Six Year Patent Reform Effort Heads to Final Vote

Today is the opening day of the 2011 American Football season. A few months back it seemed that the 2011 season may be lost altogether or significantly delayed due to legal wrangling and disputes over revenue allocation. Then suddenly, the parties came to an agreement, and in a matter of days an agreement was forged and signed. The games were set and ready to begin…tonight is the culmination of those hard fought efforts as a new season begins.

It is only fitting that today is also the day that the U.S. Senate, after years of legal wrangling and disputes over USPTO fee diversion, will also set aside their differences and kick off a new era in U.S. Patent Law.

Senate Majority Leader Harry Reid (D-Nev.) announced yesterday that the Senate will hold a vote on final passage of H.R. 1249 (Leahy-Smith America Invents Act) at 4PM today. While there has been a discussion of amending the bill, which will be discussed prior to the 4PM vote, Senate leadership has made clear that amending at this juncture is simply not an option.

Three amendments have been offered, as follows:

1. (Coburn-R-Okla) Amendment to end fee diversion

2. (Sessions R-Ala) Amendment stripping out patent term extension provision (or the “dog ate my homework provision” as labeled by some)

3. (Cantwell D-Wa) Amendment modifying the transitional business method patent provision. (amendment here)

Senate Judiciary chairman Patrick Leahy (D-Vt.) strongly urged his colleagues yesterday to oppose an amendment from Sen. Tom Coburn (R-Okla.) that would end fee diversion from the U.S. Patent and Trademark Office, stating :

While I oppose fee diversion, I also oppose the Coburn amendment. After six years of work to get this bill here, this may kill the bill over a formality – the difference between a revolving fund and a reserve fund. [The House] spent days and weeks in heavy debate, working out their compromise in good faith and it was worked out by the House Republican leadership. There is no reason that having done that, they will reconsider and allow the original Coburn language to violate their rules and avoid oversight.

Regardless of your position on this legislation it is difficult to argue with Senator Leahy. Many that watched the House debates were sickened by the politicizing of the Coburn provision. That is to say, those in the House supporting full allocation of USPTO fees to the Agency were painted as supporting “increased government spending in a time of economic crisis.” (Of course, USPTO fees are not tax revenue).

In any event, I expect that the amendment efforts will fail and the bill will be passed today. Thereafter, the ball will be handed off to President Obama just in time for his speech this evening.

Are you ready for some football?

Leahy-Smith America Invents Act Heads to Finish Line

As expected, the Senate voted to invoke cloture in overwhelming fashion yesterday evening, 93-5. With this procedural hurdle now behind the Senate, the House bill will be forced to a limited debate on the merits (including unlikely amendment) and a final vote. Debate is expected to begin as early as today.

While it is inevitable that some amendments will be introduced, along with a bit of  pro forma grandstanding, it seems clear that the Senate is intent on delivering the bill to the president in current form.  (As any amendment would scuttle the opportunity to pass patent reform in the near term, I do not expect any to be seriously considered or adopted—- the majority has spoken).   

UPDATE: Watch the Debate ideo/C-SPAN2/”>live today at 11:30AM

Enactment could occur in a matter of days.

Congress to Pass Point of No Return Today?

Past the point of no return
No backward glances
Our games of make-believe are at an end.

(Past the Point of No Return, Phantom of the Opera)

Today, Congress returns from summer recess to begin the Fall term. The first order of legislative business for the Senate will be to vote on a cloture motion to preclude further debate (beyond a limited and fixed schedule) of the Leahy-Smith America Invents Act. The vote is scheduled for later this evening and can be viewed on C-span.

As explained in early August, while there are differences with H.R. 1249 and S.23, most notably concerns over fee diversion, the Senate intends to simply adopt the House bill. The adoption of the House bill will prevent further back-and-forth between the Senate and House on legislation that is far too esoteric for the average voter. On the heels of last week’s dismal job report, and with elections upcoming, Congress is eager to pass something—anything –that they can sell to the masses as a job’s stimulus. With the Leahy-Smith America Invents Act being the only bill even close to passage in the near term, any lingering concerns over the merits of this bill are likely to be muted quickly. The Senate is essentially fast tracking the House bill so that  it may be forwarded on to the White House for enactment this month.

It is also expected that President Obama will be selling patent reform to the public during his scheduled speech on Thursday. The administration appears poised to tout the importance of technology in today’s world economy. 200,000 jobs are also routinely identified as a by-product of the bill. I don’t know about all of that, but at the very least the USPTO will be hiring.

See my previous posts on the immediate change to patent reexamination practice upon passage of the Leahy Smith America Invents Act. Also, see these posts (here) and (here) on the potential impact on litigation strategy.

Claim Changes in Patent Reexamination & Reexamination Certificates

When faced with the assertion of a patent of dubious validity, prospective defendants increasingly resort to patent reexamination as a cost effective mechanism to dissolve the dispute.

In many patent disputes, patent reexamination is conducted in parallel to a district court or ITC proceeding. Of course, as the reexamination proceeding advances, the reexamination prosecution history creates new defensive opportunities such as, additional prosecution history disclaimer and/or estoppel arguments; enhanced, or additional  inequitable conduct positions; and new non-infringement arguments.

Claim changes and/or cancellation are a boon to defendants as potentially mooting current infringement contentions or at least creating an intervening rights defense.  Yet, it is important to keep in mind that such claim changes are not effective until the proceeding is concluded. This past Monday in Keung Tse v. eBay, Inc., et al (CAND), the Court considered whether cancellation/amendment  of a claim during patent reexamination mooted an otherwise justiciable dispute, explaining:

Only claim 21 of United States patent number 6,665,797 is asserted in this action. A reexamination of the ’797 patent was initiated in July 2007 by defendants in a different district court action, and in July 2009, the United States Patent and Trademark Office issued a final rejection of several claims, including claim 21. Plaintiff then filed the instant action in December 2009 — at a time when claim 21 of the ’797 patent did not officially exist.

Plaintiff appealed the USPTO rejections, and he amended claim 21 in March 2010, during the appeal process. The Board of Patent Appeals and Interferences reversed the rejection as to amended claim 21, but affirmed the rejection of other claims. Plaintiff then appealed the BPAI decision to the Court of Appeals for the Federal Circuit; that appeal remains pending (see Dkt. No. 133).

.           .          .           .           .             .          .         .

The court continued,

No reexamination certificate has been issued for the ’797 patent. Thus, the original version of claim 21 has been cancelled, but the amended version has not yet issued. There is no claim 21 at this time, and there is no guarantee that a reexamination certificate eventually will issue with the an amended version of claim 21 in its current form.

(emphasis added, decision dismissing the action here)

While, practically speaking, claim 21 has been “changed” during reexamination, such alterations are not effective until the certificate issues. As noted in MPEP 2250,

Amendments proposed in a reexamination will normally be entered and be considered to be entered for purposes of prosecution before the Office (if they are timely and comply with the rules); however, the amendments do not become effective in the patent until the reexamination certificate under 35 U.S.C. 307 is issued and published.

Thus, claim 21 of the original patent still exists in a technical sense until cancelled or amended by certificate, which has yet to happen. Thus, the court is incorrect to assume that claim 21 “does not exist.”

The effective date of a claim cancellation/amendment may seem esoteric, but, ignoring this reality could lead to premature summary judgement motions on non-infringement, intervening rights, etc. Of course, such a development is a strong argument in favor of staying a case, which seemed the more appropriate remedy here.

(Note:  the Patentee did not respond to the Court’s Order to show cause as to why the case should continue, which may explain the result.)

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

Race to Secure Venue Could Shut Out USPTO

When there is an imminent threat of litigation, rather than await the inevitable lawsuit, a potential defendant may pursue a declaratory judgement to establish a lack of liability. In patent disputes, declaratory judgment of invalidity and/or non-infringement were traditionally sought to remove the specter of litigation from a prospective defendant’s business. Increasingly, however, declaratory judgement actions are filed to secure a more desirable venue in advance of a litigious competitor, or dreaded “patent troll.” For example, rather than await being added to the Lodsys dispute in the notoriously Patentee friendly Eastern District of Texas, Wolfram Research, The New York Times, and Foresee Results Inc all sought declaratory judgement of invalidity of the Lodsys patents in different federal district courts, namely, Wisconsin, Illinois and California.

For those prospective defendants seeking to utilize a DJ action to secure venue after the enactment of the America Invents Act, doing so will foreclose a later filed inter partes challenge (i.e., Inter Partes Review or Post Grant Review) at the USPTO.   The America Invents Act provides with respect to Inter Partes Review:

Sec. 315. Relation to other proceedings or actions

(a) Infringer’s Civil Action-

(1) INTER PARTES REVIEW BARRED BY CIVIL ACTION- An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

Likewise, the America Invents Act provides with respect to Post Grant Review:

Sec. 325. Relation to other proceedings or actions

(a) Infringer’s Civil Action-

(1) POST-GRANT REVIEW BARRED BY CIVIL ACTION- A post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

The provision makes clear in a further section that a “civil action” is not a counterclaim, only a declaratory judgement.

Perhaps of more strategic interest to those defendants considering the necessity of a DJ action is section (2) of these provisions, which provide:

(2) STAY OF CIVIL ACTION- If the petitioner or real party in interest files a civil action challenging the validity of a claim of the patent on or after the date on which the petitioner files a petition for post-grant review [or inter partes review] of the patent, that civil action shall be automatically stayed until either–

(A) the patent owner moves the court to lift the stay;

(B) the patent owner files a civil action or counterclaim alleging that the petitioner or real party in interest has infringed the patent; or

(C) the petitioner or real party in interest moves the court to dismiss the civil action.

Under section (2), a creative defendant may file a request for either Inter Partes Review or Post Grant Review, and at the same time seek a DJ action in a favorable venue. The effect of this dual filing strategy would secure a USPTO review right, and at the same time secure a desirable district court venue that would be automatically stayed. Certainly, options (2)(A) and (2)(B) seem to provide relatively straightforward mechanisms for the patent owner to lift the stay. Yet, with a concurrent USPTO proceeding going forward at an accelerated pace (if the legislation is implemented as designed) one has to wonder whether the district court would be in much of  a hurry to lift the stay, or simply maintain the status quo. Indeed, other sections of the America Invents Act, codify the well known factors considered in granting stay.

(Note: these changes are not effective upon enactment of patent reform, but instead on the one year anniversary)

For a further discussion of the America Invents Act for patent litigators, see my previous post (here)

Patent Reform & Inter Partes Review

Last week, I discussed some important changes to inter partes patent reexamination that will become effective immediately upon enactment of the patent reform legislation. Namely, that the standard for initiating inter partes reexamination will become stricter. The new standard is defined as: a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request. This new standard replaces the current standard that requires a Substantial New Question of Patentability (SNQ), perhaps within a matter of days.

Inter Partes Review will ultimately replace inter partes patent reexamination on the one year anniversary of the enactment of the patent reform legislation. Thus, the interim standard for the last year of inter partes patent reexamination will help the USPTO prepare to transition to the new Inter Partes Review proceeding, which will use the same standard.

Looking forward to Inter Partes Review, current litigation defendants will find themselves shut out from the USPTO with respect to a parallel inter partes proceeding unless they pursue matters before the one year anniversary.

Inter Partes Review as currently written in the pending legislation, includes 35 U.S.C. § 315. Section 315(b) is entitled Patent Owner’s Action, and provides as follows:

An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

(emphasis added)

In other words, defendants can no longer wait until an advanced stage of a litigation proceeding before deciding to pursue Inter Partes Review.

For those already subject to litigation, the clock would appear to begin ticking upon enactment. So, litigation currently in early stages, awaiting a settlement, or just months away from costly discovery, may lose out on the ability to institute an inter partes proceeding if not mindful of the anniversary. Indeed, currently active litigants will not be able to wait for Inter Partes Review as once this proceeding becomes available in roughly 12 months, their litigation will be outside the 1 year date provision. Instead, those litigants desiring a parallel inter partes proceeding will be forced to file an inter partes reexamination now, before the anniversary date of patent reform enactment.

As pointed out previously, the date of patent reform enactment and the one year anniversary will likely result in a bubble of inter partes patent reexamination filings.

Of course, the estoppel provisions of inter partes patent reexamination currently in place effectively limit the ability to conclude an inter partes patent reexamination before the conclusion of an advanced litigation. Still, often times such filings are pursued by defendants for additional claim construction clarification, or stay purposes. While ex parte patent reexamination remains an option after Patent Reform, the loss of a voice in USPTO proceedings is a significant pitfall for those not following the seemingly imminent enactment of the Patent Reform legislation.

2011 AIPLA Economic Survey

 The cost of legal services will vary, depending upon the expertise of the attorney, market rates in a given area, and the unique aspects of a given project. In an attempt to provide a rough gauge on the expected costs in a given market and law firm size, the American Intellectual Property Law Association (AIPLA) issues a yearly economic survey of their membership.

This year’s survey provides some interesting insight into patent reexamination practices. For example, the average cost of an ex parte patent reexamination request in the U.S. is just under $19K. On the other hand, the average cost of an inter partes patent reexamination is $46K. These numbers are an average of all law firm sizes and geographical regions, and pertain to preparation of a typical request only.

From start to finish (reexamination request filing  to CAFC appeal), the cost of an inter partes patent reexamination proceeding is estimated to be $278K. (ex parte cost was not provided) 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.

Contact the AIPLA for the full survey and detailed break down by region, and firm size/expertise.

USPTO Updates Patent Reissue Practice to be Consistent with In re Tanaka

The USPTO has now issued a Notice entitled “Clarification of Criteria for Reissue Error in View of In re Tanaka.”

As a reminder, Ex parte Tanaka was decided in December of 2009 by the Board of Patent Appeals and Interferences (BPAI). In their decision, the Board explained that a reissue application was improper where the only defect identified in an issued patent was the failure to present additional dependent claims.  The Board reasoned that the mere addition of new dependent claims did not identify any defect in the issued patent. The Board rejected the reasoning of In re Handel, which indicated that a failure to pursue dependent claims was an appropriate error in patent reissue. The Board characterized this reasoning as “dicta.”

The Board’s decision was reversed by the CAFC (In re Tanaka here). In their reversal, the CAFC explained that contrary to the Board’s position, the In re Handel dicta is consistent with the patent reissue statute, and the court has not departed from this line of reasoning over the years.

In order to account for the decision of the CAFC, the USPTO Notice provides:

Effective immediately, the following policy is implemented. Where the only change to a patent made in an application for its reissue is the addition of a claim or claims that is/are narrower in scope than the existing patent claims, without any narrowing of the existing patent claims, the application claims are not to be rejected as failing to state an error under 35 U.S.C. § 251. In addition, any rejection of record in a pending application on this basis will be withdrawn, and any new Office action issued will inform applicant of the withdrawal, and the resulting status of the application in view of the withdrawal.

MPEP § 1402 will be revised in due course to reflect the holding in Tanaka.

While the Notice simply reiterates the Tanaka holding, its existence will allow examiners to ignore the inconsistent MPEP language.

2011 has been a banner year at the CAFC with respect to patent reissues disputes with Tanaka and  In re Mostafazadeh, and In re Staats still to come. In Mostafazadeh, the CAFC, while siding with the USPTO on the facts, corrected the USPTO’s position on the recapture rule.  The CAFC explained that a claim may be broadened with respect to previously surrendered subject matter (i.e., recapture) if the claim is also materially narrowed with respect to the surrendered subject matter. (previous post here).

On September 8th the CAFC is slated to hear oral arguments relating in another important patent reissue dispute with the USPTO, In re Staats. (previous post here)

Enactment of America Invents Act to Change Inter Partes Patent Reexamination Practice Immediately

The USPTO is currently hard at work preparing to implement and adapt agency practices to comport with the various provisions of the Leahy-Smith America Invents Act. As many features of the legislation will require a significant USPTO rule making effort, most of the provisions of the Act will not become effective until the 1 year anniversary of enactment. In this regard, the USPTO has reportedly penciled in September 20th as the target date for the expected enactment of the Leahy-Smith America Invents Act.

While most provisions of the Act will not take effect until a year after enactment, there are some very important changes to patent reexamination practice that will become effective immediately…..likely, in a few weeks time.

The biggest, immediate change is the new standard for initiating an inter partes patent reexamination (soon to be Inter Partes review). Today the standard for initiating any patent reexamination, ex parte or inter partes, is the familiar Substantial New Question of Patentability (SNQ).

Currently, for an SNQ to be found, it is only necessary that: a teaching of (prior art) patents and printed publications is such that a reasonable examiner would consider the teaching to be important in deciding whether or not at least one claim of the patent is patentable; and (B) the same question of patentability as to the claim has not been decided by the Office in a previous examination or pending reexamination of the patent. It is not necessary that a “prima facie” case of unpatentability exist as to the claim in order for an SNQ to be present as to a claim. Thus, an SNQ as to a patent claim could be present even if the examiner would not necessarily reject the claim as either fully anticipated by, or rendered obvious in view of, the prior art patents or printed publications. MPEP 2240/2640

The new inter partes reexamination standard will be stricter, and is codified as: a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request. Not only will this new standard will be applied to the new Inter Partes Review proceedings (available 1 year from enactment), but in the interim, to all inter partes patent reexamination filings. (See  6(c)(3)(C) of H.R. 1249; current Section 312 would apply between the date of enactment and the 1 year anniversary, at which time new Section 314 would go into effect with the same standard for Inter Partes Review.)

The new standard was designed to reign in the gaudy grant rates of inter partes patent reexamination (95%).

What does this mean for practitioners?

Unlike ex parte patent reexamination, an Office Action typically accompanies an Order of inter partes patent reexamination.  Thus, one could argue that there is a de facto, prima facie standard already applied by the USPTO to initiate inter partes patent reexamination. Still, it would seem prudent for practitioners planning on filing a request for inter partes patent reexamination in the next few weeks to be mindful of the looming change in standards.

Interestingly, the reasonable likelihood of prevailing standard will not consider rebuttal arguments from the Patent Owner, at least not for the next 12 months. Thus, the change may not yield a significant change in grant rates over the current de facto, prima facie standard. Still, filings after enactment of the Leahy-Smith America Invents Act will need to follow the new guidelines.

On the other hand, Inter Partes Review will allow for a preliminary response of the Patentee prior to deciding the Order.

As such, it is expected that there will be a small surge in inter partes reexamination filings immediately prior to the enactment of patent reform to avoid the new, heightened standard, and then another surge prior to the 1 year anniversary of enactment to avoid the new patentee preliminary response period.

Finally, with respect to ex parte reexaminations, the SNQ standard is maintained. However, enactment of patent reform will immediately preclude appeal by Patentees to the District Court in ex parte patent reexaminations. (to the extent that right currently exists, previous post here).

The times they are a-changin.

ABA Accepting Best Blog Nominations

Yes, you have seen this post before.

I tend to take it easy on Fridays (at least in the summer when readership falls off by week’s end anyway), just another groveling solicitation reminder to vote!

The American Bar Association (ABA) is now accepting nominations for the 100 best legal blogs. If you have found anything posted here in the past year even remotely helpful to your practice/research interests I would appreciate the support. Historically, the ABA rankings tend to be dominated by general interest blogs that are not as geared toward actual practitioners as this one. 

Thanks for your support. (Nominate this blog wg100_submit/”>here)