To Shift or Not to Shift: Burden Shifting Framework and the PTAB

Earlier this year, in E. I. du Pont de Nemours & Co. v. Synvina C.V. (Fed. Cir. 2018) (“Dupont v. Synvina”), the Federal Circuit found that the Patent Trial and Appeals Board (“the Board”) had erred in holding that in an inter partes review (IPR), the burden to produce evidence of patentability did not shift to the patentee.  Interestingly, in each of the previous two years also the court had occasion to address burden shifting in IPRs.  In In re Magnum Oil Tools International, Ltd., 829 F.3d 1364, 1375 (Fed. Cir. 2016) (“Magnum Oil”), the Board was found to have been wrong in deeming that when it institutes an IPR – which requires concluding that the petitioner has met the “reasonable likelihood of success” standard – that conclusion operated to shift the burden of producing evidence of patentability to the patentee.  Also, in Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (“Aqua Products”), the court considered whether a patentee could amend claims during an IPR only if it accepted the burden of proving that the substitute claims were patentable.  Such was the Board’s position in the IPR.  Upon appeal to the Federal Circuit, an en banc court issued a divided opinion remanding the matter to the Board for assessing patentability of the substitute claims without placing the burden of persuasion on the patent owner.

Looking at Magnum Oil and Dupont v. Synvina, in the IPR that led to Magnum Oil, the Board shifted the burden of producing proof of patentability to the patentee when it should not have done so.  Conversely, in the IPR that led to Dupont v. Synvina, the Board failed to shift the burden when it should have done so.  It is noteworthy that in each case, the Board was following what it believed was the Federal Circuit precedent.  This article sheds light on the issues underlying the confusion over burden shifting in Magnum Oil and Dupont v. Synvina.  Magnum Oil is considered first.

In Magnum Oil, challenger McClinton asserted two grounds of obviousness of Magnum’s patent claims relying on several references, referred to here by their single letter abbreviations.  The first ground of obviousness was based on the primary reference, “A”, and references “C” and “K” and the second was based on the primary reference, “L”, and references “C” and “K”.  Reference L purportedly discloses the same relevant features as the primary reference A, so for the second ground, McClinton largely incorporated by reference the arguments for A, C, and K, replacing A with L.  The Board found the challenger to have established “a reasonable likelihood of success” in its petition based on the second ground and instituted an IPR.  In the trial that followed, the Board found all challenged claims obvious.  Magnum appealed to the Federal Circuit and argued that the Board had erred because neither McClinton nor the Board had established a prima facie basis for the rejection.  According to Magnum, the challenger had failed to show motivation to combine L with C and K, incorporation of L by reference was improper, and L fails to disclose key limitations of the claims.

In its opinion, the Federal Circuit defined terms regarding the burdens of proof as follows: “[T]here are two distinct burdens of proof: a burden of persuasion and a burden of production.  The burden of persuasion is the ultimate burden assigned to a party who must prove something to a specified degree of certainty, such as by a preponderance of the evidence or by clear and convincing evidence . . . .  A distinct burden, the burden of production may entail producing additional evidence and presenting persuasive argument based on new evidence or evidence already of record.”  Magnum Oil at 1375.  Further, the court referred to 35 U.S.C. § 316(e), observing that “[i]n an inter partes review, the burden of persuasion is on the petitioner to prove unpatentability by a preponderance of the evidence,” and that this burden never shifts to the patent owner.  Id.

Importantly, the Federal Circuit pointed out that the Board was wrong in contending that the burden of production or the burden of going forward with evidence shifts between the petitioner and the patent owner as soon as the Board institutes an IPR.  For this incorrect position, the Board had relied on Dynamic Drinkware, LLC v. Nat’l Graphics Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015) (“Dynamic Drinkware”), in which, in the context of establishing earlier priority over a cited reference, the court had noted that the patentee bore the burden of establishing the priority, i.e., the burden shifted.

The court explained that in Dynamic Drinkware the shifting of the burden of production was warranted because the patentee had affirmatively sought to establish a proposition not relied on by the patent challenger and therefore, not a necessary predicate for the asserted unpatentability of the claims.  In other words, the patentee was offering an affirmative defense to rebut the challenger’s case for unpatentability.  Magnum Oil, however, was different and the notion of burden-shifting inapposite, the court explained, because in Magnum Oil, the patentee disputed whether the challenger had met its burden of proving obviousness, i.e., the existence of a prima facie case was in dispute.

The court observed generally that where the only question presented was whether due consideration of the four Graham factors rendered claims obvious, no burden shifted from the patent challenger to the patentee.  Such was the case in Magnum Oil because the only issues to be considered in that case were what the prior art disclosed, whether there would have been a motivation to combine the prior art, and whether that combination rendered the patented claims obvious.  Therefore, the burden did not shift.

On a broader level, the court emphasized that the decision to institute an IPR and the final written decision were “two very different analyses,” each applying a “qualitatively different standard,” implying thereby that the burden shifting in the two situations were not same.  The court noted that at the point of deciding whether to institute an IPR, the Board is considering the matter preliminarily without the benefit of a full record and is free to change its view of the merits after further development of the record, if convinced that its initial inclinations were wrong.  Therefore, shifting of burden to the patentee at this stage is not warranted.  Addressing Magnum Oil, the court noted that the Board’s final written decision was replete with examples where, rather than requiring the challenger to prove its assertion of obviousness, the Board improperly shifted the burden to Magnum to disprove obviousness.

Turning now to Dupont v. Synvina, in this case, in contrast to Magnum Oil, the Board was found to have erred in not shifting the burden of producing evidence of patentability to the patentee.  Ironically, the Board believed that it was following the precedent set in Magnum Oil.  Looking to facts, DuPont, a competitor of Synvina, petitioned for an IPR of Synvina’s patent directed to a method of producing a chemical product using certain specific reaction conditions (temperature, pressure, solvent, and catalyst).  The IPR petition was based on obviousness of claims on several grounds, two of which were accepted by the Board for instituting the IPR.  The prior art disclosed making the product under reaction conditions that overlapped with those required by the challenged claims.  After a trial, the Board issued a final written decision holding claims not obvious, stating as reason that none of the references expressly taught a process in which the chemical product at issue was produced under the reaction conditions recited in the claims.  Additionally, the Board interpreted Magnum Oil as prohibiting burden-shifting to the patentee in an IPR and failed to ask Synvina to produce evidence of nonobviousness.  According to the Federal Circuit, both finding the claims obvious for the reason given and not shifting the burden of proof to Synvina were errors.

The court first set forth the applicable legal principle: where the general conditions of a claim are disclosed in the prior art, it is not inventive to discover the optimum or workable ranges by routine experimentation.  Applied to overlapping ranges, a prima facie case of obviousness typically exists when the ranges of a claimed composition overlap the ranges disclosed in the prior art, the court noted.  The prima facie case may be rebutted by the patentee in several ways including through evidence of unexpected results and teaching away.

Magnum Oil and Dynamic Drinkware did not overturn the procedural scheme for overlapping range cases, the court observed.  In Magnum Oil there was a dispute as to whether a prima facie had at all been made.  As such, the burden of production could not shift to the patentee.  On the other hand, in Dynamic Drinkware, the patentee affirmatively sought to establish a proposition not relied on by the patent challenger for asserting unpatentability (i.e., the existence of a prima facie was not in doubt).  Therefore, the burden of production to prove the affirmative defense automatically shifted to the patentee.

Comparing IPR to district court litigation, the court clarified that while different evidentiary standards applied between district court litigation and IPRs, that difference did not alter the shifting burdens between the parties because in both a district court case and an IPR, the patent challenger has the burden of proving unpatentability.  Dupont v. Synvina at 18.  The only relevant difference, the court noted, was in the quantum of evidence necessary to prove unpatentability.  Thus, an IPR petitioner has the burden of persuasion to prove unpatentability by a preponderance of the evidence, which burden never shifts; however, the burden of production can shift with respect to the presentation of evidence.  Id.

The trio of cases, Dupont v. Synvina, Magnum Oil, and Dynamic Drinkware, considered together, are helpful for one’s understanding of the burden shifting framework in both IPR and district court litigation.