Reaffirming the petitioner’s burden of proof codified in 35 USC § 316(e), the US Court of Appeals for the Federal Circuit reversed the decision of the Patent Trial and Appeal Board (PTAB or Board) finding the patent owner’s challenged claims invalid. In re: Magnum Oil Tools International, Ltd., Case No. 15-1300 (Fed. Cir., July 25, 2016) (O’Malley, J). 

McClinton Energy Group challenged Magnum’s patent in inter partes review (IPR). After the PTAB held all challenged claims invalid as obvious, Magnum appealed. As part of a settlement agreement with Magnum, McClinton agreed not to participate in the appeal. The US Patent and Trademark Office (PTO) intervened on behalf of the PTAB. 

Notwithstanding that intervention, the Federal Circuit noted that it may review a PTAB final written decision even if such decision relies on determinations made in the institution decision. Citing its precedent in Versata (IP Update, Vol. 18, No. 8), the Court explained that it “[has] jurisdiction to review determinations made during institution that are subsequently incorporated into the Board’s final written decision.” The Court also noted that Magnum was not required to request a rehearing from the PTAB prior to filing an appeal (from a final written decision that relies on the institution decision). 

As to the merits of Magnum’s appeal, the Federal Circuit found that the PTAB erred in shifting the burden of proof on obviousness from the petitioner to the patent owner. Section 316(e) states that “[i]n an inter partes review . . . the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.” The Court separately addressed the underlying burdens of persuasion and production. 

Regarding the burden of persuasion, the Federal Circuit cited its decision in Dynamic Drinkware (IP Update, Vol. 18, No. 10) that “the burden of persuasion . . . never shifts to the patentee.” Regarding the burden of production, the Court found that the PTO erred in finding that institution of the IPR shifted the burden of production from the petitioner to the patent owner, explaining that because the burden of persuasion remains with the petitioner, shifting the burden of production to the patent owner would create confusion. The Court further found burden shifting inappropriate in light of the different analyses and standards applied during institution versus the final written decision.

Under the proper allocation of burdens, the Federal Circuit concluded that the PTAB had no basis for finding that McClinton had met its burden of proving obviousness. The Court found the final written decision replete with examples where the PTAB improperly shifted the burden to the patent owner to disprove obviousness. In one example cited by the Court, McClinton provided no analysis for why a combination of references rendered the claims invalid, yet the PTAB faulted Magnum for not explaining why McClinton’s analysis regarding a different combination of references did not apply. The Court stated that the need for separate analysis between the various combinations was evidenced by the PTAB’s decision to institute only on the first ground asserted, but not the second. 

The Federal Circuit explained that the PTAB erred by adopting arguments that could have been, but were not, raised by the petitioner. The Court ultimately concluded that the PTAB failed to articulate a sufficient rationale for why a skilled artisan would have sought to combine the asserted prior art to achieve the claimed invention. 

Practice Note: In America Invents Act proceedings, the PTAB is not permitted to raise arguments that “could have been, but were not, raised by the petitioner.” In light of strict page limits, a petitioner wishing to assert multiple combinations of references should consider filing separate petitions to allow space for development of all arguments.