In Re: Magnum Oil Tools International, Ltd.

July 25, 2016

Federal Circuit No. 2015-1300
Author: Hyunseok Park

In an inter partes review ("IPR") of U.S. Patent No. 8,079,413 (the "’413 patent”), owned by Magnum, McClinton filed a petition arguing that the claims of the ’413 patent are not patentable under 35 U.S.C. § 103.  McClinton presented two different grounds, one based on Alpha as the primary reference, Cockrell and Kristiansen and another based on Lehr as the primary reference, Cockrell and Kristiansen.  In presenting arguments based on Lehr, Cockrell and Kristiansen, McClinton largely incorporated by reference its arguments on Lehr from its earlier arguments based on Alpha.  The Board instituted the IPR of all challenged claims based on Lehr in view of Cockrell and Kristiansen, but not on the basis of Alpha.  The Board issued a final written decision holding all challenged claims unpatentable under 35 U.S.C. § 103.

On appeal, Magnum argued that McClinton failed to establish a prima facie case of obviousness based on Lehr, Cockrell and Kristiansen for the reason that McClinton failed to articulate a sufficient rationale for why one skilled in the art would have sought to combine Lehr with Cockrell and Kristiansen.  In addition, Magnum argued that the Board in its final written decision improperly incorporated by reference McClinton’s arguments based on Alpha into the Board’s conclusion that the claimed invention would have been obvious in light of the primary reference Lehr.

The USPTO, which has intervened in the appeal, argued that McClinton met its initial burden of proving obviousness when the Board concluded in the decision to institute the IPR.  In addition, the USPTO argued that once the Board found a reasonable likelihood that McClinton would ultimately carry its burden of persuasion, the burden of production shifted to Magnum to argue or produce evidence in its patent-owner response that Lehr, Cockrell, and Kristiansen do not render claim 1 obvious.

The Federal Circuit stated that in an IPR, the burden of persuasion is on the petitioner to prove unpatentability by a preponderance of the evidence, and that burden never shifts to the patentee.  In addition, the Federal Circuit held that McClinton merely argued in conclusory fashion that the same analysis for Alpha also applied to Lehr, without further explanation, and that the Board had no basis apart from this and similar conclusory statements to find a motivation to combine Lehr with the other prior art references, Cockrell and Kristiansen.  From the above, the Federal Circuit held that the Board did not have sufficient evidence on which to base its legal conclusion of obviousness and reversed the Board's decision.