Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-01300/USCOURTS-ca13-15-01300-0/pdf.json

Parties Involved:
Magnum Oil Tools International, Ltd.
Appellant
McClinton Energy Group, LLC.
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

IN RE: MAGNUM OIL TOOLS 

INTERNATIONAL, LTD.,

Appellant

______________________ 

2015-1300

______________________ 

Appeal from the United States Patent and Trademark 

Office, Patent Trial and Appeal Board, in No. IPR2013-

00231.

______________________ 

Decided: July 25, 2016

______________________ 

NATHANIEL ST. CLAIR, II, Jackson Walker LLP, Dallas, 

TX, argued for appellant. Also represented by JOHN 

MARTIN JACKSON, CHRISTOPHER J. ROURK. 

KRISTI L.R. SAWERT, Office of the Solicitor, United 

States Patent and Trademark Office, Alexandria, VA, 

argued for intervenor Michelle K. Lee. Also represented 

by THOMAS W. KRAUSE, SCOTT WEIDENFELLER, MICHAEL 

SUMNER FORMAN. 

______________________ 

Before NEWMAN, O’MALLEY, and CHEN, Circuit Judges.

O’MALLEY, Circuit Judge.

McClinton Energy Group, LLC filed a petition for inter partes review (“IPR”) of U.S. Patent No. 8,079,413 (the 

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2 IN RE: MAGNUM OIL TOOLS INTERNATIONAL

“’413 patent”), owned by Magnum Oil Tools International, 

Ltd. (“Magnum”). The Patent Trial and Appeal Board 

(“Board”) instituted review and issued a final written 

decision holding all challenged claims of the ’413 patent

obvious under 35 U.S.C. § 103. Subsequently, McClinton 

and Magnum settled their dispute over the ’413 patent 

and other patents not at issue here. Magnum now appeals the Board’s judgment regarding the ’413 patent. 

The Director of the U.S. Patent and Trademark Office

(“PTO”) intervened in the appeal pursuant to 35 U.S.C. 

§ 143. For the following reasons, we reverse. 

I. FACTUAL BACKGROUND

A. The ’413 Patent

The ’413 patent is directed to technology in the field of 

oil drilling through use of hydraulic fracturing, commonly 

known as “fracking.” Fracking is a technique used to 

extract natural gas and oil from natural shale formations. 

During the fracking process, a hole known as a “wellbore” 

is drilled into the earth. Then, a fluid mixture is injected 

down the wellbore into the shale at high pressure to 

release the gas or oil. 

Downhole plugs divide the wellbore into separate sections so that different sections of the wellbore may be 

fracked at different times. A setting tool is used to insert 

the downhole plugs into their appropriate positions in the 

wellbore. The body of the plug is then secured in place via 

the radial expansion of “slips” and “malleable elements” 

that contact the sidewalls of the wellbore. The expanded 

plug forms an airtight barrier, blocking movement of 

liquid or gas around the plug. See ’413 patent, at col. 8, l. 

46–col. 9, l. 13. 

The setting tool can connect either to the top of the 

plug facing the opening of the wellbore (“top-set”), or to 

the bottom of the plug (“bottom-set”). The ’413 patent 

teaches a bottom-set plug in which the setting tool fits 

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IN RE: MAGNUM OIL TOOLS INTERNATIONAL 3

through a hollow passageway in the body of the plug and 

attaches near the bottom of the plug. See id. at col. 9, 

ll. 29-46. The setting tool exerts an axial force upward on 

the body of the plug while a “setting sleeve” exerts an 

axial force downward on the plug. The resulting axial 

compression causes the plug to set in place via radial 

expansion. Id. 

Once the downhole plug is set, the setting tool must 

be disengaged from the plug and extracted from the 

wellbore. The ’413 patent at issue describes a mechanism 

for releasing the setting tool from the downhole plug. Id.

at col. 3, ll. 47-57. 

The ’413 patent teaches the use of an insert having a 

“lower shear or shearable mechanism” for releasing a 

setting tool. ’413 patent, at col. 2, ll. 54-56. The patent 

teaches that the insert is placed within the plug body and 

contains both shearable and nonshearable threads. The 

inner threads connected to the setting tool shear when 

exposed to sufficient stress, but the outer threads connected to the plug body do not shear. The stress level 

required to shear the shearable threads is lower than that 

required to dislodge the plug body, so that the setting tool 

may be released without dislodging the plug from its set 

position. Id. at col. 2, ll. 59-63. Figure 1A of the ’413 

patent depicts the claimed insert:

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The ’413 patent has twenty claims, three of which are 

independent (claims 1, 7, and 17). All of the claims of the 

’413 patent recite that the “shearable threads” of the 

release mechanism are part of an insert that is placed 

within the central bore of the plug. Claim 1 of the ’413 

patent is representative, and is reproduced below in its 

entirety: 

1. A plug for isolating a wellbore, comprising: 

a body having a first end and a second end; 

at least one malleable element disposed about the 

body; 

at least one slip disposed about the body; 

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at least one conical member disposed about the 

body; and 

an insert screwed into an inner surface of the body 

proximate the second end of the body and adapted 

to receive a setting tool that enters the body 

through the first end thereof, wherein: 

the insert comprises one or more shearable threads 

disposed on an inner surface thereof; 

the insert has a passageway extending 

therethrough; 

the one or more shearable threads are adapted to 

engage the setting tool; and 

the one or more shearable threads are adapted to 

deform to release the setting tool when exposed to 

a predetermined axial force, thereby providing a 

flow passage through the insert and the body. 

’413 patent, at col. 13, l. 57-col. 14, l. 7 (emphasis added).

B. Overview of the Prior Art

The Board instituted IPR based on the following three 

primary references: U.S. Patent Application Publication 

No. 2007/0151722 to Lehr et al. (“Lehr”); U.S. Patent No. 

4,437,516 to Cockrell (“Cockrell”); and U.S. Patent No. 

4,595,052 to Kristiansen (“Kristiansen”). J.A. 8. In its 

petition for institution, McClinton had also relied on a 

reference known as the Alpha Oil Tools Catalog (1997), 

“Standard Frac Plug” (“Alpha”). J.A. 136-38. Specifically, 

McClinton argued that both Alpha and Lehr disclose 

downhole plugs that include the standard features of a 

typical downhole plug and all the limitations of claim 1 

except for (1) shearable threads on the inside of an insert 

that shear in response to a predetermined axial force; and 

(2) non-shearable threads on the outside of the insert that 

screw into the inner surface of the plug body. Compare 

J.A. 98-100 (Alpha), with J.A. 115-18 (Lehr). 

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The Board declined to institute IPR based on Alpha,

instead instituting IPR based on the primary reference 

Lehr in view of Cockrell and Kristiansen. Alpha is nonetheless relevant to this appeal because Magnum focuses

its arguments on differences between Alpha and Lehr. 

We briefly review each of these references in turn. 

1. Alpha

As shown in the figure below, Alpha teaches a bottomset plug with a shear ring. The Alpha insert contains 

non-shearable threads on the inside of the insert, which

allow the setting tool to apply a sufficient force to separate the shear ring from the insert and allow the setting 

tool to remove the insert through the bore of the plug. See

J.A. 138.

Appellant Br. at 7.

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2. Lehr

Lehr teaches the use of a “deformable release device” 

to allow release of a setting tool from a downhole plug. 

J.A. 184 (¶ 0003). The deformable release device 30

shown in Figure 5 of Lehr is a washer-shaped device that 

is held in place by plunger 80, as shown in Figure 3B. 

J.A. 178-79. The washer-shaped device of Lehr does not 

have threads. 

Lehr also discloses a setting tool. Figure 1 of Lehr 

provides an overview picture of the deformable release 

device 30 and the plunger 80 in the context of the downhole plug 70 and the setting tool 10. 

J.A. 187 (¶¶ 0037-39).

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3. Cockrell

Cockrell teaches shearable threads on a “frangible release member” that is used to release a downhole plug or 

other downhole tool from its working position. Cockrell 

’516 patent, at Abstract (J.A. 139). Figure 1C of Cockrell, 

reproduced below, shows that the release member is 

located near the lower end of the plug and possesses both 

internal shearable threads 140 and external threads 138. 

Id. at col. 5, ll. 40-47 (J.A. 145). Accordingly, one way 

that the downhole plug or tool may be released from its 

working position is through the application of sufficient 

axial force to shear the internal threads of the release 

member. Id. at col. 5, l. 52 – col. 6, l. 68 (J.A. 145).

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Unlike Lehr, Cockrell does not teach the use of a setting tool. Instead, Cockrell is hydraulically set. Cockrell 

’516 patent, at col. 7, ll. 3-8 (J.A. 146). 

4. Kristiansen

Kristiansen teaches the use of a non-shearable 

threaded insert known as a “converter plug” that is used 

during field reconfiguration of a downhole plug. See

Kristiansen ‘052 patent, at col. 3, ll. 58-61 (J.A. 227). The 

Kristiansen insert screws into the body of a plug by way 

of threads along its outer surface. Id. at col. 5, ll. 30-35 

(J.A. 228). Figures 13 and 17 of Kristiansen illustrate the 

converter plug 4 and its position within a plug body. 

Also unlike Lehr, Kristiansen does not teach the use 

of a setting tool. Kristiansen teaches the use of a charge 

to set downhole plugs. Id. at col. 7, ll. 50-58 (J.A. 229). 

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II. PROCEDURAL BACKGROUND

McClinton filed this IPR challenging all claims of the 

’413 patent. In its Petition, McClinton argued that the 

claims would have been obvious over Alpha as a base 

reference, in combination with Cockrell and Kristiansen. 

While McClinton also noted that the claims would have 

been obvious over the combination of Lehr as a base 

reference (in view of Cockrell and Kristiansen), McClinton 

largely “incorporated by reference” its arguments on Lehr 

from its earlier arguments based on Alpha. See, e.g., 

J.A. 118 (Petition for IPR) (incorporating by reference 

arguments with respect to Lehr “as discussed above with 

respect to Alpha,” and noting that “[t]he same analysis 

applies to combinations using Lehr as a base reference”). 

In its Preliminary Response, Magnum argued that 

McClinton’s obviousness arguments based on Lehr were 

insufficient for failure to “specify where each element of 

the claim is found in” Lehr, Cockrell, and Kristiansen. 

J.A. 368 (quoting 37 C.F.R. § 42.104(b)(4)). Magnum also 

contended that McClinton’s Petition and expert declaration focused on explaining how a skilled artisan might 

have modified Alpha in view of Cockrell and Kristiansen, 

but failed to describe how a skilled artisan would modify 

Lehr in view of Cockrell and Kristiansen. J.A. 369-72. 

Finding that McClinton had established a reasonable 

likelihood of success in its Petition, the Board instituted 

IPR of all challenged claims based on Lehr in view of 

Cockrell and Kristiansen, but not on the basis of Alpha. 

J.A. 385-412 (“Institution Decision”). After trial and the 

completion of briefing, the Board issued a final written 

decision holding all challenged claims unpatentable under 

35 U.S.C. § 103. J.A. 1-37. Magnum requested rehearing, 

arguing that the Board had relied on a “new ground of 

unpatentability” regarding a skilled artisan’s motivation 

to combine Lehr with Cockrell and Kristiansen. See J.A.

34-42. Magnum also argued that there was no evidence 

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supporting the Board’s finding that a skilled artisan 

would have had a reasonable expectation of success in

removing Lehr’s retaining pins and replacing them with

Cockrell’s shearable threads. J.A. 42. The Board rejected 

Magnum’s arguments, finding that McClinton had explained adequately why a skilled artisan would have had 

a reasonable expectation of success and a motivation to 

combine the teachings of Lehr, Cockrell, and Kristiansen. 

Accordingly, in a decision dated October 29, 2014, the 

Board denied Magnum’s request for rehearing. J.A. 38-

47.

Subsequently, McClinton and Magnum entered into a 

settlement agreement, wherein “McClinton has agreed 

not to participate in any appeal of the final written decision in the underlying inter partes review proceeding.” In 

re Magnum Oil Tools Int’l, Ltd., Fed. Cir. No. 15-1300, 

Doc. 3 (filed Feb. 2, 2015). When Magnum filed the 

instant appeal, McClinton filed a request to withdraw 

from the appeal, which we granted. Id., Doc. 4 (filed Feb. 

5, 2015). After McClinton’s withdrawal, the Director of 

the PTO intervened in this appeal pursuant to 35 U.S.C. § 

143. 

We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A). 

III. STANDARD OF REVIEW

Obviousness is a question of law based on underlying 

facts. In re Gartside, 203 F.3d 1305, 1316 (Fed. Cir. 

2000). We review the Board’s legal conclusion of obviousness de novo, and underlying factual findings for substantial evidence. In re Cuozzo Speed Techs., LLC, 793 F.3d 

1268, 1280 (Fed. Cir. 2015), aff’d, Cuozzo Speed Techs., 

LLC v. Lee, No. 15-446, 2016 U.S. LEXIS 3927 (June 20, 

2016). Substantial evidence “means such relevant evidence as a reasonable mind might accept as adequate to 

support a conclusion.” Consol. Edison Co. v. NLRB, 305 

U.S. 197, 229 (1938); see In re Morsa, 713 F.3d 104, 109 

(Fed. Cir. 2013).

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IV. DISCUSSION

As an initial matter, the PTO argues that Magnum 

challenges only the Board’s decision to institute the IPR, 

which is an unreviewable decision. Intervenor Br. at 35; 

Cuozzo Speed Techs., LLC v. Lee, No. 15-446, 2016 U.S. 

LEXIS 3927, at *23 (June 20, 2016) (“[W]here a patent 

holder merely challenges the Patent Office’s ‘determin[ation] that the information presented in the petition . . . shows that there is a reasonable likelihood’ of 

success ‘with respect to at least 1 of the claims challenged,’ §314(a), or where a patent holder grounds its 

claim in a statute closely related to that decision to institute inter partes review, § 314(d) bars judicial review.”). 

Magnum responds that it is not challenging the Board’s 

decision to institute the IPR, but rather the Board’s 

statements made regarding obviousness of the claimed 

invention, some of which were made in the Board’s institution decision and later relied upon in the Board’s final 

written decision. Appellant Reply Br. at 3. 

Magnum is correct to state that we have jurisdiction 

to review determinations made during institution that are 

subsequently incorporated into the Board’s final written 

decision. See Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 

F.3d 1306, 1315 (Fed. Cir. 2015) (“To be clear, it is the 

merits of the final written decision that are on appeal; we 

are not here called upon to review the determination by 

the [Board] whether to institute a CBM review, and 

indeed the statute expressly instructs that we may 

not . . . .”). In Versata, we held that “[w]e have jurisdiction to decide the [merits of a final written decision] even 

though it is decided . . . initially by the [Board] at the 

decision to institute stage.” Id. at 1329. Nothing in either 

35 U.S.C. § 314(d) or Cuozzo Speed Techs. shields aspects 

of a Board decision which are critical to its ultimate 

judgment merely because its final analysis relies on

statements made when it initially considered the petition. 

We have jurisdiction here to review all of Magnum’s 

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arguments regarding the basis for the Board’s ultimate 

judgment of unpatentability. 

On the merits, Magnum argues that the Board erred 

in cancelling the claims of the ’413 patent because “neither McClinton nor the [Board] ever established a prima 

facie basis for the rejection.” Appellant Br. at 12. Magnum further contends that McClinton failed to specifically 

argue why a skilled artisan would have been motivated to 

combine Lehr with Cockrell and Kristiansen. Instead, 

Magnum contends, McClinton attempted to improperly

incorporate by reference its separate arguments concerning its assertion of obviousness based on Alpha in view of 

Cockrell and Kristiansen. Magnum asserts that Lehr 

could not be the basis for a finding of obviousness because 

Lehr fails to disclose key limitations recited in the ’413 

patent, and a skilled artisan would not have sought to 

combine Lehr with the other prior art references. 

The PTO disagrees with Magnum’s proposed burdenshifting framework. The PTO takes the view that upon 

institution of an IPR, the Board necessarily finds that the 

Petitioner has demonstrated a “reasonable likelihood of 

success.” The PTO urges that this finding operates to 

shift the burden of producing evidence of nonobviousness 

to the patentee. Intervenor Br. at 32. Here, the PTO 

asserts that the Board necessarily held that McClinton 

met its initial burden of proving obviousness when the 

Board “concluded in the decision to institute that McClinton ‘ha[d] demonstrated a reasonable likelihood of prevailing’ on its assertion that claim 1 is unpatentable over 

Lehr, Cockrell, and Kristiansen.” Id. The PTO then

explains its view 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.” Id. at 33. In making this argument, the PTO implies that the Board’s conclusion on 

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obviousness in an IPR can be based on less than a preponderance of the evidence if the patent holder does not 

affirmatively disprove the grounds upon which the IPR 

was initiated. Id. at 31-33. 

Having set forth its position regarding the parties’ respective burdens, the PTO asserts that the Board properly applied its described burden-shifting framework in 

holding the challenged patent claims obvious. Id. at 33. 

In particular, the PTO argues that Lehr discloses all of 

the features of the claimed invention other than the 

recited shearable threads. In place of the shearable 

threads, Lehr discloses a deformable release device. The 

PTO contends that substantial evidence supports the 

Board’s finding that a skilled artisan would have been 

motivated to combine the deformable release device 

taught in Lehr with the shearable threads taught in 

Cockrell and Kristiansen, primarily relying on Magnum’s 

failure to prove the contrary. Id. at 44.

A. Burden of Proof

“In an inter partes review . . . , the petitioner shall 

have the burden of proving a proposition of unpatentability by a preponderance of the evidence.” 35 U.S.C. 

§ 316(e). “[T]he burden of proof is on the petitioner to 

prove unpatentable those issued claims that were actually 

challenged in the petition for review and for which the 

Board instituted review.” Nike, Inc. v. Adidas AG, 812 

F.3d 1326, 1334 (Fed. Cir. 2016). 

Because several terms regarding the burden of proof 

are critical to resolving the parties’ dispute, we briefly 

define the terms here. “As an initial matter . . . there 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.” Dynamic Drinkware, LLC v. Nat’l Graphics, 

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IN RE: MAGNUM OIL TOOLS INTERNATIONAL 15

Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015) (citing Tech.

Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1326-27 

(Fed. Cir. 2008)). A distinct burden, “[t]he burden of 

production may entail ‘producing additional evidence and 

presenting persuasive argument based on new evidence or 

evidence already of record.’” Id. (citing Tech. Licensing 

Corp., 545 F.3d at 1327). 

“In an inter partes review, the burden of persuasion is 

on the petitioner to prove ‘unpatentability by a preponderance of the evidence,’ 35 U.S.C. § 316(e), and that 

burden never shifts to the patentee.” Dynamic Drinkware, 800 F.3d at 1378. Indeed, “the Supreme Court has 

never imposed nor even contemplated a formal burdenshifting framework in the patent litigation context.” In re 

Cyclobenzaprine Hydrochloride Extended-Release Capsule 

Patent Litig., 676 F.3d 1063, 1075 (Fed. Cir. 2012) (reversing district court’s determination of obviousness because

“the court imposed a burden-shifting framework in a 

context in which none exists”). We have noted that “a 

burden-shifting framework makes sense in the prosecution context,” where “[t]he prima facie case furnishes a 

‘procedural tool of patent examination, allocating the 

burdens of going forward as between examiner and applicant.’” Id. at 1080 n. 7 (citing In re Oetiker, 977 F.2d 

1443, 1445 (Fed. Cir. 1992)). As the PTO concedes, however, that burden-shifting framework does not apply in 

the adjudicatory context of an IPR. Intervenor Br. at 30 

(citing In re Jung, 637 F.3d 1356, 1362 (Fed. Cir. 2011) 

(holding the prima facie case during patent examination

“is merely a procedural device that enables an appropriate shift of the burden of production” from the PTO to the 

patent applicant)). 

Next, we resolve the parties’ arguments about the related but distinct burden of production. The PTO incorrectly contends 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 

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institutes an IPR. Intervenor Br. at 31 (discussing Dynamic Drinkware, 800 F.3d at 1379). In Dynamic Drinkware, we noted that, in the context of establishing 

conception and reduction to practice for the purposes of 

establishing a priority date, the burden of production can 

shift from the patent challenger to the patentee. 800 F.3d 

at 1379. This is because a patent challenger has the 

burden of producing evidence to support a conclusion of 

unpatentability under § 102 or § 103, but a patentee bears 

the burden of establishing that its claimed invention is 

entitled to an earlier priority date than an asserted prior 

art reference. See id. (discussing Tech. Licensing, 545 

F.3d at 1327). In such a case, the shifting of the burden of 

production is warranted because the patentee affirmatively seeks to establish a proposition not relied on by the 

patent challenger and not a necessary predicate for the 

unpatentability claim asserted—effectively an affirmative 

defense. In the context of the present case, however, the 

notion of burden-shifting is inapposite because the patentee’s position is that the patent challenger failed to 

meet its burden of proving obviousness. Applying a

burden-shifting framework here would introduce unnecessary confusion because the ultimate burden of persuasion of obviousness must remain on the patent challenger 

and “a fact finder must consider all evidence of obviousness and nonobviousness before reaching a determination.” In re Cyclobenzaprine, 676 F.3d at 1077; see also 

Nike Inc., 812 F.3d 1335 (“Importantly, we have repeatedly emphasized that an obviousness inquiry requires 

examination of all four Graham factors and that an 

obviousness determination can be made only after consideration of each factor.”) (citing, inter alia, Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1360 

(Fed. Cir. 2012))). 

Where, as here, the only question presented is whether due consideration of the four Graham factors renders a 

claim or claims obvious, no burden shifts from the patent 

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challenger to the patentee. This is especially true where 

the only issues to be considered are what the prior art 

discloses, whether there would have been a motivation to 

combine the prior art, and whether that combination 

would render the patented claims obvious. We thus 

disagree with the PTO’s position that the burden of 

production shifts to the patentee upon the Board’s conclusion in an institution decision that “there is a reasonable 

likelihood that the petitioner would prevail.” See Intervenor Br. at 32 (citing 35 U.S.C. § 314(a)). The PTO’s 

proposed burden shifting framework is also directly at 

odds with our precedent holding that the decision to 

institute and the final written decision are “two very 

different analyses,” and each applies a “qualitatively 

different standard.” TriVascular, Inc. v. Samuels, 812 

F.3d 1056, 1068 (Fed. Cir. 2016). As we explained in 

TriVascular: 

[T]he Board is not bound by any findings made in 

its Institution Decision. At that point, the Board is 

considering the matter preliminarily without the 

benefit of a full record. The Board is free to 

change its view of the merits after further development of the record, and should do so if convinced its initial inclinations were wrong.

Id.; see also Cuozzo Speed Techs., 2016 U.S. LEXIS 3927, 

at *18-19 (“The Patent Office’s decision to initiate inter 

partes review is ‘preliminary,’ not ‘final.’”) (quoting 5 

U.S.C. § 704)). Furthermore, because of the “significant 

difference” between the standards of proof at institution 

and trial during an IPR, see TriVascular, 812 F.3d at 

1068, it is inappropriate to shift the burden to the patentee after institution to prove that the patent is patentable.1 

 

1 We note, however, that while the institution of an 

IPR does not by itself translate to a conclusion of unpatentability and the patent owner is not required to use 

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Instead, the petitioner continues to bear the burden of 

proving unpatentability after institution, and must do so 

by a preponderance of the evidence at trial. See 35 U.S.C. 

§ 316(e). And, the Board has an obligation to assess the 

question anew after trial based on the totality of the 

record.

B. Obviousness

Magnum argues that the Board improperly shifted 

the burden to Magnum to prove nonobviousness. Magnum contends that the Board never required McClinton to 

explain why a skilled artisan would have sought to combine the asserted prior art references. Magnum points 

out that McClinton attempted to establish obviousness in 

its petition by arguing from Alpha as the primary base 

reference. The Board did not initiate the IPR based on 

Alpha, however. But, contends Magnum, 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 PTO argues that the differences between Alpha 

and Lehr are irrelevant to this appeal, and that, regardless, “the proper time for Magnum to challenge the 

Board’s actions would have been in a Request for Rehearing of the Institution Decision under 37 C.F.R. § 42.71(c).” 

Intervenor Br. at 36. The PTO further contends that “it is 

not error for the Board to rely on an unpatentability 

 

its opportunity under the regulations to file a patent 

owner response, as in district court validity challenges, 

the patent owner “‘would be well advised to introduce 

evidence” on the asserted challenge. Pfizer, Inc. v. Apotex, 

Inc., 480 F.3d 1348, 1360 (Fed. Cir. 2007) (quoting Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 

1570 (Fed. Cir. 1986)).

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theory that could have been included in a properly-drafted 

petition,” but was not. Intervenor Br. at 34. 

We briefly dispose of the PTO’s argument that Magnum was required to raise its concerns with the Board in 

its request for rehearing prior to filing the instant appeal. 

See Intervenor Br. at 36. “A party to an inter partes 

review . . . who is dissatisfied with the final written 

decision of the Patent Trial and Appeal Board under 

section 318(a) . . . may appeal the Board’s decision only to 

the United States Court of Appeals for the Federal Circuit.” 35 U.S.C. § 141(c). Nowhere does the statute 

granting parties the right to appeal a final written decision in an IPR require that the party first file a request 

for rehearing before the Board, especially a rehearing of 

the initial institution decision. Instead, a party who is 

dissatisfied with the final written decision of the Board 

can elect to directly appeal that decision. Magnum may 

advance on appeal its argument concerning motivation to 

combine, since it raised this argument before the Board in 

the IPR. Thus, we reject the PTO’s contention that Magnum was required to raise the present challenge to the 

Board’s actions in a request for rehearing of the institution decision before it could challenge a final Board opinion relying on the same rationale given in the institution 

decision. As a practical matter, why would Magnum have 

had an incentive to seek reconsideration of an Institution 

Decision relying solely on Lehr when it believed McClinton ultimately would be unable to sustain its burden of 

proof based on that reference? Fleshing that out is what 

an IPR trial is for. 

We now address Magnum’s argument that the Board’s 

improper shifting of the burden of proof resulted in reversible error. Appellant Br. at 22-24. Magnum cites to 

several examples in the Board’s decision where the Board 

required Magnum to rebut Petitioner McClinton’s assertions that a skilled artisan would have been motivated to 

combine the prior art references, without first requiring 

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20 IN RE: MAGNUM OIL TOOLS INTERNATIONAL

McClinton to provide evidence to support its assertions. 

We agree with Magnum that the Board improperly shifted the burden to it, as the patentee, to prove nonobviousness. Because McClinton failed to separately meet its 

burden of establishing obviousness in view of Lehr, 

Cockrell, and Kristiansen, we reverse.

The final written decision is replete with examples 

where, rather than require McClinton to prove its assertion of obviousness, the Board improperly shifted the 

burden to Magnum to disprove obviousness. One example 

of the Board’s error is found in the following passage of 

the final written decision:

Magnum does not explain adequately why the 

same analysis [that McClinton provided for Alpha] is not applicable to Lehr. For instance, Magnum does not explain why the simple substitute of 

shearable threads, as taught by Cockrell (Ex. 

1005, 5:43-47, 54-60), for retaining pins 31 that 

secure the deformable release device 30, as taught 

by Lehr (Ex. 1007 ¶ 0044,) would not yield a predictable result. See KSR Int’l Co. v. Teleflex, Inc., 

550 U.S. 398, 417 (2007). Moreover, Magnum 

does not provide sufficient or credible evidence 

that such a substitution is beyond the level of an 

ordinarily skilled artisan. See Leapfrog Enters., 

Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1162 

(Fed. Cir. 2007).

J.A. 23. As is evident from the quoted passage, the Board 

expected Magnum to explain, and faulted Magnum for 

allegedly failing to explain, why an obviousness argument 

based on a first set of prior art references (Alpha, 

Cockrell, and Kristiansen) that the Board did not adopt

would not be applicable to a second set of prior art references (Lehr, Cockrell, and Kristiansen). Neither the 

Board nor the petitioner explained why borrowing the 

rationale for combining the first set of references equally 

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IN RE: MAGNUM OIL TOOLS INTERNATIONAL 21

applies to the second set of references, which was particularly necessary here where the two primary references 

plainly operate in different manners. This constituted an 

improper shifting of the burden to Magnum, the patentee, 

to prove that the claimed invention would not have been 

obvious. 

Another example of the Board’s improper shifting of 

the burden to Magnum is evident from the following 

passage in the Board’s Institution Decision: 

Here, the arguments presented by Magnum fail to 

account for McClinton’s position that the combined teachings of Lehr, Cockrell, and Kristiansen 

teach the claimed “insert” and the corresponding 

aspects of being “screwed into an inner surface of 

the body,” “shearable threads disposed on the inner surface,” “passageway extending

therethrough,” and “the one or more shearable 

threads are adapted to deform to release the setting tool when exposed to a predetermined axial 

force, thereby providing a flow passage through 

the insert and the body.” Consequently, we are 

not persuaded by Magnum’s argument because it 

attacks Lehr, Cockrell, and Kristiansen individually and, therefore, does not account for what the 

combination of those references conveys to an ordinarily skilled artisan.

JA 405-06. Here, the Board improperly assumed, without 

deciding, that “McClinton’s position that the combined 

teachings of Lehr, Cockrell, and Kristiansen teach the 

claimed ‘insert’” is correct. See id. The Board then required the patentee, Magnum, to rebut the position of the 

petitioner, McClinton, and to prove nonobviousness of the 

claimed invention. 

We are not suggesting that any reference to “rebuttal” 

evidence by the Board would constitute reversible error. 

It is not the language employed with which we are conCase: 15-1300 Document: 65-2 Page: 21 Filed: 07/25/2016
22 IN RE: MAGNUM OIL TOOLS INTERNATIONAL

cerned, it is the placement of the burden of persuasion 

that matters. Where, as here, it is clear that the Board 

did not require the petitioner to support its claim of 

obviousness by a preponderance of the evidence, we must 

reverse. 

The record reveals that McClinton failed to articulate 

a motivation to combine the specific teachings of Lehr, 

Cockrell, and Kristiansen to achieve the claimed invention. Indeed, McClinton merely attempted to incorporate

its arguments based on Alpha to its obviousness analysis 

based on Lehr, without presenting particularized arguments explaining why those arguments from Alpha would 

be cross-applicable to the Lehr reference. In arguing that 

a skilled artisan would have been motivated to combine 

Lehr with the other prior art references, McClinton 

reasoned as follows: 

Lehr does not have two of the elements of claim 1: 

(1) the requirement in elements [1.6, 1.8, and 1.9] 

of threads that shear in response to a predetermined axial force; and (2) the requirement of [1.5] 

of [sic] threads on the outside of the insert that

screw into the inner surface of the plug body. 

However, as discussed above with respect to Alpha, these elements were known—indeed, well 

known—in the art, particularly as shown by the 

Cockrell reference. The explanation above for 

Challenge No. 1 explains how each of these missing elements is set forth in Cockrell and Kristiansen. Challenge No. 1 also explains why it was 

obvious to a person of skill to combine Cockrell 

and Kristiansen with other downhole plug prior 

art. The same analysis applies to combinations 

using Lehr as a base reference, with Cockrell and 

Kristiansen supplying the elements of claim 1 

that are missing from Lehr, and the combination 

of these references rendering claim 1 obvious.

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IN RE: MAGNUM OIL TOOLS INTERNATIONAL 23

J.A. 117-18 (Petition) (emphases added). 

But Alpha and Lehr are different, as the Board’s institution on the latter, but not the former, evidences. 

McClinton failed to provide any analysis of how or why 

the deformable release device 30 of Lehr could be combined with Cockrell or Kristiansen in the same manner as 

the Alpha insert, nor did McClinton articulate a different 

rationale for why a skilled artisan would be motivated to 

combine Lehr with Cockrell or Kristiansen. Instead, 

McClinton attempted to provide the motivation to combine merely by noting surface similarities between the 

Alpha and Lehr references. See J.A. 491-92 (Petitioner’s 

Reply Brief) (noting that, inter alia, Alpha and Lehr both 

disclose frac plugs and downhole tools). These surface

similarities do not control the obviousness analysis because they are not directed to the relevant features of the 

claimed invention, namely an insert containing:

(1) shearable threads on the inside of the insert that allow

for release of a setting tool; and (2) nonshearable threads 

on the outside of the insert that allow for attachment of 

the insert to a plug body. 

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24 IN RE: MAGNUM OIL TOOLS INTERNATIONAL

The Board also failed to address Magnum’s argument

that “the insert disclosed by Alpha and the deformable 

release member disclosed by Lehr are entirely different in 

structure and purpose.” J.A. 435 (Patent Owner’s Response Brief) (emphasis in original). These structural 

differences are evident from the figures below, which

show the shear ring insert of Alpha on the left and the 

deformable release member of Lehr on the right.

Id. 

Notwithstanding the Board’s failure to explain why a 

skilled artisan would have been motivated to swap out the 

deformable release device 30 of Lehr, Magnum also 

correctly notes that McClinton failed to articulate why a 

skilled artisan would have sought to combine Lehr with 

Cockrell and Kristiansen. Cockrell and Kristiansen do 

not disclose setting tools. In contrast to Lehr, which 

discloses a setting tool, Cockrell is hydraulically set. 

Cockrell ’516 patent, at col. 7, ll. 3-8. And Kristiansen is 

set with a charge. Kristiansen ’052 patent, at col. 7, ll. 50-

58. McClinton did not address these specific differences 

in how the prior art references are set, despite the fact 

that the claimed inventions of the ’413 patent are each 

directed to an insert allowing for the release of a setting 

tool. See, e.g., ’413 patent, at col. 13, l. 57-col. 14, l. 7. In 

light of McClinton’s failure to explain why a skilled artiCase: 15-1300 Document: 65-2 Page: 24 Filed: 07/25/2016
IN RE: MAGNUM OIL TOOLS INTERNATIONAL 25

san would have sought to combine the prior art references 

to achieve the claimed invention, the Board had no basis 

for its conclusion that McClinton had met its burden of 

proving by a preponderance of the evidence that the 

claimed invention would have been obvious. See KSR, 

550 U.S. at 418.

To satisfy its burden of proving obviousness, a petitioner cannot employ mere conclusory statements. The 

petitioner must instead articulate specific reasoning, 

based on evidence of record, to support the legal conclusion of obviousness. Id. In its petition, McClinton merely 

argued in conclusory fashion that “[t]he same analysis” 

for Alpha also applied to Lehr, without further explanation. JA 117-18. 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. Because such conclusory statements 

cannot satisfy the petitioner’s burden of demonstrating 

obviousness, the Board did not have sufficient evidence on 

which to base its legal conclusion of obviousness. 

Finally, we address the PTO’s assertion that the 

Board did not err in making an obviousness argument on 

behalf of McClinton based on the primary reference Lehr

because this argument “could have been included in a 

properly-drafted petition.” Intervenor Br. at 34 (citing

Cuozzo, 793 F.3d at 1275). It is the petitioner that bears 

the burden of proof in IPRs, however. See 35 U.S.C. § 

316(e) (“In an inter partes review instituted under this

chapter, the petitioner shall have the burden of proving a 

proposition of unpatentability by a preponderance of the 

evidence.”) (emphasis added). It is true that the entire 

IPR process is one designed as an “efficient system for 

challenging patents that should not have issued.” Cuozzo 

Speed Techs., 2016 U.S. LEXIS 3927, at *29 (quoting H.R. 

Rep. No. 112-98, pt. 1, at 39-40 (2011)). But it is still a 

system that is predicated on a petition followed by a trial 

in which the petitioner bears the burden of proof. Given 

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26 IN RE: MAGNUM OIL TOOLS INTERNATIONAL

that framework, we find no support for the PTO’s position 

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. Instead, the Board must 

base its decision on arguments that were advanced by a 

party, and to which the opposing party was given a 

chance to respond. SAS Inst., Inc. v. ComplementSoft, 

LLC, No. 2015-1347, 2016 U.S. App. LEXIS 10508, at *20-

21 (Fed. Cir. June 10, 2016) (“An agency may not change 

theories in midstream without giving respondents reasonable notice of the change and the opportunity to present argument under the new theory.”) (interpreting 5 

U.S.C. § 554(b)(3)) (quoting Belden Inc. v. Berk-Tek LLC, 

805 F.3d 1064, 1080 (Fed. Cir. 2015) (internal quotations 

omitted). Here, “[i]t was [petitioner’s] burden to demonstrate both ‘that a skilled artisan would have been motivated to combine the teachings of the prior art references 

to achieve the claimed invention, and that the skilled 

artisan would have had a reasonable expectation of success in doing so.’” Intelligent Bio-Sys., Inc. v. Illumina 

Cambridge, Ltd., 821 F.3d 1359, 1367-68 (Fed. Cir. 2016)

(citing, inter alia, Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1360 (Fed. Cir. 2012)). Thus, 

while the PTO has broad authority to establish procedures for revisiting earlier-granted patents in IPRs, that 

authority is not so broad that it allows the PTO to raise,

address, and decide unpatentability theories never presented by the petitioner and not supported by record 

evidence. 

V. CONCLUSION

As explained above, the Board erred in shifting the 

burden of proof on obviousness in this IPR from the 

petitioner, McClinton, to the patent owner, Magnum. The 

Board further failed to articulate a sufficient rationale for 

why a skilled artisan would have sought to combine the 

asserted prior art to achieve the claimed invention. The 

Board’s decision was premised on a legally incorrect 

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IN RE: MAGNUM OIL TOOLS INTERNATIONAL 27

standard for assessing obviousness, and the Board’s 

factual findings regarding the alleged motivation to 

combine lacked substantial evidence. Accordingly, we 

reverse the Board’s decision. 

REVERSED

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