USPTO’s Rule 56 “But For-Plus” Proposal

Last week, the USPTO published proposed changes to the materiality standard of  37 CFR §§ 1.56 and 1.555 in response to the Federal Circuit en banc decision in Therasense, Inc. v. Becton, Dickinson & Co.

Impressively, the USPTO has managed to publish the proposed changes in just under two months (since the issuance of the Therasense decision). The initiative to craft such meaningful proposals in such a short time period, as well as the intention to help alleviate the significant duty of disclosure obligations is certainly greatly appreciated by all stakeholders.

In distilling the essence of Therasense down to succinct language for rule making purposes, the USPTO has promulgated a “but for-plus” test.

Is this test appropriate as currently presented, or does it require a bit more seasoning? 

The proposed rule is shown below in its entirety. (Rule 1.555 being the same)

§1.56 Duty to Disclose Information Material to Patentability

*******

(b) Information is material to patentability if it is material under the standard set forth in Therasense, Inc. v. Becton, Dickinson & Co., ___ F.3d ___(Fed. Cir. 2011). Information is material to patentability under Therasense if:

(1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or

(2) The applicant engages in affirmative egregious misconduct before the Office as to the information.

Part (b)(1) above is straight forward enough, (b)(2) on the other hand is a bit more problematic; (b)(2) embodies the “plus” aspect of the proposed “but for-plus” materiality standard.

Historically, the USPTO treated intentional misrepresentations, false and misleading statements under 37 CFR § 11.18(b)(1) as exemplified by MPEP § 410. Whereas, the duty of disclosure was covered by 37 CFR §§ 1.56, 1.555 and 1.933 and dealt with in MPEP § 2000. Affirmative egregious misconduct in the form or false statements or misrepresentations, especially in affidavits or declarations were considered to be inherently material. But such materiality was a result of a violation of the duty of candor and good faith. Whereas the duty of disclosure was confined to acts of omission and given separate treatment.

As can be appreciated, the proposed materiality definition mixes together concepts relating to acts of omission with that of false statements and misrepresentations.

Part (a) of both Rules 56 and 555 serve as a reminder that no patent will be granted or a reexamination certificate issue where fraud on the Office was practiced or attempted. In view of this statement, is it even necessary to define materiality in terms of egregious misconduct?

Tomorrow’s post will discuss the potential impact of the mixing of the duty of candor and good faith with that of the duty of disclosure relative to reexamination practices and the proposed post grant proceedings of the Leahy-Smith America Invents Act.

Therasense Decision to Influence the Choice Between Ex Parte vs. Inter Partes Patent Reexamination?

On May 25, 2011, the Federal Circuit issued its the long awaited en banc decision in Therasense, Inc. v. Becton, Dickinson & Co. 2008-1511.  The majority opinion authored by Chief Judge Randall Rader established a single new standard for determining materiality in inequitable conduct cases. This new “but for” standard defines material information as any non-cumulative information which, had it been disclosed prior to patent issuance, would have prevented the patent from issuing.

Unlike the prior standard used in determining materiality of undisclosed information, the new standard assesses materiality on a preponderance of evidence burden of proof standard giving the patent claims their broadest reasonable construction in light of and consistent with the supporting patent specification. Presumably, because the majority opinion rejected the applicability of the USPTO’s materiality standard under 37 CFR § 1.56(b)(1), the new “but for” standard will take into account any rebuttable evidence that is proffered by the patent owner such as antedating non-statutory bar prior art and objective indicia of non-obviousness, irrespective of the fact that none of such rebuttal evidence was ever submitted to the USPTO for consideration prior to patent issuance.

A consequence of the new “but for” test for materiality is that, at least for those filings that include art forming the basis of an inequitable conduct defense to infringement, inter partes patent reexamination is now the more attractive option. 

With the “important to a reasonable examiner” standard and the “prima facie unpatentable” standards eliminated in Therasense as materiality standards for proving inequitable conduct, ex parte reexamination becomes less attractive for use in corroborating an inequitable conduct defense. Previously the reasonable examiner standard was at least arguably evidenced upon a mere decision to reexamine/reject claims in either form of patent reexamination. However, Post-Therasense, the new goal is for the reexamined patent claims to be canceled or amended based on the undisclosed patents and printed publications, such would be dispositive that the original claims should not have issued in their original form.

Because the new “but for” standard allows the patent owner to submit rebuttable evidence, the third party requester needs to be cognizant that patents and printed publications that qualify as prior art under 35 U.S.C. §§ 102(a) or (e) may be vulnerable to antedating by the patent owner. Moreover, if the bases for the rejections are solely under 35 U.S.C. § 103, the patent owner may be able to rebut the prima facie case of obviousness through proof of objective indicia of non-obviousness, such as proof of unexpected results.

Particularly, in inter partes reexamination where the third party requester may participate at every stage of the proceedings, including independent rights to appeal the BPAI and Federal Circuit, the third party is provided with the most effective tool to prove materiality. USPTO statistics (here) demonstrate that challengers are far more successful in forcing claim amendment/cancellation in an inter partes patent reexamination.

Akin to the new “but for” materiality standard of the district courts, in patent reexamination, claims are also a broadest reasonable construction. Likewise, prior art is also evaluated under a preponderance of evidence standard in patent reexamination. See for example, MPEP §§ 2258(I)(G) and 2658(I).

Where the third party requester has a strong case of unpatentability of original patent claims based undisclosed prior patents and printed publications previously known by the patent owner, reexamination, preferably inter partes reexamination may be a tool of choice, if filed promptly, to prove the “but for” test for materiality Post-Therasense.

For further insight into factors that may influence the selection of one form of patent reexamination over another, see Scott’s BNA videos on the topic (here)

The admissibility of evidence relating to an ongoing patent reexamination in a parallel patent litigation is often times a question of both purpose and timing. Last January, we presented a four part series on this topic. These earlier posts compared the attempted litigation purpose (i.e., willfulness, inequitable conduct, claim construction, etc) of patent reexamination evidence relative to the stage of the patent reexamination (i.e., grant, first action, final action, etc).

In addition to these two factors, consideration must also be given to the litigation forum.

As mentioned above, one purpose for introducing evidence of an ongoing patent reexamination in a parallel litigation is to avoid a post filing (i.e., complaint) willfulness determination. The existence of an ongoing patent reexamination may be admitted to demonstrate that the accused infringer was not objectively reckless in its actions irrespective of its prior knowledge of the asserted patent. Although some courts have found that reexamination evidence defeats a finding of willfulness, these courts typically examine the status of the claims in the reexamination proceeding at the time of the willfulness determination, finding that the weight of the reexamination evidence depends on whether the reexamination proceedings are complete and whether the patent claims have undergone substantive changes in reexamination. When seeking introduction of such evidence, depending upon the court, the stage of the parallel litigation (Summary Judgment, JMOL, Pre-Trial Motions) may determine whether or not it is admissible.

While evidence of a concurrent patent reexamination is consistently admitted at the summary judgment stage to demonstrate objectively reasonable behavior, certain courts are often times reluctant to admit such evidence for jury consideration. When it comes to jury exposure some courts find reexamination evidence prejudicial to the Patentee, even for a limited purpose of demonstrating objectively reasonable conduct. Since courts have wide discretion in admitting evidence that is more prejudicial than probative, it is not surprising that different courts espouse different theories on what constitutes prejudicial evidence.

In Real Time Data LLC. v. Packeteer Inc., et al. (EDTX, ORDER September 30, 2009), the court explained:

After reviewing the arguments of both parties, the Court agrees with Plaintiff that evidence of an incomplete reexamination proceeding is unduly prejudicial in relation to the probative value contained therein. See FED. R. EVID. 403. As this Court observed in i4i v. Microsoft Corp., even if a reexamination proceeding is somewhat probative of invalidity, the probative value of this evidence is “substantially outweighed by its prejudicial effect.”  . . .

Federal Rule of Evidence 403 gives the Court broad discretion to exclude evidence where its probative value is substantially outweighed by the danger of unfair prejudice. An Office Action, such as the USPTO’s preliminary findings of invalidity of the ‘104 patent, carries with it a substantial risk that the jury will give its conclusions undue deference. See Pharmastem, 2003 WL 22244704, at *3 (finding that an opinion from a quasi-judicial or administrative body increases the likelihood that a jury will give its conclusions deference). Furthermore, even if the jury is instructed to consider the Office Action for the limited purpose of assessing objective recklessness, there is a strong likelihood that the jury would be confused as to its relevance and use this evidence in considering the validity of the ‘104 patent. In sum, although an ongoing reexamination proceeding and the USPTO’s actions therein could be considered by the Court as a factor in a willfulness determination at the summary judgment stage, during trial in a request for judgment as a matter of law as to willful infringement, and/or post-verdict,  it should not be introduced before the jury due to the highly prejudicial effect the USPTO’s actions would have on the jury.

However, not every court follows the Texas model.

On September 1, 2010, Judge Roslyn O. Silver of the United States District Court for the District of Arizona denied a motion to exclude evidence of the patent reexamination of the ’894 patent-in-suit in Integrated Technology Corp. v. Rudolph Technologies, Inc., Civil Action No. CV-06-02182-PHX-ROS.  Judge Silver, simply concluded that the USPTO’s action is relevant, at the very least, to the issue of willful infringement citing Lucent Tech., Inc. v. Gateway, Inc., 2007 WL 6955272 (S.D. Cal.).

As demonstrated by the considerable difference in opinion here, not to mention the different attitudes as to whether or not to stay a case pending patent reexamination, the practices of particular jurisdictions are a critical factor in assessing patent reexamination strategies.

Many inter partes patent reexaminations are conducted concurrent to district court litigation (USPTO statistics indicating 70% ). At one point or another, the defendant(s) will seek a stay of the parallel litigation arguing that the inter partes patent reexamination will reduce issues for trial based upon familiar factors. Of course, in arguing against the stay, the Patentee will cite to the statistics indicating that inter partes patent reexamination take years to conclude through appeal.

So, since everyone knows the game, why don’t defendants show some creativity and take matters into their own hands? In other words, there is a rule already in existence by which participants of an inter partes patent reexamination can accelerate the proceeding THEMSELVES. So, why isn’t anyone using it?

37 CFR 1.953(b) provides for an expedited Right of Appeal Notice (RAN). At any time after the Patentee’s response to the initial Office action on the merits in an inter partes patent reexamination, the patent owner and all third party requesters may stipulate that the issues are appropriate for a final action, which would include a final rejection and/or a final determination favorable to patentability, and may request the issuance of a RAN. The request must have the concurrence of the patent owner and all third party requesters present in the proceeding, and must identify all of the appealable issues and the positions of the patent owner and all third party requesters on those issues. If the examiner determines that no other issues are present or should be raised, a RAN limited to the identified issues shall be issued. See also MPEP § 2673.02 (II).

In other words, significant portions of inter partes patent reexamination prosecution can be compacted, by agreement. Of course, litigating parties never agree on anything, which is why this rule is never used. But, if a defendant were to indicate in their motion for stay that they would stipulate to following this procedure, they would in fact be offering to accelerate the proceeding. In this way, the defendant can take some of the “bite” out of the Patentee’s prejudice (i.e., time delay) argument.

In practice very few expedited RANs are sought (I’m not aware of a single one), thus contributing to the prolongation of the inter partes patent reexamination prosecution phase (appeal being a separate phase). If the patent litigation is not stayed and the trial is imminent or underway, the patent owner has little incentive to expedite the inter partes reexamination proceedings. In such circumstances, particularly where the patent owner has not canceled or amended claims for fear of intervening rights applying, expediting the right of appeal where original patent claims are rejected has no benefit. Even where all claims are confirmed or allowed, the patent owner has little incentive to expedite the right of appeal notice to permit the third party requesters to get their appeals heard promptly.

On the other hand, where the concurrent patent litigation is stayed pending the outcome of the inter partes reexamination proceeding, the patent owner may want to expedite the right of appeal notice, especially where all claims are confirmed or allowed. In such circumstance, the third party requesters may lack an incentive to seek an expedited right of appeal notice because of fear of the estoppel provisions of 35 U.S.C. § 315(c). Thus, agreeing to fast track the case to appeal is not without risk for either party.

Finally, where there are circumstances that may warrant the filing of an expedited right of appeal notice, such as where a parallel litigation is stayed, the USPTO should consider a sua sponte waiver of 37 C.F.R. 1.955. This would permit a joint interview for the purpose of reaching agreement on the issues appropriate for final action and identification of all of the appealable issues. Such would advance the inetrests of the special dispatch requirements of 35 U.S.C. § 314(c). Such a procedure would be in a similiar vein to that of the pilot program seeking waiver of the Patent Owner Statement in ex parte patent reexamination.

In a separate action on November 11, 2008, GEOSPAN requested the U.S Patent Office to reexamine Pictometry’s U.S. Patent Number 7,424,133, entitled “Method and Apparatus for Capturing, Geolocating and Measuring Oblique Images.” This action is a procedure used by the U.S. Patent Office to allow the claims in existing patents to be contested (Ref. No. 95/001,110)

In its request, GEOSPAN set forth substantial new questions of patentability based upon  a September 5, 2002 printed publication by David Rattigan, a reported for a Boston newspaper. The USPTO ordered inter partes reexamination of the ‘133 Patent, and subsequently issued a Non-Final Office Action on February 2, 2009 rejecting claims 17-24 on anticipation and obviousness grounds. Currently, the rejections are on appeal to the BPAI.

On May 25, 2010, the patent owner filed its brief. On the appeal, the Patent Owner is contesting  the USPTO’s conclusion that the submitted declaration evidence filed under 37 C.F.R. § 1.131 (swear behind) is insufficient as well as the conclusion that declaration evidence filed under 37 C.F.R. § 1.132 is insufficient to disqualify the Rattigan publication based upon attribution. (MPEP 716.10). Of particular interest is the dispute between the USPTO and the Patent Holder as to whether declaration evidence can be used to disqualify a prior art reference as “attributed” to the  inventors’ work where none of the inventors is an author of the printed publication used to reject the claims. 

The USPTO has taken the position that some overlap must exist between inventorship and authorship of the prior art reference to properly be “attributed.” Conversely, the patent owner in its brief relies on In re Costello, 717 F.2d 1346, 1347 (Fed. Cir. 1983), Ex parte Nykoluk, Appeal No. 2008-1778, page 21 (Bd. App. & Int. 2008) and Ex parte 5872952 et al., Appeal No. 2005-2512 (Bd. App. & Int. 2006) in arguing that co-authorship is not a requirement for disqualifying a reference using a § 1.132 declaration.

PPG Comment:  Attribution typically involves co-authorship as inventions are often described in academic papers by the inventors along with other contributors. The idea behind attribution is that a description initially identified as prior art that is “attributable” to the inventors work, should be disqualified. Here, the description is by a reporter commenting on a promising technology that formed the basis for the patent, as demonstrated by the declaration evidence of record (Patent Owner Brief here). The Office appears to be requiring co-authorship of the news report not based upon any holding of the courts, but instead, based on commonly encountered fact patterns.

An Answer to the appeal briefing was issued last week (here). I was hoping for a bit more insight into the position of the Office. Unfortunately, the Answer simply incorporates the positions of the RAN (which, was of course written prior to the briefs). Very strange.

The court denied the motion to stay the litigation citing familiar factors, noting that (1) the stay would prejudice the plaintiff, (2) the stay would not likely simplify the issues in litigation and facilitate trial, and (3) discovery will soon be complete. Yet, clearly, of more interest to the court was why Envisionware chose to ignore the ‘870 Patent altogether.

In explaining his decision, the magistrate judge expressed concern that Envisionware was seeking a stay for purely tactical reasons. The Court explained that, with respect to the ‘870 Patent, there would still need to be an infringement analysis, claim construction, expert discovery and fact discovery despite the fact that the ’870 Patent shares a common specification with the ’780 Patent. At the hearing counsel for Envisionware explained that inter partes reexamination of the ‘870 Patent was not possible. Envisionware offered no clear answer as to why ex parte reexamination of the ‘870 Patent was not pursued.

PPG Comment: Third parties are reluctant to pursue ex parte reexamination believing that the lack of third party participation will lead to an unfavorable result. Yet, as pointed out by the court in this case, if the USPTO were to conclude that the claims in the reexamination were patentable, this would not bind the Court from reaching a contrary determination. Indeed, as we noted last week, courts do not even give deference to the decisions of the USPTO. By deliberately choosing to avoid the risk of a favorable ex parte patent reexamination result, Envisionware seemingly failed to see the forest for the trees.

USPTO statistics demonstrate

Of course, the number of concluded inter partes reexamination as compared to ex parte reexamination is still relatively small, likely skewing the statistics. Yet, it is quite clear that eliminating the active voice of the third party requester, as well as avoiding third party appeal of confirmed/allowed claims is highly desirable from a Patent Owner perspective.

Knowing that ex parte patent reexamination presents the most favorable odds to a Patent Owner, is there a preemptive strategy a patent owner can employ to diffuse the risk of inter partes patent reexamination?

In deciding to grant or deny a request for reexamination, the USPTO analyzes the proposed Substantial New Questions of Patentability (SNQs) presented with respect to previously considered art of the original prosecution, as well as concluded/ongoing reexamination proceedings. Where an earlier initiated ex parte reexamination includes the same, or cumulative art, a later request for inter partes reexamination that is based on such art and presented in the same light, must be denied MPEP 2642. Thus, by “front loading” prior art in a patent owner initiated ex parte reexamination request the opportunity to seek inter partes reexamination based on the same art may be foreclosed to a third party.

For example, Forecast Consoles filed an April 2005  request for ex parte reexamination of its own patent (U.S. Patent No. 6,857,712) which the USPTO assigned Reexamination Control No. 90/007,706.  An SNQ was established based on a Catta patent and an Evan printed publication. Subsequently, in August 2005, third party requester TBC sought inter partes reexamination of this same patent. In addition to the Catta patent and the Evan publication used to establish an SNQ for the independent patent claims, other references were included to establish an SNQ, however, these other references were only used in connection with dependent claims.

In Reexamination Control No. 95/000,106 the USPTO did not order inter partes reexamination, finding that because the Catta and Evans references were used as the basis for an SNQ in the ex parte reexamination filed by the patent owner (i.e., presented in the same light), they could not be used as a basis for an SNQ by the third party requester against the independent claims in the IPR proceedings. Furthermore, TBC’s failure to raise an SNQ against the independent claims prevented them from presenting an SNQ against the dependent claims, although additional prior art was used with Catta and Evans against the dependent claims.

Subsequently, the ex parte reexamination proceeding terminated with all original patent claims confirmed; resulting in a true victory for Forest Consoles in preempting TBC’s inter partes reexamination efforts.

To be sure, a preemptive ex parte reexamination filing by a Patent Owner is a bold step, unlikely in many concurrent litigation contexts. Still, the lesson to be learned for third parties is to initiate inter partes reexamination promptly, especially in highly specialized technologies that have a limited universe of available prior art.

Generally, if a requester chooses not to request reexamination for a claim, that claim will typically not be reexamined. Yet, the decision to reexamine any claim for which reexamination has not been requested lies within the sole discretion of the Office. See MPEP 2240; Sony Computer Entertainment America Inc. v. Dudas, 85 USPQ2d 1594 (E.D. Va 2006).

During reexamination of the ‘083 Patent the Patentee placed the features of claim 2 into claim 1. In response to the amendment, the examiner again rejected claims 1 and 3-6 over a reference cited in the original prosecution. On appeal, the BPAI in Ex parte Yasukochi et al. affirmed the examiner’s rejection of claims 1, and 3-6.

In its decision, the BPAI refused to consider the appellant’s argument that the rejection of the claims over old art was improper, because it did not raise a substantial new question of patentability (SNQ), holding that the question of whether an SNQ exists is a petitionable issue and not an appealable issue.

In order to properly contest the new rejection, the patent owner should have filed a petition under 37 CFR § 1.181 to the Director of the CRU when the examiner initially raised the new rejection.  However, such a petition would now be considered as untimely, since more than two months have elapsed since the rejection was made.  Moreover, if the examiner can characterize the technical features of the old art in a new light, reexamination over the previously considered prior art would not be precluded.

The BPAI decision also expressly refused to allow the patent owner to rely upon disclaimer of the original prosecution history in interpreting the claims at issue noting that “disavowal of scope, no matter how clearly stated, in lieu of an amendment to the claims.” This is an especially disturbing statement, and at odds with previous BPAI holdings, more on this topic Monday.

As noted in our post yesterday, prior to their Memorial Day break, the Federal Circuit issued two decisions touching upon patent reexamination practice, the second decision is discussed below.

In Dow Jones & Co., Inc. v. Ablaise Ltd., (Fed. Cir. 2010), the court affirmed the district court’s grant of summary judgment that the asserted claims of  U.S. Patent No. 6,961,737 (the ‘737 Patent, claiming a method for generating computer web pages) are invalid as obvious. The court also addressed a related patent, 6,295,530 (the ‘530 Patent).

The court noted that the ‘737 Patent is the subject of an ex parte reexamination proceeding. In the concurrent patent reexamination, claims 1-6 of the ‘737 Patent stand finally rejected as anticipated. In footnote number three of the CAFC decision, the court lamented the fact the reexamination was not yet completed through appeal to the BPAI, stating:

An ultimately final rejection of the claims by the PTO, would fatally undermine the legal presumption of validity of the ‘737 patent and would be sufficient by itself to moot this entire portion of the appeal and warrant affirmation of the district court’s finding of invalidity.  However, the ex parte reexamination has not yet been completely resolved.

Reexamination of the ‘737 Patent was ordered December 22, 2008 (Control No. 90/010,311, request filed October 10, 2008). On May 5, 2009 a first Office Action was mailed. On July 6, 2009 a response by the Patent Owner to the first Office Action was filed. On December 23, 2009 the final Office Action was mailed containing the final rejection of claims 1-6 of the ‘737 Patent.  A Notice of Appeal was February 23, 2010.  An Appeal Brief was filed April 23, 2010 by the Patent Owner. In other words, the reexamination spanned 18 months from initial request to appeal.

Interestingly, the concurrent litigation was initiated by Dow Jones (declaratory judgment) in June of 2006.  So, patent reexamination was not sought until some 28 months later in October 2008. With the litigation out in front of the reexamination by some 28 months, how can litigants realistically expect the USPTO to overtake the litigation? Simply filing the reexamination request in a timely fashion would have very likely avoided the necessity for the CAFC appeal.

Yet, the late filing at issue in this case is not at all exceptional. Defendants routinely opt to wait until an adverse Markman ruling before seeking reexamination. Of course, when the USPTO does not make up for the REQUESTER’S DELAY, it is the Office that is faulted.

When all else fails, blame the government.

As a review for new readers, some IPR basics.

Reexamination allows the USPTO to reconsider the patentability of at least one claim of an existing patent.  Congress intended reexaminations to provide an important quality check on patents that would allow the government to remove defective and erroneously granted patents.  Upon making a reexamination determination, the USPTO may confirm or cancel original patent claims or allow claims as amended or newly added.  There are two types of reexamination proceedings: ex parte and inter partes.  An inter partes reexamination, in contrast to the ex parte reexamination, provides the third party requester to participate throughout the proceedings, including appeals. The results of inter partes reexamination are binding on the third party requester in any subsequent or concurrent civil action.  The goal of reexamination is to permit efficient resolution of questions about the patentability of issued patent claims without recourse to expensive and lengthy infringement litigation.  H.R. Rep. No. 96-1307(I).

The benefits provided by an inter partes reexamination include:

1. Patents and printed publications relied upon in the reexamination also presented to the Court will have been first considered by the USPTO, with its particular expertise;
2. Many discovery problems relating to prior art patents and printed publications can be alleviated by the reexamination;
3. In those cases resulting in effective final adverse determinations on claim patentability, the suit may be dismissed;
4. The outcome of the reexamination may encourage a settlement without the further use of the court;
5. The reexamination file history may be entered into the record at trial, thereby reducing the complexity and length of the litigation;
6. Issues, defenses, and evidence will be more easily limited in pretrial conferences after a reexamination; and
7. The cost will likely be reduced both for the parties and the court.

A purpose of the reexamination procedure is to eliminate trial of issues or to facilitate trial of issues.  The courts should not expend unnecessary judicial resources by attempting to resolve claims which may be amended, eliminated or lucidly narrowed by the reexamination process and the expertise of the USPTO.