Callaway Pro V1 Golf Dispute Taken to Virginia District Court

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.