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  • The opinions, commentary and characterizations provided to this online forum by the authors and moderators are provided for encouraging discussion, thought and debate on important post grant issues. These postings are in no way representative of the opinions of Oblon Spivak et al., or its clients.

Declaratory Judgement Less Attractive After Patent Reform?

Posted On: Aug. 31, 2011   By: Scott A. McKeown
declaratory judgementRace to Secure Venue Could Shut Out USPTO

When there is an imminent threat of litigation, rather than await the inevitable lawsuit, a potential defendant may pursue a declaratory judgement to establish a lack of liability. In patent disputes, declaratory judgment of invalidity and/or non-infringement were traditionally sought to remove the specter of litigation from a prospective defendant’s business. Increasingly, however, declaratory judgement actions are filed to secure a more desirable venue in advance of a litigious competitor, or dreaded “patent troll.” For example, rather than await being added to the Lodsys dispute in the notoriously Patentee friendly Eastern District of Texas, Wolfram Research, The New York Times, and Foresee Results Inc all sought declaratory judgement of invalidity of the Lodsys patents in different federal district courts, namely, Wisconsin, Illinois and California.

For those prospective defendants seeking to utilize a DJ action to secure venue after the enactment of the America Invents Act, doing so will foreclose a later filed inter partes challenge (i.e., Inter Partes Review or Post Grant Review) at the USPTO.  The America Invents Act provides with respect to Inter Partes Review:

Sec. 315. Relation to other proceedings or actions

(a) Infringer’s Civil Action-

(1) INTER PARTES REVIEW BARRED BY CIVIL ACTION- An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

Likewise, the America Invents Act provides with respect to Post Grant Review:

Sec. 325. Relation to other proceedings or actions

(a) Infringer’s Civil Action-

(1) POST-GRANT REVIEW BARRED BY CIVIL ACTION- A post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

The provision makes clear in a further section that a “civil action” is not a counterclaim, only a declaratory judgement.

Perhaps of more strategic interest to those defendants considering the necessity of a DJ action is section (2) of these provisions, which provide:

(2) STAY OF CIVIL ACTION- If the petitioner or real party in interest files a civil action challenging the validity of a claim of the patent on or after the date on which the petitioner files a petition for post-grant review [or inter partes review] of the patent, that civil action shall be automatically stayed until either–

(A) the patent owner moves the court to lift the stay;

(B) the patent owner files a civil action or counterclaim alleging that the petitioner or real party in interest has infringed the patent; or

(C) the petitioner or real party in interest moves the court to dismiss the civil action.

Under section (2), a creative defendant may file a request for either Inter Partes Review or Post Grant Review, and at the same time seek a DJ action in a favorable venue. The effect of this dual filing strategy would secure a USPTO review right, and at the same time secure a desirable district court venue that would be automatically stayed. Certainly, options (2)(A) and (2)(B) seem to provide relatively straightforward mechanisms for the patent owner to lift the stay. Yet, with a concurrent USPTO proceeding going forward at an accelerated pace (if the legislation is implemented as designed) one has to wonder whether the district court would be in much of  a hurry to lift the stay, or simply maintain the status quo. Indeed, other sections of the America Invents Act, codify the well known factors considered in granting stay.

(Note: these changes are not effective upon enactment of patent reform, but instead on the one year anniversary)

For a further discussion of the America Invents Act for patent litigators, see my previous post (here)

2 Responses to “Declaratory Judgement Less Attractive After Patent Reform?”

  1. Paul F. Morgan says:

    Scott, good points, but it may not make that much difference in practice, because the Houston Law Center statistics say that only about 5% of patent suits are terminated by S.J., and as you know, almost all of even those are based on non-infringement, [often after or with a Markman]. I.e. the odds of getting out of a patent suit with a D.J. of invalidity are very slim. Especially with the “clear and convincing evidence” burden on the movant. Also, most of such D.J. suits are being used by threatened parties to select a forum of their choice and avoid E.D.TX. But most E.D. TX patent suits seem to be against parties with no prior warnings.

  2. Paul,

    I agree, venue drives most DJ actions these days. As to ultimately, and cost effectively defeating a patent, you are better off at the PTO. Still, having a chosen venue secured as a back up, and frozen in place, would be a nice one-two punch.

    Scott