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The Reexamination Center Executive Interview: Richard Levick on “Reexaminations and the Media”

Reexaminations can have huge collateral impact on patent owners, alleged infringers, and other stakeholders and interested parties. It thus behooves all involved to be aware of the public impact of reexaminations and how best to manage and react to public scrutiny. We are most pleased to be able to address this topic in this interview with Richard Levick, Founder and CEO of Levick Strategic Communications (www.levick.com).

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Quick Stat

808

Total number of inter partes requests filed from November 29, 1999 to December 31, 2009.

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Analysis

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The marked increase in the use of reexamination has naturally caused more frequent and closer evaluation of its unique procedures by involved parties and the courts. In short, reexamination and its satellite issues (such as litigation stays) remain among the faster developing areas of intellectual property law. We have identified a number of hot topics that are currently confronting parties finding themselves in this so-called “parallel universe”.

Hot Topics

Background: Reexamination with Concurrent District Court or ITC Litigation

There are numerous high profile court cases involving patent reexaminations. Examples of high profile cases involving reexaminations and co-pending litigation include NTP, Inc. v. Research in Motion, Ltd. (patents found to cover the Blackberry), TiVo v. Echostar, (TiVo’s TimeWarp Patents), Proctor & Gamble v. Kraft Foods Global, Inc. (patents for packing fresh coffee), and the numerous reexaminations and litigations surrounding U.S. Patent No. 5,253,341 for a “Remote Query Communication System.” These high-profile cases, some involving highly profitable products, have highlighted the critical interplay between the parallel universes of the Article III and Article I courts on the one hand and the PTO on the other.

This resource addresses the interplay between patent litigation before the Federal Courts or the United States International Trade Commission (“ITC”) (“the courts”) and co-pending reexamination proceedings involving the patent-in-suit before the United States Patent and Trademark Office (“PTO”). As independent arbiters of patent validity, each forum poses a distinct set of challenges and risks for those disputing or defending patent validity. These so-called “parallel universes” work with separate rules, standards, procedures, time lines, and results in cases involving the same patent.

Background: Primary Factors Contributing to the Increase in Reexamination

Two primary factors have contributed to the increased use of reexamination as an alternate venue to challenge patent validity where district court litigation has been initiated. First, the PTO made a commitment in 2005 to make reexamination a more streamlined and viable venue for post-grant validity challenges by creating the Central Reexamination Unit (“CRU”). The CRU’s sole responsibility is handling reexaminations. But if the continued growth in the number of reexaminations filed is any indication, its formation has certainly put real teeth into a process previously perceived as pro-patent owner and plagued by delay and uncertainty.

Second, the legal landscape surrounding patent validity and reexamination has been in great flux. The Supreme Court’s 2007 decision in KSR Int’l Co. v. Teleflex, Inc. dramatically changed the calculus for determining whether an invention was “obvious” and that decision alone appears to have cast serious doubt on the validity of many hundreds of thousands of issued patents. Further, Federal Circuit cases such as In re Translogic Tech. and In re Swanson dramatically impacted and illuminated the legal landscape and brought the interplay between the courts and the PTO into sharper focus.

Reexamination Pendency

Reexamination pendency is a perennial hot topic for a number of reasons. First, for reexamination to be an effective post-grant venue for challenging patent validity, it must be concluded in a timely and efficient manner—i.e., with the “special dispatch” required by statute. To avoid prejudice, however, the PTO must nonetheless act in a deliberate and fair manner by giving the patent owner a full opportunity to defend the patentability of its claims. Second, reexamination pendency is an important factor weighed by the courts when deciding whether to stay concurrent litigation. Third, predictable reexamination timetables are enormously helpful to both third-party requesters and patent owners when they work reexamination strategies into dynamic district court litigation and ITC investigation timetables. In short, uncertainty in pendency of a reexamination proceeding diminishes the fairness and effectiveness of reexamination and litigation for all involved parties.

By statutory mandate, all reexaminations are to be handled with “special dispatch” [35 U.S.C. §§ 305 and 314]. Nonetheless, the CRU does prioritize pending reexaminations. For instance, higher priority is afforded to reexaminations of patents involved in litigation. Even higher priority is afforded when trial proceedings have been stayed pending the outcome of reexamination. Further, if there is a concurrent litigation and the reexamination proceeding has been pending for more than one year, the PTO may further expedite a reexamination proceeding by setting a one-month or thirty day period for responses to Office Actions [MPEP §§ 2263 and 2663(L)]. Litigation notwithstanding, the highest priority is assigned reexaminations that have been pending for two or more years.

Litigation Stays

Litigation stays and reexamination pendency are closely linked. Pendency is, or at least should be, a factor in practically every stay decision. If a district court judge can have reasonable confidence in a reexamination timeline, it can simplify the stay calculus. For instance, if reexamination pendency is completely uncertain, or if the time to final decision extends years past an expected trial date, then stays become less likely as they severely prejudice the patent owner. Conversely, if the reexamination is certain to conclude shortly, substantial resources may be saved by issuing a stay.

Once a district court judge is reasonably comfortable with the reexamination timeline, then a number of other factors come into play. Judge Selna in the Central District of California has authored a number of nuanced stay decisions, including Allergan Inc. v. Cayman Chem. Co. [Allergan Inc. v. Cayman Chem. Co., SACV 07-01316-JVS (Order dated April 9, 2009)]. In Allergan, Judge Selna denied the stay primarily because the parties were competitors, and “the PTO might not conclude its reexamination for several years, and that this delay would prejudice Allergan’s rights to exclusive use of its patented technology and would cause it irreparable harm.” Judge Selna noted “the totality of the circumstances governs,” and listed several positive factors supporting the grant of a stay.

Related Cases:

  • Allergan Inc. v. Cayman Chem. Co. [Allergan Inc. v. Cayman Chem. Co., SACV 07-01316-JVS] (Order dated April 9, 2009)

Protective Orders

The interplay between the duty of disclosure in a reexamination proceeding and a protective order in a concurrent litigation is a critical issue facing not just the patent owner, but also the third party requester (who is often the defendant in the concurrent litigation), the PTO and the courts. How should parties craft a Protective Order in a concurrent district court litigation or ITC investigation to prepare for a possible reexamination proceeding at the PTO? Is it possible for a patent owner to satisfy its duty of disclosure while adhering to the guidelines of a protective order? What limitations does a protective order place on the resources available to a patent owner to prosecute the reexamination proceeding?

In a reexamination proceeding, each individual associated with the patent owner has a duty of candor and good faith in dealing with the PTO. The duty of candor includes a duty to disclose to the PTO all information known to that individual to be material to patentability in a reexamination proceeding [37 C.F.R. §§ 1.555(a) and 1.933(a)]. Individuals who have a duty to disclose to the PTO all information known to be material to patentability in a reexamination proceeding. “[T]he patent owner, each attorney or agent who represents the patent owner, and every other individual who is substantively involved in a reexamination proceeding” is bound by the duty of candor [37 C.F.R. §§ 1.555(a) and 1.933(b)].

When crafting a protective order for district court litigation or ITC investigations, the parties must consider the possibility of a reexamination being filed when crafting the protective order for the litigation. For example, the parties may establish procedures to allow the filing of materials obtained during discovery that are subject to a protective order in the PTO reexamination proceeding. Absent sufficient procedures, a patent owner may be barred by the protective order from presenting materials to support patentability (e.g., evidence of secondary considerations of nonobviousness) to the PTO. Similarly, the third party requester may be barred from submitting evidence supporting its obviousness position to the PTO.

Related Cases:

  • Intelli-Check v. Tricom Card Techs., Inc. (D. N.J. Nov. 10, 2005)
  • TeleCommunication Systems, Inc. v. Mobile 365, Inc. (C.A. No. 3:06CV485)

Substantial New Questions of Patentability (SNQ)

While it may sound relatively simple, presentation of an SNQ is more subtle than many practitioners realize. This section presents an overview of the SNQ. It then discusses the impact of two recent court decisions on the SNQ. This section remains a “Hot Topic” because it is an often misunderstood area of reexamination practice that is ripe for litigation—e.g., where the parties challenge the existence of an SNQ in a reexamination request through the Administrative Procedures Act or through appeal to the Federal Circuit.

The Federal Circuit in In re Swanson [In re Swanson, 540 F.3d. 1368 (Fed. Cir. 2008)] recently clarified what it takes to support an SNQ where a reference was previously used to reject the claims in original prosecution. The ex parte reexamination statute sets forth the universe of references that can be used to raise an SNQ [35 U.S.C. § 303(a) "patents and printed publications"].

In Portola, the Federal Circuit “interpreted the statutory intent [of the ex parte reexamination statutes] as precluding reexamination based on ‘prior art previously considered by the PTO in relation to the same or broader claims.’” In re Swanson, p. 11 (citing Portola, 110 F.3d at 791). Congress explained that the amendment to 35 U.S.C. § 303(a) “overturns the holding of In re Portola Packaging, Inc., a 1997 Federal court decision imposing an overly-strict limit that reaches beyond the text of the Patent Act.” H.R. Rep. No. 107-120, at 2.

In re Swanson provides some guidance on what constitutes a “new light” for old art. For example, an SNQ based on previously applied art could arise because the examiner in the original examination misunderstood the actual technical teaching, because the examiner failed to consider a portion of the reference that contained the now cited teaching, or if the examiner applied the reference to a different limitation or claim than the reference is currently being applied. But a reference does not raise an SNQ if the examiner in the original examination understood the actual technical teaching, but got it “wrong” in the rejection. This is a subtle but critical distinction.

A further unsettled issue for many practitioners is the impact of KSR on reexamination practice. Did KSR open the door to reexamination challenges based on prior art overcome during original prosecution by arguing lack of teaching, suggestion, or motivation to combine? When KSR was decided at the end of April 2007, the PTO feared an avalanche of reexaminations based solely on an argument that the obviousness standard applied in the original prosecution had been relaxed.

KSR states that patent examiners, as well as the courts, can review the factual predicates underlying the obviousness calculus and reach the ultimate legal conclusion whether the subject matter is obvious [KSR, 540 U.S. at 413 (“While the sequence of [the Graham factors] might be reordered in any particular case, the factors continue to define the inquiry that controls. If a court, or patent examiner, conducts this analysis and concludes the claimed subject matter was obvious, the claim is invalid under § 103.”)]. Thus, it makes logical sense that it would be of great interest to the reexamination examiners to know what a person of ordinary skill in the art would have known at the time of filing of the original application for which reexamination is requested.

Related Cases:

Real Party in Interest

While ex parte reexamination requests may be filed anonymously by any party, at any time, inter partes reexamination requests must identify the real party in interest filing the request [37 C.F.R. § 1.510(b),(f)]. The real party in interest requirement is closely tied to the inter partes reexamination estoppel provisions [MPEP § 2612 (“note that it is the real party in interest that is subject to the estoppel provisions and not the party who actually filed the request.”)]. The estoppel provisions of 35 U.S.C. § 317(b) apply to the “third party requester” and “its privies.” The real party in interest disclosure therefore must be “to the extent necessary for a subsequent person filing an inter partes reexamination request to determine whether that person is a privy” [37 C.F.R. § 1.915(b)(8)].

The PTO currently is struggling with the “real party in interest” rule where there is concurrent district court litigation with multiple defendants. Typically, in a multi-defendant litigation, the group of defendants will create a joint defense group (“JDG”). Issues occur when one or more defendants, but not all, file an inter partes reexamination request. For instance, the filing defendant (or defendants) may have minimal infringement exposure but is alleged or believed to be acting as a surrogate for the other defendants who are not officially part of the inter partes reexamination and thus not bound by the estoppel provisions [35 U.S.C. §§ 315(b) and 316(b)]. An alternative scenario is that the defendant filing the inter partes reexamination request is doing so on its own initiative, and perhaps against the wishes of one or more co-defendants.

Impact of KSR on Reexamination

The Supreme Court’s decision in KSR v. Teleflex altered the obviousness calculus in a fundamental way by making the obviousness determination more subjective. The full scope of KSR’s impact on patent reexamination remains to be seen, but initial reports indicate that the results may be dire for patent owners, particularly in the “predictable” arts. Extensive research about the impact of KSR has been done by many groups.

That research demonstrates the impact is significant in original prosecution. For instance, perhaps the most extensive publicly available sample and analysis is by Microsoft’s Corporate Vice President for IP Policy and Strategy, Marshal Phelps et al.. His research was presented at Sedona Patent Litigation 2008. As his analysis shows, the most effective way to challenge an obviousness rejection in predictable arts is to persuasively argue, with factual support, that a claim feature is not taught by the references.

If the references in fact show each element, either explicitly or inherently, then it seems to be very difficult to overcome an obviousness rejection. Many argue that the mere existence of all of the claim elements in the prior art as the basis for a finding of obviousness turns this test of patentability on its head since most inventions are “combination of old elements.” This applies to some of the most important inventions of all time.

Related Cases:

Other Validity Challenges

Original patent claims in both ex parte and inter partes reexamination proceedings are only examined on the basis of patents and printed publications [35 U.S.C. §§ 302, 311; 37 C.F.R. §§ 1.510(a), 1.915(b)]. The full suite of defenses available in patent litigations including statutory subject matter (35 U.S.C. § 101), written description and enablement (35 U.S.C. § 112), public use, prior sale and inequitable conduct are NOT available in reexamination proceedings. This disparity between invalidity challenges available in a district court and the invalidity challenges in reexamination has spawned efforts to expand the available bases for requesting reexamination to create more equivalence between the two forums.

The PTO takes the position that the reexamination statute does not permit such an expansion [See 37 C.F.R. §§ 1.552, 1.906; M.P.E.P. §§ 2258, 2658]. The CRU has therefore strictly enforced the narrow basis for reexamination of original claims to rejections based on patents and printed publication. Under this regime, collateral prior art defenses—for example commercialization activities surrounding a printed publication—cannot be considered in reexamination even though such defenses can be considered in any parallel court litigation under prior art categories such as “on sale” or “public use.”

The efforts to achieve identity between the invalidity challenges available in district court and those available in reexamination have centered primarily on changes to the underlying statute and the introduction of a new post grant review process. This post grant review (“PGR”) process has been proposed in several prior versions of Patent Reform legislation; and as of the publication of this paper Senate Bill S515 contains language for a “first window” post-grant review. Under the current version, the “window” concept refers to the time period from when the patent issues to when the period for filing a PGR would close—12 months in the current draft. The PGR would supplement, not replace reexamination.

Related Cases:

Multiple PTO Proceedings

If the parallel universe of having the same patent subject to review in reexamination and court litigation seems complicated enough, the picture can become even more multi-dimensional if the patent is also subject to additional reexamination, reissue or interference proceedings. There are several scenarios possible under current practice. Another ex parte or inter partes reexamination can be filed on the same patent. If an inter partes reexamination has already been filed, the estoppel provisions of 35 U.S.C. § 317 prevent the third party requester or its privies from filing a subsequent reexamination request. A reissue application, whether broadening or narrowing, can also be filed. Additionally, the patent in reexamination can be involved in an interference proceeding with another patent application. Under present practice, it is conceivable that a single patent could be involved in all of these proceedings concurrently.

Such multiple proceedings will likely have a significant impact on pendency, cost, and complexity of the reexamination. Current legislation contained in S515 in the U.S. Senate could expand this complexity with the creation of a “first window” post grant review process and expansion of inter partes reexamination to cover all unexpired patents. Such multiple PTO proceedings involving the same patent are not rare. In fact, multiple reexaminations of the same patent and/or a reexamination with a parallel reissue application are seen frequently, especially if the patent is perceived as being very valuable or is part of a hard fought litigation.

Appeals to the BPAI and the Federal Circuit

Examples of appeal to the Federal Circuit are limited. Appeal to and remand from the BPAI to the CRU, however, occurs frequently where a proposed ground of rejection in the reexamination request is not adopted by the CRU examiners in the first Office Action. On appeal to the BPAI the third party requester raises this as a “new ground of rejection” that should have been made by CRU. The BPAI agrees but does not have the factual and argument record to decide the rejection and thus remands the reexamination back to the CRU to address with the parties.

This possibility of multiple remands (dubbed the “infinite do loop” from computer programming parlance) has been raised and seriously discussed. Senior PTO officials and others were concerned about its existence. Since then the authors have conferred with these senior officials and others to assess whether this problem is global or whether it is limited to two possible remands or to certain situations (e.g., the unadopted proposed ground of rejection example discussed). It seems that it is too early in the deployment of the current inter partes reexamination process to know whether the problem is global. Moreover, it may be that the BPAI will go more in the direction of acting as a judge who makes a final decision and sets case for appeal to Federal Circuit, and less as a “super examiner” who remands for another round of prosecution in its review of inter partes reexaminations.

Related Cases:

Impact of PTO and Court Decisions on Stock Price

The CRU, the courts and the parties should all be aware of how their decisions involving reexaminations can impact the world outside the tribunal. In certain high profile situations in the past two years, the stock price (and company valuation) of a publicly traded patent owner has dropped precipitously due to a significant decision in a patent suit or in a concurrent reexamination of the patent in suit such as the issuance of a non-final office action rejecting some or all of the claims of the patent in reexamination. This precipitous drop is in large part due to “short selling” in the capital markets of the stock of the patent owner, which is driven down by the shorts as a way to make a big profit.

In January 2009, shares of Rambus fell nearly 40 % when the U.S. District Court for the District of Delaware ruled in a patent infringement suit that the “company cannot enforce 12 of its semiconductor patents in a suit against Micron Technology Inc. because Rambus destroyed documents about them.” [IPLaw360, Document Shredding Voided Rambus Patents (January 9, 2009)]. Tessera Technologies shares dropped nearly 40% following a non-final office action in a patent reexamination. Tessera’s stock recovered somewhat, but only after its general counsel contacted investors and assured them non-final actions were not unusual and that “[c]laims of a patent can not be invalidated in reexamination until the process if fully complete, including all appeals.”

Effect of Settlement Agreements

What is the effect on inter partes reexamination proceedings where a settlement agreement is reached in a concurrent litigation and one of the parties to the reexamination concedes or stipulates either to the validity or invalidity of the patent? It is well settled that, during litigation, patent owners may make admissions to which they may be bound to during reexamination proceedings.

For instance, a patent owner may make a binding admission as to whether a particular reference is prior art. If a third party requester concedes patent validity in a settlement agreement, is the PTO then obligated to decide the reexamination on such an admission? Would a settlement be considered a final decision such that the estoppel provisions now apply in the reexamination? Does a third party requester lose standing to participate in an inter partes reexamination automatically upon settlement or should removal from the reexamination proceeding be a condition of settlement? If a third party requester agrees to step out of the reexamination, would the inter partes reexamination continue or does the PTO convert the inter partes proceeding to an ex parte reexamination?

A settlement agreement will not operate to terminate a co-pending inter partes reexamination, even when an identity of claims and issues exists between the two proceedings. The estoppel provisions of 35 U.S.C. § 317(b) states that the estoppels arise “[o]nce a final decision has been entered against a pary in a civil action … that the party has not sustained its burden of proving the invalidity of any patent claim in suit.” A settlement agreement is not a final decision that a party has not sustained its burden of proving invalidity of a patent claim. PTO takes this position and will not terminate an inter partes reexamination based solely on a settlement agreement between parties.

Related Cases:

Reexaminations and Willfulness

Another extremely hot topic in concurrent reexamination and litigation is the use of reexaminations as a defense against willful infringement. In In re Seagate Technology, LLC [In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2006)] the Federal Circuit overturned the then existing standard for willful infringement. Under the new standard, “to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.

Under the new standard, some practitioners argue that the granting of a reexamination request by the PTO therefore defeats a claim of willful infringement. To date, district courts have declined to establish a per se rule regarding the impact of reexamination on a claim of willfulness. Instead, the district courts have viewed the granting of a reexamination request as one factor, among a totality of the circumstances, to consider in examining whether a party can meet the requirements of In re Seagate [See Lucent Technologies v. Gateway, Inc., (S.D. Cal. 2007); St. Clair Intellectual Propery Consultants, Inc. v. Matsushita Electronic Industrial Co., Ltd. (D. Del 2009).]. At least one court found that “[i]t does appear that a reexamination order may be taken as dispositive with respect to post-filing conduct.”

Related Cases