Veritas Technologies LLC v. Veeam Software Corp., No. 2015-1894 (Fed. Cir. Aug. 30, 2016).
On recurring controversy in AIA trials is the difficulty patent owners face meeting the PTAB’s strict requirements for amending claims. In a recent case, the Federal Circuit vacated a PTAB ruling denying a patent owner’s motion to amend. It noted that the patent owner demonstrated that elements added to the claims resulted in a combination that was not disclosed in the prior art, and that the PTAB’s refusal to grant the patent owner’s motion to amend was arbitrary and capricious.
Claim Amendments in IPR Proceedings
The America Invents Act permits patent owners to move to amend claims in a patent under IPR review. 35 U.S.C. § 316(d). Despite this statutory right, patentees usually have been unsuccessful in seeking amendments. The USPTO has promulgated rules that force the patent owner to demonstrate that a proposed amended claim is patentable over the known prior art. See 37 C.F.R. § 42.121; Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012–00027, Paper 26, 2013 WL 5947697 (PTAB June 11, 2013). In a decision by an expanded panel, the PTAB clarified this requirement, noting that for purposes of motions to amend “known prior art” refers to:
(a) any material art in the prosecution history of the patent;
(b) any material art of record in the current proceeding, including art asserted in grounds on which the PTAB did not institute review; and
(c) any material art of record in any other proceeding before the USPTO involving the patent.
See Masterimage 3D, Inc. v. Reald Inc., No. IPR2015-00040, Paper 42, 2015 WL 4383224 (PTAB Jul. 15, 2015)(informative). A panel of the Federal Circuit has deferred to the USPTO’s procedures governing amendment, although it has granted en banc review of the question. In re Aqua Prod., Inc., No. 2015-1177, 2016 WL 4375651 (Fed. Cir. Aug. 12, 2016).
Denial of Veritas’ Motion to Amend
The most recent Federal Circuit case involved a patent owner, Veritas Technologies LLC, that owns U.S. Patent No. 7,024,527, covering systems and methods for prioritizing the restoration of computer data when the data is used in an active application. Veeam Software Corp. filed a petition for inter partes review, alleging that five claims of the ‘527 patent were unpatentable over cited prior art. The PTAB construed the challenged claims to apply to two types of memory, file-level memory and block-level memory. On that basis, the PTAB ruled that the claims were unpatentable as obvious in light of the references cited by Veeam. In its response, in addition to arguing that the claims were limited to restoration of block-level memory, Veritas filed a conditional motion to substitute two challenged claims for claims that essentially limited the claims to block-level memory restoration. The PTAB denied the motion to amend on the grounds that Veritas failed to meet its burden under § 316(d), because Veritas’ motion and supporting expert report only discussed whether the block-level memory in combination with other recited features was disclosed in the prior art, and did not explicitly address whether the block-level memory feature was separately known in the art.
On appeal, the Federal Circuit affirmed the PTAB’s ruling that the challenged claims were unpatentable, but vacated the PTAB’s denial of the motion to amend. The court noted that under the Administrative Procedures Act, the denial could be overturned only if it was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A). The court held that the PTAB’s denial of the motion on the sole grounds that Veritas and its expert did not discuss the amended element separately, but only in combination with other known features, was “unreasonable and hence must be set aside as arbitrary and capricious.” Slip op. at 13. After noting that Veritas’ motion discussed whether the block-level memory feature added in the amended claims was found in the memory restoration art, and in the references cited by Veeam (which did not argue that the combination was disclosed in any reference), the court observed that it did “not see how the Board could reasonably demand more from Veritas in this case.”
In this case, we fail to see how describing the combination is meaningfully different from describing what is new about the proposed claims, even in comparison to the unamended claims. For that reason, we conclude that the Board erred in its sole reason for denying the motion to amend. The Board rationale here is erroneous independently of any resolution of this court’s recently initiated en banc proceedings in In re Aqua Products, Inc.[.]
Slip op. at 15-16.
One issue to be decided in the upcoming en banc hearing in In re Aqua Products, Inc. is whether the USPTO procedures for amending claims in IPR proceedings improperly place the burden of proving that the amended claim in patentable on the patent owner, instead of the petitioner. The Veritas case demonstrates that, even under this difficult standard, the PTAB cannot apply the standard woodenly. A patent owner may meet the burden of proving that a proposed amended claim is patentable, even if the evidence does not strictly conform to the PTAB’s preferred format.