Ultimately the PTO sided with i4i and confirmed the validity of its patent. The PTO issued A Notice of Intent to Issue a Reexamination Certificate (NIRC) on April 28, 2010; the Reexamination Certificate being issued today, July 27, 2010 in the eOfficial Gazette for Patents. The Reexamination Certification is the final step in the patent reexamination. Microsoft may not appeal the PTO’s decision.

In the i4i patent reexamination, i4i is represented by Sterne, Kessler, Goldstein & Fox P.L.L.C.  Before the U.S. District Court in the Eastern Distrct of Texas, i4i is represented by McKool Smith.  The company is also represented by Finnegan before the U.S. Court of Appeals for the Federal Circuit.

In this short video, Robert Sterne of Sterne, Kessler, Goldstein & Fox PLLC discusses the recent i4i reexamination victory over Microsoft.  As i4i’s reexamination attorney, Sterne highlights the implications of the ruling for patent owners in view of new standards for determining and defending patent validity.

Watch the video here.

More coverage about the recent i4i patent reexamination success and its relation to i4i’s litigation struggle with Microsoft can be found in the National Law Journal on the Law.com news portal. Additionally, i4i issued a press release on this result available in numerous news outlets.

BACKGROUND

In March 2007, i4i sued Microsoft for willful infringement of its ‘449 patent. Late in 2008, Microsoft filed an ex parte request for reexamination of certain claims of the ‘449 patent. On May 20, 2009, Microsoft was determined to have willfully infringed i4i’s ‘449 patent in the concurrent district court litigation. On August 11, 2009, i4i was granted a Final Judgment against Microsoft, including both an award of damages to i4i and a permanent injunction.

Microsoft unsuccessfully appealed the decision to the Court of Appeals for the Federal Circuit late in 2009 and also unsuccessfully sought a rehearing early in 2010. Throughout the process, Microsoft made extensive reference to the notion that the patent was “provisionally invalidated by the PTO” while undergoing reexamination. Confirmation of the validity of i4i’s ‘449 patent represents a significant development and squarely settles this issue.

A Notice of Intent to Issue Reexamination Certificate (NIRC) was issued April 28, 2010, and a Reexamination Certificate will be issued in due course, formally concluding the reexamination proceeding favorably for i4i. The successful i4i reexamination team was lead by Rob Sterne and Lori Gordon of Sterne, Kessler, Goldstein & Fox PLLC and supported by i4i’s trial team at McKool Smith and its Court of Appeals team at Finnegan.

Read the full motion here: Realtime Memorandum Opinion and Order

In Realtime, the Defendants first learned of the patent-at-issue six days before the filing of the lawsuit by reviewing a letter from an attorney stating that the patent-at-issue was invalid.  Thereafter, Defendants initiated a reexamination proceeding against the patent-at-issue, which the USPTO granted.  The USPTO issued a first Office Action rejecting the claims of the patent-at-issue.

Plaintiff Realtime argued that evidence relating to the pending reexamination should be excluded because such evidence was highly prejudicial, considering that the reexamination proceedings were incomplete.  Realtime further argued that the jury would be confused as to the relevance of the reexamination proceeding and, therefore, give undue weight to that evidence.

Defendants intended to use the evidence in defense of Realtime’s assertion of willful infringement.  Defendants argued that evidence of the reexamination proceeding and the USPTO’s first Office Action may assist the jury in determining whether Defendants acted objectively reckless — the standard set forth by the Federal Circuit in In re Seagate.  Specifically, Defendants argued “the jury may consider the objective fact that the PTO has granted a reexamination request and has provided an initial rejection of the claims of the [patent-at-issue]…”

In granting Plaintiff’s motion in limine to exclude any evidence of the pending reexamination, the Court reasoned, “even if a reexamination proceeding is somewhat probative of invalidity, the probative value of this evidence is ’substantially outweighed by its prejudicial effect,’” citing i4i v. Microsoft Corp., 2009 WL 2449024 at *17 (E.D. Tex. Aug. 11, 2009).  With regard to Defendant’s argument that ongoing reexaminations are relevant as to willfulness, the court disagreed, finding such proceedings, even if relevant, to be unfairly prejudicial, citing Presidio Components, Inc. v. Am. Technical Ceramics Corp., 2009 WL 3822694 at *2 (S.D. Cal. Nov. 13, 2009) (specifically considering the effects of reexamination proceedings on a willfulness determination).

The court found that a USPTO Office Action containing preliminary findings of invalidity carries a substantial risk that a jury will give such evidence undue deference.  Significantly, the court noted that a court could consider evidence of the pending reexamination and the USPTO’s actions therein at the summary judgment stage, during trial in a request for judgment as a matter of law as to willful infringement, and/or post-verdict.

The Court previously denied a motion to stay a year prior when the PTO had only just granted the requests filed by defendant USA Mobility, Inc. in a different case involving the same patents. In August 2009, the PTO rejected all of the claims of the patents-in-suit. Bell contended that the claims against it would be eliminated if EON, the plaintiff,  was to substantively amend the patents-in-suit and that its stipulations would simplify the issues for trial. Bell further advised that it no longer operated the infringing service, no longer entitling EON to a preliminary injunction.

In deciding whether to stay litigation, the Court considered the customary factors of undue prejudice or tactical disadvantage to the non-moving party, simplification of issues or trial, and whether discovery is complete or the trial date set (See Stays). Read Court Order: Motion for Stay Pending Reexamination; 2009-12-18; Denied Without Prejudice; Magistrate Judge John D. Love; EON Corp. IP Holdings, LLC v. Sensus Metering Systems, Inc. (6-09-cv-00116) TXED

Regarding undue prejudice, the Court expressed concern that the delay could be significant in terms of length if appealed or if Bell subjected EON to serial ex parte reexaminations. Also, because Bell was no longer involved in the infringing service the Court reasoned: “Bell has little incentive to maintain documents and employees relating to its alleged infringement,” citing that memories may fade and evidence may be lost. Thus, EON would be unduly prejudiced.

Regarding simplification of the issues based on Bell’s proposed stipulations, the Court stated “stipulations alleviate, though do not eliminate” concerns regarding rearguing of issues already advanced in ex parte reexamination, which lacks estoppel provisions. Ultimately, Magistrate Love was not convinced that the prejudice and tactical disadvantage perceived for EON would be offset by such stipulations, although he noted they are viewed favorably by the Court.

As stated in the Order: “[t]he Court is unmoved by the fact that the PTO has initially rejected all of the claims of the patents-in-suit.” Citing December 2008 PTO statistics, the Court observed that at the final action it is more than twice as likely that all claims will be confirmed than cancelled. Moreover, a conclusion by the PTO would not eliminate the need to consider inequitable conduct and laches. This view of the outcome weighed against granting the stay.

The Court further noted that the remaining defendants in this and the related case would still have the option of raising the invalidity issues Bell’s stipulation would avoid. Thus, it remarked that while a stay may result in “cost savings to Bell” it would not simplify the issues for other parties or the Court. This fact, as a practical matter, weighed against granting the stay.

Regarding the stage of litigation, the Court noted that despite being served with a summons in June 2009, Bell did not answer until August 31 after four extensions of time. Moreover, the parties had begun the discovery process. Acknowledging that while the litigation was not at a stage sufficiently advanced to weigh against granting a stay, it did not weigh in favor either, making it a neutral factor. Overall, issues of prejudice outweighed other considerations.

The case is EON Corp. IP Holdings, LLC v. Sensus Metering Systems, Inc., case number 6-09-cv-00116, in the United States District Court of Eastern District of Texas. Reexaminations 90/010,383 and 90/010,382 both filed on January 9, 2009.

Read Court Order: Motion for Stay Pending Reexamination; 2009-12-14; Denied Without Prejudice; District Judge David Folsom; Sky Technologies LLC v. SAP AG et al (2-06-cv-00440) TXED

SAP filed its motion to stay on November 12, 2009, less than a week after the civil litigation was reopened following resolution of a well-known interlocutory appeal to the United States Court of Appeals for the Federal Circuit on an issue of assignment. See, Sky Techs. LLC v. SAP AG (Fed. Cir. 2009).

Sky filed a sealed reply to SAP’s motion and Judge Folsom concluded that the status of these reexaminations would be better ascertained closer to October 2010, the next available trial date. The Court could not find sufficient reason to stay because discovery closed and the case was already being readied for trial when SAP filed the interlocutory appeal. Thus, with little discussion of the factors conventionally used to determine whether to grant a stay, defendants’ motion was denied without prejudice subject to “re-filing if and when appropriate.”

The case is Sky Technologies LLC v. SAP AG et al, case number 2-06-cv-00440, in the United States District Court of Eastern District of Texas. Reexaminations associated with the two-patents-in-suit are 90/010,139 and 95/001,037, both filed on April 10, 2008.

Read the Court’s Order Denying the Stay:  Motion for Stay Pending Reexamination; 2009-11-17; Denied; Magistrate Judge Caroline Craven; Motorola Inc v. Vtech Communications, Inc. et al (5-07-cv-00171) TXED

The two patents, U.S. Pat. No. 5,157,391 (’391 Patent, Weitzen) and U.S. Pat. No. 5,394,140 (’140 Patent, Wong) are currently undergoing one or more ex parte reexaminations before the USPTO.  The court noted that the CRU finally rejected every asserted claim of both the ‘391 and ‘140 patents and the former is set to expire before the end of 2009.  It further noted that the same two patents have been asserted in a separate action against Research in Motion, Ltd. (“RIM”), which is now pending as Research in Motion, Ltd. v. Motorola, 3:08-CV-0284-G (N.D. Tex. 2008) where a stay had been granted by Judge Ed Kinkeade on June 15, 2009.

In its motion VTech argued that final rejection of all the claims of the patents representing 90% of the allegedly infringing products would simplify issues and furthermore that a stay would not exclude any legal remedy currently available to Motorola.  In opposition, Motorola argued that delay of the proceedings for an “indefinite period of time” would allow VTech additional time to sell infringing cordless telephones in competition with Motorola-branded products, citing that ex parte reexaminations “typically average from approximately 30-40 months long or longer” and that the subject patents “could be in proceedings for another two years or more.”

In assessing whether there would be undue prejudice, the Court noted that stays of proceedings are not favored when parties are competitors, citing Motorola’s contention that the resulting harm would be irreparable and not fully compensable by money damages insofar as the VTech’s activities were: “[t]hreatening Motorola’s royalty stream; reducing the ability of Motorola’s licensee to make a profit and remain financially viable; and compromising Motorola’s goodwill in the marketplace.”  The Court found it sufficient that Motorola showed its cordless phones are sold by a licensee that competes directly with VTech, thus weighing against a stay.

Furthermore, the Court took particular notice of the fact that RIM requested reexamination of the two patents in September 2008.  After the USPTO granted their requests in November of 2008, they timely moved for a stay in February of 2009 in the N.D. of Texas. VTech, on the other hand, waited approximately ten months to request a stay in the present case, during which time the Court noted: “Motorola prepared for and participated in a tutorial and claim construction hearing, noticed or defended 50 depositions, filed or responded to more than twenty briefs relating to VTech’s failed transfer motion and VTech’s multiple motions to amend its invalidity contentions, pursued fact discovery, and is now conducting expert discovery.”  As such the Court found VTech “unreasonably delayed” in seeking a stay, causing undue prejudice to Motorola.

With respect to simplification of issues, the Court found that regardless of the USPTO outcome, issues of patent infringement, validity, and damages would still require disposition by the Court.  Moreover, since only two out of the six patents-in-suit would be affected, the Court considered Motorola’s assertion that it might have to modify its damages calculations and request additional discovery.  As noted by the Court both parties had completed fact discovery; exchanged expert reports; the Court issued its claim construction order; the deadline for filing dispositive motions was less than a month away; and trial was scheduled for February 2010.  In emphasizing that trial is only three months away and fact discovery concluded, in combination with the considerations addressed above, all factors weighed against a stay.

The case is Motorola Inc v. Vtech Communications, Inc. et al, case number 5-07-cv-00171, in the United States District Court of in the Eastern District of Texas.  The ‘391 Patent is associated with ex parte reexaminations 90/010,279 (filed on 09-16-2008) and 90/009,509 (filed on 07-01-2009).  The ‘140 Patent is associated with ex parte reexamination 90/010,278 (filed on 09-16-2008).