patent reissue oathMost practitioners are well aware that disputes with the USPTO over formal oath requirements in patent reissue are the rule, not the exception.  I have written extensively in the past as to the significant delays caused by this seemingly straight forward formal requirement.

In most cases, the dispute relates to a lack of specificity in identifying the error to be corrected in the patent reissue application. While in many cases the correction necessary is relatively minor. However, in most cases the objection raised relative to the oath does not come from the examiner, but instead, a Quality Assurance Specialist (QAS) of the USPTO. Thus, it is not uncommon to contact the examiner to request a recommended change to an oath to finally settle the dispute only to have the examiner inform you “I think it’s fine, but the QAS has some issue that I don’t really understand.” This leaves the Patentee with no efficient means to address the problem in a timely manner. This type of roadblock is especially aggravating in broadening patent reissue applications.

Continue Reading Defects in Patent Reissue Oaths Inefficiently Cured

PGR Window Anomaly to Encourage Early Litigation?

Post Grant Review (PGR) is limited to patents maturing from applications filed on or after March 16, 2013 (note, the exception for business method patents, Sec. 18 of the AIA).  Of course, it will take several years for such patents to issue from the USPTO. Thus, practically speaking, PGR will not be an option for third parties seeking to challenge the validity of an issued patent until at least the second half of this decade. Nevertheless, the PGR statutes will have a significant impact on third party options and parallel litigation strategy going forward.

As a reminder, patents eligible for PGR that are not business method patents, are those that are within 9 months of issuance, or re-issuance for broadening reissues (§ 321 (c)).

When fashioning the Inter Partes Review (IPR) statutes, Congress mandated that IPR may not be requested until the later of 9 months from patent issuance, or if PGR is instituted the date of termination (§ 311(c)). This timing limit is meant to ensure that PGR and IPR are not conducted in parallel. IPR, unlike PGR,  becomes available for all patents next September 16, 2012.

So, for newly issued patents that will not be eligible for PGR over the next few years, do requesters still have to wait 9 months before filing a request for IPR? To answer that question, one has to review the language of § 311(c).

(c) Filing Deadline- A petition for inter partes review shall be filed after the later of either–

(1) the date that is 9 months after the grant of a patent or issuance of a reissue of a patent; or

(2) if a post-grant review is instituted under chapter 32, the date of the termination of such post-grant review.

As can be appreciated, the statute makes no exception to the 9 month window for patents based on their eligibility for PGR. Perhaps some basis may exist in the legislative history for excluding such, but it seems very unlikely that the rules for implementing IPR will stray that far from the clear language of the statute.

Going forward, this creates a troubling dilemma for third parties faced with an infringement action that includes a newly issued patent that is not eligible for PGR. While on the one hand, the statutes mandate that IPR must be pursued within 12 months of service of a complaint, 9 months of that time is effectively unavailable for any inter partes challenge (IPR or PGR). For those defendants sued in courts with a particularly swift dockets, waiting 9 months may destroy any opportunity to stay the case pending USPTO proceedings. Certainly, a third party may still resort to ex parte reexamination (EXP), but that option is much less attractive for third party requesters based on historical results. Likewise, a later IPR may be denied if the issues presented in an earlier EXP are substantially similar to those presented in the later IPR request.

Patentees that obtain patents after September 16, 2012, that fall under the old first to invent scheme, seem best served taking advantage of this inter partes dead zone by suing immediately.

Filing Fees to Increase Substantially

From start to finish, the cost of an inter partes patent reexamination (IPX) proceeding is estimated to be $278K by the 2011 AIPLA Economic Survey. This figure includes all expenses from the time of filing the request to a decision of the Board of Patent Appeals & Interferences (BPAI). The government filing fee for requesting inter partes patent reexamination is $8800.

The America Invents Act (AIA) introduces several new inter partes proceedings for the purposes of challenging the validity of a U.S. Patent. The first, Inter Partes Review (IPR), will be available on September 16, 2012 and will replace IPX. The second, Post Grant Review (PGR) will also be available on September 16, 2012 to challenge certain business method patents. Thereafter, PGR may be used to challenge (within a 9 month window after issuance) a patent filed on or after March 16, 2013.

As discussed yesterday, IPR will provide a significant improvement over IPX with respect to overall pendency delays. PGR will follow the same general timeline. In addition to the improvement in pendency, both IPR and PGR will provide for limited discovery, protective orders, oral hearings, settlement, and the management of the proceedings by a three person Administrative Patent Judge (APJ) panel of the new Patent Trial & Appeal Board (PTAB). But, what is all of this going to cost filers?

If initial rumors out of the USPTO are correct, the filing fee for IPR and PGR will be on the order of $48,000. This is a significant increase over the current fee for IPX ($8800) and is intended to cover the increased effort of the agency to conclude these proceedings within 12-18 months. Likewise, as the Office will be assigning three APJs to every filing, and will be managing discovery, oral proceedings and a trial, there will be additional burdens on resources.

As to attorney fees, using the $278K average of IPX as a baseline, one can expect the cost of the new proceedings to at least double due to the increased time pressures, additional discovery and quasi-litigation features.

While half a million dollars may seem quite pricey, contrast this expense with the average cost of a patent litigation to the CAFC, estimated by the AIPLA to be $ 3 million for a low stakes case (i.e., less than $25 million at stake) and $6 million for a higher stakes case.

Practical Pendency of IPR to be 18-24 Months

In promulgating the new Inter Partes Review (IPR) proceeding as part of the America Invents Act (AIA) Congress hoped to address a major criticism of inter partes patent reexamination (IPX), namely, the significant length of time necessary to conclude these proceedings.

IPX first includes an examination phase handled by patent examiners of the Central Reexamination Unit. Once the examination phase concludes, an IPX may be appealed to the Board of Patent Appeals and Interferences (BPAI). Thereafter, an IPX may be further appealed to the CAFC. This three-phase process cannot be navigated quickly. That is to say, IPXs fully contested through CAFC appeal remain pending some 6-8 years from the time of the initial request.

Pendency is an important factor for challengers considering alternatives for quickly resolving a patent dispute. Likewise courts will often cite to the significant delay of IPX as justification to deny a request to stay ongoing litigation proceedings pending a parallel IPX.

To address this problem, Congress mandated that IPR be concluded at the USPTO with in 12 months, extendable to 18 months if the Director is able to show cause for extension (§ 316 (11)). Yet, is it realistic to expect a 12 month duration?

Below is a chart showing a rough estimate of an IPR timeline (Click to Enlarge)

IPR Timing

As shown in the above timeline, while the IPR stature requires that the new Patent Trial and Appeal Board (PTAB) complete the IPR in 12-18 months, there is at least a 6 month front end to the proceeding.

Upon filing a request for IPR (9/17/12 in the example), the Patentee has a right to a preliminary response (§ 313). While Rules have yet to be issued on when the response is due, it seems likely that there will be at least a two month response period, perhaps extendable by a month or more. (2 month timing used in EXP for Patent Owner Statement). Once the preliminary response is submitted (or the time has passed for such) the Office has 3 months to make a determination whether or not to proceed (§ 314 (b)). Thus, there will be a 5-6 month delay from the time of filing to an actual determination.

As shown in the chart, it is unclear whether patent examiners of the CRU will serve as gatekeepers, (akin to the staff attorney model of the ITC) or whether APJs/PTAB personnel will perform this function. In the chart the CRU is illustrated as examiners of this unit are actively applying the new IPR standard to current IPX filings.

Once granted, the PTAB has 12 months to conclude the proceeding with a written decision. The chart indicates some estimated times of the various discovery, amendment and oral proceeding milestones (to be clarified by the forthcoming Rules). As previously mentioned, the Director can extend the 12 month deadline by 6 months by a show of cause. Thus, from start to finish, (accounting for the front end) the proceeding will take 18-24 months. Thereafter, the written decision can be appealed to the CAFC.

Even with an appeal to the CAFC, the complete duration should not exceed 3 years, a significant improvement over the current 6-8 year timeline of IPX.

USPTO Denies Petition for Further Review

The epic battle between Microsoft and i4i effectively ended with the Supreme Court ruling upholding the clear and convincing standard. Yet, some lingering arguments at the USPTO were only recently finalized relative to i4i’s U.S. Patent 5,787,449.

As a reminder, Microsoft had made two attempts to invalidate the ‘449 Patent at the USPTO. A first ex parte patent reexamination was favorably concluded to i4i without amendment to the original claims (90/010,347), and the second request was denied outright (90/011,198) on November 24, 2010.

On December 27, 2010 a Rule 1.181 petition was filed to seek supervisory review of the examiner’s November denial. This petition was denied on September 29. 2011. The original petition, and the related decision may be found (here)

In denying the petition the Office found that the submitted art was largely cumulative of that already considered, and took issue with some of the positions asserted by Microsoft in their second request, noting:

Requester seems to alter what they consider a tag to suit their current argument. However, these changing definitions are internally inconsistent within the request.. . . . . . .the section cited refers to start tags for Chapter and Title. Reading until the next code is found does not necessarily mean that the next code is an end code and, in the portion that requester refers to, it is not the end tag. Furthermore, these tags have nothing to do with the nodes in the tree structure . . . .Requester is forcing the term tag to take on an unsupportable meaning to attempt to combine the references in a manner that would contain a new teaching.

Interestingly, the Office did take the opportunity to correct a statement in the first reexamination relating to the breadth of claim scope for the claim term “addresses of use,” adopting the court’s construction (see page 6 of the petition decision)

Of course, a grant of the December petition would not have had any real impact on the now settled dispute. The recent USPTO endorsement is just a bit more icing on the cake.

Shift in BPAI Fact Finding Necessitates New Rejection

Back in February, In re Stepan (or In re Side-steppin if it helps you remember the case) was argued before the CAFC. In a previous post, I explained how this case demonstrated a problem addressed by the 2010 proposed rule package for practice before the BPAI. Namely, the shifting in rejection grounds during appeal relative to that of the originally applied rejection. The newly proposed Rules attempt to liberalize the manner by which an Applicant/Patent Holder may challenge a “new ground of rejection” as presented in an Examiner Answer. The idea being, it is unfair for the Office to change course once prosecution is closed as no new rebuttal evidence may be entered.

Unchecked, a modification to the Office’s fact finding/legal theory in an Examiner Answer or BPAI decision can be quite prejudicial during patent reexamination. This is because, once on appeal, there is no RCE-like procedural mechanism by which a patent holder can unilaterally restart prosecution for the purpose of submitting new rebuttal evidence (unlike patent application prosecution).

At issue in Stepan was reexamination of U.S.Patent 6,359,022. During the reexamination, the USPTO disputed the priority right to a parent application under 35 USC  § 120. As the parent was a CIP, the examiner did not agree that certain claims were entitled to priority. Thus, under the examiner’s theory the applied art of the reexamination qualified under 102(b).

The Patentee argued that the priority claim was effective and that the art qualified as 102(a). Therefore, the Patentee asserted that declaration evidence (antedating) under 37 CFR § 1.131 was effective to “swear behind” the applied art. As the examiner maintained the 102(b) rejection, the sufficiency of the declaration evidence was not examined.

On appeal, the Board found that the Examiner was incorrect as to 120, and that some of the disputed claims were entitled to the priority date of the parent. However, the Board found that the declaration evidence was insufficient for these claims. In essence, the Board affirmed the examiner by changing the basis of the rejection from 102(b) to 102(a), but did not designate the 102(a) rejection as new. The Board sidestepped the new rejection issue by taking the position that the Patentee had anticipated the 102(a) rejection by submitting the declaration evidence, and that either rejection(102(a) or 102(b)) was still applied under 102.

As noted above, this change in grounds was significant as the Patentee never had an opportunity to address the perceived deficiencies in the declaration evidence, and has no ability to unilaterally reopen prosecution. In their analysis of the issues (here), the CAFC explained:

By making and relying on new fact findings regarding an issue the examiner did not raise, i.e., the sufficiency of Stepan’s Declaration to swear behind the Singh reference as § 102(a) prior art, the Board relied on a new ground of rejection. Kumar, 418 F.3d at 1367–68 (finding that a new ground of rejection exists when the Board relies on new fact findings which had not been previously advanced by the examiner about an existing prior art reference); see also In re Kronig, 539 F.2d 1300, 1302–03 (CCPA 1976) (noting there was no new ground of rejection when the Board used the same basis and the same reasoning advanced by the examiner). It is crucial that the examiner issue a rejection (even if that rejection is subsequently withdrawn) so the applicant is on notice that it is obligated to respond. Mere reliance by the Board on the same type of rejection or the same prior art references relied upon by the examiner, alone, is insufficient to avoid a new ground of rejection where it propounds new facts and rationales to advance a rejection—none of which were previously raised by the examiner.

(emphasis added)

.                .               .              .                .                 .

Notice does not focus on the applicant’s arguments divorced from the examiner’s rejections of record that are actually appealed to the Board. Instead, it focuses on the “adverse decisions of examiners” during prosecution which form the basis of the Board’s scope of review. 35 U.S.C. § 6(b). Because Stepan did not have prior notice of the Board’s intent to craft and rely on new findings of fact to support a §§ 102(a)/103(a) rejection and because it failed to identify this rejection as a new ground, Stepan’s notice rights were violated. 5 U.S.C. § 554(b)(3); 35 U.S.C. § 6(b). Had the Board labeled its rejection as a new ground of rejection, Stepan could have reopened prosecution to address the newly-alleged deficiencies in its Declaration with the examiner. We vacate the Board’s decision and remand with instructions to designate its rejection as a new ground of rejection.

Going forward it is expected that prosecution will be reopened in more appeals, especially appeals in patent reexamination as Patentees/Requesters have available no mechanism to reopen prosecution on their own to rebut new reasoning of the Board.

High Court Denies Inventors Plea to Punish Law Firm

Perhaps surprising no one but the petitioner, the strange case of Lockwood v. Sheppard, Mullin, Richter & Hampton came to an end Monday on the steps of the nation’s highest court.

As a reminder, in this case the plaintiff accused the defendant law firm (Sheppard Mullin), and two of its attorneys, of malicious prosecution relating to an alleged “sham patent reexamination.”  The California court determined that the state law cause of action was preempted by federal law (i.e., the USPTO has jurisdiction over practitioner conduct); this holding was appealed to the CAFC. A week after oral arguments the lower court decision was affirmed per curiam. (See earlier posts here and here)

Undeterred, the plaintiff sought Supreme Court review of the dispute. (petition here). In discussing what actually occurred during the reexamination, I always found it quite odd that this case was pursued so vigorously.

Estoppel Effect of USPTO Decision Attaches Only After All Appeals Exhausted

Estoppel, as it relates to inter partes patent reexamination (IPX) proceedings and the new inter partes review (IPR) of the AIA, has been a topic of discussion here over the past few weeks. As if on cue, the CAFC has chimed in with a bit of clarification on the topic of (IPX) estoppel as it relates to 35 USC § 315.

The USPTO has maintained the position that IPX estoppel (35 USC § 317) only attaches after all appeals are exhausted. That is to say, the USPTO will not honor an intermediate court result to for the purposes of vacating an ongoing IPX, or denying a new request, by operation of estoppel. Instead, the USPTO awaits a final appeal decision (or time for filing of such to pass). The Office has not had much opportunity to comment on the complimentary statute § 315 (c), which provides the estoppel effect of a USPTO decision on the district courts.  This analysis was performed this past week by the CAFC.

The timing of 315 estoppel attachment was explored in Bettcher Industries, Inc. v. Bunzl  USA, Inc., (Fed. Cir. 2011). During ther litigation dispute between the parties, Bunzl sought IPX of  U.S. Patent 7,000,325 (relating to a meat cutting assembly). In the reexamination, a Right of Appeal Notice was issued (RAN) confirming the patentability of certain claims at issue in the parallel litigation.

Bettcher took the position that the RAN was a final determination of patentability in accordance with 315 (c). In pursuing this argument before the district court, Bettcher convinced the court to refuse consideration of the prior art considered in the IPX based on an estoppel theory. For their part, Bunzl argued that IPX estoppel could not attach until the appeals process concluded, consistent with the USPTO interpretation of 317.

This dispute over the time of estoppel attachment was pursued to the CAFC, along with other issues.  Specifically at issue was the meaning of “final determination” as recited in 315 (c).

In deciding this issue of first impression, the CAFC examined legislative history of the IPX statutes and the language used across the various IPX statutes. The Court also considered the USPTO’s interpretation of 317, according Chevron deference. Ultimately, the CAFC held that the estoppel effect of a USPTO determination under 315 does not attach until all appeals are exhausted (consistent with the USPTO interpretation of 317), explaining that:

The relevant House and Senate records confirm that § 317(b) applies “after any appeals.” 145 Cong. Rec. 29276, 29973 (1999). And the Patent Office has interpreted § 317 consistent with this legislative history in M.P.E.P. § 2686.04 (emphases in original):

While Congress desired that the creation of an inter partes reexamination option would lead to a reduction in expensive patent litigation, it nonetheless also provided in the statute that a court validity challenge and inter partes reexamination of a patent may occur simultaneously; but once one proceeding finally ends in a manner adverse to a third party, then the issues raised (or that could have been raised) with respect to the validity of a claim in that proceeding would have estoppel effect on the same issues in the other proceeding.

. . .

The 35 U.S.C. 317(b) estoppel applies only in a situation where a final decision adverse to the requester has already been issued. If there remains any time for an appeal, or a request for reconsid-eration, from a court (e.g., District Court or Federal Circuit) decision, or such action has already been taken, then the decision is not final, and the estoppel does not attach.

While we believe that § 317(b) is clear, even if it were ambiguous, the Patent Office’s interpretation that § 317(b) does not apply “[i]f there remains any time for an appeal” would be entitled to deference. See Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336 (Fed. Cir. 2008) (holding that the “Patent Office had the authority under 35 U.S.C. § 2 to interpret section [of the act creating inter-partes reexamination] because that interpretation both governs the conduct of proceedings in the Patent Office, not matters of substantive patent law, and is a prospective clarification of ambiguous statutory language.”).

The CAFC also justified the consistent interpretation of 315 and 317 on other statutory interpretation grounds, the full opinion (here) is worth a read.

Of course, once the case heads back down to the lower court for consideration of the IPX art, the IPX appeal will be before the CAFC. Absent a reversal of the USPTO determination in the IPX, this maybe a hollow victory for Bunzl as estoppel will attach upon such a final determination of the CAFC (barring further appeal).

As noted last week, the new estoppel provisions of IPR provide for estoppel attachment at the time of a written PTAB decision.

Inter Partes Review Estoppel Applies to Ex Parte Patent Reexamination

Last week, I explained the current estoppel provisions of inter partes patent reexamination and the new Inter Partes Review estoppel relative to parallel litigation proceedings. I pointed out that the Inter Partes Review (IPR) estoppel provisions are similar in some respects to the current inter partes patent reexamination (IPX) provisions, but differ in important aspects of timing and scope.  As a result of these improvements, it is expected that the filing of an IPR will be especially effective to stay a district court litigation pending the outcome of the IPR. (Note: The ITC may take a dimmer view of these speedier proceedings in view of their mandate).

Another interesting consideration is how the new estoppel provisions will impact the USPTO. That is to say, the estoppel provisions of Inter Partes Review will not only have an impact on court proceedings, but also other USPTO proceedings, including ex parte patent reexamination.

The aspect of the new Inter Partes Review statute that applies to USPTO proceedings is as follows:

315 (e) Estoppel

(1) PROCEEDINGS BEFORE THE OFFICE- The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

Interestingly, the estoppel outlined above applies not only to a subsequent request for IPR from the same requester (or privies) but to any “office proceeding.”  By definition a Post Grant Review (PGR) can only be conducted prior to an IPR. This is because an IPR can only be filed once the 9 month PGR window has ended, or after any ongoing PGR concludes. As such, the primary office proceeding that can be requested, or maintained in this regard is ex parte patent reexamination.

Yet, in many cases ex parte patent reexamination is requested anonymously. (MPEP 2213)

So, how then can the USPTO prevent a new anonymous request by a losing IPR requester, or vacate an ongoing anonymously filed proceeding of the same requester by operation of Inter Partes Review estoppel?

It is suggested that the USPTO require a statement of any IPR filer that the estoppel provisions do not apply to the Requester, somewhat akin to what is required now of IPX filers. Yet, in addition to this statement, the Requester will also need to identify any previous ex parte reexamination filings, including those that may have originally been filed anonymously. Indeed, it may be necessary for the Requester to make an affirmative statement with respect to any existing ex parte patent reexamination proceeding, or any time a new request is received by the Office.

The notice of proposed rule making for IPR requests is expected in December.

Estoppel Provisions Disfavor Parallel Proceedings

During yesterday’s webinar on post grant USPTO proceedings, I compared the current estoppel provisions of inter partes patent reexamination to that of Inter Partes Review. The Inter Partes Review (IPR) estoppel provisions are similar in some respects to the current inter partes patent reexamination (IPX) provisions, but differ in significant respects.

In some ways, the new estoppel provisions are designed to address shortcomings of the existing IPX estoppel provisions. For example, while IPX estoppel does not apply to ITC proceedings, the IPR provisions extend estoppel to ITC proceedings. Additionally, while the IPX provisions use the terminology “raised or could have raised,” the new IPR provisions recite “raised or reasonably could have raised during Inter Partes Review.” Ostensibly, this language softening is designed to provide some slight wiggle room to account for the late found reference in a far away library of Siberia.

Of perhaps much greater interest however is the aspect of IPR estoppel that may compel judges to stay a parallel litigation pending IPR.

The Chart below lays out the differences between IPX and IPR estoppel. (modified from yesterday’s presentation for clarity, Click to Enlarge)

IPR-IPX estoppel

As shown in the chart, starting at the leftmost column. IPR estoppel attaches upon a written determination of the PTAB, not at the exhaustion of all appeals. This is a significant difference as estoppel is attainable within 12-18 months, much different than the roughly 6 year time frame it takes to navigate the USPTO and get a final CAFC decision.

In the second column, when a patent is found not invalid at the PTO in either IPX or IPR, the estoppel effect is largely the same. (The only difference being that the IPR estoppel extends to the ITC and is expressed as “reasonably could have raised, note bold text).”

In the third column, whether a patent falls at the USPTO or in court, estoppel becomes irrelevant.

The fourth and fifth columns are a bit trickier. Column 4 assumes there are no parallel USPTO proceedings. In column 5 the proceedings are conducted in parallel.

In the fourth column, with respect to IPX , a failure to prove invalidity in a district court would preclude the same party from later seeking inter partes patent reexamination based upon issues that were raised or could have been raised in the district court action. 35 U.S.C. 317(b). Applying this same circumstance to a defendant that is seeking IPR, while there is no estoppel per se, the litigation would be well beyond the 12 month deadline for filing. (New requirement of 315 (b)). Thus, there is a practical estoppel for those defendants that do not seek Inter Partes Review before the 12th month of litigation.

Moving on the 5th column, 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. So, judges considering whether or not to stay the litigation pending the new IPR proceeding will consider the following scenarios in the case of a parallel IPR:

1. If the stay is granted, in 12-18 months IPR will either simplify the validity issues in dispute by operation of estoppel, or perhaps resolve the dispute altogether by invalidating the patent.

2. If the stay is not granted and the court result comes first, IPR will continue and possibly conclude with a different result. Alternatively, if the USPTO result comes first (very likely if concluded on time) the court may be wasting resources in continuing on a parallel track.

One might argue that the above scenario exists today, such as when ex parte patent reexamination runs in parallel. (as there is no estoppel for these proceedings). Yet, the years of pendency of patent reexamination greatly diminishes that eventuality in all but the rarest of cases. On the other hand, estoppel will attach in IPR within 12-18 months of commencement.

Clearly, fending off a motion to stay pending IPR will be an uphill battle for future plaintiffs.