Patent-Quality Org Backs Ptab Amendment Regs At Fed. Circ.

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Originally reported by Matthew Bultman on Law360, New York (November 8, 2016, 8:02 PM EST)

An advocacy group that focuses on patents in the financial services industry has waded into the debate over the Patent Trial and Appeal Board’s controversial rule governing amendments to patents in America Invents Act reviews, telling the full Federal Circuit the current regulation is in line with congressional intent.

Askeladden LLC filed an amicus brief Nov. 2 supporting the U.S. Patent and Trademark Office as it defends against a bid from Aqua Products Inc. to undo the PTAB’s amendment procedures.

Under current board rules, the burden of persuasion is on the patent owner to establish that a proposed substitute claim is unpatentable. Aqua contends this "unduly restrict[s]" patent owners' ability to amend their patents and says the burden should be on petitioners.

But Askeladden said the AIA gave the USPTO "expansive" authority to set the rules for administrative proceedings like inter partes reviews. It said the regulation isn’t just a reasonable exercise of that authority — it’s the only workable standard for handling substitute claims.

"Overturning the Patent Office regulation so that the patent owner no longer has to establish that substitute claims are patentable would subvert the purposes that inter partes review was designed to serve," it wrote, arguing there would be a rise in weak patents.

This is especially important in the financial services and tech industries, where abuse of the patent system by entities asserting low-quality patents can be more prevalent than in other areas, like pharmaceuticals, according to Askeladden.

"It’s a great time to be in financial services, there’s so much innovation going on," Sean Reilly, general counsel of Askeladden, told Law360 on Tuesday. "And it’s important to have high-quality assets. Low-quality assets drive up costs, create noise and really stifle the innovation."

The Federal Circuit will hear arguments Dec. 9 in the case, which is being closely watched in patent circles. Patent owners have complained the board makes it nearly impossible to secure claim amendments, which are a key tool for saving patents from invalidity challenges.

Askeladden’s brief was filed the same day as one from the Internet Association and companies like Dell Inc. and Vizio Inc. The companies similarly argued the rule furthers’ Congress desire to weed out bad patents.

Much has been made of recent statistics that showed as of April, the board had granted just six of the 118 motions to amend that had been filed. Aqua has cited this as evidence that the system isn’t working like lawmakers planned. But the Internet Association argued the data suggests the IPR process is working exactly as Congress intended: "to target and cancel especially weak patent claims."

The case stems from a lawsuit that Aqua Products filed against Zodiac Pool Systems Inc. in 2012, alleging infringement of its patent. Zodiac responded by challenging the patent in an inter partes review, and the PTAB found that many claims are invalid. It also denied Aqua Products' motion to amend.

A Federal Circuit panel affirmed in May, by which time Zodiac had been dismissed from the case.

In a recent brief, Aqua Products argued that shifting the burden of persuasion to the patent owner contravenes the plain language of the AIA. Not only that, but it destroys the PTAB's role as a neutral arbiter and essentially puts it in the shoes of a litigant adverse to the patent owner, it argued.

"Because Congress has spoken directly to this issue and there is no ambiguity in the statutory language, the [USPTO’s] contrary interpretation is entitled to no deference and should be reversed," Aqua wrote.

The patent office, for its part, insists that its approach is "fully consistent with normal practice and common sense." It told the Federal Circuit that there was nothing to suggest Congress would have intended for the burden to be placed solely on the party challenging the patent.

Chiming in last week, Askeladden added that unlike patent examiners, the PTAB isn’t designed to examine patents or search for prior art. Rather, the board conducts a trial and rules on a record of evidence that is established by the two sides.

"Accordingly, the regulation assigning the burden of persuasion to the patent owner to establish the patentability of substitute claims is reasonable in view of the purpose of inter partes review and the capabilities of the board," it wrote.

The patent-in-suit is U.S. Patent Number 8,273,183.

Aqua Products is represented by James Barney, David Mroz and Timothy McAnulty of Finnegan Henderson Farabow Garrett & Dunner LLP.

The USPTO is represented by Nathan K. Kelley, Scott C. Weidenfeller, Meredith H. Schoenfeld, Farheena Y. Rasheed and Joseph Matal of the agency and Mark R. Freeman of the U.S. Department of Justice.

Askeladden is represented by Kevin J. Culligan and John P. Hanish of Maynard & Gale PC.

The case is In re: Aqua Products Inc., case number 15-1177, in the U.S. Court of Appeals for the Federal Circuit.

--Additional reporting by Ryan Davis and Kevin Penton. Editing by Mark Lebetkin.