‘Law360’ Ranks Jackson Walker Patent Case Among Top AIA-Related Decisions of 2016

January 23, 2017 | Mentions

Law360 reviewed seven of the most notable appellate rulings in 2016 under the new America Invents Act. Included in the list is a review of Jackson Walker’s successful appeal in the case In re: Magnum Oil Tools International Ltd.

Last summer, Jackson Walker attorneys secured a rare total reversal in a ruling by the U.S. Court of Appeals for the Federal Circuit, wherein the court ruled that the Patent Trial and Appeal Board (PTAB) had improperly shifted the burden of proof to the patent owner in an inter partes review (IPR).

Jackson Walker represented Magnum Oil Tools International Ltd. (Magnum) in defending its fracking plug patent against McClinton Energy Group (McClinton) in the U.S. District Court for the Southern District of Texas. In the midst of the litigation, McClinton filed an IPR petition against all claims of the patent held by Magnum and argued to the PTAB that the claims were obvious. The PTAB instituted the IPR and, shortly thereafter, Magnum settled the district court litigation. Although McClinton settled out of the litigation and withdrew from the IPR proceedings, the PTAB proceeded to render a final decision of invalidity. Jackson Walker was not involved in the original IPR proceedings before the PTAB but was engaged by Magnum to handle the appeal of the final decision of the PTAB before the Federal Circuit. The PTO intervened in that appeal.

Jackson Walker challenged the PTAB’s final decision on the grounds that it improperly shifted the burden of proof from McClinton to Magnum, once the IPR was instituted. For appeals to the PTAB from adverse patent examination decisions, burden-shifting is used by the PTAB to evaluate whether the patent examiner has properly rejected claims. However, that regime should not apply in the context of an IPR, because the America Invents Act (AIA) requires that the burden of proving unpatentability remain on the petitioner and does not shift to the patent owner. The PTAB had been improperly applying burden-shifting in IPR proceedings until Jackson Walker appealed that practice to the Federal Circuit, calling attention to the fact that the PTAB had to interject its own reasoning – not the Petitioner’s reasoning – in order to rule in favor of the Petitioner.

In response, the PTO argued that the PTAB was correct to apply the same burden-shifting framework regarding obviousness in an IPR as the PTO does in patent examination because the PTAB must find that the petitioner has a reasonable likelihood of success before initiating the IPR. According to the PTO, that finding was the equivalent of proving a prima facie case. The PTO also argued that the PTAB could reach its decision based on an alternate theory of invalidity that could have been presented, as is also common in appeals from patent examination decisions.

Jackson Walker attorney Nate St. Clair successfully argued against that point, by pointing out that allowing the PTAB to rely on an alternate theory that was not argued by the petition was “not what Congress intended.”  The Federal Circuit agreed, squarely rejecting the PTO’s arguments and holding that the burden of persuasion in an IPR is on the petitioner to prove unpatentability by a preponderance of the evidence, as stated in the AIA, and that such burden never shifts to the patentee.

Likewise, the Federal Circuit held that the burden of production does not shift to the patentee either. The Federal Circuit noted that while the burden of production might shift to a patentee on certain limited points (for example where the patent owner asserts an affirmative defense), applying a burden-shifting framework to the requirement for establishing a prima facie case of obviousness would introduce unnecessary confusion. The court concluded the ultimate burden of persuasion of obviousness must remain on the petitioner, and a fact finder must consider all evidence of obviousness and nonobviousness before reaching a determination. In other words, if the petitioner does not meet its burden of proof, then the patent owner has no obligation to present any evidence.

The Federal Circuit went on to hold that the PTAB’s improper shifting of the burden of proof did, in fact, result in reversible error given that the petitioner failed to meet its burden of establishing obviousness. Furthermore, the Federal Circuit held that while the PTAB has some leeway to modify a petitioner’s grounds of rejection, it does not have authority to raise, address, and decide unpatentability theories never presented by the petitioner. If the Board adopts a modified version of petitioner’s grounds, there must be clear evidence supporting the motivation to combine references. Going forward, when the Board deviates from a petitioner’s original grounds, patent owners should be sure to point out any instances of unsupported combinations of references or conclusory statements in the petition that are relied upon in an institution decision, given the ruling in Magnum.

For more detailed information, read the Federal Circuit Court of Appeals ruling.

For Law360’s review of this case and others, read “A Look Back at the Top AIA-Related Decisions of 2016” (subscription may be required).

About Our Team

John M. Jackson has represented a wide variety of clients in patent litigation and complex commercial litigation matters in federal and state courts throughout the country and before the International Trade Commission for over 18 years.

Bob Latham has developed nationally recognized expertise in the areas of media law and intellectual property litigation and chairs both practice areas at Jackson Walker. As well as a trial lawyer, Bob is a published author and columnist, and a much sought-after speaker nationally and internationally.

Chris Rourk is a Dallas-based intellectual property attorney with experience handling high-profile matters for clients in intellectual property as well as corporate transactions, commercial litigation, and other complex interdisciplinary matters.

Nate St. Clair is an Intellectual Property litigator and counselor, representing clients in a wide range of Intellectual Property matters and complex civil litigation matters. His practice focuses particularly on patent litigation, IP portfolio licensing, and management, though he also performs infringement and invalidity analyses, patentability studies, and risk assessments and provides general IP counseling, particularly in the electrical and mechanical arts.