Terms and Concepts

Parallel Universe

The term “parallel universe” has been used to describe the situation where patent validity is considered simultaneously by both a district court or the ITC and the PTO.  It should be noted that the proceedings are “parallel” only in the temporal sense.  To the extent that the term connotes any other identity of procedure, the term is a misnomer.  In actuality, the proceedings are quite different in both scope and procedure.  Understanding those differences is critical to any informed decision making on parallel reexamination proceedings. 

Scope of Proceedings: The scope of available validity challenges is far broader in district court litigation than it is in patent reexamination proceedings.  In district court litigation, patent validity may be challenged under any statutory provision, including provisions set forth at 35 U.S.C. §§ 101, 102, 103 and 112.  Further, patent challengers also may argue that the asserted patent is unenforceable due to either inequitable conduct or laches.  Patent reexamination, on the other hand, is far more limited in scope.  By statute, reexaminations may only be initiated when the PTO is presented with a “substantial new question of patentability” (35 U.S.C. §§ 303, 304, 312, 313).  A SNQ only may be predicated on prior art printed publications and may not be cumulative to information already considered by the PTO in original prosecution or in prior reexaminations.  A SNQ may not be predicated on any other statutory provisions, including whether the claims contain statutory subject matter under section 101 or whether there exists an “on-sale-bar” or “public use” under section 102(b).  Any party considering a parallel reexamination should be aware of the limited scope available to challenge the patentability during a patent reexamination.

Standard of Review:  The standard of review for patent validity is different in district court litigation than it is before the CRU in patent reexamination proceedings.  In district court, patent claims enjoy a presumption of validity, which may be overcome only by clear and convincing evidence.  In contrast, no such evidentiary presumption exists during reexamination before the PTO.  The PTO and the CRU use a “preponderance of the evidence” standard for adjudicating patentability [MPEP § 706.I (“The standard to be applied in all cases is the ‘preponderance of the evidence’ test.  In other words, an examiner should reject a claim if, in view of the prior art and evidence of record, it is more likely than not that the claim is unpatentable")].  For this reason, challenging a patent’s validity should be easier before the PTO than in the district court.  The district courts determine “validity,” while the PTO reexamines “patentability.” In addition, a patent owner faces many practical limitations in its ability to amend claims during reexamination (no proposed amended or new claim enlarging the scope of claims of a patent is permitted in a reexamination proceeding 35 U.S.C. § 305). The test for when an amended or new claim enlarges the scope of an original claim is the same as that under the two-year limitation for reissue applications that add enlarging claims under 35 U.S.C. § 251, last paragraph.  MPEP § 2250 (citing In re Freeman, 30 F.3d 1459, 1464 (Fed. Cir. 1994)).  After expiration of a patent undergoing reexamination, no amendments may be proposed for entry (37 CFR § 1.121(j)).  Further, any amendments and all claims added during the proceeding are withdrawn if a patent expires during pendency of a reexamination proceeding (MPEP § 2250). One of the most important is that liability for past damages is put at serious risk if claims are amended substantively during reexamination.

Claim Construction: The standards for claim construction are very different in district court litigation compared to patent reexamination proceedings.  During reexamination proceedings, claims are construed with their broadest reasonable interpretation, consistent with the specification (In re Yamamoto, 740 F.2d 1596, 1571 (Fed. Cir. 1984)).  For this reason, a Markman order in district court has no preclusive effect on the PTO and is not binding thereon (In re Trans Texas Holdings Corp., 498 F.3d 1290, 1297 (Fed. Cir. 2007)).  A broad claim construction draws in more potential prior art [when a patent owner loses their ability to amend the claims (e.g., when a patent term expires during the reexamination proceeding), the standard for claim construction moves from the broadest reasonable interpretation standard to a standard “pursuant to the principle set forth by the court in Phillips v. AWH Corp., 415 F.3d 1303, 1316, 75 USPQ2d 1321, 1329 (Fed. Cir. 2005)(words of a claim ‘are generally given their ordinary and customary meaning’ as understood by a person of ordinary skill in the art in question at the time of the invention)”  MPEP §2258.I.G]. In U.S. district courts, on the other hand, claims are often construed so that they remain valid in view of prior art.  The court looks to get the “correct” claim construction after reviewing the parties’ respective positions.  Such a construction will typically be narrower than that used by the PTO and may thus limit the world of available prior art. This is not a merely academic distinction—the difference in claim construction can have real world effects in the parallel universe.  Consider a situation where a court issues a claim construction order in a litigation and the patent owner is ultimately successful in defending its intellectual property right against an invalidity challenge based on this claim construction.  The defendant (or another third party) may subsequently challenge the patentability of the same patent in the PTO.  In this situation, the PTO, using a broader construction, creates a different scope for the claims, and arguably a different intellectual property right.  In such cases, the patent owner is not permitted to adopt the claim construction of the court.  Due to these different claim construction standards, a patent owner may be forced into the difficult circumstance of having to amend claims to incorporate the court’s construction and potentially lose past damages, or continue to argue the issue in the reexamination proceeding and potentially extinguish all intellectual property rights in the patent.  To be sure, more than a few patent owners have faced this exact situation. It is technically true that a patent owner has the ability to amend claims during reexamination, provided the amendments do not enlarge the scope of the claims.  In the parallel universe situations, however, this ability is severely circumscribed.  First, substantive amendments to asserted claims could literally wipe out a district court or ITC Markman ruling.  If the litigation or ITC investigation has progressed to trial, substantive amendments to asserted claims could result in an enormous waste of judicial and party resources—sometimes to the tune of tens of millions of dollars.  Second, if a patent owner is forced to amend claims to preserve patentability, it risks the loss of any claim to past damages under the intervening rights doctrine, which is fully applicable to reexamination proceedings (35 U.S.C. §§ 307(b) and 316(b)).  In many instances, this not an insignificant prospect.  Third, in inter partes proceedings, the patent owner is not allowed to interview the examiner.  If the patent owner decides to first argue around the prior art, and then is faced with a final Office action, there is little room for the type of negotiation necessary to arrive at claim amendments likely to be successful in overcoming pending final rejections.  Thus, in reality, patent owners have an extremely limited ability to amend claims.  This is one area of law that deserves careful attention.

Decision Makers: The ultimate arbiter of patent validity is different in the district court than it is in patent reexamination proceedings.  This may be stating the obvious, but this fact has very real consequences.  Patent validity challenges in district court are determined by a judge or jury that more often than not has absolutely no technical background in the relevant art.  Before the CRU, on the other hand, patentability is determined by technically trained, experienced patent examiners.  Moreover, the CRU assigns a three examiner team to each reexamination.

District Court v. Central Reexamination Unit: “Courts do not find patents ‘valid,’ only that the patent challenger did not carry the ‘burden of establishing invalidity in the particular case before the court …..’” [In re Swanson, 540 F.3d 1368, 1377 (Fed. Cir. 2008)].  A prior holding of validity by a district court is therefore not inconsistent with a subsequent holding of invalidity by the PTO (In an inter partes reexamination brought by a party to the litigation, a final holding of validity in the civil action triggers the estoppel provisions of 37 C.F.R. § 317(b) in the reexamination proceeding.  All issues that were raised or could have been raised by the party in the civil action will not be maintained in the inter partes reexamination proceeding.)  While the PTO may accord deference to factual findings made by the court, the determination of whether a SNQ exists will be made independently of the court’s decision on validity, since the decision is not controlling on the PTO [Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1428-29 (Fed. Cir. 1988); In re Swanson, No. 2007-1534 at pp. 12-18 (citing Ethicon, 849 F.2d at n. 3 and Stevenson v. Sears Roebuck & Co., 713 F.2d 705, 710 (Fed. Cir. 1983)) (emphasis in original)].  A non-final holding of claim invalidity or unenforceability also will not be controlling on the question of whether a SNQ is present.  Only a final holding of claim invalidity or unenforceability (after all appeals) is controlling on the PTO.  In such cases, a SNQ would not be present as to the claims held invalid or unenforceable (See MPEP § 2686.04).  In other words, the PTO will not reexamine patent claims that previously were invalidated by a district court.  In sum, only a final, non-appealable, ruling on invalidity is binding on the PTO.

Cumulative Effect: The cumulative effect of the “non-parallel” aspects of district court and reexamination proceedings is profound.  It is the authors’ perception that broader claim construction used by the PTO, combined with the lack of any presumption of validity and skilled decision makers, results in far easier prior art validity challenges.  Moreover, the CRU often rejects all of the claims in the first Office action and puts the burden on the patent owner to prove the patentability of the claims even if the claims have been subject to extensive prior art attack in prior court actions.  With a high level understanding of the fundamental differences between validity challenges before the district court and the CRU, we now can explore various reexamination strategy considerations when district court litigation is threatened or pending.