Patents - May 06, 2016

Inter partes review 4: Burden of proof

The party challenging the validity of patent claims in an inter partes review (IPR) proceeding must prove its case by a preponderance of the evidence (which means “more likely than not”). This burden of proof is lower than the “clear and convincing” standard for proving a patent claim is invalid in a district court lawsuit. The recent case of Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., ___ F.3d ___, 2016 WL 1128083 (Fed. Cir. March 23, 2016) illustrates the difference.

Automated Creel Systems, Inc. (ACS) sued Shaw Industries Group, Inc. (Shaw) for infringement of ACS’s U.S. Patent no. 7,806,360, which relates to “creels” for supplying yarn and other stranded materials to a manufacturing process.  ACS voluntarily dismissed the action without prejudice.  “Without prejudice” means that ACS retained the right to sue Shaw later for infringement of the ‘360 patent.

Shaw ultimately filed two petitions for IPR with respect to the claims of the ‘360 patent.  Shaw presented a number of grounds for invalidation of each claim.  The Patent Trial and Appeal Board (PTAB) instituted two IPR proceedings on a subset of the grounds presented for invalidation (we will discuss “redundancy” in a related post).  The PTAB consolidated the proceedings and concluded that Shaw (1) had not shown by a preponderance of the evidence that the “interposing claims” were unpatentable, and (2) had shown by a preponderance of the evidence that the “non-interposing claims” (including claim 4) were unpatentable.

The preponderance of the evidence standard is used by the PTAB in contested proceedings.  See 37 C.F.R. 42.1(d) (“The default evidentiary standard [in a proceeding before the PTAB] is a preponderance of the evidence”).  The Federal Circuit accepted this standard without question when considering, for example, “Shaw’s challenges to the Board’s determination that Shaw had not shown by a preponderance of the evidence that the interposing claims would have been obvious over Munnekehoff or Barmag in view of Ligon.”  The court reviews the Board’s ultimate conclusion of obviousness de novo and its factual findings for substantial evidence.

The court decided to vacate the PTAB’s decision that Shaw had not shown that the “interposing claims” were unpatentable because the decision was ambiguous as to a finding about what the Munnenkehoff reference disclosed.  The court remanded to the PTAB to reconsider its decision on this issue.

The lesson from ACS v. Shaw and similar cases is that the petitioner for IPR faces the lowest possible burden of proof in the final determination.  The situation in a district court case is different.  The Supreme Court confirmed in the case of Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S. ___, 131 S. Ct. 2238 (2011) that a defense of patent invalidity must be proved by “clear and convincing evidence.” The lower standard of proof is an appealing feature of IPR proceedings for parties that are threatened by a patent.