Reexamination During the Course of Litigation: What Should You Do? November 30, 2006

Transcription

1 Reexamination During the Course of Litigation: What Should You Do? November 30, th Annual Advanced Patent Law Institute Presented by: Katherine Lutton lutton@fr.com

2 Strategic Reexam Oxymoron? [T]he current US re-examination procedure differs dramatically from the EPO opposition procedure in virtually all of its features, of which the most significant are the identity of the party requesting a re-examination (the patent owner in more than 40% of the cases) and the outcomes, which are rarely revocation of the patent. These characteristics of re-examination hardly qualify it as the sort of adversarial procedure that EPO oppositions represent, but they are not surprising when we consider the differences in structure between the two procedures: 1) A three-examiner panel including the original examiner, but not as chair, in the EPO versus a single examiner, often the same as the original examiner, in the USPTO; 2) the bar in later litigation to questions that could have been raised in a reexam in the US; 3) the inter partes nature of the proceeding at the EPO versus ex parte at the USPTO. -- Hall et al., May

3 It s Alive! It s Alive! Reexam is invigorated 3

4 Then 1980 Reexam established (ex parte) to serve as expedited, low cost alternative to litigation Only 2150 reexams filed 2000 Still not popular; patentee generally prevails; patents made stronger through reexam As of % of patents survived ex parte reexam in some form Only 54% survived a validity challenge in court Did not make sense to file! 4

5 What Has Changed? 5

6 What Has Changed? 6

7 What Has Changed? PTO committed to patent quality Industry lobbying for change in Congress Reexam has been attacked Post grant opposition offered as a solution Reexam has become more public MercExchange (stay tuned for next panel) Assigned to same examiner Assigned to different examiner Ex Parte stats better Now have inter partes more 3 rd party participation 7

8 Ex Parte v. Inter Partes Ex parte Inter partes Who Can Initiate? 35 U.S.C U.S.C. 311 Patentee or 3 rd party (can be anonymous) 3 rd party only (not anonymous) 3 rd Party Participation Ends before first OA Throughout prosecution & appeal What Patents? Those filed on or after 07/01/81 Those filed on or after 11/29/1999 Interviews Permitted Not permitted Estoppel? No Yes 8

9 Ex Parte v. Inter Partes (3/21/06) Ex parte Inter partes Total Filed 7991 (since 07/81) 138 (since 11/99) Granted 7772 (91%) 114 (93%) Not Granted 684 (9%) 8 (7%) Known in Litigation 1858 (23%) 35 (25%) Pendency (Months) 22.6 (average) 17.5 (median) 29.5 (average) 31.2 (median) 9

10 Reexam Now (Ex Parte & Inter Partes) Advantages: First ruling in 3 months (very likely granted >90%) Puts patent under cloud Might kill or weaken patent Might produce useful estoppels or admissions PTO more technically sophisticated (than juries) to analyze complex patents Grant of reexam may be used to establish materiality for IC 10

11 Reexam Now (Ex Parte & Inter Partes) Advantages, cont: Standard of review low preponderance of evidence not clear & convincing Vehicle for potentially staying litigation (more later) May affect calculus for preliminary litigation relief (more later) 11

12 Reexam Now (Ex Parte & Inter Partes) Disadvantages: If patent survives, it will likely be stronger Patent owner has opportunity to clear newly discovered prior art Intervening rights 35 U.S.C. 307(b), 316(b) (2006) No adversarial measures (discovery, depositions) available 12

13 Some Particulars Ex Parte Only Can invalidate a patent previously held valid by a court, even over the same prior art Inter Partes Only Fast: First OA usually comes with reexam order (2 months) Inter Partes Only Certainty: Final resolution not likely to differ from first OA Inter Partes Only Requester always gets the last word and can appeal Inter Partes Only Estoppel for issues raised, or that could have been raised, in reexamination To mitigate estoppel issue, have third party file re-exam? Inter Partes Only Third party must identify self Have another make the request? 13

14 Some Things Never Change Resolves substantial new question of patentability (low threshold) A substantial new question of patentability as to one claim is sufficient to warrant a reexamination of all claims Can be based on materials previously cited to PTO Cannot be duplicative of issue previously decided in earlier reexamination or litigation Conducted with special dispatch (2 mos. for responses) No withdrawal and cannot be settled once started Need to consider effects on possible settlements Patent is in force during reexam Printed Publications ONLY Not on sale, public use, or 112 issues Claims can be added, confirmed, amended, or canceled (but not broadened) 14

15 Show me the money! The Stats Are Starting To Look Promising 15

16 Reexam Works! (by 3/31/06) Ex parte Total reexam certificates issued (since 1981) 5316 Certificates with all claims confirmed 1385 (26%) Certificates with all claims canceled 543 (10%) Certificates with claim changes 3388 (64%) Confirmed (26%) Changed (64%) Canceled (10%) 16

17 Works Even Better with Inter Partes! (by 3/31/06) Inter partes Total reexam certificates issued (since 1999) 3 Certificates with all claims confirmed 0 (0%) Certificates with all claims canceled 3 (100%) Certificates with claim changes 0 (0%) Total reexam requests with OA (since 1999) 104 All claims confirmed (interim) 7 (7%) All claims canceled (interim) 67 (60%) Some claim changes (interim) 35 (33%) Confirmed (7%) Canceled (60%) Changed (33%) 17

18 Works Even Better with Inter Partes! Ex Parte Inter Partes Confirmed (26%) Changed 33% 7% Confirmed Changed (64%) Canceled (10%) 60% Cancelled 18

19 Challengers Are Starting to Choose Inter Partes Inter Partes Reexam 30% 05/ / % Ex Parte Reexam If Patent filed after 11/29/1999, no real reason to choose Ex Parte. Thus, expect migration from Ex Parte to Inter Partes! 19

20 Requests for Inter Partes Reexam Increasing Inter Partes Requests Projected Series1 Number of Requests 10/00-09/01 10/01-09/02 10/02-09/03 10/03-09/04 10/04-09/05 10/05-09/06 Time Period 20 Source of Data: Joseph Cohen

21 However, Ex Parte Requests Still Doing Better in Terms of Numbers Source: 21

22 You ve got to ask yourself Do I feel lucky? Do You Really Want to Put All Your Eggs in the Litigation Basket? 22

23 Rather Just Take Your Chance At Trial? Patent authenticated by the PTO (twice) Presumed valid High clear and convincing evidence standard EDTX & other patent-friendly juries Invalidity Rate in Lawsuit (Year 1998) Source: Allison & Lemley, Empirical Evidence on Patent Validity Invalidity Decisions 46%. Validity Decisions 54% 23

24 Better Resolve on MSJ! > 2/3 patents tried to juries held valid (49 of 73, or 67.1%) Almost 3/4 patents in MSJs held invalid Validity Rate Source: Allison & Lemley, Empirical Evidence on Patent Invalidity 100% 50% 0% 33% 43% 72% 67% 57% 28% Jury Trial Bench Trial Court before Trial Invalid Valid 24

25 If You Lose At Trial, Can t Trust Fed. Cir. To Fix! Fed. Cir. affirms most findings of validity/invalidity. 100% 80% 60% 40% 20% 0% Affirmance and Reversal Rates Source: Allison & Lemley, Empirical Evidence on Patent Invalidity 54% 44% 90% 83% 23% 10% Appealed Affirmed Reversed Invalidity Validity 25

26 Can t Bet On It! Source: Allison & Lemley, Empirical Evidence on Patent Invalidity 94% 82% 86% 93% 100% 72% 100% 80% 60% 40% 20% 0% Jury Trial Affirmed Trial Affirmance Rate Bench Trial Affirmed Pretrial Affirmed Invalidity Validity 26

27 I feel the need -- the need for speed! What About Preliminary Relief? 27

28 Can Affect Preliminary Injunctions Preliminary Injunction Factors: A reasonable likelihood of success on the merits non-movant likely infringes the patent patent(s) will likely withstand non-movant s challenges to validity and unenforceability Irreparable harm if a preliminary injunction is not granted A balance of hardships tipping in the movant s favor The impact of an injunction on the public interest If the moving party makes a clear showing of infringement and validity, irreparable harm will be presumed. In the absence of a presumption, the court must consider, weigh, and balance all of the equitable circumstances. Amazon.com, Inc. v. Barnesandnoble.com, LLC, 239 F.3d 1343 (Fed. Cir. 2001); Illinois Tool Works, Inc. v. Grip-Pak, Inc. 906 F.2d 679 (Fed. Cir. 1990). 28

29 PI: What If Patentee Succeeds In Reexam? Northern District of California: A successful reexam is persuasive, but not enough to satisfy the clear showing of validity required for irreparable harm to be presumed (White v. Seagate Tech., 44 U.S.P.Q.2d 1512 (N.D. Cal. 1997)) Confirmation twice on reexamination is enough to demonstrate validity if the defendant fails to come forward with any evidence of invalidity (Atari Corp. v. Sega of Am., 869 F. Supp. 783 (N.D. Cal. 1994)) District of Delaware: Confirmation on reexamination is enough to demonstrate validity if the prior art in question was considered by the PTO during the reexam (Novo Nordisk A/S v. Bio-Technology Gen. Corp., 207 F. Supp. 2d 322 (D. Del. 2002)) ED Texas, ED Virginia, & WD Wisconsin: No cases reported involving interplay between reexamination and preliminary injunction 29

30 But, May Not Survive Appeal Federal Circuit Vacated 75% of the PIs granted by lower courts! (6/8) 8 cases in which lower court used fact of successful reexam to counsel in favor of granting a PI 6 of those reversed by Fed. Cir. In general, Fed. Cir. found no clear showing of validity even though patent survived reexam Of the two lower court PI denials appealed, Federal Circuit reversed one and affirmed one The Federal Circuit implicitly has recognized, however, that claims already subject to reexam are more likely to withstand validity challenges (and thus the Plaintiff s likelihood of prevailing on validity is strengthened) (See, e.g., Oakley, Inc. v. Sunglass Hut Int'l, 316 F.3d 1331, 1348 (Fed. Cir. 2003)) 30

31 Can Affect TROs TRO Factors (same as for preliminary injunction): A reasonable likelihood of success on the merits; Irreparable harm; Balance of hardships tips in movant s favor; and Public interest favors injunction. 31

32 TRO: What If Patentee Succeeds In Reexam? Eastern District of New York Allowance of claims following reexamination strengthens the presumption of validity afforded to patent claims (though in this case defendant has substantial invalidity argument and thus avoided TRO) (CollaGenex Pharmaceuticals, Inc. v. IVAX Corp, 375 F.Supp.2d 120 (E.D.N.Y. 2005)) Central District of California: Reexam (with claims confirmed) strengthens presumption of validity in TRO challenge; TRO granted (Oakley, Inc. v. Sunglass Hut Int'l, 316 F.3d 1331, 1348 (Fed. Cir. 2003)) District of Maryland: Reexam (with claim confirmed) is a factor militating in favor of Plaintiff's likelihood of success on the issue of validity; TRO granted (CVI/Beta Ventures v. Custom Optical Frames, 859 F.Supp. 945 (D. Maryland. 1994)) 32

33 TRO: What If a Reexam Request Is Granted? Western District of Oklahoma: Pending reexam may favor denial of TRO (Digital Magnetic Systems, Inc. v. Ansley, 1982 U.S. Dist. LEXIS (W.D. Okla. 1982)) Plaintiff s motion would appear to be premature as the Patent Office has not yet determined whether to grant defendants reexamination request. However, assuming a reexamination order will issue, the plaintiff s motion for an interlocutory order, is still denied. Congress enacted the reexamination procedure to promote an inexpensive, expedient means of determining patent validity which, if available and practical, should be deferred to by the courts. 33

34 Hasta la vista, baby! What About Stays? 34

35 Stays Pending Reexam Stay Litigation in Light of Reexam Courts have inherent power to order a stay pending reexam -- Ethicon, Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1988) Stays granted in slightly more than half of the decisions Four Factors to determine if a request to stay should be granted: Whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party Whether a stay will simplify the issues in question and trial of the case Whether discovery is complete and whether a trial date has been set Whether the request for reexam was filed relatively early at trial 35

36 Stays Pending Reexam, con t Courts may deny a stay if they think that the plaintiff is trying to game More likely to obtain stay in early stages Before the close of discovery Prejudice less likely if early in the litigation Knowledge of the prior art and delaying the request for reexam Cuts against a stay -- Lectrolarm Custom Servs., Inc. v. Vicon Indus., Inc., 2005 WL (W.D. Tenn. 2005) Many courts will dismiss prejudice argument and remedy with money damages -- Zilog, Inc. v. Quicklogic Corp., 2004 WL (N.D. Cal. 2004) Helps to manage docket (but stats to trial look bad for Judge) Reexam has the potential to narrow or eliminate complex claims Less likely granted if case involves additional issues 36

37 More Likely Than Not To Survive Appeal 50% of stays were effectively affirmed (3/6)* 33% of district court decisions on stay were reversed (3/9) Federal Circuit has denied stay of injunction pending reexam Federal Circuit has denied stay of final judgment pending reexam *3 were appealed; of those 2 affirmed; 1 dismissed for lack of final resolution 37

38 Toto, I've got a feeling we're not in Kansas anymore. Venue Matters 38

39 Venue Matters 88% % of Motions to Stay Granted % 50% 0% 50% Ø 0 Stay Granted Stay Denied 39 Reported Cases ( ) N.D.Cal. D.Del. E.D.Tex. E.D.Va. W.D.Wis. Fed. Cir.

40 District of Delaware 64% of stays granted (7/11) Reasons for denial: Case involves additional claims (e.g. Sherman Act claims) which require litigation of validity regardless of whether stay is granted. See Synopsys, Inc. v. Magma Design Automation, 2006 WL (D. Del.). Reexamination and stay are sought after extensive discovery plus movant could have requested reexamination and stay much earlier. See Cognex Corp. v. Nat l Instruments Corp., 2001 WL (D. Del.). Reexamination and stay are sought after jury returns an infringement verdict. See Mars, Inc. v. Conlux USA Corp., 818 F. Supp. 707 (D. Del. 1993). 40

41 Some Delaware Examples Judge Robinson & Farnan have denied motions to stay pending reexam Litigation and reexam are distinct proceedings, with distinct parties, purposes, procedures, and outcomes. ArthroCare Corp. v. Smith & Nephew, Inc., C.A. No , Nov. 11, 2002 slip op. at 1-2. The court s role is to prepare the case for appeal. St. Clair v. Sony, C.A. No , Feb. 25, Judge Sleet has granted stays pending reexam Staying case where a closely related patent-in-suit was being reexamined, and where the Fed. Cir was reviewing three other closely related patents from an ITC appeal. Alloc, Inc. v. Unilin Décor N.V., C.A. No , July 11, Staying case where plaintiff filed more than 300 related patent applications with an estimated 10,000 claims. Pegasus Development Corp. v. DirecTv, C.A. No , May 14,

42 Eastern District of Texas The one stay requested was denied (0/1) Reason for denial: Stay is requested one month before conclusion of discovery after both parties have produced hundreds of thousands of documents. See Soverain Software LLC v. Amazon.com, Inc., 356 F. Supp. 2d 660 (E.D. Tex. 2005). Common wisdom is that stays will not be granted in EDTX 42

43 Eastern District of Virginia 50% of the stays requested were granted (1/2) Reason for denial: Stay of remand proceedings requested by a party that had requested three stays during litigation and had prolonged the court proceedings with incessant delays. See NTP, Inc. v. Research In Motion, Ltd., 397 F. Supp. 2d 785 (E.D. Va. 2005). 43

44 Northern District of California 87.5% of stays granted (14/16) Stays granted as late as middiscovery Stays granted even when a related patent was under reexamination Both denials effectively resulted in stays In Applied Materials, Inc. v. Negevtech, Inc., 2005 WL (N.D. Cal.), the court denied the stay because the PTO still had 3 months to decide whether or not to grant the reexamination request, but the court made it clear the motion to stay would be subject to renewal as soon as the reexam request was granted. In Raytek, Inc. v. Solfan Systems, Inc., 211 U.S.P.Q. 405 (1981), the court purported to deny the stay, but nonetheless held that trial should await the results of the re-examination. 44

45 Western District of Wisconsin No cases reported in which stay of litigation was sought pending reexam outcome Time to trial too short? Little likelihood stay will be granted? (Remember this is the district that forces service) 45

46 Venue & Timing Ex Parte 2 mos Faster Venues Like W.D.Wisc & Lufkin Proceeding To Trial Slower Venues Like E.D.TX, Del., etc. Proceeding To Trial 18 mos Request Reexam Order First Action On merits Final Office Action Reexam Certificate Inter Partes 2 mos 19 mos 30 mos Request Reexam Order First Action On merits Action closing Prosecution Right of App. Notice Reexam Certificate 46

47 Carpe diem. Seize the day, boys. When to File 47

48 When to File Reexam Before the lawsuit In conjunction with the potential filing of a declaratory judgment action? Provides a strong argument for the court to grant a stay if litigation is later filed Cheaper to take down patent via reexam ($50K) versus litigation ($3.5M+) (but might provoke suit) Can cast later suit as retaliatory At the beginning of the lawsuit To maximize the chance of being granted a stay of litigation To minimize the chance of preliminary injunction/ TRO The first OA is likely to occur before trial 48

49 When to File Reexam, cont. Near the end of the lawsuit The requests can be supported by arguments developed along in the lawsuit The grant of a reexam may be influential to the trier of fact A pending reexam may be influential in post-trial actions, including arguing against a potential permanent injunction Inter partes reexam relatively easier to prepare after prior art searching completed; less concern about estoppel 49

50 When to File Reexam, cont. After the lawsuit Not common to file a request for reexam after the lawsuit May serve to reduce ongoing royalty payments Multiple, staggered ex parte reexams Each new reexam request can address shortcomings that the PTO ruled upon in a prior request 50

51 Houston, we have a problem. Useful to Patentees As Well 51

52 Also for Plaintiffs in Trouble Plaintiffs may file to clear patent in light of prior art May file to attempt to cure inequitable conduct Unlike certificates of correction, changes to claims apply to pending litigation Can file for stay and keep place in line/venue 52

53 Case Study ArthroCare v. Smith & Nephew (D. Delaware) Facts: ArthroCare sued Smith & Nephew for infringement of three patents relating to arthroscopic surgical devices At the time of filing, the PTO had granted a third party request for reexam of one of the patents Nov PTO rejected the claims of the patent-in-suit in light of prior art relied on in the litigation Smith & Nephew moved to stay but was denied During the reexam, the patentee put all of defendant s prior art and invalidity contentions before the PTO The jury was told about the reexam and upheld the validity of the patents Smith & Nephew s motion to stay the permanent injunction was also denied despite PTO s granting request for reexam 53

54 All-righty then! Some Final Thoughts 54

55 Consider Filing As Defendant, consider filing if: Have other, non-patent/publication art Have strong and/or very technical printed publication art Have weak noninfringement position Want to cast shadow over patent for jury Sued by contingency fee firm or don t have much money yourself Want to mitigate chance of preliminary injunction issuing Want stay (design around, wait patent out until expiration, tire Plaintiff, etc.) As a Plaintiff, consider filing if: Need to clear patent over new art; want to amend claims Gain additional leverage based on favorable reexam 55

56 Be Aware of Open Issues/Traps in Inter Partes Scope of estoppel How extensive a prior art search must be performed? Constructive knowledge of everything publicly accessible? 3rd party currently can t respond to office action if patentee doesn t respond (i.e., all claims granted) 3rd party comment period currently limited to 30 days Reduces settlement leverage once filed 56

57 Stuck with Ex Parte (App. Filed After Nov. 29, 1999)? File early & often Can file multiple ex parte reexams on same art (if you can raise substantial new questions of patentability different than that raised in pending reexam) MPEP 2240 Consider filing reexam on any continuation apps (to shoehorn arguments) Provide as much input/argument with your request as you can! 57

58 Fasten your seatbelts. It's going to be a bumpy night. Thank You! 58

59 About the Presenter: Kathi Lutton works closely with companies ranging from Fortune 100 companies to startups, primarily in the electrical arts. Ms. Lutton leads high-stakes, high-tech litigation. Ms. Lutton brings to the table her Federal Circuit clerkship and knowledge of Federal Circuit law as well as her bachelor s and master s degrees in electrical engineering and industry experience. By understanding and simplifying complex technical concepts for the courts and juries, and by working closely with clients to develop strategies that best serve their needs, Ms. Lutton optimizes results for her clients. 59

60 About the Materials: These materials were prepared by: Katherine Lutton Principal Silicon Valley Brian Nester Principal Washington, D.C Insert others who put a good amount of work into this 60

61 About the Materials: These materials were prepared with the assistance of Fish & Richardson 2006 Summer Associates: Corrin Drakulich, Boalt Hall Bing Hai, U.C. Hastings College of Law Louise Lu, U.C. Hastings College of Law 61