Milestones in the reexamination timeline are critical. We discuss timing of reexamination requests, the risk versus reward calculus, general strategic tenets, and other, often overlooked considerations when litigation is threatened or pending.
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Strategic Considerations When Litigation is Threatened or Pending
This resource addresses the interplay between patent litigation before the Federal Courts or the United States International Trade Commission (“ITC”) (“the courts”) and co-pending reexamination proceedings involving the patent-in-suit before the United States Patent and Trademark Office (“PTO”). As independent arbiters of patent validity, each forum poses a distinct set of challenges and risks for those disputing or defending patent validity. These so-called “parallel universes” work with separate rules, standards, procedures, timelines, and results in cases involving the same patent.
A comprehensive strategy should be in place before filing a reexamination request. The requester should have a clear objective and should be fully aware of the consequences of filing a reexamination request. Once filed, the requester cannot “unfile” the reexamination as part of a settlement with the patent owner (In a recent example, we are told that a third party requester attempted to halt a reexamination proceeding by stopping payment of a check for the reexamination fee. The PTO indicated that such actions could result in OED imposing a suspension of the attorney from PTO practice for taking the action). After the reexamination is instituted, it will take on a life of its own. Many pitfalls await the unwary requester who has not fully thought out the consequences of filing a reexamination request.
- Timelines and Pendency
- Litigation Stays
- Impact on Trial
- Potential risks for accused infringers
- Timing of the Requests – When to File?
- Multiple Ex Parte Reexamination Requests
- Flowcharts and Diagrams
Timelines and Pendency
A realistic timetable for a reexamination is a crucial data point for third-party requesters, patent owners and judges as they navigate the parallel universe. For these reasons, we provide some insight into external and internal PTO and Central Reexamination Unit procedures, as well as the latest information regarding reexamination pendency. Upon filing, reexamination requests first undergo review by the CRU staff to ensure compliance with the rules.
Once a satisfactory request has been made, the CRU has a three-month deadline to issue a decision on the request based on whether a substantial new question of patentability (“SNQ”) has been raised in the request. For ex parte requests, the grant starts a two-month window in which the patent owner may respond to the request. In that response, the patent owner may amend claims or argue that the claims under reexamination are patentable. Overall, the CRU has established an internal goal to issue a final office action or an Action Closing Prosecution (“ACP”) within two years of the filing date of a request for reexamination.
All reexaminations are required by statute to be handled with “special dispatch” [35 U.S.C. §§ 305 and 314]. Nonetheless, higher priority is afforded to reexaminations of patents involved in litigation. Even higher priority is afforded when trial proceedings have been stayed pending the outcome of reexamination. The highest priority is assigned to reexaminations that have been pending for at least two years. The CRU thus assigns priority based on its own statistics and research, and based on patent owner notifications. Therefore, it is critical for the Patent Owner to keep the PTO informed of the existence and status of related co-pending district court or ITC proceedings.
- Request Requirements
- SNQ Requirements
- Office Actions (Non-Final, Final)
- Action Closing Prosecution (ACP)
- Right of Appeal Notice (RAN)
- Notice of Intent to Issue Reexamination Certificate (NIRC)
- Appeal to the BPAI
- Subsequent (Court) Appeals
- Expedited Proceedings
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 bell cannot be unrung.
- The “Pocket” Reexamination Request
- Effect on Inter Partes Reexamination
Because the issue of patent validity is running concurrently in two separate proceedings, judicial economy would seem to counsel a stay of one or the other proceeding in all instances. In reality, this is far from true because each venue is bound by different rules and standards for assessing patent validity. Further, each venue is bound by very different rules and standards for determining whether a stay is appropriate, and each stay decision is highly fact specific. Some general patterns may be discerned, however, and these are described more fully below.
District court judges have inherent and almost unfettered control over their own dockets. A decision to stay a case is reviewed for abuse of discretion—a very difficult standard to overcome on appeal. Further, district court judges have great flexibility in the types of stays they issue. For instance, in one Eastern District of Texas case, Judge Everingham granted a motion to stay the litigation based on the accused infringer’s ex parte reexamination request. In the order granting the stay, the court crafted a stipulation that the accused infringer must agree not to challenge the validity at trial of the patents-in-suit based on prior art patents or printed publications that were considered in the reexamination proceedings. Ordinarily, these estoppels only apply to inter partes reexams, and only after the proceeding has concluded. Further, the accused infringer was barred from directly or indirectly instituting any further reexamination proceedings, despite being statutorily allowed to do so.
Despite this nearly unfettered discretion, however, courts will generally consider at least the following high level factors in making stay determinations:
- whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party;
- whether a stay will simplify the issues at trial;
- whether discovery is complete and whether (or when) a trial date has been set. These broad factors are discussed more fully below.
First, a court looks at the extent to which the non-moving party would be prejudiced in delaying the litigation. Inherent in this factor is consideration of reexamination pendency. Further, as noted above in the Hot Topics, the extent to which the parties are competitors should be considered carefully. In certain instances, the district court will mitigate any potential prejudice to the patentee by requiring a stipulation that the accused infringer will not challenge the patent on grounds considered during reexamination. By doing so, the court reasons, the patentee “is afforded both the advantage of ex parte proceeding and an estoppel effect.”
Second, courts take into account the possibility of simplifying issues with a stay. Under this factor, the status of the reexamination is often considered. The further along the reexamination, the more likely a stay will be granted. Typically, stays are rarely granted on the basis of the reexamination grant; at least a first Office action rejection is required. Of course, potential invalidation of the only patent-in-suit would simplify many issues, but cases are often more complicated. For example, an accused infringer may have a strong case for patent invalidity based on statutory subject matter or an on-sale bar. Reexaminations may not be instituted on this basis and the court may still, therefore, have to determine patent invalidity on these grounds if the patent survives reexamination on the prior art. As the PTO develops more information about the reexamination process, in particular the statistics of inter partes reexamination, courts will be better able to make an informed decision as to whether a stay will simplify a subsequent trial.
Finally, the court asks if discovery is complete and whether trial dates have been set. Judicial economy naturally favors requests made early in the litigation. Therefore, in view of (1) and (2) above, any patent challenger hoping to stay the more costly district court litigation should strive to get its reexamination filed as soon as possible and to request a stay of a co-pending litigation as soon as feasible. Denials due to premature requests are usually without prejudice and stay requests can be renewed based on developments during reexamination.
In a particularly nuanced stay decision, Judge Selna of the Central District of California articulated a number of factors supporting the grant of a stay in Allergan Inc. v. Cayman Chem. Co. ,(Id.):
- Prior art presented to the Court will have been considered by the PTO, with its particular expertise.
- Discovery problems relating to prior art can be alleviated by the PTO examination.
- It the PTO invalidates the patent-in-suit, the case will likely be dismissed.
- The outcome of reexamination may encourage settlement.
- The record of reexamination will likely be entered at trial, thereby reducing the complexity and length of the litigation.
- Issues, defenses and evidence will be more easily limited in pre-trial conferences after a reexamination.
- The cost will likely be reduced for both the parties and the court.
Judge Selna also noted the following factors that would support denial of a stay (Id.):
- Delay and changing market conditions over time may dramatically lower the value of injunctive relief.
- Substantial expense and time invested may be wasted when litigating issues also under reexamination.
- A delay may grant a tactical advantage to the moving party.
- The reexamination outcome might not affect the civil litigation.
- Judicial Economy
- Abuse of Discretion
- Factors Weighed
- Expedited Proceedings [MPEP § 2686.04]
- Stay of Reexamination [37 C.F.R. §§1.565(b) and 1.987]
- Allergan Inc. v. Cayman Chemical Co. (CDCA April 9, 2009)
- In re Translogic Tech., Inc., 504 F.3d 1249 (Fed. Cir. 2008)
Impact on Trial
Can the existence of or developments in the reexamination proceeding, such as a final rejection of the claim(s) in suit, be brought to the attention of the jury, or is this inadmissible because it is too prejudicial? One patent litigator shared that her mock jury research indicated that the mere knowledge by the jury of the existence of the reexamination reduced the likelihood that the jury would find invalidity because it assumed that the PTO, the administrative agency expert in deciding validity, now had assumed responsibility for this issue. In effect, the jury would “punt” on the invalidity issue. Assuming this jury research is reproducible, it further argues that the judge should be concerned about the prejudicial impact on the jury of any information about the existence of or developments in the reexamination. Indeed, the possibility that unexpected developments in the reexamination could be admissible at trial has been the basis for some trial counsel choosing not to seek reexamination even when there is strong prior art. This concern seems to be intertwined with several factors. The first is that many judges have little practical knowledge about reexaminations and what really happens at the CRU or the BPAI. They could be “easily swayed” by initial developments from the CRU, whether it is rejection of all of the claims or allowance of some of the claims in suit in the first office action. The second is that some judges would like to defer the validity issue to the PTO. The third is the possibility of a litigation stay, which if granted initially and then lifted later could present a dilemma in explaining to the jury why there has been a time delay in the suit.
However, at least one district court decision deemed non-final reexamination proceedings to be too prejudicial to present to a jury (Microsoft Corporation et al v. Commonwealth Scientific & Industrial Research Organisation, 6-06-cv-00549 (April 9, 2009 EDTX) (Judge Davis)). In that case, the court ruled that “without any [final] conclusions of the PTO to rely upon, evidence that the PTO is currently reexamining the patent may work to unduly alleviate Defendants’ ‘clear and convincing’ burden for both invalidity and willfulness in front of the jury.” Similarly, the Federal Circuit recently recognized that “a requester’s burden to show that a reexamination order should issue from the PTO is unrelated to a defendant’s burden to prove invalidity by clear and convincing evidence at trial” (Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 848 (Fed. Cir. 2008)). If the trend of these recent decisions continue, it may be difficult to get any evidence at all related to reexamination proceedings before a jury.
Finally, some trial counsel take the view that, if the prior art is not successful before the CRU, it will be even less successful before the court. This is based on the use of KSR at the PTO, the broader claim construction rules at the PTO, and the lower burden of proof of invalidity at the CRU. To put it in sound bite terms – “If you can’t win it at the CRU, then you have even less chance to win it in court.” Such counsel take this view particularly in jurisdictions having a reputation for upholding the validity of patents.
- Prejudicial Impact on Jury
- Courts Perceived as “Pro-Patent”
- Microsoft Corporation et al v. CSIRO, 6-06-cv-00549 (April 9, 2009 EDTX) (Judge Davis)
- Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 848 (Fed. Cir. 2008)
Official PTO statistics indicate that approximately two-thirds of patents that emerge from reexamination result in some change to their claims. Ten percent of claims are canceled outright. Some critics assert that there is insufficient granularity in these PTO statistics to reflect situations where some but not all asserted claims are either found to be invalid or are substantially amended. Where claims are substantively amended, the accused infringers may not be liable for past damages under intervening rights law. This can be crucial where the patent term is short or the accused infringers have clear and inexpensive design-around options.
More specifically, substantive amendments made during reexamination may defeat damages for past infringement under the statutory doctrine of intervening rights [35 U.S.C. §§ 252, 307(b), 316(b)]. A patent owner cannot seek damages for claims that are not substantially identical to the original claims [Bloom Eng’g Co. v. N. Am. Mfg. Co., 129 F.3d 1247, 1250 (Fed. Cir. 1997)]. There is no per se rule for determining whether a claim is not “substantially identical” [Laitram Corp. v. NEC Corp., 952 F.2d 1357, 1358 (Fed. Cir. 1991)]. The analysis includes examining “the claims of the original and the reexamined patents in light of the particular facts, including prior art, the prosecution history, other claims, and any other pertinent information” [Id. at 1362-63]. The determination is a legal one, and a claim is changed if its scope is changed [Tennant Co. v. Hako Minuteman, Inc., 878 F.2d 1413, 1417 (Fed. Cir. 1989)].
If a claim is not substantially identical, then a patentee may not seek damages for product sales prior to issuance of the reexamination certificate. If damages have already been awarded, a defendant may seek to have damages vacated since the claims were void ab initio. Again, because of the potential impact on damages, reexamination requests should be filed on all patents-in-suit, if possible, and on all the asserted claims.
- Substantially Amended Claims
- Doctrine of Intervening Rights
- Vacating as Void Ab Initio
- Bloom Eng’g Co. v. N. Am. Mfg. Co., 129 F.3d 1247, 1250 (Fed. Cir. 1997)
- Laitram Corp. v. NEC Corp., 952 F.2d 1357, 1358 (Fed. Cir. 1991)
- Tennant Co. v. Hako Minuteman, Inc., 878 F.2d 1413, 1417 (Fed. Cir. 1989)
Potential Risks for Accused Infringers
The clearest risk for an accused infringer is that at least one asserted patent claim survives the reexamination process unamended and without any adverse prosecution history estoppels. The reexamination may allow the patent owner to have the CRU consider all of the prior art in the litigation and to present arguments and declarations that support patentability of the claims over this prior art. This could include, for instance, possible secondary (objective) considerations of non-obviousness that were not present when the claims were originally prosecuted.
An ex parte reexamination may also give the patent owner a significant advantage in dealing with the prior art because, once begun, the third party requester is excluded from the process, while the patent owner can interview the examiner. Although the court can find a patent invalid even if it survives reexamination, most judges likely will defer to the presumed administrative expertise of the PTO, CRU, and BPAI.
Further, putting an asserted patent into reexamination could allow the patent owner to correct other defects in the patent, such as potentially ambiguous claim language, antecedent basis problems, or other perceived issues with the claims. This is especially true with newly issued patents where the potential for damages lies in the future, rather than with past damages. In the same vein, patent owners can also add claims during reexamination, provided that the added claims are not broader in scope than the original claims. The added claims could strategically cover aspects of the accused infringing products not included in the issued claim set, although prohibitions against broadening amendments may bar such activity.
Finally, a reexamination request filed early on in the litigation could impact trial. This is especially true where the PTO decisions are favorable to patentability. However, as noted above, there are questions and concerns as to the admissibility of any non-final PTO action at trial.
- Correction of Defects
- Strategic Amendment
- Favorable to Patentability
Timing of the Request
Once a decision is made to proceed with a reexamination strategy, one of the most important considerations is deciding when to file. The timing of a reexamination request ultimately will be determined by the requester’s overall goals. Early filing should be considered where the goal is to stay a more costly district court litigation until the validity of the asserted patent is adjudged by the PTO. Most courts will not consider staying the litigation until at least a first office action rejection is received.
Statistics indicate that the issuance of the first office action could be one year or more after the request is granted and a filing date is accorded in an ex parte reexamination request. In an inter partes reexamination, the rules state that “[t]he order for inter partes reexamination will usually be accompanied by the initial Office action on the merits of the reexamination” [37 C.F.R. § 1.935]. However, this is not always the case, particularly with the increased popularity of inter partes reexaminations in the past two years.
Early filing is also highly recommended where the reexamination is launched as an insurance policy against an adverse district court decision. Overall, at least two years are typically necessary for a final decision from the CRU; waiting too long to file a request could reduce the effectiveness of such a strategy. The CRU has indicated an internal goal of 24 months from instituting the inter partes reexamination request to final office action. For such strategy, keeping tabs on the trial date is a must.
- Goal is to Stay the District Court Litigation
- Insurance Against Adverse Court Decision
- Reexamination as a Settlement Tool
- Rule 60 – FRCP 60(b)(6)
Multiple Ex Parte Reexamination Requests
Where a party has a choice in filing an ex parte or inter partes reexamination request, what considerations go into the choice? One factor to consider is that there is no legal limit on the number of ex parte reexamination requests that can be filed. However, the bar for establishing a valid SNQ may become higher with each reexamination request. Because the Examiner makes a determination whether a reference raising an SNQ is cumulative to earlier considered art, the more references already considered raises the bar for references in subsequent reexamination requests.
In what situations should multiple ex parte reexamination requests be considered? The ability to file more than one request can be a valuable tool where the patent owner is seen to mischaracterize the prior art, to make inconsistent statements between the reexamination and the parallel court proceeding, or where there is newly discovered prior art that surfaces after the previous reexamination request has been filed. Another factor to consider is the impact that multiple or “rolling” reexamination requests may have on a district court judge.
Could multiple reexamination requests impact an already granted litigation stay? At least one district court precluded an accused infringer from filing further ex parte reexamination requests as a condition of granting its motion to stay a litigation on the eve of trial [Visto Corp. v. Research in Motion Ltd., No. 2-06CV-181 (E.D. Tex. complaint filed Apr. 28, 2006)]. The ability to file subsequent reexamination requests may be an important tool in an overall ex parte reexamination strategy and relinquishing that ability should be carefully considered.
- Raising the Bar for Each SNQ
- Impact on Litigation Stay
- USPTO Policy Notice [March 1, 2005 OG]
- Harassment of Patent Owner [MPEP § 2240]
- Visto Corp. v. Research in Motion Ltd., No. 2-06CV-181 (E.D. Tex. complaint filed Apr. 28, 2006)