Aqua Products, Inc. v. Matal

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. § 102

and § 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. at

461–62, 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. at

229–31). 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 f

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