In re Magnum Oil Tools International, Ltd.

Docket No. 2015-1300

July 25, 2016

Brief Summary: Board decision of obviousness reversed because petitioner failed to show a motivation to combine, the burden to do so “never shifts to the patentee”, and “the Board is [not] free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner”.

Summary: McClinton Energy Group, LLC requested IPR of Magnum’s US 8,079,413 directed to “fracking” technology, alleging that all of the claims are invalid for obviousness. The PTAB issued a final written decision holding that all of the claims are invalid for obviousness in view of three references (“Lehr in view of Cockrell and Kristiansen”). The PTAB declined to institute IPR on the basis of a fourth reference, “Alpha”, but the FC opinion explained that it “is nonetheless relevant to this appeal because Magnum focuses its arguments on differences between Alpha and Lehr.” The parties subsequently settled their dispute over the ‘413 patent. Magnum appealed the PTAB decision and the PTO intervened in the appeal pursuant to 35 USC § 143 after McClinton withdrew as part of the settlement. All of the ‘413 claims require “shearable threads” in a “release mechanism” that is “part of an insert that is placed within the central bore of the plug” (“[a] plug for isolating a wellbore”). The PTO argued Magnum was appealing the non-appealable decision to institute IPR but Magnum argued it was relying on statements made in the decision to institute that were relied upon in the final written decision. The FC panel agreed such reliance is proper under Versata (FC 2015) and not prohibited by 35 USC § 314(d) or Cuozzo Speed Techs (US 2016). Magnum argued that McClinton failed to specifically show a motivation to combine the references. The PTO argued that a decision to institute IPR means the “Petitioner has demonstrated a ‘reasonably likelihood of success’” which “operates to shift the burden of producing evidence to the patentee”. The FC panel noted that the PTO’s argument “implies that the Board’s conclusion on obviousness in an IPR can be based on less than a preponderance of the evidence if the patent holder does not affirmatively disprove the grounds upon which the IPR was initiated.” However, it also explained that in an IPR “the burden never shifts to the patentee” (Dynamic Drinkware, FC 2015 (proper in the context of establishing conception and reduction to practive for the purposes of establishing a priority date); and it may properly shift during prosecution (In re Oetikr, FC 1992)). The FC panel explained that “[w]here, as here, the only question presented in whether due consideration of the four Graham factors renders a claim or claims obvious, no burden shifts from the patent challenger to the patentee” (TriVascular, FC 2016). The FC panel found “[t]he final written decision [to be] replete with examples where, rather than require McClinton to prove its assertion of obviousness, the Board improperly shifted the burden to Magnum to disprove obviousness” and “McClinton failed to articulate a motivation to combine” (“a petitioner cannot employ mere conclusory statements”). The FC panel also found error with the Board’s “making [of] an obviousness argument on behalf of McClinton…because this argument ‘could have been included in a properly-drafted petition” (“It is the petitioner that bears the burden of proof in IPRs…the Board is [not] free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner….”) The FC panel also rejected to PTO’s contention that Magnum was required to request rehearing before filing its appeal to the FC. Thus, the Board decision was reversed.

This entry was posted in Inter Parties Review (IPR), IPR, Obviousness. Bookmark the permalink.

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