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.

Tracy-Gene G. Durkin of Sterne, Kessler, Goldstein & Fox PLLC discusses the increase in design patent cases being heard by the Federal Circuit in the past two years and the related trends in design patent reexamination on IPWatchdog.com. Her review of filing trends in design patent reexamination over the past ten years reveals the landscape for both patent owners and third-party requesters. Take a look at the full article on IPWatchdog here.

Reasons to expect an increase in design patent reexamination filings include the effectiveness of the proceeding as a defense strategy for accused infringers, the abundance of qualifying printed publications available in the form of product catalogues and images, the high rate of claim cancellation compared to utility patent reexaminations, a potential increase in the standard for patentability of designs, and the low rate of rejection during design patent prosecution.

As presented at the AIPLA Spring Meeting these trends, coupled with recent Federal Circuit decisions involving design patents, suggest a continued increase in design patent reexamination requests by both patent owners and third-party requesters.  The recent Federal Circuit cases include:  Crocs, Inc. v. International Trade Commission, International Seaway Trading Corp. v. Walgreens Corp. and Egyptian Goddess, Inc. v. Swisa, Inc.

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.

The PTO’s construction here, though certainly broad, is unreasonably broad.  The broadest-construction rubric coupled with the term ‘comprising’ does not give the PTO an unfettered license to interpret claims to embrace anything remotely related to the claimed invention.  See Schriber-Schroth Co. v. Cleveland Trust Co., 311 U.S. 211, 217 (1940) (‘The claims of a patent are always to be read or interpreted in light of its specification.’)
 

The court’s holding is significant for reexamination practice because the CRU often fails to give the specification its proper weight in construing claim terms.  When the specification is given short shrift, or even ignored, the patent owner may be harmed irreparably because the resulting construction is often overly broad.  An overly broad claim construction can force otherwise unnecessary claim amendments, which in turn can greatly impact potential damages available to the patent owner.  An overly broad construction also can force unnecessary argument-based estoppels as the patent owner challenges the construction.  Finally, a broad construction could draw in more potentially invalidating references than would have been available under a narrower construction according to the claim construction principles used by district courts. 

The court declined to address an issue of critical importance where a reexamination proceeds in parallel to district court litigation — whether a federal court’s Markman ruling binds the PTO:

 With respect to the “material for finishing the top surface of the floor” limitation, Suitco contends that the Board should have been bound by this court’s earlier construction of “material for finishing.”  In the alternative, Suitco contends that the Board’s adopted construction is unreasonable.  This court need not address Suitco’s first argument because even under the broadest-construction rubic, the PTO’s construction is unreasonable.”

In our view, the failure of the Court to address this important reexamination issue is significant.  The issue is what role Markman rulings in parallel proceedings should play in PTO during reexamination.  This issue is ripe for treatment by the Federal Circuit and cuts to the larger issue of whether it is even appropriate to apply the broadest reasonable interpretation (“BRI”) standard during reexamination.  The premise for the PTO’s application of the BRI standard is that the applicant has the ability to amend claims.  But some argue this is not the case in reexamination with parallel district court proceedings.  The argument against the CRU applying the BRI standard is that the patent owner, from a practical perspective, does not have the same freedom to amend claims.  Claim amendments can significantly impact not only patent damages but the entire court proceeding and can lead to great waste.  By taking a broader claim construction at the CRU, the PTO effectively whipsaws the patent owner because the district court mandate to follow well established claim construction canons outlined in Philips.  This violates the basic patent law tenent that claims should be construed the same for validity and infringement.  Amgen Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1330 (Fed. Cir. 2003) (“[i]t is axiomatic that claims are construed the same way for both invalidity and infringement.”)

What is the proper standard for materiality? 

What role should the United States Patent and Trademark Office’s rules play in defining materiality?

Should a finding of materiality require that but for the alleged misconduct, one or more of the claims would not have issued?

Inequitable conduct is intertwined with reexamination practice in many ways. Third-party requesters may file a reexamination request for the purpose of having the PTO find that a particular document raises a valid SNQ, which finding may be cited at trial for the materiality element in an inequitable conduct defense. The duty of disclosure attaches to the patent owner in reexamination (but not the third-party requester).

Complying with that duty can be problematic for even the most diligent and forthright patent owner, especially after the Notice of Intent to Issue a Reexamination Certificate (NIRC) has issued and before the Reexamination Certificate has published. A patent owner with a large portfolio of pending patent applications that are related to the patent under reexamination has to be especially careful and diligent.

Reexamination counsel is a prime target for a charge of violating of the duty of disclosure in a parallel patent litigation.  A violation can create subsequent issues for reexamination counsel before the Office of Enrollment and Discipline.  These and other concerns make this en banc rehearing relevant to reexamination practice.

The Federal Circuit stated that briefs of amicus curiae will be entertained in the en banc rehearing. Four amicus briefs, including one from the PTO, were filed with the petition for rehearing en banc.  It is expected that there will be many additional amicus filings in this case.

Under the current briefing schedule, it is expected that the Federal Circuit will hear arguments in the case next October or November.

Download the Order

Therasense Inc v Becton Dickinson and Company (Fed Cir April 26 2010)(en banc)

This paper will be part of the course materials for the upcoming 5th Annual Advanced Patent Law Institute on January 21-22, 2010 hosted at the USPTO.

“We are pleased to provide cutting edge data and analysis on this important developing area of patent reexamination,” said Robert Greene Sterne, founding director of SKGF, paper co-author, and recognized expert on patent reexaminations.  “Previously unavailable, this data and our analysis confirms what we have known anecdotally: the next big battle ground in reexamination is going to be appeals from the CRU.”

Jon E. Wright, SKGF director, paper co-author and former CAFC clerk observed, “The CAFC is going to be confronting a flood of reexam appeals from the CRU.  The Court is going to have to decide critical issues involving reexams to make the system more timely, balanced and effective.”

Lori A. Gordon, SKGF director, paper co-author, and seasoned reexamination attorney with domain experience in electronics and communications noted, “Our data collection and analysis provides the first ever explanation of what is really happening at the CRU in terms of appeals to the BPAI.  The BPAI is experiencing very significant backlogs in appeals from normal patent examination.  The addition of a significant number of time-critical appeals from the CRU will further test the BPAI’s ability to process reexam appeals with the required ’special dispatch.’”

Paper co-author and SKGF associate Byron L. Pickard added that “Other areas of interest are district court review of reexam rulings under the Administrative Procedure Act and possible mandamus actions.  These areas of reexam law may prove critical as the reexam process matures.”

Download the full paper here: Appeals from the Central Reexamination Unit

The statutory basis for appeals to the Federal Circuit for ex parte reexamination is 35 U.S.C. § 306.  Therein, the statute states that the patent owner may seek court review of Board decisions “under the provisions of sections 141 to 145 of this title.” (see 35 U.S.C. § 306)  Sections 141-144 deal with appeals to the Federal Circuit.  Section 145, on the other hand, appears to permit a civil action against the Director in the United States District Court for the District of Columbia.

However, allowing a civil action in ex parte reexamination appears to be inconsistent with Section 141 itself.  Specifically, Section 141 states that “[a] patent owner, or a third-party requester in an inter partes reexamination proceeding, who is in any reexamination proceeding dissatisfied with the final decision in any appeal to the [Board] under section 134 may appeal the decision only to the United States Court of Appeals for the Federal Circuit.” (See 35 U.S.C. § 141).  Section 141 thus appears to foreclose any civil action under section 145.

This anomaly is the result of amendments to the statutes as a result of passage of the American Inventors Protection Act of 1999 (“AIPA”).  The AIPA created the inter partes reexamination procedure.  The AIPA amended 35 U.S.C. § 141 to state that appeals from any reexamination may be taken only to the Federal Circuit.  Notably, it left unchanged § 306, which still permitted the patent owner in ex parte reexamination to seek review under § 145.  Thus, the cross reference in § 306 to § 145 is in tension with the AIPA amendment to § 141.

The PTO rules governing review of Board decisions are 37 C.F.R. §§ 1.301-304.  Notwithstanding the above noted anomaly, the PTO has interpreted the statutes to foreclose § 145 actions for any ex parte reexamination filed after November 29, 1999.  Specifically, Rule 303 states that “for an ex parte reexaminations filed on or after November 29, 1999, and for any inter partes reexamination proceeding, no remedy by civil action under 35 U.S.C. § 145 is available.”

The Rule 303 provision was recently challenged in the U.S. District Court for the Eastern District of Virginia in the case styled Sigram Schindler Beteiligungsgesellschaft MBH v. Kappos, No. 1:09cv935.  The plaintiff Sigram Schindler (“SSBG”) is a patent owner in the middle of an ex parte reexamination appeal to the Board.  It challenged PTO Rule 303 as being “in excess of [the PTO’s] statutory jurisdiction, authority, or limitations, or short of statutory right.”  Despite the fact that the Board had not yet rendered a decision in its appeal, SSBG sought a declaratory judgment action because the challenged Rule 303 currently purports to deprive SSBG of it right under § 306 to file a civil action in a D.C. District Court, thereby causing SSBG harm.  According to SSBG, it would have been forced to appeal to the Federal Circuit under § 141 and thereby waive its right to appeal under § 145, or file a civil action under § 145 and risk losing its right to appeal to the Federal Circuit under § 141 if the D.C. District Court determined that it lacked jurisdiction to hear the case after expiration of the sixty-day deadline for appealing to the Federal Circuit.

The PTO, on the other hand, challenged the ripeness of SSBG’s declaratory action because there was currently no justiciable “case” or “controversy” under Article III of the Constitution.  For instance, a favorable Board decision that reversed the examiner’s finding of unpatentability could preclude SSBG from seeking any review of the Board’s decision.  The PTO also challenged SSBGs standing to bring the suit.

In a memorandum decision dated December 18, 2009, the court ruled in favor of PTO, finding that SSBG’s request for judgment was “unripe because: (i) the BPAI has not yet rendered an adverse decision that would allow SSBG to seek court review of that determination, making the purported hardship contingent and speculative, and (ii) plaintiff has not demonstrated that the challenged regulation creates an immediate, direct, and significant hardship altering its day-to-day activities; and (iii) any hardship is remediable by 28 U.S.C. § 1631.”   28 U.S.C. § 1631 relates to “Transfer to cure want of jurisdiction.”  It provides a court finding that it has no jurisdiction to, in the interest of justice, “transfer such action or appeal to any other court in which the action or appeal could have been brought at the time it was filed or noticed, and the action or appeal shall proceed as if it had been filed in or noticed for the court to which it is transferred  on the date upon which it was actually filed in or noticed for the court form which it is transferred.”  Therefore, the court determined there was no “justiciable case or controversy, and thus no jurisdiction to reach the merits of whether 37 C.F.R. § 1.303 contravenes 35 U.S.C. § 306.”  (Id. at 22.)

Despite the fact that the court did not reach a decision on the merits, it appears clear that 2002 amendments to Section 141 did intend to foreclose Section 145 actions for ex parte reexaminations.  As noted above, this is how the Office construes these provisions.  Until such time as the issue is properly raised, it would behoove patent owners to assume that appeals in ex parte reexamination will go straight to the Federal Circuit.

The statutory basis for appeals to the Federal Circuit for inter partes reexamination is straightforward.  It is governed by 35 U.S.C. § 315.  Unlike the anomalous ex parte reexamination appeal statute, Section 315 states that the patent owner and the third party requester “may appeal under the provisions of sections 141-144.”  Thus, there is no ambiguity for inter partes reexamination and appeals from the Board may only be taken to the Federal Circuit.

The parties have a history of patent litigation against each other, having filed four earlier separate patent lawsuits against each other in the Northern District of West Virginia going back to 2003.  All of the earlier cases are currently stayed pending reexamination of the asserted patents.  In the present case, which is apparently the fifth patent suit between the parties, Chief Judge Bailey simultaneously entered a preliminary injunction against sales of the allegedly infringing products and stayed all other claims pending outcome of ongoing reexamination proceedings.  Both parties filed interlocutory appeals.  Both parties agreed that the district court erred by simultaneously entering a preliminary injunction and staying the case.  They disagreed, naturally, on which order should be maintained.

After resolving a jursidictional challenge by Crane, the Federal Circuit first turned to the preliminary injunction arguments.  The Federal Circuit found that the district court abused its discretion in determining that Automated Merchandising Systems (AMS) would suffer irreparable harm.  The irreparable harm was based solely on lost revenue and market share.  The lost revenue argument cannot by itself support a finding of irreparable harm because it is presumed to be compensable through damages.   The Federal Circuit found the lost market share and price erosion analyses to be speculative and not supported by the Supreme Court’s decision in eBay Inc v. MercExchange LLC.

The Federal Circuit then turned to the likelihood of success on the merits and found that the district court had improperly shifted the burden to Crane to show AMS was unlikely to succeed on the merits, rather than forcing AMS to demonstrate that it was reasonably likely to succeed on the merits.  It also found the district court too quick to dismiss Crane’s invalidity arguments.  It cited to the Supreme Court’s decision in KSR International Co. v. Teleflex Inc., noting that it “changed the state of obviousness law [and] was issued after the patents were examined in the PTO,  but before the district court issued the decision under review here.  Interestingly, the Federal Circuit made no reference at all to the pending reexaminations as a factor in this analysis.

Because the Federal Circuit found no irreparable harm had been proven, and that AMS has failed to prove reasonable likelihood of success on the merits, the Court vacated the preliminary injuction.

The Federal Circuit then turned to the propriety of the stay pending reexamination.  It agreed with the parties that the District Court erred in both granting a preliminary injunction and a stay pending the outcome of reexamination.  The Court stated that “[b]ecause it logically seems that there cannot simultaneously be a substantial issue of patentability and no substantial issue of patentability, stays pending reexamination are typically inappropriate in cases in which preliminary injunctions are appropriate.”  Because the Court vacated the injunction, it stated that “there is no longer any problem with staying AMS’s claims agains Crane pending the outcome of the reexamination process.”  It further acknowledged that “it may simplify the issues for trial [and it] might even render a trial unnecessary.”  The Court then noted that “given the wide discretion the district court generally has to manage its docket, this seems to be a case in which the stay could have been correctly granted or denied.”  The Court found no abuse of discretion and affirmed the district court’s stay of AMS’s claims against Crane, as well as against Crane’s co-defendant Seaga.

See also, the recent Reexamination Center posting related to a stay pending reexamination and a preliminary junction in the District Court of New Jersey here.

The Sigram Schindler case seeks to clarify the statutory provisions governing appeals from the Board of Patent Appeals and Interferences (“the Board”) in ex parte reexamination.  The statutory provisions governing appeal are ambiguous.  One section appears to allow patent owners to challenge Board decisions in the U.S. District Court for the District of Columbia, while another section appears to only allow appeals from the Board to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”).

More specifically, the statutory basis for appeals to the Federal Circuit for ex parte reexamination is 35 U.S.C. § 306.  Therein, the statute states that the patent owner may seek court review of Board decisions “under the provisions of sections 141 to 145 of this title.”  Sections 141-144 deal with appeals to the Federal Circuit, while Section 145 allows a civil action against the Director in the United States District Court for the District of Columbia.

However, allowing a civil action in ex parte reexamination appears to be inconsistent with Section 141 itself.  Specifically, Section 141 states that “[a] patent owner, or a third-party requester in an inter partes reexamination proceeding, who is in any reexamination proceeding dissatisfied with the final decision in any appeal to the [Board] under section 134 may appeal the decision only to the [Federal Circuit].”  Section 141 thus appears to foreclose any civil action under section 145.  The ambiguity exists because when Congress amended Section 141 in 2001, it appears to have neglected to also amend Section 306.

Sigram Schindler seeks to clarify this statutory ambiguity by challenging the PTO rules implementing the 2001 amendment as unlawful and, according to the Complaint, asking that they “be set aside as having been adopted in excess of the PTO’s statutory authority.”  The vehicle for this regulatory challenge is an ex parte reexamination initiated by Cisco Systems Inc., which challenges Sigram Schindler’s 2005 patent for a telecommunications network data transmission method and related network switch.  The ability to challenge any Board decision under Section 145 could be beneficial to patent owners because of the ability to potentially enter new evidence.

On Oct. 21, the PTO filed a motion for summary judgment to dispose of the case.  The basis for the summary judgment motion is primarily jurisdictional.  The PTO argues in its motion that Sigram Schindler lacks standing because the BPAI has not yet ruled on the reexamination.  The PTO also believes that allowing challenges to Board decisions of ex parte reexaminations under Section 145 would “eliminate or outright ignore the unequivocal statutory language Congress specifically placed into the Patent Act.”  As noted above however, the statutory provisions are not entirely clear.

As a final matter, we note that the statutory basis for appeals to the Federal Circuit for inter partes reexamination is 35 U.S.C. § 315.  Unlike the ex parte reexamination appeal statute, Section 315 states that the patent owner and the third party requester “may appeal under the provisions of sections 141-144.”  Thus, there is no ambiguity for inter partes reexamination and appeals from the Board may only be taken to the Federal Circuit.

The SAFOCO Inc. inter partes reexaminations are believed to be the first inter partes reexaminations to reach the Federal Circuit.  The third party requester Cooper Cameron brought the appeal from the Board.  The appeal was docketed on July 8, 2009, and styled by the Federal Circuit as Cooper Cameron v. SAFOCO Inc., as is normal in inter partes cases such as interferences.  On July 14, the Patent and Trademark Office Solicitor Raymond Chen sent a letter to the Clerk of the Federal Circuit asking that the USPTO be a party to the case.  On July 21, 2009, the patent owner SAFOCO filed a notice of intent to participate in the appeal.

Prior to the Cooper Cameron case, it was unclear what role, if any, the PTO would play in appeals of inter partes reexamination proceedings.  In the July 14 letter from the Solicitor, the PTO sought to amend the official caption to show it as a party to the proceedings.  In support, Solicitor Chen noted that such an appeal is conducted under the provisions of 35 U.S.C. § 143.  Section 143 states that “[i]n any ex parte case or any reexamination case, the Director shall submit to the court in writing the grounds for the decision of the [USPTO], addressing all the issues involved in the appeal.”  Therefore, according to the Solicitor’s letter, “the Director [of the USPTO] is a party to this appeal, just as in an ex parte appeal.”

On August 31, 2009, the Court granted permission for the Director to participate in the appeal, but it did not amend the official caption.  Specifically, the Director was ordered to file its brief after appellant Cooper Cameron’s brief, but before appellee SAFOCO’s brief.  The SAFOCO brief would have been due 14 days after the Director’s brief.  Thus, the briefing order would have been (i) Appellant, (ii) PTO and , (iii) Appellee.

However, Cameron Cooper filed a motion to voluntarily withdraw its appeal on October 2, 2009.  The Court granted the motion on October 7, 2009.  The appeal has therefore been dismissed.  Despite the dismissal, Cameron Cooper illustrates that the Solicitor’s office will be permitted to at least file a brief and presumably participate in oral argument for any inter partes reexaminations appealed to the Federal Circuit.  As in ex parte cases, the Solicitor is expected to advocate in support of the Board’s final decision.  It is therefore possible that the Solicitor will be advocating FOR patentability where appeals are taken by the third party requester—a position that, to our knowledge, would be first for the PTO solicitor.