Rebutting the Presumption of Unreasonability

Given the complications associated with amending litigated claims, amendment is still relatively rare at the Patent Trial & Appeal Board (PTAB).  Yet, there remain Patent Owners willing to amend claims in limited scenarios. For these Patent Owners, the Board has provided some helpful guidance post Aqua Products.  As a reminder, newly designated precedent Western Digital Corp. v. SPEX Techs., Inc has replaced now de-designated precedent/informative decisions of MasterImage 3D, Inc. v. RealD Inc.,Case IPR2015-00040 (PTAB July 15, 2015) (Paper 42) and Idle Free Sys., Inc. v. Bergstrom, Inc., Case IPR2012-00027 (June 11, 2013) (Paper 26).

However, Aqua Products did not overrule all aspects of these earlier decisions despite their de-designations. So, the question remains as to the continued viability of some of these earlier positions — such as the standard for assessing a “reasonable number” of substitute claims.

In a decision issued today, the Board emphasized that adding claims beyond a 1-1 substitution creates a presumption of unreasonability.  And, that rebutting that presumption may not necessarily require a showing of patentable distinctness between multiple substitutes, as previously explained in Idle Free.

In Adidas AG v. Nike Inc., the Board considered amended claims remanded from the Federal Circuit post-Aqua Products. While ultimately finding that the record demonstrated these claims unpatentable, the Board debated the earlier standard of reasonableness as presented in Idle Free.  The continued viability of that standard was seemingly laid to rest by the decision of the Board, but concurring opinions raised some interesting food for thought (here).

First, the opinion of the Board, explained:

Subsection (a)(3) of 37 C.F.R. § 42.121 provides that there is a presumption that only one substitute claim would be needed to replace each challenged claim. Rule 42.121(a)(3) also provides, however, that the presumption is one that may be “rebutted.” With that in mind, we do not read Idle Free as requiring Patent Owner to show in every instance a patentable distinction of each proposed substitute claim over all other proposed substitute claims for the same challenged claim to overcome that regulatory presumption. Idle Free, by its own terms, does not necessitate such a showing under all circumstances. Indeed, it conveys that only “in certain circumstances” must a patent owner undertake to show patentable distinction of a given substitute claim over other substitute claims for the same challenged claim. (stating that Patent Owner may show a patentable distinction or a special circumstance evidencing a need for multiple substitute claims). Thus, Idle Free clearly contemplates circumstances where the patentable distinction showing is not required.

.         .         .          .          .

Importantly, a strict reading of Idle Free erects procedural hurdles where they serve no purpose. In some cases, an analysis of the patentable distinction between multiple substitute claims may involve more effort than simply addressing the patentability of each substitute claim. In this case, we use our discretion not to rigidly apply a “patentable distinction” test that will burden the Office, Patent Owner, and Petitioner. And in no way can rigid adherence to a “patentable distinction” test be said to “secure the just, speedy, and inexpensive resolution of every proceeding.” 37 C.F.R. § 42.1(b) (emphasis added).

To be sure, we subscribe to Idle Free’s premise that an inter partes review does not provide patent owners with an opportunity to start anew with a fresh set of claims at trial. The Office provides other and ample means to achieve those goals. Nevertheless, patent owners may propose a reasonable number of substitute claims, and we should not apply a rigid requirement of establishing patentable distinctness over all other proposed substitute claims to overcome the regulatory presumption where circumstances dictate otherwise.

(internal citations omitted)

The opinion of the Board then emphasized the number of claims proposed to be cancelled relative to those added.

The first concurrence found that the Board opinion strayed from the notice provided in Idle Free as to the enunciated standard for reasonability, and that patentable distinctness should be a required showing for additional claims to foster predictability.

My colleagues announce here a new interpretation of Idle Free and apply that new interpretation without prior notice to the Parties or to the Federal Circuit. Further, the new interpretation really provides no standard at all. Instead, the new interpretation presumes that future panels simply will know a reasonable number of substitute claims when they see one.

.         .         .          .          .

[T]he majority’s new interpretation of Idle Free replaces an admittedly strict, but definite and predictable, standard for determining when multiple, substitute claims are “reasonable,” with a standard based on the virtually unfettered discretion of individual panels.

The second concurrence agreed with the firsts as to applying the Idle Free distinctness standard in this case (given the Patent Owner was operating under the Idle Free standard, and, the Federal Circuit had remanded the case to be decided accordingly), but found the patentable distinctness standard of Idle Free inefficient going forward, explaining:

I have considered Idle Free’s approach and do not believe, now, that it remains a sound framework for analyzing whether the number of substitute claims is reasonable. Idle Free’s test that a substitute claim should be patentably distinct from another substitute claim is, for example in this case, an impediment to determining reasonableness under 37 C.F.R. § 42.121(a)(3) and is not linked in a meaningful way to a “demonstration of need” by which patent owners may rebut the presumption. A strategic goal of the reasonableness requirement in both the statute and our rules is to facilitate the goals of keeping the review process within the statutorily directed time limits (see 35 U.S.C. § 316(a)(11)) and “secur[ing] the just, speedy, and inexpensive resolution of every proceeding” (37 C.F.R. § 42.1(b)). A tactical goal is to maintain the scope of the claims within bounds which maintain inter partes review as an adjudicatory, rather than a prosecutorial, process. Idle Free’s test does not help achieve those goals. Instead, it unnecessarily adds a second patentability analysis to motions to amend and to our decisions resolving such motions.

Setting aside the first concurrence’s point as to whether or not the Idle Free standard should be applied to this particular case, I agree with the second concurrence that the test is unwieldy.  Given the page constraints on Motions to Amend, the requirement to walk through such an analysis would be onerous—to the point that the test itself would swallow the issue.  That is, if a Patent Owner can’t fit the distinctness showing (along with the other significant discussions) within the page limit, it can’t submit the additional claims in any event (securing additional space from the Board, while an option, can be unpredictable).  Seems to me that Patent Owner’s should be able to explain the need for additional claims in a far simpler manner, if they really need them.

Ultimately, what this decision signals to the public is that the reasonableness analysis is flexible, and that when adding greater than a 1-for-1 claim substitution, the number of claims cancelled can also demonstrate reasonableness. In this case, the contingent motion proposed cancellation of 46 claims and substitution of only 4 claims. It would be a very bad look indeed for the PTAB to find this particular scenario “unreasonable.”  The more flexible approach, especially given the severe negative publicity the Board has received on amendment practice, is the more prudent path forward.