1 February 2010PatentsEldora Ellison & Jon Wright

Litigation or re-examination?

While accused infringers continue to challenge the validity of patents in the US district courts, potential infringers are increasingly seeking relief in parallel by requesting the US Patent and Trademark Office (USPTO) to re-examine their competitors’ patents.

The number of re-examination requests has climbed steadily in recent years, and there are currently more than 2,100 re-examinations pending before the Central Re-examination Unit (CRU) of the USPTO. The USPTO grants requests for re-examination at a high rate in both inter partes and ex parte proceedings (95 percent and 92 percent, respectively).

More than two-thirds of patents undergoing inter partes re-examination and approximately one-third of patents undergoing ex parte re-examination are involved in some form of co-pending litigation.

Re-examinations are alluring to potential infringers because, in ex parte re-examinations to date, only 25 percent of patent re-examination certificates have confirmed all the patent claims. In inter partes re-examinations, the corresponding number shrinks to six percent. So both patent owners and potential patent infringers must keep the possibility of patent re-examination in the front of their minds.

Patent re-examinations versus district court litigation

There are a number of significant differences between patent challenges during district court litigation and patent re-examination. The proceedings differ in scope, standard of review, claim construction and procedure. In the district court, patent validity may be challenged under any statutory provision, including lack of utility, anticipation, obviousness, lack of written description and/or lack of enablement.

Further, patent challengers also may argue that the asserted patent is unenforceable—for example, due to inequitable conduct or laches. In re-examinations, however, challengers must present the USPTO with a ‘substantial new question of patentability’ predicated on prior art patents or publications. A party considering a parallel re-examination must contend with this limitation on challenging patentability.

In district courts, patent claims are presumed valid, and clear and convincing evidence is required to establish invalidity. No presumption of validity exists during re-examination, and the USPTO and CRU use a lower ‘preponderance of the evidence’ standard. Therefore, challenging a patent may be easier before the USPTO than in a district court.

In re-examinations, claims are given their broadest reasonable construction consistent with the specification. In US district courts, on the other hand, claims may be construed more narrowly, thus potentially limiting the world of available prior art.

For example, claims are sometimes construed so as to preserve their validity and statements made during prosecution generally place a greater limit on the claim construction applied during litigation than during re-examination.

Thus, a Markman order (used to establish the meaning of a patent claim) in a district court is not binding on the USPTO. A broader claim construction may result in an increase in the amount of prior art relevant to patentability.

Such differences may have practical consequences. Consider a situation in which a district court issues a claim construction order and the patent owner then succeeds in defending its patent against an invalidity attack. The defendant (or another third party) may request re-examination of the same patent and the USPTO may apply a broader claim construction.

The patent owner may then have to amend its claims to incorporate the court’s construction (e.g. to avoid prior art). Such an amendment may give rise to intervening rights accorded to the accused infringer under which the patent owner may be precluded from recovering damages for past infringement.

Alternatively, the patent owner may stand its ground in the re-examination, rather than amend the claims, but it risks the possibility of having its rights in the patent extinguished. Patent validity challenges in district courts are determined by a judge or jury who, not surprisingly, typically has no technical background in the relevant art. In contrast, re-examinations are conducted by technically trained, experienced patent examiners.

"Early filing may cause a patent owner to think twice before bringing suit."

Accordingly, in district courts, the case may be more likely to turn on issues that are readily accessible to the average person, such as credibility of the witnesses and a simply told story that appeals to one’s notions of fairness. In contrast, CRU examiners are more likely than the average juror to understand sophisticated distinctions in the technology and to grasp applicable subtleties in the patent laws.

Patent owners and potential infringers each should strive for consistency in their litigation and re-examination game plans. For example, in formulating a proposed claim construction when asserting or denying infringement, it is worthwhile considering whether that same claim construction may be applicable in re-examination and what impact it would have on the potential relevance of the available prior art.

Similarly, nuanced technical arguments that may be unappealing in litigation may strike a chord with technically skilled examiners. Yet, in a quest to balance simplicity with nuanced technicalities, the parties must exercise caution to avoid inconsistencies and contradictions.

Given the increasing use of re-examinations, particularly in the face of litigation, patent owners who contemplate enforcing their patents would be wise to assess the vulnerability of their patents to re-examination and, if possible, shore up any shortcomings in the patent before bringing suit.

Possibility of re-examination raises important issues for corporate counsel

A competitor who contemplates requesting re-examination must consider whether to request an ex parte or, if available, an inter partes proceeding. A requester who seeks ex parte re-examination will not be estopped from raising the same issues in litigation involving the patent or from filing additional requests for ex parte re-examination.

In contrast, a requester of inter partes re-examination ostensibly may be estopped in litigation from raising issues it raised or could have raised in re-examination, and vice versa. As a practical matter, however, such estoppel typically has not precluded patent challenges because the estoppel provision takes effect upon a ‘final’ decision, which may take many years to reach.

Although a patent owner may narrow its claims during re-examination, the practical ability to make amendments in the course of concurrent re-examination and litigation is limited. First, substantive claim amendments may essentially wipe out a court’s claim construction, potentially resulting in a waste of judicial and/or party resources.

Second, a patent owner who amends its claims must consider the possibility of creating intervening rights in the patent. Third, in inter partes proceedings, examiner interviews are prohibited, thus constraining a patent owner’s ability to negotiate claim amendments that may be necessary to obtain allowance.So patent owners should carefully consider the potential constraints on their ability to amend claims in re-examination.

Parties to a litigation also should bear in mind the possibility of patent re-examination while drafting a protective order. The parties may wish to allow the submission of certain protected documents during the course of any re-examination proceeding.

Absent sufficient procedures, a patent owner may be precluded from presenting materials to support patentability (e.g. evidence of secondary considerations of non-obviousness) to the USPTO. Similarly, the third-party requester may be precluded from submitting certain evidence supporting its obviousness position to the USPTO.

Effective rebuttal of rejections during re-examination usually involves expert testimony in the form of affidavits or declarations. Both parties to a litigation will want to ensure that any expert testimony in the re-examination is not contradicted by expert testimony in the litigation, and a minefield awaits the unwary.

Further, the parties should confirm whether any protective order that applies to an expert in the litigation would bar such an expert from participating in the re-examination proceedings.

For those seeking to challenge the validity of a patent through re-examination, one important decision is when to file. Early filing may be desirable if the goal is to obtain the stay of a costly litigation until patentability of the asserted patent is reassessed by the USPTO. Early filing is also important where re-examination is viewed as an insurance policy against an adverse district court decision.

Overall, at least two years are typically necessary for a final decision from the USPTO— waiting too long to file a request could reduce the effectiveness of such a strategy. Early filing also may cause a patent owner to think twice before bringing suit, and the mere threat of re-examination may help force an early settlement.

For example, a draft re-examination request may be presented to a patent owner prior to filing the request with the USPTO. For the most effective use of such a tool in settlement discussions, the request should be prepared early on in the dispute.

Even if the re-examination is not immediately requested, arguments included in such a ‘pocket re-examination’ are directly applicable to an accused infringer’s potential invalidity case. Even if a pocket re-examination does not force settlement, re-examination and a subsequent adverse Office Action may improve the accused infringer’s negotiation position.

Potential requesters should keep in mind, however, that once a re-examination is filed, it cannot be ‘unfiled’. Therefore, a premature request may jeopardise future settlement discussions.

Conclusion

The increasing use of patent re-examinations to challenge patents has changed the dynamic between patent owners and potential infringers. Given that most patents undergoing inter partes re-examination also are involved in litigation, corporate competitors would be wise to consider the risks and rewards of re-examination when litigation looms on the horizon.

Eldora L. Ellison is a director at Sterne, Kessler, Goldstein & Fox. She can be contacted at: eellison@skgf.com

Jon E. Wright is a director at Sterne, Kessler, Goldstein & Fox. He can be contacted at: jwright@skgf.com

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