C.A.G. Insights

Who Carries the Burden in IPR—And, Does it Matter?

The Inter Partes Review (“IPR”) proceeding, part of the America Invents Act, sets up a streamlined procedure for any party (“petitioner”) to challenge the validity of the claims of an issued patent, not in a court, but in the US Patent Office, generally at a much lower cost when compared to federal court. An IPR is based on prior art patents and publications that the petitioner argues show that the claimed invention is not novel or is obvious. At the outset, in order for an IPR to be instituted, the petitioner must show a “reasonable likelihood” that it would prevail on a challenge to the validity of at least one claim of the patent. Once the petitioner meets this initial burden of proof, the inter partes “trial” of the patent claims can proceed before the Board.

During the trial phase, both petitioner and patent owner can take limited depositions and develop evidence in support of its position as to the validity or invalidity of a patent claim at issue. When validity of a patent claim is a close question, as is often the case, the outcome might turn on which party carries the burden of proof on invalidity. (The burden of proof is viewed as having two components: a burden of persuasion, and a burden of production of evidence.) Further, an outcome can also turn on whether at some point the burden shifts to the other party.

So it becomes important to identify who carries the burden as this could be outcome-determinative. How the Patent Office assigns the burdens of proof and of production might have been a significant factor in the high rates of patent claims that have been found invalid to date. The Federal Circuit has recently weighed in on the issue, and the subtle but meaningful ruling could have a significant effect in reducing the number of patent claims ruled invalid. (See In re Magnum Oil Tools Int’l, Ltd., (2016 U.S. App. LEXIS 13461, 119 U.S.P.Q.2D (BNA) 1541 (Fed. Cir. July 25, 2016).

This appeal to the Federal Circuit arose from an IPR that was decided in favor of the petitioner, and the patent owner appealed the invalidity of the claims. When the petitioner then withdrew due to a settlement with the patent owner, the Director of the Patent Office then intervened to defend the Board’s ruling of invalidity in the appeal.

The patent owner did not appeal the Board’s institution of the IPR, but instead attacked the finding of invalidity that was based on a shifting of the burden of proof to the patent owner.   The  Director countered that once an IPR was instituted, the Board was justified in shifting of the burden to the patent owner to produce evidence of patentability of the claims.  Putting aside the complexities of the factual details of the case, the legal issues boil down quite simply to:

  1. In an IPR, who has the burden of persuasion on the invalidity of a patent claim and what is the standard?
  2. In an IPR, does the burden of persuasion of invalidity shift to the patent owner when a petitioner has made a prima facie case of invalidity?
  3. In and IPR, who has the burden of production of evidence, and under what conditions does the burden shift to the other party?

As to points (1) and (2), the court ruled that the petitioner has the burden of persuasion that the patent claim is invalid, by “a preponderance of the evidence.”  Moreover, that burden of persuasion never shifts to the patent owner.  It is interesting that in dicta, the court analogized IPRs to patent litigation, where burden shifting does not take place.  In so doing, it distinguished IPR proceedings from patent application prosecution where burden shifting may take place. The court reasoned that in a prosecution context, once the Examiner had made a prima facie case of unpatentability, it is merely a “procedural device” to shift the “burden of production” of evidence supporting patentability to the applicant.  (The Patent Office conceded these points in its Briefs.)

As to point (3), the court ruled that the Patent Office incorrectly asserted that the burden of production shifted to the patent owner once the Board had determined that an IPR should be instituted.  In other words, the Board’s practice of shifting the burden of production of evidence to support patentability to the patent owner after it had found a “reasonable likelihood of success on the merits” in order to institute the IPR, was error. Instead, the court ruled that, because the petitioner has the burden to prove invalidity, by a “preponderance of the evidence”, it is inappropriate to shift the burden of production at the very outset to the patent owner.  As one might imagine, this reversal of the Board’s practice of shifting the burden to the patent owner at the point of institution of the IPR could have a potentially major impact in reducing the number of patent claims that are invalidated.  To that extent, albeit that the Magnum Oil Tools opinion is “procedural,” it could be outcome-determinative in many cases.  

Finally, the court addressed whether the improper shifting of the burden resulted in reversible error. The court examined the Board’s written decision and found that the decision was “replete” with instances where it was clear the Board inappropriately placed the burden on the patent owner by expecting it to explain, and faulting it for failing to explain, why the claims were not invalid.  The court also found that the petitioner failed to show motivation to combine the cited prior art on which the invalidity argument was based.

Interestingly, and perhaps unusually, the Board substituted a reference for one that had been advanced by the petitioner in the combination used to reject the patent claims.  This led the court to rebuke the Board: it was not empowered to make arguments on its own initiative that the petitioner could have raised, but did not raise.  While the Board has “broad authority” in procedural matters in an IPR, it does not have authority to decide unpatentability on theories not proposed by the petitioner.  In short, the Board cannot help the petitioner in its arguments to invalidate a patent.