On Wednesday, September 8, 2010, Judge Sue Robinson in the United States District Court for the District of Delaware denied a motion to stay the present action pending appeal of the United States Patent and Trademark Office’s final rejections of all claims of the patents in suit in Oracle Corporation v. Parallel Networks LLP. The denial related to a request to stay the litigation pending the outcome of an appeal of an ex parte reexamination filed by Oracle in March 2007.  

In denying the stay, the Judge cited  analysis regarding appeal pendancies presented in Appeals from the Central Reexamination Unit, authored by Washington, DC-based intellectual property specialty law firm Sterne, Kessler, Goldstein & Fox P.L.L.C., and published in January 2010 on The Reexamination Center.   

Appeals from the Central Reexamination Unit is the first paper to provide an in-depth analysis of all aspects of patent reexamination appeals, including appeals from the Central Reexamination Unit to the Board of Patent Appeals and Interferences (BPAI), as well as from the BPAI to the Court of Appeals to the Federal Circuit.  It provides the first detailed analysis on what is happening to patents in reexamination being appealed at the United States Patent & Trademark Office (USPTO).  The statistics and analysis provided is based on a comprehensive review of all 188 publicly available final decisions rendered by the BPAI from January 1, 2007 to January 1, 2010.  Examples of data collected include various appeal statistics such as time between a Right of Appeal Notice docketing at the Board, and between docketing and a Board Decision on the merits for both inter partes and ex parte reexamination.  It also includes statistics on affirmance and reversal rates by art unit. ]]> http://reexamcenter.com/2010/09/2017/feed/ 0 http://reexamcenter.com/2010/09/trial-counsel-may-advise-clients-on-amending-claims-subject-to-patent-reexamination-even-after-reviewing-defendants%e2%80%99-confidential-information/ http://reexamcenter.com/2010/09/trial-counsel-may-advise-clients-on-amending-claims-subject-to-patent-reexamination-even-after-reviewing-defendants%e2%80%99-confidential-information/#comments Fri, 10 Sep 2010 19:04:14 +0000 sterne http://reexamcenter.com/2010/09/trial-counsel-may-advise-clients-on-amending-claims-subject-to-patent-reexamination-even-after-reviewing-defendants%e2%80%99-confidential-information/ At least one Judge has now ruled that trial counsel may advise a plaintiff patentee on amending its claims subject to patent reexamination before the USPTO, even where trial counsel has access to defendants’ confidential information disclosed during litigation. 

On September 8, 2010, in Xerox Corp. v. Google, Inc. et al., the District of Delaware adopted plaintiff’s proposed-protective-order language because, according to the court, plaintiff patentee should not be denied the advice of its trial counsel in amending claims on reexamination even where counsel had access to defendants’ confidential information.  Following the Federal Circuit’s logic in In re Deutsche Bank Trust Co., 605 F.3d 1373 (Fed. Cir. 2010) (precedential Order), the Court balanced defendants’ concern that their confidential information could be competitively misused in strategically narrowing plaintiff’s patent claims during reexamination against plaintiff’s right to counsel of its choice.  Where Deutsche Bank considered whether trial counsel with access to defendant’s confidential information should be barred from prosecuting patents, Xerox explicitly considered whether trial counsel with access to defendant’s confidential information should be barred from participating in patent reexamination.  The Xerox Court ultimately found that the potential harm in denying plaintiff the full benefit of its trial counsel outweighed the risk of inadvertent or competitive use of defendants’ confidential information by plaintiff’s trial counsel in evaluating potential claim amendments on reexamination. 

The Court First Analyzed The Risk of Inadvertent Disclosure of Defendants’ Confidential Information

The Xerox Court first considered the risk of inadvertent disclosure of defendants’ confidential information.  The Court agreed with defendants that any use of their confidential information by plaintiff during reexamination would be improper and a violation of the interim protective order; however, that risk was not “unacceptable” as delineated by the Federal Circuit in its Order in Deutsche Bank for at least five reasons.  First, unlike patent prosecution, patent reexamination is a “limited proceeding assessing only the patentability of existing claims against specific prior art references.”  Second, defendants’ confidential information is “basically irrelevant” to determining patentability in the reexamination context.  Third, “while claims may be broadened during prosecution to support new, tailor-made infringement allegations, amendments made during reexamination can only serve to narrow the original claims.”  Fourth, any details added to a claim in reexamination to distinguish it from the prior art must already exist in the original patent’s specification.  Fifth, a patentee seeks to preserve the broadest possible reading on its claims during reexamination, regardless of any insight gleaned from defendants’ confidential information. 

The Court Then Analyzed The Potential Harm To Plaintiff In Limiting Its Choice Of Counsel

After considering the risks to the defendants, the Court analyzed the potential harm in denying the plaintiff its choice of reexamination counsel, finding that plaintiff had a strong interest in choosing its own counsel “particularly in the complex and technical realm of patent litigation.”  Plaintiff’s choice of reexamination counsel was significant for two reasons.  First, plaintiff’s trial counsel acquired expertise in the patents-in-suit, including an in-depth understanding of the claim language and prior art.  The Court reasoned, “[f]orcing plaintiff to rely on less knowledgeable counsel during reexamination would thus increase costs and duplicate efforts.”  Second, plaintiff had the right to formulate consistent litigation strategy because “choices made before the PTO [] have consequences in this court.”

This case is significant in what it adds to the Federal Circuit’s recent precedential Order in Deutsche Bank, which was silent on the issue regarding patent reexamination.  Judge Thynge recognized the key differences between patent prosecution and patent reexamination, such as the inability to broaden claims in reexamination and the importance of maintaining consistent arguments across the two parallel proceedings.  Relying on Deutsche Bank, the Court then tailored a decision appropriate for patent reexamination.  This case is a welcome addition to the growing body of decisions addressing the overlap between patent reexamination and parallel district court litigation.

Effective Date: The procedure set forth in this notice is effective on August 17, 2010.

Applicability Date: The procedure set forth in this notice is applicable to any appeal brief (regardless of whether it is an appellant’s brief, a respondent’s brief, or a rebuttal brief) that is filed in an inter partes reexamination proceeding on or after August 17, 2010.

Brief Summary:  The Chief Judge of the Board of Patent Appeals and Interferences (BPAI) or his designee (collectively, “Chief Judge”), will have the sole responsibility for determining whether appeal briefs filed in inter partes reexamination proceedings (i.e., appellant’s briefs, respondent’s briefs, and rebuttal briefs) comply with the applicable regulations, and will complete the determination before the appeal brief is forwarded to the examiner for consideration. The examiner will no longer review appeal briefs for compliance with the applicable regulations.

SUPPLEMENTARY INFORMATION: Under the streamlined procedure, upon the filing of an appeal brief in an inter partes reexamination proceeding (i.e., an appellant’s brief, a respondent’s brief, or a rebuttal brief), the Chief Judge will review the appeal brief to determine whether the appeal brief complies with 37 CFR 1.943(c) and 37 CFR 41.67, 41.68, or 41.71 before it is forwarded to the Central Reexamination Unit (CRU) or other Technology Center examiner for consideration. The Chief Judge will endeavor to complete this determination within one month from the filing of the appeal brief. To assist parties in complying with 37 CFR 1.943(c), 41.67, 41.68, and 41.71, the BPAI has provided a checklist for notices of appeal and appeal briefs and a list of eight reasons appeal briefs have been previously held to be noncompliant on the USPTO Web site at: http://www.uspto.gov/ip/boards/bpai/procedures/guidance_noncompliant_briefs.jsp.

The USPTO recognizes the need to reduce the pendency of reexamination proceedings and improve the efficiency of the reexamination process. The USPTO is considering a number of short and long-range initiatives that can be implemented in three phases. In phase I, the USPTO will implement streamlined procedures, as well as optional programs in which patent owners and third party requesters may elect to participate in order to gain the benefit of shorter pendency. In phases II and III, the USPTO will consider the data gathered from phase I and the feedback from the patent owners and other stakeholders, and implement process changes that are likely to improve efficiency. Such changes may include internal procedural changes, rule making that includes opportunities for the public to comment, and/or administrative proposals for statutory changes to enhance the efficiency of the USPTO in conducting reexamination proceedings. As part of phase I to reduce pendency and improve efficiency in ex parte reexamination proceedings, the USPTO is implementing, in this notice, a pilot program in which patent owners may waive the right to file a patent owner’s statement upon a request made by the USPTO. This will enable USPTO in suitable cases to issue the first Office action on the merits together with or soon after the reexamination order, and thereby reduce the pendency of the proceeding by about three to five months.

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.

The Advisory Action, which follows the patent owner’s response after a final rejection, stated that Flexiteek had failed to overcome all of the rejections of the patent-in-suit. After the Advisory Action issued, the defendant moved the district court to lift the permanent injunction, invoking language therein stating that “upon any decision by a court of the [PTO] that renders the ‘881 Patent invalid or unenforceable, [the defendants] may petition this Court to terminate this Permanent Injunction.” The plaintiffs argued that the Advisory Action was not a final PTO decision and that they had “additional challenges,” including a timely noted appeal to the BPAI. The Court sided with the defendants and terminated the permanent injunction: “the Court finds that the PTO’s Advisory Action is not only the most recent decision regarding the ‘881 Patent’s validity, it is a decision made after a thorough examination of the matter conducted by a body which holds particular expertise in such issues. The Court finds that the PTO’s determination should control and the Court will terminate the Permanent Injunction.” The plaintiff also pointed out its ability to amend its patent claims based on a reissue application of the same patent, and that even if the current claims were canceled defendants will infringe the reissued claims. The Court rejected that argument as speculative.

Some critics have argued that this decision is decided wrongly. The final Office action was on appeal to the BPAI and the claims of the patent had not been finally cancelled. The BPAI may reverse the CRU or the patent owner may seek additional appeals of the reexamination to the Federal Circuit. Simply put, these critics contend that the CRU’s determination is only the first step in determining patent validity in a reexamination. Indeed, it is not uncommon for the BPAI to reverse final CRU determinations. Statistics show that a sizeable number of appealed ex parte reexaminations result in reversal and issuance of reexamination certificates with one or more original claims confirmed. If this decision is widely adopted, and permanent injunctions can be routinely lifted based merely on a final Office action, tremendous uncertainty could result for patent owners. Critic’s views aside, the case underscores the significant impact that reexamination—even an ongoing one—can have on the remedies available in concurrent litigation. And, it highlights the need for parties to educate the court on the procedural nuances of reexamination so that well informed orders can be entered.

Click here to view the video.

For several years now, both houses of Congress have debated legislation that would significantly increase a party’s ability to challenge its competitors’ patents in actions before the U.S. Patent and Trademark Office.  A newly-proposed proceeding, known as a Post-Grant Review proceeding will provide an early and comprehensive basis for challenging patents.  Additionally, the current inter partes reexamination process may be replaced by, or supplemented with, an Inter Partes Review proceeding for challenging patents. 

The National Law Review posted an article this week titled, “Challenging Patents Before the USPTO: Looking Ahead to a World of Patent Reexaminations, Post-Grant Reviews and Inter Partes Reviews” by Eldora L. Ellison and Robert Greene Sterne, both directors at Washington, DC-based IP specialty firm Sterne, Kessler, Goldstein & Fox P.L.L.C., that takes a closer look at this topic.  

Click here to read further about these mechanisms for challenging patents and their potential substantial impact on corporate competitors and patent rights.

Read the full notice here: Clarification on the Procedure for Seeking Review of a Finding of a Substantial New Question of Patentability in Ex Parte Reexamination Proceedings

The notice clarifies that Director Kappos has delegated to the Chief Judge of the Board of Patent Appeals and Interferences (BPAI) the authority to review issues relating to the grant of the SNQ.  The Chief Judge can further delegate the SNQ review to a panel of Administrative Patent Judges who are deciding the appeal in the ex parte reexamination proceeding.  As is currently the case, the notice identifies that separate from the BPAI’s consideration of the SNQ issue, a patent owner may file a petition under 37 CFR 1.181(a)(3) to vacate an ex parte reexamination as “ultra vires.”

This right of appeal is not interlocutory.  Instead, for an ex parte reexamination proceeding ordered before June 25, 2010, the patent owner may include a challenge to the finding of an SNQ as a separate ground in an appeal to the BPAI, even if the patent owner did not request that the Central Reexamination Unit (CRU) reconsider the finding of the SNQ during prosecution.

For ex parte reexaminations proceedings ordered on or after June 25, 2010, the patent owner must request that the CRU reconsider the grant of the SNQ as part of a full response to the Office action in order to preserve the issue for appeal.

The notice procedures do not apply to inter partes reexamination proceedings.  A determination by the USPTO in an inter partes reexamination either that no SNQ has been raised or that a reference raises a SNQ is final and non-appealable.  See 35 U.S.C. 312(c).

This change is a good one for the reexamination system.  However, it can be argued that it does not solve the problem of serial ex parte reexaminations filed by third party requesters to harrass the patent owner because it does not provide an interlocutory appeal.  Moreover, it can also be argued that 35 U.S.C. needs to be amended to apply this procedure to a grant of an SNQ in an inter partes reexamination.

Read the full decision here: Blazek Sklo Poderady v. Burton International, (D. Minn., June 11, 2010)(CA 08-2342)

On June 16, 2008 Blazek brought a lawsuit against defendants asserting infringement of the patents-in-suit.  To avoid the expense of litigating the infringement suit, the defendants sought an ex parte reexamination of the patent but waited to submit the reexamination until five days before the close of fact discovery.  Prior to that, the defendants did not participate in discovery.  Plaintiff Blazek served an infringement claim chart, but defendants did not respond to it and the defendants did not submit a prior art statement as required by the court’s scheduling order.  The defendants also did not identify any experts or submit expert reports as required by the court’s scheduling order.

After submitting the reexamination request, essentially on the eve of trial, the defendants asked the court to stay the litigation arguing that the plaintiffs would not be prejudiced by a stay and that a stay would streamline the issues for trial.  The court denied the stay.  Citing the 36-month average pendency for ex parte reexaminations, the court held a near three-year delay would prejudice the plaintiff because the inventor was nearly 80-years old and ailing:  ”waiting more than 3 years to resume this case could very likely result in the loss of critical evidence, if not a very important witness.”  The Court also found it relevant that the defendants delayed seeking the reexamination request until fact discovery closed and the case was trial-ready.  The defendants admitted that they knew of the prior art patents on which they sought the reexamination request at least four months before seeking the reexamination.  The Court found it was significant that the defendants sought the stay for the tactical reason of avoiding the cost of litigation and concluded “defendants cannot ‘have their cake and eat it too.’”  Finally the court held that there would not be a streamlining of issues based on the results of the reexamination because the defendants did not assert invalidity of the patent as a defense.

A timely filed patent reexamination may sometimes be effective in staying a concurrent litigation.  But, as this case illustrates, it is no guarantee.  A determination whether to stay a litigation in lieu of a pending reexamination is invariably a balancing test that considers the totality of the circumstances.  The sole factor weighing in favor of a stay in this case was the mere chance that, three years down the road, the patent-in-suit could be invalidated.  Not surprisingly, this was insufficient for this district court judge and the defendant will likely pay heavy price for ignoring the pending litigation.