Defendant’s Patent Reexamination Request Undercuts $200K Fee Award

By Scott McKeown on March 17, 2011

Shotgun Approach to Patent Reexamination Request Haunts DefendantWithin a few days of filing, requests for patent reexamination are reviewed by the USPTO for basic compliance as to matters of form. Currently, upward of 30% of filings are returned as non-compliant. While practitioners may find this perceived nit picking an annoyance, as a recent case demonstrates, the USPTO may be doing you a huge favor.Yesterday, in Old Reliable Wholesale, Inc. v. Cornell Corp., (Fed. Cir. 2011), the CAFC reversed an award of attorney fees and costs (roughly $200k) to defendant Cornell. The fee award stemmed from an earlier infringement suit of U.S. Patent 5,069,950 directed to insulated roof board. The reversal as to fees was based, in part, on the fact that the USPTO favorably concluded an ex parte patent reexamination (90/009,258) of the ‘950 patent.While the CAFC reversed the fee award based upon the favorable consideration of certain prior art in the reexamination, it appears as though this art was largely overlooked, perhaps, due to the format of the defendant’s request.The fees were awarded based upon the trial court’s decision that pursuit of the litigation beyond a certain deposition date was baseless. During a deposition, the plaintiff’s founder seemingly acknowledged the “sameness” of certain prior art relative to the patented claims. As a result, summary judgment of invalidity was entered in favor of defendant Cornell (later affirmed by the CAFC). Shortly thereafter, the defendant sought, and was awarded the $200k costs in the district court for all litigation expenses occurring after the deposition. The prior art that formed the basis of the summary judgment, related to certain products of Cornell and that of another company, Branch River. These references (in the form of product brochures) were submitted to the USPTO in a request for ex parte patent reexamination on August 20, 2008. After a first action was issued in October of 2009, the proceeding was favorably concluded in a Notice of Intent to Issue a Reexamination Certificate (NIRC) to on June 15, 2010. (As the CAFC invalidated the patent 6 months prior, the PTO corrected the NIRC to cancel all claims two weeks later)In appealling the fee award to the CAFC, the plaintiff pointed out the USPTO’s favorable reexamination conclusion as evidence that the pursuit of the litigation was not unreasonable as to invalidity. (The CAFC took official notice of this patent reexamination evidence since it was not part of the district court record). The CAFC explained:The fact that the PTO, after assessing the relevant prior art, confirmed the patentability of all claims of the ’950 patent undercuts Cornell’s contention that Old Reliable had no reasonable basis for its assertion that its patent was not anticipated. . . .Moreover, although the PTO may not have considered all the deposition testimony relied upon by the district court in making its invalidity determination, the fact remains that the PTO assessed the VT-2 [Cornell] and the Air-Flo [Branch River], as well as many other prior art references, and yet confirmed the validity of all claims of the ’950 patent over the prior art. (emphasis added)However, it is unclear whether or not the USPTO really assessed these references.In their request for reexamination, the defendant presented 14 prior art references, including the Cornell and Branch River art noted by the CAFC. Unfortunately, in presenting the 14 references for consideration, the art was lumped together and argued in the alternative as to anticipation and obviousness. It is unlikely that such a request would be deemed compliant by the USPTO today. (See USPTO FAQ # 4) Still, the request was granted in 2008.In the grant of the patent reexamination, the examiner found that the Cornell and Branch River art constituted SNQs relative to the patent. Yet, the Cornell and Branch River references were not applied in the later rejections. Presumably, the examiner deemed this art, as well as the vast majority of other references, cumulative (although the action is silent as to this issue). Thereafter, the patentee was able to convince the examiner of the patentability of the issued claims in view of the limited art applied. In the NIRC, the examiner simply stated that the “other art did not disclose or suggest” the claims.By arguing in the alternative and lumping together the rejections of the request, the defendant left it to the examiner to pick and choose among the seemingly interchangeable art. Looking back, a notice of non-compliance may have saved Cornell $20

Within a few days of filing, requests for patent reexamination are reviewed by the USPTO for basic compliance as to matters of form. Currently, upward of 30% of filings are returned as non-compliant. While practitioners may find this perceived nit picking an annoyance, as a recent case demonstrates, the USPTO may be doing you a huge favor.

Yesterday, in Old Reliable Wholesale, Inc. v. Cornell Corp., (Fed. Cir. 2011), the CAFC reversed an award of attorney fees and costs (roughly $200k) to defendant Cornell. The fee award stemmed from an earlier infringement suit of U.S. Patent 5,069,950 directed to insulated roof board. The reversal as to fees was based, in part, on the fact that the USPTO favorably concluded an ex parte patent reexamination (90/009,258) of the ‘950 patent.

While the CAFC reversed the fee award based upon the favorable consideration of certain prior art in the reexamination, it appears as though this art was largely overlooked, perhaps, due to the format of the defendant’s request.

The fees were awarded based upon the trial court’s decision that pursuit of the litigation beyond a certain deposition date was baseless.

During a deposition, the plaintiff’s founder seemingly acknowledged the “sameness” of certain prior art relative to the patented claims. As a result, summary judgment of invalidity was entered in favor of defendant Cornell (later affirmed by the CAFC). Shortly thereafter, the defendant sought, and was awarded the $200k costs in the district court for all litigation expenses occurring after the deposition.

The prior art that formed the basis of the summary judgment, related to certain products of Cornell and that of another company, Branch River. These references (in the form of product brochures) were submitted to the USPTO in a request for ex parte patent reexamination on August 20, 2008. After a first action was issued in October of 2009, the proceeding was favorably concluded in a Notice of Intent to Issue a Reexamination Certificate (NIRC) to on June 15, 2010. (As the CAFC invalidated the patent 6 months prior, the PTO corrected the NIRC to cancel all claims two weeks later)

In appealling the fee award to the CAFC, the plaintiff pointed out the USPTO’s favorable reexamination conclusion as evidence that the pursuit of the litigation was not unreasonable as to invalidity. (The CAFC took official notice of this patent reexamination evidence since it was not part of the district court record). The CAFC explained:

The fact that the PTO, after assessing the relevant prior art, confirmed the patentability of all claims of the ’950 patent undercuts Cornell’s contention that Old Reliable had no reasonable basis for its assertion that its patent was not anticipated. . . .

Moreover, although the PTO may not have considered all the deposition testimony relied upon by the district court in making its invalidity determination, the fact remains that the PTO assessed the VT-2 [Cornell] and the Air-Flo [Branch River], as well as many other prior art references, and yet confirmed the validity of all claims of the ’950 patent over the prior art. (emphasis added)

However, it is unclear whether or not the USPTO really assessed these references.

In their request for reexamination, the defendant presented 14 prior art references, including the Cornell and Branch River art noted by the CAFC. Unfortunately, in presenting the 14 references for consideration, the art was lumped together and argued in the alternative as to anticipation and obviousness. It is unlikely that such a request would be deemed compliant by the USPTO today. (See USPTO FAQ # 4) Still, the request was granted in 2008.

In the grant of the patent reexamination, the examiner found that the Cornell and Branch River art constituted SNQs relative to the patent. Yet, the Cornell and Branch River references were not applied in the later rejections. Presumably, the examiner deemed this art, as well as the vast majority of other references, cumulative (although the action is silent as to this issue). Thereafter, the patentee was able to convince the examiner of the patentability of the issued claims in view of the limited art applied. In the NIRC, the examiner simply stated that the “other art did not disclose or suggest” the claims.

By arguing in the alternative and lumping together the rejections of the request, the defendant left it to the examiner to pick and choose among the seemingly interchangeable art. Looking back, a notice of non-compliance may have saved Cornell $200k.