itself testified before Congress,
providing a patent owner with a meaningful opportunity
to amend subject to minimal statutory and regulatory
criteria helps “preserve the merited benefits of patent
claims better than the win-all or lose-all validity contests
in district court.” PTO Gen. Counsel Toupin Statement, at
10.
The AIA achieves these dual goals through a defined
mechanism allowing for a limited category of challenges—
an adversary proceeding where the Board is the arbiter of,
rather than a party to, challenges asserted under only
§ 102 and § 103 of Title 35. The AIA relies on the adver-
sarial nature of IPRs to ensure quick but thorough adju-
dication of the merits: the petitioner raises its best
arguments at the outset; the patent owner has the oppor-
tunity to adjust the scope of its claims if need be; and the
Board provides a speedy ruling as to the patentability of
the original and amended claims.
AQUA PRODUCTS, INC. v. MATAL 37
d. Legislative History of § 316(e)
While legislative history generally carries little
weight when interpreting the text of issued statutes,
“[w]hen aid to construction of the meaning of words, as
used in the statute, is available, there certainly can be no
rule of law which forbids its use, however clear the words
may appear on superficial examination.” Train v. Colo.
Pub. Interest Research Grp., Inc., 426 U.S. 1, 10 (1976).
The clarity of the statutory provision here, both alone and
in context, obviates the need to rely on the legislative
history of the AIA. The legislative history nevertheless
strongly supports our conclusion that the language of
§ 316(e) unambiguously places the burden of proving the
unpatentability of all claims on the petitioner.
As noted, Congress made clear that patent owners
may propose amendments to their patents as of right at
least once in an IPR. The congressional record reflects
Congress’s desire to protect the patent owner’s right to
propose amendments by placing the burden of proving the
unpatentability of amended claims entered into an IPR on
the petitioner.
Earlier drafts of § 316(e) stated that “[t]he presump-
tion of validity in § 282 shall apply in post-grant review
proceedings.” PTO Suppl. Br. 20 (emphasis in original)
(quoting S. 3600, 110th Cong. § 5(c) (2008) (proposing 35
U.S.C. § 331(a)). These drafts also stated that “[t]he
petitioner shall have the burden of proving a proposition
of invalidity . . . .” S. 3600, 110th Cong. § 5(c) (2008)
(emphasis added) (proposing 35 U.S.C. § 331(b)); see also
S. 1145, 110th Cong. § 5(c)(1) (2008) (proposing 35 U.S.C.
§ 331(b) (“The petitioner . . . shall have the burden of
proving a proposition of invalidity . . . .” (emphasis add-
ed))). At this stage in the drafting process, § 316(a)(9) had
not been added to the statute. In the enacted version,
Congress changed “invalidity” to the broader term “un-
patentability,” and also delegated rulemaking authority to
38 AQUA PRODUCTS, INC. v. MATAL
the Director for “setting forth standards and procedures
for allowing the patent owner to move to amend the
patent” under § 316(d). These simultaneous changes
reflect Congress’s intent to direct the PTO to adjudicate
amended claims based on the specific burden of proof
stated in § 316(e), rather than to promulgate regulations
changing that substantive burden. Had Congress intend-
ed that the patent owner bear the burden of persuasion on
the patentability of amended claims, or to leave such
assignment to the PTO, it could have left the term “inva-
lidity” in § 316(e).
A Senate Report on the Patent Reform Act of 2009 ex-
plains that the burden of proving unpatentability in post-
grant proceedings is always on the challenger:
The examinational model places the burden on
the PTO to show that a claim is not patentable,
and requires a series of filings, office actions, and
responses that make this system inherently slow.
By contrast, in an oppositional system, the burden
is always on the challenger to show that a claim is
not patentable.
S. REP. NO. 111-18, at 57 (2009) (emphasis added). The
comparison to examination proceedings—which necessari-
ly relate to proposed new claims—is telling. It indicates
that Congress viewed the petitioner’s unwavering burden
broadly, as covering all claims in the IPR.
In the March 2011 Senate debates involving the re-
placement of inter partes reexamination with the AIA’s
IPRs, Senator Kyl articulated Congress’s intention to
create an adjudicative proceeding where the petitioner
bore the burden of showing unpatentability:
One important structural change made by the
present bill is that inter partes reexamination is
converted into an adjudicative proceeding in
which the petitioner, rather than the Office, bears
AQUA PRODUCTS, INC. v. MATAL 39
the burden of showing unpatentability. . . . In the
present bill, section 316(a)(4) gives the Office dis-
cretion in prescribing regulations governing the
new proceeding. The Office has made clear that it
will use this discretion to convert inter partes into
an adjudicative proceeding. This change also is
effectively compelled by new section 316(e), which
assigns to the petitioner the burden of proving a
proposition of unpatentability by a preponderance
of the evidence.
157 CONG. REC. 3386 (2011) (emphasis added) (statement
of Sen. Kyl). Again, there is no indication in this lan-
guage that the drafters intended § 316(e) to apply narrow-
ly, rather than to both original and amended claims.
Indeed, in earlier versions of the AIA, Congress con-
sidered language regarding the burden of proof that
looked a great deal like the language the PTO wants us to
read into Rule 42.20(c). See, e.g., H.R. 1908, 110th Cong.
(2007) (Ҥ 328 Proof and Evidentiary Standards (b) Bur-
den of Proof—The party advancing a proposition under
this chapter shall have the burden of proving that propo-
sition by a preponderance of the evidence.”); see also H.R.
1260, 111th Cong. (2009) (same). But Congress changed
its language on the burden of proof to state explicitly both
that the petitioner bears the burden of proof in the enact-
ed version and that the standard of proof is by a prepon-
derance of the evidence. See 35 U.S.C. § 316(e)
(“Evidentiary standards.—In an inter partes review
instituted under this chapter, the petitioner shall have the
burden of proving a proposition of unpatentability by a
preponderance of the evidence.” (emphasis added)). We
believe Congress’s change removed the possibility that the
PTO could assign the burden of proving patentability to
the patent owner for any claim, rejecting the very inter-
pretation the PTO now argues conforms with the statute.
40 AQUA PRODUCTS, INC. v. MATAL
As noted, the AIA outlines a logical framework for the
PTO’s adjudication of these proceedings. By reading too
much into § 316(d) and too little into § 316(e), the PTO
effectively injects illogic into that framework and under-
mines its function and purpose.
e. There Is No Potential for Issuance
of “Untested” Amended Claims
Despite the AIA’s clear framework and placement of
the burden of proving unpatentability for all claims onto
the petitioner, at least one of our earlier decisions ex-
pressed concern about the potential issuance of “untested”
amended claims. See Nike, 812 F.3d at 1333. The panel
in Nike explained that “placing this burden [to show
patentability] on the patent owner for its newly formulat-
ed claims is appropriate,” as IPRs “are distinctly different
from a typical PTO examination or reexamination where
a patent examiner performs a prior art search and inde-
pendently conducts a patentability analysis of all claims,
whether newly proposed or previously existing.” Id. The
dissent echoes that concern. See Taranto Op. at 16–17.
Respectfully, both the Nike decision and the dissent
overstate the likelihood that an untested amended claim
might issue. During oral argument, the parties agreed
that amended claims are virtually never uncontested.
Oral Arg. at 25:15–23, 47:11–21,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
15-1177_1292016.mp3. When a petitioner does contest an
amended claim, the Board is free to reopen the record to
allow admission of any additional relevant prior art
proffered by a petitioner or to order additional briefing on
any issue involved in the trial. See 37 C.F.R. § 42.20(d);
see also id. § 42.123. The Board may then consider all art
of record in the IPR, including any newly added art, when
rendering its decisions on patentability.
More importantly, amended claims added to an IPR
are neither untested nor unexamined. The original claims
AQUA PRODUCTS, INC. v. MATAL 41
issued following an examination under all criteria set
forth in Title 35. Because proposed amended claims must
be narrower in scope and cannot add new matter, they
necessarily were subjected to that same earlier examina-
tion and are reassessed to determine whether they are
supported by the patent’s written description. 8 The only
remaining question is whether they are unpatentable in
the face of the prior art cited in the IPR and any new art
relevant to § 102 or § 103 that the petitioner asks be
introduced into the IPR. See 35 U.S.C. § 316(d)(3). These
“amended claims” do not, moreover, issue as part of the
patent unless and until the Board both decides to render a
final decision and finds those claims not unpatentable.
Id. § 318(b).
Even when a petitioner ceases participation in the
IPR, we see little potential for harm from “untested”
claims. In a scenario where the Board reviews the record
presented in the IPR, including any entered amended
claims, and concludes that those entered amended claims
are not unpatentable, the “worst” possible outcome is that
a patent issues in which the previously-examined claims
have been narrowed and clarified in such a way that the
petitioner does not fear its ability to continue to make,
use, or sell its own product, and the public is put on notice
of exactly how to innovate around those claims in the
future. See id. §§ 316(d)(3), 318(b). In this scenario,
moreover, the PTO will have been unable to conclude that
any issued amended claims are unpatentable under very
8 Here, the Board found that all these requirements
were satisfied. Zodiac Pool Sys., Inc., v. Aqua Prods., Inc.,
No. IPR2013-00159, 2014 WL 4244016, at *22–26
(P.T.A.B. Aug. 22, 2014) (noting that the proposed
amended claims satisfied all criteria under both § 316(d)
and Rule 42.121, were not indefinite, and satisfied the
written description requirement).
42 AQUA PRODUCTS, INC. v. MATAL
relaxed standards—preponderance of the evidence and
broadest reasonable interpretation. Finally, not only will
any issued amended claims be subject to the intervening
rights of anyone already practicing them and limit the
scope of the patent owner’s damages, if any, but any
issued amended claims will remain subject to challenge in
various future proceedings, including subsequent IPRs, ex
parte reexaminations, district court litigations, or through
the Director’s ability to initiate an ex parte reexamination
pursuant to 37 C.F.R. § 1.520.
Accordingly, while we recognize that our views on this
question have not garnered a majority of the available
votes, we believe that Congress intended that the peti-
tioner bear the burden of persuasion as to all claims in an
IPR, whether original or amended. Because we believe
that “the intent of Congress is clear” in § 316(d) and
§ 316(e), moreover, we believe “that [should be] the end of
the matter.” Chevron, 467 U.S. at 842 (emphasis added).
2. Chevron Step Two
We believe there is no need to consider whether defer-
ence to any interpretation of § 316(d) and § 316(e) that is
contrary to ours is appropriate. Because, of the eleven
judges participating in this en banc rehearing, six believe
the relevant statutory scheme is ambiguous, however, we
must and do reach Chevron Step Two. Where there is an
ambiguity in a statute, we first must determine whether
the ambiguity is attributable to the fact that Congress
was less than clear about the result it intended, or to the
fact that Congress did not intend any particular result
and instead meant to allow the agency to resolve the
question. Antonin Scalia, Judicial Deference to Adminis-
trative Interpretations of Law, 1989 DUKE L.J. 511, 516
(1989). If it is the first, we are to resolve that ambiguity
by traditional principles of statutory construction. In
other words, it remains a simple question of law to be
resolved by the courts. Id. Only where the latter is the
AQUA PRODUCTS, INC. v. MATAL 43
case do we move on to a traditional Chevron Step Two
analysis. Id.
As discussed above, we think Congress was clear that
it wanted to place the burden of persuasion for all propo-
sitions of unpatentability on the petitioner. If, as our
colleagues urge, however, Congress’s failure to mention
amended claims expressly in § 316(e) makes its intention
with respect to amended claims less than clear, we believe
clarity can be achieved through the traditional statutory
interpretation in which we have engaged above. Congress
considered both the standard of proof to be employed in
IPRs and the placement of that burden. The legislative
history outlined above reflects the extent to which those
concepts were key considerations when structuring the
IPR process. We see nothing to indicate that Congress
meant to leave any aspect of that substantive decision to
the PTO.
Because we are forced to assume a scenario in which
there is an ambiguity in the statute with respect to the
substantive burden of persuasion on motions to amend
that is irresolvable, we must determine: (1) whether the
PTO has adopted a rule or regulation through APA-
compliant procedures that have the force and effect of
law; (2) if so, whether that rule is within the scope of the
PTO’s rulemaking authority; and (3) if so, whether that
rule is based on “a permissible construction of the stat-
ute.” Chevron, 467 U.S. at 843. If we conclude that the
answer to either of the first two inquiries is no, then it is
our obligation to interpret the governing statute without
deference. See Encino Motorcars, LLC v. Navarro, 136 S.
Ct. 2117, 2127 (2016). Because we conclude that the
answer to at least the first question is no, we proceed to
analyze the relevant statutory provisions in the first
instance.
The PTO’s argument that it is entitled to Chevron
deference is primarily based on its misinterpretation of
44 AQUA PRODUCTS, INC. v. MATAL
§ 316(d), discussed above. The Supreme Court has ex-
plained that deference to misinterpretation of a statute is
impermissible. See Smith v. City of Jackson, 544 U.S.
228, 267 (2005) (O’Connor, J., concurring) (“Of course, it is
elementary that ‘no deference is due to agency interpreta-
tions at odds with the plain language of the statute it-
self.’” (quoting Pub. Emps. Ret. Sys. v. Betts, 492 U.S. 158,
171 (1989))).
The PTO turns to a regulatory argument only as a
fallback. Section 316(a)(9) grants the Director the author-
ity to “set[] forth standards and procedures for allowing
the patent owner to move to amend the patent under
subsection (d) to cancel a challenged claim or propose a
reasonable number of substitute claims.” The PTO ar-
gues that it is pursuant to this authority that it promul-
gated Rules 42.20 and 42.121, which the PTO claims place
the burden of proving the proposition of the patentability
of amended claims on the patent owner. Notably, the
PTO does not, as does Judge Taranto, argue that Rules
42.20 and 42.121 unambiguously assign this burden to
the patent owner. As discussed below, this is likely
because neither rule uses the term “burden of persuasion”
or “patentability” and the PTO never indicated to the
public in its rulemaking process that either rule was
intended to address that substantive issue. Instead, the
PTO attempts to back into its request for Chevron defer-
ence by arguing that it is entitled to Auer deference for its
interpretation of Rules 42.20 and 42.121, including its
conclusion that those rules, together, impliedly address
the burden of persuasion for amended claims in IPRs and
limit the scope of § 316(e). But the regulations on which
the PTO relies do not support that strained interpreta-
tion. And Auer does not authorize an agency to rewrite its
regulations in the guise of “interpretation.”
AQUA PRODUCTS, INC. v. MATAL 45
a. The PTO Has Not Adopted a Rule or Regulation
Governing the Burden of Persuasion on the
Patentability of Proposed Amended Claims
We use the same interpretive rules to construe regu-
lations as we do statutes; we consider the plain language
of the regulation, the common meaning of the terms, and
the text of the regulation both as a whole and in the
context of its surrounding sections. Tesoro Haw. Corp. v.
United States, 405 F.3d 1339, 1346–47 (Fed. Cir. 2005);
Lockheed Corp. v. Widnall, 113 F.3d 1225, 1227 (Fed. Cir.
1997); Lengerich v. Dep’t of the Interior, 454 F.3d 1367,
1370 (Fed. Cir. 2006). If the regulatory language is clear
and unambiguous, no further inquiry is usually required.
Roberto v. Dep’t of the Navy, 440 F.3d 1341, 1350 (Fed.
Cir. 2006). But “[d]eference is undoubtedly inappropriate,
for example, when the agency’s interpretation is ‘plainly
erroneous or inconsistent with the regulation.’” Christo-
pher v. SmithKline Beecham Corp., 567 U.S. 142, 155
(2012) (quoting Auer, 519 U.S. at 461).
Neither Rule 42.20 nor Rule 42.121 addresses the
burdens of proof or persuasion with respect to propositions
of unpatentability once an amended claim has been
entered into the IPR. Rule 42.20 is a general provision
establishing procedures for motion practice in IPRs. As
noted previously, when the patent owner files a motion to
amend claims during an IPR, the patent owner’s “re-
quested relief” under Rule 42.20 is the Board’s permission
to enter a reasonable number of substitute claims into the
IPR. That is the “motion” practice contemplated and,
indeed, spelled out in § 316(d). To the extent
Rule 42.20(c) imposes a burden on the patent owner as
the “movant,” it is a burden to show that the amendments
do “not enlarge the scope of the claims of the patent or
introduce new matter” as required by 35 U.S.C.
§ 316(d)(3), not a burden to prove the overall patentability
of the amended claim.
46 AQUA PRODUCTS, INC. v. MATAL
Likewise, Rule 42.121(a)(2)(i) merely requires the pa-
tent owner to show that its proposed amendment is
responsive to at least one ground of unpatentability at
issue in the IPR. 9 In connection with its promulgation,
the PTO explained to the public that this requirement
was merely to ensure that the proposed amendment had a
minimal level of relevancy to the IPR. Changes to Imple-
ment IPRs, 77 Fed. Reg. at 48,705. The PTO said that
this procedural rule was intended to streamline IPRs, not
to create a substantive requirement that the patent owner
bear the burden of persuasion on the patentability of an
amended claim:
As the PTO explained, [Rule 42.121(a)(2)(i)] is
meant to “enhance efficiency of review proceed-
ings . . . . [A]ny amendment that does not respond
to a ground of unpatentability most likely would
cause delay, increase the complexity of the review,
and place additional burdens on the petitioner
and the Board.”
Proxyconn, 789 F.3d at 1308 (second alteration in origi-
nal) (quoting Changes to Implement IPRs, 77 Fed. Reg. at
48,705). Like Rule 42.20, Rule 42.121 does not address
the underlying issue of where the burden of persuasion
9 Aqua argued before the panel that the PTO lacked
authority to require that any proposed amendment “re-
spond to a ground of unpatentability” involved in the IPR.
We conclude, however, that this procedural requirement
fits within the Director’s delegated authority to “set[]
forth standards and procedures for allowing the patent
owner to move to amend the patent,” 35 U.S.C.
§ 316(a)(9), and does not go so far as to eviscerate the
right to amend Congress granted patent owners in
§ 316(d). Indeed, Rule 42.121 is consistent with the
directive in § 316(d)(1) that a motion to amend be directed
to “challenged claims.”
AQUA PRODUCTS, INC. v. MATAL 47
lies for the proposed amended claims once entered into
the proceeding. The language of Rule 42.121 does not
suggest that the Board must deny a motion to amend if a
patent owner fails to prove the ultimate patentability of
the proposed amended claims in that motion. Both by
statute and by its own rules, the Board has only limited
grounds for denying a motion to amend: (1) if the
amendment “does not respond to a ground of unpatenta-
bility involved in the trial,” 37 C.F.R. § 42.121(a)(2)(i); or
(2) if the amendment “seeks to enlarge the scope of the
claims of the patent or introduce new subject matter,” id.§ 42.121(a)(2)(ii).
We do not read these regulations, separately or to-
gether, to say that the patent owner must bear the burden
of proving the patentability of amended claims or to
require satisfaction of that burden on the face of the
motion to amend. These regulatory requirements simply
do not address the ultimate relief sought by the petitioner
in the IPR: a determination of unpatentability, leading to
the cancellation of challenged patent claims—as originally
issued or amended—after a final written decision. They
address preconditions to entry of the amended claims into
the IPR. Auer deference does not permit the PTO to write
words into a regulation, or to interpret a regulation in
ways that are not supported by the very language em-
ployed in the regulations. See, e.g., Christopher, 567 U.S.
at 155 (Auer “[d]eference is undoubtedly inappropriate,
for example, when the agency’s interpretation is ‘plainly
erroneous or inconsistent with the regulation.’” (quoting
Auer, 519 U.S. at 461)).
More fundamentally, the PTO’s contention that its
regulations actually address and interpret the scope of
§ 316(d) and § 316(e) finds no support in the language of,
or commentary relating to the adoption of, those regula-
tions. Other than language parroting the basic require-
ments of § 316(d)(3), there is no other reference to either
statutory section, no reference to proving propositions of
48 AQUA PRODUCTS, INC. v. MATAL
patentability or unpatentability, and no mention of the
words “burden of persuasion.” And, there is no place in
the regulations or relevant commentary where reference
to an ambiguity or statutory silence in either § 316(d) or
§ 316(e) is claimed, explored, or mentioned. Chevron does
not apply where an agency has not actually addressed the
issue it purports to be within its discretion to address.
See, e.g., Encino, 136 S. Ct. at 2127 (holding Chevron
deference is not warranted where the agency “did not
analyze or explain why the statute should be interpreted”
in a particular manner).
Auer cannot be invoked to substitute for an agency’s
failure to analyze the relevant statutory provisions in the
first instance. See Gonzales v. Oregon, 546 U.S. 243, 257
(2006) (“Simply put, the existence of a parroting regula-
tion does not change the fact that the question here is not
the meaning of the regulation but the meaning of the
statute. An agency does not acquire special authority to
interpret its own words when, instead of using its exper-
tise and experience to formulate a regulation, it has
elected merely to paraphrase the statutory language.”).
Of course, “if Congress has directly spoken to an issue
then any agency interpretation contradicting what Con-
gress has said would be unreasonable.” Entergy Corp. v.
Riverkeeper, Inc., 556 U.S. 208, 218 n.4 (2009).
The PTO’s decisions in Idle Free and MasterImage do
not alter our conclusion that the PTO’s regulations do not
speak to either § 316(e) or the ultimate burden of persua-
sion regarding patentability.
First, the Idle Free decision is not entitled to defer-
ence. It has been designated as an “interpretive” non-
binding discussion not approved by the Director, and later
redesignated as a “representative” non-binding discus-
sion. Such musings are not sufficient to command Chev-
ron or Auer deference of any sort. See, e.g., Christensen v.
Harris County, 529 U.S. 576, 587 (2000) (collecting cases
AQUA PRODUCTS, INC. v. MATAL 49
and noting, “[i]nterpretations such as those in opinion
letters—like interpretations contained in policy state-
ments, agency manuals, and enforcement guidelines, all
of which lack the force of law—do not warrant Chevron-
style deference.”); see also Mead, 533 U.S. at 230 (“It is
fair to assume generally that Congress contemplates
administrative action with the effect of law when it pro-
vides for a relatively formal administrative procedure
tending to foster the fairness and deliberation that should
underlie a pronouncement of such force.”); Nat’l Org. of
Veterans’ Advocates, Inc. v. Sec’y of Veterans Affairs, 260
F.3d 1365, 1378 (Fed. Cir. 2001) (“Chevron deference does
not normally apply to informal proceedings.”).
Second, Idle Free just does not say what the PTO
reads into it. There, a panel of the Board examined 35
U.S.C. § 316(a)(9) and § 316(d) in the context of discussing
“Claim-by-Claim Analysis” and the requirement that an
amendment may be denied where it introduces new
matter. See Idle Free, 2013 WL 5947697, at *1–5. But
the panel did not cite to any other statutory provision.
Nowhere in that decision is § 316(e) cited or interpreted.
The leap the PTO asks us to take based on Idle Free is
simply too great. The PTO enacted regulations that do
not interpret § 316(e). Then, a Board panel issued a
decision discussing those regulations, which also never
addresses § 316(e). Despite this, the PTO asks that we
defer to its current contention that both the regulations
and Idle Free do, in fact, define the scope of that statutory
provision. We do not.
The PTO next points to MasterImage. Again, the
Board did not purport to interpret any statutory provision
in MasterImage. While the Board provided policy expla-
nations for its practice of requiring the patent owner to
provide patentable distinctions over a broad range of prior
art, it did not explain how that interpretation is con-
sistent with, or supported by, the governing statutes. The
Board did not analyze the PTO’s rulemaking authority
50 AQUA PRODUCTS, INC. v. MATAL
under 35 U.S.C. § 316(a)(9); it did not analyze the re-
quirements for motions to amend under § 316(d); and it
did not analyze the burden of proof designation under
§ 316(e).
To be entitled to Chevron deference, “an agency must
cogently explain why it has exercised its discretion in a
given manner.” Motor Vehicle Mfrs. Ass’n of United
States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
48 (1983); see also Encino, 136 S. Ct. at 2127. No such
cogent explanation has ever been provided by either the
Director or the Board. See, e.g., Waterkeeper All. v. EPA,
853 F.3d 527, 530, 534–38 (D.C. Cir. 2017) (vacating an
EPA Final Rule and concluding that Chevron Step One
ended the inquiry, where the EPA failed to point to any
statutory ambiguity authorizing its Final Rule).
If, moreover, as the PTO contends, Idle Free and Mas-
terImage actually concluded that Rule 42.20 requires the
assignment of the burden of persuasion to the patent
owner regarding the ultimate patentability of amended
claims—despite the texts of § 316(d), § 316(e), and the
regulations themselves—that burden shift would be a
substantive change in the law. Medtronic, Inc. v.
Mirowski Family Ventures, LLC, 134 S. Ct. 843, 849
(2014); Dir., Off. of Workers’ Comp. Programs v. Green-
wich Collieries, 512 U.S. 267, 271 (1994). But the PTO
itself represented to the public that Rule 42.20 was purely
“procedural and/or interpretative,” not substantive. Rules
of Practice for Trials Before the Patent Trial and Appeal
Board and Judicial Review of Patent Trial and Appeal
Board Decisions, 77 Fed. Reg. 48,612, 48,651 (Aug. 14,
2012) (hereinafter “Final Rules of Practice”). This is
important.
If an agency purports to rest its authority to act on an
express grant of rulemaking authority—as the PTO
suggests it may do here—then it may only act consistently
with its obligations under the APA. One such obligation
AQUA PRODUCTS, INC. v. MATAL 51
is to inform the public of the substance of the subjects its
rulemaking purports to address. 5 U.S.C. § 553(b)(3)
(Federal Register notice must include “either the terms or
substance of the proposed rule or a description of the
subjects and issues involved.”). Notice of agency rulemak-
ing is insufficient “where interested parties would have
had to divine [the Agency’s] unspoken thoughts.” Int’l
Union, United Mine Workers of Am. v. Mine Safety &
Health Admin., 407 F.3d 1250, 1260 (D.C. Cir. 2005)
(citation and quotation marks omitted, alteration in
original). If notice is inadequate where an agency’s
explanations are unclear, it is surely inadequate when the
agency expressly denies it is adopting a practice it later
attempts to insert into a rule by interpretation.
In connection with the adoption of its rules governing
IPRs, including Rule 42.20, the PTO defended its choice
not to employ all of the rulemaking procedures under the
APA by explaining, repeatedly, that nothing it was doing
in its rules was substantive and nothing in its rules would
impact final decisions on patentability. The Director
stated:
Although the Office sought the benefit of public
comment, these rules are procedural and/or inter-
pretive. Stevens v. Tamai, 366 F3d. [sic] 1325,
1333–34 (Fed. Cir. 2004) (upholding the Office’s
rules governing the procedure in patent interfer-
ences). The final written decisions on patentabil-
ity which conclude the reviews will not be
impacted by the regulations, adopted in this final
rule, as the decisions will be based on statutory pa-
tentability requirements.
Final Rules of Practice, 77 Fed. Reg. at 48,651 (emphasis
added). And the Director went on to cite Cooper Technol-
ogies Co. v. Dudas, 536 F.3d 1330, 1336–37 (Fed. Cir.
2008), “for the proposition that 5 U.S.C. [sic] 553, and
thus 35 U.S.C. [sic] 2(b)(2)(B), does not require notice and
52 AQUA PRODUCTS, INC. v. MATAL
comment rulemaking for ‘interpretive rules, general
statement of policy, or rules of agency organization,
procedure or practice.’” Id. The PTO cannot say that its
rules do not relate to issues of patentability and then later
apply those very rules to impose substantive burdens of
persuasion with respect to patentability on the patent
owner.
As Judge Moore explains in her concurrence, moreo-
ver, improperly characterizing a rule regarding burdens of
proof as “procedural” does not excuse failure to comply
with the Director’s obligations under the APA. Section
316(a)(9) is a narrow grant of rulemaking authority to
carry out an express congressional goal: to allow the
patent owner to move to amend the patent as authorized
by § 316(d). In the face of that grant of rulemaking au-
thority, the Director may only set forth such “standards
and procedures” through the rulemaking identified in
§ 316(a)(9), with all of the requirements and obligations
that accompany the exercise of that authority. There are
no doubt circumstances in which agencies may address
unanticipated policy challenges, carry out generally-
worded statutory charges, or set forth internal operating
procedures, even through ad hoc adjudication. See, e.g.,
NLRB v. Bell Aerospace Co., 416 U.S. 267, 293–94 (1974).
This is not one of those circumstances, however.
On this point, Judge Hughes conflates the broader
rulemaking authority granted under § 316(a)(4)—which
broadly references procedures for IPRs—with the narrow
authority granted under § 316(a)(9). He also confuses
Chevron deference with Auer deference. Because Chevron
deference displaces judicial discretion to engage in statu-
tory interpretation, it requires a relatively formal expres-
sion of administrative intent, one with the force and effect
of law. Indeed, the very cases from which Judge Hughes
quotes demonstrate far more formality than his chosen
quotations imply out of context. Later interpretations of
an agency’s formal expression can, of course, occur, and
AQUA PRODUCTS, INC. v. MATAL 53
would be entitled to Auer deference. But later interpreta-
tions cannot rewrite formal administrative expressions or
be used as a vehicle to skirt the obligations to engage in
the necessary formalities in the first instance. Judge
Hughes may have concerns about the future of adminis-
trative law, but nothing in our opinion, as properly under-
stood, justifies those concerns.
Judges Taranto and Hughes separately say that the
PTO’s post-2012 consideration of the issue supports their
view that the PTO’s interpretations of its own regulations
are both clear and entitled to deference. Specifically, they
cite to the Board decisions in Idle Free and MasterImage
for the proposition that, by then, it was understood that
the PTO was interpreting the reference to burdens of
proof in Rule 42.20 to include the burden of persuasion on
patentability for amended claims. Taranto Op. at 28;
Hughes Op. at 11. They then cite to some roundtables
and solicitation of comments from 2014, saying these
together were informative about where the Director
thought Rule 42.20 placed the burden of proof. They
finally cite to Federal Register commentary from 2015,
where the Director confirmed that she did not intend to
“change her practice” of placing the burden of persuasion
of proving the patentability of amended claims on the
patent owner, as proof that she must have always under-
stood that to be the practice.
But neither opinion explains how this post-2012 con-
sideration of the issue can cure the fact that Rule 42.20
never mentions the burden of persuasion, never addresses
any of the relevant statutory provisions, was described by
the PTO as purely a procedural—not a substantive—rule,
and was publicly characterized by the PTO as a rule that
applied when a determination was being made about
whether to enter an amendment into an IPR and had
nothing to do with the Board’s patentability determina-
tions. While the Board’s view of how it wished to deal
with amendments authorized by § 316(d) may have
54 AQUA PRODUCTS, INC. v. MATAL
changed over time—and it may have become obvious that
it had given the Board’s virtually universal denial of
motions to amend—nothing the PTO did post-2012 can
cure what it failed to do before then and still has not
done. 10 We have already addressed the weakness of the
PTO’s reliance on Idle Free and MasterImage, and will not
repeat those points here. Reference to the 2014 and 2015
commentaries is equally weak, if not more so.
Once more, those commentaries lack any substantive
consideration of any regulation and do not purport to
analyze what Congress intended when it contemplated an
amendment as of right in § 316(d) or discussed the burden
of proving propositions of unpatentability in § 316(e).
Reference to these post-hoc rationalizations to justify
deference is not just a stretch—it is Auer on steroids. See
Global Crossing Telecomms., Inc. v. Metrophones Tele-
comms., Inc., 550 U.S. 45, 77 (2007) (Thomas, J., dissent-
ing) (“[A] court may not, in the name of deference,
abdicate its responsibility to interpret a statute.”). All the
PTO did was cite policy rationales for continuing to place
the burden of proving the patentability of proposed
amended claims on the patent owner; it never said it
found a gap or ambiguity in the AIA that allowed it to
regulate that practice. Its comments say no more than
Idle Free and MasterImage did. There is no cogent, con-
sidered examination of the relevant statutory provisions.
“Even under Chevron’s deferential framework, agencies
must operate within the bounds of reasonable interpreta-
tion. . . . An agency has no power to tailor legislation to
bureaucratic policy goals.” Util. Air Regulatory Grp., 134
S. Ct. at 2442, 2445 (internal quotations and citation
omitted). “[A]n agency may not rewrite clear statutory
10 Even the PTO does not suggest in its briefing to
us that anything in any of its Federal Register commen-
taries supports its position.
AQUA PRODUCTS, INC. v. MATAL 55
terms to suit its own sense of how the statute should
operate.” Id. at 2446.
To the extent the PTO’s 2015 commentary relied on
this court’s endorsement of its practices in Proxyconn, as
discussed above, Proxyconn never considered § 316(e) or
whether the ultimate burden of persuasion on the patent-
ability of amended claims could be placed on the patent
owner; neither issue was ever in debate. And, to the
extent the PTO’s 2016 commentary relied on Synopsys
and Nike, it is well established that an agency’s belief
that a statute or court decision compels or authorizes its
practices is not the type of analysis to which deference is
due. See, e.g., Negusie v. Holder, 555 U.S. 511, 521 (2009);
Nat’l Org. of Veterans’ Advocates v. Sec’y of Veterans
Affairs, 314 F.3d 1373, 1379 n.7 (Fed. Cir. 2003) (“It is, of
course, impermissible for the Department to adopt regula-
tions . . . on the ground that particular regulations are
required under the unambiguous language of the stat-
utes.” (emphasis added)). Indeed, it is an indication that
no reasoned analysis occurred.
In sum, the PTO has failed to make any determina-
tion on the ambiguity of either § 316(d)(1) or § 316(e) at
any point before the briefing before this court. Even in its
briefing, moreover, the PTO initially contends that
§ 316(e) does not govern amended claims at all, and only
points to its interpretations of its own rules in the alter-
native. We therefore conclude that the Board’s decisions
do not reflect “a reasonable accommodation of manifestly
competing interests . . . [where] the agency considered the
matter in a detailed and reasoned fashion, and the deci-
sion involves reconciling conflicting policies,” and, thus,
conclude that no basis for deference under either Chevron
or Auer exists. Chevron, 467 U.S. at 865 (footnotes omit-
ted).
We do not, as Judge Hughes claims, purport to re-
quire “magic words” in either the PTO’s regulations or its
56 AQUA PRODUCTS, INC. v. MATAL
interpretations of those regulations. We require that the
PTO comply with its obligations under the APA and make
clear to the public both what it is doing and why what it is
doing is permissible under the statutory scheme within
which it is operating. Agency rulemaking is not supposed
to be a scavenger hunt. It must, moreover, be tied to the
congressional purpose for which that rulemaking authori-
ty was granted. We conclude that, even if we were to find
§ 316(e) to be ambiguous, or that the AIA statutory
framework authorizes the Director to promulgate a regu-
lation governing burdens of persuasion, the Director has
never clearly done so. In fact, the PTO failed to
acknowledge at any point prior to the briefing in this
appeal that § 316(e) might even apply to or conflict with
its current practices regarding motions to amend. Calling
upon Auer to allow the agency to rectify all these failures
after the fact—as Judge Hughes and the PTO both do—
simply does not suffice under the law. For these reasons,
we, like Judges Dyk and Reyna, find there is no interpre-
tation of either § 316(d) or § 316(e) to which this court
must defer. 11
11 We do not accept Judge Taranto’s suggestion that
our analysis of Chevron should be less thorough. The
Chevron question developed slowly in this case. In its
initial brief, Aqua argued that the PTO could not resort to
a request for Chevron deference because § 316(e) unam-
biguously prohibited the PTO’s amendment practices,
regardless of how they were put in place. The PTO,
similarly, argued that § 316(d) unambiguously justified
its practices, and only discussed the concept of deference
to the Board’s practices in the alternative. It was not
until our decisionmaking process that questions of Chev-
ron and Auer deference loomed large. It is because the
four dissenters conclude that Chevron dictates the result
here, and because Judges Chen and Hughes believe Auer
AQUA PRODUCTS, INC. v. MATAL 57
b. Is A Rule Regarding the Burden of Persuasion
on Patentability Within the Rulemaking
Authority of the PTO?
Judge Taranto concludes that § 316(a)(9) gives the
PTO the express authority to regulate burdens of proof
and persuasion with respect to amendments authorized
under § 316(d). We disagree.
First, the PTO’s regulations may not countermand the
express burden of proof set forth in § 316(e). See Chevron,
467 U.S. at 843–44 (explaining that, where there is a
statutory gap for an agency to fill, we “give[] controlling
weight [to the agency’s regulations] unless they are arbi-
trary, capricious, or manifestly contrary to the statute”
(emphasis added)). Importantly, the language of
§ 316(a)(9) says that the Director may set forth “stand-
ards and procedures for allowing the patent owner to
amend the patent” under § 316(d); this directive does not
grant the PTO the power to make substantive modifica-
tions to the statutory scheme. (emphasis added). The
PTO cannot regulate away the statutory directive in
§ 316(d)(1) that patent owners be permitted to propose
amendments to challenged claims at least once as of right
when the amendments comply with the requirements of
that provision. While the Director certainly may pass
regulations regarding the timing of motions to amend or
the page limits applicable to them, may confirm the
statutory threshold showings needed before the proposed
amendment may become part of the ongoing IPR, and
may set forth reasonable threshold preconditions for entry
of an amendment into an IPR, he may not rewrite, or
countermand the purpose of, substantive statutory man-
dates.
does the same, that the rest of the court has been forced to
address Chevron and Auer. Having been taken there, we
choose to address those concepts fully.
58 AQUA PRODUCTS, INC. v. MATAL
Even if we were to accept the proposition that there is
an ambiguity in the statutory scheme that is irresolvable
by normal tools of statutory construction, it is not clear to
us that the phrase “standards and procedures” in
§ 316(a)(9) was meant to encompass burdens of proof. A
“standard” of proof is not the same as a burden of proof.
As the Supreme Court explained in Microsoft Corp. v. i4i
Ltd. Partnership, 564 U.S. 91, 100 n.4 (2011), a standard
of proof describes the quantum of evidence necessary to
prove an issue, whereas a burden of proof establishes
which party must provide that evidence. The latter is a
legal principle that affects the substantive rights of the
parties, not some procedural mechanism designed to
streamline or maintain order in agency proceedings.
Medtronic, 134 S. Ct. at 849 (“‘[T]he burden of proof’ is a
‘substantive aspect of a claim.’” (quoting Raleigh v. Ill.
Dep’t of Revenue, 530 U.S. 15, 20–21 (2000), Greenwich
Collieries, 512 U.S. at 271 (The “assignment of the burden
of proof is a rule of substantive law . . . .”), and Garrett v.
Moore-McCormack Co., 317 U.S. 239, 249 (1942) (“[T]he
burden of proof . . . [is] part of the very substance of [the
plaintiff’s] claim and cannot be considered a mere incident
of a form of procedure.”)). While this issue is not control-
ling of the question before us, even assuming an ambigui-
ty in the statutory context of which § 316(a)(9) is a part,
the plain language of § 316(a)(9) arguably is not broad
enough to authorize the Director to set a “burden of proof”
for the patentability of amended claims in IPRs.
Assuming the PTO were permitted to regulate the
substantive burden of proof or persuasion regarding the
patentability of amended claims under the “standards and
procedures” language of § 316(a)(9), moreover, it is also
unclear that we would have an obligation to defer to such
a rule. The point of Chevron is to encourage courts to
defer to agencies on issues that “implicate[] agency exper-
tise in a meaningful way.” Sandoval v. Reno, 166 F.3d
225, 239 (3d Cir. 1999); see Chevron, 467 U.S. at 865; see
AQUA PRODUCTS, INC. v. MATAL 59
also Singh v. Ashcroft, 383 F.3d 144, 151 (3d Cir. 2004).
Pure questions of law—such as the substantive burden of
proof or persuasion, or interpretation of the interplay
between § 316(d) and § 316(e)—are not issues that impli-
cate the PTO’s expertise. See, e.g., INS v. Cardoza-
Fonseca, 480 U.S. 421, 446 (1987) (noting that a “pure
question of statutory construction [is] for the courts to
decide”); see also Goncalves v. Reno, 144 F.3d 110, 127 (1st
Cir. 1998) (citing Cardoza-Fonseca, 480 U.S. at 446, 448).
Those are issues that seem to reside firmly within the
expertise of Article III courts. Cardoza-Fonseca, 480 U.S.
at 446. After all, it is the prerogative of the judiciary “to
say what the law is.” Marbury v. Madison, 5 U.S. (1
Cranch) 137, 177, 2 L.Ed. 60 (1803).
c. De Novo Statutory Analysis Places the
Burden of Proof on the Petitioner
With nothing to which we must defer for our interpre-
tation of § 316(d) and § 316(e), we are left to determine
the most reasonable reading of those provisions. Specifi-
cally, we are tasked to decide in the first instance whether
the AIA either requires or authorizes placing the burden
of proving the patentability of amended claims on the
patent owner rather than the petitioner. For all the
reasons discussed in section V.A.1 of this opinion, we
believe that the most natural reading of the statute is
that it does not.
For these reasons, we, along with Judges Dyk and
Reyna, conclude that the Board erred when it imposed the
burden of proving the patentability of its proposed substi-
tute claims on Aqua. We reach this conclusion today by
following two different analytical paths: we address this
issue as part of a Chevron Step Two analysis, while
Judges Dyk and Reyna follow the approach laid out in
Encino, where the Supreme Court treated the question of
whether the agency had engaged in the type of regulatory
action to which deference would be due as a threshold
60 AQUA PRODUCTS, INC. v. MATAL
inquiry. Once it concluded that the agency actually had
not analyzed the statute or explained why the statute
should be interpreted in a given way, the Supreme Court
dispensed with further reference to Chevron; it ordered
the court of appeals to interpret the statute in the first
instance. Encino, 136 S. Ct. at 2126–27. The Supreme
Court has vacillated on whether this inquiry is always a
threshold inquiry, however, rather than one that falls
under Chevron Step Two. Compare id. at 2124–26, with,
e.g., Michigan v. EPA, 135 S. Ct. 2699, 2707–08 (2015)
(addressing sufficiency of agency rulemaking at Chevron
Step Two).
Because we believe a thorough discussion of the statu-
tory scheme at the outset lends context to the deference
inquiry, and because we ultimately must interpret the
statutory scheme either way, we address deference at
Step Two. Judges Dyk and Reyna chose the alternative
route. But, we end up in the same place under either
approach: (1) there is no considered statutory interpreta-
tion that has been undertaken by the agency to which we
must defer; and (2) in the absence of regulatory action to
which we must defer, the burden of proving the unpatent-
ability of all claims in an IPR—both original and amend-
ed—is on the petitioner.
B. The Board Must Base Its Patentability
Determinations on the Entirety of the Record Before It
Our en banc order also asks whether the Board may
sua sponte raise patentability challenges to a proposed
amended claim. Having fully considered the record,
however, we conclude that the record does not present
this precise question. We believe it should be reserved for
another day, as, apparently, do the other members of the
court. The record and the panel decision in this case,
however, directly pose a different question: whether the
Board may base its patentability determinations with
respect to amended claims solely on the face of the motion
AQUA PRODUCTS, INC. v. MATAL 61
to amend, without regard to the remainder of the IPR
record. The panel decision in this case answered that
question in the affirmative. We do not.
Section 318(a) provides that, where it proceeds to a fi-
nal written decision, the Board is to issue a decision on
the patentability of both originally issued, challenged
claims and any amended claims. That final substantive
decision must be based on the entirety of the record. Basic
principles of administrative law compel this conclusion.
First, an agency must explain why it decides any
question the way it does. SEC v. Chenery Corp., 318 U.S.
80, 94 (1943) (“[T]he orderly functioning of the process of
review requires that the grounds upon which the adminis-
trative agency acted be clearly disclosed and adequately
sustained.”). That obligation means that the agency must
“articulate a satisfactory explanation” of its reasoning; it
may not simply provide a conclusion. Tourus Records,
Inc. v. DEA, 259 F.3d 731, 737 (D.C. Cir. 2001) (quoting
State Farm, 463 U.S. at 43); see also In re Lee, 277 F.3d
1338, 1342 (Fed. Cir. 2002) (agency has an obligation “to
provide an administrative record showing the evidence on
which the findings are based, accompanied by the agen-
cy’s reasoning in reaching its conclusions”).
Second, an agency’s refusal to consider evidence bear-
ing on the issue before it is, by definition, arbitrary and
capricious within the meaning of 5 U.S.C. § 706, which
governs review of agency adjudications. Butte County v.
Hogen, 613 F.3d 190, 194 (D.C. Cir. 2010). That means
that the agency must take account of all the evidence of
record, including that which detracts from the conclusion
the agency ultimately reaches. Id. (citing Universal
Camera Corp. v. NLRB, 340 U.S. 474, 487–88 (1951)); see
also Princeton Vanguard LLC v. Frito-Lay N. Am. Inc.,
786 F.3d 960, 970 (Fed. Cir. 2015) (“[S]ubstantial evi-
dence review ‘requires an examination of the record as a
whole, taking into account both the evidence that justifies
62 AQUA PRODUCTS, INC. v. MATAL
and detracts from an agency’s opinion.’” (quoting Falkner
v. Inglis, 448 F.3d 1357, 1363 (Fed. Cir. 2006))); In re Lee,
277 F.3d at 1345 (“The Board’s findings must extend to all
material facts . . . .”); Morall v. DEA, 412 F.3d 165, 177–
78 (D.C. Cir. 2005) (an agency decision that fails to con-
sider relevant contradictory evidence is an arbitrary and
capricious one).
Neither of these obligations is one the Director may
obviate by rule, moreover. “Reasoned decisionmaking is
not a procedural requirement.” Butte County, 613 F.3d at
195; see also Citizens to Preserve Overton Park, Inc. v.
Volpe, 401 U.S. 402, 416 (1971) (“Scrutiny of the facts
does not end, however, with the determination that the
Secretary has acted within the scope of his statutory
authority. Section 706(2)(A) requires a finding that the
actual choice made was not ‘arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law.’ To make this finding the court must consider
whether the decision was based on a consideration of the
relevant factors and whether there has been a clear error
of judgment.” (citations omitted)). Certainly, these are
not requirements that the Board may eschew simply by
the adoption of practices it employs when considering the
patentability of amended claims during the course of an
IPR.
In the context of this case, accordingly, we believe
that the Board’s decision to reject Aqua’s proposed
amended claims without consideration of the entirety of
the IPR record was an abuse of discretion which provides
an independent basis for our judgment vacating and
remanding this matter to the Board. While our colleagues
do not address this question, we believe it is a fairly
uncontroversial proposition under the APA.
AQUA PRODUCTS, INC. v. MATAL 63
C. Part III of Judge Reyna’s Concurrence
Before closing, we address the final section of Judge
Reyna’s concurrence. We find it odd on a number of
levels.
First, though it has no proposed judgment attached to
it, all four dissenters “join” Part III of Judge Reyna’s
concurrence. Indeed, not only is no proposed judgment
attached to this section, but the dissenters disagree with
the only judgment Judges Dyk and Reyna believe is the
correct one—that the matter must be vacated and re-
manded for the Board to place the burden of persuasion
on the petitioner with respect to the patentability of the
proposed amended claims. Where written words are not
in support of any judgment, they cannot logically serve as
an opinion of the court or any of its members. Certainly,
they cannot serve as a collective opinion of those who
disagree on the judgment. See, e.g., United States v. Epps,
707 F.3d 337, 348 (D.C. Cir. 2013) (concluding that the
controlling opinion must “represent a common denomina-
tor” of a court’s reasoning, and such a position must
“support the judgment” (quoting King v. Palmer, 950 F.2d
771, 781 (D.C. Cir. 1991) (en banc))).
Second, that section of Judge Reyna’s concurrence ex-
pressly concedes that the entire discussion is dictum. It
leads off by pointing out what “Aqua has not challenged”
and then proceeds to discuss those very issues. And the
concurrence ends by citing to and discussing PTO Rule
42.22, while noting that rule is not at issue in this case.
Indeed, not once in these proceedings—here or below—
has any party or any of the many amici involved relied
upon Rule 42.22 or its accompanying commentary for any
reason; it appears nowhere in any of the briefing and was
not mentioned during oral argument. While Judge Reyna
calls this section a “judgment” of the court describing
what the Board may do “regarding the burden of produc-
tion on remand in this case,” that, respectfully, cannot be
64 AQUA PRODUCTS, INC. v. MATAL
true. Only two of the six judges who join in that conclu-
sion have concurred in the judgment vacating the Board’s
decision denying Aqua’s motion to amend and ordering a
remand; that is the only judgment this court enters today.
And, on remand, no questions regarding any burden of
production remain. As noted, in its final written decision,
the Board expressly concluded that the proposed substi-
tute claims satisfied all statutory and rule-based produc-
tion requirements applicable to them, were not indefinite,
and satisfied all written description requirements. The
only question that remains is whether the amended
claims are patentable over the asserted prior art. It is
that question which the Board must reconsider.
Disparate members of the court cannot come together
and purport to rule on the applicability or validity of any
rule that has never been briefed or argued to us and on
which the Board did not rely below. Indeed, it is ele-
mental that an appellate court must avoid ruling on
matters neither presented nor passed upon below. Inter-
active Gift Express, Inc. v. Compuserve Inc., 256 F.3d
1323, 1344 (Fed. Cir. 2001) (citing Singleton v. Wulff, 428
U.S. 106, 120 (1976)); see also 19 James Wm. Moore et al.,
Moore's Federal Practice § 205.05, at 205–55 (3d ed. 1997)
(“It is a long-standing rule that, in order to be reviewable
on appeal, a claim or issue must have been ‘pressed or
passed upon below.’”). “This is because appellate courts
are courts of review and ‘[n]o matter how independent an
appellate court’s review of an issue may be, it is still no
more than that—a review.’” Id. (quoting Sage Prods., Inc.
v. Devon Indus., Inc., 126 F.3d 1420, 1426 (Fed. Cir.
1997)).
Third, the discussion of Rule 42.22 appears contrary
to everything else said by Judge Reyna today. He seems
to opine that a rule that (1) does not mention motions to
amend, (2) never considers § 316(d) and its contemplation
of a right to amend in IPRs, and (3) never addresses the
language of § 316(a)(9), which only grants the Director the
AQUA PRODUCTS, INC. v. MATAL 65
authority for “setting forth standards and procedures for
allowing the patent owner to move to amend” its claims,
can be rewritten and expanded by the Director’s Federal
Register commentary. That is directly at odds with the
rationale he and Judge Dyk employ to support the princi-
ples justifying the judgment they resolve to be correct.
Finally, it appears that the purpose of Judge Reyna’s
closing dictum is to create a hole in the very judgment he
and Judge Dyk endorse today, to say that, as long as the
Director calls something a burden of production, the
Board can place any substantive burden it chooses on the
patent owner’s ability to propose amendments under
§ 316(d). Without knowing what burdens Judge Reyna
has in mind, it is hard to know whether such burdens
could be characterized fairly as falling within the bounds
of “standards and procedures for allowing the patent
owner to move to amend the patent under [§ 316(d)].” But
that is the only authority to engage in rulemaking regard-
ing motions to amend Congress granted to the PTO under
§ 316(a)(9). Even if the unspecified burdens Judge Reyna
envisions could be squeezed into that linguistic basket,
any such burdens would still have to be reasonable. No
matter how characterized, moreover, they may not oper-
ate to negate the right to amend that Congress granted in
§ 316(d), nor render § 316(e)’s express placement of the
burden of persuasion on the petitioner meaningless. Nor
can they obviate the Board’s obligation to base its patent-
ability determinations under § 318(a) on the entirety of
the record.
VI. CONCLUSION
This process has not been easy. We are proceeding
without a full court, and those judges who are participat-
ing disagree over a host of issues. As frustrating as it is
for all who put so much thought and effort into this mat-
ter, very little said over the course of the many pages that
form the five opinions in this case has precedential
66 AQUA PRODUCTS, INC. v. MATAL
weight. The only legal conclusions that support and
define the judgment of the court are: (1) the PTO has not
adopted a rule placing the burden of persuasion with
respect to the patentability of amended claims on the
patent owner that is entitled to deference; and (2) in the
absence of anything that might be entitled deference, the
PTO may not place that burden on the patentee. All the
rest of our cogitations, whatever label we have placed on
them, are just that—cogitations. Even our discussions on
whether the statute is ambiguous are mere academic
exercises.
The final written decision of the Board in this case is
vacated insofar as it denied the patent owner’s motion to
amend. The matter is remanded for the Board to issue a
final decision under § 318(a) assessing the patentability of
the proposed substitute claims without placing the burden
of persuasion on the patent owner. The Board must
follow this same practice in all pending IPRs unless and
until the Director engages in notice and comment rule-
making. At that point, the court will be tasked with
determining whether any practice so adopted is valid.
VACATED AND REMANDED
COSTS
No costs.
United States Court of Appeals
for the Federal Circuit
______________________
AQUA PRODUCTS, INC.,
Appellant
v.
JOSEPH MATAL, PERFORMING THE FUNCTIONS
AND DUTIES OF THE UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR, U.S. PATENT AND TRADEMARK
OFFICE,
Intervenor
______________________
2015-1177
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2013-
00159.
______________________
MOORE, Circuit Judge, with whom Circuit Judges
NEWMAN and O’MALLEY join.
This case involves one straightforward question of
statutory interpretation: Does 35 U.S.C. § 316(e) place
the burden of proving unpatentability of an amended
claim on the petitioner? I conclude that it does and join
Judge O’Malley’s opinion. Our court has, however, con-
cluded by a 6–5 vote that the statute is ambiguous.
Because of this, we are forced to address a much harder
question: Whether the agency ought to be afforded defer-
ence for its decision to place the burden of persuasion on
2 AQUA PRODUCTS, INC. v. MATAL
the patentee regarding the patentability of amended
claims. The agency explains that it is entitled to adopt
legal standards related to motions to amend (including
upon whom to place the burden of persuasion) pursuant to
Congress’ delegation of gap-filling authority to the Direc-
tor in § 316(a)(9). The agency claims that a number of
different agency actions are each entitled to Chevron
deference. This panoply of claims by the PTO has engen-
dered the five opinions in this case. This opinion is lim-
ited to a single issue: Are Board opinions entitled to
Chevron deference in this case? 1
I join Judge O’Malley’s opinion in its entirety and
agree with Judge Reyna’s conclusion that the agency
actions at issue are not entitled to Chevron deference. I
write separately to address problems with the Director’s
attempt to extend Chevron deference beyond any prior
applications of the doctrine. In this case, the Director
argues, not for the first time, that Board decisions are
entitled to Chevron deference. The Director argues that
the Board’s informative decision in Idle Free, 2 and its
1 This opinion is limited to addressing the PTO’s
claim that its Board opinions are entitled to Chevron
deference for the statutory interpretation and gap filling
performed therein because Congress authorized it to do so
in § 316(a). This opinion does not address the distinct
question of whether the Board opinions would be entitled
to Auer deference to the extent they interpret agency
regulations. Chevron deference applies to an agency’s
statutory interpretations, Auer deference applies to an
agency’s regulatory interpretations.
2 I have trouble understanding how the pro-
nouncement in Idle Free fits within even the agency’s own
claims for Chevron deference as that opinion is designated
“informative,” not precedential, and was not voted upon
AQUA PRODUCTS, INC. v. MATAL 3
precedential decision in MasterImage, represent the
agency’s authoritative determination reached through
formal adjudicative processes and are therefore entitled to
Chevron deference. The Director explains that designat-
ing a Board decision as precedential requires a vote to do
so by a majority of the nearly 300-person Board and
concurrence with the precedential designation by the
Director. See Director Br. 12 n.1. Once designated as
precedential, the Board decision would then bind future
panels of the Board. The Director argues that the desig-
nation of MasterImage as precedential warrants Chevron
deference for the Board’s decision that the patentee shall
bear the burden of persuasion on the patentability of its
proposed amended claims in motions to amend. I write
separately to explain why these Board opinions are not
entitled to Chevron deference.
In some circumstances, rules articulated in formal
agency adjudication have been entitled to Chevron defer-
ence. See United States v. Mead, 533 U.S. 218, 230
(2001). I am not certain as a general matter whether
precedential Board decisions are “formal administrative
procedure[s] tending to foster the fairness and delibera-
tion that should underlie a pronouncement of such force.”
Id. Accepting without deciding that the precedential
Board decision in MasterImage is such a “formal agency
adjudication,” I still conclude in light of the statute it is
not entitled to Chevron deference.
Chevron explains: “The power of an administrative
agency to administer a congressionally creat-
ed . . . program necessarily requires the formulation of
policy and the making of rules to fill any gap left, implicit-
ly or explicitly, by Congress.” Chevron, U.S.A., Inc. v.
by the full Board or approved by the Director, and is not
binding on future panels.
4 AQUA PRODUCTS, INC. v. MATAL
Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984)
(quoting Morton v. Ruiz, 415 U.S. 199, 231 (1974)). Chev-
ron continues: “If Congress has explicitly left a gap for
the agency to fill, there is an express delegation of author-
ity to the agency to elucidate a specific provision of the
statute by regulation.” Id. at 843–44. To be sure, Chev-
ron, and later Mead, explains that there can be express or
implicit delegation on a particular question by Congress
to the agency. See id. at 843–44; Mead, 533 U.S. at 228–
29. Those arguing for agency deference in this case
conclude that Congress expressly delegated in § 316(a)(9)
authority to the Director to fill just such an explicitly
acknowledged gap:
Regulations. —The Director shall prescribe regu-
lations—
(9) setting forth standards and procedures
for allowing the patent owner to move to
amend the patent under subsection
(d) . . . . 3
Even assuming that the Director has the authority to
adopt a standard placing the burden of persuasion upon
the patentee to prove the patentability of its proposed
amended claims, Congress only delegated the Director the
3 Section 316(b) reiterates Congress’ choice to au-
thorize the Director to gap fill through regulations and
only after considering particular policy considerations
which Congress intends to guide the Director’s actions:
“In prescribing regulations under this section, the Direc-
tor shall consider the effect of any such regulation on the
economy, the integrity of the patent system, the efficient
administration of the Office, and the ability of the Office
to timely complete proceedings instituted under this
chapter.”
AQUA PRODUCTS, INC. v. MATAL 5
authority to do so through regulations. On this point
there is no ambiguity in the statute. The clear and un-
disputed language of the statute is that the Director may
fill this gap, the need for standards and procedures relat-
ed to allowing the patent owner to move to amend the
patent, but must do so through regulations.
The Supreme Court explained in Mead:
We granted certiorari in order to consider the lim-
its of Chevron deference owed to administrative
practice in applying a statute. We hold that ad-
ministrative implementation of a particular statu-
tory provision qualifies for Chevron deference
when it appears that Congress delegated authori-
ty to the agency generally to make rules carrying
the force of law, and that the agency interpretation
claiming deference was promulgated in the exer-
cise of that authority.
533 U.S. at 226–27. Mead explains that Chevron defer-
ence is tied to the delegation of legislative authority, and
in particular to the indication of “congressional intent.”
Id. at 227. Congressional intent to give the agency the
authority to gap fill regarding standards applicable to
allowing the patent owner to move to amend the patent is
expressed clearly in the statute itself—the agency may do
so by regulation.
In light of Congress’ clearly expressed intent, we do
not assume that Congress also implicitly gave the agency
every other known means to gap fill. As the Supreme
Court explained in Encino Motorcars, LLC v. Navarro,
136 S. Ct. 2117, 2124 (2016), “In the usual course, when
an agency is authorized by Congress to issue regulations
and promulgates a regulation interpreting a statute it
enforces, the interpretation receives deference . . . .” And
the Court in Encino added: “A premise of Chevron is that
when Congress grants an agency the authority to admin-
6 AQUA PRODUCTS, INC. v. MATAL
ister a statute by issuing regulations with the force of law,
it presumes the agency will use that authority to resolve
ambiguities in the statutory scheme.” Id. at 2125.
In Mead, the Supreme Court held, “On the face of the
statute, to begin with, the terms of the congressional
delegation give no indication that Congress meant to
delegate authority to Customs to issue classification
rulings with the force of law.” 533 U.S. at 231–32. Like-
wise, on the face of the statute at issue here, Congress
gave no indication that the Director may gap fill stand-
ards applicable to allowing the patent owner to move to
amend the patent by issuing Board opinions. Congress
expressly delegated authority to gap fill to the Director by
regulation only. Thus, while in some circumstances,
formal adjudication may suffice to entitle an agency to
Chevron deference, see Mead, 533 U.S. at 230, this is not
true here where Congress’ delegation expressly articu-
lates the means by which the agency is permitted to gap
fill. See also Gonzales v. Oregon, 546 U.S. 243, 258 (2006)
(“Chevron deference, however, is not accorded merely
because the statute is ambiguous and an administrative
official is involved. To begin with, the rule must be prom-
ulgated pursuant to authority Congress has delegated to
the official.”).
Chevron transfers to the executive the function of in-
terpreting statutes and filling gaps in law from the judi-
cial and legislative branches which are normally accorded
these functions. Chevron deference stems from a delega-
tion by the legislature to the executive of specific rule-
making authority. See Gonzales, 546 U.S. at 255–56
(“Deference in accordance with Chevron, however, is
warranted only ‘when it appears that Congress delegated
authority to the agency generally to make rules carrying
the force of law, and that the agency interpretation claim-
ing deference was promulgated in the exercise of that
authority.’” (quoting Mead, 533 U.S. at 226–27)). Where
Congress has delegated authority to “prescribe regula-
AQUA PRODUCTS, INC. v. MATAL 7
tions,” I cannot agree that Chevron deference ought to be
expanded to encompass other means by which the agency
may offer its “rules.” In short, Congress may, by statute,
expressly determine upon what and how the Director may
promulgate rules.
There are dozens of very specific grants of rulemaking
authority by Congress to the Director. In some circum-
stances, Congress has delegated to the Director rulemak-
ing authority without specifying the means of enactment.
See, e.g., 35 U.S.C. § 21 (“The Director may by rule pre-
scribe . . .”); § 23 (“The Director may establish rules for
taking affidavits . . .”); § 25 (“The Director may by
rule . . .”); § 27 (“The Director may establish proce-
dures . . .”); § 111(c) (“the Director may prescribe the
conditions . . .”); § 119(b)(2) (“the Director may establish
procedures . . .”). In other circumstances, Congress has
delegated to the Director rulemaking authority and
specified that it be by promulgated regulation. See, e.g.,
35 U.S.C. § 115(h)(1) (“the Director shall establish regula-
tions under which such additional statements may be
filed.”); § 119(a) (“The Director may prescribe regula-
tions . . .”); § 123(a)(1) (granting the Director the authori-
ty to “define in regulations” who qualifies as a small
entity); § 132(b) (“The Director shall prescribe regulations
to provide for the continued examination of applica-
tions . . .”). Where Congress has chosen to delegate rule-
making authority by regulation, including in the grant of
delegated authority before us today, the exercise of that
delegated authority must be through the promulgation of
regulations in order to be entitled to Chevron deference.
Congress has the power to determine what grants to
make and how the Director must exercise that delegated
rulemaking authority. If Congress has delegated to the
executive specific gap-filling functions and the precise
means by which the agency may promulgate such rules,
we cannot and should not expand the executive’s gap-
8 AQUA PRODUCTS, INC. v. MATAL
filling or rulemaking authority beyond the delegation by
Congress.
It is not for courts to second guess Congress’ decision
that the Director must effect such rulemaking through
regulation. Nonetheless, I note that there are certainly
procedural differences which may undergird Congress’
choice between rulemaking achieved through regulation
and through adjudication. The promulgation of substan-
tive regulations, consistent with the APA, requires notice
of proposed rulemaking published in the Federal Register
and an opportunity for comment before the rules may
take effect. 5 U.S.C. § 553(b)–(c). 4 It requires an agency
to “notify the public of the proposal, invite them to com-
ment on its shortcomings, consider and respond to their
arguments, and explain its final decision in a statement of
the rule’s basis and purpose.” Perez v. Mortg. Bankers
Ass’n, 135 S. Ct. 1199, 1211 (2015) (Scalia, J., concurring).
Agency adjudication, as this case highlights, can take
many forms. The informative decision in Idle Free which
the Director claims ought to be given Chevron deference
appears to have none of the formal indicia associated with
substantive rulemaking. Board decisions are designated
informative by the Chief Judge “for any reason.” PTAB
Standard Operating Procedure 2 (Rev. 9), at 3. The
majority of the Board does not vote on the opinion or the
designation, the Director need not approve it, and the
4 Certain rules, including rules on procedure, are
exempt from the notice-and-comment rulemaking re-
quirements of § 553. 5 U.S.C. § 553(b)(A). Even the
agency concedes that the rule at issue relates to a legal
standard that it created and does not fall within § 553(b)’s
exceptions to notice and comment rulemaking. Director
Br. 10 (“A ‘standard of proof’ is one of a number of com-
mon legal ‘standards.’”).
AQUA PRODUCTS, INC. v. MATAL 9
decision is, according to the Board, still “not binding
authority.” Id. at 3–4. Making a Board decision prece-
dential, in contrast, requires a majority vote of the Board
judges and approval by the Director, and the decision
then becomes binding on the Board in subsequent mat-
ters. 5 Id. at 2–3. But precedential Board decisions are
not subject to notice and comment. Precedential Board
decisions are posted on the Board’s website and are not
published in the Federal Register, and there is no oppor-
tunity for public comment prior to the designation as
precedential. 6 Finally, neither the authority to designate
opinions as precedential nor the process for doing so is to
be found in the statute; rather this agency grant of power
to itself is articulated only in the agency’s own Standard
Operating Procedures. Regardless of whether preceden-
5 On May 16, 2017, the PTO Director explained that
she intends to expand agency adjudication through prece-
dential decision making and streamline the procedure for
such decision making. See Bryan Koenig, PTAB Not
Mowing Down Patents, USPTO Head Says, LAW360 (May
16, 2017), https://www.law360.com/articles/924461/ptab-
not-mowing-down-patents-uspto-head-says; see also
Director Michelle K. Lee, Keynote Address at the George
Washington University School of Law (May 16, 2017),
https://www.uspto.gov/about-us/news-updates/remarks-
director-michelle-k-lee-george-washington-university-
school-law.
6 In fact, the opinion can be designated precedential
without even the parties to the case being given any
opportunity for comment. The Board’s procedure allows
any member of the public to request that an opinion be
designated precedential, but neither that person, nor the
interested public has the opportunity for any further
input into the Board’s determination.
10 AQUA PRODUCTS, INC. v. MATAL
tial Board decisions constitute formal agency adjudica-
tion, they are not subject to the same requirements as
notice and comment rulemaking through regulation.
Rulemaking through regulation is different from rulemak-
ing through adjudication.
Assuming § 316(a)(9) grants the Director authority to
place the burden of persuasion upon the patentee, this
statutory delegation of authority is limited to prescribing
regulations. A majority of judges agree; where a statute
delegates to the Director the authority to prescribe regula-
tions adopting standards, only notice and comment rule-
making by regulation will be given Chevron deference.
See O’Malley Op. at 54–55 (joined by Judges Newman,
Lourie, Moore, and Wallach); Reyna Op. at 10 (joined by
Judge Dyk).
Congress here gave the agency the authority to “pre-
scribe regulations” on standards and procedures related to
allowing the patent owner to move to amend the patent.
If this rulemaking authority gives the Director authority
to place the burden of persuasion on the patentee in
motions to amend, it is not surprising that Congress
purposefully limited the exercise of that rulemaking to
APA-compliant regulations. The delegation of rulemak-
ing authority to the Director has traditionally been quite
narrowly proscribed by Congress. See John M. Golden,
Working Without Chevron: The PTO as Prime Mover, 65
DUKE L.J. 1657, 1691 (2016) (“[T]he PTO’s powers remain
significantly limited, particularly with respect to its
ability to bind courts to an agency interpretation of sub-
stantive provisions of the Patent Act.”); Joseph Scott
Miller, Substance, Procedure, and The Divided Patent
Power, 63 ADMIN. L. REV. 31, 32–33 (2011) (“It is settled
that Congress has given the Patent Office the power to
issue procedural rules for patent examination at the
AQUA PRODUCTS, INC. v. MATAL 11
Office, not substantive rulemaking power of the sort
federal agencies typically possess.”). 7 It is not for the
courts to second guess Congress’ choice regarding agency
rulemaking.
This is not to say that the agency cannot, absent regu-
lation, adopt a position and apply it to an individual case
in the course of its adjudication. Of course it can, and
does. But it is a distinct question whether Chevron defer-
ence ought to be extended to such a statutory interpreta-
tion, as Mead and other authorities make clear. Courts
generally review questions of statutory interpretation de
novo. 8 If Chevron deference applies then judicial review
7 35 U.S.C. § 2(b)(2)’s broad grant of authority to
the Office to establish regulations to “govern the conduct
of proceedings in the Office” does not eliminate the re-
quirement that the PTO, like other agencies, must comply
with the requirements of the APA. Notably, § 2(b)(2)
expressly requires the agency’s regulations “shall be made
in accordance with section 553 of title 5.” Even if the
delegation to the Director had not specified that the
Director must prescribe regulations to create legal stand-
ards governing motions to amend, § 553 requires notice
and comment rulemaking for agency action purporting to
adopt substantive standards as opposed to interpretive
rules or rules of agency procedure.
8 An agency interpretation not entitled to Chevron
deference may nonetheless be entitled to Skidmore defer-
ence which the Supreme Court describes as follows:
“Such a ruling may surely claim the merit of its writer’s
thoroughness, logic, and expertness, its fit with prior
interpretations, and any other sources of weight.” Mead,
533 U.S. at 235. Skidmore deference is a somewhat
ethereal concept as it amounts to deference which the
Supreme Court explains is proportional to the ruling’s
12 AQUA PRODUCTS, INC. v. MATAL
is substantially narrowed; we would review the agency’s
statutory interpretation only to determine if it contradicts
an unambiguous congressional choice and, if not, whether
it is reasonable. In this case, where Congress delegated
the agency rulemaking authority to be exercised through
regulation, I cannot agree to extend Chevron deference to
agency rulemaking achieved through other means. I
would thus review the relevant legal question—who has
the burden of persuasion—without giving Chevron defer-
ence to the agency position articulated in its Board opin-
ions.
Judge Hughes argues that when Congress enacts leg-
islation that says “The Director shall prescribe regula-
tions . . .” it does not really mean regulations. According
to Judge Hughes, the term regulation is “generic.”
Hughes Op. at 14. According to Judge Hughes, it includes
agency rules apparently without regard to how they are
adopted. 9 Id. Judge Hughes believes that when the
“power to persuade.” Id. This feels a lot like saying I
defer to your interpretation because I have determined
that it is correct.
9 Because the Supreme Court stated in Cuozzo that
§ 316(a) “allows the Patent Office to issue rules,” Judge
Hughes concludes that “rules” and “regulations” must
have identical scope. Hughes Op. at 14–15. He concludes
that the terms are “interchangeable” and that Congress’
delegation to the PTO to “prescribe regulations” should
thus be construed as granting the agency much broader
authority, namely the authority to adopt rules by any
means (including through Board opinions). Id. I do not
agree. And I see no inconsistency in the Supreme Court’s
reference to a regulation as a rule. It is correct to say
regulations are rules, it is not correct to say that all rules
AQUA PRODUCTS, INC. v. MATAL 13
patent statute authorizes the Director “to prescribe regu-
lations” for some things (like legal standards), but permits
the Director “to establish procedures” or “to establish
rules” for other things, those differences are without
meaning. I cannot agree with such a squishy approach to
statutory interpretation. I believe that Congress, by
authorizing the agency to “prescribe regulations” in
§ 316(a) while using broader language in other provisions
of the statute, has chosen how the PTO is permitted to
exercise the authority delegated by § 316(a) and the
prescribed process does not include Board decisions,
whether precedential or not. Congress can choose what to
delegate to agencies and how the agencies are permitted
to exercise that delegated authority. 10
are regulations. An apple is a piece of fruit, but not all
fruit are apples.
10 Judge Hughes suggests that since three decisions
have given Chevron deference to something other than a
regulation even where the statute delegated authority to
regulate, we should too. See Hughes Op. at 15–16 (citing
Cooper Techs. Co. v. Dudas, 536 F.3d 1330 (Fed. Cir.
2008); Tibble v. Edison Int’l, 729 F.3d 1110 (9th Cir.
2013), vacated on other grounds, 135 S. Ct. 1823 (2015);
Mylan Labs. Inc. v. Thompson, 389 F.3d 1272 (D.C. Cir.
2004)). The Mylan decision never mentions the statutory
grant of authority (or the fact that it refers to regula-
tions), so surely that case does not amount to a deliberate
holding that when the statute only delegates authority to
regulate, the agency is free to act in a less formal manner
and still be entitled to Chevron deference. To the extent
the remaining two decisions can be read to afford Chevron
deference to agency action which differed from that ex-
pressly and exclusively delegated by Congress to the
agency, I do not agree with them. These decisions are
14 AQUA PRODUCTS, INC. v. MATAL
Unlike Judge Hughes, I conclude that when Congress
expressly delegates to the Director the ability to adopt
legal standards and procedures by prescribing regulations,
the Director can only obtain Chevron deference if it adopts
such standards and procedures by prescribing regulations.
“Congress . . . does not alter the fundamental details of a
regulatory scheme in vague terms or ancillary provi-
sions—it does not, one might say, hide elephants in
mouseholes.” Whitman v. Am. Trucking Ass’ns, Inc., 531
U.S. 457, 468 (2001). The Board may adopt a legal stand-
ard through a precedential decision in an individual case,
but that legal standard will not receive Chevron deference
when Congress only authorized the agency to prescribe
regulations.
CONCLUDING THOUGHTS
Chevron has effected a broad transfer of legislative
and judicial function to the executive. See Michigan v.
EPA, 135 S. Ct. 2699, 2712–14 (2015) (Thomas, J., con-
curring) (questioning the constitutionality of Chevron
deference under the separation of the powers); Gutierrez-
Brizuela v. Lynch, 834 F.3d 1142, 1149–58 (10th Cir.
2016) (Gorsuch, J., concurring) (Chevron “permit[s] execu-
tive bureaucracies to swallow huge amounts of core judi-
nonetheless easily distinguished from ours. Cooper
treated the interpretation at issue as addressing a matter
of procedure (procedural rules are exempt from notice and
comment rulemaking under § 553(b)). 536 F.3d at 1336.
Tibble held that the regulatory preamble at issue had in
fact gone through full notice and comment and appeared
in the agency’s final rule. The PTO seeks Chevron defer-
ence for the legal standard it adopted in two Board opin-
ions, not a procedural rule, and these Board opinions did
not go through notice and comment rulemaking.
AQUA PRODUCTS, INC. v. MATAL 15
cial and legislative power and concentrate federal power
in a way that seems more than a little difficult to square
with the Constitution of the framers’ design.”); Egan v.
Del. River Port Auth., 851 F.3d 263, 278–83 (3d Cir. 2017)
(Jordan, J., concurring) (“The deference required by
Chevron not only erodes the role of the judiciary, it also
diminishes the role of Congress.”); Philip Hamburger,
Chevron Bias, 84 GEO. WASH. L. REV. 1187, 1189 (2016)
(asking, “even where agencies have congressional authori-
ty to exercise their judgment about what the law is, how
can this excuse the judges from their constitutional duty,
under Article III, to exercise their own independent
judgment?”); Jeffrey A. Pojanowski, Without Deference, 81
MO. L. REV. 1075, 1079 (2016) (summarizing scholarly
critique of the Chevron doctrine). I do not agree with the
agency’s attempts to expand Chevron. We cannot by
judicial fiat usurp legislative authority and hand it over to
the executive.
United States Court of Appeals
for the Federal Circuit
______________________
AQUA PRODUCTS, INC.,
Appellant
v.
JOSEPH MATAL, PERFORMING THE FUNCTIONS
AND DUTIES OF THE UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR, U.S. PATENT AND TRADEMARK
OFFICE,
Intervenor
______________________
2015-1177
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2013-
00159.
______________________
REYNA, Circuit Judge, joined by Circuit Judge DYK; and in
which Chief Judge PROST and Circuit Judges TARANTO,
CHEN, AND HUGHES join only to Part III.
SUMMARY
My colleagues today join one of two thorough and
well-reasoned opinions, Judge O’Malley’s opinion and
Judge Taranto’s dissent. Both opinions begin and end
with a Chevron analysis. They operate under the premise
that whether Chevron deference is warranted is a yes-or-
2 AQUA PRODUCTS, INC. v. MATAL
no question. I disagree with that premise and chart a
different course.
The course of this opinion takes three turns. First, I
concur in Judge Taranto’s reading of § 316(e) as ambigu-
ous to be the fairest reading of the statute and of
§ 316(a)(9) as authorizing the Patent Office to promulgate
a regulation on the burden of persuasion. This means
that a majority of the court interprets § 316(e) to be
ambiguous as to the question of who bears the burden of
persuasion in a motion to amend claims. Second, I de-
termine that the Agency’s general discussion finding that
the burden of persuasion is borne by the patentee is not
an interpretation of the statute that carries the full force
of law, nor did the Agency properly promulgate this
substantive rule of widespread applicability in compliance
with the Administrative Procedure Act. Third, I conclude
that § 316(d) and 37 C.F.R. § 42.121 place a default bur-
den of production on the patentee. This last part of the
opinion is joined by Chief Judge Prost and Circuit Judges
Dyk, Taranto, Chen, and Hughes, collectively represent-
ing a majority view of the court.
In conclusion, although I do not join her opinion,
Judge O’Malley and I agree to vacate and remand this
matter, but for entirely different reasons. I would vacate
and remand with instruction for the Agency to review the
underlying motion to amend by applying only a burden of
production on the patent owner, as § 316(d) and 37 C.F.R.
§ 42.121 currently permit, and not a burden of persuasion,
and a majority of the court agrees. This opinion does not
bar the Agency from crafting a wholesome interpretation
of the evidentiary burdens allowed under the inter partes
review statute that could be afforded deference if properly
promulgated under APA rulemaking procedures.
I. AMBIGUITY OF § 316(E)
The Supreme Court has rejected an all-or-nothing
view of deference in favor of a nuanced approach that
AQUA PRODUCTS, INC. v. MATAL 3
accounts for the full spectrum of an agency’s action.
United States v. Mead, 533 U.S. 218, 236–37 (2001).
Such an approach requires that we begin this inquiry by
looking at the nature of the question at issue and the
interpretive method used by the Agency. Barnhart v.
Walton, 535 U.S. 212, 222 (2002) (citing Mead, 533 U.S. at229–31). Indeed, this case turns on the interpretative
method used by the Patent Office. As discussed further
below, I conclude that the Patent Office has yet to fully
consider the inter partes review statutes, 35 U.S.C.
§§ 316(a)(9), (d), and (e), that this court has been tasked
to review. One result is that the Agency action in ques-
tion is disassociated from the statute at hand. Chevron
deference is thus not applicable. See Negusie v. Holder,
555 U.S. 511, 521 (2009). I further conclude that the
Patent Office’s attempt to assign a burden of persuasion
to be procedurally flawed such that Chevron deference is
not warranted. See Encino Motorcars, LLC v. Navarro,
136 S. Ct. 2117, 2125 (2016).
The question before the court is whether, under
§ 316(e), Congress barred the Patent Office from assign-
ing the patent owner, who moved to amend its claims, the
burden of proof, also understood as the burden of persua-
sion, to show its proposed substitute claims are patenta-
ble. My view that Chevron deference does not apply does
not preclude me from reviewing in the first instance the
import of § 316(e) with respect to motions to amend. See
Encino, 136 S. Ct. 2127. Independent of the question of
deference, I agree with Judge Taranto’s view that § 316(e)
can be fairly interpreted to permit the Patent Office to
assign the burden of persuasion on the patent owner who
moves to amend its claims. Accordingly, I concur with
Part III of Judge Taranto’s Opinion only with respect to
his conclusion that § 316(e) is ambiguous and that the
Patent Office has the authority within § 316(a)(9) to
promulgate regulations on the burden of persuasion, and I
join that limited portion of his opinion. Taranto Op. 8, 25.
4 AQUA PRODUCTS, INC. v. MATAL
II. PATENT TRIAL AND APPEAL BOARD’S GENERAL
DISCUSSION
I now turn to whether the Patent Office has set forth
an interpretation of the evidentiary burdens codified in
the inter partes review statute to which Chevron defer-
ence would apply. Here, I depart from Judge Taranto and
Judge O’Malley, both of whom engage in a Chevron two-
step analysis. The Patent Office has yet to proffer a fully
considered interpretation of the inter partes review stat-
ute directed to the evidentiary burdens for motions to
amend necessary for Chevron deference, and its attempt
to promulgate a rule through ad hoc adjudication is too
procedurally defective to receive Chevron deference.
Negusie, 555 U.S. at 521; Encino, 136 S. Ct. at 2125;
Mead, 533 U.S. at 227.
The nature of this question involves an administrative
agency’s authority to assign a burden of persuasion—a
substantive rule. Dir., Office of Workers’ Compensation
Programs, Dep’t of Labor v. Greenwich Collieries, 512 U.S.
267, 271 (1994) (citing Am. Dredging Co. v. Miller, 510
U.S. 443, 454 (1994)). The allocation of this burden of
persuasion was first addressed in Idle Free Systems, Inc.
v. Bergstrom, Inc., where the Patent Trial and Appeal
Board, through a panel of six administrative law judges,
dismissed a patent owner’s motion to amend for failure to
confer with the Board before filing its motion in violation
of 37 C.F.R. § 42.121. No. IPR2012-00027, 2013 WL
5947697, at *1 (P.T.A.B. June 11, 2013). Instead of
stopping at dismissal, the Board continued into dicta. In
what it called a “general discussion,” the Board estab-
lished wholly new evidentiary requirements mandating
that the burden of persuasion is on the patent owner to
show its proposed substitute claims contain a patentable
distinction over the prior art. Id. at *4. The dicta in Idle
Free was constructed without any reference to the specific
circumstances of the case before the Board.
AQUA PRODUCTS, INC. v. MATAL 5
The Board relied on 37 C.F.R. § 42.20—a general reg-
ulation that provides that “[t]he moving party has the
burden of proof to establish that it is entitled to the
requested relief.” Idle Free’s “general discussion” did not
consider the text of the America Invents Act statute, how
various statutory sections interrelate, whether the Board
had the statutory authority to issue substantive rules for
motions to amend through adjudication, or whether the
statute is inconsistent with the Board’s interpretation of
§ 42.20. The Board also provided no rationale as to why
the burden of persuasion was best situated with the
patent owner. 1
Idle Free was designated informative, which the Chief
Judge of the Board can do “for any reason.” PTAB Stand-
ard Operating Procedure 2 (Rev. 9). Informative decisions
provide “Board norms on recurring issues,” “guidance on
issues of first impression,” and “guidance on Board rules
and practices.” Id. at 3. Idle Free’s dicta thus became
nonbinding guidance. This nonbinding guidance was
never converted into a regulation.
Review of Idle Free first reached this court in Mi-
crosoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1303–08
(Fed. Cir. 2015). In Proxyconn, this court narrowly ad-
dressed the Board’s interpretation of its regulations, 37
C.F.R. §§ 42.20 and 42.121. Id. at 1306. But Proxyconn
contains no discussion of whether the inter partes review
statute, particularly § 316(e), bars 37 C.F.R. § 42.20 from
allocating the burden of persuasion on the patent owner
to show its proposed substitute claims are patentably
distinct over the prior art. Id. at 1307 n.4 (choosing not to
1 Two years passed before the Board proposed a ra-
tionale. Proposed Rule, Amendments to the Rule of
Practice for Trials Before the Board, 80 Fed. Reg. 50720-
01, 50723 (Aug. 20, 2015) (codified at 37 C.F.R. pt. 42).
6 AQUA PRODUCTS, INC. v. MATAL
address “Idle Free’s requirement that the patentee [sic]
show patentable distinction over all prior art known to
the patent owner.” (quotation marks and citation omit-
ted)). Significantly, the court in Proxyconn did not con-
sider that Idle Free’s requirements were dicta
disassociated from the statute. The court in Proxyconn
did not raise or mention the issue of statutory interpreta-
tion.
Despite this dearth of statutory interpretation, the
Patent Office embraced Proxyconn as a ringing endorse-
ment of Idle Free in MasterImage 3D, Inc. v. RealD Inc.,
No. IPR2015-00040, 2015 WL 10709290, at *1 (P.T.A.B.
July 15, 2015), stating that under Idle Free, “[t]he ulti-
mate burden of persuasion remains with Patent Owner,
the movant, to demonstrate the patentability of the
amended claims.” It was a cold embrace. I agree with
Judge O’Malley’s well-articulated view on this particular
point. Arguments presented in Proxyconn did not obligate
the court to “engage in any statutory analysis—with
respect to § 316(e) or otherwise.” O’Malley Op. 16–17.
In MasterImage, the Board adopted Idle Free’s guid-
ance that the patent owner bears the burden of persua-
sion to show its proposed substitute claims are patentable
and clarified the scope of prior art to be “prior art of
record and prior art known to the patent owner.” Id. at
*1. The decision relies heavily on Proxyconn for the
proposition that “[t]he ultimate burden of persuasion
remains with the Patent Owner, the movant, to demon-
strate the patentability of amended claims,” but fails to
acknowledge that Proxyconn was limited to reviewing the
Patent Office’s interpretation of its regulations, primarily
37 C.F.R. §§ 42.20 and 42.121. MasterImage, like Idle
Free, contains no discussion of § 316(e) or of the scope of
the Board’s rulemaking authority under § 316(a)(9).
On May 10, 2016, almost a year after it was issued,
the Patent Office designated MasterImage as preceden-
AQUA PRODUCTS, INC. v. MATAL 7
tial. 2 The Patent Office now cites to Idle Free as the
underlying authority for the proposition that the patent
owner bears the burden of persuasion for showing its
substitute claims are patentable over the prior art of
record. 3
Given this important aspect of the “full spectrum” of
the Agency’s action, we should not ignore that the Patent
Office’s thinking on the allocation of the burden of per-
suasion in a motion to amend is the Idle Free dicta. I do
not accept these dicta to be an interpretation of §§ 316(e),
316(d), and 316(a)(9). As Idle Free and MasterImage lack
any discussion of the evidentiary standard codified at
§ 316(e), or how § 316(e) impacts §§ 316(d) and 316(a)(9), I
conclude that the Patent Office has not fully considered or
2 Designating a decision as precedential requires
each Board member to vote on the opinion and the Direc-
tor’s concurrence. PTAB Standard Operating Procedure 2
(Rev. 9) 2. Precedential opinions are “binding authority in
subsequent matters involving similar facts or issues.” Id.
at 3.
3 See, e.g., Br. for Intervenor – Dir. of the United
States Patent and Trademark Office, Symantec Corp. v.
Veeam Software Corp., No. 2015-1894, 2016 WL 380962,
at *2–3 (Fed. Cir. Jan. 27, 2016); Br. for Intervenor – Dir.
of the United States Patent and Trademark Office, In re
Bosch Automotive Serv. Sols., LLC, No. 2015-1928, 2016
WL 661516 (Fed. Cir. Feb. 8, 2016); Corrected Br. for
Intervenor-Director of the United States Patent and
Trademark Office, Shinn Fu Co. of Am., Inc. v. The Tire
Hanger Corp., No. 2016-2250, 2016 WL 6833819, at *27–
28 (Fed. Cir. Nov. 16, 2016); Br. for Intervenor – Dir. of
the United States Patent and Trademark Office, In re
Silver Peak Sys., Inc., No. 2015-2072, 2016 WL 661517, at
*45–46 (Fed. Cir. Feb. 8, 2016).
8 AQUA PRODUCTS, INC. v. MATAL
interpreted the relevant statutes. Even the underlying
Board opinion in this matter lacks any discussion of
§§ 316(a)(9), (d), or (e). Zodiac Pool Sys., Inc. v. Aqua
Prods., Inc., No. IPR2013-00159, 2014 WL 4244016(P.T.A.B. Aug. 22, 2014). Without the Patent Office’s full
consideration of the statutory question currently before
the court, there is no ripened interpretation to defer to,
and that renders irrelevant the question of Chevron
deference. See Negusie, 555 U.S. at 521 (declining to
reach the issue of Chevron deference where the agency did
not articulate an interpretation based on a full considera-
tion of the statute).
In Negusie, the Court held that where an agency fails
to fully consider the statutory question presented, courts
should not reach the question of Chevron deference. 555
U.S. at 523. The agency at issue had relied on a mistaken
premise that a Supreme Court decision controlled its
interpretation. Id. at 516, 522–23. The Court remanded
to the agency, finding that it failed to reach an independ-
ent interpretation in the first instance and that the agen-
cy’s full consideration of the statutory question is required
before the Court considers deference. Id.
Here, like Negusie, the Board has not addressed the
statutory question of how § 316(e) impacts the evidentiary
burdens in a patent owner’s motion to amend or the rule-
making scope of § 316(a)(9). This important aspect of the
“full spectrum” of the agency action is clear: The Patent
Office has made no independent interpretation in the first
instance. The Board’s MasterImage opinion rests on the
mistaken premise that Proxyconn fully endorses the
Patent Office’s placement of the burden of persuasion on
the patent owner to prove the patentability of its proposed
substitute claims. As discussed above, the holding in
Proxyconn was limited to reviewing the Patent Office’s
regulations and does not address § 316(e) or the scope of
§ 316(a)(9). Without the Board’s fully considered inter-
pretation of § 316 in the first instance as applied to the
AQUA PRODUCTS, INC. v. MATAL 9
burden of persuasion in motions to amend, Chevron
deference is not warranted. 4 Negusie, 555 U.S. at 521.
Indeed, under these circumstances, engaging in a Chevron
analysis would be an exercise in speculation.
I also conclude that the Patent Office does not possess
the statutory authority to issue through adjudication a
substantive rule that creates and allocates a burden of
persuasion. If at all, it can only do so through the prom-
ulgation of a regulation consistent with the APA, 5 U.S.C.
§ 553. Where an agency exceeds its delegated authority
by improperly issuing a substantive rule, it acts ultra
vires and the resulting rule is a nullity. City of Arlington
v. FCC, 133 S. Ct. 1863, 1869 (2013); Chrysler Corp. v.
Brown, 441 U.S. 281, 302 (1979); see also Ruhrgas AG v.
Marathon Oil Co., 526 U.S. 574, 583 (1999); Steel Co. v.
Citizens for a Better Env’t., 523 U.S. 83, 94 (1998). 5 The
Patent Office cannot effect an end-run around its congres-
sionally delegated authority by conducting rulemaking
4 In National Cable & Telecommunications Ass’n v.
Brand X Internet Services, the Supreme Court reversed a
Ninth Circuit decision for failure to apply Chevron defer-
ence to the Federal Communications Commission’s inter-
pretation of Title II of the Communications Act. 545 U.S.
967, 980 (2005). Brand X does not require the court to
apply Chevron deference where, as here, the Patent Office
never considered the statutory question facing the court.
See Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664, 1678
(2017) (Breyer, J., concurring).
5 The Proxyconn decision suggests that the Patent
Office may possess such adjudicatory rulemaking power
for motions to amend. 789 F.3d at 1307. However, it fails
to consider the plain language of § 316(a)(9) that express-
ly limits the Director’s rulemaking power to promulgating
regulations.
10 AQUA PRODUCTS, INC. v. MATAL
through adjudication without undertaking the process of
promulgating a regulation.
Nor should the Patent Office be permitted to effect an
end-run around the APA’s rulemaking process. Judge
Taranto’s opinion thoroughly considers the notice-and-
comment periods for proposed amendments for the rules
of practice for trials before the Board following Idle Free.
Taranto Op. 28–29. But those attempts clearly fell short
of a proper rulemaking on a burden of persuasion; no final
regulation issued on that subject. 6 The Patent Office’s
commentary fails to adequately address the importance of
§ 316(e) on a patent owner’s motion to amend its claims,
or discuss the scope of the Patent Office’s authority to
promulgate substantive rules through adjudication or
regulation under § 316(a)(9). Such general commentary
on existing practices is not equivalent to APA rulemaking,
which requires notice of the issues involved in formulat-
ing a rule that would include the statutory interpretation
issues now before the court. 5 U.S.C. § 553(b).
The Patent Office’s attempt to “construct policy by ad-
judication is evident.” First Bancorporation v. Bd. of
Governors of Fed. Reserve Sys., 728 F.2d 434, 438 (10th
Cir. 1984). While I recognize that the choice between
6 The APA’s mandate states that “an agency shall
afford interested persons general notice of proposed
rulemaking and an opportunity to comment before a
substantive rule is promulgated.” Chrysler, 441 U.S. at
313; Perez v. Mortg. Bankers Ass’n, 135 S. Ct. 1199, 1211
(2015) (Scalia, J., concurring). The Patent Office’s at-
tempt to reverse-engineer Idle Free into a regulation with
the force and effect of law cannot stand because failure to
provide the public notice before engaging in substantive
rulemaking runs afoul of the APA. See Chrysler, 441 U.S.
at 316.
AQUA PRODUCTS, INC. v. MATAL 11
rulemaking via adjudication or regulation lies within an
agency’s discretion, “[t]he function of filling the interstic-
es” of the Patent Act “should be performed as much as
possible, through the quasi-legislative promulgation of
rules to be applied in the future.” SEC v. Chenery Corp.,
332 U.S. 194, 202 (1947). An agency’s choice to use adju-
dication to construct rules of general applicability can
amount to an abuse of discretion. NLRB v. Bell Aerospace
Co. Div. of Textron, Inc., 416 U.S. 267, 295 (1974). Rule-
making through adjudication is a nonstarter here, where
the subject rule is a significant game change in the inter
partes review process by setting out a substantive rule
that creates and allocates an evidentiary burden to a
party, none of which before existed. See Morton v. Ruiz,
415 U.S. 199, 232–36 (1974); see also 5 U.S.C. § 552(a)(D).
Such a substantive rule of general applicability should not
be reached through ad hoc adjudication. Ford Motor Co.
v. FTC, 673 F.2d 1008, 1009 (9th Cir. 1981); Matzke v.
Block, 732 F.2d 799, 802 (10th Cir. 1984). This is partic-
ularly true in this case because the rule articulated in Idle
Free and MasterImage contains no adjudicative facts
specifically relevant to the circumstances of the petitioner
or patent owner. See First Bancorporation, 728 F.2d at
438.
Thus, while decisions such as MasterImage may occa-
sionally be designated as precedential, there must be a
principled legal reason for doing so. There is no reason to
conclude that Congress intended “to create a Chevron
patchwork of [adjudicative decisions], some with force of
law, some without.” Mead, 533 U.S. at 234. While I
recognize the Director’s authority to designate Board
decisions as precedential for agency consistency and to
establish purely procedural requirements by adjudication,
this authority is not a carte blanche to use adjudicative
rulemaking without accounting for the nature of the rule
at issue and the rule’s effect on other litigants. Here,
because there was no such accounting, the Director’s
12 AQUA PRODUCTS, INC. v. MATAL
designation of MasterImage as precedential was little
more than an attempt to issue a substantive rule without
following established procedural requirements of rule-
making under the APA.
Where a statute is silent on the allocation of an evi-
dentiary burden and there is no agency action that earns
Chevron deference such as a wholesome interpretation of
the question at hand, the court’s review of the agency’s
choices typically begins with the ordinary default rules of
evidence. Gross v. FBL Fin. Servs., Inc., 557 U.S. 167,
177 (2009); see Schaffer v. Weast, 546 U.S. 49, 56 (2005).
This is because Congress is presumed to draft legislation
with these long-standing default rules in mind. Meacham
v. Knolls Atomic Power Lab., 554 U.S. 84, 91–92 (2008).
Here, as discussed further below, § 316(d) and the Patent
Office’s regulations governing motions to amend claims
override any default evidentiary rules by placing only a
burden of production on a patent owner to satisfy the
requirements of § 316(d) and 37 C.F.R. § 42.121. 7 Under
the statute, therefore, the default rule is that the patent
owner does not bear the burden of persuasion on the
patentability of its proposed amended claims. 8
7 On this point, I agree with Judge O’Malley’s view
solely to the extent that § 316(d) does not unambiguously
impose a burden of persuasion on the patent owner.
O’Malley Op. 21.
8 This same reasoning applies to the second ques-
tion presented: whether the Board can sua sponte raise
patentability issues if the petitioner does not raise a
patentability argument. The Patent Office has not fully
considered whether the inter partes review statute can be
reasonably interpreted to give the Board this kind of
broad discretion, in particular where, as here, the peti-
tioner remains in the inter partes review proceeding.
AQUA PRODUCTS, INC. v. MATAL 13
III. BURDEN OF PRODUCTION
It is important to note that Aqua has not challenged
two important aspects of the Board’s practice pertaining
to the burden of production. First, the obligations the
Patent Office may impose on the patent owner to produce
evidence pertinent to the required assessment of patenta-
bility. See Microsoft Corp. v. i4i Ltd. P’ship, 564 U.S. 91,
100 n.4 (2011) (distinguishing burdens of persuasion from
burdens of production); Dynamic Drinkware, LLC v. Nat’l
Graphics, Inc., 800 F.3d 1375, 1378–79 (Fed. Cir. 2015).
The other is the assignment of various pleadings or ar-
gument duties, i.e., the scope of obligations the Patent
Office may impose on the patent owner to address partic-
ular patentability issues in its motion to amend. See
Veritas Techs., LLC v. Veeam Software Corp., 835 F.3d
1406, 1414–15 (Fed. Cir. 2016) (noting that issue of what
patent owner must address in its motion to amend is
distinct from the issue of the ultimate burden of persua-
sion on the evidence). Section 316(e) does not address
either aspect.
With respect to motions practice outside the inter
partes review context, it is well settled that regardless of
which party bears the ultimate burden of persuasion, the
movant bears a burden of production. For example,
Federal Rule of Civil Procedure 7(b)(1) provides that any
motion must “state with particularity the grounds for
seeking” a court order and “state the relief sought.”
“Thus, a motion that fails to state any grounds for relief
or a motion that simply states that there are several
reasons for relief without explaining those grounds for
relief is insufficient . . . .” Allender v. Raytheon Aircraft
Co., 439 F.3d 1236, 1240 (10th Cir. 2006); see also United
States ex rel. Doe v. Dow Chem. Co., 343 F.3d 325, 331
(5th Cir. 2003) (noting that a “bare request in an opposi-
tion to a motion to dismiss—without any indication of the
particular grounds on which the amendment is sought, cf.
14 AQUA PRODUCTS, INC. v. MATAL
Fed. R. Civ. P. 7(b)—does not constitute a motion within
the contemplation of rule 15(a)”).
There is no disagreement that the patent owner bears
a burden of production in accordance 35 U.S.C. § 316(d).
Indeed, the Patent Office has adopted regulations that
address what a patent owner must submit in moving to
amend the patent. 37 C.F.R. §§ 42.20(a), 42.22(a),
42.121(a)(2)(i). For instance, § 42.22(a) requires a movant
to provide in a motion “[a] full statement of the reasons
for the relief requested, including a detailed explanation
of the significance of the evidence including material
facts, and the governing law, rules, and precedent.”
During rulemaking, regarding rules of practice before the
Board, the Patent Office cited § 42.22 to explain,
In the event that a patent owner files a motion to
amend the claims, the patent owner must include
a statement of the precise relief requested and a
full statement of the reasons for the relief re-
quested, including a detailed explanation of the
significance of the amended claims (e.g., a state-
ment that clearly points out the patentably dis-
tinct features for the proposed new or amended
claims). See § 42.22.
77 Fed. Reg. at 48,626. These regulations are not called
into question by today’s decision. Contrary to Judge
O’Malley’s suggestion, Part III of my opinion, joined by a
majority of this court, is not “dictum.” See O’Malley Op.
63–64. Instead, Part III of this opinion sets forth the
judgment of this court on what the Board may and may
not do with respect the burden of production on remand in
this case. To that extent, a patent owner is not excused
from assisting the Board to perform its statutory obliga-
tion to “issue a final written decision with respect to the
patentability of . . . any new claim added under section
316(d).” 35 U.S.C. § 318(a).
AQUA PRODUCTS, INC. v. MATAL 15
IV. CONCLUSION
With respect to the burden of persuasion, my col-
leagues’ willingness to dive headlong into a Chevron two-
step analysis without initially considering whether the
Patent Office’s position in Idle Free and MasterImage is
an interpretation of the inter partes review statute fails to
account for the Supreme Court’s nuanced approach that
reviews the full spectrum of an agency’s actions. I decline
to extend Chevron deference to the Patent Office until it
has fully considered the statutory question. Until then,
there is nothing to review, the Agency action is a nullity.
Given the foregoing, I would hold that the Agency ac-
tion under consideration in this case to be contrary to law.
Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1379
(Fed. Cir. 2016); 5 U.S.C. § 706(2). With this in mind, I
would vacate the Board’s decision denying Aqua’s motion
to amend, and remand for further proceedings. Should
the Patent Office present a fully considered interpretation
of the governing statute and properly promulgate such a
rule through APA compliant rulemaking, Chevron defer-
ence would be on the table. In the interim, the Patent
Office must by default abide by the existing language of
the inter partes review statute and regulations, § 316(d)
and 37 C.F.R. § 42.121, which only allocate a burden of
production to the patent owner.
United States Court of Appeals
for the Federal Circuit
______________________
AQUA PRODUCTS, INC.,
Appellant
v.
JOSEPH MATAL, PERFORMING THE FUNCTIONS
AND DUTIES OF THE UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR, U.S. PATENT AND TRADEMARK
OFFICE,
Intervenor
______________________
2015-1177
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2013-
00159.
______________________
TARANTO, Circuit Judge, joined by PROST, Chief Judge,
and CHEN and HUGHES, Circuit Judges, dissenting from
the judgment, and joined in part in other respects by DYK
and REYNA, Circuit Judges.
Most of this opinion sets forth a full analysis support-
ing the following two legal conclusions that are joined by
a majority of the court—the four Judges signing on to this
opinion in full and Judges Dyk and Reyna. First, in an
inter partes review (IPR), 35 U.S.C. § 316(a) authorizes
the Director of the Patent and Trademark Office (PTO) to
2 AQUA PRODUCTS, INC. v. MATAL
address who has the burden of persuasion on the patent-
ability of substitute claims that the patent owner propos-
es to add to the patent in a motion to amend the patent.
Second, 35 U.S.C. § 316(e) does not unambiguously bar
assigning that burden to the patent owner. This opinion
also notes my agreement with the majority conclusion, set
forth in Judge Reyna’s opinion, that certain PTO regula-
tions imposing burdens of production on the patent owner
are undisturbed and therefore applicable on remand in
this case.
On the other hand, I disagree with a conclusion drawn
by a differently constituted majority—Judge O’Malley, the
four Judges joining her opinion, and Judges Dyk and
Reyna—regarding the assignment to the patent owner of
the burden of persuasion regarding patentability of pro-
posed substitute claims. The majority has concluded that
the PTO has not made that assignment through action
that warrants deference under Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837(1984). That conclusion leads the court to vacate the
decision of the Patent Trial and Appeal Board, which
assigned the burden of persuasion to patent owner Aqua
Products. I disagree with the conclusion and therefore
the vacatur. In my view, a PTO regulation assigns the
burden of persuasion to the patent owner, 37 C.F.R.
§ 42.20(c), and Aqua Products has presented no sound
argument against giving Chevron deference to that regu-
lation. Because I would affirm the Board’s decision on
that basis, I dissent from the judgment of vacatur.
I. INTRODUCTION
Under the America Invents Act (AIA), Pub. L. No.
112-29, 125 Stat. 284 (2011), the PTO may revisit the
patentability of patent claims that have been challenged
on statutorily specified grounds by way of a petition for an
IPR. The PTO’s Director may institute such a review
upon determining that “there is a reasonable likelihood
AQUA PRODUCTS, INC. v. MATAL 3
that the petitioner would prevail” as to at least one of the
challenged claims. 35 U.S.C. § 314(a). After an IPR has
been instituted, the patent owner may file a “motion to
amend the patent,” proposing “substitute claims” to
replace one or more of the challenged claims. 35 U.S.C.
§ 316(d)(1). Under 35 U.S.C. § 316(e) (“In an inter partes
review instituted under this chapter, the petitioner shall
have the burden of proving a proposition of unpatentabil-
ity by a preponderance of the evidence.”), the petitioner
undisputedly has the burden of persuasion on the un-
patentability of any claims it challenges on which the IPR
was instituted. The question involved in this case is who
has the burden of persuasion regarding patentability of
any substitute claims that the patent owner proposes to
add to the patent after institution.
Congress has directed the Board to adjudicate patent-
ability in IPRs, including the patentability of “any new
claim added under section 316(d).” 35 U.S.C. § 318(a).
Fulfilling that obligation requires a determination of who
has the burden of persuasion as to such proposed substi-
tute claims. Congress has expressly granted the PTO
Director the authority under 35 U.S.C. § 316(a)(4) and
(a)(9) to promulgate regulations “establishing and govern-
ing inter partes review” and “setting forth standards and
procedures for allowing the patent owner to move to
amend the patent” during an IPR. Based on 37 C.F.R.
§ 42.20(c), a regulation adopted by the Director through
notice-and-comment rulemaking pursuant to the § 316(a)
authority, the Board, from the outset of the IPR program,
has assigned the burden to the patent owner, which is the
party requesting an affirmative action from the Board,
namely, to add the substitute claims to the patent.
Aqua Products contends that Congress foreclosed that
choice through § 316(e). The Director argues otherwise. I
agree with the Director. The assignment of the burden to
the patent owner for proposed substitute claims, which
fits within the Director’s § 316(a) regulatory authority,
4 AQUA PRODUCTS, INC. v. MATAL
passes muster under the framework established by Chev-
ron. In my view, Section 316(e) does not address the
precise issue and does not unambiguously place the
burden on an IPR petitioner to prove that the patent
owner’s proposed substitute claims are unpatentable.
Under Chevron Step Two, the patent owner may be
assigned the burden of persuasion as long as doing so is
reasonable. Aqua Products makes no meaningful argu-
ment under Step Two independent of its Step One argu-
ment about § 316(e).
Aqua Products’ only remaining contention amounts to
a narrow argument for why the Chevron framework
should not apply here. I would reject that argument. The
assignment to the patent owner of the burden of persua-
sion regarding proposed substitute claims has from the
outset of the IPR program rested on 37 C.F.R. § 42.20(c).
That regulation, issued through notice-and-comment
rulemaking pursuant to the statutorily granted § 316(a)
authority, is a classic example of the kind of agency action
that generally warrants application of the Chevron
framework. Aqua Products’ only argument about that
regulation is about what the regulation means: Aqua
Products argues that the regulation is not properly read
actually to assign the burden of persuasion at issue. I
conclude otherwise—that, judicially interpreted, even
without any deference to the PTO, the regulation does
assign the burden of persuasion at issue here. Because I
reject Aqua Products’ only argument against applying the
Chevron framework, I would apply Chevron.
I do not address other potential objections to the ap-
plicability of the Chevron framework. No such other
objections, including objections to the deficiency of the
PTO’s rulemaking consideration of the relevant issues,
have been raised by Aqua Products or meaningfully
briefed by the parties. If the PTO is to assign the burden
of persuasion to the patent owner, it will need to launch a
AQUA PRODUCTS, INC. v. MATAL 5
new rulemaking—which can obviate objections to the
adequacy of the Director’s process and reasoning to date.
II. BACKGROUND
In 2013, pursuant to 35 U.S.C. §§ 311–319, Zodiac
Pool Systems, Inc. filed a petition with the PTO for an
inter partes review of claims 1–14, 16, and 19–21 of U.S.
Patent No. 8,273,183, owned by Aqua Products, Inc. The
petition challenged the patentability of those claims on
grounds of anticipation and obviousness, based on U.S.
Patent Nos. 3,321,787 (Myers), 3,936,899 (Henkin), and
4,100,641 (Pansini). Zodiac Pool Sys., Inc. v. Aqua Prods.,
Inc., No. IPR2013-00159 (P.T.A.B. Feb. 25, 2013), Paper
No. 5. A panel of the Patent Trial and Appeal Board,
exercising authority delegated by the PTO’s Director, 37
C.F.R. §§ 42.4, 42.108, instituted review of claims 1–9, 13,
14, 16, and 19–21. Zodiac Pool Sys., No. IPR2013-00159
(P.T.A.B. Aug. 23, 2013), Paper No. 18.
Soon thereafter, pursuant to 35 U.S.C. § 316(d) and
37 C.F.R. § 42.121, Aqua Products filed a motion to
amend its patent, proposing to substitute claims 22, 23,
and 24 for claims 1, 8, and 20, respectively. Zodiac Pool
Sys., No. IPR2013-00159 (P.T.A.B. Mar. 3, 2014), Paper
No. 42. Zodiac, in addition to pressing its patentability
challenge to the issued claims, opposed the motion to
amend, arguing that the proposed substitute claims were
likewise unpatentable. Zodiac Pool Sys., No. IPR2013-
00159 (P.T.A.B. Mar. 10, 2014), Paper No. 45. The Board,
in its final written decision, held both the issued and
proposed substitute claims unpatentable and denied Aqua
Products’ motion to amend. Zodiac Pool Sys., No. IPR-
2013-00159, 2014 WL 4244016 (P.T.A.B. Aug. 22, 2014).
With respect to the motion to amend, the Board con-
cluded that the proposed substitute claims were un-
patentable based on two of the three prior-art references,
i.e., Henkin and Myers, that it had invoked in determin-
ing that the issued claims were unpatentable. Id. at *12–
6 AQUA PRODUCTS, INC. v. MATAL
17, 29–30. The Board simply concluded that Aqua Prod-
ucts had not carried the ultimate burden of persuasion of
showing patentability of the proposed substitute claims.
Id. at *27, 30. In ruling that the patent owner had that
burden of persuasion, the Board relied on one of the
Director’s 2012 regulations, 37 C.F.R. § 42.20(c), govern-
ing IPR and other trial proceedings newly created by the
AIA. 1 In Idle Free Systems, Inc. v. Bergstrom, Inc., No.
IPR2012-00027, 2013 WL 5947697, at *4 (P.T.A.B. June
11, 2013), apparently the first Board decision on a motion
to amend under the new IPR provisions, a special Board
panel had concluded that § 42.20(c) imposes the burden of
persuasion on patentability for a proposed substitute
claim on the patent owner, the movant in seeking to
amend the patent.
On appeal to this court, Aqua Products appealed only
the denial of the motion to amend, not the rejection of the
issued claims of the ’183 patent. After Aqua Products
filed its opening brief, the Director intervened to defend
the Board’s decision; and not long afterwards, appellee
Zodiac withdrew from the appeal. A panel of this court
concluded that the Board did not err in holding proposed
substitute claims 22–24 unpatentable. In re Aqua Prods.,
Inc., 823 F.3d 1369 (Fed. Cir. 2016). In affirming the
Board’s denial of the motion to amend, the panel followed
several decisions of this court that upheld the PTO’s
1 Those regulations relied on the Director’s rule-
making authority under § 316(a) as well as other rule-
making authority relevant to the other proceedings
covered by the regulations, e.g., 35 U.S.C. §§ 2(b)(2),
326(a). See Final Rule, Rules of Practice for Trials Before
the Patent Trial and Appeal Board and Judicial Review of
Patent Trial and Appeal Board Decisions, 77 Fed. Reg.
48,612, 48,670 (Aug. 14, 2012) (2012 Final Rule).
AQUA PRODUCTS, INC. v. MATAL 7
assignment to the patent owner of the burden of persua-
sion on the patentability of proposed substitute claims.
See Nike, Inc. v. Adidas AG, 812 F.3d 1326, 1332–35 (Fed.
Cir. 2016); Synopsys, Inc. v. Mentor Graphics Corp., 814
F.3d 1309, 1323–24 (Fed. Cir. 2016); Prolitec, Inc. v.
ScentAir Techs., Inc., 807 F.3d 1353, 1362–65 (Fed. Cir.
2015), petition for reh’g pending; Microsoft Corp. v. Proxy-
conn, Inc., 789 F.3d 1292, 1307 (Fed. Cir. 2015).
Aqua Products sought en banc rehearing to challenge
the burden-of-persuasion assignment regarding proposed
substitute claims as impermissible under the statute—
specifically, as incompatible with 35 U.S.C. § 316(e).
Aqua Products’ Pet. for Reh’g En Banc 1. On August 12,
2016, this court vacated the panel’s decision and granted
en banc review. In re Aqua Prods., Inc., 833 F.3d 1335(Fed. Cir. 2016) (en banc).
III. DISCUSSION
This case involves a familiar pattern under the IPR
provisions of the AIA. An IPR was instituted to review
claims in an issued patent based on a petitioner’s chal-
lenge. While contesting the challenge to the issued
claims, the patent owner also filed with the Board, under
§ 316(d), a “motion to amend [its] patent” to include new
claims as substitutes for some of the issued claims. As is
common, the patent owner asked for the substitution to be
made only if the issued claims were held unpatentable.
The Board, upon concluding that the issued claims were
unpatentable, was required to determine, in its final
written decision, “the patentability of . . . any new claim
added under section 316(d).” 35 U.S.C. § 318(a). An
affirmative determination would require the Director to
add the substitute claim to the patent. Id. § 318(b). Here,
the Board denied the motion to amend the patent upon
determining that the proposed substitute claims were not
patentable and so should not be added to the patent.
8 AQUA PRODUCTS, INC. v. MATAL
It is undisputed that, under § 316(e), a petitioner has
the burden of persuasion on the patentability of the
issued claims on which the IPR was instituted. The
question presented to us involves the burden of persua-
sion regarding substitute claims that the patent owner, by
a motion to amend, asks the PTO to add to the patent.
Who has that burden is a question that must be answered
for the Board to carry out the adjudicatory task Congress
has assigned it in § 318. 2
I conclude that the Director has answered that ques-
tion, by assigning the burden of persuasion regarding
patentability of proposed substitute claims to the patent
owner, in a regulation adopted through notice-and-
comment rulemaking in August 2012 in preparation for
the September 2012 launch of the IPR program—37
C.F.R. § 42.20(c). As a threshold matter, I conclude that
the assignment of that burden comes within the language
of the congressional grant to the Director of authority to
promulgate regulations “establishing and governing inter
partes review,” 35 U.S.C. § 316(a)(4), and “setting forth
standards and procedures for allowing the patent owner
to move to amend the patent,” 35 U.S.C. § 316(a)(9). As
noted above, assigning the burden of persuasion is neces-
sary for deciding patentability of proposed substitute
claims in IPRs. Prescribing an across-the-board rule
making the assignment is thus a natural part of estab-
lishing and governing IPRs, as authorized by § 316(a)(4),
and § 316(a)(9) too is broad enough to reach such a gener-
2 I agree with Judge Reyna’s discussion in Part III
of his opinion that nothing in today’s decision casts doubt
on the PTO’s authority or prescriptions regarding the
burden of producing evidence or duties to address speci-
fied matters in pleadings or other filings. See Reyna Op.
13–15.
AQUA PRODUCTS, INC. v. MATAL 9
ic rule for evaluating motions to amend. Moreover,
§ 316(e)’s title (“evidentiary standards”) characterizes
assignment and definition of a burden of persuasion as a
“standard.” And the Covered Business Method Review
provision of the AIA, § 18(a)(1), 125 Stat. at 329, requires
the PTO generally to “employ the standards and proce-
dures” of the Post-Grant Review program, 35 U.S.C.
§§ 321–329, among them a burden-of-persuasion provision
just like § 316(e). See 35 U.S.C. § 326(e).
I do not think that the burden of persuasion falls out-
side the Director’s § 316(a) authority merely because
burdens of persuasion are treated as “substantive” for
various legal purposes. See O’Malley Op. 53, 57-58.
Section 316(a) does not use “substantive” as a criterion of
exclusion. The term, often used in contrast to “procedur-
al,” lacks a uniform bright-line meaning, and the sub-
stance-procedure distinction is not the distinction made
by § 316(a)—which, for example, covers both “standards
and procedures.” The Supreme Court found § 316(a) to
cover the choice of the broadest-reasonable-interpretation
approach to construing patent claims, which is not self-
evidently either a “substantive” or “procedural” matter.
Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2142–
43 (2016). 3
3 The burden of persuasion, for its part, is “proce-
dural” enough that the Administrative Procedure Act
(APA) contains a provision, 5 U.S.C. § 556(d), that assigns
the burden of persuasion to the proponent of an agency
rule or order. See Dir., Office of Workers’ Comp. Pro-
grams, Dep’t of Labor v. Greenwich Collieries, 512 U.S.
267, 272–81 (1994); cf. Cooper v. Oklahoma, 517 U.S. 348,
367 (1996) (referring to “procedures” as including the
burden of persuasion). Such matters are properly distin-
guished from, importantly, the interpretation of the
10 AQUA PRODUCTS, INC. v. MATAL
Aqua Products’ chief argument is that the Director’s
authority to answer this particular question is superseded
by a clear answer given directly by Congress elsewhere in
the IPR provisions, namely, in § 316(e). Specifically,
Aqua Products argues that § 316(e) precludes the assign-
ment of the burden of persuasion to the patent owner.
The Director argues to the contrary.
In addressing that dispute, I follow the Chevron
framework, which the parties accept with only a brief
challenge by Aqua Products. Under Chevron’s Step One,
the question is whether Congress has “directly spoken to
the precise question at issue,” answering it “unambigu-
ously.” Chevron, 467 U.S. at 842–43; see Encino Motor-
cars, LLC v. Navarro, 136 S. Ct. 2117, 2125–26 (2016).
Although the ambiguity determination must consider the
statute as a whole, see Nat’l Ass’n of Home Builders v.
Defs. of Wildlife, 551 U.S. 644, 666 (2004), Aqua Products’
argument focuses overwhelmingly on § 316(e). If the
statute is ambiguous on the question, the Step Two ques-
tion is whether the choice made by the agency is “reason-
able.” Chevron, 467 U.S. at 844; Encino Motorcars, 136 S.
Ct. at 2124–25.
I conclude that the suggested statutory bar, § 316(e),
does not unambiguously assign to the petitioner the
burden of persuasion on the unpatentability of proposed
statute’s patentability provisions, e.g., 35 U.S.C. §§ 101,
102, 103, 112, over which the PTO has not been granted
deference-generating authority. See In re Cuozzo Speed
Techs., LLC, 793 F.3d 1268, 1279 (Fed. Cir. 2015), aff’d
sub nom. Cuozzo, 136 S. Ct. 2131. It was the latter,
“substantive criteria of patentability” that the Director
was distinguishing when characterizing the 2012 rules as
“procedural and/or interpretive.” 2012 Final Rule, 77 Fed.
Reg. at 48,650, 48,651.
AQUA PRODUCTS, INC. v. MATAL 11
substitute claims. Section 316(e) may properly be under-
stood to reach only issued claims, which the petitioner
necessarily challenged (or else they would not be the
subject of the instituted IPR), and not to reach proposed
substitute claims, which the statute itself makes clear
may go unchallenged by the petitioner. In this case,
answering the Step One question in the Director’s favor
means that the Director’s position passes muster under
Chevron because there is no meaningful dispute that it is
among the reasonable choices available if the statute is
ambiguous on the point.
Aqua Products, while predominantly arguing within
the Chevron framework that the statute unambiguously
forbids the Director’s position, makes a brief argument
against the applicability of the Chevron framework. It
asserts that 37 C.F.R. § 42.20(c) does not address the
burden of persuasion regarding patentability and that
Idle Free, which relied on § 42.20(c) as assigning the
burden of persuasion at issue, was not a binding Board
decision or otherwise owed any deference. I conclude,
however, that, wholly apart from any deference to Idle
Free or other Board decisions, § 42.20(c)—a binding
regulation adopted through notice-and-comment rulemak-
ing as authorized by 35 U.S.C. § 316(a)—does assign the
burden of persuasion on substitute claims to the patent
owner. Aqua Products has not challenged the regulation
on other grounds. There being no meritorious objection
raised to relying on § 42.20(c) as making the burden
assignment at issue, the formal regulation, adopted
through notice-and-comment rulemaking, suffices to
make Chevron applicable. See Encino Motorcars, 136 S.
Ct. at 2124–26; City of Arlington v. FCC, 133 S. Ct. 1863,
1874 (2013); Barnhart v. Walton, 535 U.S. 212, 217, 227
(2002); United States v. Mead Corp., 533 U.S. 218, 227,
229–30 (2001).
12 AQUA PRODUCTS, INC. v. MATAL
A
1
Within the Chevron framework, the Step One ques-
tion here focuses on 35 U.S.C. § 316(e). Again, that
subsection states: “In an inter partes review instituted
under this chapter, the petitioner shall have the burden of
proving a proposition of unpatentability by a preponder-
ance of the evidence.” The question is whether that
provision “unambiguously” applies to a patent owner’s
proposed substitute claim. Chevron, 467 U.S. at 843.
Aqua Products argues that it does. Aqua Products re-
lies almost entirely on a simple, textual argument: that,
when a petitioner (like Zodiac in this IPR) opposes addi-
tion of a proposed substitute claim on the ground that the
claim is unpatentable, the petitioner is asserting “a
proposition of unpatentability” covered by § 316(e). The
Director, in contrast, contends that § 316(e) applies only
to the issued patent claims whose patentability is being
adjudicated in the IPR.
Applying Chevron’s Step One standard, I would reject
Aqua Products’ textual argument and conclude that the
text admits of being read to apply only to issued claims.
The crucial textual fact is § 316(e)’s reliance on a “peti-
tioner” and a “proposition of unpatentability.” The signif-
icance of that fact is informed by basic features of the IPR
statute: (1) The IPR provisions distinguish between
issued claims and newly proposed claims. (2) Congress
understood that, for issued claims, a “petitioner” would
always have advanced a “proposition of unpatentability.”
(3) Congress recognized that a patent owner’s proposed
substitute claims may go unchallenged by any “petitioner”
and, thus, never lead to any assertion of a “proposition of
unpatentability.” And yet (4) the Board has a statutory
obligation under § 318(a) to determine the patentability of
proposed substitute claims, irrespective of whether they
have been challenged as unpatentable.
AQUA PRODUCTS, INC. v. MATAL 13
I begin with what § 316(e) does not say: It is not writ-
ten in terms independent of the presence of a petitioner
asserting unpatentability. Thus, it does not expressly
mention proposed substitute claims. Nor does it mention
“claims” at all, much less in a way that would necessarily
imply coverage of proposed substitute claims. Sec-
tion 316(e) does not use language that broadly declares
that to reject any claim the Board must find unpatentabil-
ity by a preponderance of the evidence. It is not written
to refer only to the adjudicator, or only to the patent
owner, or only to both.
Rather, § 316(e) is written in terms of what “the peti-
tioner” must prove to establish “a proposition of un-
patentability.” Aqua Products does not adequately
account for that language in asserting a lack of ambiguity
under Chevron Step One. The congressional tying of
§ 316(e) to “the petitioner” and its unpatentability asser-
tion provides a textual basis for the sensible view that, in
§ 316(e), Congress was writing a rule only for the class of
claims that it recognized as necessarily having been
challenged as unpatentable by a “petitioner” (namely,
issued claims) and not for a distinct class of claims that it
expressly recognized might be placed before the Board by
the patent owner without any opposition from a petitioner
(namely, proposed substitute claims).
The provisions governing IPRs make that distinction
between issued and proposed substitute claims clear. As
to issued claims: An IPR may not be instituted sua sponte
by the Director, but only upon a petitioner’s filing of a
petition under § 311. The scope of the IPR is also limited
by § 311. The petitioner “may request to cancel as un-
patentable” issued claims “only on a ground that could be
raised under section 102 or 103.” 35 U.S.C. § 311(b). The
petition must, among other things, identify with particu-
larity “each claim challenged, the grounds on which the
challenge to each claim is based, and the evidence that
supports the grounds for the challenge to each claim.” Id.14 AQUA PRODUCTS, INC. v. MATAL
§ 312(a)(3). The Director’s determination to institute then
is tied to “the information presented in the petition” and
the existence of “a reasonable likelihood that the petition-
er would prevail with respect to at least 1 of the claims
challenged in the petition.” Id. § 314(a). Those provisions
imply that only claims challenged by the petitioner may
be included in the instituted IPR. From the beginning,
the Director’s regulations have made that clear. 37 C.F.R.
§ 42.108(a) (“When instituting inter partes review, the
Board may authorize the review to proceed on all or some
of the challenged claims and on all or some of the grounds
of unpatentability asserted for each claim.”). 4 For all
issued claims adjudicated in an IPR, then, Congress could
take as a given that “the petitioner” necessarily had
challenged them through assertion of a “proposition of
unpatentability.” 5
In contrast, Congress made plain its recognition that
any new substitute claims proposed by the patent owner
during an IPR might well go unchallenged by any peti-
tioner. The provisions of chapter 31 that lay out the
framework for a petitioner’s challenge to issued claims
(§§ 311 and 312) do not impose on a petitioner any re-
sponsibility with respect to substitute claims. More
4 That regulation refers to the Board because, as
noted, the Director has delegated institution authority to
the Board. 37 C.F.R. §§ 42.4, 42.108.
5 Section 317 recognizes that, after institution, one
or all petitioners may drop out of the proceeding. But
that possibility does not contradict the premise, implied in
the IPR regime as just indicated, that a petitioner did
challenge all of the issued claims subject to the instituted
IPR—and, indeed, made a record before institution suffi-
ciently strong to support a determination that unpatenta-
bility is at least reasonably likely.
AQUA PRODUCTS, INC. v. MATAL 15
specifically and affirmatively, the provision that address-
es motions to amend the patent, § 316(d), expressly estab-
lishes that Congress contemplated unchallenged proposed
substitute claims. Section 316(d)(2) provides for motions
to amend filed “upon the joint request of the petitioner
and the patent owner to materially advance the settle-
ment of a proceeding.” 35 U.S.C. § 316(d)(2). As that
provision indicates, there is no reason to assume that a
petitioner would always be motivated to oppose a pro-
posed substitute claim. Whatever the likelihood in prac-
tice, a patent owner may propose substitute claims
sufficiently different from the issued claims so as no
longer to be of concern to the petitioner—either at all or
enough to justify the expense of an adequate opposition.
See O’Malley Op. 30 (“Congress contemplated narrowing
amendments which would relieve a petitioner of any
threat of infringement. . . .”). For those practical reasons,
as reflected expressly in § 316(d)(2), Congress could not
have assumed that a proposed substitute claim will
always face opposition from a petitioner.
Yet Congress expressly demanded that the Board ad-
judicate the patentability of proposed substitute claims
under § 318(a). It is against the background of that Board
obligation, and the recognized possibility that a petitioner
might not challenge proposed substitute claims, that the
language of § 316(e)—specifically, the inclusion of the
“petitioner” and “proposition of unpatentability” lan-
guage—must be understood. That language, in a provi-
sion not referring specifically to “claims,” is permissibly
read to make the same distinction that is made using
other language in certain sections that, unlike § 316(e), do
refer to “claims.” 35 U.S.C. §§ 314(a), 318(a), 318(b); see
O’Malley Op. 25. The reference to “the petitioner” in
§ 316(e) is readily understood to embody a simple categor-
ical distinction between issued and proposed substitute
claims: for the former, the presence of a “petitioner”
assertion of unpatentability is a certainty; for the latter, it
16 AQUA PRODUCTS, INC. v. MATAL
is not. That distinction permits reading § 316(e) to apply
only to claims for which the categorical assumption of a
petitioner unpatentability assertion applies, namely,
issued claims.
Accepting Aqua Products’ and others’ suggested con-
trary readings of § 316(e) would require attributing to
Congress unproven assumptions about the handling of the
clearly contemplated scenario of a proposed substitute
claim never opposed by a petitioner. In one such reading,
the Board is required simply to issue the proposed substi-
tute claim—even where no examiner ever reviewed it for
patentability, even though § 318(a) requires a Board
determination regarding patentability, and even when (as
in this case) the Board has already concluded that the
issued claims on which the IPR was instituted are un-
patentable. In another reading of § 316(e), the Board
might make a patentability determination on its own,
using any tools available for it to do so.
As I read it, Judge O’Malley’s opinion agrees that the
first, automatic-grant alternative is not tenable under the
statute: the Board must assess patentability of proposed
substitute claims on the record of the IPR, even if no
petitioner opposes the proposed claims. O’Malley Op. 5,
30, 41. But that view leaves an evident problem: if no
petitioner opposes a motion to amend, or the opposition is
inadequate in the Board’s view, the record may not con-
tain readily available prior art or arguments that were
immaterial to the issued claims but that would render the
substitute claims unpatentable. 6 That record-deficiency
6 A proposed substitute claim by definition is differ-
ent from the issued claims and, under 35 U.S.C. § 282(a),
must be evaluated on its own terms. See Altoona Publix
Theatres, Inc. v. Am. Tri-Ergon Corp., 294 U.S. 477, 487
(1935); Jones v. Hardy, 727 F.2d 1524, 1528 (Fed. Cir.
AQUA PRODUCTS, INC. v. MATAL 17
problem might be addressed in significant part by a
burden of production on the patent owner—which, im-
portantly, this court today is not restricting the Board’s
authority to impose. See Reyna Op. 13–15. But the
record may remain deficient, and it is uncertain to what
extent the Board can itself make up for the deficiencies. 7
1984). Amendments, which are not permitted to be
broadening, 35 U.S.C. § 316(d)(3), typically narrow
claims, often by adding a new element. Additional prior
art may be needed to evaluate a new claim with a new
element: if that element was absent from the claims on
which the IPR was instituted, the petitioner may not have
initially introduced prior art that addressed the element.
7 It is at present unclear to what extent the Board
may sua sponte introduce evidence or arguments into the
record—and rely on them after giving notice and oppor-
tunity to be heard—even in adjudicating the patentability
of issued claims, much less in assessing proposed substi-
tute claims. IPRs, as the PTO has accepted in briefs to
our court, are “adjudications” under 5 U.S.C. § 554, see
Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1080 (Fed.
Cir. 2015), and they are partly like district-court adjudi-
cations, see Cuozzo, 136 S. Ct. at 2143–44. It is therefore
relevant that district courts have various record-
expanding powers. See Day v. McDonough, 547 U.S. 198,
205–11 (2006); Monolithic Power Sys., Inc. v. O2 Micro
Int’l Ltd., 558 F.3d 1341, 1346–48 (Fed. Cir. 2009); Fed. R.
Evid. 614(a) (“The court may call a witness on its own or
at a party’s request.”), 706(a) (“The court may appoint any
expert that the parties agree on and any of its own choos-
ing.”); see also 37 C.F.R. § 42.62(a) (generally adopting
Federal Rules of Evidence for IPRs). Cuozzo’s recognition
that IPRs are “hybrid” proceedings that are partly court-
like and partly “specialized administrative proceeding[s],”
18 AQUA PRODUCTS, INC. v. MATAL
It is not necessary to explore in detail the alternatives
to assigning to the patent owner the burden of persuasion
on proposed substitute claims. It is enough to say that
§ 316(e) does not unambiguously require these or any
other suggested alternatives to the sensible interpretation
of the “petitioner” and “proposition of unpatentability”
language in § 316(e) that permits the Director’s position.
That interpretation also accords with a general back-
ground rule regarding burdens of persuasion in adjudica-
tions. A party that is requesting an affirmative action by
a tribunal to alter the pre-proceeding status quo generally
has the burden of persuasion to show entitlement to have
the tribunal take the requested action. 8 For issued
claims, it is the petitioner that is seeking such action: a
136 S. Ct. at 2143–44, may suggest that Board powers
over the record are even greater than those of courts.
8 Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49, 56
(2005) (“‘Perhaps the broadest and most accepted idea is
that the person who seeks court action should justify the
request, which means that the plaintiffs bear the burdens
on the elements in their claims.’” (quoting Christopher B.
Mueller & Laird C. Kirkpatrick, Evidence § 3.1, at 104 (3d
ed. 2003)); id. at 57–58 (“Absent some reason to believe
that Congress intended otherwise, . . . the burden of
persuasion lies where it usually falls, upon the party
seeking relief.”); see also Medtronic, Inc. v. Mirowski
Family Ventures, LLC, 134 S. Ct. 843, 851 (2014); Gross v.
FBL Fin. Servs., Inc., 557 U.S. 167, 177 (2009); Meachem
v. Knolls Atomic Power Lab., 554 U.S. 84, 92–93 (2008);
1 Christopher B. Mueller & Laird C. Kirkpatrick, Federal
Evidence § 3.3 (4th ed. 2017); Kenneth S. Broun et al.,
2 McCormick on Evidence § 337 (7th ed. 2017); Kenneth
W. Graham, Jr., 21B Federal Practice & Procedure Evi-
dence § 5122 (2d ed. 2017).
AQUA PRODUCTS, INC. v. MATAL 19
ruling of unpatentability followed by cancellation. For
proposed substitute claims, it is the patent owner that is
seeking such action: a ruling of patentability followed by
addition to the patent of claims not part of the patent
when the IPR was filed. That distinction makes it sensi-
ble to read § 316(e)’s specification of the standard of proof
the “petitioner” must meet—a preponderance of the
evidence, not clear and convincing evidence, as would be
required in a district-court validity challenge—as apply-
ing only to the petitioner’s requests for affirmative relief,
namely, the petitioner’s challenges to issued claims.
The general rule that governs the allocation of bur-
dens of persuasion is not limited to judicial proceedings.
Section 7(c) of the APA, 5 U.S.C. § 556(d), which governs
IPR proceedings as agency adjudications subject to
5 U.S.C. § 554, codifies the rule that the party requesting
an order of the tribunal has the burden of persuasion as
to the requested order. It provides that “[e]xcept as
otherwise provided by statute, the proponent of a rule or
order has the burden of proof,” and the Supreme Court
has held that the provision’s “burden of proof” language
refers to the burden of persuasion, Greenwich Colliers,
512 U.S. at 272–81. By focusing on the proponent of the
relevant action, the Director’s interpretation of § 316(e) is
consistent with the applicable APA provision, which
suggests different treatment, with respect to the burden
of persuasion, of a petitioner’s efforts to cancel an issued
claim and a patent owner’s request to add a claim. And
because § 316(e) refers to the “petitioner,” § 316(e) may
sensibly be read to be in harmony with, rather than to
depart from, the APA provision. 9
9 IPR proceedings are adjudications subject to 5
U.S.C. § 554 and hence to 5 U.S.C. § 556. See Belden, 805
F.3d at 1080. In contrast, examinations of original appli-
20 AQUA PRODUCTS, INC. v. MATAL
In short, the reference to “petitioner” and “a proposi-
tion of unpatentability” in § 316(e) can properly be under-
stood to assume the existence of a petitioner challenge to
the patentability of the claims subject to the provision.
No guarantee of such a petitioner challenge applies to a
patent owner’s proposed substitute claims, as Congress
recognized in § 316(d). In proposing contrary readings of
§ 316(e), Aqua Products and others make contrary as-
sumptions that they cannot show Congress unambiguous-
ly made. For the reasons set forth, § 316(e) contains
language that thus provides a textual basis—one that fits
and is confirmed by other provisions in chapter 31—for
answering the Chevron Step One question in favor of the
Director: Congress did not unambiguously address the
precise question of the burden of persuasion for motions
to amend.
cations are outside 5 U.S.C. § 556, which covers rule-
makings subject to § 553 and adjudications subject to
§ 554. Such examinations are not rulemakings, and they
also fall outside § 554 because (a) that provision excludes
matters that are “subject to a subsequent trial of the law
and the facts de novo in a court,” 5 U.S.C. § 554(a)(1), and
(b) disappointed patent applicants may obtain such a trial
under 35 U.S.C. § 145. See Kappos v. Hyatt, 566 U.S. 431(2012) (§ 145 provides for de novo trial on applications); In
re Gartside, 205 F.3d 1305, 1313 (Fed. Cir. 2000) (exami-
nations not subject to § 556). Ex parte reexaminations
were subject to 35 U.S.C. § 145 until the AIA amended 35
U.S.C. § 306. IPRs are not subject to 35 U.S.C. § 145 or
any de novo court trial. The traditional burdens applica-
ble in examinations therefore cannot be simply trans-
posed to the IPR setting. See infra pp. 27–30 (§ III.B.1).
AQUA PRODUCTS, INC. v. MATAL 21
2
Nothing else in the statute or legislative history justi-
fies a different conclusion about the absence of a clear
prohibition on the Director’s position on the assignment of
the burden of persuasion on substitute claims.
a
PTO practice involving proposed claims outside the
IPR context does not negate a reading of § 316(e) as
reaching only issued claims. It is true that there are
other contexts involving patent examination or reexami-
nation in which the patent owner has not been assigned
the burden of persuasion on patentability when proposing
claims, including amended claims. See In re Oetiker, 977
F.2d 1443, 1445 (Fed. Cir. 1992) (initial examination);
Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1427 (Fed. Cir.
1988) (ex parte reexamination); In re Etter, 756 F.2d 852,
856–57 (Fed. Cir. 1985) (same). 10 But as Aqua Products
acknowledges, the Director did assign such a burden for
proposed substitute claims in interference proceedings
and other contested cases—which, like the later IPRs,
were adjudicatory, oppositional proceedings. See Bam-
berg v. Dalvey, 815 F.3d 793, 798–99 (Fed. Cir. 2016);
Director’s Suppl. Br. 18; Aqua Products’ Suppl. Reply Br.
19. Indeed, IPRs, like other adjudicatory proceedings,
including interference and derivation proceedings, are
unlike the typical examination or reexamination, in which
a patent examiner performs a prior-art search and inde-
pendently conducts a patentability analysis of all claims.
10 As to amended claims in those examinational con-
texts, see In re Jung, 637 F.3d 1356, 1360–62 (Fed. Cir.
2011); In re Morris, 127 F.3d 1048, 1051–57 (Fed. Cir.
1997); Ethicon, 849 F.2d at 1427; Etter, 756 F.2d at 856–
57.
22 AQUA PRODUCTS, INC. v. MATAL
See Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1327–28
(Fed. Cir. 2013). At a minimum, that disparity in back-
ground practices between adjudicatory and examinational
proceedings means that there is no basis for inferring the
clear congressional prescription that Aqua Products urges
for § 316(e).
b
Aqua Products points to the fact that § 316(e) uses the
term “patentability,” not “validity,” and argues that this
choice of language is significant because an earlier bill in
the legislative path to enactment used “validity.” Aqua
Products’ Suppl. Br. 12–13; Aqua Products’ Suppl. Reply
Br. 4–6, 24. That choice, Aqua Products contends, shows
that Congress meant to cover not just issued claims
(subject to “validity” analysis) but also proposed claims
(subject to “patentability” analysis). But the choice of
“patentability” as a term does not justify that inference.
Aqua Products cites nothing in the legislative history
stating that coverage of proposed claims was the reason
for using the word “patentability.” And, in fact, there is a
readily available explanation for the choice of language
that has nothing to do with a desire to reach beyond
issued claims to proposed claims. At the time of the
America Invents Act, “patentability,” as opposed to “valid-
ity,” was the standard terminology used when the PTO, as
opposed to a court, determined compliance with various
statutory requirements for patenting; and that usage was
standard (if not quite universal) even for already-issued
claims, as in reexamination proceedings. 11 There is no
11 See, e.g., 35 U.S.C. §§ 301, 303, 304, 306, 307 (ex
parte reexamination); id. §§ 312, 313, 315, 316 (2006)
(inter partes reexamination); 37 C.F.R. §§ 1.501, 1.510,
1.515, 1.520, 1.525, 1.530, 1.550, 1.555, 1.560 (2010) (ex
AQUA PRODUCTS, INC. v. MATAL 23
basis for attributing the choice of terminology in
§ 316(e)—and throughout the IPR provisions, 35 U.S.C.
§§ 311–319, and Post-Grant Review provisions, id.§§ 321–329—to anything but the simple desire to conform
to that standard usage. For that reason, the choice of
terminology in § 316(e) would make perfect sense even if
§ 316(e) were expressly limited to “issued claims.” The
choice of “patentability” thus does not imply coverage of
substitute claims proposed to be added to the patent by
the patent owner.
Aqua Products correctly notes that the special Cov-
ered Business Method Review provision of the AIA refers
to “validity,” not “patentability.” AIA § 18(a)(1), 125 Stat.
at 329. But that usage does not weaken the essential
reason for finding a textual basis for the Director’s view in
§ 316(e)—the provision’s use of “petitioner” language tied
to the “proposition of unpatentability.” Moreover, there is
good reason to believe that the Covered Business Method
Review provision’s reference to “validity” is unrelated to
Aqua Products’ proposed distinction. The provision
originated in an amendment on the Senate floor just
before passage of the bill, not in the same series of com-
mittee actions that conformed the other provisions of the
bill to the standard “patentability” usage. See 157 Cong.
Rec. S1038 (daily ed. Mar. 1, 2011). Further, the Covered
Business Method Review provision itself elsewhere incor-
porates the Post-Grant Review regime, which uses “pa-
tentability” language in common with the IPR regime.
parte reexamination); id. §§ 1.097, 1.915, 1.923, 1.927,
1.931, 1.933, 1.948, 1.949, 1.953 (2010) (inter partes
reexamination); Manual of Patent Examining Procedure
chs. 22, 26 (8th ed. rev. 8 2010). But see 35 U.S.C. § 315(c)
(referring to claim “determined to be valid and patenta-
ble”).
24 AQUA PRODUCTS, INC. v. MATAL
35 U.S.C. §§ 321, 324, 326, 328; AIA § 18(a)(1), 125 Stat.
at 329. Thus, there is no basis for inferring a congres-
sional intent to distinguish the terms in this context.
c
Aqua Products asserts that § 316(e) begins with the
introductory phrase “[i]n an inter partes review” and that
a motion to amend, or at least the proposed substitute
claim that is the subject of the motion, is one of the things
that are “in” the IPR. Even if Aqua Products were correct,
however, the two assertions taken together would not
justify its suggested inference about § 316(e) and substi-
tute claims. The “in” aspect of the provision’s language is
only one requirement for coverage by the provision. As
already explained, there is also the “petitioner” and
“proposition of unpatentability” language, which, as
explained, can be understood as establishing an addition-
al requirement that excludes substitute claims. Satisfac-
tion of one requirement does not imply satisfaction of the
other.
d
That § 316(e), which governs “evidentiary standards,”
is located at the end of § 316 does not imply that its
burden-of-persuasion rule clearly applies to all claims in a
proceeding, including proposed substitute claims. Section
316 is not a tightly integrated provision whose structure
would clearly define the relationship of each part to the
others. Rather, following provisions on, e.g., petitions,
institution, and relation to other proceedings, § 316
addresses a variety of topics, in separate subsections,
concerning the “conduct” of IPRs. In this “conduct” provi-
sion, the topics covered are “[r]egulations” the Director is
to promulgate on a range of subjects, § 316(a);
“[c]onsiderations” governing the Director’s adoption of
regulations, § 316(b); the “Board” as the designated entity
to “conduct” each IPR, § 316(c); “[a]mendment of the
patent,” § 316(d); and, finally, “[e]videntiary standards,”
AQUA PRODUCTS, INC. v. MATAL 25
§ 316(e). No clear inference can be drawn about § 316(e)’s
scope from its placement within the section.
e
Pointing to the “estoppel” provision of § 315(e), Judge
O’Malley suggests that the provision applies to issued and
substitute claims and that it is illogical to estop the
petitioner as to any claims for which it lacked the burden
of persuasion. O’Malley Op. 32–33. I do not see the
suggested illogic, let alone statutory language supporting
the suggestion. Section 315(e)’s rule denying the petition-
er certain second chances applies equally, and makes
logical sense, whether the petitioner’s first chance (in the
IPR) was one for which the petitioner had to carry the
burden of proving unpatentability or, instead, had the
easier task of arguing that the patent owner failed to
prove patentability. The provision’s language and ra-
tionale apply in both circumstances. The provision thus
cannot imply that the petitioner has the burden of per-
suasion on proposed substitute claims.
***
For all of the foregoing reasons, the authority of the
Director, under § 316(a), readily encompasses assignment
to the patent owner of the burden of persuasion regarding
substitute claims it proposes in a motion to amend the
patent. Moreover, § 316(e), considered alone and in the
context of the overall IPR regime, does not override that
authority under the Chevron Step One standard requiring
a clear congressional resolution of the issue. Assignment
of the burden of persuasion to the patent owner thus
clears Step One. Aqua Products makes no meaningful
argument challenging that assignment under Step Two: it
does not deny that, for example, the possible absence or
inadequacy of any petitioner opposition makes the as-
signment of the burden to the patent owner a reasonable
choice if, as I conclude at Step One, the choice is left to the
26 AQUA PRODUCTS, INC. v. MATAL
Director under § 316(a). The Director’s position thus
passes muster under Chevron.
B
Aqua Products’ only remaining contention is a brief
challenge to the applicability of the Chevron framework
here. This contention focuses on 37 C.F.R. § 42.20(c), the
regulation that provides the basis for assigning the patent
owner the burden of persuasion on the patentability of
any substitute claims that it seeks to add to the patent.
Aqua Products offers two related arguments. First, Aqua
Products argues that § 42.20(c), which was addressed in
Idle Free and is indisputably binding, does not in fact
establish a burden of persuasion regarding the Board’s
patentability assessment, but only a burden to justify
adding a substitute claim to the IPR. Aqua Products’
Suppl. Br. 29–31. Second, Aqua Products argues that the
Board’s “informative” decision in Idle Free was not a
binding determination, and does not deserve deference for
that reason. Aqua Products’ Suppl. Br. 25–26.
I would reject the first of Aqua Products’ contentions,
based on an independent judicial interpretation of the
regulation—a conclusion that makes the second of Aqua
Products’ contentions immaterial. That is, without reli-
ance on deference to agency regulatory interpretations, I
conclude that § 42.20(c), when applied to a motion to
amend the patent, imposes the burden of persuasion as to
patentability of substitute claims on the patent owner.
Aqua Products does not develop any argument against the
applicability of the Chevron framework if, as I conclude,
the regulation has that meaning even without special
deference as to its interpretation.
A procedurally proper regulation that is within the
Director’s authority under § 316(a) is subject to the Chev-
ron framework. See Encino Motorcars, 136 S. Ct. at
2124–26; Barnhart, 535 U.S. at 217, 227; Mead Corp., 533
U.S. at 227, 229–30. Aqua Products makes no argument
AQUA PRODUCTS, INC. v. MATAL 27
for procedural impropriety or any other defect in the
(notice-and-comment) rulemaking process that produced
37 C.F.R. § 42.20(c). I find meritless the limited objection
made by Aqua Products as to what that regulation means.
On that basis I conclude that the regulation itself suffices
to make Chevron applicable. I do not address potential
objections that Aqua Products has not made and the
parties have not briefed.
1
In February 2012, preparing for the September 2012
launch of the IPR and related programs created by the
AIA, the Director proposed various regulations pursuant
to various grants of rulemaking authority, including the
§ 316(a) authority for IPRs generally and motions to
amend particularly. See 35 U.S.C. §§ 2(b)(2), 316(a),
326(a). As relevant here, one of the proposals was a
regulation governing motions, 37 C.F.R. § 42.20. See
Notice of Proposed Rulemaking, Rules of Practice for
Trials Before the Patent Trial and Appeal Board and
Judicial Review of Patent Trial and Appeal Board Deci-
sions, 77 Fed. Reg. 6879, 6885, 6909 (proposed Feb. 9,
2012) (2012 Notice).
As proposed (and adopted), § 42.20(c) declares:
Burden of proof. The moving party has the bur-
den of proof to establish that it is entitled to the
requested relief.
Id. at 6909. In proposing § 42.20, the Director made clear
that the regulation “would place the burden of proof on
the moving party” and that it would apply to “requests to
amend the patent.” Id. at 6885.
In August 2012, after receiving comments from the
public, the Director adopted the provision as proposed.
2012 Final Rule, 77 Fed. Reg. at 48,610–20, 48,673. The
Director again made clear that the rule “places the bur-
28 AQUA PRODUCTS, INC. v. MATAL
den of proof on the moving party” and that it applies to
“requests to amend the patent.” Id. at 48,619. 12
Although I rely here solely on the 2012 regulation in-
dependently construed, I note again that, in 2013, a
special six-member panel of the Board concluded that,
“[f]or a patent owner’s motion to amend, 37 C.F.R.
§ 42.20(c) places the burden on the patent owner to show
a patentable distinction for each proposed substitute
claim over the prior art . . . the burden is not on the
petitioner to show unpatentability, but on the patent
owner to show patentable distinction.” Idle Free Sys.,
2013 WL 5947697, at *4. 13 That conclusion has uniformly
been understood as referring to the burden of persuasion.
Under internal PTO procedures, Idle Free was designated
“informative.” The Director did not need to approve such
a designation. See Standard Operating Procedure 2 (rev.
9).
In subsequent years, the burden-of-persuasion as-
signment was applied in numerous IPRs, was approved by
this court, see Proxyconn, 789 F.3d at 1307, and was
reaffirmed in a ruling (which the Director approved as
“precedential”) by another special panel of the Board, see
12 The language of § 42.20(c) is nearly identical to 37
C.F.R. § 41.121(b) (2010), a pre-existing provision govern-
ing the few pre-AIA contested cases, such as interfer-
ences. The contested-case regulation, when adopted in
2004, was accompanied by the Director’s comments refer-
ring to the burden of persuasion. See Rules of Practice
Before the Board of Patent Appeals and Interferences, 69
Fed. Reg. 49,960, 49,987 (Aug. 12, 2004).
13 The Board panel in Idle Free also cited 37 C.F.R.
§ 42.121, which deals with what the patent owner must
address in its motion to amend, not with a burden of
persuasion in assessing the evidence.
AQUA PRODUCTS, INC. v. MATAL 29
MasterImage 3D, Inc. v. RealD Inc., No. IPR2015-40, 2015
WL 10709290, at *1 (P.T.A.B. 2015). And the Director, in
preparing for and conducting various rulemaking proceed-
ings, solicited comments on the amendment process and
explained why she was not proposing to change the as-
signment. See, e.g., Request for Comments on Trial
Proceedings Under the America Invents Act Before the
Patent Trial and Appeal Board, 79 Fed. Reg. 36,474,
36,476 (June 27, 2014); Proposed Rule, Amendments to
the Rules of Practice for Trials Before the Patent Trial
and Appeal Board, 80 Fed. Reg. 50,720, 50,723–24 (pro-
posed Aug. 20, 2015); Amendments to the Rules of Prac-
tice for Trials Before the Patent Trial and Appeal Board,
81 Fed. Reg. 18,750, 18,754–55 (Apr. 1, 2016).
Those PTO actions show the consistency of the PTO
regarding the interpretation of § 42.20(c). Even that fact,
however, is not necessary to my conclusion. I rely on none
of the activity post-dating the August 2012 promulgation
of 37 C.F.R. § 42.20(c) in concluding, on this record, that
the Chevron framework is applicable.
2
For the Director’s position on the assignment of the
burden of persuasion regarding proposed substitute
claims to trigger application of the Chevron framework, it
suffices that her formally promulgated regulation, 37
C.F.R. § 42.20(c), embodies that position. I so read the
regulation, without the need to rely on deference to a
Board or Director interpretation of the regulation. That
is, as a matter of independent judicial determination of
the best interpretation, I agree with Idle Free’s reading of
§ 42.20(c) as to the burden of persuasion, without relying
on deference to Idle Free or other agency pronouncements
on the regulation’s meaning.
Aqua Products correctly accepts that § 42.20(c) ap-
plies to a motion to amend the patent, as the Director
made clear in 2012 when proposing and adopting the
30 AQUA PRODUCTS, INC. v. MATAL
regulation. But Aqua Products contends that § 42.20(c)
means only that the patent owner must show entitlement
to “bring[] the proposed substitute claims into the pro-
ceeding,” which Aqua Products says is the “requested
relief,” not that the patent owner must show entitlement
to add the proposed substitute claims to the patent. Aqua
Products’ Suppl. Br. 30–31; see id. at 31 (“[T]he ‘requested
relief’ is merely to have the proposed amended claims
added to the IPR . . . .”). That contention is wrong.
Section 42.20(c), entitled “burden of proof,” states that
“[t]he moving party has the burden of proof to establish
that it is entitled to the requested relief.” 37 C.F.R.
§ 42.20(c). Contrary to Aqua Products’ contention, the
“requested relief” in a motion to amend the patent is not
the addition of the proposed substitute claim to the IPR.
In a motion “to amend the patent,” 35 U.S.C. § 316(d)(1)
(emphasis added), the requested relief is to add the pro-
posed substitute claims to the patent. See also 37 C.F.R.
§ 42.121(a) (“motion to amend a patent”) (emphasis add-
ed).
Of course, the Board may “enter” the motion before
deciding whether to grant it. See Final Rule, Changes to
Implement Inter Partes Review Proceedings, Post-Grant
Review Proceedings, and Transitional Program for Cov-
ered Business Method Patents, 77 Fed. Reg. 48,680,
48,692 (Aug. 14, 2012). But as the PTO stated, what is
“entered” into the IPR proceeding is the “motion,” not the
proposed substitute claims. Id. at 48,690. And such a
procedural step does not change what the motion re-
quests, which is addition of the proposed substitute claims
to the patent, not addition to the roster of claims at issue
in the IPR. From the outset of the IPR program, granting
(as opposed to entering) the motion has meant adding the
substitute claims to the patent. By its plain terms, then,
§ 42.20(c) assigns to the movant—the patent owner—“the
burden of proof to establish” entitlement to that relief.
AQUA PRODUCTS, INC. v. MATAL 31
Aqua Products is therefore wrong in its only real ar-
gument against reading § 42.20(c) as assigning the bur-
den of persuasion on patentability to the patent owner.
Once it is clear that the motion to amend the patent
focuses on what is required to justify addition to the
patent, it is also clear what the proper understanding of
§ 42.20(c) is. Under the terms of 35 U.S.C. § 318(a) & (b),
entitlement to addition of the proposed substitute claim to
the patent requires patentability of the claim. That is the
subject of the “burden of proof.” And there is no basis for
giving “burden of proof” in § 42.20(c) a different meaning
from the indistinguishable phrase in § 316(e)—namely,
“burden of proving”—which undisputedly means the
burden of persuasion. Indeed, as already noted, the text
of § 42.20(c) uses language from a pre-AIA regulation
that, when it was promulgated, the Director made clear
was addressing the burden of persuasion. See supra n.12.
For those reasons, I conclude, without relying on any
deference to the agency, that the Director’s formally
promulgated regulation, § 42.20(c), prescribes the burden-
of-persuasion assignment at issue here. In light of that
conclusion, Aqua Products’ criticism of any reliance on
Idle Free is immaterial.
3
Aqua Products makes no other objection to applying
the Chevron framework, despite the Director’s repeated
invocations of that framework, and § 42.20(c) particularly,
before the panel and the en banc court. See Director’s
Suppl. Br. 7–21; Director’s Br. 17–24. In particular, Aqua
Products does not argue, under Encino Motorcars, 136 S.
Ct. 2117, that the Director’s rulemaking was procedurally
inadequate because the Director failed to set forth suffi-
cient reasoning to justify an interpretation of § 316(e) that
permits assigning to the patent owner the burden of
persuasion on the patentability of substitute claims. Nor
does Aqua Products argue that the Director’s rulemaking
32 AQUA PRODUCTS, INC. v. MATAL
was somehow defective under Negusie v. Holder, 555 U.S.
511 (2009), which held that the Chevron framework is not
applicable where an agency erroneously perceives the
correct interpretation of a statute to be judicially com-
pelled rather than left to the agency’s discretion.
Reflecting the fact that Aqua Products did not raise
such arguments about the applicability of Chevron here,
the government has not developed responsive arguments.
As a result, it has not presented arguments that address,
for example, whether the present adjudication is a proper
vehicle for challenging the adequacy of the Director’s
reasoning in the 2012 rulemaking proceeding, whether
the Director had to engage in more statutory analysis
than the 2012 rulemaking discloses, and whether for a
rule like the one at issue here—which, unlike the rule in
Encino, reverses no previous rule—the comments filed in
the rulemaking proceeding circumscribe what agency
reasoning is necessary.
Those kinds of issues about Chevron’s applicability do
not affect this court’s jurisdiction, so we are not obliged to
raise them sua sponte. I do not suggest that there is a
rigid bar to our addressing such matters, though raising
issues sua sponte is generally disfavored. See, e.g., Arizo-
na v. California, 530 U.S. 392, 412–13 (2000); Silber v.
United States, 370 U.S. 717, 718–19 (1962). But I ulti-
mately think it inadvisable to do so here, considering such
factors as the interests in full adversarial presentation
and the degree of uncertainty in the relevant governing
law on the matters not fully developed before us.
In these circumstances, I would apply the Chevron
framework in this case—under which, as already conclud-
ed, the Director’s position is valid.
IV. CONCLUSION
For the foregoing reasons, I would uphold the burden-
of-persuasion assignment to Aqua Products. Having
AQUA PRODUCTS, INC. v. MATAL 33
rejected Aqua Products’ legal challenge to that assign-
ment, I would reinstate the panel opinion, which affirms
the Board’s denial of Aqua Products’ motion to amend for
failure to carry the burden. Accordingly, although I agree
with the majority’s resolution of the legal questions about
the scope of § 316(a) and the ambiguity of § 316(e), I
respectfully dissent from the judgment of the court vacat-
ing the Board decision.
United States Court of Appeals
for the Federal Circuit
______________________
AQUA PRODUCTS, INC.,
Appellant
v.
JOSEPH MATAL, PERFORMING THE FUNCTIONS
AND DUTIES OF THE UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR, U.S. PATENT AND TRADEMARK
OFFICE,
Intervenor
______________________
2015-1177
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2013-
00159.
______________________
HUGHES, Circuit Judge, joined by CHEN, Circuit Judge,
dissenting from the judgment.
We took this case en banc to resolve the seemingly
straightforward question of whether the statute at issue
unambiguously requires the burden of persuasion for
motions to amend to remain with the petitioner. A clear
majority of the court has decided that it does not. That
conclusion alone should resolve the case and require
deference to the Director’s clear and consistent interpre-
tation of an ambiguous statute that he is entitled to
interpret, as evidenced by the Director’s regulatory inter-
2 AQUA PRODUCTS, INC. v. MATAL
pretation of the statute and further definitive interpreta-
tions of that regulation. But rather than following tradi-
tional rules of administrative law when faced with an
ambiguous statute, i.e., determining whether the agency’s
interpretation is reasonable, we find fault in the sufficien-
cy of the Director’s rulemaking procedure—an issue
raised for the first time by judges of this court without
briefing or argument from the parties.
We err in our role as an appellate court to provide
clear rules. Rather, we have compiled five separate opin-
ions numbering over one-hundred pages that provide
varying reasons for affirmance or reversal. Reasonable
minds can differ about the core issue of this case—plain
meaning or not—but the complicated reasons of the
majority for the judgment of vacatur do a serious disser-
vice to the issue at hand, and to a stable interpretation of
the law. For the reasons set forth below, I concur in part,
and respectfully dissent from the judgment of vacatur.
I fully join Judge Taranto’s opinion, which concludes
that the statutory language at issue does not dictate who
bears the burden of proof on motions to amend claims
under 35 U.S.C. § 316(d). 1 The statute delegates rule-
making authority to the Patent and Trademark Office for
the conduct of inter partes reviews generally, and to set
procedures for the amendment of claims specifically. In
exercising this grant of statutory authority, the PTO
engaged in notice and comment rulemaking, and placed
the burden of proof for all motions on movants. In adopt-
ing this rule, the PTO expressly considered the amend-
ment provision in its regulation, but declined to provide
an exception for motions to amend. That clear regulatory
1 I agree with Judge Reyna that the patent owner
bears the burden of production on motions to amend
claims. I therefore join Part III of his opinion.
AQUA PRODUCTS, INC. v. MATAL 3
command was within its authority, is entitled to Chevron
deference, and should resolve this case.
I write separately for two reasons. First, to note that
even if the scope of the PTO’s regulation—37 C.F.R.
§ 42.20(c)—on the burden of proof for motions is ambigu-
ous, the PTO is still entitled to Auer deference for its
interpretation of its own regulation. Auer v. Robbins, 519
U.S. 452 (1997). As this court and the Supreme Court
have repeatedly found, an agency’s interpretation of its
own regulation is “controlling unless plainly erroneous or
inconsistent with the regulation.” Id. at 461 (citation and
internal quotation marks omitted). Therefore, I would
defer to the PTO’s reasoned interpretation of its own
regulation placing the burden of proof for all motions
upon the moving party to include motions to amend. It is
in fact the most reasonable reading of that regulation.
Thus, I would affirm.
Second, to address the notion that Congress’s use of
the word “regulation” in a statute delegating authority to
an agency limits that agency’s authority to promulgating
regulations codified in the Code of Federal Regulations
(CFR). This is a novel approach to administrative law,
without support in precedent or in any statute. The term
“regulations” has routinely been found to cover other
forms of agency authority. By suggesting that delegation
statutes using the word “regulation” narrowly confine
agency action to the CFR, this court may “make the
administrative process inflexible and incapable of dealing
with many of the specialized problems which arise.” SEC
v. Chenery Corp., 332 U.S. 194, 202 (1947).
I
The question of who bears the burden of proof on mo-
tions to amend is guided by the well-established two-step
Chevron framework. Suprema, Inc. v. Int’l Trade
Comm’n, 796 F.3d 1338, 1346 (Fed. Cir. 2015) (en banc)
(discussing Chevron framework). At step one, we look to
4 AQUA PRODUCTS, INC. v. MATAL
whether “Congress has directly spoken to the precise
question at issue” because, “[i]f the intent of Congress is
clear, that is the end of the matter.” Chevron, U.S.A., Inc.
v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 (1984).
When the statute is “silent or ambiguous with respect to
the specific issue” in dispute, we must proceed to step two.
Id. at 843. At this step, we deem that “Congress has
explicitly left a gap for the agency to fill,” and our task is
simply to determine “whether the agency’s answer is
based on a permissible construction of the statute.” Id.A
For the reasons discussed by Judge Taranto, I agree
that the statute is sufficiently ambiguous for the PTO to
clear the first step of Chevron. At step two, we are as-
sessing whether the agency’s interpretation “is based on a
permissible construction of the statute.” Chevron, 467
U.S. at 843. A permissible interpretation is one that is
not “arbitrary or capricious in substance, or manifestly
contrary to the statute.” Mayo Found. for Med. Educ. &
Research v. United States, 562 U.S. 44, 53 (2011) (citation
and internal quotation marks omitted). Under this defer-
ential standard, even if the agency’s view is not “the only
possible interpretation, nor even the interpretation
deemed most reasonable by the courts,” we are obligated
to defer to it as long as it is a reasonable interpretation.
Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218
(2009) (emphasis in original). Once we determined that
the statute is silent or ambiguous, “the question for the
court [is] whether the agency’s answer is based on a
permissible construction of the statute.” INS v. Aguirre-
Aguirre, 526 U.S. 415, 424 (1999) (quoting Chevron, 467
U.S. at 843). If the agency’s interpretation is not in
conflict with the statute and represents “a reasonable
policy choice for the agency to make,” we must defer to it.
Nat’l Cable & Telecomms. Ass’n v. Brand X Internet
Servs., 545 U.S. 967, 986 (2005) (quoting Chevron, 467
U.S. at 845); see also Cuozzo Speed Techs., LLC v. Lee, 136
AQUA PRODUCTS, INC. v. MATAL 5
S. Ct. 2131 (2016) (rejecting Cuozzo’s statutory arguments
and concluding that the PTO’s choice for a claim construc-
tion rubric was reasonable under the statute, without
considering whether the PTO had evaluated Cuozzo’s
statutory arguments during the rulemaking process).
The PTO’s regulation regarding where the burden of
proof lies on motions, 37 C.F.R. § 42.20, is not arbitrary,
capricious, or manifestly contrary to the statute. The
regulation was promulgated in accordance with the
procedures described in § 553 of the APA, which included
notice and an opportunity for public comment. 5 U.S.C.
§ 553(c). In both the proposed rulemaking and final rule,
the PTO emphasized to the public that this rule governing
the burden of proof for motions would also apply to mo-
tions to amend. Rules of Practice for Trials Before the
Patent Trial and Appeal Board and Judicial Review of
Patent Trial and Appeal Board Decisions, 77 Fed. Reg.
6879, 6885 (proposed Feb. 9, 2012) (hereinafter 2012
Notice); Rules of Practice for Trials Before the Patent
Trial and Appeal Board and Judicial Review of Patent
Trial and Appeal Board Decisions, 77 Fed. Reg. 48,612,
48,619 (Aug. 14, 2012) (hereinafter 2012 Final Rule).
While there were comments regarding certain aspects of
amending claims, no one raised comments on the PTO’s
proposal to place the burden of proof on motions, includ-
ing motions to amend, on the movant. This may be be-
cause “[p]erhaps the broadest and most accepted idea is
that the person who seeks court action should justify the
request.” Frolow v. Wilson Sporting Goods Co., 710 F.3d
1303, 1312 (Fed. Cir. 2013) (quoting Schaffer ex rel.
Schaffer v. Weast, 546 U.S. 49, 56 (2005)). Accordingly, in
the face of statutory ambiguity, placing the burden of
proof on movants by adopting 37 C.F.R. § 42.20 through
notice and comment rulemaking is a permissible reading
of the statute, and the PTO’s regulation should receive
deference under Chevron step two.
6 AQUA PRODUCTS, INC. v. MATAL
B
Despite the preceding, Judge O’Malley and Judge
Reyna find that the PTO has not done enough to warrant
deference under Chevron. See O’Malley Op. at 44–56; see
also Reyna Op. at 3 (faulting the agency for not “fully
consider[ing] the inter partes review statutes, 35 U.S.C.
§ 316(a)(9), (d), and (e) . . . .”). This I cannot agree with.
The 2012 rulemaking specifically mentioned that § 42.20
“would place the burden of proof on the moving party,”
and would apply to “requests to amend the patent.” 2012
Notice, 77 Fed. Reg. at 6885. The PTO considered not
only the inter partes review statutes but specifically
motions to amend when proposing allocating the burden
of proof for motions on the movant.
The PTO’s failure to explicitly mention 35 U.S.C.
§ 316(a)(9), (d), and (e) does not mean its proposed regula-
tion was defective. Rather, it necessarily implies that the
PTO understood that the inter partes review statutes
were ambiguous or silent as to the allocation of proof on a
motion to amend, and so did the public, as no one urged
otherwise. More importantly, Chevron step two does not
require, as a threshold matter, the agency to perform a
comprehensive statutory analysis during rulemaking to
justify each promulgation of a new regulation. Nor does
Chevron step two direct us to conduct a hypertechnical
review of an agency’s exercise of its discretion. Our
inquiry is much more limited: “we are simply conducting a
reasonableness review, we treat the [agency’s] interpreta-
tion as controlling unless it has reached a conclusion that
is arbitrary, capricious, or manifestly contrary to the
statute.” Mahmood v. Sessions, 849 F.3d 187, 195 (4th
Cir. 2017) (emphasis in original) (citation and internal
quotation marks omitted). And here, the PTO’s conclu-
sion is neither manifestly contrary to the statute nor
arbitrary or capricious.
AQUA PRODUCTS, INC. v. MATAL 7
As best I can tell, my colleagues’ conclusion would
force an agency to use specific magic words before its
exercise of discretion can receive deference. In other
words, Chevron step two would be transformed into a de
novo review of the agency’s choices, where we no longer
test the reasonableness of the agency’s conclusion but
examine in detail its mode of reasoning. This will turn
agency rulemaking on its head, and the facts of today’s
case illustrate the herculean task we are placing on
agencies. In 2012, when the PTO proposed placing the
burden of proof for motions to amend on movants, not a
single commenter raised concerns that § 316(e) precludes
the PTO from placing the burden on a movant. Between
the promulgation of § 42.20 and today’s case, I could not
find a single party who complained before this court that
the § 42.20 was promulgated in a defective manner be-
cause the PTO failed to discuss § 316(e). And even in
today’s case, Aqua did not argue that § 42.20 was proce-
durally defective because of a failure to discuss § 316(e); it
essentially conceded that if the inter partes statutes were
ambiguous, the PTO could place the burden of proof for
motions to amend on movants. Yet, we now have several
judges of this court that believe § 42.20 was promulgated
in a defective way because the PTO did not explicitly
mention 35 U.S.C. § 316(a)(9), (d), and (e). This line of
thinking would force agencies in rulemaking to deal with
any and all potential objections to the rule, including
those never raised by any commenters, any parties, and
raised for the first time, sua sponte, by judges in an
opinion. In other words, agencies can no longer be sure
that any promulgated rule will withstand judicial review
and the sua sponte ideas of courts.
The Supreme Court’s decision in Negusie v. Holder
does not compel a different conclusion. 555 U.S. 511(2011). In Negusie, the agency mistakenly believed that
its interpretation of a statute was compelled by a prior
Supreme Court case. Id. at 518. In the context of the
8 AQUA PRODUCTS, INC. v. MATAL
Chevron framework, the agency stopped its analysis at
step one, believing that it had no discretion to interpret
the statute. Id. at 523 (“[I]f an agency erroneously con-
tends that Congress’ intent has been clearly expressed
and has rested on that ground, we remand to require the
agency to consider the question afresh in light of the
ambiguity we see.”) (quoting Cajun Elec. Power Coop., Inc.
v. FERC, 924 F.2d 1132, 1136 (D.C. Cir. 1991)). Since the
agency stopped at step one, the agency never exercised its
Chevron discretion to interpret the statute in question.
Thus, the Supreme Court remanded the case for the
agency to consider the statute under step two of Chevron.
Here, the PTO did reach step two of Chevron and exer-
cised its discretion to pass, using notice and comment
procedures, a regulation placing the burden of proof on
the movants.
Moreover, while I believe the PTO exercised its dis-
cretion and sufficiently explained its reasoning, even if it
had not, I question the wisdom of remanding this case
back to the agency solely because of the mistaken belief
that the PTO failed to adequately explain its reasoning.
See, e.g., PDK Labs. v. DEA, 362 F.3d 786, 808–09 (D.C.
Cir. 2004) (Roberts, J., concurring in part and concurring
in the judgment). “The rationale that animates all Prill[ 2]
remands is real and genuine doubt concerning what
interpretation the agency would choose if given the oppor-
tunity to apply ‘any permissible construction.’” Id. at 809.
Unlike Negusie and Prill, where the agency never had the
opportunity to apply any permissible construction of the
statute, we know how the PTO would choose to interpret
2 In Prill v. NLRB, 755 F.2d 941, 948 (D.C. Cir.
1985), the D.C. Circuit remanded a case to the agency
because “a regulation [was] based on an incorrect view of
applicable law.”
AQUA PRODUCTS, INC. v. MATAL 9
this ambiguous statute because the PTO already reached
“its interpretation . . . in the course of a purely discretion-
ary act.” Id. at 800; see also Nicholas Bagley, Remedial
Restraint in Administrative Law, 117 COLUM. L. REV. 253,
300 n.326 (2017) (“Cases in which an agency changes its
mind in response to Prill remands are rare, and the
circumstances tend to be unusual.”). Indeed, when con-
fronted with questions regarding the scope of § 42.20, and
particularly, the effect of § 316(e), the PTO has clearly
and consistently stated that the burden of proof imposed
by § 42.20 applies to motions to amend, even in light of §
316(e). Idle Free Sys., Inc. v. Bergstrom, Inc., No.
IPR2012-00027, 2013 WL 5947697, at *4 (P.T.A.B. June
11, 2013); MasterImage 3D, Inc. v. RealD Inc., No.
IPR2015-0040, 2015 WL 10709290, at *1 (P.T.A.B. July
15, 2015); 2012 Notice, 77 Fed. Reg. at 6885; 2012 Final
Rule, 77 Fed. Reg. at 48,619. Even if we accept that some
deficiency exists in the initial rulemaking, a remand is
unnecessary because there is no “real and genuine doubt
concerning what interpretation the agency would choose.”
PDK Labs, 362 F.3d at 808.
C
Moreover, even if the burden of proof regulation was
unclear in the scope of its application, in accordance with
Auer, we would still be required to affirm the PTO’s
interpretation here. Auer, 519 U.S. at 461; see also Cass
R. Sunstein & Adrian Vermeule, The Unbearable Right-
ness of Auer, 84 U. CHI. L. REV. 297 (2017). While § 42.20
is a general regulation governing the burdens on motions,
no one has adequately explained why, assuming the
statute is ambiguous, it should not apply to the more
specific context of motions to amend. I believe that it
must. During proposed rulemaking, the PTO specifically
mentioned motions to amend in discussing its proposed
general rules for motion practice. The adopted regulation
contains no exception for motions to amend, and if we
require a general regulation to specify what specific types
10 AQUA PRODUCTS, INC. v. MATAL
of motions that fall under its umbrella, it would make the
notion of a general regulation meaningless.
Under Auer, an agency’s interpretation of its own reg-
ulation is given “controlling weight unless it is plainly
erroneous or inconsistent with the regulation.” Thomas
Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)
(citation and internal quotation marks omitted). Agency
interpretations need not be well-settled or long-standing
to be entitled to deference, but they must “reflect the
agency’s fair and considered judgment on the matter in
question.” Auer, 519 U.S. at 462. Auer deference is
warranted even if the agency’s interpretation first ap-
pears during litigation, see Chase Bank USA, N.A. v.
McCoy, 562 U.S. 195, 203 (2011), unless “the interpreta-
tion is nothing more than a convenient litigating position,
or a post hoc rationalization advanced by an agency
seeking to defend past agency action against attack.”
Christopher v. SmithKline Beecham Corp., 567 U.S. 142,
155 (2012) (citation and internal quotation marks omit-
ted).
Accordingly, if we have doubts regarding the applica-
bility of § 42.20 to motions to amend, we are obligated to
defer to the PTO’s interpretation under Auer unless it is
“plainly erroneous or inconsistent with the regulation.”
“It is well established that an agency’s interpretation
need not be the only possible reading of a regulation—or
even the best one—to prevail.” Decker v. Nw. Envtl. Def.
Ctr., 568 U.S. 597, 613 (2013). An agency’s view need
only be reasonable to warrant deference. Pauley v. Beth-
Energy Mines, Inc., 501 U.S. 680, 702 (1991) (“[I]t is
axiomatic that the [agency’s] interpretation need not be
the best or most natural one by grammatical or other
standards. Rather, the [agency’s] view need be only
reasonable to warrant deference.” (internal citation
omitted)).
AQUA PRODUCTS, INC. v. MATAL 11
The inter partes regulations were promulgated by the
PTO in 2012. In adopting § 42.20, the PTO made clear
that the regulation would place the burden of proof on the
movant. To the extent this regulation of general applica-
bility did not call out specific categories of motions that
fall under its umbrella, it is entirely reasonable for the
PTO to interpret this regulation as applying to motions to
amend, especially when it specifically expressed that
intention during its rulemaking. 2012 Notice, 77 Fed.
Reg. at 6885; 2012 Final Rule, 77 Fed. Reg. 48619. And it
certainly is not inconsistent with the text of the regula-
tion. 3
This interpretation is also not a convenient litigating
position or a post-hoc rationalization of the PTO’s deci-
sionmaking. The PTO has consistently enforced this
position since 2012. In 2013, the PTAB concluded that 37
C.F.R. § 42.20(c) places the burden for motions to amend
on the patent owner. Idle Free. 2013 WL 5947697, at *4.
In the spring of 2014, the PTO conducted various
“roundtables” with the public, making presentations and
receiving informal comments on practice under the new
rules. In at least some of the roundtables, the PTO
showed a slide on “Motions to Amend” that listed the
“need to show patentable distinction” and cited Idle Free.
See U.S. Patent & Trademark Office, AIA Trial
Roundtables, slide 35, (April 15, 2014), available at
https://www.uspto.gov/ip/boards/bpai/ptab_roundtable__sl
ides_may_update__20140503.pdf (April 15, 2014).
3 For the reasons expressed in Judge Taranto’s
opinion, which explains how a motion to amend, per 35
U.S.C. § 316(d), is a “motion to amend the patent”—not
merely a motion to have a proposed substitute claim
added to the proceeding—I find Judge O’Malley’s coun-
terargument to be without merit.
12 AQUA PRODUCTS, INC. v. MATAL
In June 2015, we held that it was permissible to as-
sign to the patent owner the burden of persuasion on
patentability of a proposed substitute claim. Microsoft
Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307 (Fed. Cir.
2015). The next month, a six-member Board panel issued
a “clarification” of Idle Free. MasterImage, 2015 WL
10709290, at *1. In making that clarification, which
concerned what subjects the patent owner must address
in a motion to amend, the MasterImage panel reaffirmed
that “[t]he ultimate burden of persuasion remains with
Patent Owner, the movant, to demonstrate the patenta-
bility of the amended claims,” citing Proxyconn. Id. The
MasterImage order was designated “precedential,” under
Standard Operating Procedure 2 (rev. 9), which requires
the concurrence of the Director.
In August 2015, when issuing her 2015 Proposed
Rule, the Director confirmed that the burden of persua-
sion rested on the patent owner and set forth reasons why
this assignment of the burden serves important policy
objectives. She stated that she would not shift the as-
signment of “the ultimate burden of persuasion on pa-
tentability of proposed substitute claims from the patent
owner to the petitioner.” Amendments to the Rules of
Practice for Trials Before the Patent Trial and Appeal
Board, 80 Fed. Reg., 50,720, 50,723 (proposed Aug. 20,
2015).
The Director reaffirmed that the patent owner bears
the burden of persuasion as to amendments in her final
regulatory amendments in 2016. Amendments to the
Rules of Practice for Trials Before the Patent Trial and
Appeal Board, 81 Fed. Reg. 18,750, 18,754–55 (April 1,
2016).
Thus, the PTO has consistently, since 2012, main-
tained that the burden of proof for motions to amend falls
on the movant. As such, this position is neither a conven-
ient litigating position nor a post-hoc rationalization of
AQUA PRODUCTS, INC. v. MATAL 13
the PTO’s decisionmaking. And if there is any ambiguity
regarding the applicability of § 42.20 to motions to amend,
Auer requires us to defer to the PTO’s interpretation.
II
Finally, I am deeply troubled by the suggestion that,
by using the word “regulation” in a statute, Congress
intended to foreclose all means of statutory or regulatory
interpretation other than notice and comment rulemak-
ing. O’Malley Op. at 50-52; Moore Op. at 4–8. This
position would severely curtail the PTO’s authority to
regulate its own proceedings by forcing the agency to
codify rules on every procedural issue, even those that are
interpretations of existing regulations. This remarkable
proposition contradicts both the Supreme Court and our
own precedent, and drastically changes administrative
law as we know it. Thus, I disagree that § 316(a) limits
the Director’s authority to the issuance of regulations
appearing in the CFR.
I start with the general principle that agencies, in-
cluding the PTO, have wide discretion in choosing how to
regulate. The Supreme Court has long recognized that
“[a]ny rigid requirement” for legislative rulemaking
“would make the administrative process inflexible and
incapable of dealing with many of the specialized prob-
lems which arise.” Chenery, 332 U.S. at 202. Nor is
legislative rulemaking a prerequisite for Chevron defer-
ence. In United States v. Mead, the Supreme Court
explained that “administrative implementation of a
particular statutory provision qualifies for Chevron defer-
ence when it appears that Congress delegated authority
to the agency generally to make rules carrying the force of
law, and that the agency interpretation claiming defer-
ence was promulgated in the exercise of that authority.”
533 U.S. 218, 226–27 (2001). The fact that an agency
“reached its interpretation through means less formal
than ‘notice and comment’ rulemaking does not automati-
14 AQUA PRODUCTS, INC. v. MATAL
cally deprive that interpretation of the judicial deference
otherwise its due.” Barnhart v. Walton, 535 U.S. 212, 221
(2002) (internal citation omitted).
Here, the statutory scheme indicates that Congress
intended to give broad discretion to the PTO to regulate
IPR proceedings. 35 U.S.C. § 2(b)(2)(A) gives the PTO
authority to “establish regulations, not inconsistent with
law, which shall govern the conduct of proceedings in the
[PTO].” And 35 U.S.C. § 316 further delegates authority
to the Director to regulate IPR procedure, including
grounds for review, standards for discovery, and the
standard for amending claims. Given this statutory
delegation of authority, we have long recognized that “the
broadest of the [PTO]’s rulemaking powers is the power
to” establish rules governing its own proceedings. Stevens
v. Tamai, 366 F.3d 1325, 1333 (Fed. Cir. 2004). Indeed,
“we understand Congress to have ‘delegated plenary
authority over PTO practice’” Id. (emphasis added) (inter-
nal citation omitted).
Of course, Congress may limit the agency’s discretion
by statute. Judge O’Malley and Judge Moore argue that
Congress did so by using the word “regulation” in
§ 316(a), which supposedly constrains the PTO’s regulato-
ry authority to notice and comment rules codified in the
CFR only. However, using a generic term like “regula-
tion” does not mean Congress “expressly determine[d]
upon what and how the Director may promulgate rules.”
Moore Op. at 7 (emphasis in original). The terms “regula-
tion” and “rules” are often used interchangeably. For
example, in Cuozzo, the Supreme Court considered the
very same statutory provision before us now, and ex-
plained that § 316(a) “allows the Patent Office to issue
rules.” 136 S. Ct. at 2142; id. at 2137 (“[§ 316(a)] grants
the Patent Office the authority to issue rules.”). And a
“rule” under the APA is broadly defined as “the whole or a
part of an agency statement of general or particular
applicability and future effect. . . .” 5 U.S.C. § 551(4).
AQUA PRODUCTS, INC. v. MATAL 15
Moreover, our own precedent confirms that “regula-
tions” is not limited to rules codified in the CFR. For
example, we held that Congress’s delegation of authority
to “establish regulations” to govern proceedings at the
PTO meant that we would afford Chevron deference to an
interpretative rule published in the Federal Register,
even though it did not result in a regulation codified in
the CFR. Cooper Techs. Co. v. Dudas, 536 F.3d 1330,
1337 (Fed. Cir. 2008). And in Groff v. United States, we
held that the Bureau of Justice Assistance’s (BJA) legal
interpretations announced through adjudication were
entitled to Chevron deference. 493 F.3d 1343, 1348 (Fed.
Cir. 2007). In Groff, the statue allowed the BJA to estab-
lish “rules, regulations, and procedures” to administer a
benefits program for public safety officers. Id. In that
case, we refused to limit the BJA’s regulatory authority to
notice-and-comment rulemaking. Id. at 1350. Instead,
we explained that, by authorizing the BJA to establish
rules, regulations, and procedures, “Congress intended for
the BJA's statutory interpretations announced through
adjudication to have the force of law, and that those
interpretations are therefore entitled to deference un-
der Chevron.” Id.Likewise, other regional circuits have afforded Chev-
ron deference to legal interpretations not codified in the
CFR, even though the delegating statutes use the word
“regulation.” For example, 29 U.S.C. § 1135 states that
“the Secretary [of Labor] may prescribe such regulations
as he finds necessary or appropriate to carry out [certain]
provisions” of the Employee Retirement Income Security
Act. (emphasis added). In Tibble v. Edison International,
the Ninth Circuit applied Chevron deference to the De-
partment of Labor’s legal interpretation announced
through a preamble to a rule. 729 F.3d 1110, 1122 (9th
Cir. 2013) vacated on other grounds, 135 S. Ct. 1823(2015). The preamble was published in the Federal
Register, but not codified in the CFR. Id. Nevertheless,
16 AQUA PRODUCTS, INC. v. MATAL
the court explained that where Congress gave the Secre-
tary of Labor the authority to prescribe regulations,
Chevron deference is not limited “to materials destined for
the pages of the Code of Federal Regulations.” Id.As another example, the Federal Food, Drug, and
Cosmetic Act (FDCA) gives the FDA authority to “prom-
ulgate regulations for the efficient enforcement” of the
statute. 21 U.S.C. § 371(a) (emphasis added). In Mylan
Laboratories, Inc. v. Thompson, the D.C. Circuit expressly
rejected the argument that “minimal deference is owed to
the FDA’s interpretation of the FDCA because it was
expressed in letters to the parties and ‘is not embodied in
any regulation, much less a regulation that was subject to
notice and comment rulemaking.’” 389 F.3d 1272, 1279
(D.C. Cir. 2004) (internal citations omitted). The court
explained that “‘the want of notice and comment does not
decide the case’ against Chevron deference.” Id. (quoting
Barnhart v. Walton, 535 U.S. 212, 222 (2002)); see also
Apotex, Inc. v. FDA, 226 F. App’x 4, 5 (D.C. Cir. 2007) (per
curium) (holding that Chevron deference applies to FDA’s
statutory interpretation of the FDCA announced through
informal adjudication). Other courts have similarly held
that notice and comment rulemaking resulting in codifica-
tion in the CFR is not required for Chevron deference.
See, e.g., Miccosukee Tribe of Indians of Fla. v. United
States, 566 F.3d 1257, 1273 (11th Cir. 2009) (giving
Chevron deference to Fish & Wildlife Service Handbook
that was not published in the CFR); Citizens Exposing
Truth About Casinos v. Kempthorne, 492 F.3d 460, 467
(D.C. Cir. 2007) (holding that a publication in the Federal
Register is entitled to Chevron deference).
I could not find a definition of “regulation” limiting it
to codified agency pronouncements appearing in the CFR
and I have not been able to find any support in the AIA or
APA for such a narrow interpretation. Nor, apparently,
have my colleagues, since their opinions do not explain
how they derived their interpretation of “regulation” other
AQUA PRODUCTS, INC. v. MATAL 17
than to state their conclusion based, presumably, on their
plain language interpretation of the term “regulation.”
Contrary to their position, the PTO has broad discretion
over how it regulates IPR procedures. And the word
“regulation” in § 316(a) does not restrict that authority, as
Congress “does not alter the fundamental details of a
regulatory scheme” through generic or vague terms.
Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468
(2001).
Aside from the fact that § 316(a) does not limit the
PTO’s authority to regulations codified in the CFR, an-
other fallacy in my colleagues’ position is that the PTO
did promulgate regulations on the standards and proce-
dures for amending patents. In particular, the PTO
established § 42.20 through notice and comment rulemak-
ing. 2012 Notice, 77 Fed. Reg. at 6885; 2012 Final Rule,
77 Fed. Reg. 48619. And the PTO made clear that § 42.20
applies to motions to amend. 2012 Notice, 77 Fed. Reg. at
6885. Likewise, the PTO also promulgated § 42.121,
which details the timing, scope and content for motions to
amend. Therefore, even if the term “regulation” requires
an agency to adopt rules through notice and comment
rulemaking, the PTO has done so by promulgating a rule
that places the burden of proof on movants as a general
matter.
To the extent these regulations fail to address a spe-
cific factual scenario, the PTO can clarify or interpret its
own regulations without resorting to additional rulemak-
ing. Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 96
(1995) (“The APA does not require that all the specific
applications of a rule evolve by further, more precise rules
rather than by adjudication.”). Accordingly, the PTO’s
subsequent clarification of its own regulations in Master-
18 AQUA PRODUCTS, INC. v. MATAL
Image and Idle Free is at least entitled to Auer deference. 4
“Not every principle essential to the effective administra-
tion of a statute can or should be cast immediately into
the mold of a general rule. Some principles must await
their own development, while others must be adjusted to
meet particular, unforeseeable situations.” NLRB v. Bell
Aerospace Co. Div. of Textron, 416 U.S. 267, 293 (1974).
The choice of how to interpret the agency’s statutes and
regulations “lies in the first instance within the [agency’s]
discretion.” Id. at 294. The fact that Congress uses the
term “regulation” does not foreclose the PTO from inter-
preting its own rules through guidance documents or
adjudication.
If my colleagues believe that “regulations” in § 316(a)
means the Director may only interpret the agency’s own
regulations by promulgating even more regulations codi-
fied in the CFR, this is a dramatic upheaval of adminis-
trative law. See O’Malley Op. at 51-52, Moore Op. at 5.
As I have discussed, the use of the word “regulation” does
not support the notion that Congress expressly intended
to limit the PTO to rulemaking in all instances. And I can
find nothing else that suggests Congress intended to
constrain the PTO’s ability to interpret its own regula-
tions. Mead acknowledged that Congress can implicitly
delegate agency authority by, for example, “provid[ing] for
a relatively formal administrative procedure.” Mead, 533
4 Judge O’Malley and Judge Moore’s opinions do
not reach the question of whether the Board’s opinions in
MasterImage and Idle Free are entitled to Auer deference.
However, I believe that a proper application of Auer
should lead this court to defer to the Board’s legal inter-
pretations in those decisions and affirm the decision
below, even under my colleagues’ narrow interpretation of
the term “regulation.”
AQUA PRODUCTS, INC. v. MATAL 19
U.S. at 230. Considering that Congress delegated author-
ity to the PTO to regulate motions to amend, I find it
implausible that Congress would undermine the PTO’s
ability to clarify or expound on its own rules using rela-
tively formal adjudication like IPRs.
This new approach to administrative law has ramifi-
cations far beyond this case. For example, consider the
PTO’s regulation that a motion to amend cannot “intro-
duce new subject matter” to the patent. 37 C.F.R.
§ 42.121(a)(2)(ii). If the PTO sought to clarify what type
of amendments constitute “new subject matter,” the
agency might now, despite long-established precedent to
the contrary, have to promulgate regulations in the CFR,
using notice and comment rulemaking, for each and every
example of “new subject matter.” Essentially, when the
PTO is confronted with a new issue in an IPR that it has
not foreseen and accounted for in the CFR, it will not able
to deal with that issue in a more timely and efficient
manner. Instead, it will have to promulgate regulations
in the CFR through a drawn-out rulemaking process.
Such a rigid constraint on the PTO will “make the admin-
istrative process inflexible and incapable of dealing with
many of the specialized problems which arise.” Chenery,
332 U.S. at 202.
III
Accordingly, I would affirm. From the contrary judg-
ment of Judge O’Malley, Judge Moore, and Judge Reyna,
I respectfully dissent.