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The patent-at-issue involved technology in the field of oil drilling through the use of hydraulic fracturing (“fracking”).  The Federal Circuit reversed the PTAB’s final decision finding that all challenged claims of US 8,079,413 were obvious, holding that the Board erred by shifting the burden of production on the issue of obviousness from the petitioner to the patent owner upon the institution of the IPR and by failing to articulate a sufficient rationale for why a skilled artisan would have sought to combine the asserted prior art to achieve the claimed invention.

First, the Federal Circuit clarified that the Board’s decision to institute an IPR based on “a reasonable likelihood that the petitioner would prevail” did not shift the burden of production to the patentee. The Court held that “because of the significant difference between the standards of proof at institution and trial during an IPR, it is inappropriate to shift the burden to the patentee after institution to prove that the patent is patentable.” The Court emphasized that the petitioner continues to bear the burden of proving invalidity after the institution of an IPR, which it “must do so by a preponderance of the evidence at trial,” and the “board has an obligation to assess the question anew after trial based on the totality of the record.”

Next, the Federal Circuit found that while the petition explained why it would be obvious to combine reference Y with A and B, the Board improperly incorporated by reference that explanation into its final decision based on the different references, X combined with A and B. The Federal Circuit rejected the PTO’s assertion that because a properly-drafted petition could have included an obviousness argument based on X, A, and B, the PTO did not err in basing its decision on that combination. The Federal Circuit noted that even though the PTO has “broad authority to establish procedures for revisiting earlier-granted patents in IPRs,” that authority does not “allow the PTO to raise, address, and decide unpatentability theories never presented by the petitioner and not supported by the record evidence.”

In re: Magnum Oil Tools, Case No. 2015-1300 (July 25, 2016); Opinion by: O’Malley, joined by Newman and Chen; Appealed From: United States Patent and Trademark Office, Patent Trial and Appeal Board.  Read the full opinion here.

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