In a rare complete reversal of the Patent Trial and Appeal Board, the Federal Circuit held that the Board clearly erred in shifting the burden of proving obviousness to the patent owner. McClinton had filed a petition for inter partes review against Magnum's patent relating to hydraulic fracturing (fracking). The Board found that the patent was invalid for obviousness based on three references.
After the decision but before appeal, McClinton and Magnum settled their dispute. Magnum then appealed, and the director of The United States Patent and Trademark Office (USPTO) intervened in the appeal. Magnum argued that the Board’s decision had improperly shifted the burden to Magnum, the patent owner, to prove nonobviousness. The USPTO argued that, while the burden of persuasion may rest with the petitioner, the ultimate burden of production shifts to the patent owner once the inter partes review has been instituted.
The Federal Circuit explained that the burden of persuasion on the petitioner to prove unpatentability by a preponderance of the evidence never shifts to the patentee. Similarly, the court held that shifting the burden of production to the patent owner after institution was also erroneous. In reviewing the specific facts of the case, the Federal Circuit found that, in its final written decision, the Board did improperly shift the burden to Magnum to disprove obviousness. The court also found that McClinton, the petitioner, had failed to prove obviousness separately. In reversing the Board’s decision, the Federal Circuit noted that “the Board must base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond.”
In re Magnum Oil Tools Int’l, Ltd., No. 2015-1300 (Fed. Cir. July 25, 2016).
[Newman, O’Malley, Chen]