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Fed. Circ. Says PTAB Wrongly Axed Fracking
Patent In IPR
By Ryan Davis
Law360, New York (July 25, 2016, 8:04 PM ET) -- The Federal Circuit on Monday reversed
the Patent Trial and Appeal Board’s inter partes review decision invalidating a fracking
patent, finding that the board wrongly put the burden of proof on the patent owner, rather
than the challenger, in a rare total reversal of a PTAB ruling.
The appeals court said that the PTAB’s final written decision was “replete with examples”
where the board improperly required patent owner Magnum Oil Tools International Ltd. to
disprove that its patent was obvious, rather than requiring petitioner McClinton Energy Group
LLC to prove obviousness.
Moreover, McClinton's arguments were based on "mere conclusory statements" that cannot
satisfy its burden of demonstrating that the patent was obvious, the court ruled.
"We agree with Magnum that the board improperly shifted the burden to it, as the patentee,
to prove nonobviousness," the court said. "Because McClinton failed to separately meet its
burden of establishing obviousness ... we reverse."
McClinton challenged Magnum's patent on technology used in hydraulic fracturing, commonly
known as fracking. The patent covers a mechanism for inserting a plug to divide a wellbore
so that different sections can be fracked at different times.
McClinton cited four prior art reference in its petition, arguing that the patent would be
obvious in view of two different combinations of prior art references. The board instituted
review based on only three of the references and ultimately concluded that the patent was
invalid.
After the board issued its decision, McClinton settled with Magnum and agreed not to
participate in the appeal. The U.S. Patent and Trademark Office intervened in the appeal to
defend the board's decision.
Magnum argued on appeal that the board did not establish a case that the patent was
obvious in view of a combination of those three references. The USPTO argued that when
the board institutes an inter partes review, it necessarily finds that the petitioner has
demonstrated a reasonable likelihood of success, so the burden of producing evidence of
nonobviousness shifts to the patentee.
The Federal Circuit strongly disagreed, writing that the USPTO's argument is "directly at odds
with our precedent" that the burden remains on the challenger. It said that adopting the
USPTO’s view would "introduce unnecessary confusion."
The court cited several examples in the decision where the board expected Magnum to
7/25/2016 Fed. Circ. Says PTAB WronglyAxed Fracking Patent In IPR - Law360
http://www.law360.com/articles/820986/print?section=appellate 2/2
explain — and faulted it for failing to explain — why an obviousness argument would not be
applicable, improperly requiring Magnum to prove nonobviousness.
Further, the court found that McClinton merely made conclusory statements that it would be
obvious to combine the prior art to arrive at the claimed invention, which is not sufficient for
a finding of obviousness.
"The board's decision was premised on a legally incorrect standard for assessing
obviousness, and the board's factual findings regarding the alleged motivation to combine
lacked substantial evidence," the court concluded. "Accordingly, we reverse the board's
decision."
Nathaniel St. Clair II of Jackson Walker LLP, an attorney for Magnum, said Monday that the
company was pleased with the decision reversing the PTAB and was confident that the court
would correct the board’s error.
The decision “is a further endorsement of the validity of the ... patent and the novel
technology that Magnum has diligently developed over the last several decades,” he said.
“The court provided some much-needed guidance regarding limits to the board's discretion,
during the inter partes review process, which should help both petitioners and patent owners
to obtain more predictable outcomes at the board.”
The USPTO does not comment on litigation.
Judges Kathleen O'Malley, Pauline Newman and Raymond Chen sat on the panel for the
Federal Circuit.
The patent-in-suit is U.S. Patent Number 8,079,413.
Magnum is represented by Nathaniel St. Clair II, John Jackson and Christopher Rourk of
Jackson Walker LLP.
The USPTO is represented by Kristi Sawert, Thomas Krause, Scott Weidenfeller and Michael
Forman of the agency's office of the solicitor.
The case is In re: Magnum Oil Tools International Ltd., case number 2015-1300, in the U.S.
Court of Appeals for the Federal Circuit.
--Editing by Patricia K. Cole.
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