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.

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.

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.

Intermec countered that any stay at this point, after the parties had engaged in years of litigation including the exchange of expert reports, depositions of 41 individuals, exchange of 24 expert reports, 26 days of expert depositions, and complete briefing of dispositive motions on more than 25 issues, would “reward an attempt to gain a tactical advantage in this litigation by circumventing the Court’s discovery orders” as undue prejudice.  Although this was stated in Intermec’s opposition to the motion, the Court did not explicitly identify these issues in its order.  Rather, the Court simply stated that “[A]fter careful consideration, the Court agrees with the parties that a conditional stay pending the PTO’s determination on the request for reexamination is appropriate. A conditional stay will serve the interests of both parties, as exemplified by each party’s brief on this matter.”

Read Court Order: Motion for Stay Pending Reexamination; 2009-12-23; Granted; District Judge Ralph R. Erickson; Alien Technology Corporation v. Intermec, Inc. et al (3-06-cv-00051) NDD

Thus, the Court ordered the alternative proposed by Intermec (and agreed to by Alien) that the litigation be stayed until February 10, 2010 pending the PTO’s decision whether or not the request raised a substantial new question of patentability. The Court would then enter a partial final judgment, such that Intermec could appeal the non-infringement summary judgment decision if the stay is to be maintained throughout reexamination.

The case is Alien Technology Corporation v. Intermec, Inc. et al, case number 3-06-cv-00051, in the United States District Court of the Southeastern Division of North Dakota. Reexamination 95/001,265 filed November 11, 2009.

Spectrum further urged that despite the pending reexaminations, Sorensen proceeded to initiate not only the present lawsuit but numerous others, at least 23 of which had been granted stays pending reexamination of the ‘184 patent, in many cases by the present Court. Spectrum also suggested that the statutory mandate of “special dispatch” had been compromised by Sorensen’s petitioning for (and receipt of) multiple extensions of time to respond to each Office Action.

Ultimately, the Court concluded that a stay was appropriate because the litigation was in its early stages, Sorensen had not established undue prejudice, and the reexamination would simplify issues for the Court and save expense for the parties. Moreover, plaintiff could move to vacate if the reexamination did not take a “reasonable” amount of time. The Court further provided that any party could apply for an exception to the stay for “specific, valid” reasons believed to require discovery in order to preserve evidence that would otherwise be unavailable after the stay.

Read the Order: Motion for Stay Pending Reexamination; 2009-12-23; Granted; District Judge Barry Ted Moskowitz; Sorensen v. Spectrum Brands, Inc. et al (3-09-cv-00058) CASD

The Court was evidently not persuaded by Sorensen’s 23 page opposition to the motion, which began: “An ex parte reexamination of a patent is like a baseball game with an undetermined number of innings …[t]his Court cannot predict the final outcome of the ‘184 patent reexamination and it can no longer wait for the game to end.”

The case is Sorensen v. Spectrum Brands, Inc. et al, case number 6-09-cv-00116, in the United States District Court of the Southern District of California. Reexaminations 90/008,976 filed on December 21,2007 and 90/008,775 filed on July 30, 2007.

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.

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; 2009-12-16; Denied; District Judge William K. Sessions, III; Synventive Molding Solutions, Inc. v. Husky Injection Molding Systems, Inc. (2-08-cv-00136) VTD

Judge Sessions was not persuaded by Synventive’s argument that suffering ongoing harm constituted undue prejudice insofar as monetary damages would be available for past and future infringement. Nevertheless, he acknowledged that “having to undergo reexamination” may constitute a tactical disadvantage and thus the first factor weighed “slightly” in favor of a stay.

Surprisingly, the Court found that a stay would not simplify the case for trial. Judge Sessions reasoned that triable issues would remain even after the conclusion of all reexamination proceedings, necessitating further discovery. Moreover, granting a stay would “substantially increase the total time necessary to resolve this litigation” despite the PTO’s statutory mandate of special dispatch citing recent USPTO Statistics dated September 30, 2009 (See Statistics).

Last, regarding the stage of trial, both parties were near conclusion of an “unusually acrimonious discovery” period, a trial date had been set, and nothing in the Court’s opinion supported delaying resolution of the litigation. Thus, this factor weighed firmly against a stay.

The case is Synventive Molding Solutions, Inc. v. Husky Injection Molding Systems, Inc., case number 2-08-cv-00136, in the United States District Court of Vermont. The requests for ex parte reexamination have been assigned control numbers 90/009,602 for the ‘025 patent, 90/009,603 for the ‘870 patent, and 90/009,604 for the ‘116.

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; 2009-12-15; Granted; District Judge Maxine M. Chesney; Advanced Analogic Technologies, Inc. v. Kinetic Technologies, Inc. (3-09-cv-01360) CAND

First, it reasoned that AATI failed to provide any evidence that “memories may fade” or evidence would be lost as a result of delay, stating that delay in and of itself does not constitute prejudice. Even though both parties agreed that the average time to complete a proceeding before the PTO may take as much as three years, AATI’s projection to appeal any adverse decision to the Federal Circuit indefinitely by raising a defense of “assignor estoppel” was merely speculative.

The Court seemed persuaded by statistics cited by KTI in its motion to stay that most reexamination proceedings resulted in canceling or altering of one or more of the claims at issue, concluding that such an outcome would likely narrow and clarify the issues for construction and trial. Last, since discovery was in its early stages, a trial date set for more than fifteen months in the future, no briefing on the merits of claim construction and no dispositive motions filed, the Court found all factors weighed in favor of granting a stay.

The case is Advanced Analogic Technologies, Inc. v. Kinetic Technologies, Inc., case number 3-09-cv-01360, in the United States District Court of Northern District of California.

As background, TouchTunes filed suit in 2007 alleging infringement of its U.S. Patents and asked the Court for a declaratory judgment of non-infringement and invalidity of six patents owned by defendant Arachnid relating to “computer jukeboxes.” Arachnid filed a counterclaim alleging infringement of four of its patents by TouchTunes on February 15, 2008.

During this period, third-party Ecast, Inc. requested ex parte reexaminations of four of the six patents involved in the counterclaim, U.S. Patent Nos. the 6,397,189 (’189 Patent), 6,970,834 (’834 Patent), 6,381,575 (’575 Patent), and 5,848,398 (’398 Patent). Arachnid noted it may assert infringement claims against TouchTunes based on the patents not undergoing reexamination.

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; 2009-12-15; Denied; District Judge Robert W. Sweet; Touchtunes Music Corp. v. Rowe International Corp. et al (1-07-cv-11450) NYSD

Regarding prejudice to TouchTunes, the Court noted that although the Examiner issued a final rejection, Arachnid is pursuing an appeal to the BPAI. Although, as Arachnid noted, the process of reexamination thus far had been relatively short (only 16 months), there was no suggestion that appeal would proceed with similar dispatch.

The Court outlined the potential delay introduced by the possibility of appeal, for example, directly to the Court of Appeals for the Federal Circuit, or of filing a new civil action against the Director of the PTO, the outcome of which itself would be appealable to the Federal Circuit. In the Court’s view, such delay would “maintain the cloud of litigation” over business and unduly prejudice TouchTunes by perpetuating the harm its declaratory judgment sought to address.

Regarding simplification of the issues, the Court concluded that the two patents not undergoing reexamination were not “tied to the outcome” of Arachnid’s appeal from the Examiner’s rejection of its other four patents insofar as at least one patent was not in the same family, did not share a close technical relationship, did not share common claim terms with those patents, and was directed towards different subject matter.

Judge Sweet also noted that two claims had been confirmed by the Examiner and even if fewer than all the claims are upheld, the Court would still be left to consider non-infringement, lack of written description, anticipation, and obviousness. Thus, even if the Examiner’s rejections were upheld there would still be significant issues before the Court, which weighed against a stay.

Regarding the stage of litigation, discovery was substantially completed including depositions of witnesses and the exchange of approximately 750,000 pages of documents and electronic files. Moreover, the parties had completed claim construction briefing. Thus, the Court concluded that a stay would not serve to preserve judicial resources.

The case is Touchtunes Music Corp. v. Rowe International Corp. et al, case number 1-07-cv-11450, in the United States District Court of Southern District of New York. Reexaminations 90/010,094, 90/010,095, 90/010,097, and 90/010,147 all appealed to BPAI on October 13, 2009.