Federal Circuit Provides Ammunition to Patentees In Magnum Decision

cafc1Patent Owners gained a bit of a reprieve in the Federal Circuit’s recent decision in In Re Magnum Oil Tool Int’l, Ltd.decided on July 25, 2016. In several key respects, Patent Owners regained some footing in the otherwise daunting IPR process.

As an initial matter, in one of its first post-Cuozzo (Supreme Court edition) decisions, the Federal Circuit determined that, for issues that are central to the Board’s Final Written Decision, the Court is not prohibited by § 314(d) from reviewing those decisions just because they were also addressed in the Decision to Institute. The merits of a final written decision is reviewable, even though the issue was initially decided by the Board at the decision to institute stage. Id. at 12. In the context of the Magnum decision, this meant that the Court had jurisdiction to review all of Patent Owner’s arguments regarding the basis for the Board’s ultimate judgment of unpatentability, including rationale to combine references, even though the Board addressed those arguments in the decision to institute.

The key substantive issue in the case was whether the Board’s decision adequately established a prima facie basis of obviousness. Specifically, Patent Owner argued that no adequate motivation to combine the subject references was articulated. The issue stemmed from the fact that, in the petition, Petitioner put forth a detailed obviousness argument on one set of references (“Ground 1”), but took a more abbreviated approach with a second set of references (“Ground 2”), that “incorporated by reference” the motivation to combine from Ground 1.

In response, the PTO argued that when the Board institutes a ground, it necessarily finds that Petitioner has demonstrated a reasonable likelihood of success and that this finding operates to shift the burden of producing evidence of nonobviousness to Patent Owner. But, the Court rejected the PTO’s contention and clarified that the burden of persuasion is always on the Petitioner to prove unpatentability by preponderance and that burden never shifts to the patentee. The court reasoned that, due to the significant difference between the standards of proof at institution (likelihood of success) and at trial (preponderance), it is inappropriate to shift the burden to the patentee after institution to prove that the claims are patentable.

As to the ultimate conclusion of obviousness, the court concluded that, in light of Petitioner’s failure to explain why a skilled artisan would combine the Ground 2 references, the Board had no basis for its conclusion that Petitioner had met its burden of proving obviousness by preponderance under KSR.  The court emphasized that to satisfy its burden of proving obviousness, Petitioner cannot employ mere conclusory statements because such statements cannot satisfy Petitioner’s burden. Nonetheless, the PTO argued that the Board did not err in making an obviousness argument on behalf of Petitioner based on the Ground 2 references because this argument “could have been included in a properly drafted petition.” The court flatly rejected the PTO’s contention that the Board is free to adopt arguments on behalf of Petitioners that could have been but were not raised by the Petitioner during an IPR, noting again that Petitioner bears the burden of proof. The court acknowledged that the PTO has broad authority to establish procedures in IPR’s but clarified that the authority is not so broad to allow the PTO to raise, address, and decide patentability theories never presented by the Petitioner and not supported by record evidence. Instead, the court emphasized that the Board must base its decisions on arguments advanced by a party and to which the opposing party was given a chance to respond. Accordingly, the court held that the Board’s obviousness conclusion was not based on sufficient evidence since the Board relied on Petitioner’s conclusory statements and improperly argued on behalf of Petitioner why the Ground 2 references could be combined.

Lastly, the Court addressed the PTO’s argument that Patent Owner should have challenged the Board’s actions in the rehearing request. The court quickly disposed the PTO’s argument, stating that the plain language of 35 USC § 141(c) does not require a party dissatisfied with the Board’s final written decision to first raise the issue in a rehearing request before appealing the issue to the court.

In sum, Magnum is a ray of hope for Patent Owners that have become accustomed to most aspects of IPR practice being construed against them. The Court’s docket contains many upcoming cases that will allow us to learn whether this is an aberration, or a trend.

PTAB Reversed for Failing to Explain “Why” a Person of Skill Would Modify the Prior Art

Judge's BenchIt is no secret that patent owners have, on average, struggled at the PTAB over the last three and a half years.  Some practitioners say that a reason for this result is that the Board many times takes an aggressive approach in the assessment of “obviousness” under Section 103.  Yesterday, the Federal Circuit issued its decision in Black & Decker, Inc. v. Positec USA, Inc., which may signal a change in that tide.

Positec challenged Black & Decker’s US Patent No. 5,544,417, which is directed to a manner of mounting a motor in the housing of a string trimmer.  In particular, the ‘417 patent discloses the use of a “motor mounting plate” supported by the string trimmer’s housing such that the motor does not contact the interior surface of the housing.  The motor is fixedly secured to the motor mounting plate.

The Board upheld the validity of claims 7 and 10 directed to a vegetation string trimmer, but found that claims 16 and 17, directed to a method of assembling an outdoor power tool, were unpatentable under 35 USC Sec. 103 in view of Mack alone.

The Federal Circuit reversed the Board’s finding of obviousness, finding that it “is not sufficient” under Section 103 to merely find that a person skilled in the art “could have” or “would have known” to do something.  The Board must “explain why one of skill in the art would have adapted or replaced Mack’s motor mounting yoke to ensure that the motor did not move relative to the motor mounting structure.  The Board did not do so.”  (emphasis added).  “Our precedent requires that the Board explain a rationale why a person of ordinary skill would have modified Mack’s motor.”  Citing, Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc. 555 F.3d 984, 993 (Fed. Cir. 2009).  The Federal Circuit further noted that Positec offered mere attorney argument, not evidence, to explain why a person of ordinary skill would have “fixedly secure[d]” the motor.

Perhaps this case will result in more rigorous analyses of the rationale for proposed combinations and/or modifications to prior art in the context of Section 103 assessments.  In any event, this case is a positive for patent owners.

*By way of disclaimer, Harness Dickey represented Black & Decker in the IPR and the Federal Circuit appeal

PTAB Rejects Challenge to Onglyza® Patent

32481593_sThe lower burden of proof associated with inter partes reviews should make IPRs attractive to generic pharmaceutical companies, but even with that lower burden, success is not guaranteed, as illustrated by IPR2015-01340.  Mylan Pharmaceuticals challenged AstraZeneca’s patent RE44,186 on saxagliptin, the active ingredient in Onglyza® (used to treat type 2 diabetes).  Mylan’s petition argued the structure of the drug would have been obvious.  The Board disagreed, determining that the prior art did not provide sufficient motivation to modify the lead compound chosen by Mylan.  The Board denied review.

The Board started with the legal standard for this sort of issue:  “A determination of whether a new chemical compound would have been obvious over the prior art typically follows a two prong inquiry considering first, whether one of ordinary skill would have selected one or more lead compounds for further development and, second, whether the prior art would have supplied sufficient motivation to modify a lead compound to arrive at the compound claimed with a reasonable expectation of success.”

Here, the Board accepted Petitioner’s proposed lead compound, but found the record did not support the second prong of the test, modification of the lead compound to arrive at the claimed invention.  The Board analyzed the two aspects of the modification argument, stability and potency, and found both lacking.  As to stability, Petitioner argued that the person of ordinary skill would have been motivated to change one group on the lead compound to a more stable adamantyl group (as one would expect, the more stable group is also on the claimed compound).  The problem, though, was that the lead compound was noted for its stability, and the Board found the record was insufficient to establish a person of ordinary skill in the art would have been motivated to make it even more stable.  As to potency, Petitioner argued for a second substitution of a different group, which combined with the first substitution would yield the claimed compound.  The Board found the record failed to show that the proposed substitution would have been expected to increase potency.

The Board thus denied review.

Toward a Bullet-Proof Petition – Motivation to Combine

white puzzle with one piece missing, on blueWhile 8 out of 10 Petitions seeking inter partes review are granted by the PTAB, there remain several key errors that unsuccessful Petitioners make. Among them is the failure to provide sufficient factual basis for a rationale to combine prior art references in an obviousness analysis. That issue arose, in an unsuccessful petition, in Kinetic Technologies, Inc. v. Skyworks Solutions, Inc., IPR2014-00529, where the Board found Petitioner’s motivation to combine arguments inadequate. The case involved US Pat. No. 7,921,320, directed to a single wire serial interface that may be used to control stand-alone power integrated circuits and other devices.  Decision at 3.

Petitioner, in arguing obviousness of the challenged claims, asserted that combining to two prior art references was a matter of combining know elements to yield predictable results, among other conclusory remarks. Petitioner did list several similarities in the circuits of the two references, and provided expert testimony, but did not provide much in the way of details. Id. at 14.

As such, the Board was unpersuaded by Petitioner’s argument for motivation to combine. First, the Board gave little or no weight to the expert testimony, since it was virtually identical in content to the arguments presented in the petition, and lacked facts or data to support the opinion of the expert. Specifically, the Board criticized the expert declaration as filing to “expain the ‘how,’ ‘what,’ and ‘why’ of the proposed combination of references.” Id. at 15. To that end, the Board found that the expert did not explain how the references could be combined, or how such combination would yield a predictable result.  In the final criticism of the expert testimony, the Board noted that the expert failed to explain why the ordinary artisan would have combined elements from the two references in the specific way the ‘320 invention does.

Accordingly, the Board reminded Petitioner that there must be reasoning supporting combination of references in an obviousness challenge, and rejected Petitioner’s argument for motivation to combine references, stating that the argument lacked articulated reasoning with rational underpinning. Id. at 16. As such, the Board determined that Petitioner failed to demonstrate a reasonable likelihood that it would prevail in establishing the challenged claims as unpatentable.

Another IPR Petition Comes Up Short for Failing to Adequately Show Rationale to Combine

9710318_sMany Patent Owners are finding success in undermining the challenge grounds of a Petition by arguing that the Petition fails to make an adequate showing that a person of ordinary skill in the art would have combined the relied-on references. That was the case in Zimmer Holdings, Inc. and Zimmer, Inc. v. Bonutti Skeletal Innovations LLC, involved US Pat. No. 7,837,736, where the Board rejected a Petition due to an inadequate combination argument.

Relying on expert testimony, the Petitioner argued that it would have been obvious to the ordinary artisan to substitute a “dovetail joint” described in one reference (Beuchel) for the “abutment and recess” structure described in a second reference (Walker) to arrive at the ‘736 invention.  Specifically, the expert testified that the “dovetail” joints of Beuchel perform the same function as the “abutment and recess” of Walker—i.e., “constrained movement of meniscal components relative to the tray in mobile bearing knee implants.”  With that predicate, the expert posited that substituting the “dovetail” joints in place of the “abutment and recess” joints was simply a matter of design choice.

The Board disagreed, because Beuchel’s “dovetail” joints had substantially different structure and function than Walker’s “abutement and recess.”  Decision at 20–21.  Specifically, Beuchel’s “dovetail” joint functioned to limit or prevent rotation, while Walker’s “abutment and recess” functioned to facilitate rotation.  Decision at 21.  Accordingly, the Board found that Petitioner failed to support its substitution argument with “adequate articulated reasoning with rational underpinnings.”  Decision at 21 (citing In re Gal, 980 F.2d 717, 719 (Fed. Cir. 1992) (design choice is not a sufficient rationale for obviousness where the structure recited in claim and the function it performs are different from the prior art).  Accordingly, the Board declined to institute review.  Id.