Terms and Concepts

Settlement

Reexamination could help force an early settlement.  For example, some practitioners suggest presenting a reexamination request to the opposing party patent owner prior to submitting the request to the PTO (i.e., a “pocket reexamination request”).  The idea is to encourage early settlement of pending litigation on favorable terms.  The patent owner may need to be educated on the risks that reexamination poses to its patent-in-suit.  Further, the patent owner will be put on notice of invalidity risks its patent-in-suit faces at trial.  Even if a pocket reexamination does not immediately drive settlement, a grant of reexamination, or an Office action that is adverse to the patent claims, especially a final rejection, may improve the accused infringer’s settlement negotiating position.  Potential requesters should keep in mind however, that once launched, the reexamination cannot be recalled.

What is the effect on inter partes reexamination proceedings where a settlement agreement is reached in a concurrent litigation and one of the parties to the reexamination concedes or stipulates either to the validity or invalidity of the patent?  It is well settled that, during litigation, patent owners may make admissions to which they may be bound to during reexamination proceedings.  For instance, a patent owner may make a binding admission as to whether a particular reference is prior art.  If a third party requester concedes patent validity in a settlement agreement, is the PTO then obligated to decide the reexamination on such an admission?  Would a settlement be considered a final decision such that the estoppel provisions now apply in the reexamination?  Does a third party requester lose standing to participate in an inter partes reexamination automatically upon settlement or should removal from the reexamination proceeding be a condition of settlement?  If a third party requester agrees to step out of the reexamination, would the inter partes reexamination continue or does the PTO convert the inter partes proceeding to a de facto ex parte reexamination (without interview rights and the right of substantive communications)?

A settlement agreement will not operate to terminate a co-pending inter partes reexamination, even when an identity of claims and issues exists between the two proceedings.  The estoppel provisions of 35 U.S.C. § 317(b) states that the estoppels arise “[o]nce a final decision has been entered against a pary in a civil action … that the party has not sustained its burden of proving the invalidity of any patent claim in suit.” 

A settlement agreement is not a final decision that a party has not sustained its burden of proving invalidity of a patent claim.  The PTO takes this position and will not terminate an inter partes reexamination based solely on a settlement agreement between parties. However, depending on the facts of the case, a Consent Order filed in the district court may be sufficient to trigger the estoppel provisions.

The PTO also will not automatically remove standing of the third party requester when the co-pending litigation settles.  Therefore, any settlement agreement must address the ability of the third party to continue participation in the inter partes reexamination request.  A third party can waive its ability to participate further in the reexamination.  When the third party steps out of the reexamination, the inter partes reexamination effectively turns ex parte in nature (i.e., only the patent owner remains).  Other interested entities are not permitted by the PTO to step into the shoes of the settling requestor. In litigations involving multiple accused infringers, the accused infringers that are not requesters to an inter partes reexamination run the risk that the requester will settle and use this prospect as settlement leverage with the patent owner who benefits from having the reexamination effectively converted to ex parte (However, these same accused infringers benefit because they are not subject to the estoppels of the inter partes statute). Whether a reexamination can upset a prior settlement agreement is another story, as noted in In re Swanson [In re Swanson, 540 F.3d 1168, at n.5 (Fed. Cir. 2008) ("an attempt to reopen a final federal court judgment of infringement on the basis of a reexamination finding of invalidity might raise constitutional problems")].

Concepts