Patent re-examination procedure as a litigation strategy

Barry P Golob and Amy EL Schoenhard
Arent Fox PLLC,Washington DC

An effective patent litigation strategy is crucial to many of today’s businesses, whose fortunes may rise and fall on the value of their intellectual property portfolios or the strength of a competitor’s patents. Indeed, it is an understatement to say that patents play a substantial role in the business world. Patents serve as an asset to enhance the net worth of the patent’s owner, a source of revenue from an active licensing programme, a shield to protect an innovation from competitors, and a threat to competitors in terms of the liability and cost of infringement litigation. Consequently, the cost of a patent litigation can be quite prohibitive.

Potential litigants, however, have a valuable tool available to them that is often overlooked and could substantially reduce the cost of patent litigation – re-examination.

The procedure surrounding a re-examination request

Patent re-examination was introduced in 1980 to “strengthen investor confidence in the certainty of patent rights by creating a system of administrative re-examination of doubtful patents” (see HR Rep No 96-1307(I) at *3, 1980 USCCAN 6460, 6462). During re-examination, the US Patent and Trademark Office (USPTO) takes a second look at the validity of the claims of a patent in view of a prior art patent or printed publication believed to have a bearing on the patentability of any claim of the patent in question. If the asserted claims are cancelled by the USPTO during re-examination, the issue of claim validity is eliminated and the accused infringer is free with respect to those claims. However, if the claims at issue survive the re-examination proceedings, the written record of the re-examination proceedings facilitates trial of the issue of validity by providing the district court with the experienced view of the USPTO examiners, and that patent holder has the advantage of a stronger patent.

Two types of re-examination

Under 35 USC § 302, the patent owner or any third party may request re-examination at any time. Two types of re-examination may be requested: ex parte or inter partes. In ex parte re-examination under 35 USC §§ 302-307, a third party requester is not directly involved during the re-examination process before the USPTO.

In contrast, inter partes re-examination under 35 USC §§ 311-318 permits a third-party to participate during the re-examination process. However, this avenue is only available for patents based upon an original application filed on or after 29th November 1999. If inter partes re-examination is requested, the third-party requester not only receives a copy of every communication from the USPTO and the patent owner, but may file written comments during the entire re-examination process to address issues raised by the USPTO or the patent owner. Further, unlike an ex parte re-examination, the third-party requestor has the right to appeal the final decision on re-examination to the USPTO’s Board of Patent Appeals and Interferences (BPAI), and then to the US Court of Appeals for the Federal Circuit (Federal Circuit). However, in exchange for such privileges, the third- party requester is prevented (by an estoppel provision) from later using the same arguments in a proceeding before a court or the USPTO.

The procedure

The re-examination process is likely to take at least one to two years and careful consideration must be given to the timing and appropriateness of the re-examination request based on the litigation strategy. A brief breakdown of that timing follows.

A written request for re-examination must describe the pertinence of the prior art to each claim of the patent for which re-examination is requested and must be accompanied by a filing fee, copies of the prior art relied upon and the patent itself. In inter partes re-examination, the third-party requester also must serve a copy of the request on the patent owner and certify to the USPTO that the copy was in fact served.

If the Commissioner of the USPTO finds a substantial new question of patentability within three months of filing, then the request for re-examination will be granted (see 35 USC §§ 303(a) and 312(a)). The patent owner then has at least two months to file a statement regarding the patentability of its patent and to respond to any issues raised by the requester; the requester has two months to respond and to serve a copy of the response on the patent owner (see 35 USC § 304).

An examiner will then issue a non-final office action rejecting or affirming the patentability of the claims at issue. At this point, the patent owner has at least two months to file a response and an inter partes requestor may respond to the patent owner’s response. This process repeats itself until the examiner agrees that the claims are patentable or prepares to issue a final rejection of the claims, known as an action closing prosecution in inter partes re-examination. At this point, a patentability review conference is held, where three experienced primary examiners or other USPTO examiners knowledgeable in the art review the patentability of the claims at issue and affirm or deny the examiner’s decision.

If the examiner agrees that the claims are patentable and the patentability review conference affirms the examiner’s decision, the USPTO will issue a certificate of patentability under 35 USC §§ 307 or 316. The certificate cancels any claim of the patent finally determined to be unpatentable, confirms any claim of the patent determined to be patentable, and incorporates in the patent any proposed amended or new claim determined to be patentable. Alternatively, if the patentability review conference disagrees with the examiner’s decision to affirm the patentability of the claims, the re-examination process may continue.

In contrast, if the patentability review conference disagrees with the examiner’s decision to issue a final rejection of the claims, the re-examination process may continue. Meanwhile, if the patentability review conference affirms the examiner’s decision to issue a final rejection, the examiner will then be allowed to issue the final rejection. At this point, the patent owner may file a statement in response to the final rejection to be considered by the examiner. If necessary, the patent owner or an inter partes requestor may then file an appeal to the USPTO’s BPAI, and then to the Federal Circuit (see 35 USC § 306).

The timing of a re-examination request during litigation

To prove effective as a tool during litigation, re-examination is most effective when litigation is merely contemplated or at an early stage of the litigation. A re-examination generally involves a lengthy delay of at least one year. However, this delay could easily exceed two years as a result of extensive arguments and/or an appeal.

Such a delay may stay a pending litigation. However, a re-examination proceeding does not automatically stay any pending district court litigation involving the same claims. On the contrary, the district court has discretion in deciding whether to stay the litigation to await the outcome of the re-examination (see, eg, Xerox Corp v 3COM Corp, 69 F Supp 2d 404, 406 (WDNY 1999), appeal dismissed, 243 F 3d 554 (Fed Cir 2000)).

Courts have considered the following factors in deciding whether to grant a stay (Xerox Corp, 69 F Supp 2d at 407-408):

• whether a stay would unduly prejudice or present a clear tactical disadvantage to the party not requesting the stay.

• whether a stay will simplify the issues in question in the litigation and at trial; and

• whether discovery is complete and a trial date has been set.

Thus, the closer to the trial that the re-examination request is filed, the less likely that a stay will be granted. If a trial date has been set, the requesting party must generally show a “clear case of hardship or inequity” (id).

For example, in Cognex Corp v National Instruments Corp, 2001 WL 34368283 (D Del 2001), Cognex, the patentee, filed a request for re-examination three weeks before the close of discovery and after a trial date was set. The district court refused to stay the litigation despite Cognex’s argument that the re-examination would narrow and/or resolve the issues in the case. If the patent were held invalid, the litigation would be dismissed; if the claims were held patentable, a settlement might be encouraged.

National Instruments, the accused infringer, argued that a stay would cause severe prejudice, because of the additional expense caused by the delay in the litigation schedule and trial date, and the continued threat of litigation to National Instruments and its customers. Additionally, National Instruments argued that the case would not be sufficiently simplified by a stay, because Cognex alleged a number of allegations unrelated to the patent infringement claim which required a trial, and that Cognex unnecessarily waited to file the re-examination until it forced National Instruments to spend over a million dollars in defence of itself.

The court concluded that Cognex did not demonstrate a clear case of hardship or inequity and that National Instruments would be prejudiced if a stay were granted. Specifically, the court commented that “[t]he court will not elevate a party’s failure to address its concerns in a timely fashion to an example of hardship warranting a stay” (id at *2 (internal citations omitted)).

Unless a request for re-examination is filed early enough, the re-examination is unlikely to affect the litigation. Indeed, even if a request is filed early, delays at the USPTO may prevent the re-examination from concluding prior to conclusion of trial. However, if the re-examination yields a different result than the litigation, a request for a new trial may be granted at a later time.

Potential advantages of re-examination as a litigation strategy

The greatest advantage of re-examination as a litigation strategy is that re-examination may decrease the time and resources of both parties to a litigation. Specifically, re-examination may limit the amount of resources expended in deciding whether a patent is valid, as it requires no discovery or other related litigation expenses. By simplifying or resolving the validity issue, re-examination may reduce the number of issues to be tried and may alleviate many discovery problems related to prior art. A patent that survives re-examination emerges as a stronger patent. Indeed, the results of the re-examination may encourage settlement without further litigation of the issues. Alternatively, if the patent is held invalid, the patent litigation will likely be dismissed. At a minimum, all prior art presented to the court will have been first considered by the USPTO, with its particular expertise.

Additional advantages of re-examination as a litigation strategy include the following:

• The re-examination process is accomplished by experienced examiners within the USPTO, who also have access to internal re-examination experts, and the process itself is expedited through the USPTO.

• During re-examination, there is no presumption of validity of the patent under 35 USC § 282, as in litigation. Instead, there is a subjective examination of the claims in light of the prior art (see In re Etter, 756 F 2d 852, 855-858 (Fed Cir 1985), cert denied, 474 US 828 (1985)).

• During re-examination, claims are given the broadest reasonable interpretation consistent with the specification (see In re Yamamoto, 740 F 2d 1569, 1571 (Fed Cir 1984)).

• The scope of the claims may be narrowed by the patent owner’s arguments, admissions, amendments to the claims and chosen claim interpretation (the scope of the claims may not be broadened during re-examination (see 35 USC §§ 305 and 314(a))).

• If substantive changes to the claims are made, such that the scope of the claims is changed, infringement damages may only be collected from the issue date of the re-examination certificate – that is, the issuance of the re-examined claims (see 35 USC §§ 252 and 307(b); and Laitram Corp v NEC Corp, 163 F 3d 1342, 1345 (Fed Cir 1998)).

• Re-examination may enable the court to focus on legal rather than technical issues.

• Re-examination is generally governed by well-established patent law principles and practice.

Potential disadvantages of re-examination as a litigation strategy

The risk to the patent owner is that the scope of the claims of the patent may be narrowed or even cancelled. Such a risk is based mostly upon the pertinence of the asserted prior art patent or printed publication. Meanwhile, a third-party requestor risks the affirmation of the patent’s validity, thereby strengthening the patent holder’s litigation position.

Additional disadvantages are present if inter partes re-examination is requested. As noted above, the requestor is precluded from contesting validity in a later proceeding based upon arguments or evidence that was known or should have been known at the time of the inter partes re-examination (see 35 USC § 315(c)).

Further disadvantages may include the lengthy delay in acquiring a determination from the USPTO. As noted above, if a stay in litigation is not granted, the re-examination is unlikely to affect the present litigation. However, the result of the re-examination may provide either party with an opportunity to re-open litigation. Alternatively, if a stay is granted, re-examination may unnecessarily delay final judgment on the merits of a matter critical to the financial wellbeing of both parties. Such prolonged uncertainty can be harmful both in terms of long-range financial planning and short-term market stability.

Conclusion

From the standpoint of an investor, a patent is an important asset that is essentially surrendered to the USPTO during the re-examination process. Thus, the decision to utilise the litigation strategy of re-examination must be carefully considered, weighing all of the advantages and disadvantages.

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