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— Reducing  Infringement Liability Via

         Intervening Rights (PART I)–

As reported last week, USPTO reexamination of Amazon’s “1-click patent” concluded with the amendment of the broadest claims. In response, many Internet news sources, and IP blogs decried the reexamination process and the USPTO as a failed system. Yet, lost in the hysteria and naiveté is a very fundamental concept of post-grant proceedings at the USPTO, namely, the doctrine of intervening rights.

USPTO statistics very clearly bear out that complete cancellation of ALL patent claims via ex parte reexamination, such as was conducted of Amazon’s 1-click patent, is the exceptional case, not the rule.  Indeed, as of December 2009, only 11% of ex parte reexaminations conclude with all claims cancelled. Yet, roughly 600 requests for ex parte reexamination have been filed every year since the inception of the Central Reexamination Unit (CRU). With only 11% of patents having all claims cancelled over a 20+ year period, clearly the strategy behind ex parte reexamination requests is something other than outright cancellation.[1]

Certainly, a third party requestor would be pleased with the cancellation of all claims of a patent in reexamination, however, the goal of a reexamination request need not be so ambitious.  This is because in many cases, third parties are seeking claim amendments, and/or the creation of additional prosecution history. 

Additional reexamination prosecution of a patent creates new opportunities for an accused infringer to obtain: additional prosecution history disclaimer and/or estoppel arguments; enhanced, or additional  inequitable conduct positions; and new non-infringement arguments.  For example, in a concurrent litigation, a case may be stayed pending the outcome of the reexamination.  Allowing the reexamination to conclude prior to continuing the litigation may reduce or simplify issues for trial.  Likewise, a delayed Markman Hearing may benefit from a refinement of claim interpretation issues via the additional prosecution history of the reexamination. 

Yet, from the defendant perspective, perhaps the most valued aspect of reexamination is the potential of claim amendments. A common question of clients considering patent reexamination is:

What is the effect of a claim amendment in patent reexamination?

Claim amendments in current post grant proceedings at the USPTO (i.e., reexamination/reissue) create intervening rights. 35 U.S.C. 307 (ex parte) and 35 U.S.C. 316 (inter partes) describe the impact of amending claims in patent reexamination, incorporating 35 USC 252 (relating to intervening rights in reissue applications). 

35 U.S.C.  252 Effect of reissue.

The surrender of the original patent shall take effect upon the issue of the reissued patent, and every reissued patent shall have the same effect and operation in law, on the trial of actions for causes thereafter arising, as if the same had been originally granted in such amended form, but in so far as the claims of the original and reissued patents are substantially identical, such surrender shall not affect any action then pending nor abate any cause of action then existing, and the reissued patent, to the extent that its claims are substantially identical with the original patent, shall constitute a continuation thereof and have effect continuously from the date of the original patent(emphasis added)

The first paragraph of 252 above, states that substantially identical claims are treated no differently with respect to liability (damages) as original claims. In the case of substantive amendment (the meaning of substantially identical will be explored in Part II of this post) the second paragraph of 252 provides:

A reissued patent shall not abridge or affect the right of any person or that person’s successors in business who, prior to the grant of a reissue, made, purchased, offered to sell, or used within the United States, or imported into the United States, anything patented by the reissued patent, to continue the use of, to offer to sell, or to sell to others to be used, offered for sale, or sold, the specific thing so made, purchased, offered for sale, used, or imported unless the making, using, offering for sale, or selling of such thing infringes a valid claim of the reissued patent which was in the original patent. The court before which such matter is in question may provide for the continued manufacture, use, offer for sale, or sale of the thing made, purchased, offered for sale, used, or imported as specified, or for the manufacture, use, offer for sale, or sale in the United States of which substantial preparation was made before the grant of the reissue, and the court may also provide for the continued practice of any process patented by the reissue that is practiced, or for the practice of which substantial preparation was made, before the grant of the reissue, to the extent and under such terms as the court deems equitable for the protection of investments made or business commenced before the grant of the reissue. (emphasis added)

As made clear above, the latter half of 35 U.S.C. 252 presents two flavors of intervening rights in the reexamination/reissue context: absolute intervening rights, and equitable intervening rights

The doctrine of absolute intervening rights requires that claims of the reexamination/reissue that are not substantially identical to those of the original patent, cannot lead to liability for any infringement pre-dating the newly added/amended claims of the reexamination/reissue.

The doctrine of equitable intervening rights (“may provide”) is judicially administered in accordance with the principles of equity to protect business investments made prior to the issuance of the newly added/amended claims.

USPTO statistics note that claims are amended in ex parte reexamination 65% of the time. Adding in the 11% statistic, (all claims cancelled) the potential success rate, in terms of potentially deceasing liability is 76%. Thus, realistically speaking, third party requestors are not expecting complete cancellation of all claims in ex parte reexamination.[2] Instead, they are looking to remove the Patent Holder’s leverage relating to past damages, and/or to avoid infringement liability by the narrowing of the claims.

In Part II, we will explore the meaning of substantially identical to determine the types of amendments that result in absolute and/or equitable intervening rights.

[1] Inter partes reexamination on the other hand, fare much better in this respect. Of course, only patents filed on or after November 29, 1999 are eligible for this proceeding.

[2] Inter partes reexamination provides enhanced participation, thus the expectation there is quite different. Statistics, while still preliminary due to a smaller sample, indicate that 51% of cases end in cancellation of all claims.