[00:00:06] Speaker 01:
OK.

[00:00:07] Speaker 01:
The first argued case this morning is NRA Magnum Oil Tools International, number 151300.

[00:00:13] Speaker 01:
Mr. St.

[00:00:14] Speaker 01:
Clair.

[00:00:14] Speaker 01:
Good morning, Your Honors.

[00:00:22] Speaker 00:
My name is Nathaniel St.

[00:00:23] Speaker 00:
Clair.

[00:00:24] Speaker 00:
I'm here on behalf of Magnum Oil Tools of Corpus Christi, Texas, the appellate.

[00:00:28] Speaker 00:
I have three points that I'd like to cover with the court here today.

[00:00:31] Speaker 00:
The first of which being the petitioner failed to prove obviousness of the 413 patent

[00:00:36] Speaker 00:
when it used the Lear application as its primary reference.

[00:00:39] Speaker 00:
Because of that failure, the board was forced to employ an alternate theory of obviousness in order to fill in some of the missing claim elements, which were never proposed by the petitioner.

[00:00:50] Speaker 00:
The second of which being, the Lear reference itself actually teaches a way from the proposed combination set forth by the board.

[00:00:57] Speaker 00:
And this just caused the board to reach an incorrect Lear conclusion.

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The last of which of those points will be, the petitioner failed to meet his burden.

[00:01:05] Speaker 00:
The petitioner provided no explanation of how the three references are combined and relied solely on conclusory statements.

[00:01:12] Speaker 00:
So get into that first point.

[00:01:14] Speaker 00:
The petitioner failed to prove obviousness of the 413 when he used the Lear reference as the primary reference, along with the Cockrell and Christensen references.

[00:01:23] Speaker 00:
As a result of that failure in proving obviousness, the board was forced to use an alternate theory of obviousness, a theory that was never proposed by the petitioner in any of its IPR petition

[00:01:34] Speaker 00:
And the board used that to fill in some of the missing claim elements in this decision.

[00:01:39] Speaker 03:
Are you saying that the case can't develop further after the point of the initiation?

[00:01:47] Speaker 00:
No.

[00:01:47] Speaker 00:
We're not attempting to appeal the initiation.

[00:01:50] Speaker 00:
We're actually saying that they didn't carry.

[00:01:52] Speaker 00:
The prima facie case, if that was shown, then they can initiate, obviously.

[00:01:57] Speaker 00:
What we're appealing is the final decision.

[00:01:59] Speaker 00:
The final decision based on the fact that going from that point on,

[00:02:03] Speaker 00:
the petitioner did not carry their burden all the way through final decision.

[00:02:07] Speaker 00:
The Drinkwater case, the Stratoflex cases, all of those cases teach that even though if the IPR is initiated, it's the petitioner's burden to show obviousness all the way through until final decision.

[00:02:18] Speaker 03:
Well, clearly.

[00:02:19] Speaker 03:
Clearly.

[00:02:20] Speaker 03:
There's no shifting of burden.

[00:02:22] Speaker 03:
There's no question about whether they have the burden to establish obviousness.

[00:02:26] Speaker 03:
My question to you is whether you are saying,

[00:02:29] Speaker 03:
that if they rely on a particular ground in their petition, that that's frozen in time, that there can be no further development during the course of the case and the proceeding with respect to the nuances of the theory.

[00:02:45] Speaker 00:
No, I don't believe it's frozen in time, Your Honor.

[00:02:48] Speaker 00:
But the point that we are making is that what the board actually relied on is something that was never actually in evidence.

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And then going from there and even step beyond that,

[00:02:58] Speaker 00:
what they actually relied on is factually incorrect.

[00:03:01] Speaker 00:
The Lear reference itself teaches away from the very proposed combination that the board relied on in making their final decision.

[00:03:09] Speaker 02:
Well, let's drill down a little bit.

[00:03:10] Speaker 02:
There were a lot of known ways in the art of down-hole plugs to attach a setting tool to the plug, right?

[00:03:21] Speaker 02:
And shearable threads was one way to do it.

[00:03:27] Speaker 02:
And that was known, and I guess Lair teaches that notion.

[00:03:32] Speaker 02:
And so the point of the board's analysis for the 103 is because there are multiple known ways in this down-hole plug art to attach a setting tool to a plug, it would be obvious to use one over another.

[00:03:49] Speaker 02:
And one of the known methods, as shown by Lair, is using shearing threads, which is what you've claimed.

[00:03:57] Speaker 02:
Where's the defect in that?

[00:03:59] Speaker 00:
Well, if you'll let me take a step back.

[00:04:00] Speaker 00:
Lear actually teaches using a deformable disk.

[00:04:04] Speaker 00:
And the deformable disk is attached to the mandrel.

[00:04:08] Speaker 00:
Oh, I'm sorry.

[00:04:08] Speaker 02:
Cockrell.

[00:04:08] Speaker 02:
Cockrell teaches the shear of threads.

[00:04:10] Speaker 00:
Right.

[00:04:10] Speaker 00:
Cockrell discusses using shear threads.

[00:04:13] Speaker 00:
However, what the board proposed is basically taking the deformable disk of Lear, which is, if you can imagine, a compact disk.

[00:04:21] Speaker 00:
And that is deformed as a plunger is pulled through

[00:04:25] Speaker 00:
the downhole tool to create this release.

[00:04:27] Speaker 00:
What the board is suggesting is you take this, what the LEER references teaches is something that is fairly flat in nature and put threads on the inside of it.

[00:04:36] Speaker 00:
The LEER references itself in paragraphs 10, 11, 13, and 44 actually teach reasons why you don't want to take LEER and either attach it with something that will fall down, down hole, which will be disadvantageous creating debris in the well bore.

[00:04:52] Speaker 00:
And it discusses that it's undesirable

[00:04:54] Speaker 00:
to drill into the down-hole tool.

[00:04:56] Speaker 00:
The layer reference itself actually teaches away from the suggestion that the board has created.

[00:05:02] Speaker 00:
Specifically, the layer references talks about this deformable disc, this CD, if we use that.

[00:05:08] Speaker 00:
This disc is attached to the mandrel by retention pins.

[00:05:13] Speaker 00:
In this art, in the down-hole tool art, if you're using retention pins, it's specifically for a reason.

[00:05:17] Speaker 00:
A skilled artisan would know and understand

[00:05:19] Speaker 00:
that these retention pins are there to prevent the very thing that the board is suggesting, something shearing off falling down hole.

[00:05:27] Speaker 03:
You had two prompts to your argument here.

[00:05:29] Speaker 03:
One is you said that this information that the board relied upon or inferred or implied or found was not actually in evidence.

[00:05:40] Speaker 00:
Right.

[00:05:40] Speaker 00:
This was not the petitioner's proposed argument.

[00:05:43] Speaker 00:
The way this actually got into their final decision

[00:05:46] Speaker 00:
the board referenced back to one of the references the grounds weren't even initiated on, the Alpha reference.

[00:05:52] Speaker 00:
And in the final decision, the Alpha reference was not one of the references under which the board initiated the review.

[00:05:58] Speaker 01:
Now, who raised the Alpha reference and the others?

[00:06:01] Speaker 01:
How did all of these references that you say should not have been relied upon get into the system?

[00:06:08] Speaker 00:
The Alpha reference was one of the 20 proposed invalidity grounds that was in the original petition.

[00:06:14] Speaker 01:
But were they in the petition?

[00:06:16] Speaker 01:
So they were argued by the petitioner?

[00:06:19] Speaker 00:
It was in the original petition.

[00:06:20] Speaker 00:
The board initiated a review on six of those grounds, none of which had anything to do with Alpha.

[00:06:28] Speaker 00:
And when the board got to final decision, the three references that were discussed in this final decision were the Lear reference, the Copper reference, and the Christensen reference.

[00:06:37] Speaker 00:
Even in its final decision, the board and the petitioner, I'm sorry, even throughout the petition,

[00:06:42] Speaker 00:
The petitioner is making arguments saying everything based on alpha would have been possible with leer.

[00:06:51] Speaker 00:
So let's incorporate those arguments in by reference.

[00:06:53] Speaker 00:
But nowhere in its arguments did the petitioner actually show these missing elements or how one of skill in the art would have made this proposed combination.

[00:07:02] Speaker 00:
They attempted to employ somewhat of a mental shortcut and say, take alpha, which the board didn't initiate on, and let's plug in leer.

[00:07:09] Speaker 00:
And let's say everything with leer and alpha is the same.

[00:07:12] Speaker 00:
The problem with that is it's not.

[00:07:15] Speaker 00:
The tools, Alpha and Lear, are so dissimilar in not only their setting tools, their sharing mechanism, that you cannot take a simple substitution of Alpha, which is not even in the case, and place Lear in that place.

[00:07:29] Speaker 01:
When you say it's not in the case, but you said that it was cited in the petition.

[00:07:33] Speaker 00:
It was originally cited.

[00:07:34] Speaker 00:
I'm sorry, Your Honor.

[00:07:35] Speaker 01:
Well, why is it not in the case?

[00:07:37] Speaker 00:
It's not one of the grounds in which the review was granted.

[00:07:41] Speaker 00:
It was originally proposed, but it was not one of the six grounds under which the board initiated review.

[00:07:46] Speaker 01:
But that takes us back to the question of whether, in fact, after initiation, that ends the premises on which the case can proceed.

[00:07:55] Speaker 01:
And I thought your answer to Judge O'Malley was that you didn't think so.

[00:08:00] Speaker 00:
No, I believe it can proceed.

[00:08:02] Speaker 00:
It proceeds on the grounds on which review was initiated.

[00:08:06] Speaker 03:
Only?

[00:08:07] Speaker 00:
Yes.

[00:08:07] Speaker 03:
But see, the board's position is that even if it's not initiated,

[00:08:11] Speaker 03:
solely on Alpha grounds, that doesn't mean Alpha is irrelevant in terms of the art that exists and that the board is supposed to consider.

[00:08:19] Speaker 00:
And even taking so, if that is the case, Your Honor, if we take that as the premise, nowhere from that point on, once review has been initiated, did we take the Lear reference and show how that same argument actually does apply from Alpha to Lear.

[00:08:35] Speaker 00:
And that's the problem.

[00:08:36] Speaker 03:
So you're saying that this is a situation in which

[00:08:40] Speaker 03:
the petitioner did not present any evidence, did not address the question, did not have testimony regarding Alpha?

[00:08:47] Speaker 00:
Right.

[00:08:48] Speaker 00:
The only arguments that they have are conclusory statements by Gary Woolley saying that these are the same and it would have been done in that same way.

[00:08:55] Speaker 00:
When addressed with why one skill of the art would take the Lear reference where it has at least four times saying

[00:09:03] Speaker 00:
We would not do this in this way.

[00:09:05] Speaker 00:
We would not have retention pans becoming sheer pans because it's disadvantageous.

[00:09:10] Speaker 00:
We would not drill into it creating the same thing that the board is citing to.

[00:09:16] Speaker 00:
They just glossed over it.

[00:09:17] Speaker 00:
And it was never actually addressed in those conclusions made by Gary Wolf.

[00:09:21] Speaker 02:
Well, I mean, the alpha reference is not part of the rejection.

[00:09:28] Speaker 02:
It's not officially part of the rejection.

[00:09:30] Speaker 02:
But in terms of the reasoning for combining the elements,

[00:09:33] Speaker 02:
the board said look over here at this reasoning for possibly combining alpha with these secondary references and that kind of reasoning applies equally to using layer as the primary reference.

[00:09:48] Speaker 02:
So now let's go to that question where the board seemed to be pointing to what the petitioner said that one would it be

[00:09:59] Speaker 02:
one of skill in the art would be motivated to substitute Alpha's shearing for Lear's deformable device.

[00:10:11] Speaker 02:
And so by extension, the board is saying likewise, one would be motivated to substitute Lear's deformable device and swap it out with Cockrell's shearing threats.

[00:10:27] Speaker 02:
Now aside from your teaching away argument,

[00:10:29] Speaker 02:
I understand that argument.

[00:10:30] Speaker 02:
Why aren't those two things interchangeable and equivalent?

[00:10:35] Speaker 00:
Why aren't what Lear and Alpha teaches?

[00:10:38] Speaker 02:
No, I'm sorry.

[00:10:40] Speaker 02:
Lear's deformable release device and Cockrell's shearing threads.

[00:10:48] Speaker 02:
Why aren't those two equivalent and interchangeable so that one in skill and the art would know how to substitute one for the other?

[00:10:56] Speaker 00:
Well, in Alpha,

[00:10:58] Speaker 00:
the entire point is there being some breakage of some sort.

[00:11:02] Speaker 00:
What Lear actually tells us is that we want this to be retained because the plunger in Lear is asserted up a uphold before it actually goes down into Downhold Tool.

[00:11:15] Speaker 00:
If we put in a device such as what Alpha is suggesting, the entire operation of it would be different.

[00:11:22] Speaker 00:
The other thing that makes it different is

[00:11:24] Speaker 00:
The alpha tool, I believe, is run on a wireline setting tool, as opposed to what's taught in the patented ARC, and in LEAR, are actually run on separate mechanical setting tools.

[00:11:35] Speaker 02:
I'm sorry, forget about alpha for a second.

[00:11:38] Speaker 02:
Just let's focus on LAR and Cochral.

[00:11:40] Speaker 02:
Cochral has the sharing threads.

[00:11:42] Speaker 02:
LAR has the releasable deformable device.

[00:11:46] Speaker 02:
Why wouldn't someone think that those two things are interchangeable?

[00:11:52] Speaker 00:
Well, LIR would actually require a complete redesign in order to make a place to put the shearing thread cylinder within the actual mandrel.

[00:12:03] Speaker 00:
The way LIR is designed, the retention device is actually external.

[00:12:07] Speaker 02:
Is it your view that the board's reasoning was, well, you wouldn't remove LIR's deformable device.

[00:12:16] Speaker 02:
What you would actually do is

[00:12:18] Speaker 02:
adapt it.

[00:12:19] Speaker 02:
You would modify that very device, what you call a CD, by putting internal threads on it and external threads on it.

[00:12:27] Speaker 02:
And so therefore, you would now have something that matches your claim limitation.

[00:12:32] Speaker 00:
Right.

[00:12:32] Speaker 00:
And it would be a complete redesign.

[00:12:34] Speaker 00:
And if we go that far and say we're taking Lear, we're adding girth to it to allow it to retain threads, and then we're also moving it from being external to what is now Lear,

[00:12:46] Speaker 00:
to being internal to what is the patent invention, it would be a complete redesign.

[00:12:52] Speaker 00:
And one of skill in the art at the time of this invention would not have made that conclusion.

[00:12:57] Speaker 00:
And we provided technical explanation by Kevin Trahan, 20 years of experience, that actually cited that same thing that has designed these tools for 30 years.

[00:13:06] Speaker 00:
Because what the board has essentially done is taken a packer, which is completely different than a frac plug.

[00:13:12] Speaker 00:
They're both used in down hole operations

[00:13:14] Speaker 00:
and attempted to adapt one to perform the function of the other.

[00:13:18] Speaker 01:
Now, Mr. Sankler, where is McClinton in this appeal?

[00:13:21] Speaker 01:
Where is the prevailing party in defending the decision in their favor?

[00:13:27] Speaker 00:
The prevailing party sat on the sidelines.

[00:13:30] Speaker 00:
We had some district court litigation in Southern District of Texas before Judge Ramos.

[00:13:35] Speaker 00:
We received an injunction in that case and a favorable settlement.

[00:13:39] Speaker 00:
And once that went away, they stepped aside with respect to this matter.

[00:13:41] Speaker 01:
So where is the controversy?

[00:13:43] Speaker 01:
What happens depending on who wins this appeal?

[00:13:47] Speaker 01:
Does anything change?

[00:13:49] Speaker 00:
Other than the fact that my client would perhaps lose their patent.

[00:13:53] Speaker 01:
Where is the controversy, the judicial controversy that invokes federal jurisdiction?

[00:13:59] Speaker 00:
Well, right now it's whether or not the petitioner met their burden.

[00:14:03] Speaker 01:
Who do you have a controversy with?

[00:14:06] Speaker 00:
In this place now it will be the intervener.

[00:14:08] Speaker 01:
How did that happen?

[00:14:09] Speaker 01:
This was an inter-parties debate.

[00:14:11] Speaker 01:
Between yourself, the petitioner raised the issue.

[00:14:14] Speaker 01:
You responded.

[00:14:15] Speaker 01:
There was an adjudication.

[00:14:17] Speaker 01:
The prevailing party has disappeared from this case.

[00:14:22] Speaker 00:
Yes.

[00:14:23] Speaker 00:
And the petitioner, the intervener stepped in and the petitioner shoot.

[00:14:27] Speaker 01:
Is the intervener, I shall ask the intervener if they're representing the government or if they're representing your opponent.

[00:14:35] Speaker 00:
The government.

[00:14:36] Speaker 01:
We'll save you rebuttal time because that's the first question I want to ask.

[00:14:41] Speaker 01:
Ms.

[00:14:42] Speaker 01:
Sowert on behalf of the government.

[00:14:45] Speaker 00:
Thank you.

[00:14:46] Speaker 01:
Thank you, Mr. St.

[00:14:47] Speaker 01:
Clair.

[00:14:51] Speaker 01:
Where is the appellee in this case?

[00:14:54] Speaker 01:
Where is the case of controversy?

[00:14:56] Speaker 04:
The appellee in this case is the government and we represent the board and the director.

[00:15:01] Speaker 01:
Will you speak up a little, please?

[00:15:02] Speaker 04:
I'm sorry.

[00:15:03] Speaker 04:
We represent the director as the appellee.

[00:15:08] Speaker 01:
The director was the losing party?

[00:15:11] Speaker 01:
or the prevailing party, I thought the director was adjudicating this controversy.

[00:15:18] Speaker 04:
That's correct, Your Honor.

[00:15:20] Speaker 01:
If we have an appeal from the district court and the prevailing party decides not to defend the appeal, we have never had a case where the district judge has said, never mind, I'm going to appeal and argue, support my decision.

[00:15:34] Speaker 04:
Yes, Your Honor, but the director has the right to intervene in an IPR

[00:15:39] Speaker 01:
Exactly, and we're very interested in what the director has to say about matters of law.

[00:15:45] Speaker 01:
Very interested.

[00:15:46] Speaker 01:
But you're not saying that.

[00:15:48] Speaker 01:
You're defending the adjudicator is now coming in to defend your decision.

[00:15:56] Speaker 01:
That's quite curious in the federal system.

[00:16:00] Speaker 04:
Well, Your Honor, we view our rationale for being here is to protect the public.

[00:16:06] Speaker 04:
In our view, a patent

[00:16:08] Speaker 04:
issued erroneously because it would have been obvious.

[00:16:12] Speaker 04:
And so now the patent owner has lost at the board and our job now is to prevent the patent owner from regaining their patent because this invention or what's claimed should be out in the public for free use of the public.

[00:16:29] Speaker 01:
So the director will always intervene on the side of eliminating the patent?

[00:16:36] Speaker 04:
depending on what the board's decision is.

[00:16:38] Speaker 04:
Of course, if the board decides that in an IPR that the claims were not unpatentable, the petitioner can appeal that.

[00:16:54] Speaker 04:
I would assume a patent owner would not show up to this court at that point.

[00:17:02] Speaker 04:
But there could be a possibility that we would

[00:17:05] Speaker 04:
that the PTO would come and defend the board's decision that, yes, the patent owner is rightfully entitled to this patent?

[00:17:16] Speaker 01:
That's unusual.

[00:17:20] Speaker 01:
Whether it's appropriate is an interesting question because it seems to contradict the Constitution and every obligation of the federal courts to have a case of actual controversy

[00:17:35] Speaker 01:
there's always a public interest in getting the right answer in adjudication.

[00:17:39] Speaker 01:
And yet, we have never seen a case where the public interest, we have, of course, there are always interveners.

[00:17:46] Speaker 01:
There are friends of the court expressing a viewpoint as to how the public is affected.

[00:17:53] Speaker 01:
And we appreciate that the statute authorizes the director to intervene, presumably,

[00:18:03] Speaker 01:
I think was the intention we would be interested in your viewpoint in order to discuss the law, which is being involved not to discuss the facts, the equities, the merits of the particular case, as between these two protagonists, one of whom apparently they've come to terms, makes not the slightest difference to anybody how this case is decided.

[00:18:31] Speaker 03:
So let me

[00:18:32] Speaker 03:
You talk about intervention and the right to intervene.

[00:18:35] Speaker 03:
Clearly, that exists by statute.

[00:18:37] Speaker 03:
But you understand that the PTO couldn't appeal on its own.

[00:18:43] Speaker 03:
Correct.

[00:18:44] Speaker 03:
So if you have a situation in which there is no opposing party, does the PTO's right to intervention allow them to step into the shoes of the opposing party?

[00:18:59] Speaker 03:
Or is the right to intervention

[00:19:01] Speaker 03:
solely to allow the PTO to be a third party to the proceeding and a pure intervener.

[00:19:08] Speaker 03:
And you have to presuppose that there is otherwise a case of controversy that is ongoing.

[00:19:15] Speaker 04:
I believe that we step into the shoes.

[00:19:18] Speaker 04:
But honestly, Your Honor, the PTO's position I can't speak to, that would be I'm happy to go back to the PTO and get

[00:19:30] Speaker 04:
get the director's official position on the interpretation of the intervention statute and submit a letter to the court if you would like that.

[00:19:40] Speaker 01:
Well, because to wrap this up, let's say that the PTAB had decided in favor of this patent and had sustained it, overruling the board.

[00:19:50] Speaker 01:
Is your position or your reserving comment that the director, if the

[00:19:59] Speaker 01:
other side doesn't appeal could come in and say that my board got it wrong?

[00:20:05] Speaker 01:
No.

[00:20:07] Speaker 01:
So it's only if the patent is... runs the risk of being sustained by this court that the director can intervene.

[00:20:18] Speaker 04:
I believe the situation is the same as in inter-parties re-examination.

[00:20:24] Speaker 04:
The Solicitor's Office has come here

[00:20:27] Speaker 04:
representing the director in both cases where the patentee lost the patent and in cases where the patentee retained the patent.

[00:20:37] Speaker 04:
So we've been in situations where we've defended the board's upholding of a patent and we defended the board's final conclusion that a patent was unpatentable.

[00:20:50] Speaker 01:
Even when there's no controversy, we're told it makes not the slightest difference anymore to these parties.

[00:20:55] Speaker 01:
They've settled.

[00:20:56] Speaker 01:
That's why the prevailing party isn't squandering any more funds on this litigation.

[00:21:02] Speaker 04:
Yes, Your Honor.

[00:21:04] Speaker 04:
Again, we view our position here as protecting the public against a patent, an invention, a claimed invention that should be in the public domain.

[00:21:12] Speaker 01:
So you come in only when there's a risk that the patent will be sustained on appeal.

[00:21:19] Speaker 04:
I don't think that's correct, but again.

[00:21:21] Speaker 01:
That's what we have now.

[00:21:23] Speaker 01:
We have a petition.

[00:21:24] Speaker 04:
Yes, that's what we have.

[00:21:26] Speaker 01:
The other side won.

[00:21:27] Speaker 01:
He doesn't care.

[00:21:29] Speaker 01:
But you care.

[00:21:30] Speaker 04:
We care.

[00:21:31] Speaker 01:
That's my question.

[00:21:33] Speaker 01:
We care.

[00:21:33] Speaker 01:
That's very interesting.

[00:21:34] Speaker 01:
I think judges always care about their result being sustained on appeal.

[00:21:40] Speaker 01:
But this would be very interesting if, from now on, any judge who wants to make sure that the appellate tribunal gets it right comes in as a party.

[00:21:55] Speaker 01:
Well, all right.

[00:21:55] Speaker 01:
You see the issue that concerns us, I think we need to explore.

[00:21:59] Speaker 02:
My understanding is the Solicitor's Office is always, as a default practice, defended a patent board decision whenever the prevailing party below drops out of the case, whether the patent is found ultimately patentable or unpatentable.

[00:22:13] Speaker 04:
That has been our default practice, like I said.

[00:22:16] Speaker 01:
But that was the case in the prior system before we developed this adjudicatory body in the office.

[00:22:25] Speaker 01:
I agree, when it was just simply an appeal to whatever was called then.

[00:22:31] Speaker 01:
OK, let's turn to the merits.

[00:22:32] Speaker 03:
Before we get to the merits, can I just ask a slightly different process question?

[00:22:36] Speaker 03:
And this is the one that I was curious about from the beginning when I saw that there was no opposing party.

[00:22:42] Speaker 03:
Assuming that we disagree with your position and that we either find that the board applied the wrong obviousness standard or we find that the facts

[00:22:53] Speaker 03:
that the board found were not supported by evidence in the record.

[00:22:58] Speaker 03:
And we then vacate and remand.

[00:23:02] Speaker 03:
Would the PTO continue the IPR under those circumstances?

[00:23:10] Speaker 03:
I looked at the PTO's own rules and it talks about when it would or wouldn't continue and one of the times when it says that it will continue the IPR is when it's very close to a decision,

[00:23:21] Speaker 03:
or it's already begun rendering its decision.

[00:23:24] Speaker 03:
But if it's essentially right after initiation, it wouldn't continue.

[00:23:30] Speaker 03:
In this circumstance, you'd be starting over.

[00:23:33] Speaker 03:
So would the PTO continue or could it continue?

[00:23:38] Speaker 04:
Right now, there are no rules as to what happens when a case comes back from the federal circuit.

[00:23:45] Speaker 04:
The reason for that is the board wanted to maintain maximum discretion

[00:23:50] Speaker 04:
address each case on its own.

[00:23:52] Speaker 04:
In the future, there may be rules, depending on how the practice plays out.

[00:23:57] Speaker 04:
But I can't speak to what would happen in this case when it goes back if the petitioner has dropped out.

[00:24:04] Speaker 04:
The board may view its role, again, as protecting the public against the patent that should have never issued, or it may decide that

[00:24:17] Speaker 04:
The petitioner has dropped out and there's no reason to continue as it does before the final written decision has been issued.

[00:24:26] Speaker 04:
But I can't speak for the board in this particular case because there are no rules forcing the board to do one thing or the other.

[00:24:33] Speaker 01:
Okay.

[00:24:36] Speaker 01:
Okay.

[00:24:37] Speaker 01:
Please proceed with the merits.

[00:24:39] Speaker 04:
May it please the court?

[00:24:41] Speaker 04:
The prima facie case of obviousness, all the elements are clearly found in the record in this case.

[00:24:48] Speaker 04:
If we start with all the claim limitations, again, those are found in the record at A403-404.

[00:24:57] Speaker 04:
That's the institution decision.

[00:24:59] Speaker 02:
Can you point us to where in the three references do any of them teach an insert that's threaded or screwed into the body of a plug that also has shearable threads disposed around its inner surface?

[00:25:15] Speaker 04:
Cockerell teaches an insert.

[00:25:18] Speaker 04:
In cockerel there's a mandrel in the center and it teaches a sleeve which is inserted onto the mandrel and the threads on the interior part of that sleeve are curable.

[00:25:31] Speaker 02:
Which element are you pointing to in cockerel?

[00:25:53] Speaker 04:
The insert is release member 136.

[00:26:01] Speaker 02:
And is this what the board pointed to as being the insert that gets screwed into the body of a plug that has shearable threads on the internal surface?

[00:26:11] Speaker 04:
The board agreed with the claim chart that Dr. Woolley submitted as part of the petition.

[00:26:16] Speaker 04:
And the claim chart is at

[00:26:20] Speaker 04:
A288 through A298.

[00:26:39] Speaker 04:
So the insert element starts at A290.

[00:26:49] Speaker 04:
And it was the position and the board agreed that LEAR discloses a deformable release device as an insert.

[00:26:59] Speaker 04:
Of course that doesn't have threads, but it is an insert.

[00:27:03] Speaker 02:
Okay, so then to get it straight here that the board did not rely on Cockrell's frangible release number 136 to be the claimed insert.

[00:27:16] Speaker 02:
It relied on

[00:27:17] Speaker 02:
the deformable release device 30 of Lear to be the claimed insert.

[00:27:22] Speaker 04:
Well, actually, all three prior art references teach inserts.

[00:27:26] Speaker 02:
Well, I'm trying to get to the bottom of what was the board's reasoning.

[00:27:30] Speaker 02:
And I guess you're telling me that the board relied on the Lear deformable release device 30 to correspond to the claimed insert.

[00:27:42] Speaker 04:
The board relied on the claim chart.

[00:27:45] Speaker 04:
It agreed with the claim chart in full.

[00:27:47] Speaker 04:
So I believe that it's fair to say that the board relied on all three references to teach an insert.

[00:27:53] Speaker 02:
OK.

[00:27:54] Speaker 02:
Where does the claim chart point me to frangible release number 136 as corresponding to the claimed insert?

[00:28:09] Speaker 04:
This is at page 2A291 at the end of the very bottom of the box.

[00:28:20] Speaker 04:
It says, third, Cockrell teaches a shearable insert that is screwed into a body.

[00:28:26] Speaker 04:
And then it quotes a frangible release number 136.

[00:28:31] Speaker 02:
Now, when we get back to the board's decision, it talks about substituting shearing threads for the retaining pins.

[00:28:42] Speaker 02:
That I didn't follow.

[00:28:45] Speaker 04:
So the board, if we look at the institution decision, the board made two comments about the motivation to combine Lear with Cockrell.

[00:29:01] Speaker 04:
The first statement is at A404 towards the end of the page.

[00:29:11] Speaker 04:
when the board here discusses the ground of unpatentability based on Alpha Cockroll and Christiansen.

[00:29:19] Speaker 04:
And then turning the page to A405, the board says, Magnum does not explain why the simple substitution of shearable threads as taught by Cockroll for the pins that secure the deformable release device as taught by Lear would not yield a predictable result.

[00:29:40] Speaker 04:
So there the board is saying that it would have been obvious to exchange one release mechanism for another.

[00:29:51] Speaker 04:
So to use an insert that has threads is substitutable with an insert that has a deformable release device and pins.

[00:30:00] Speaker 02:
The retaining pins though are for fastening the deformable device to the body of the plug.

[00:30:07] Speaker 02:
It's not for, the retaining pins are not being used by layer.

[00:30:10] Speaker 02:
for attaching the setting tool with the plug.

[00:30:15] Speaker 04:
So what happens in the invention of Lear is that you have this deformable release device and it attaches the setting tool to the body.

[00:30:25] Speaker 04:
And then underneath the deformable release device, you have these pins that are screwed in that attach the deformable release device to the body.

[00:30:35] Speaker 04:
And so this whole mechanism keeps everything in place because the whole point of a setting tool is to keep the plug on the setting tool while it goes down the hole.

[00:30:46] Speaker 04:
And then once the plug is set, the setting tool's function is over.

[00:30:51] Speaker 04:
You have to get rid of it.

[00:30:52] Speaker 04:
And so this is just, LEAR just teaches one release mechanism for releasing.

[00:31:00] Speaker 03:
Where in the record is there expert testimony to that effect?

[00:31:04] Speaker 03:
Because at the institution decision, I mean, to rely on the institution decision where all you had was generalized statements with no evidentiary support, and then you put the burden, you shift the burden to the patent holder to disprove

[00:31:21] Speaker 03:
just these generalized statements, that's clearly not consistent with what the board's analysis is supposed to be in an obvious misdetermination.

[00:31:31] Speaker 04:
There was evidence in the record.

[00:31:33] Speaker 04:
And if we go to, if I could direct the court's attention to Dr. Woolley's test declaration at A285, starting at paragraph 73.

[00:31:44] Speaker 04:
There he says, I was aware of bottom set plugs

[00:31:51] Speaker 04:
and knew that many different release mechanisms could be used.

[00:31:56] Speaker 04:
I was aware of both deformable elements and shear threads and I viewed them as interchangeable with each other with practical differences but not functional differences.

[00:32:05] Speaker 04:
So when the board said this release mechanism of Lear is easily interchangeable with the release mechanism of Cockroll,

[00:32:19] Speaker 04:
That's when the board was saying, tell me why.

[00:32:21] Speaker 04:
We have the evidence here in the record.

[00:32:24] Speaker 04:
Tell me why this doesn't give you a predictable result.

[00:32:30] Speaker 03:
Well, wait a minute.

[00:32:30] Speaker 03:
You've got one statement with no support, doesn't point to anything in the prior art, doesn't point to anything specific in the patents.

[00:32:40] Speaker 03:
And it just says, I was aware of deformal elements and shear threads, and I viewed them as interchangeable, period.

[00:32:46] Speaker 03:
And then you put the burden on the patent holder to disprove that generalized statement that has no evidentiary support?

[00:32:56] Speaker 04:
Your Honor, that statement does have evidentiary support.

[00:32:59] Speaker 04:
If you go to A253 at paragraph 34, Dr. Woolley there says that at the time of the invention I recognized this is paragraph 34.

[00:33:12] Speaker 04:
and others having ordinary and skill in the art recognized that a shearing that deforms by shearing at a predetermined axial force was equivalent to an interchangeable with threads that deform.

[00:33:24] Speaker 04:
And then he recites all these patents in the prior art that show using threads to detach one element from another was well known to the skilled artisan.

[00:33:37] Speaker 01:
But he doesn't refer to anything to say that you should make this change.

[00:33:41] Speaker 01:
And the requirements of the law is that you need something in the prior art to suggest that this change should be made.

[00:33:50] Speaker 01:
Instead, he says, well, what they did I could have done.

[00:33:54] Speaker 04:
Well, he does suggest a rationale for changing it, and this is at eight.

[00:33:58] Speaker 01:
What authority?

[00:33:59] Speaker 01:
Not that he and his head looking retrospectively at what this inventor did, but where is the prior art suggestion that this change should be made?

[00:34:10] Speaker 04:
So in Christensen, and this is, he uses the disclosure of Christensen to suggest that someone skilled in the art would have been motivated to make this change.

[00:34:24] Speaker 01:
But didn't make it until this inveter made it.

[00:34:27] Speaker 01:
Turns out apparently it's superior, or else the petitioner wouldn't have cared.

[00:34:33] Speaker 01:
And we're told has made some sort of arrangement.

[00:34:37] Speaker 01:
We don't know what.

[00:34:38] Speaker 01:
So that he's no longer affected.

[00:34:40] Speaker 01:
by the decision here?

[00:34:43] Speaker 04:
Your Honor, there's been no evidence in this record that it is superior.

[00:34:49] Speaker 04:
They haven't relied on secondary considerations.

[00:34:52] Speaker 04:
But putting that aside, Dr. Woolley testified without challenge that a skilled artisan would have been motivated to use an insert as disclosed by Christensen as a single element.

[00:35:10] Speaker 01:
And I believe this court's case- This whole appeal is the challenge to the obviousness of making that change.

[00:35:17] Speaker 01:
I'm sorry.

[00:35:18] Speaker 01:
The fact that he was allowed as the expert to testify without being interrupted is not to say that the patentee agreed with every word that he said.

[00:35:30] Speaker 04:
I understand that, but they had the opportunity to depose Dr. Christensen.

[00:35:37] Speaker 04:
They had the opportunity.

[00:35:39] Speaker 04:
The patent owner had the opportunity to submit statements about the deposition to the board.

[00:35:47] Speaker 04:
But the board looked at the declaration of Dr. Woolley and compared it to the declaration of Mr. Trahan and decided that the declaration of Dr. Woolley was more credible.

[00:36:02] Speaker 02:
The problem I have is that you're doing a thorough job of showing us lots of different things on the record.

[00:36:09] Speaker 02:
But ultimately, we're supposed to review the board's decision and try to understand what was the board's rationale.

[00:36:18] Speaker 02:
And that's the problem I have right now.

[00:36:21] Speaker 02:
I don't have a picture in my mind of what the board is actually thinking when it proposed the combination of the various references to come up with the claim of invention.

[00:36:33] Speaker 02:
To me, it looks like it rested the substitution theory

[00:36:38] Speaker 02:
on substituting the retaining pins for the shearing threads of cockerel.

[00:36:45] Speaker 02:
And if that's the board's rationale, I still don't see how that matches up with the claim limitation.

[00:36:53] Speaker 04:
I understand, Your Honor.

[00:36:54] Speaker 02:
Do you agree with me that that is the pivot point, the key to the board's decision on modifying the primary rare layer reference?

[00:37:06] Speaker 02:
It is to replace

[00:37:08] Speaker 02:
and substitute retaining pins for these shearing threads from cockerel.

[00:37:14] Speaker 04:
No, I don't.

[00:37:15] Speaker 02:
Okay, they said it three times.

[00:37:17] Speaker 04:
I think, I agree with you, it's not as... They said it three times?

[00:37:22] Speaker 02:
You agree with that?

[00:37:22] Speaker 04:
I agree with you, it's not as precise as it could have been.

[00:37:25] Speaker 04:
If you look at the sentence that you're referring to, is it A-23 at the

[00:37:35] Speaker 04:
Two-thirds of the way down.

[00:37:36] Speaker 02:
And then A27 as well.

[00:37:38] Speaker 04:
Yes.

[00:37:38] Speaker 04:
And they say, again, Magnum does not explain why the simple substitution of shareable threads as taught by Carpereau for retaining pins that secure the deformable release device as taught by Lear would not yield a predictable result.

[00:37:54] Speaker 04:
It would have been more clear if they said four retaining pins and deformable release device.

[00:38:00] Speaker 04:
But if you take it together and you look at the entire record,

[00:38:04] Speaker 04:
The record is replete that changing one using threads or using shear pins or using any other mechanism, these were all well known in the art and they were all well known to be interchangeable.

[00:38:19] Speaker 03:
But wait, even if it's true that the PTO can intervene in the absence of an opposing party, the only thing the PTO can intervene to do is to defend the decision on the grounds that the board used.

[00:38:33] Speaker 03:
You can't ask us to substitute our own review of the art and use grounds that are not articulated by the board, right?

[00:38:43] Speaker 03:
I mean, even if you don't agree with the board, which I sense that you think it would have been an easier analysis or a better analysis had they done other things, but that's not the PTO's role at this point, is it?

[00:38:55] Speaker 04:
Well, Your Honor, I think the fundamental disagreement is I believe they were saying what I'm saying to you now.

[00:39:02] Speaker 04:
I think that the sentence that the court seems to have trouble with could have been written clearer.

[00:39:09] Speaker 04:
But if you look at the whole record, the board's path is discernible.

[00:39:15] Speaker 03:
But it seems like the whole path was based on a misapplication of the burden.

[00:39:21] Speaker 03:
In other words, I get someone who says, you can combine this with this, and you didn't disprove that.

[00:39:30] Speaker 03:
That doesn't seem to me to be an appropriate obviousness analysis.

[00:39:35] Speaker 04:
Well, Your Honor, Dr. Woolley's testimony or declaration, he speaks as someone skilled in the art at the time of the invention.

[00:39:44] Speaker 04:
He's telling us what somebody skilled in the art would have understand.

[00:39:48] Speaker 04:
He references several patents in the art.

[00:39:51] Speaker 04:
And he actually references a patent that shows that using an insert with shearable threads to remove a setting tool has been used for 50 years.

[00:40:01] Speaker 04:
And so that was certainly sufficient evidence to meet the prima facie case as far as the prima facie case of reasonable likelihood that the petitioner would prevail.

[00:40:17] Speaker 03:
That has to do with initiation.

[00:40:18] Speaker 03:
Once you get into the mayor's determination, there is no such thing as saying all we need to show is a reasonable likelihood.

[00:40:25] Speaker 03:
prima facie case analysis anymore.

[00:40:28] Speaker 04:
No, I understand that.

[00:40:29] Speaker 04:
And that was our point in our intervention brief, that once you get to trial, then the whole trial opens up.

[00:40:41] Speaker 04:
And at that point, we are trying to get to what are the merits of the case.

[00:40:45] Speaker 04:
And at that point, it's not helpful to talk about whether they said this in their petition or whether they said that.

[00:40:53] Speaker 04:
It's helpful to

[00:40:54] Speaker 04:
At this point, we want to know, has the petitioner carried their burden of showing by preponderance of the evidence?

[00:41:05] Speaker 04:
And standing here today, our point is that all the elements of a prima facie case or obviousness are shown in this record.

[00:41:14] Speaker 04:
And the patentee has not sufficiently rebutted it.

[00:41:18] Speaker 02:
But doesn't the board have an obligation to spell it out?

[00:41:21] Speaker 02:
I mean, you're saying,

[00:41:23] Speaker 02:
the fullness of the record, you can locate all the pieces of evidence and favorable testimony to finding these claims unpatentable.

[00:41:32] Speaker 02:
But isn't there an obligation for the board to somehow package it together so that we can see their rationale?

[00:41:39] Speaker 02:
Right now, it looks like, as you said, they took a shortcut in this substitution theory of retaining pins for shearing threads.

[00:41:48] Speaker 02:
And then secondly, they took perhaps a shortcut in saying,

[00:41:53] Speaker 02:
There is one would know to substitute, but they didn't say one would know to substitute because dot dot dot.

[00:42:02] Speaker 02:
There's no because I see in the board's decision.

[00:42:07] Speaker 04:
I have to disagree that they took a shortcut.

[00:42:10] Speaker 04:
My point standing here today is maybe they weren't as articulate as they could have been.

[00:42:15] Speaker 04:
But what they're saying is in the sentence that the court has issue with,

[00:42:23] Speaker 04:
we are changing, if you add threads to the deformable release device, then you don't need the pins anymore.

[00:42:32] Speaker 04:
And anyone skilled in the art would understand that, because the whole point of the pins are to hold the deformable release device in place.

[00:42:39] Speaker 02:
Right, but don't you need the threads on the interior surface of the deformable device?

[00:42:44] Speaker 04:
Yes, and that's what Cockerill teaches.

[00:42:47] Speaker 02:
I know, but when you substitute the threads for the retaining pins,

[00:42:52] Speaker 02:
Now you're talking about putting threads on the exterior, not the interior, of the deformable device of layer.

[00:42:59] Speaker 04:
Yes, and Christensen is what we use to teach threads on the exterior.

[00:43:06] Speaker 04:
Right.

[00:43:07] Speaker 04:
So to hold the release mechanism into place, if you're not using pins, you need to use exterior threads.

[00:43:14] Speaker 02:
Right.

[00:43:15] Speaker 02:
But that still leaves the gap of why would anybody put threads on the interior of the layer deformable device?

[00:43:22] Speaker 04:
Because threads are well-known in the art to be used to release one element from another, as Cockerell teaches.

[00:43:30] Speaker 02:
All right.

[00:43:33] Speaker 01:
OK.

[00:43:34] Speaker 01:
We need to move on, if it's all right with the panel.

[00:43:39] Speaker 01:
OK.

[00:43:39] Speaker 01:
Thank you, Mr. St.

[00:43:42] Speaker 01:
Clair.

[00:43:43] Speaker 01:
We've run way over, so let's give Mr. St.

[00:43:46] Speaker 01:
Clair 10 minutes or so if he needs it.

[00:43:48] Speaker 00:
I don't need 10 minutes, Your Honor.

[00:43:50] Speaker 00:
This should be very quick.

[00:43:51] Speaker 00:
Judge Chen, we're in agreement with your last few statements that it seems like that the board took a shortcut.

[00:44:01] Speaker 00:
A lot of the argument that we just heard, we feel like was not in the record.

[00:44:05] Speaker 00:
And that was the problem with the appellant feeling like we're arguing against what's essentially a moving target.

[00:44:13] Speaker 00:
The record is replete with the board using its own biased logic to replace the retaining pins of what was known in ER

[00:44:21] Speaker 00:
with shear pins, which doing so is actually taught against in this same very primary reference.

[00:44:28] Speaker 00:
The record is devoid of any showing of how a skilled artisan would have ever been motivated to do that.

[00:44:33] Speaker 03:
The record is devoid of any rational underpinning, as taught by the Henry Kine case, on why someone— Put aside the rational—but how do you respond to the government's argument that actually the Woolley Declaration should have been enough?

[00:44:51] Speaker 00:
Well, in looking at the Woolley Declaration, it was our position that the Woolley Declaration is just full of conclusory statements without making that connection.

[00:44:59] Speaker 00:
I've deposed Dr. Woolley probably four times in the district court litigation, and when we got to this stage, we saw no point in deposing him again because we knew what his position was.

[00:45:08] Speaker 00:
Mr. Trahan, and to add on to that, Dr. Woolley has never designed a down-hold tool a day in his life.

[00:45:14] Speaker 00:
He's a university professor.

[00:45:16] Speaker 00:
We relied on the technical opinion of Mr. Kevin Trahan

[00:45:19] Speaker 00:
who's worked for the likes of Halliburton and Schlumberger, who's worked in this field for 25 plus years, he was at some point a person of ordinary skill in the art, and now he's a person of extraordinary skill in the art.

[00:45:29] Speaker 00:
From his opinion, which we believe is a lot more highly credible than that of Dr. Woolley, he says someone with a skilled artisan that is described in this record would not have reached the conclusion of combining the deformable disc of Lear

[00:45:43] Speaker 00:
with what's taught in Cockerell or Christensen.

[00:45:46] Speaker 02:
What about the idea of using Cockerell's frangible release member, that cylindrical thing 136, and then taking out the deformable release device 30 from Lair and putting that cylindrical frangible release member 136 into Lair?

[00:46:05] Speaker 00:
Well, that could have been something that was otherwise possible.

[00:46:08] Speaker 00:
We don't feel like it was

[00:46:09] Speaker 00:
properly argued by the board or by the original petitioner in itself.

[00:46:14] Speaker 00:
And at this point, we feel like the board is attempting to fill in these missing claim elements using the patent claims as an outline in hindsight.

[00:46:23] Speaker 00:
And at this point, addressing the question that Judge Newman raised early on, we feel like that the structure now of the IPR has put us in a precarious position as opposed to what the inter partes re-exam position was.

[00:46:38] Speaker 00:
In viewing the board's recent decision and Judge Newman's dissent in the At the Con, Covidian case, we're completely in agreement that the structure the way it is now is not what Congress intended.

[00:46:50] Speaker 00:
And then on top of that, now we have the intervener stepping in in a case acting as both where the board made the decision to institute, they made the final decision with respect to invalidity, and now we have the intervener attempting to step in and add another level of adjudication where we think it's not exactly what Congress intended.

[00:47:08] Speaker 00:
That's all I have.

[00:47:09] Speaker 00:
Thank you.

[00:47:11] Speaker 01:
OK.

[00:47:11] Speaker 01:
Any more questions for Mr. Shankar?

[00:47:13] Speaker 01:
Thank you.

[00:47:14] Speaker 01:
Thank you both.

[00:47:14] Speaker 01:
The case is taken under submission.