Callaway Pro V1 Golf Dispute Taken to Virginia District Court

This past January, I recounted the longstanding dispute between Callaway Golf and Acushnet. Acushnet is the parent company of Titleist, maker of the ProV1 family of golf balls. Callaway has asserted that the ProV1 balls infringe several of their patents (6,210,293, 6,503,156, 6,506,130, 6,595,873) in the Delaware District Court.

In 2006, Acushnet sought inter partes patent reexamination of the Callaway patents. In March of this year the BPAI decided the appeals of these reexaminations, finding the asserted claims of the Callaway patents invalid. Likewise, the same claims were found invalid in March of 2010 by the Court (neither dispute has made it to the CAFC).

Interestingly, patent reexamination was sought by Acushnet despite a 1996 contractual agreement between the companies that mandated all proceedings be conducted in the Delaware court. In fact, the Court has found Acushnet to have breached the terms of the settlement agreement by virtue of the patent reexamination filings (decision here).

At the outset of the reexamination proceedings Callaway attempted to have the reexamination proceedings vacated by the USPTO. Callaway argued that the USPTO was assisting in the breach of the contract by conducting patent reexamination. These petitions were denied. In denying the petitions the USPTO explained that private contract could not alter the USPTO’s statutory duty to conduct reexamination.

After four years worth of patent reexamination, and on the heels of an unsuccessful appeal to the BPAI, Callaway filed suit against the USPTO in an attempt to once again vacate the proceedings.

Last week the Virginia Court largely agreed with the USPTO explaining (full decision here):

After reviewing the inter partes reexamination statute, the PTO concluded that the 1996 settlement agreement could not abrogate its ability to reexamine the [patents]. The PTO also concluded that a contractual provision that absolutely prohibits reexamination would violate the strong public policy interest in ensuring valid patents.

The PTO’s decision is grounded in basic contract law. The 1996 settlement agreement cannot restrict the PTO’s participation in the reexaminations unless the PTO was a party to the agreement. . . .. The PTO was not a party to the 1996 settlement agreement and therefore cannot be bound by any of its provisions.

Moreover, the PTO correctly concluded that the inter partes reexamination statute provides a nondiscretionary duty, requiring the PTO to conduct a reexamination once it receives a request and makes the initial finding that a substantial new question of patentability exists.

The decision is not at all surprising.

Callaway may have had better luck seeking an injunction to prevent Acushnet from participating in the inter partes reexamination proceedings at the outset. At this stage of the game the damage has been done. An injunction 4 years prior would have at least given Callaway an ex parte path to the BPAI, which is statistically more favorable to patentees.

The decision is interesting with respect to its seemingly ephemeral rationales in distinguishing inter partes patent reexamination from court proceedings. For example, the Court notes that reexamination is not a judicial proceeding, and that a private agreement preventing patent reexamination would be against public policy. In a few months, patent reform will transform inter partes patent reexamination to inter partes review, an adjudicated proceeding. Also, the inter partes review statute expressly provides for settlement between the parties (Sec. 317 of H.R. 1249), which would effectively discontinue the USPTO’s efforts by operation of private agreement.

Those fashioning forum selection clauses for litigation settlement purposes would be wise to consider the changing landscape of post grant patent practice going forward.

Extension of Time Request in Patent Reexamination Angers Court

A few days back, I explained the very unusual, abbreviated stay entered in MONKEYMedia Inc. v. Apple Computer, et al (WDTX). In order to ensure that the parallel reexaminations advanced, the Court ordered the parties to expedite their submissions to the USPTO, in addition, the Court ordered the USPTO to “expedite” the reexamination proceedings.

Only a couple of days after issuing the original Order, the judge had a change of heart. No, not because his Order was stretching the bounds of his jurisdiction relative to the USPTO, but due to the “monkeying around” of MONKEYmedia (couldn’t resist).

It seems Monkey Media, prior to the Order, had requested an extension of time (60 days) to respond to an Office Action in at least one of the reexaminations. Interestingly, this would have reset the due date to October 15…giving the USPTO one week to decide the issues under the previous Order. (i.e., Court ordered resolution by October 24th). Yet, the request for extension was denied by the Office.

MONKEYmedia then informed the court, after the Order was issued, that they intended to seek reconsideration of their request. Needless to say, the court was not amused, modifying the previous Order as follows (Modified Order here):

Obviously, the PTO cannot expedite its reexamination if the parties drag their feet. This Court ordered an abbreviated stay in this case on the assumption that all parties were interested in resolving matters quickly and in the hope that the case could retain its place on the Court’s busy civil docket. MONKEYmedia in particular was adamant any delay would be both wasteful and inequitable. However, because MONKEYmedia is apparently no longer in any hurry, neither is the Court. This case will proceed when the PTO has fully reexamined [the patents] and come to a final conclusion, a process whose length will be dictated primarily by the actions of the parties before the PTO.

Ouch.

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

Is the USPTO Obligated to Follow a District Court Order?

Last Friday, the patent infringement action MONKEYMedia Inc. v. Apple Computer, et al (WDTX) was stayed pending the outcome of several patent reexaminations (U.S. Patents 6,393,158; 7,467,218; and 7,890,648). Interestingly, the stay is of a limited duration, 3 months, to allow time for the reexaminations to progress. In order to ensure that the reexaminations advance, the Court ordered the parties to expedite their submissions to the USPTO. What sets this decision apart from other is that the Court also ordered the USPTO to “expedite” the reexamination proceedings. (Order here)

Aside from the legal debate about whether or not the Judge has jurisdiction over the PTO, and whether or not the USPTO will follow the Order….lost on many is the fact that the USPTO would already do what the judge is asking, Order or not.

As noted in MPEP 2286:

Where a< request for ex parte reexamination * indicates (A) that it is filed as a result of >an order by a court or< an agreement by parties to litigation which agreement is sanctioned by a court, or (B) that litigation is stayed for the filing of a reexamination request >, the request< will be taken up by the examiner for decision 6 weeks after the request was filed >, and all aspects of the proceeding will be expedited to the extent possible<. See MPEP § 2241. If reexamination is ordered, the examination following the statement by the patent owner under 37 CFR 1.530 and the reply by the requester under 37 CFR 1.535 will be expedited to the extent possible. Office actions in these reexamination proceedings will normally set a 1-month shortened statutory period for response rather than the 2  months usually set in reexamination proceedings. See MPEP § 2263. **>Response periods< may be extended only upon a >strong< showing of sufficient cause. See MPEP § 2265. >Action on such a proceeding will generally take precedence to any other action taken by the examiner.< See generally In re Vamco Machine and Tool, Inc., 752 F.2d 1564, 224 USPQ 617 (Fed. Cir. 1985); Gould v. Control Laser Corp., 705 F.2d 1340, 217 USPQ 985 (Fed. Cir. 1983); Loffland Bros. Co. v. Mid-Western Energy Corp., 225 USPQ 886 (W.D. Okla. 1985); The Toro Co. v. L.R. Nelson Corp., 223 USPQ 636 (C.D. Ill. 1984); Digital Magnetic Systems, Inc. v. Ansley, 213 USPQ 290 (W.D. Okla. 1982); Raytek, Inc. v. Solfan Systems Inc., 211 USPQ 405 (N.D. Cal. 1981); and Dresser Industries, Inc. v. Ford Motor Co., 211 USPQ 1114 (N.D. Texas 1981).

(emphasis added)

While many would bemoan this provision as “…well that is what the PTO says, but that is not what happens,” the section also qualifies the commitment with the proviso that the proceeding “will be expedited to the extent possible.” Currently, the agency is under severe budget restraints and patent reexamination proceedings are being initiated in record numbers.

So, now we are back to the original question, is the USPTO bound by the October 24, 2011 deadline of the Order?

There would seem to be enough case law to protect the agency from District Court interference. Emerson Elec. Co.v. Davoil, Inc., 88 F.3d 1051 (Fed. Cir. 1996) (discussing conditions fo stay being predicated on reexamination action of parties) See also Patently-O discussion of Singer Co. v. P.R. Mallory & Co., 671 F.2d 232 (7th Cir. 1982) (Court may not order disruption of USPTO proceedings). An Order essentially asking the USPTO to drop everything else in favor of a particular reexamination would appear to cause a disruption of all other reexamination proceedings being handled by the CRU examiners responsible for these reexaminations.

Moreover, from a policy standpoint, compliance with the Order would very likely encourage every defendant to seek the same relief from their court when arguing in favor of staying their case. As the USPTO already does everything possible to expedite such cases, by their own rules, it would not appear to be in the USPTO’s best interest to cater to the wishes of individual judges in this regard.

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

Enactment of Patent Reform to Trigger Monumental Rule Making Effort

With so much of the current focus on Congress being centered around the debt ceiling debate, it is easy to forget about other legislative initiatives in the queue. Still, once the current crisis is resolved (or the can kicked down the road as the case may be) the Senate will turn to other issues of interest to the voting masses, like patent reform no-cost job bills.

With many expecting the Leahy-Smith America Invents Act to be fast tracked to enactment, the USPTO has been busy organizing their forces in anticipation. With Patent Reform bringing the most significant changes to patent law in generations, the USPTO will be tasked with drafting an unprecedented number of rule packages (19 or more) to implement the legislative changes within a very tight deadline.

Yesterday, the USPTO announced the establishment of a website to expedite the submission of public feedback. The site is explained as providing: “information to our stakeholders and the public on the legislation and USPTO’s actions to implement the provisions of the AIA, and to seek your preliminary input and comments.  We will provide updates on this site throughout the implementation process.  While any comments you provide on the site are informal and not treated as part of a formal request for comments or a rulemaking, we intend to review and consider comments provided on the site.”

The site may be found (here). 19 rule making areas are identified (here)

New Therasense Guidelines to Invite Extrinsic Evidence Abuse?

As discussed yesterday, the USPTO has proposed to modify asepcts of Rule 1.56(b) and Rule 1.555(b) to comport to the materiality standard of the recent Therasense decision of the CAFC. In doing so, the Office has proposed a definition of “but for-plus” materiality standard defined by acts of omission (duty of disclosure) together with affirmative acts relating to willful false statements and misrepresentations (duty of candor and good faith).

Rule 56 is an ethical guidepost that pertains only to Patent Applicants. As such, aside from a rare protest under Rule 1.291 or 1.99, third parties do not submit prior art materials to the USPTO under this Rule (of course patent reform will provide more opportunities for pre-grant submissions). Instead, Rule 56 compliance is litigated as an element of an inequitable conduct defense to patent infringement. Charges of inequitable conduct are not substantively considered in patent reexamination as the Office is a less than ideal arbiter of questions of “intent.” 

Currently, the USPTO is proposing to define, by Rule, a materiality standard in terms of “bad acts.” Consequently, has the USPTO now undermined established practice (MPEP) by encouraging new 1.555(b)(2) submissions for consideration of such information in patent reexamination?

Section (c) of Rule 1.555 provides that:

The responsibility for compliance with this section rests upon the individuals designated in paragraph (a) of this section and no evaluation will be made by the Office in the reexamination proceeding as to compliance with this section. If questions of compliance with this section are raised by the patent owner or the third party requester during a reexamination proceeding, they will be noted as unresolved questions in accordance with § 1.552(c). (emphasis added)

In view of the language of 555(c), which remains unchanged by the proposal, it is clear that submissions by third parties in patent reexamination that address matters of compliance with Rule 555 cannot be considered in the reexamination proceeding. This section does not preclude retrospective compliance arguments relating to the original prosecution (Rule 56 compliance challenges).  

On the other hand, MPEP 2216 cautions that conduct of parties should not be included in a Request for reexamination as such will not be considered. Further, Rule 1.552(c), (mentioned above in 1.555 (c)) provides that issues outside of patents and printed publications will not be considered, but merely noted on the record in the next Office Action.

The problem with the proposed changes is that Rule 555(b)(2) defines a materiality determination in terms of an analysis of affirmative acts relating to willful false statements and misrepresentations. The proposed changes to Rule 555(b) also replace the previous language that helped refined patent reexamination materiality in terms of patents and printed publications–it is unclear why this language was removed.

Assuming the USPTO finalizes the current proposal, the Office may have a difficult time refusing extrinsic information in patent reexamination as to the “plus” aspect of the proposed materiality standard. That is to say, the proposed Rule provides a “but for-plus” standard in ascertaining materiality of a reference, but the “plus” component is essentially off limits to Third Parties in arguing materiality of a given reference before the Office. 

Can the Office rightfully refuse extrinsic evidence explaining previous misleading submissions to the Office? Would such information not provide “new light” as to the materiality of previously considered art under the Proposed Rules? 

A more manageable solution is to modify the proposal to add back in “patents and printed publications” to 555(b)(1) and to drop (b)(2) altogether. As written yesterday, safeguards against fraudulent conduct already exist, there is no need to muddy the waters of materiality.

With enhanced pre-grant submission rights being expanded by Patent Reform, and Inter Partes Review and Post Grant Review providing new, litigation style dispute formats, the USPTO could very well find themselves policing past conduct under the current proposal.

Rule 56

USPTO’s Rule 56 “But For-Plus” Proposal

Last week, the USPTO published proposed changes to the materiality standard of  37 CFR §§ 1.56 and 1.555 in response to the Federal Circuit en banc decision in Therasense, Inc. v. Becton, Dickinson & Co.

Impressively, the USPTO has managed to publish the proposed changes in just under two months (since the issuance of the Therasense decision). The initiative to craft such meaningful proposals in such a short time period, as well as the intention to help alleviate the significant duty of disclosure obligations is certainly greatly appreciated by all stakeholders.

In distilling the essence of Therasense down to succinct language for rule making purposes, the USPTO has promulgated a “but for-plus” test.

Is this test appropriate as currently presented, or does it require a bit more seasoning?  Continue Reading Mixing the Duty of Candor with the Duty of Disclosure

Therasense “But For” Standard Codified by USPTO

As mentioned yesterday, the USPTO has now issued a Notice of Proposed Rule Change in the Federal Register on Rule 56 and Rule 555. The proposal is for the Office to adopt the materiality decision of the recent Therasense decision of the CAFC. (Proposal here)

I will have more commentary on this proposal in the coming days.

Goings on and Rumored Changes at the USPTO (Summer 2011)

As discussed last week, the USPTO is anticipating the passage of patent reform in the near term.  Upon enactment, the agency would have access to the additional fees of the one track program (expedited patent application examination), and the 15% surcharge.  Based on this influx of funding, it is expected that current restrictions on operations will be lifted, such as the freeze on examiner overtime. Hiring is also expected to begin again, with the goal of bringing in additional examiners as well as a significant number of Administrative Patent Judges (APJs). A detailed financial snapshot of USPTO operations and budgeting was presented at last week’s PPAC meeting. Preparations are underway to begin the hiring process in a matter of weeks. (CFO presentation here)

Of perhaps greater interest to practitioners, back in May, the Office issued a statement noting that the Therasense decision was being studied. It is rumored that the USPTO will issue a Notice of Proposed Rule-making as early as tomorrow to adjust Rule 56 practice in light of Therasense. 

Check back tomorrow for an update.

 

patent reform

Did Therasense Moot Supplemental Examination?

Supplemental Examination, as currently proposed in the patent reform legislation, would enable Patentees to effectively cure inequitable conduct for all but the most offensive conduct. This reform provision was designed to combat the plague of inequitable conduct charges that existed prior to the Therasense decision. 

Supplemental examination would enable the Patentee to have the USPTO consider, reconsider, or correct information believed to be relevant to its patent if the information presented a substantial new question of patentability (SNQ).  If an SNQ is found to exist, the supplemental examination would include a full examination of the claims. (not just limited to patents and printed publications as in current reexamination practices).  Once Supplemental Examination concludes, the issues brought before the Office in the second examination cannot serve as a basis for an inequitable conduct defense.

The legislative proposal hoped to provide a post grant opportunity to cure such issues as it was well established by the courts that patent reexamination and patent reissue could not cure such defects…..that is, until Therasense. Continue Reading The Impact of Therasense on Patent Reform

AIPLA Submits Comments

As discussed here in significant detail over the past few months, the USPTO is considering various proposals in an attempt to streamline patent reexamination. Back in April, the USPTO published a collection of working concepts and initiatives in the Federal Register for the purpose of streamlining patent reexamination. Based upon public commentary, the USPTO will now begin the process of considering to implement/modify the various proposals via a formal rule-making process, or through internal policy changes. (a copy of the Federal Register Notice is found here)

Comments submitted to date can be found posted (here). AIPLA comments were submitted last week, a copy of which is found (here). The AIPLA has joined in my suggestion to adopt the patent interference model for deciding petitions in inter partes patent reexamination. 

Comments of the ABA IP Section are expected later this week.