Practitioners Preoccupied with Discovery Opportunities

Generally speaking, “discovery” is a litigation process by which information or facts pertinent to a case can be systematically obtained from an opponent or third party prior to trial. Of course, discovery is not permitted in patent reexamination proceedings because patent reexamination does not qualify as a “contested proceeding” in accordance with 35 U.S.C. §§ 23-24.

The lack of discovery in patent reexamination was often cited by Patentees as an example of the inequities of patent reexamination. For example, Patentees are unable to confirm the given identity of a real-party-in-interest identified in a request for inter partes patent reexamination, which could aid certain unscrupulous filers to dodge potential estoppel effects. Likewise, if the Patentee may be unable to obtain and present certain secondary indicia of non-obviousness (i.e., copying, commercial success of an infringing product, etc) as the third party requester may be the best source of such information.

With the passage of the America Invents Act (AIA) comes new, contested proceedings to challenge patent validity at the USPTO. These proceedings, Post Grant Review (PGR) and Inter Partes Review (IPR) will be available as of September 16, 2012. The proceedings will be conducted by the new Patent Trial & Appeal Board (PTAB) and will include “limited discovery.”

In their proposed rules to implement these new, contested proceedings, the USPTO has fleshed out the meaning of “limited discovery.” 

As infringement is not at issues before the PTAB, the need for discovery is much less pronounced as compared to district court/ITC litigation. In attempting to qualify the types of discovery that would be available, the USPTO has identified two classes: “routine” discovery and “additional” discovery. A party to a PGR or IPR is entitled to routine discovery, additional discovery is only available if shown to be “in the interests of justice” for IPR, and if good cause is shown for PGR.

Routine discovery has been identified as any exhibit not otherwise served, cross examination of a declarant, and non-cumulative information that is inconsistent with a position taken by the party before the PTAB. (The last classification is somewhat broad in scope, but is meant to cover situations, for example, where a test result is at issue in the proceeding and inconsistent results are known to a party.)

Strangely, while the rules with respect to discovery are quite straightforward, and as the statute implies…quite limited, at virtually every one of the USPTO road shows explaining the new rules, the vast majority of practitioner questions are directed to discovery practices. The most common inquiry seems to revolve around the need to secure “additional discovery” to explore secondary indicia of non-obviousness.

As a reminder, MPEP 716.01(a) lists several categories of objective evidence that may tend to refute an obviousness determination.

–Evidence of criticality or unexpected results
–Evidence of commercial success
–Long-felt but unsolved needs
–Failure of others

–Evidence of copying
–Skepticism of experts

Such evidence can make the difference in a proceeding. Yet, in the vast majority of cases such evidence is typically disregarded as unrelated to the claimed invention (i.e., nexus)

The PTAB can expect the bolded classifications above to be routinely cited as areas requiring “additional discovery” from a petitioner. In an IPR proceeding such discovery would have to be in the interests of justice. Thus, unless presenting the Board with a more compelling rationale than “there might be something there,” such discovery will almost certainly be denied. On the other hand, in PGR, a Patentee need only show “good cause;” a much lower hurdle.

The difference in standards could subject a PGR petitioner to disclose a significant amount of otherwise confidential business information under Patentee secondary indicia theories that would otherwise be denied in an IPR proceeding. To be sure, protective orders are also provided for by the Rules, but this additional discovery burden may be yet another reason to opt for IPR over PGR given the choice.

Added Rebuttal Opportunity of Limited Value to Patentees

When faced with a third party request for either ex parte patent (EXP) reexamination or inter partes patent (IPX) reexamination, a Patentee must sit helplessly by and await the determination of the USPTO to grant or deny the request. That is to say, the Patentee may not file any argumentation prior to the determination of the USPTO to institute a reexamination proceeding. For this reason, as well as the relatively low Substantial New Question (SNQ) threshold set for patent reexaminations (although no longer applicable to IPX), the grant rates for both EXP and IPX have hovered around 93%.

In order to address the absence of input from Patentees, and perhaps to a lesser extent the high grant rate, the new post grant proceedings of the America Invents Act (AIA) require higher thresholds (reasonable likelihood standard for Inter Partes Review (IPR) and more likely that not standard for Post Grant Review (PGR)). In addition, prior to ordering a trial in either of the new proceedings, Patentees will now have the option of submitting a preliminary response.

Yet, while on paper the filing of a preliminary response may seem to foster a more balanced system, in practice, such filings may be very rare.

As shown in the exemplary timeline below, an IPR/PGR proceeding kicks off with a third party petition filing (9/17/12 in the timeline). (Click to Enlarge)

PTABOnce filed, the Patentee is given two months to respond. In that time, the Patentee must receive notice of the proceeding, perhaps delayed by mail and communication delays of a previous patent counsel (listed on the face of the patent), then seek qualified post grant counsel. In my experience, this process can burn up to 3-4 weeks of valuable time.

Thereafter, the Patentee must assemble their response (in the remaining month’s time). Keep in mind that the third party has likely spent 4-6 months or longer preparing their petition, and included declarations of experts supporting their invalidity positions. On the other hand, the Patentee is likely responding within roughly 4-6 weeks time (no extensions are contemplated in the proposed rules).

Perhaps more disturbingly, a preliminary response may not include new testimonial evidence (42.107). Thus, attorney argument of the Patentee is weighed against the declaration evidence of the challenger. It would seem to me that the “reasonable likelihood of success” in this system is significantly skewed in favor of the third party.

Additionally, should the Patentee scramble to file a preliminary response and fail to persuade the Patent Trial & Appeal Board (PTAB) to deny the petition, once instituted, the third party may be permitted to file a supplemental response (42.123). If not properly policed, such supplemental information could allow a third party to further refine their positions based on the preliminary response of the Patentee.

A failed preliminary response will likely provide the third party with a 3-4 month preview of the Patentee’s positions for very little value. For example, the USPTO predicts in their proposed rule package for IPR that the grant rate will be 90% (as compared to the current 93%  grant rate of IPX).

Absent a clear cut rebuttal such as the applied references of a petition not qualifying as prior art, and in view of the significant shortcomings of the proposed preliminary response procedure, it seems unlikely that a Patentee would choose to avail themselves of such an otherwise well intentioned mechanism.

Speedy, One Sided Estoppel to Force Judicial Deference

The estoppel provisions of Post Grant Review (PGR) and Inter Partes Review (IPR) are markedly different than those in existence today for Inter Partes Reexamination (IPX). Most importantly, PGR/IPR estoppel attaches upon a written determination of the PTAB, and a final, non-appealable decision of a court will not force the USPTO to vacate a parallel IPR/PGR proceeding. These estoppel features are expected to be a significant driver going forward in motions to stay parallel infringement actions.

Currently, IPX requires all appeals to be exhausted before estoppel can attach. In practice, this means that there is (roughly speaking) a 6 year journey through the Central Reexamination Unit (CRU), Board of Patent Appeals & Interferences (BPAI) and Court of Appeals for the Federal Circuit (CAFC). Starting September 16 2012, IPX will be replaced with IPR. Estoppel in an IPR proceeding will be effective within 12-18 months from the initiation of the proceeding. This is because IPR/PGR proceedings must be concluded in this time frame by statutory mandate.

The speed of IPR/PGR proceedings relative to court proceedings will certainly undermine plaintiff oppositions to a motion to stay. Often times, the strongest plaintiff argument in opposing a stay is that the significant USPTO delay will be prejudicial to the plaintiff.  However, perhaps more compelling will be the shifting of the prejudice argument to the side of the defendant.

Currently, if both an IPX and litigation are running in parallel, the first to conclude (after all appeals) wins. If the court action concludes first, the ongoing IPX is vacated by the USPTO. See Sony Computer Entertainment America Inc. v. Dudas (E.D. Va 2006, discussing race to the finish)

On the other hand, if an IPR is running in parallel to a court proceeding (district court or ITC), and the court action concludes first, a failure to prove invalidity will not impact the ongoing IPR. In this situation, the defendant may be prejudiced by paying damages on a patent later found to be invalid. Recent headlines pertaining to ex parte patent reexamination scenarios have emphasized this soon to be expanding possibility to the courts, and judges are beginning to take notice.

[T]his Court is aware that “the Federal Circuit has recently confirmed that the [US]PTO would not be bound in its reexamination by the determinations of [a district court]”. Sorensen, 2007 U.S. Dist. LEXIS 66712, at *15.

Therefore, not only is plaintiff unlikely to be prejudiced in these proceedings by a stay pending the [US]PTO reexamination, but defendants would potentially be prejudiced by failing to enter a stay… . Not only could the court and the [US]PTO reach conflicting determinations, but one possible scenario could result in irreparable harm to defendant: if this court finds that the patent is not invalid and the defendant has infringed it, and orders defendant to pay damages to plaintiff for such infringement, then defendant would have no ability to recover those damages if at a later date the [US]PTO determined that the patent is invalid.

Monosol RX LLC., v. Biodelivery Sciences International Inc. et. al., (D.NJ) Order dated March 7, 2012. (here).

With perhaps the ITC being the only other forum capable of beating the PTO to a conclusion in the 12-18 month time frame, it would seem that district courts would be hard pressed to deny such a defendant motion in the face of such compelling speed and prejudice arguments. As a reminder, an IPR/PGR proceeding is only available to those defendants that file with the USPTO within 12 months of receiving a complaint for infringement; thus, the court case in many instances will be in the early stages. As such, going forward, it is expected that district court proceedings will be stayed should an IPR/PGR be initiated in parallel.

After Final Pilot Program Designed to Cut Down on RCE Filing Rates

A bit of “pre-grant” news today…. the USPTO has launched a new, internal pilot program entitled “After Final Consideration Pilot” (AFCP). The memo announcing the program to the Examining Corps outlines the purpose as: To advance the goal of compact prosecution, the following guidance is provided to highlight situations when entry of an Amendment After Final Rejection under 37 CFR 1.116(b) may lead to earlier allowance of the application without undue burden on the examiner or applicant. . . . In limited situations further amendments or arguments may be considered.”

In a nutshell the program allots additional time to examiners to consider applicant submissions after final rejection, explaining:

A full and complete review of a response includes any additional search required to determine whether or not proposed amendments distinguish over the prior art. Examiners should review responses under 37 CFR 1.116(b) and use their professional judgment to decide whether the nature and extent of the amendments or arguments presented in the response can be fully considered within the limited amount of time authorized by the After Final Consideration Pilot.

If the examiner determines that the response can be fully considered, including any additional search required, within 3 hours for plant and utility applications or 1 hour for design applications, that amount of non-production time is available whether or not the consideration of the amendment results in allowance of the application . .

(emphasis added)

The memo is found (here).

authorized by the After Final Consideration Pilot.

Court Cites Change in Inter Partes Reexamination Standard as Justifying Stay

When faced with the assertion of a patent of questionable validity prospective defendants increasingly resort to patent reexamination. Once a suit is filed, the opportunity to obtain a stay of an ongoing district court infringement action pending a parallel patent reexamination is a major benefit of the USPTO proceeding.

For this reason, patent reexamination parallel to a district court is often initiated in an attempt to stay the more cost prohibitive court proceeding. In deciding whether or not to stay the court proceeding the courts look to many factors. (See factor based analysis here). When considering whether to stay the proceeding in view of an ongoing inter partes patent reexamination (IPX), courts often identify the estoppel provisions of IPX as supporting an argument that issues will be simplified for trial by awaiting the USPTO decision.

In an interesting twist on the special consideration given to IPX filings, a California district court considered the impact on the recent America Invents Act (AIA) change to the standard for initiating IPX.

Specifically, “[t]he threshold for initiating an inter partes review [was] elevated from ‘significant new question of patentability’—a standard that [previously] allow[ed] 95% of all requests to be granted—to a standard requiring petitioners to present information showing that their challenge has a reasonable likelihood of success.” H.R. Rep. No. 112-98, (Pt. 1), at 47 (2011); see also Pragmatus AV, 2011 WL 4802958 at *3 n.1. Neither party has provided any statistics, presumably because none are available yet, regarding the percentage of requests for inter partes reexamination that are granted under this new standard. Nor have the parties provided statistics regarding the percentage of claims that are amended or cancelled after a reexamination request has been granted under the “reasonable likelihood” standard. Congress apparently intended to partially shift the merits determination earlier, to the petition stage of reexamination, likely resulting in a decrease in petitions granted, but an increase in amended or cancelled claims after a request has been granted.  . . .. This suggests that if Inova’s requests for inter partes reexamination are granted, there is an even higher likelihood than under the prior standard that the issues in this action will be simplified by the reexamination. On the other hand, as discussed below, if the USPTO rejects Inova’s requests, the stay will be relatively short. Therefore, this factor weighs in favor of a stay.

.       .      .

Furthermore, given the recent change to the inter partes reexamination standard, it is unclear whether the inter partes reexamination process will take as long as current statistics suggest. If the USPTO does not grant either of the requests for reexamination, the stay will be in place no longer than three months. If the USPTO grants either or both of the requests, the significance of that decision under the elevated standard for reexamination combined with the possibility of a shorter reexamination process, the early stage of this litigation, and Inogen’s failure to move for preliminary injunctive relief suggest that a stay is appropriate. Accordingly, Inova’s Motion to Stay pending reexamination is GRANTED.

(emphasis added) (Order here)

While the decision to stay is also premised on other factors, including the failure of the plaintiff to seek preliminary injuctive relief, the court appears to have been misinformed as to the potential impact of the new IPX standard.

Prior to the new standard, the Substantial New Question of Patentability (SNQ) standard was utilized. Under the old SNQ standard, the USPTO would determine whether or not the submitted art would have been deemed “important to a reasonable examiner;” a fairly low threshold. The new standard is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged; certainly stricter than the SNQ standard. However, in IPX proceedings, an Office Action typically accompanies the Order. Rejections of an office action require a prima facie showing. In this way, an IPX does not move forward absent such a heightened showing.

Moreover, until replaced by the new Inter Partes Review (IPR) proceeding of the AIA in September 2012, the Office will not consider rebuttal arguments from the Patent Owner prior to issuing the Order. Thus, the request to initiate an IPX remains one-sided despite the change in standard. For this reason the change has not resulted in a detectable drop in the IPX grant rate. Indeed, in the USPTO rule package outlining the implementation details for IPR, the Office estimates a grant rate of 90% for IPR—even with additional Patent Owner rebuttals. (the current IPX grant rate is roughly 93%)

As to speed, while the USPTO has certainly improved over the published IPX pendency statitstics, the change in standard will have no impact in this regard.

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

Severe Page Limit Restrictions Likely to Force Parallel Filings

The page limit restrictions proposed by the USPTO for the new post grant proceedings of the America Invents Act (AIA) are quite severe. The currently proposed rules set a maximum 50 page limit for requests to initiate Inter Partes Review (IPR), and 70 pages for Post Grant Review (PGR). The page limits may be waived upon successful petition for additional pages, however, the Office has explained that such cases would be “exceptional.”

As if the page limits were not enough, the proposal also requires double spacing and a 14 point font (§42.24). These guidelines, taken together with the need to explain lengthy patent claims (up to 20 claims per request) and compare complex figures of the prior art, combine to present significant disincentives to the public. Simply stated, the “use it or lose it” nature of the statutory estoppel provisions of IPR and PGR are inconsistent with such restrictions. For example, to present more than a single proposed rejection in an IPR request directed to 10 claims or more would almost certainly exceed the 50 page limit.

As pointed out last week, the mean page count for an inter partes patent reexamination (IPX) is several hundred pages. IPR was formulated by Congress to replace IPX. As such, the Office’s administrative restrictions may very well frustrate the intent of Congress that these new post grant proceedings serve as a meaningful alternative to patent litigation (in which expert reports on validity and related pleadings may span thousands of pages).

An additional side effect of the proposed limits may be that filers present their proposed rejections across several requests filed in parallel.

For example, take the case of a patent having 5 independent claims and 15 dependent claims. It may be wiser from an estoppel perspective to present the five independent claims in a single request. By segregating the claims, additional page space is freed up to present multiple challenges directed to the 5 base claims. The remaining 15 claims can be included in one or more separate requests.

Moreover, while the Office has provided an escalating filing fee for attacking more than 20 claims of a subject patent, there does not seem to be a provision to expand the page count in correspondence to the increased fee. Thus, a filer seeking to attack 30 claims of a patent, can file a single 50 page request in IPR seeking to address all claims for $34K, or file two 50 page requests that divide the claims (100 pages total) for a fee of $54k. It seems whether filing a request directed to 20 claims or 1000, the Office will still require a 50 page request in IPR. Aside from being non-sensical in application, the Agency would be hard pressed to rationalize the practical effect of this proposal as being consistent with the Paperwork Reduction Act.

Unlike inter partes patent reexamination, which precludes multiple filings after an initial Order under 35 U.S.C. § 317(a), no such prohibition exists for IPR or PGR. Of course, a $27K filing fee would be associated with each additional filing. Yet, for significant disputes the trade off in estoppel protection may be well worth the investment. Indeed, in typical troll suits it is quite common for defendants to cooperate on a reexamination filing strategy by filing separate requests; the cost of the filings being spread among the parties.

While the proposed rules provide broad powers to the PTAB to consolidate, and even stay a related Board proceeding (§§42.122/42.222) there would not seem to be cause to stay multiple proceedings related to different claims, but instead, consolidate them. That is to say if two requests are pending, one directed to claims 1-10 of a patent, the other directed to claim 11-20, there would not seem to be any basis to stay one in favor of the other. On the other hand if there were two requests, both of which are directed to claims 1-20, there is arguably cause (waste of office resources) to stay one in favor of the other. Thus, parties subject to multi-defendant disputes would be wise to coordinate their filing strategy to target individual claims per request instead of separate requests directed to the same claims.

At the time of this writing the major bar associations are preparing comments directed to the proposed rules. Based on the preliminary comments I have seen, the organizations will point out that the escalating fee structure is a recognition on the part of the USPTO that  proceedings involving more challenged claims will require additional work. For that reason, the USPTO proposes a fee for a proceeding directed to 51 claims be double the fee charged for a proceeding involving 20 claims.  The page limit rule, aside from being too low a base value (50 pages for IPR and 70 for PGR), should recognize the same realities, and should provide for increased numbers of pages in complex proceedings with numerous claims.  If the petitioner pays fees for review of additional claims, especially at the proposed levels, then extra pages should be available.

Candidates Question the Good Faith Basis for Suit

Back in February, I noted the “interesting” decision of plaintiff EveryMD to file suit against the Republican presidential candidates. The suit, captioned EveryMD v. Rick Santorum, Mitt Romney, and Newt Gingrich(C.D.CA) explains that U.S. Patent 7,644,122 is infringed by Facebook, and as business customers of Facebook receiving messages, that there is some type of liability on the part of the candidates. (complaint here).

POLITICO now reports that the candidates have fired back, questioning the legitimacy of the suit. The letter (found here) points out that EveryMD had first sued Facebook only to have the case dismissed (patent now subject to reexamination at the USPTO). The letter reasons that the most recent suit is an attempt to circumvent the previous failure, explaining:

[W]e do not believe there is a good faith basis for the filing of EveryMD’s action at this time. Indeed, it appears that this case seeks to circumvent the intent and effect of the Court’s earlier dismissal of virtually identical claims in a related prior action. Under the circumstances, we request that you immediately dismiss the pending complaint, failing which we expressly reserve any and all of our rights and remedies, including any right to seek recovery of all fees and costs incurred in responding to EveryMD’s complaint.

POLITICO also notes that the Patent Holder has seemingly given President Obama a fully paid up license….just because.

CAFC Determines That Claims Must be Textually Amended to Invoke Intervening Rights Statute

During a post grant proceeding, an amendment of an originally issued claim could create an intervening rights defense for potential  infringers. That is to say if the amended or new claim introduced by the post grant proceeding is not substantially identical in scope relative to a previously issued claim, potential infringers of the amended/new claims may be provided with an absolute and/or equitable intervening rights defense (35 U.S.C. § 252).

Back in September, in Marine Polymer Technologies, Inc. v. Hemcon, Inc., the CAFC considered whether or not a claim needed to be explicitly (textually) amended to invoke the statute, or whether or not changes to claim scope based on prosecution history could have the same amendatory effect. The September panel ruled that an “amendment in effect” (i.e., disclaimer of claim scope) is equally effective in creating an intervening rights defense as an explicit amendment.

The panel decision was subsequently vacated in favor of an en banc review. In yesterday’s en banc decision, (here) the Court held (by a split-majority) that 35 U.S.C. §252 could not be invoked absent a textual change to the subject claim, explaining:

Section 307(b) governs intervening rights arising from ex parte reexamination and specifies that only “amended or new” claims incorporated into a patent during reexamination “will have the same effect as that specified in section 252,” i.e., will be susceptible to intervening rights. HemCon ignores this threshold statutory requirement and asks that we proceed directly to the subsidiary “substantive change” analysis, which derives from § 252. See Kaufman Co. v. Lantech, Inc., 807 F.2d 970, 975–77 (Fed. Cir. 1986) (explaining the relationship between §§ 252 and 307(b) and holding that “identical,” as used in § 252, means “without substantive change”). But under § 307(b), the first question when assessing whether intervening rights arose from a reexamination is whether the asserted claim is “amended or new”; if the answer is no, that ends the inquiry. Only if the claim at issue is new or has been amended may the court proceed to the second step in the analysis and assess the substantive effect of any such change pursuant to § 252.

.                              .                               .

Whether or not Marine Polymer’s arguments to the examiner and cancellation of claims during reexamination may have affected the remaining claims’ effective scope, they did not “amend” those claims for intervening rights purposes or make them “new,” which is what the statutory language requires. Intervening rights are therefore unavailable under § 307(b) as a matter of law.

With respect to the public policy arguments in favor of defendant Hemcon, the Court noted:

HemCon also expresses concern that excluding its concept of amendment by argument from the ambit of § 307(b) would “create a significant loophole” in the intervening rights defense—shrewd patentees would simply opt to rely on arguments rather than amendments to effectively change, and thereby preserve, otherwise invalid claims during reexamination without engendering intervening rights against those claims. Reply Br. for Defendant-Appellant at 25, 2011 WL 287045.

We believe that is highly unlikely. If, in reexamination, an examiner determines that particular claims are invalid and need amendment to be allowable, one would expect an examiner to require amendment rather than accept argument alone.  . . . Thus, the fear of gamesmanship does not persuade us to rule contrary to the plain meaning of the statute. Various amici have in fact pointed out that such gamesmanship concerns run both ways, suggesting that HemCon’s interpretation of § 307(b), if adopted, would invite putative infringers to initiate reexamination proceedings with marginal or non-invalidating prior art. Under HemCon’s rule, such a requestor could expect that, even if the reexamination ultimately confirms all claims as patentable without amendment, the patent owner will necessarily make substantive arguments in defending the claims, thereby allowing the requestor to allege intervening rights based on those arguments.

The majority is correct that the USPTO almost always requires claim amendments, but, in this case, the Office simply confused issues of claim differentiation. As to the points of the amici favorable to Marine Polymer, after the initial panel ruling in Marine, intervening rights defenses indeed began to spring up in ongoing litigations that included claims previously confirmed in patent reexamination.

A fairly spirited dissent was authored by Judge Dyk. The dissent took issue with the manner in which the majority seemingly addressed the intervening rights issue in dictum and their strict interpretation of the statute. With respect to public policy concerns the dissent argued:

Tellingly, the amici who support the court’s interpretation of the statute recognize that formal amendments to claim language during the course of reexamination are unusual. See Amicus Br. of Soverain et al. at 10. Telling too they admit that formal amendments are now, and will be, avoided for the very purpose of avoiding the creation of intervening rights. Id. at 4 (arguing that patent owners often “follow a course of not seeking to amend their asserted claims, with the settled understanding that if they could avoid claim amendments, they could also avoid intervening rights”). In other words, applicants will amend claims by argument rather than formal methods for the very purpose of avoiding intervening rights.

This very problem has led numerous amici to oppose the majority’s mechanical construction of the term “amend” and to recognize that the majority’s interpretation of intervening rights will create the very opportunities for mischief and “foster gamesmanship” that the statute was designed to avoid. Amicus Br. of Geico et al. at 9-10 (“[U]nder such a rule, patentees will be reluctant to change the words of their claims during reexamination or reissue and, instead, badger examiners with arguments changing the meaning of the words in the claims.”); Amicus Br. of Hewlett-Packard Co. et al. at 11 (“Appellee’s reading of the statute to exclude claims narrowed through disclaimer would lead to absurd results and discourage formal claim amendments in favor of prosecution history maneuvering.”).

While the dissent is very well reasoned otherwise, the reliance on the exaggerated public policy arguments of the Hemcon amici is misguided. It is certainly true that amendments are disfavored by Patentees in reexamination/reissue— yet, such is hardly a novel practice. Indeed, the USPTO has been “badgered” with arguments attempting to change the meaning of the words in the claims since the very inception of patent reexamination. Simply stated, the fact pattern of Marine is an aberration, not an indication that the PTO will suddenly begin accepting pronouncements of claim scope in favor of claim amendments.

Interestingly, even had Marine textually amended their claims to the same effect, according to the lower court’s claim interpretation ruling, the claim scope would not have been altered. As evidenced by the recent Aspex decision, intervening rights may not exist where the text of the claims is amended to comport with the claim construction of a district court.

Amended/New Claims Barred by Res Judicata

Previously, the substantially identical standard enunciated by 35 U.S.C. § 252 was analyzed in Aspex Eyewear, Inc., et al., v Marchon Eyewear Inc., et. al., (SDFLA). In the lower court ruling, the court found that claims changed/added in patent reexamination were in fact substantially identical to the previously issued claims. This was because, the claim changes made during patent reexamination added claim features the district court previously ruled to be embraced by the originally issued claim scope.

The lower court explained (decision here) that Aspex was barred from re-litigating these new claims against the previous defendants, reasoning:

The [previous action] was fully adjudicated on the merits. The dismissal release . . . made clear that the settlement dismissed with prejudice as to any causes of action “any claim which could have been had by and between the Parties arising from or connected with [the earlier dispute]. Plaintiffs argue that it alleged legally separate causes of action in their complaint because claim 23 and claim 35 [reexamination changes] did not exist at the time the [previous actions] were being litigated. The reexamination of the ‘545 Patent does not entitle Plaintiffs to circumvent claim preclusion because the amended claims relate back to the original ‘545 Patent reissue date. (emphasis added)

In affirming the lower court, the CAFC reasoned (decision here):

In arguing that the reexamination of the ’545 patent created new causes of action not barred by res judicata, Aspex relies on cases involving reissue patents. There are two problems with Aspex’s argument, however. First, as noted above, the two claims on which Aspex relies are not materially different from original claim 23, and thus they do not create a new cause of action that was not previously available to Aspex. Second, the differences between reissue and reexamination make the reissue cases on which Aspex relies inapposite. Unlike reissue, reexamination does not result in the surrender of the original patent and the issuance of a new patent. Moreover, by statute, new claims that emerge from reexamination must not be broader than the original claims. See 35 U.S.C. § 305 (“No proposed amended or new claim enlarging the scope of a claim of a patent will be permitted in a reexamination proceeding under this chapter.”); In re Freeman, 30 F.3d 1459, 1464 (Fed. Cir. 1994). Consistent with that rule, the claims on which Aspex relies are not broader than their predecessor; they therefore did not create a new legal right against infringement that Aspex lacked under the original version of the patent. Accordingly, claims that emerge from reexamination do not create a new cause of action that did not exist before. See Hoffman v. Wisner Classic Mfg. Co., 927 F. Supp. 67, 73 (E.D.N.Y. 1996). We therefore reject Aspex’s argument that the issuance of amended claim 23 and new claim 35 had the effect of negating the res judicata effect of the prior litigation . . . .

Interestingly, the applicaton of res judicata seems to hinge on the absence of the defense of intervening rights (due to the perceived sameness in the scope of claims before/after reexamination, a relatively uncommone set of circumstances). The second point relative to the patent surrender requirement of patent reissue seems to be more of the same. In other words, the impact of the surrender on the ability of the claims to “relate back” to the original patent for damage purposes will depend upon whether or not the claims were amended enough to trigger intervening rights (i.e., not substantially identical; 35 USC 252). The change in patent number for a patent reissue is of no moment.

As to the third point, while it is certainly true that claims cannot be enlarged in patent reexamination, they can be amended to undermine non-infringement (e.g., Markman definitions) positions of a defendant. As such, narrower claims, may greatly aid an infringement case and opportunities may in fact be created via patent reexamination that may not have existed previously.

Proposed Page Limits Based on Interference Model

As discussed previously, the fees proposed to initiate for Post Grant Review (PGR) and Inter Partes Review (IPR) may be too cost prohibitive for many filers. Yet, perhaps more troubling than the proposed fee structure is the extreme page limits proposed for these proceedings.

The proposed rules set a maximum 50 page limit for requests to initiate IPR, 70 pages for PGR (inclusive of claim charts). The proposed rule explains that federal courts often impose page limits, and perhaps more importantly that the “Board’s experience” in patent interference leads the Office to believe that the current proposals are reasonable. The Office explains that the current page limit for prior art motions in a patent interference is 25 pages. Thus, the Office reasons that the doubling of this existing limit to 50 pages for IPR is quite reasonable.

The Office has borrowed heavily from patent interference practice in arriving at the proposed rules of procedural practice before the Patent Trial & Appeal Board (PTAB); this makes sense. However, one size does not fit all with respect to contested proceedings. There are important distinctions between a patent interference and an IPR/PGR. That is to say, the problem with the Office’s reasoning is that validity challenges in patent interference do not encumber challengers with statutory estoppel that extends to the federal courts; nor are such validity based challenges the focus of a patent interference (i.e., priority dispute). Indeed, as the very ownership of the patent rights are in dispute in a patent interference, there may be strategic reasons for limiting validity challenges.

Rather than gauging the proposed page limits for IPR and PGR on patent interference practices, it would make much more sense for the USPTO to look to the current practice in inter partes patent reexamination (IPX); the very proceeding being replaced by IPR. So far in 2012, the mean page count for IPX requests is 262….a far cry from the 50 pages proposed by the USPTO.

Of the 67 or so odd IPX request filed in 2012 (at the time of this writing), roughly 10 would be compliant if filed this time next year as a request for IPR. The charts below shows the distribution of page counts for 2012 IPX filings, and a comparison to the mean page count for IPX and that proposed for IPR. (Click to Enlarge)

distribution

IPX-pageWhile it is true that the proposed limits may be waived upon successful petition for additional pages, the Office has explained that such cases would be “exceptional.”

It is understandable that the Office propose a page limit control to streamline proceedings that must be completed within 12 months, and one could certainly cite to the long pendency of IPX proceedings as justification for ignoring it as model for future proceedings. Yet the agency would be hard pressed to justify current IPX pendency issues on mere page count alone. Instead, delays are more a result of a separate examination and BPAI phases, each of which have historically taken on the order of 18-14 months. For this reason, IPR was designed to be an adjudicative proceeding (i.e., no examination phase).

Congress has recognized the relationship between IPX and IPR by limiting the number of IPR filings (281) based upon the number of IPX filings in fiscal 2010. As such, it is befuddling that the USPTO would adopt a patent interference based benchmark rather than be guided by current IPX realities.

Courts certainly limit page counts in motions, claim construction, etc. However, expert reports are typically hundreds of pages and often times contain the bulk of the asserted invalidity positions. If IPR/PGR is to be a true alternative to patent litigation, as Congress intended, filers must be able to present their submitted art to the USPTO in a cost effective fashion that adequately balances their risk of estoppel. Otherwise, IPR/PGR filings will be few and far between…especially at the currently proposed fee levels.