IP Gespräche 2009

Frankfurt ● Karlsruhe ● Basel ● Zürich

Strategic Uses of U.S. Reexamination Proceedings –

Strengthen Your Market Position and Avoid U.S. Patent Litigation

Jonathan H. Spadt, Esquire

Glenn E.J. Murphy, Esquire

Reexamination vs. Litigation

Congress established reexamination to provide a quality check on issued patents. Patent validity can be challenged outside of court.

Reexamination is a way to challenge, or reaffirm, the validity of a patent claim.

Reexamination Is:

• Cheaper than litigation

• Sometimes quicker than litigation• More effective than litigation

(from the perspective of a patent challenger)

• A strategically useful tool that is effective either offensively or defensively, before or after litigation has begun

Cheaper Than Litigation

$13,000 $91,000

$767,000

$1,589,000

$0

$200,000$400,000

$600,000$800,000

$1,000,000$1,200,000

$1,400,000$1,600,000

$1,800,000

Ex Parte Inter Partes Litigation worthless than

$1,000,000

Litigation worthmore than$1,000,000

Sometimes Quicker than Litigation

Average and Median Pendency

24.9

34.9

19.5

32.5

25.9

0

10

20

30

40

Ex Parte Inter Partes Litigation

Procedure

Mon

ths Average Pendency

Median Pendency

More Effective Than Litigation(from the perspective of a patent challenger)

Results Comparison

25

9

67

11

70

33

64

21

0

10

20

30

40

50

60

70

80

Ex Parte Inter Partes LitigationType of Proceeding

Out

com

e Pe

rcen

tage

All Claims Confirmed

All Claims Cancelled

Claims Changed

Strategically Useful Tool

What are They? Ex Parte ReexaminationsInter Partes Reexaminations

How are they used?

Ex Parte Reexaminations

Anyone Can Request an ex parte Reexam:

1. The Patent Holder

2. A Challenging Entity

3. The Director of the PTO

Ex Parte Reexaminations

An explanation of how the prior art is relevant to each of the claims.

What is required for an ex parte Request?

A Challenging Entity may request an ex parte reexamination anonymously.

If there is a substantial new question of patentability a Reexamination proceeding will commence.

Ex Parte Reexaminations

For Ex Parte Reexam:

The reexamination takes place between only the patent owner and the PTO.

Only the patent owner may appeal an adverse decision from the reexamination.

Inter Partes Reexaminations

For Inter Partes Reexam:

The third party participates with the reexamination prosecution in the PTO.

The third party may file or be a part of an appeal by the patent owner.

There is an estoppel created.

Inter Partes Reexaminations

For Inter Partes Reexam:

The third party participates with the reexamination prosecution in the PTO.

The third party may file or be a part of an appeal by the patent owner.

There is an estoppel created.

Estoppel A third-party requester is estopped from arguing

during a subsequent litigation that a claim is invalid based on grounds that were “raised or could have been raised” during the reexamination.

The estoppel is specifically limited to “civil actions” in district court.

Similarly, an accused infringer cannot request an inter partes reexamination after losing a final decision in district court on any validity issues that the party “raised or could have raised” in the civil action.

Estoppel

The estoppel provisions do not on their face apply to Section 337 investigations through the ITC. An ITC finding of validity does not estop the losing defendant from later requesting inter partes reexamination on the same grounds.

Likewise, a defendant may raise invalidity issues in an ITC investigation that were previously addressed by an inter partes reexamination involving the same parties.

Reexaminations

What are some tactical advantages?

1. Cost savings over litigation2. Focus on patent/publication prior art

validity arguments3. Other Validity attacks available for court

action (in addition to prior art) 4. Expertise of Examiners5. Comfort with Patent Office procedures6. Different presumption and burden of proof7. Clean up patents before litigation

Reexaminations

What are some tactical advantages?

1. Cost savings over litigation2. Focus on patent/publication prior art

validity arguments3. Other Validity attacks available for court

action (in addition to prior art) 4. Expertise of Examiners5. Comfort with Patent Office procedures6. Different presumption and burden of proof7. Clean up patents before litigation

Different presumption and burden of proof

Relevant legal standards that apply in Reexamination proceedings favor the patent challenger more than in Federal Court.

No presumption of validity. Lower burden of proof –

Mere preponderance of the evidence (vs. the higher clear and convincing evidence required in Federal Court).

Intervening Rights Absolute Intervening Rights

An accused infringer may use or sell a product that was made, used, or purchased before the grant of the reexamination certificate, as long as such activity did not infringe a claim of the reexamined patent that was in the original patent.

If a claim is amended during reexamination and the amendment substantively changed the claim, then absolute intervening rights apply.

An absolute intervening right only protects products that have already been made when the reexamination certificate is granted, and does not extend to infringing processes or methods.

Essentially, an infringer may sell off existing inventory of a product that infringes the reexamined patent claims without incurring liability for past damages. It is protection from past liability and damages.

Intervening Rights, cont. . .

Equitable Intervening Rights

Protection from future liability and damages.

Equitable intervening rights address the continued manufacture, use, or sale of additional/new products covered by the reexamined patent when the defendant made, purchased, or used identical products, or made substantial preparations to make, use, or sell identical products, before the date of issuance of the reexamined claims.

Equitable intervening rights are potentially much broader than absolute intervening rights, but they are discretionary. A court may provide for equitable intervening rights to protect investments made before the grant of a reexamination certificate, including the continuation of otherwise infringing activity after such time.

Interplay of Litigation and Reexamination

Complex strategic and tactical considerations

No hard and fast rules Timing and procedural posture are

important

Favorable Outcomes – Patent Defendant

Stay or termination of litigation Reversal of prior litigation Creation of intervening rights Reduction or elimination of royalty

payments Avoidance or lifting of injunction

Favorable Outcomes – Patent Owner

Affirm validity of patent Eliminate or minimize troublesome prior

art Rehabilitate patent Estoppel (inter partes)

Translogic Tech., Inc. v. Hitachi, Ltd. 2005-1387, 2006-1333, -1192 (Fed. Cir. 2007)

District court – damages and permanent injunction

Ex parte reexamination CAFC – vacated and ordered dismissal of

district court judgment Prior holding of no invalidity not binding on

PTO in reexamination

In re Trans Texas Holdings Corp.2006-1599, -1600 (Fed. Cir. 2007)

Prior litigation settled after claim construction

Patent owner filed for reexamination PTO invalidated claims based on broader

claim construction PTO not bound by court’s claim

construction

In re Swanson2007-1534 (Fed. Cir. 2008)

District court found patents not invalid but not infringed

Reexamination ordered based on reference from original prosecution considered in litigation

Later consideration of old reference not precluded unless prior consideration involved identical issues

Procter & Gamble v. Kraft Foods Global2008-1105 (Fed. Cir. 2008)

Inter partes reexamination Infringement litigation one month after

product launch P&G moved for preliminary injunction;

Kraft moved for stay pending appeal of reexamination

Stay not available where motion for injunction is pending

Inland Steel Co. v. LTV Steel Co.03-1483 (Fed. Cir. 2004)

Jury verdict of infringement dismissed with leave to re-file pending reexamination

Reexamination canceled patents Defendant sought fees as prevailing party

in district court PTO’s invalidity finding (after appeals)

binding on courts

Summary

Reexamination gaining importance as a strategic tool in patent disputes

Reexamination generally favors the patent defendant

Reexamination is not a guarantee against being sued or having to litigate, but may lead to more favorable outcome with relatively low risk

Thank YouJonathan H. Spadt, EsquireGlenn E.J. Murphy, Esquire

RatnerPrestia, P.C.Valley Forge Office

Street address Mailing addressSuite 301 Suite 3011235 Westlakes Drive 1235 Westlakes Drive, BerwynBerwyn, PA 19312   P.O. Box 980

Valley Forge, PA 19482  USA

Phone: 1-610-407-0700Fax: 1-610-407-0701  jhspadt@ratnerprestia.comgmurphy@ratnerprestia.com