July 12, NPE Patent Litigation. The AIA s Impact on. Chris Marchese. Mike Amon

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1 The AIA s Impact on NPE Patent Litigation Chris Marchese Mike Amon July 12, 2012

2 What is an NPE? Non Practicing Entity (aka patent troll ) Entity that does not make products Thus does not practice its patents Examples Research institution (e.g., university) Patent holding company Patent aggregator 2

3 The America Invents Act (AIA) Enacted September 16,

4 Roadmap o Pre-AIA Developments o No more joinder of unrelated defendants o Failure to obtain advice of counsel not admissible to prove willfulness & inducement o Model Discovery Order reduces burdens o Prior user defense created (U.S. only) o Prior Art Expansion o Prosecution Issues Litigation changes are important but unlikely to have significant impact overall on the number of cases, who wins, or the amount of damages 4

5 Patent Reform Was Originally More Comprehensive 2007 Congress began considering patent reform Congress considered additional reforms: Venue: courts shall transfer patent cases when the proposed new venue is clearly more convenient Damages: Trial judge as damages gatekeeper Sequenced trials for liability and damages Redefining methodology for determining damages Willfulness: mere knowledge willfulness 5

6 Many of the early litigation reform proposals in Congress became moot or less important because of changes in the Courts o Injunction o ebay Inc. v. MercExchange, L.L.C. (2006) (Supreme Court) o Venue In re TS Tech USA Corp. (2008) (Federal Circuit; from EDTX) o Damages Lucent v. Gateway (2009) Uniloc USA, Inc. v. Microsoft Corp. (2011) 6

7 o Willfulness In re Seagate Technology, LLC (2007) o Inequitable conduct & unenforceability Therasense, Inc. v. Becton Dickinson and Co. (2011) 7

8 What Impact Will the AIA and Judicial Patent Reforms Have on NPE Litigation? 8

9 o AIA s anti-joinder rules make it difficult to file one lawsuit naming multiple defendants o Nothing prevents a plaintiff from filing multiple lawsuits on the same day in the same court The cases will likely be joined for pre-trial activities: Status conferences, discovery, claim construction Often based on Court s low number rule But defendants should get separate trials Unless liability arises out of the same transaction or occurrence Infringement allegations based on industry standard may still allow for joinder of multiple defendants in a single case 9

10 o AIA s anti-joinder rules requiring separate lawsuits for separate defendants makes it easier for a defendant to transfer a lawsuit o Federal Circuit venue decisions are making parties think hard about filing suit in jurisdictions with no relation to the case 10

11 Joinder: Thinking Outside the Box o AIA s joinder provisions do not apply to International Trade Commission (ITC) investigations o Advantages of ITC investigations: o Injunctive relief o Trial in 8-10 months o Difficult for respondent to assert counterclaims o Must Prove Domestic Industry o Substantial investment o Difficult to prove for NPE rely solely on licensing activities 11

12 Willfulness Reasons to Allege Road to treble damages Attorneys fees In re Seagate Technology More difficult to prove Two part analysis Objective test high likelihood of infringing a valid patent Defendant knew or should have known about patent 12

13 Federal Circuit Model E-Discovery Order Will Reduce Litigation Costs Federal Circuit Advisory Council s model e-discovery order reduces the amount of and electronic documents that need to be produced in litigation Does not include as general ESI Five record keepers Five search terms Contemplates cost shifting if excessive requests Adoption of model rule is incremental and subject to change East Texas: eight record keepers and ten search terms Impact on NPE Litigation el_order.pdf 13

14 Prior Art More Certain, More Abundant What constitutes prior art will be more certain Prior art will be determined by the effective filing date, not the invention date Invention date is often unknown Potentially more prior art available Priority dates will be later in time (filing vs. invention) Foreign uses and sales Foreign patents get benefit of foreign filing date 14

15 More Patent Litigation Will Involve Both the Courts and the PTO NPEs can use supplemental examination to clean up problems identified during pre suit investigation Defendants can use inter partes review and ex parte reexamination to challenge invalidity in the PTO NPEs can use prioritized examination to increase their patent arsenals Defendants can use post grant review Companies and law firms who are adept in both forums will thrive 15

16 Supplemental Examination Allows patent owner to consider, reconsider, or correct information believed to be relevant to the patent" Most extensive grounds for Patent Office reconsideration Must be considered by PTO within three months of filing If the Director's determines that a SQP exists, then reexamination ( 257(b)) Allow patentee to avoid inequitable conduct charge 16

17 Re-Examination Inter partes reexamination ending Replaced by inter partes review New standard "a reasonable likelihood that the petitioner will prevail with regard to at least one claim Limits defendants ability to file petition for inter partes review DJ action challenging validity If IPR first, and then DJ action, DJ action is automatically stayed If defendant waits more than 1 year after service, IPR not available Ex parte reexamination remains the same 17

18 Prioritized Examination Will Become a Valuable Litigation Tool NPEs can use AIA s prioritized examination to obtain additional patents within one year NPEs can quickly get additional patents that overcome defendants best prior art Defendants can quickly obtain patents for countersuits directed toward plaintiffs products except NPEs do not have products 18

19 Post Grant Review Must be filed within 9 months of patent issuance Petitioner must establish at least one challenged claim is likely unpatentable, or request raises a novel legal question important to other patents or applications Estoppel effects different from reexam Applies to all USPTO proceedings, ITC proceedings, and district court litigations Attaches with final written determination by PTAB Applies to any grounds raised or reasonably could have been raised May preclude third party from raising invalidity defenses in litigation 19

20 Questions? Chris Marchese Principal Mike Amon Principal