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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.

Settlement Agreements & Patent Reexamination

Posted On: Jan. 5, 2012   By: Scott A. McKeown

settlement agreement

Parallel Litigation Settles, Now What?

With the vast majority of patent reexaminations now being conducted concurrent to a district court or ITC proceeding, a common question of Patentees is “what becomes of the patent reexamination once the litigation settles?”

In the case of ex parte patent reexamination, the answer is simple: the reexamination continues unaffected. Indeed, as demonstrated a few weeks back (In Re Construction Equipment, CAFC (2011)), the ultimate outcome of the ex parte reexamination can even effectively reverse an earlier decision of the CAFC.

On the other hand, if the pending reexamination is an inter partes patent reexamination (IPX), the answer will depend on the nature of the terms of the settlement agreement. In a best case scenario for Patentee, the IPX proceeding may be vacated altogether by operation of estoppel. Of course, to trigger IPX estoppel, the settling defendant/requester must agree to a consent consent judgement in the district court (not effective in the ITC as estoppel does not apply) that they failed to prove invalidity. In most cases, defendants are loathe to publicly admit defeat. Still, unwary Patentes may be walking away from significant opportunity if just swinging for the fences.

Vacatur by Consent Judgement (Homerun)

A carefully worded consent judgment can be used to trigger 35 USC § 317 (b), effectively forcing the USPTO to vacate the proceeding by operation of estoppel.

35 USC § 317 (b) provides:

(b) FINAL DECISION.- Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit or if a final decision in an inter partes reexamination proceeding instituted by a third-party requester is favorable to the patentability of any original or proposed amended or new claim of the patent, then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action or inter partes reexamination proceeding, and an inter partes reexamination requested by that party or its privies on the basis of such issues may not thereafter be maintained by the Office, notwithstanding any other provision of this chapter. This subsection does not prevent the assertion of invalidity based on newly discovered prior art unavailable to the third-party requester and the Patent and Trademark Office at the time of the inter partes reexamination proceedings.

(emphasis added)

With respect to district court proceedings, where parties agree to settle, and the Requester is also willing to accede to a consent judgment stating that they have failed to prove invalidity, such may serve as a final judgment. (once the 30 day time to appeal the consent order has passed). In considering the language of the consent order, the USPTO will look to whether or not the claims of the ongoing IPX reexamination are the same as that at issue in the litigation. For claims of the ongoing reexamination that are not subject to the consent judgment, the reexamination would continue as estoppel would not attach for these claims. (likewise for any newly added claims) Attached is a 2009 petition decision detailing a vacatur of an IPX. (here)

In practice, defendants rarely agree to such a consent order unless some aspects of a business are being merged or absorbed as part of the settlement.

Improving the Odds (Small Ball)

While Defendants typically do not agree to a consent judgement, there are still settlement terms that can be quite beneficial to Patentees.

Common sense dictates that if the fight between the Patentee and Requester has ended on the litigation side, the Requester will discontinue their participation in the IPX. Where the IPX is still being prosecuted before the examiner (i.e, prior to appeal), the filing of an express statement of non-participation with the USPTO can provide significant benefit to the Patentee even though such would seem to be unnecessary.

Historically, ex parte patent reexamination has been more favorable to Patentees as compared to IPX. The obvious reason for this difference is the lack of participation of an opposing party.(aside from the examiners). Yet, another major benefit of the ex parte proceeding is the ability to interview the examiner on the merits. Interviews are not permitted in IPX proceedings (37 CFR 1.955)

Once a statement of non-participation has been filed, it can serve as a basis for a petition under 37 CFR 1.183 to waive Rule 955 such that an interview may be conducted in the IPX proceeding. The argument being that the interests of special dispatch may be served by the interview, and, as there is no longer a participating Requester, the requested waiver of Rule 955 is appropriate under the circumstances. The petition must explain, in detail, the goal and agenda of the proposed interview.

Once granted the Patentee will have the full benefit of an ex parte proceeding. (assuming the petition is granted in time, which is another issue altogether).

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