Patents Post Grant Blog

As noted by USPTO reexamination statistics, the majority of recent patent reexaminations are also involved in concurrent litigation.  A recurring issue for litigants involved in such disputes is the fashioning of an appropriate protective order to adequately protect confidential materials. Such issues become particularly contentious in litigation between direct competitors.

Understandably, defendants typically seek protective orders providing  maximum protection of confidential materials, forbidding litigation counsel from using these materials in the prosecution of plaintiff’s patent applications. This prohibition known as a “patent prosecution bar,” is largely standard practice.  However, it is well established that patent reexamination does not involve “patent applications.” Thus, a thornier issue is presented when attempting to extend this bar to include barring participation by individuals with access to confidential information in ongoing reexamination proceedings.

Courts have taken divergent paths on the issue.  Some courts have forbidden litigation counsel from participating in the reexamination altogether. Visto Corporation v. Seven Networks, Civ. A. No. 03-333, 2006 WL 3741891 (E.D. Tex. Dec. 19, 2006).  Others, such as the Delaware District Court take a more liberal position.

In Kenexa BrassRing Inc. v. Taleo Corp., 2009 U.S. Dist. Lexis 12002 **2-3(D.Del. Feb. 18 2009) (Robinson S.) (found here), the Court reasoned that, since claim scope cannot be enlarged by amendment in reexamination, and as reexamination only deals with patents and printed publications, barring access to confidential material is “basically irrelevant to reexamination.” (citing Hochstein v Microsoft Corp. Civ. A. No. 04-73071, 2008 WL 4387594 (E.D. Mich. Sept 24, 2008)  In a recent case brought to my attention by the Delaware IP blog, Delaware District Court Order, Apeldyn Corp. v. AU Optronics Corp., C.A. No. 08-568-SLR (D. Del. March 1, 2010) (Poppiti. S.M.), the Kenexa line of reasoning was followed for a reexamination directed to LCD technology (found here).

The trend in Delaware is troubling for a few reasons.

A. Competitors

First, the “Hochstein Oath” as referred to in the Apeldyn Order, originated from a non-practicing entity (NPE). Certainly, a non-competitor has much less use of confidential materials than a competitor. In essence, the Hochstein Oath coming from a NPE is largely meaningless, as business aspirations rarely extend beyond the courthouse and, typically such portfolios do not extend beyond the patents in suit.

B. Complex Technology

Second, in Apeldyn, the dispute is between competitors in a very complex area of technology. In the Apeldyn dispute the claims are directed to relatively abstract electrical circuit features. The patent at issue relates to LCD display panels and the relative retardance (in radians) between polarization drive signals. Certainly, if a narrowing amendment becomes necessary in reexamination, such an amendment can now be closely tailored to the products of the defendant based on the access to confidential technical materials. Of course, amendment of claims is always avoided in reexamination, if possible, to avoid creation of intervening rights, yet, one must also keep in mind that amendments are sometimes necessary to obtain a reexamination certificate.[1] Perhaps even more importantly, new claims are routinely added in reexamination to add ammunition to the patent arsenal.[2] Indeed, as the addition of new, more narrow claims cannot serve as the sole basis for patent reissue, an initiated reexamination favors the Patent Holder in this respect.

The ability of a competitor to fashion claims, new or amended in complex areas of technology that are specifically targeted to relatively unknown features of a competitors product is game changing leverage in a litigation dispute. In such cases, confidential technical materials of a competitor are hardly “irrelevant to reexamination.”  New claims can mean new lawsuits.

C. Duty of Disclosure, Candor & Good Faith

Another consideration for litigants is that access to confidential materials by those involved in patent reexamination on behalf of the patent owner obligates those individuals to disclose such materials to the USPTO, if they are material to patentability.  Although such confidential materials may not qualify as prior art, they may refute, or be inconsistent with, a position the patent owner takes in opposing an argument of unpatentability relied on by the Office, or an argument for patentability (37 C.F.R. § 1.555). In such situations, the materials may be filed under seal in accordance with USPTO practice and procedure. Yet, should the Office deem the confidential information filed under seal material to patentability, the information will become public, at best frustrating the goal of the order, at worst a direct violation.  Still, the need of the Patent Owner to balance its duty of disclosure to the USPTO while complying with the protective order is of great importance in considering appropriate language.

As there is ample justification on the plaintiff and defendant sides to retain separate litigation and reexamination counsel, especially in the case of direct competitors, courts would be wise to consider the realities of this dilemma when faced with such issues in the future.

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[1] It is also acknowledged that Judge Robinson cautioned that amendments in reexamination would be treated as admissions with respect to validity.

[2] Of course the Apeldyn patent is close to expiration (2012).  However, the addition of new, “picture” claims is a common reexamination tactic.