Patent Reexamination: an Effective Litigation Alternative? by Alan W

Patent Reexamination: An Effective Litigation Alternative? By Alan W. Kowalchyk and Joshua P. Graham

ecent statistics indicate that the median cost for a over. If the request is granted, the remainder of the proceeding defendant to fight a claim of patent infringement with is, with limited exception, between the Patent Office and the between $1 and $25 million at risk is $2.5 million. Just patentee. Ex parte reexaminations are available for any patent Rto fight the case through discovery may cost the defendant up and do not preclude any nonpatentee challenger’s prior art to or in excess of $1.5 million.1 Facing such costs to defend defenses in litigation. against patent infringement claims in court, accused infringers An inter partes reexamination must be requested by a party have sought alternate ways to resolve their disputes. other than the patentee. And the requester challenging the Recently published statistics from the U.S. Patent and validity of a patent plays a more substantial role. In addition to Trademark Office point to increased use of reexamination pro- setting the proceedings in motion by requesting a reexamination, ceedings as an alternate forum for resolving patent disputes.2 the challenging party may also submit comments regarding each Various authors have commented on the advisability of and and every patentee response to Patent Office actions address- reasons to consider a reexamination as an alternative to litiga- ing the patentability of claims subject to reexamination. Inter tion.3 While different views exist on the use of reexamination partes reexaminations are only available for patents that issued as an alternative to federal court litigation, the appropriate- from an application filed on or after November 29, 1999. By ness of reexamination to challenge disputed patents is being requesting an inter partes reexamination, the challenging party is considered in a growing number of cases.4 prohibited from asserting in litigation any invalidity grounds that Whether a reexamination is a useful tool for case resolution were raised or could have been raised during the reexamination. depends on a number of factors and a case-specific evalua- The significant differences between ex parte and inter partes tion. Determining whether a reexamination is a preferred, or reexamination are outlined in the table above. viable, alternative to patent litigation in a given case requires Being able to initiate a reexamination proceeding appears an understanding of reexamination timing, procedures, and to be the least difficult hurdle to cross in weighing whether possible outcomes. Understanding what can realistically be to employ a reexamination to challenge a patent. The Patent achieved by a reexamination is critical to determining whether Office’s published statistics from August 2009 indicate that reexamination should be pursued. 92% of ex parte reexamination requests and 95% of inter partes reexamination requests are granted. Two Reexamination Routes: Similarities and As reflected in the charts on the opposing page (Figures 1 Differences Between Ex Parte and Inter Partes and 2), additional data regarding the reexaminations that are Proceedings brought indicate that of the ex parte reexaminations granted, There are two types of reexaminations: ex parte and inter 25% concluded with a certificate of reexamination confirm- partes.5 Both provide for a second examination of a patent ing all the claims, 11% with cancelation of all the claims, and based on assertions that a patent is invalid in light of prior art 64% with changing claims. Of the inter partes reexaminations patents and printed publications.6 Patent challenges based on conducted, 5% concluded with a certificate of reexamination other types of prior art, such as an existing product, or on other confirming all the claims, 60% concluded with cancelation invalidity contentions, such as indefiniteness, are outside the of all the claims, and 35% concluded with changing claims. grounds of reexamination proceedings. Finally, as to the length of time for reexaminations, the Patent An ex parte reexamination request can be made by anyone. Office reports that from start to finish, ex parte reexamina- If a nonpatentee challenges the validity of a patent by ex parte tions are pending on average for 25.1 months (median of 19.5 reexamination and the request is denied, the proceeding is months) and inter partes reexaminations are pending on average for 36.1 months (median of 33.0 months).7 Alan W. Kowalchyk and Joshua P. Graham are attorneys based in the Minneapolis office of the firm of Merchant and Gould P.C. Mr. Reexamination Factors Kowalchyk’s practice is focused on patent litigation, client counsel- While the use of reexamination by litigants has been on ing, and alternative dispute resolution. He is a State of Minnesota the rise—especially use of inter partes reexamination—the Qualified Neutral for adjudicative services and mediation, a member appropriateness of reexamination to challenge a patent must be of the AAA’s National Panel of Neutrals, and a member of WIPO’s carefully assessed in every case. The increasing use of reexami- list of Arbitrators and Mediators. Mr. Graham practices general IP law, nation has created some misconceptions about the practicality focusing on litigation support and patent and trademark prosecution support. The authors can be reached at akowalchyk@merchantgould. and advantages of requesting a reexamination during or in com and [email protected]. The views expressed herein anticipation of litigation. Using reexamination in the wrong are solely those of the authors and do not necessarily reflect the views circumstances can be counterproductive to successful case of the firm or of any attorney or client of the firm. resolution.

An Effective Litigation Alternative? Ex Parte Inter Partes • Based only on prior art patents and publications • Based only on prior art patents and publications By Alan W. Kowalchyk and Joshua P. Graham • Requires a substantial new question of patent- • Requires a substantial new question of ability patentability • Cannot be used to broaden claims • Cannot be used to broaden claims • Can be requested by anyone (patentee, director, • Cannot be requested by the patentee third party) • Requires requestor to identify real party • Can be requested anonymously in interest • Limits participation beyond request to patentee • Allows participation beyond request by the requestor • Allows examiner interviews • Prohibits ex parte communications with the • Allows only patentee to appeal examiner • Does not affect requestor’s ability to assert prior • Allows either patentee or requestor to appeal art in litigation • Estops requestor from asserting in litigation any prior art that was or could have been raised in the reexamination

Reexaminations Are Not Always Case Dispositive pendency for ex parte reexaminations is 19.5 months. The The critical inquiry is not whether claims are changed or can- median pendency for inter partes reexaminations is 33.0 months. celed in a given patent but whether the crucial claims asserted By comparison, since 1995, the median time to trial in patent as infringed are canceled or changed sufficiently to avoid cur- litigation has ranged from less than two years to more than three rent and future infringement allegations.8 In 11% of ex parte years,12 with an additional nine to 11 months for an appeal.13 reexaminations and 60% of inter partes reexaminations, all the Median pendency time does not, however, address the claims are canceled. Without any claims, the patent cannot be timing consideration in individual cases, as the median time to asserted. Co-pending or impending litigation risk will end. trial in the individual courts varies significantly. For example, In contrast to litigation, the presumption of validity does not the median time to trial in the Eastern District of Virginia is apply to claims in reexamination. And claims in reexamination less than a year, whereas the median time to trial in the District are viewed under a preponderance of evidence standard, which of Connecticut is more than four and a half years. Depending is a lower standard when compared to the clear and convincing on the type of reexamination, possibility of appeal, and juris- evidence standard.9 diction of any patent litigation, the advantages or disadvan- Published reexamination statistics regarding percentage of tages of time to final dispute resolution using reexamination as reexamination certificates that change claims lack sufficient compared to litigation will be case dependent. detail to draw any definite conclusions about whether goals of an alleged infringer were successfully achieved. Changing the The Cost of Reexamination Is Case Sensitive scope of a claim grants an accused infringer intervening rights to Ex parte reexamination is comparatively inexpensive com- sell existing products and prevents the patentee from recovering pared to litigation. This is due largely to the limited role of a damages prior to the issuance of the reexamination certificate.10 third-party requester after the reexamination is granted. While Unfortunately, published statistics do not indicate how many or inter partes reexamination is also a generally less expensive which claims were changed in individual reexaminations. Thus, way to challenge a patent than litigation, it can be quite costly the evaluation of whether a requester can achieve needed claim depending on the level of complexity and evidence used to modification must be carefully evaluated in each case. challenge the patent. The challenging party not only files the A requestor’s assessment must take into consideration the request, as in ex parte reexaminations, but also comments on idea that the patentee will make every effort to ensure that at each of the patentee’s responses to the Patent Office’s actions least one relevant claim will emerge from reexamination with- examining the patent. These comments typically involve con- out substantial change. If that occurs, even if some claims are siderable technical assessment and in many cases arguments changed, the accused infringer may be in the same or worse applying legal principals on patentability. In some cases, position regarding infringement and damages assertions. And expert declarations are prepared and submitted, and these can regarding invalidity, the prior art relied on during the reexami- raise the costs substantially. nation, at a minimum, will no longer present a strong defense in ex parte reexamination and will be subject to estoppel in Is a Reexamination Appropriate in Your Case? inter partes reexamination.11 Determining whether to request a reexamination and what type of reexamination to request requires understanding reexamina- Comparative Length of a Reexamination Timing tion practice in the Patent Office and, more importantly, the Reexaminations are generally faster than litigation. The median details of the particular case, including client goals.

Published in Landslide® magazine, Volume 3, Number 1, September/October 2010. © 2010 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Fig. 2 Fig. 1 Fig. 2 filing it with the Patent Office.Fig. The 1 arguments to be presented may alter the patentee’s position regarding the accused infringer 700 700 600 and/or its view on600 strength of the patent. Also, if reexamination 500 is being used to encourage500 settlement, a nonpatentee should 25% 25% 400 consider the impact400 of potential USPTO rejection of its reexami- 300 64% 300 64% nation position. While it is likely the request may be granted, the 11% 200 11% potential for success200 by the patentee in reexamination should be 100 weighed in advance100 of filing the request. 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Is Invalidity Your Primary Litigation Defense? Ex Parte Reexamination Ex Parte Reexamination Ex Parte Reexamination Ex Parte Reexamination Noninfringement arguments and invalidity arguments based on anything other than prior art patents and printed publica- 180 180 5% 14 5% 160 tions are not considered160 in reexaminations. If the best litiga- 140 tion defenses in 140your case are noninfringement or invalidity 120 120 35% 100 35% for any reason other100 than being based on prior art patents and 80 printed publications,80 then a reexamination will provide no 60 60 60% 40 60% benefit. While less40 expensive than litigation, the time required 20 and cost may well20 weigh against bringing a reexamination if 0 0 2004 2005 2006 2007 2008 other defenses to be 2004presented2005 in 2006 the 2007litigation2008 are clear and

Inter Partes Reexamination Inter Partes Reexamination Inter Partes Reexamination dispositive. For example,Inter a Partes clear Reexamination on-sale bar may be handled by dispositive motion in litigation. On the other hand, future Confirming all claims Confirming all claims Requests filed potential disputes with theRequests patentee filed may warrant use of reex- Canceled all claims Canceled all claims Requests granted amination even if other goodRequests defenses granted exist. Changed claims Changed claims Requests known to have Requests known to have related litigation View of Reexamination inrelated the litigationVenue of Your Case If your patent dispute is in a jurisdiction less receptive to a stay during reexamination, the cost of and resources for dual pro- What Is Reexamination Intended to Achieve? ceedings may make pursuing reexamination less attractive. A The goal of a reexamination may determine which type of stay of litigation is not automatic but is at the discretion of the reexamination is appropriate. If the goal is to end the litigation, court. The exercise of that discretion varies among the various then an inter partes is a better choice when it is available. Inter jurisdictions and district court judges. Factors considered partes reexaminations are clearly dispositive in 60% of cases. include the court’s desire for Patent Office expertise assess- Furthermore, an accused infringer has a greater opportunity to ing prior art, complexity of the patent issues, views towards focus the proceedings on the more troubling claims in an inter docket delays, and equitable considerations of the particular partes reexamination than it does in an ex parte reexamination. case.15 The statutory guidance for granting a litigation stay is This increases the likelihood that at least those troubling claims also somewhat different for ex parte and inter partes reexami- will be canceled, ending the case, or changed, creating interven- nations, with stays in inter partes reexaminations requested ing rights and cutting off past damages. On the other hand, if the by patentees being expressly addressed in 35 U.S.C. § 318. In goal is to limit expenses or pursue noninfringing design altera- both ex parte and inter partes reexaminations, courts generally tions, then an ex parte reexamination may be more appropriate. look more favorably on motions to stay pending a reexamina- If reexamination is being considered as a tool to enhance tion filed early in the litigation. potential settlement, one also must consider the fact that if the request is granted, the reexamination cannot be withdrawn. Conclusion If there is a high likelihood that claims will be narrowed or Although reexaminations are being increasingly used as an canceled, settlement discussion with a patentee may be more alternative or complement to patent litigation, they are not the productive prior to filing the request. Once reexamination is best choice in every case. Once a reexamination begins, the ordered, the scope of coverage, if any, may not be known until parties cannot stop it. So the decision to bring a reexamina- the reexamination is concluded. In inter partes reexamination, tion must be made with care. It requires considering the pros the need of both parties to continue advocating their respective and cons of what can be accomplished and understanding the positions to enhance settlement leverage may be contrary to end- advantages and disadvantages of proceeding in the Patent ing the dispute. Even in ex parte reexamination, the likelihood Office or in court. n that claims may be confirmed or canceled can lead to hesitancy to end the dispute. The availability for appeal (for either party Endnotes in inter partes and for the patentee in ex parte) can also make a 1. AIPLA, Report of the Economic Survey (July 2009). 2. All the reexamination statistics in this article come from the fol- party reluctant to commit to ending a dispute with a yet uncertain lowing two sources: U.S. Patent and Trademark Office, Inter Partes disposition. Reexamination Filing Data (June 30, 2009), available at One technique for pursuing settlement while considering http://www.uspto.gov, and U.S. Patent and Trademark Office, Ex reexamination is to share the request with the patentee before Parte Reexamination Data (June 30, 2009),

Published in Landslide® magazine, Volume 3, Number 1, September/October 2010. © 2010 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 3. Stephen S. Korniczky, Martin R. Bader & Jeffrey D. Comeau, 9. In re Swanson, 540 F.3d 1368, 1377–78 (Fed. Cir. 2008). Strategic Use of Reexamination During Litigation, 78 Pat. Trademark & 10. 35 U.S.C. §§ 252, 307. Copyright J. (BNA) 781 (2009). Joseph N. Hosteny, The New Tactics of 11. In re Laughlin Prods., Inc., 265 F. Supp. 525, 529–30 (E.D. Pa. Patent Defendants: They All Attended the Same Seminar, 16:7 Intell. 2003); see also Steven M. Auvil, Staying Patent Validity Litigation Prop. Today 40 (July 2009); Joseph N. Hosteny, Reexamination Tactics, Pending Reexamination: When Should Courts Endeavor to Do So? 41 16:10 Intell. Prop. Today 26 (October 2009). Clev. St. L. Rev. 315, 328 (1993). 12. All the district court statistics in this article come from 4. See reexamination statistics refered to in note 2, supra. PricewaterhouseCoopers, A Closer Look: 2008 Patent Litigation 5. The following statutes control the reexamination procedures: 35 Study: Damages Awards, Success Rates and Time-to-Trial 11 U.S.C. § 301 et seq. (ex parte reexaminations) and 35 U.S.C. § 311 et (2008), available at http://www.pwc.com/en_US/us/forensic-services/ seq. (inter partes reexaminations). assets/2008_patent_litigation_study.pdf. 6. U.S. Pat. & Trademark Office, Glossary, http://www.uspto.gov 13. U.S. Court of Appeals for the Federal Circuit, Median Disposition 7. This pendency period includes time for appeals. 35 U.S.C. §§ 307, Time for Cases Decided by Merit Panels 316. 8. Reexamination statistics indicate that in 75% of ex parte reexami- 14. See 35 U.S.C. § 301. nations and 95% of inter partes reexaminations, claims change or are 15. BarTex Research v. FedEx Corp., 611 F. Supp. 2d 647, 650 (E.D. canceled. These statistics, however, do not necessarily indicate the per- Tex. 2009) (denying a stay because the motion was filed 16 months after centage of cases in which the reexamination was dispositive to the critical case began and a stay was unlikely to simplify the issues); Roblor Mktg. claims(s) of the disputed patent. Supra, note 2 Group, Inc. v. GPS Indus., Inc., 633 F. Supp. 2d 1341, 1346 (S.D. Fla. 2008) (granting a stay based on consideration of the factors).