24529214er6Threat of Injunction Dissolves in Flexiteek Litigation

The initiation of patent reexamination for patents subject to concurrent litigation can provide strategic benefits independent of the ultimate outcome of the reexamination. These litigation inspired applications of patent reexamination can be thought of as falling into one of two categories, namely, pre-trial maneuvers or post-trial, damage control.

Pre-trial Maneuvers are those patent reexaminations initiated to potentially enhance a defendant’s battle in the district court.  For example, patent reexamination may be sought as an avenue to establish objectively reasonable behavior for use in preventing a willfulness finding. (see e.g., the yesterday’s Fairchild Semiconductor press release). Still other defendants initiate patent reexamination concurrent with litigation as a mechanism to leverage more acceptable settlement terms, provide additional fodder for claim construction, or to demonstrate the materiality of a reference subject to an inequitable conduct defense.

Post-trial (damage control) on the other hand, is a litigation inspired use of patent reexamination that seeks to undo the damage inflicted by the ruling of the district court. One of the more well known uses of a patent reexamination filed after a district court judgment was illustrated in In re Translogic Tech., Inc., 504 F.3d 1249, 1257 (Fed. Cir. 2007). Translogic had secured an earlier verdict for significant damages against Hitachi, the appeal reached the CAFC at the same time as the appeal rejecting all claims in reexamination, as a result, the infringement verdict was vacated.

Others have sought to leverage patent reexamination to get out from under, or to prevent an injunction. Recently, Apotex was enjoined from sale of a generic Plavix® until after the patent expires. In attempt to dislodge the injunction, Apotex has sought patent reexamination. The first reexamination was terminated favorably to the Patentee and the second was recently denied; Apotex has been unable to dislodge the injunction to date. Yet, last week, a defendant successfully leveraged a final rejection in patent reexamination to stay the enforcement of a permanent injunction.

Enforcement of Injunction Stayed in View of Patent Reexamination

In Flexiteek v. Plasteak,  (S.D. Fla. 2010) (Cohn, J.), the district court opted to stay the enforcement (order here) of the permanent injunction based upon the status of the related patent reexamination. At trial, Plasteak was found to infringe the subject patent (6,895,881), and held liable for a paltry $79K in damages, but was to be enjoined from further infringement by operation of permanent injunction.

Currently, the original claims of the ‘881 Patent stand finally rejected, however, new claims added during prosecution of the reexamination stand allowed (Advisory Action of 7/1/10).  (As an aside, this reexamination has proceeded faster than almost any I have seen to date, request was filed July 20, 2009, Advisory Action issued June 4, 2010)

In arguing against staying the injunction, Flexiteek pointed out that the patent was not “declared invalid” as stated by the defendants and that years of appeal lay ahead. Flexiteek also noted the existence of the allowed, new claims, and explained that as these new claims contained only minor changes, there would be no intervening rights — thus– Flexiteek argued that the injunction should be entered since the specific rejected claims are largely irrelevant. Not surprisingly, the defendants argued the exact opposite, taking the position that intervening rights would be found based upon the claim changes.

In deciding to stay the enforcement of the injunction, the court labeled the new claim issue as “speculative” and noted the unfairness of enjoining the defendant from infringing a patent “declared invalid,” holding:

The Court finds that the arguments set forth above are speculative. The current circumstances before this Court are that Defendants’ actions are being restrained by a patent which has been declared invalid by the PTO. Accordingly, the Court will not entertain arguments now based on what the parties believe the future may hold. Should the circumstances change in the future, the Plaintiffs make seek relief on the basis of such facts. Defendants are aware of the reexamination proceedings as well as the proposed amendments. The Court concludes that the PTO’s proceedings should govern Defendants’ actions rather than the Court’s Permanent Injunction which is based on a patent which has been declared invalid.

As the damages for past infringement are $79k, the real value to the plaintiff seems to be the keeping the defendant out of the market going forward (injunction). Thus, whether or not the new claims would be entitled to past damages (i.e., no intervening rights) seems largely unimportant for such an inconsequential dollar amount. However, should the court deem that the new claims require further construction the basis for the injunction may be undermined, requiring a new trial, discovery, etc. (the true rationale behind the intervening rights argument in the briefing)

The rejection of the original claims of the ‘881 Patent in patent reexamination seem reasonably based. Assuming the appeal goes forward, the appeal delay will prevent issuance of the new claims. This delay will allow the defendants the freedom to enter the market and practice the invention of the ‘881 patent for the next several years unabated. Thus, going forward with the appeal does not seem like a worthwhile gamble for Flexiteek.

Clearly, the court’s position that the new claims are “speculative” is a bit short sighted. Indeed, the court’s decision to stay the enforcement of the injunction may very well force Flexiteek to simply cancel the rejected claims and return to court with their new claims, in very short order.