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.

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.

In recent years, courts have been reluctant to admit evidence of an ongoing patent reexamiantion at trial. This is because the presumption of validity may be undermined by communicating to the factfinder(s) that the USPTO has changed their mind. This trend is especially prominent in plantiff forums such as Texas. 

Last week, in Imaginal Systematic, LLC v. Leggett & Platt, Inc., et. al., (CACD), the California court expressed a different perspective:

Plaintiff’s Motion in Limine No. 3 seeks an order excluding any evidence relating to the inter partes reexamination proceedings. Plaintiff contends that this evidence is irrelevant and unfairly prejudicial. To the extent the evidence is offered to refute willful infringement allegations, the Court disagrees with Plaintiff’s argument. The evidence relating to the reexamination involves more than the mere fact that the U.S. PTO is reexamining the patents-in-suit. Rather, the evidence includes the fact that the proceedings have reached a stage where U.S. PTO has made findings as to the validity of the subject claims. These findings are directly relevant to whether there was an objectively high likelihood that the patents-in-suit were valid.

As is always the case with patent reexamination and parallel litigation, depending upon the court, your mileage may vary.

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).

]]> http://www.patentspostgrant.com/lang/en/2012/01/settlement-agreements-patent-reexamination/feed 0 http://www.patentspostgrant.com/lang/en/2011/12/court-rejects-uspto-art-analysis-in-patent-reexamination http://www.patentspostgrant.com/lang/en/2011/12/court-rejects-uspto-art-analysis-in-patent-reexamination#comments Wed, 14 Dec 2011 09:10:15 +0000 Scott A. McKeown http://www.patentspostgrant.com/?p=7809 Determination of Non-Obviousness by USPTO Disregarded by Court

Last week’s CAFC decision in In re Construction Equipment decided the validity of U.S. Patent 5,234,564…..again. In the first appeal, decided in 2001, the CAFC upheld the validity determination of the District Court. In the second appeal, decided last week, the CAFC considered an appeal from the USPTO rejecting the claims of the ‘564 patent in ex parte patent reexamination. In their second decision, the CAFC found the ‘564 Patent invalid in light of some of the very same prior art references at issue in the first appeal.

In her dissent Judge Newman questioned the constitutionality of the USPTO looking over the shoulder of the CAFC.

In a case of “turnabout is fair play,” last Friday, a United States District Judge for the District of Connecticut considered, and disregarded, the USPTO’s reexamination analysis of the same prior art in Jacobs Vehicle Equipment Co. v. Pacific Diesel Brake Co. et al. (D.Conn).

The Court decided that the earlier ex parte patent reexamination analysis of U.S. Patent 4,848,289, which confirmed the validity of the ‘289 Patent, was flawed in two major respects.

First, the Court explained that the non-obviousness determination of the USPTO in 2005 predated KSR. In this regard, the Court determined that the patent reexamination analysis that confirmed the claims of the ‘289 Patent may have been too rigid an application of the teaching/suggestion/motivation test (TSM).

The second, and perhaps more troubling rationale, was that the USPTO simply did not have the time or robust record to consider the issues in full during patent reexamination as compared to that of the District Court.

The Court noted in footnote 8 of the decision that:

The record before me on issues relating to obviousness is far more complete than the one before the PTO. The ex parte reexamination interview lasted about forty-five minutes. The trial, which was more about invalidity than infringement, lasted several weeks. Nearly all the prior art was before the examiner. But he did not have the benefit of the extensive evidence and arguments submitted to me.

(decision here)

Under the above rationale, a Patentee can either lose their patent in ex parte patent reexamination outright, or simply survive to fight the very same battle on another day, at additional expense. All the while, an ongoing infringement action may even be stayed pending the outcome of the reexamination for seemingly no good reason.

The new proceedings of the America Invents Act (AIA), Inter Partes Review and Post Grant Review will provide for limited discovery, estoppel to prevent duplicative proceedings, and provide adjudicative processing. These more robust proceedings will prevent such inconsistent outcomes going forward.

Unfortunately, ex parte patent reexamination was left largely untouched by the AIA.

Patent reexamination is often initiated in parallel with an ongoing infringement litigation. In the case of a parallel inter partes proceeding (IPX), the first of the proceedings to conclude (litigation or IPX) controls the outcome of the other by operation of statutory estoppel. As such, a final holding in the parallel court proceeding will end an ongoing IPX. Moreover, the losing party would be precluded from seeking IPX at a later date.

On the other hand, ex parte patent reexamination (EXP) has no such statutory “shut off valve.” Thus, even a party that was bound by IPX estoppel could file a request for ex parte patent reexamination. In this way, the infringer could attempt to “undo” the effect of the earlier, final, court judgement by invalidating the patent via the EXP filing.

As I explained this past August, the CAFC questioned this “do-over” practice during the oral argument of In re Construction Equipment. Last week the CAFC issued a decision in this case. In the process, the CAFC disturbed the holding of their first decision, issued some 10 years earlier.

In 2001 the validity of the Construction Equipment Patent at issue was upheld by the CAFC.

Last week’s CAFC decision, like their 2001 effort, considered the validity of U.S. Patent 5,234,564 in light of certain prior art references under 35 U.S.C. 103. The recent appeal stemmed from a USPTO ex parte patent reexamination decision of the BPAI. The BPAI rejected the claims of the ‘564 Patent based upon some of the same art of the earlier decision, albeit under the more liberal preponderance of the evidence standard of the USPTO (and perhaps to a lesser extent by applying the KSR precedent not in existence in 2001).

While the majority affirmed the USPTO rejection, thus reversing the outcome of their earlier decision, Judge Newman issued a strongly worded dissent.

In addition to the principles of finality based on separation of powers, the principles of litigation repose are violated by the reopening in an administrative agency of issues that were litigated to finality in judicial proceedings. Throughout the evolving reexamination statutes, no legislation suggested that reexamination might overtake a final judicial decision, or that the preclusive effect of such decision may be ignored. The reexamination statutes do not purport to grant to the PTO the authority to ignore final judgments. Such an adjudicatory structure would not have been contemplated by the Congress, and is improperly accepted by this court.

.           .           .           .           .           .           .

Powerscreen requested reexamination on the ground of obviousness, citing the same references and additional references, placing strongest reliance on the same references that had been cited in the litigation. However, when an issue has been litigated and judgment entered in a court of last resort, “[t]he underlying rationale of the doctrine of issue preclusion is that a party who has litigated an issue and lost should be bound by that decision and cannot demand that the issue be decided over again.” In re Freeman, 30 F.3d 1459, 1465 (Fed. Cir. 1994) (in a reexamination completed after litigation, the PTO gave preclusive effect to the district court’s ruling on claim scope, although the Board stated that it did not agree with the district court). These fundamentals of judicial authority and administrative obligation are not subject to the vagaries of shifts in the burden or standard of proof in non-judicial forums, as the panel majority proposes. Although this aspect was weighed in In re Swanson, 540 F.3d 1368 (Fed. Cir. 2008), a lower standard of proof in an administrative agency cannot override the finality of judicial adjudication. The burden of proof assigned to administrative bodies is a matter of policy and procedure, not a change in substantive law. Administrative burdens do not override the Judicial Power of dispositive judgment.

(emphasis added, decision here)

Judge Newman also cited to the concern of the drafters of the America Invents Act (AIA) in providing certainty and finality with respect to the validity of issued patents in support of her policy arguments. Yet, the ability to file an ex parte patent reexamination request after losing in the district court remains an unchecked practice under the America Invents Act.

(Note in some cases a later EXP filing may be precluded under the IPR provision of AIA. However, this new form of EXP estoppel is not triggered by court decisions)

]]> http://www.patentspostgrant.com/lang/en/2011/12/judge-newman-questions-constitutionality-of-second-chance-patent-reexamination/feed 0 http://www.patentspostgrant.com/lang/en/2011/08/can-patent-reexamination-be-used-to-undo-a-markman-order http://www.patentspostgrant.com/lang/en/2011/08/can-patent-reexamination-be-used-to-undo-a-markman-order#comments Thu, 18 Aug 2011 10:10:41 +0000 Scott A. McKeown http://www.patentspostgrant.com/?p=6815 Parallel Patent Reexamination Qualifies as Newly Discovered Evidence Under Fed. R. Civ. P. 60(b)

It is well established that the USPTO utilizes different standards of evidence and claim interpretation in patent reexamination. Likewise, there is no presumption of validity in patent reexamination. For this reason, district court/ITC claim construction findings (i.e., Markman Orders) are not binding on the USPTO. In re Trans Texas Holdings Corp., 498 F.3d 1290 (Fed. Cir. 2007). Yet, the findings of the USPTO with regard to claim construction can have significant impact on the court rulings.

For example, this past January, in St. Clair Intellectual Property Consultants, Inc. v. Canon Inc., (Fed. Cir. 2011, non-precedential), the CAFC reversed a lower court claim construction ruling, based in part, on the findings of USPTO examiners in patent reexamination, explaining:

Because an examiner in reexamination can be considered one of ordinary skill in the art, his construction of the asserted claims carries significant weight.

(See the earlier discussion of this case here)

Hoping to leverage this thinking, TDM America LLC, a plaintiff of the United States Court of Federal Claims, sought to undo an earlier adverse Markman Order and summary judgment of non-infringement. TDM sought relief under Fed. R. Civ. P. 60(b) arguing that a recently concluded ex parte patent reexamination of the patent at issue constituted new evidence requiring relief from the earlier judgment. TDM argued that, as in St. Clair, the claim scope statements of the reexamination record carry significant weight, and were contrary to the court’s earlier Markman and SJ findings.

Interestingly, the court agreed that a patent reexamination that concludes after judgement does qualify as “newly discovered” evidence (citing St Clair) under Fed. R. Civ. P. 60(b)., noting:

Defendant contends that TDM’s motion also should fail because it is not based upon “newly discovered evidence.” (Def.’s Opp’n, May 24, 2011, at 22.) Specifically, Defendant asserts that the PTO’s final determinations on the `614 and `862 patents did not occur until August 31, 2010 and February 21, 2011 respectively, well after the Court’s April 27, 2010 summary judgment decision. Id. Under Rule 60(b)(2), “newly discovered evidence” must exist at the time of the Court’s original decision. Yachts America, 8 Cl. Ct. at 281. TDM counters that, although the reexamination proceedings were not complete at the time of the Court’s summary judgment decision, the facts to which the reexamination pertained were in existence before the Court’s decision. (Pl.’s Reply Mem., June 29, 2011, at 15-16.) TDM relies on a Fifth Circuit case, Chilson v. Metropolitan Transit Authority, in which the court held that an audit completed after judgment but revealing facts that existed at the time of trial constituted “newly discovered evidence.” 796 F.2d 69, 73 (5th Cir. 1986). The Court also notes that the Federal Circuit has taken judicial notice of ex parte reexamination decisions. See St. Clair Intellectual Property Consultants, Inc. v. Canon, Inc., 2011 WL 66166, at *5 n1 (Fed. Cir. Jan. 10, 2011) (”[T]his court can take judicial notice of the reexamination record.”). On the basis of these authorities, the Court will treat the ex parte proceedings as “newly discovered evidence.”

Although accepting TDM’s Rule 60(b) patent reexamination theory, the court found TDM’s allegations of contrary claim scope findings sorely lacking, and improperly focused on positions that were later reversed by the examiners.

In the 1,226-page appendix, the PTO’s examiners made many observations about the Chemfix II process and the validity of the `614 and `862 patents, but in reversing course during the proceedings, the earlier examiner observations are not consistent with the later observations. Thus, in evaluating any of the PTO examiner statements, it is important to know when the statements were made. In its motion for relief from judgment, TDM habitually cites to many of the earlier examiner comments, which were later reversed and thus carry no weight. The final PTO position is consistent with the Court’s position, and would not cause the Court to alter the outcome of the case.

Although TDM was ultimately unsuccessful, the ability to introduce a favorable reexamination record under Fed. R. Civ. P. 60(b) appears to be a viable strategy for for patentees receiving adverse judgments concurrent to a pending patent reexamination proceeding.

While reexamination is often initiated parallel to litigation, some have relied upon reexamination in post-trial settings to get out from under injunctions and/or jury verdicts.

One of the more well known cases in this regard is In re Trans Texas Holdings Corp., 498 F.3d 1290 (Fed. Cir. 2007). In Trans Texas, the patent being reexamined was subject to an infringement suit, in which the district court had issued its claim construction ruling (in a district court opinion) as to the definition of a term. The parties ultimately reached a settlement before trial, and the district court issued an “Order of Dismissal with Prejudice.” The patent owner relied on that district court claim construction ruling in a reexamination proceeding, and argued that the Office was bound by that district court claim construction ruling, under the doctrine of issue preclusion. The Federal Circuit stated that issue preclusion could not be applied against the Office based on a district court holding in an infringement proceeding, since the Office was not a party to that earlier infringement proceeding. See Also In re Translogic Tech. Inc. (CAFC 2007)

Yesterday, the CAFC heard oral argument in the case of In re Construction Equipment. Construction appealed from a decision of the BPAI in ex parte patent reexamination that found the claims of the patent anticipated and/or obvious. Previously, the CAFC found the Construction patent not invalid on appeal from the District Court. Thereafter, the appellant pursued ex parte reexamination on some of the very same art previously considered.

During oral argument the court, sua sponte, questioned the propriety of the USPTO’s seeming dismissal of the Court’s previous validity ruling.

It is long established that the USPTO may conduct patent reexamination independent of district court proceedings. As held in Ethicon v. Quigg, 849 F.2d 1422, 1428, 7 USPQ2d 1152, 1157 (Fed. Cir. 1988) that the Office is not bound by a court’s holding of patent validity and should continue the reexamination. The Court noted that District Courts and the Office use different standards of proof in determining invalidity, and thus, on the same evidence, could quite correctly come to different conclusions. Specifically, invalidity in a District Court must be shown by “clear and convincing” evidence, whereas in the Office it is sufficient to show non-patentability by a “preponderance” of the evidence. Since the “clear and convincing” standard is harder to satisfy than the “preponderance standard,” a court’s holding of patent validity is not controlling. If sufficient reasons are present, claims held valid by the court may be rejected in reexamination.

Still, the Court questioned the fairness of allowing the same losing party in Construction a chance to essentially re-litigate some of the very same issues. Judge Newman in particular questioned the finality and certainty of such a practice. (12min-17min marks of oral argument). (Although, it was acknowledged that the USPTO was essentially the appellee in this instance, not the Requester)

Of course, the Court has considered the issue previously (In re Swanson (CAFC 2008)) holding:

[the relevant statutory] language and legislative history, as well as the differences between the two proceedings, lead [to the conclusion] that Congress did not intend a prior court judgment upholding the validity of a claim to prevent the [USPTO] from finding a substantial new question of validity regarding an issue that has never been considered by the [USPTO]. To hold otherwise would allow a civil litigant’s failure to overcome the statutory presumption of validity to thwart Congress’ purpose of allowing for a reexamination procedure to correct examiner errors, without which the presumption of validity would never have arisen. Swanson, 540 F.3d at 1382.

(emphasis added)

In Construction, while some of the art of the reexamination was previously used in the district court, the SNQ determination hinges upon issues previously considered by the USPTO, not the courts. (note, there is no statutory estoppel in ex parte patent reexamination)

During oral argument Construction indicated that they intend to pursue the “loser estoppel” theory to the District Court should the CAFC affirm, which seems likely.

This past January, I recounted the longstanding dispute between Callaway Golf and Acushnet. Acushnet is the parent company of Titleist, maker of the ProV1 family of golf balls. Callaway has asserted that the ProV1 balls infringe several of their patents (6,210,293, 6,503,156, 6,506,130, 6,595,873) in the Delaware District Court.

In 2006, Acushnet sought inter partes patent reexamination of the Callaway patents. In March of this year the BPAI decided the appeals of these reexaminations, finding the asserted claims of the Callaway patents invalid. Likewise, the same claims were found invalid in March of 2010 by the Court (neither dispute has made it to the CAFC).

Interestingly, patent reexamination was sought by Acushnet despite a 1996 contractual agreement between the companies that mandated all proceedings be conducted in the Delaware court. In fact, the Court has found Acushnet to have breached the terms of the settlement agreement by virtue of the patent reexamination filings (decision here).

At the outset of the reexamination proceedings Callaway attempted to have the reexamination proceedings vacated by the USPTO. Callaway argued that the USPTO was assisting in the breach of the contract by conducting patent reexamination. These petitions were denied. In denying the petitions the USPTO explained that private contract could not alter the USPTO’s statutory duty to conduct reexamination.

After four years worth of patent reexamination, and on the heels of an unsuccessful appeal to the BPAI, Callaway filed suit against the USPTO in an attempt to once again vacate the proceedings.

Last week the Virginia Court largely agreed with the USPTO explaining (full decision here):

After reviewing the inter partes reexamination statute, the PTO concluded that the 1996 settlement agreement could not abrogate its ability to reexamine the [patents]. The PTO also concluded that a contractual provision that absolutely prohibits reexamination would violate the strong public policy interest in ensuring valid patents.

The PTO’s decision is grounded in basic contract law. The 1996 settlement agreement cannot restrict the PTO’s participation in the reexaminations unless the PTO was a party to the agreement. . . .. The PTO was not a party to the 1996 settlement agreement and therefore cannot be bound by any of its provisions.

Moreover, the PTO correctly concluded that the inter partes reexamination statute provides a nondiscretionary duty, requiring the PTO to conduct a reexamination once it receives a request and makes the initial finding that a substantial new question of patentability exists.

The decision is not at all surprising.

Callaway may have had better luck seeking an injunction to prevent Acushnet from participating in the inter partes reexamination proceedings at the outset. At this stage of the game the damage has been done. An injunction 4 years prior would have at least given Callaway an ex parte path to the BPAI, which is statistically more favorable to patentees.

The decision is interesting with respect to its seemingly ephemeral rationales in distinguishing inter partes patent reexamination from court proceedings. For example, the Court notes that reexamination is not a judicial proceeding, and that a private agreement preventing patent reexamination would be against public policy. In a few months, patent reform will transform inter partes patent reexamination to inter partes review, an adjudicated proceeding. Also, the inter partes review statute expressly provides for settlement between the parties (Sec. 317 of H.R. 1249), which would effectively discontinue the USPTO’s efforts by operation of private agreement.

Those fashioning forum selection clauses for litigation settlement purposes would be wise to consider the changing landscape of post grant patent practice going forward.

As discussed last month, evidence of a concurrent reexamination proceeding is typically excluded in district courts as lacking relevance under FRE 402 and/or as being more prejudicial than probative under FRE 403, when offered for purposes of demonstrating invalidity.

As explained last week in Volterra Semiconductor Corporation v. Primarion, Inc., et. al. (NDCA):

With respect to the PTO Initial Office Actions and reexamination orders, it is well established that while statements made by the patentee during reexamination proceedings may be probative as to questions of claim construction, see E.I. du Pont de Nemours & Co. v. Phillips Petroleum Co., 849 F.2d 1430, 1439 (Fed. Cir. 1998), preliminary decisions and actions by the PTO in the course of a reexamination proceeding are not probative of invalidity. . . . Defendants have relied on the preliminary opinions expressed by the PTO on questions of invalidity. As these opinions are only preliminary, however, they have no probative value on that question . . . Therefore, Plaintiff’s objections to Defendants’ reliance on the PTO office actions and orders are sustained to the extent that Defendants rely on them to support their positions regarding invalidity.

For the above reasons, parallel patent reexamination filings are almost never concurrently filed for the purpose of convincing a fact finder that a patent should be found invalid. Instead, the benefits of parallel patent reexamination have been discussed at great length here as potentially impacting other aspects of litigation, “Is Evidence of Parallel Reexamination Proceedings Admissible at Trial?” (Parts I, II, III, and IV). In past posts, the benefits of parallel patent reexamination evidence are explained as: aiding an inequitable conduct defense, impacting claim construction,  rebutting allegations of willful infringement, obtaining patent owner admissions to support a non-infringement defense, obtaining an intervening rights defense, providing grounds to stay a district court proceeding, and supporting/opposing injunctive relief.

In the above case, although inequitable conduct was denied on summary judgement for intent reasons, the materiality determination of the reexamination with respect to common references was considered by the court.

This case was brought to my attention by the great Docket Navigator.

Increasingly, courts are presented with evidence of a parallel patent reexamination and must determine whether/when such evidence is admissible.

Admissibility of evidence is governed by the Federal Rules of Evidence (“FRE”).  In recent cases, where the admissibility of evidence of concurrent reexamination proceedings has been offered with respect to the ultimate question of validity, patentees have attempted to use three rules of evidence to exclude such evidence, FRE 402, FRE 403, and FRE 802.

FRE 402 excludes irrelevant evidence.  Patentees, hoping to keep evidence of concurrent reexamination proceedings out of the litigation and away from the jury, have argued that this evidence is irrelevant and should be excluded under FRE 402.  Several courts have agreed.  For example, in the Northern District of Iowa, where reexamination had been granted but no office action had issued, the court stated that “evidence of incomplete patent reexamination proceedings is not admissible to prove invalidity of a patent, because it has no probative value on that issue.”  Transamerica Life Ins. Co. v. Lincoln National Life Ins. Co., 597 F. Supp. 2d 897, 907 (N.D. Iowa 2009) (citing Fed. R. Evid. 402).  Likewise, in the District of Utah, the court held that “evidence concerning the reexamination proceedings is likely irrelevant because it does not have the tendency to make any fact more or less probable than it would otherwise be.” Edizone, L.C. v. Cloud Nine, 2008 U.S. Dist. LEXIS 41258, at *4 (D. Utah, May 22, 2008).  Even where reexamination proceedings resulted in the rejection of claims and the issuance of  actions closing prosecution, the Southern District of Texas still found that such evidence was irrelevant.  Tesco Corp. v. Weatherford Int’l, Inc., 2010 U.S. Dist. LEXIS 121054 (S.D. Tex., Sep. 27, 2010).  The Tesco court stated that “[u]nlike in reexaminations, those challenging the validity of a patent in litigation must overcome a presumption of validity by proving by clear and convincing evidence that a patent is valid.  The conclusions of examiners as to whether a claim should be confirmed or rejected using a completely different standard have no probative value in this context.”  Id. at *27.  Nonetheless, the Tesco court held that evidence of concurrent reexamination proceedings was relevant to the issue of willful infringement.  Id. at *29-30.

However, even where such evidence has been found to be relevant, some courts have found that it fails the test of FRE 403.  FRE 403 states that “evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”  Patentees, hoping to exclude evidence of concurrent reexamination proceedings have argued that the probative value of such evidence would be far outweighed by the danger of its prejudice.  Several courts have agreed.  Where the PTO had granted a request for reexamination, the Eastern District of Texas held that “[t]he simple fact that a reexamination decision has been made by the PTO is not evidence probative of any element regarding any claim of invalidity. . . . Even if it was, its probative value is substantially outweighed by its prejudicial effect in suggesting to the jury that it is entitled to ignore both the presumption of validity and the defendant’s clear and convincing burden at trial.” i4i L.P. v. Microsoft Corp., 670 F. Supp. 2d 568, 588 (E.D. Tex. 2009).  The Northern District of Illinois similarly held that “telling the jury that the patent has been called into question by the Patent Office may significantly influence the jury’s application of the presumption of validity and significantly prejudice [the patentee]. The prejudicial potential of this evidence far outweighs any probative value it may have.” Amphenol T&M Antennas, Inc. v. Centurion Int’l, Inc., 2002 U.S. Dist. LEXIS 822, at *5 (N.D. Ill., Jan. 17, 2002).  Even where final rejections had been made during reexamination, the District of Delaware held that “[a]bsent unusual circumstances… non-final decisions made during reexamination are not binding, moreover, they are more prejudicial (considering the overwhelming possibility of jury confusion) than probative of validity.” SRI Int’l Inc. v. Internet Security Sys., Inc., 647 F. Supp. 2d 323, 356 (D. Del. 2009).

FRE 802 ensures the inadmissibility of hearsay evidence.  Hearsay is defined as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”  Fed. R. Evid. 801(c).  In Fresenius Medical Care Holdings, Inc. v. Baxter International, Inc., the patentee argued that the alleged infringer was offering several PTO documents, including the grant of a request for reexamination, to prove the truth of the matters asserted therein.  No. 03-cv-1431 (N.D. Cal. May 15, 2006).  According to the patentee, such documents were hearsay.  In response, the accused infringer asserted that this evidence fell within the public records exception to the hearsay rule, FRE 803(8), and was admissible.  Id.  FRE 803(8) creates an exception for “[r]ecords, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth (A) the activities of the office or agency, or (B) matters observed pursuant to duty imposed by law as to which matters there was a duty to report…, or (C) in civil actions…, factual findings resulting from an investigation made pursuant to authority granted by law, unless the sources of information or other circumstances indicate lack of trustworthiness.”  Fed. R. Evid. 803(8).  In Fresenius, the court found that evidence of a grant of reexamination fell within this exception and was not excludable as hearsay.  Id., slip op. at 4-6.  Specifically, it found that the PTO is a public office or agency, that the determination that a substantial new question of patentability exists is a final decision, and that PTO documents are trustworthy. Id. at 5.

For purposes of proving invalidity, evidence of concurrent reexamination proceedings is almost certainly to be excluded as lacking relevance under FRE 402 and/or as being more prejudicial than probative under FRE 403.

For the above reasons, parallel patent reexamination filings are almost never filed for the purpose of convincing a fact finder that a patent should be found invalid at trial.

Instead, the benefits of parallel patent reexamination have been discussed at great length here as potentially impacting other aspects of litigation, “Is Evidence of Parallel Reexamination Proceedings Admissible at Trial?” (Parts I, II, III, and IV). In past posts, we have explained the benefits of parallel patent reexamination evidence as: aiding an inequitable conduct defense, impacting claim construction,  rebutting allegations of willful infringement, obtaining patent owner admissions to support a non-infringement defense, obtaining an intervening rights defense, providing grounds to stay a district court proceeding, and supporting/opposing injunctive relief.

A successful reexamination from a defendant perspective does not always result in an overt claim change or cancellation. In other words, even where claims are confirmed, statements in the reexamination record that are inconsistent with arguments made in a concurrent litigation, or that rise to the level of an outright disclaimer, may provide new, non-infringement positions to defendants.

This week, the CAFC relied upon statements made by a Patentee in the patent reexamination of U.S. Patent 5,355,964 to affirm claim construction findings of the EDVA and NDCA.

In American Piledriving Equipment Inc., v. Geoquip, (CAFC 2011), the court explained:

The prosecution history removes all doubt that one of ordinary skill in the art would have understood the term “integral” to mean “formed or cast of one piece.” During reexamination, American Piledriving attempted to distinguish a prior art reference by arguing this very point . . .

 American Piledriving nevertheless argues that it did not clearly and unmistakably disavow the construction of “integral” it urges on appeal. It points out that it did not amend its claims and made multiple arguments to overcome the asserted prior art reference. American Piledriving contends that the statement was unnecessary to overcome the reference and that the examiner explicitly disagreed with it.

 “[W]e have made clear . . . [that] an applicant’s argument that a prior art reference is distinguishable on a particular ground can serve as a disclaimer of claim scope even if the applicant distinguishes the reference on other grounds as well.” Andersen Corp. v. Fiber Composites, LLC, 474 F.3d 1361, 1374 (Fed. Cir. 2007). Moreover, regardless of whether the examiner agreed with American Piledriving’s arguments concerning “integral,” its statements still inform the proper construction of the term. See Seachange Int’l, Inc. v. C-Cor Inc., 413 F.3d 1361, 1374 (Fed. Cir. 2005) (“An applicant’s argument made during prosecution may lead to a disavowal of claim scope even if the Examiner did not rely on the argument.”); Microsoft Corp. v. Multi-Tech Sys., 357 F.3d 1340, 1350 (Fed. Cir. 2004) (“We have stated on numerous occasions that a patentee’s statements during prosecution, whether relied on by the examiner or not, are relevant to claim interpretation.”). American Piledriving unambiguously argued that “integral” meant “one-piece” during reexamination and cannot attempt to distance itself from the disavowal of broader claim scope. (emphasis added)

The above result bears out a very important application of patent reexamination concurrent with litigation, namely, the creation of additional fodder for claim construction purposes.

Clearly, a successful patent reexamination from a defendant perspective does not necessarily require that a Patentee cancel or amend claims. As such, when facing a suit in a district court in which a Markman Hearing is scheduled some 12-18 months in the future, initiation of patent reexamination at the outset may prove an effective strategy to focus the later debate.