The Reexamination Center Executive Interview: Wayne B. Paugh
September 15th, 2009
The PTO Litigation Center interviews Wayne B. Paugh on the subject of inter partes patent reexamination. While working on Capitol Hill from 1997-2001, Mr. Paugh helped draft the pivotal American Inventors Protection Act, a landmark legislative effort which was signed into law in November 1999 (P.L. 106-113). He also served as Chief of Staff and Counsel to former Congressman and then Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office (USPTO) James E. Rogan from 2002-2004, and was responsible for the development of IP policy and executive staff management at the USPTO.
THE REEXAMINATION CENTER: As a key counsel on Capitol Hill during the passage of the American Inventors’ Protection Act in 1999 – which created inter partes reexaminations – can you give us a little background about how the law was passed?
WAYNE B. PAUGH: When the landmark American Inventors Protection Act (AIPA) was signed into law in November 1999, it represented the culmination of a careful but friendly negotiation of a wide cross section of Members of Congress and stakeholders alike. In contrast to the emotional debates witnessed in the previous Congress, the AIPA was a cohesive and inclusive process almost from the beginning.
With regard to the creation of the inter partes reexamination system, the title of that section of the bill says it all: Patent Litigation Reduction Act. The intent of Congress was clear: with the costs of patent litigation soaring, inter partes reexamination was designed to encourage third parties to settle validity disputes before the U.S. Patent and Trademark Office (PTO). In fact, numerous witnesses testified before Congress that the volume of lawsuits in district court would be reduced if third parties were given the opportunity to make their case before the PTO.
With that motivator in mind, Congress sought to establish a mechanism which could provide a chance for third parties to challenge patent validity – but not going so far as to create a true trial setting and further burden the PTO. Additionally, Congress was determined to prevent harassment of patent owners. As a result, the original inter partes enactment estopped participants from litigating any issue in a subsequent court action which was raised or could have been raised. Ultimately, through inter partes reexam, Congress was primarily seeking to reduce the financial burdens of patent litigation on small business and increase the PTO’s role as an expert agency in determining matters of patent validity. In sum, Congress desired an alternative to litigation, not simply a new avenue to attack a patent.
THE REEXAMINATION CENTER: With nearly ten years passed since inter partes reexamination was enacted, please give us your thoughts regarding its operation in practice? Has the statute been a success? Is it functioning in the manner envisioned by its creators?
WBP: Initially, the majority of law firms, corporations and academia panned the newly established inter partes reexam as a significant statutory failure. Many thought it was a hodgepodge of non sequiturs which repelled potential participants due to restrictive and suffocating estoppels. But Congress knew it would take time for industry to warm to the inter partes procedure – especially since the statute was prospective and only applied to issued patents going forward.
That said, when we investigate the recent history, we see that inter partes was utilized 118 and 142 times respectively over the last couple years and has been witness to steady growth since its enactment. In fact, the current fiscal year is on target to reach 200 grants alone. This is certainly an encouraging trend.
The feedback on inter partes performance, however, is not all positive. One aspect of inter partes reexam operation which was not anticipated is the increasingly accepted practice of employing reexam as a post-litigation tactic. Congress clearly envisioned reexam as an alternative to litigation. The fact that many reexams are filed after an infringement trial concludes seemingly turns the statute on its head.
Another unanticipated aspect is the length of time it takes to complete an inter partes reexamination. The average reported duration of approximately three years is longer than planned, especially with ‘special dispatch’ still the prevailing pace. Some practitioners even report that inter partes reexams can last five or as long as ten years. A patent validity challenge before the PTO was expected to consume much less time so as to increase its attractiveness as an alternative to litigation on issues of validity.
THE REEXAMINATION CENTER: Looking into to the future, especially with Congress now considering patent reform, what changes do you think will happen in the next year or two to inter partes reexaminations?
WBP: With the sweeping patent reform bill still hanging in the balance before Congress, many significant changes are still in play. Included among those changes, Congress is considering a new Post Grant Review (PGR) system which would create a tool used to challenge a patent immediately post-issue. But I want to stay on topic and mainly limit my remarks to the context of inter partes reexam.
Some in industry have suggested broadening the statutory scope of inter partes reexam to permit a wider challenge. Additionally, many are seeking to dilute the current estoppel structure. While I believe those sentiments are well-placed, Congress should not neglect consideration of the skeletal framework of the inter partes system itself. In other words, before equipping the car with additional horsepower and increasing the speed limits, pause should be given to the effectiveness of the steering wheel.
Additionally, there have been legislative discussions weighing the wisdom of making all patents eligible for inter partes reexam. In other words, the current prospective-only requirement would be lifted. Finally, there have been debates on abolishing the inter partes system altogether and replacing it with a robust PGR system which has two “windows” – the first to challenge the patent in the 12-month time period immediately post-grant, and the second which would surface when a third party is sued for infringement. Overall, at this stage it is quite possible we could see significant changes to reexam practice in the near future.
THE REEXAMINATION CENTER: As the Chief of Staff for Director Rogan from 2002 to 2004, you must have witnessed a lot in terms of how Director-ordered reexaminations functioned within the agency? What can you tell us about that process?
WBP: Yes, serving as Chief of Staff for Under Secretary Rogan was a wonderful opportunity and it enabled me to experience America’s patent system from a much different perspective than I had when I was a patent examiner in the agency.
In general, Director-ordered reexams are a rare occurrence – and were designed to be that way. Historically, I believe the Director-ordered reexams account for approximately 2% of all reexams conducted since the original statute was enacted in 1980. There is certainly a much higher standard adhered to in making a decision to initiate this type of reexam, even when there exists a substantial new question of patentability.
During my time at the PTO, I recall the Director-ordered reexam process involving the now famous Eolas patent as well as the controversy surrounding the Campana patents at stake in the Research in Motion Ltd. dispute. To be sure, there are absolutely no political elements involved in the process. Being a former Congressman and judge, Under Secretary Rogan ensured that his authority to issue such reexams was delegated to our Deputy Commissioner for Patent Examination Policy. Mr. Rogan accepted no meetings, phone calls, or correspondence regarding public input on patents identified as ripe for reexamination. This policy, however, may have been limited to Mr. Rogan’s (and subsequently Jon Dudas’) tenure. Statutorily, the head of the PTO has the option to participate personally in the process of evaluating whether to grant a Director-ordered reexam on a particular patent.
Regardless of who ultimately signs the order to proceed with a Director-ordered reexam, the standard for granting such an order remains difficult to surmount. A Director-ordered reexam may be permissible only if (a) at least one claim of an issued patent is prima facie unpatentable and (b) there is a compelling reason to order a reexamination. Such compelling circumstances might include an overwhelming “public outcry” from a substantial segment of the industry. This could yield the extraordinary situation required for a Director-ordered reexam to be appropriate. Fortunately, this power is pursued only when unusual circumstances arise, since the specter of abuse is never far from being summoned.
THE REEXAMINATION CENTER: I understand you have a new law review article on reexaminations which is scheduled to publish in the near future. Can you give us some detail about this article?
WBP: Yes, thank you for that question. The Federal Circuit Bar Journal intends to publish my article, “The Betrayal of Patent Reexamination: An Alternative to Litigation, Not a Supplement” in its 2009 winter issue.
Essentially, my goal in the article is to demonstrate that modern reexam practice has run off course from what its congressional creators envisioned. As included in the original report accompanying the new reexam statute, reexamination was intended to “permit efficient resolution of questions about the validity of issued patents without recourse to expensive and lengthy infringement litigation.” The theory of reexam as an alternative to litigation has not played out in practice. This is as true of ex parte reexam as it is of inter partes reexam.
Through the loopholes left open by Congress, practitioners are taking every advantage available to attack a patent, often in the sequence of litigation followed by reexamination. In contrast, Congress anticipated reexam would either precede litigation or be employed during the course of litigation, where a court could stay proceedings and refer the question of validity to an expert agency before moving to the question of infringement. In fact, the original ex parte reexam structure was designed to protect the patent owner, especially independent inventors and small businesses. In today’s environment, however, the emphasis has been placed on the variety of ways to eradicate patents of dubious quality.
Ultimately, Congress has the opportunity to make the necessary statutory changes to ensure reexamination respects its roots. By focusing on changes in the areas of estoppels, court-issued stays, and limiting the duration of reexam, Congress has the chance to revise a statutory procedure which is important to the function of our patent system.