Japanese Embrace New Patent Challenge Mechanisms

Generally speaking, inter partes patent reexamination was pursued relatively infrequently by foreign based entities. Unlike their U.S. based counterparts, foreign based companies rarely employed patent reexamination as a tool to resolve patent disputes in a more cost effective manner, and/or to pressure opponents in a parallel litigation. This phenomena was especially odd for Japanese innovators. This is because many of the top ten patent filers are Japanese companies. Clearly these companies were familiar with USPTO proceedings, but remained uncomfortable with the USPTO as a source of potential resolution for patent validity disputes.

Since the passage of the new patentability challenges of the America Invents Act (AIA), the public has overwhelmingly embraced Inter Partes Review (IPR) and Covered Business Method (CBM) proceedings as a viable option to traditional patent limitation—and, unlike inter partes patent reexamination, Japanese innovators are not far behind. The chart below identifies the Japanese companies actively involved in IPR proceedings. (Click to Enlarge)

Japanese-IPRs

As shown in the chart, Toyota Motor and Sony lead the pack in aggressively utilizing IPR as a patent challenge mechanism. Perhaps of more interest is the participation of a healthy dose of smaller, Japanese organizations. This trend, which was never the case in reexamination, appears to suggest a widespread adoption of IPR by Japanese companies as an effective patent litigation defense.

Patent Reform for the Holidays?

Now that Congress has kicked the budgetary can down the road for another 3 months they may actually squeeze in some lawmaking before the end of 2013. Given the public image problems created by the shutdown of the last few weeks, lawmakers will be eager to find an issue to address via legislation; especially an issue with bipartisan support that will not be too hotly debated— You see where this is going.

Given the the entrenched positions on both sides of the immigration debate (a stated priority of the White House), patent reform remains the lowest hanging fruit. For this reason it seems likely that the next act of political theater will be to sell patent reform as key to America’s competitive future. As a reminder, here are the issues to shape the debate in the week’s ahead:

1. Real Party in Interest: Several introduced bills note that it is often difficult to ascertain the true owner of a patent. It is explained that shell companies are created to assert the patent while the true owners remain hidden from the public and that the shell gains insight into the licensing practices of their targets. This insight is then passed from the shell to a real-party-in-interest that may be targeting the same defendant in another law suit. The proposed legislation/executive action would require a stricter identification of ownership at the USPTO to thwart such practices.
Impact on Abusive Litigation Practices: Insignificant — most trolls don’t care much about this control.
Likelihood of Becoming Law: High — few will strongly oppose/lobby against this one. Although large innovators will bear the burden of such a control. The PTO has already been instructed by executive action to address this issue.

2. Covered Business Methods: Schumer Bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High — With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High — Identical bills already in both Senate and House on same points. The Business Software Alliance, and others, oppose the expansion of CBM.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate — Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low — Other, less extreme options seem far more likely, as noted next.

4. Heightened Pleading Standard for Patent Cases: Patent trolls notoriously abuse the pleading form practice of patent litigation to withhold important information from their adversary for as long as possible, such as infringed claims, accused products, etc. Several proposals would get away from such “notice pleading” and require specific products be accused, claims identified, etc.
Impact on Abusive Litigation Practices: Moderate — Trolls will just work around it by filing 100 page complaints against smaller companies knowing full well most will settle.
Likelihood of Becoming Law: Moderate/Low — Also hurts legitimate high-tech industries that may need discovery for detailed assertions.

5. Stricter Requirements for Software Related Patents: Computer related inventions are often claimed functionally, which leads to a claim scope that is not enabled by most patents (i.e., every known process for implementing the function). The USPTO is already training examiners to reject such claims as lacking written description, and forcing applicants into means-plus-function claiming where possible.
Impact on Abusive Litigation Practices: Moderate/Low — The current inventory of patents will keep the troll machine going for another decade at least.
Likelihood of Becoming Law/USPTO Practice: High — USPTO is already working on this issue as a result of the executive action issued.

6. Modification to PGR Estoppel Provision: CBM estoppel only applies to issues actually raised in the proceeding. PGR on the other hand applies to anything raised, or “reasonably could have been raised.” Since it is possible to file a PGR for any statutory ground of invalidity, the concern is that an unsuccessful PGR will destroy all invalidity defenses in a later litigation. It has been argued that this stricter estoppel was an scriveners error in the statute. The proposal is to adopt the CBM standard for estoppel.
Impact on Abusive Litigation Practices: Low — Practically speaking PGR, due to its 9 month window, is of little value in abusive litigation scenarios.
Likelihood of Becoming Law: Moderate/Low — Bio/Pharma Lobby doesn’t want generics using PGR to challenge valued drug continuations on 101/112 grounds. On the other hand, most major bar associations are supporting this change.

7. Modification of USPTO Claim Construction: It is proposed that the USPTO apply the same claim construction and, more importantly, presumption of validity as applied in the district courts in IPR, PGR and CBM proceedings.
Impact on Abusive Litigation Practices: Helps Trolls
Likelihood of Becoming Law: Low — Application of presumption of validity to USPTO post grant proceedings is a non-starter. Expect this concept to morph into a provision requiring the USPTO to apply Philips v. AWH for all post grant proceedings (including reexamination and reissue), but not a presumption of validity.

Coming soon.

2. Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High – With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High – Identical bills already in both Senate and House on same points, limited lobbying to oppose. – See more at: https://www.patentspostgrant.com/lang/en/2013/08/which-patent-reform-initiative-will-be-taken-up-in-september#sthash.y18g4Rby.dpuf

2. Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High – With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High – Identical bills already in both Senate and House on same points, limited lobbying to oppose.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate – Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low – Plaintiff bar has kept this control from personal injury suits for years, don’t see it happening here.

– See more at: https://www.patentspostgrant.com/lang/en/2013/08/which-patent-reform-initiative-will-be-taken-up-in-september#sthash.y18g4Rby.dpuf

Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High – With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High – Identical bills already in both Senate and House on same points, limited lobbying to oppose.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate – Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low – Plaintiff bar has kept this control from personal injury suits for years, don’t see it happening here.

4. Heightened Pleading Standard for Patent Cases: Patent trolls notoriously abuse the pleading form practice of patent litigation to withold important information from their adversary for as long as possible, such as infringed claims, accused products, etc. Several proposals would get away from such “notice pleading” and require specific products be accused, claims identified, etc.
Impact on Abusive Litigation Practices: Moderate – Trolls will just work around it by filing 100 page complaints against smaller companies knowing full well most will settle.
Likelihood of Becoming Law: Moderate/Low – Also hurts legitimate high-tech industries that may need discovery for detailed assertions.

5. Stricter Requirements for Software Related Patents: Computer related inventions are often claimed functionally, which leads to a claim scope that is not enabled by most patents (i.e., every known process for implementing the function). The USPTO is already training examiners to reject such claims as lacking written description, and forcing applicants into means-plus-function claiming where possible.
Impact on Abusive Litigation Practices: Moderate/Low – The current inventory of patents will keep the troll machine going for another decade at least.
Likelihood of Becoming Law/USPTO Practice: High – USPTO is already working on this issue.

6. Modification to PGR Estoppel Provision: CBM estoppel only applies to issues actually raised in the proceeding. PGR on the other hand applies to anything raised, or “reasonably could have been raised.” Since it is possible to file a PGR for any statutory ground of invalidity, the concern is that an unsuccessful PGR will destroy all invalidity defenses in a later litigation. It has been argued that this stricter estoppel was an scriveners error in the statute. The proposal is to adopt the CBM standard for estoppel.
Impact on Abusive Litigation Practices: Low – Practically speaking PGR, due to its 9 month window, is of little value in abusive litigation scenarios.
Likelihood of Becoming Law: Low – Bio/Pharma Lobby doesn’t want generics using PGR to challenge valued drug continuatons on 101/112 grounds.

7. Modification of USPTO Claim Construction: It is proposed that the USPTO apply the same claim construction and presumption of validity as applied in the distrcit courts in IPR, PGR and CBM proceedings.
Impact on Abusive Litigation Practices: Helps Trolls
Likelihood of Becoming Law: Low – Application of presumption of validity to USPTO post grant proceedings is a non-starter. Will not go anywhere in present form. Expect this concept to morph into provision requiring USPTO to uses Philips v. AWH for all post grant proceedings (including reexamination and reissue).

Look for an entirely new bill from Senator Leahy incorporating many of the more favored concepts, as well as more focused bills from others as we approach September.

– See more at: https://www.patentspostgrant.com/lang/en/2013/08/which-patent-reform-initiative-will-be-taken-up-in-september#sthash.y18g4Rby.dpuf

1. Real Party in Interest: Several bills note that it is often difficult to ascertain the true owner of a patent. It is explained that shell companies are created to assert the patent while the true owners remain hidden from the public. The proposed legislation/executive action would require a stricter idenitfication of owenership at the USPTO.
Impact on Abusive Litigation Practices: Insignificant – most trolls don’t need, or care about anonymity.
Likelihood of Becoming Law: High – few will oppose/lobby against this one.

2. Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High – With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High – Identical bills already in both Senate and House on same points, limited lobbying to oppose.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate – Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low – Plaintiff bar has kept this control from personal injury suits for years, don’t see it happening here.

4. Heightened Pleading Standard for Patent Cases: Patent trolls notoriously abuse the pleading form practice of patent litigation to withold important information from their adversary for as long as possible, such as infringed claims, accused products, etc. Several proposals would get away from such “notice pleading” and require specific products be accused, claims identified, etc.
Impact on Abusive Litigation Practices: Moderate – Trolls will just work around it by filing 100 page complaints against smaller companies knowing full well most will settle.
Likelihood of Becoming Law: Moderate/Low – Also hurts legitimate high-tech industries that may need discovery for detailed assertions.

5. Stricter Requirements for Software Related Patents: Computer related inventions are often claimed functionally, which leads to a claim scope that is not enabled by most patents (i.e., every known process for implementing the function). The USPTO is already training examiners to reject such claims as lacking written description, and forcing applicants into means-plus-function claiming where possible.
Impact on Abusive Litigation Practices: Moderate/Low – The current inventory of patents will keep the troll machine going for another decade at least.
Likelihood of Becoming Law/USPTO Practice: High – USPTO is already working on this issue.

6. Modification to PGR Estoppel Provision: CBM estoppel only applies to issues actually raised in the proceeding. PGR on the other hand applies to anything raised, or “reasonably could have been raised.” Since it is possible to file a PGR for any statutory ground of invalidity, the concern is that an unsuccessful PGR will destroy all invalidity defenses in a later litigation. It has been argued that this stricter estoppel was an scriveners error in the statute. The proposal is to adopt the CBM standard for estoppel.
Impact on Abusive Litigation Practices: Low – Practically speaking PGR, due to its 9 month window, is of little value in abusive litigation scenarios.
Likelihood of Becoming Law: Low – Bio/Pharma Lobby doesn’t want generics using PGR to challenge valued drug continuatons on 101/112 grounds.

7. Modification of USPTO Claim Construction: It is proposed that the USPTO apply the same claim construction and presumption of validity as applied in the distrcit courts in IPR, PGR and CBM proceedings.
Impact on Abusive Litigation Practices: Helps Trolls
Likelihood of Becoming Law: Low – Application of presumption of validity to USPTO post grant proceedings is a non-starter. Will not go anywhere in present form. Expect this concept to morph into provision requiring USPTO to uses Philips v. AWH for all post grant proceedings (including reexamination and reissue).

Look for an entirely new bill from Senator Leahy incorporating many of the more favored concepts, as well as more focused bills from others as we approach September.

– See more at: https://www.patentspostgrant.com/lang/en/2013/08/which-patent-reform-initiative-will-be-taken-up-in-september#sthash.y18g4Rby.dpuf

1. Real Party in Interest: Several bills note that it is often difficult to ascertain the true owner of a patent. It is explained that shell companies are created to assert the patent while the true owners remain hidden from the public. The proposed legislation/executive action would require a stricter idenitfication of owenership at the USPTO.
Impact on Abusive Litigation Practices: Insignificant – most trolls don’t need, or care about anonymity.
Likelihood of Becoming Law: High – few will oppose/lobby against this one.

2. Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High – With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High – Identical bills already in both Senate and House on same points, limited lobbying to oppose.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate – Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low – Plaintiff bar has kept this control from personal injury suits for years, don’t see it happening here.

4. Heightened Pleading Standard for Patent Cases: Patent trolls notoriously abuse the pleading form practice of patent litigation to withold important information from their adversary for as long as possible, such as infringed claims, accused products, etc. Several proposals would get away from such “notice pleading” and require specific products be accused, claims identified, etc.
Impact on Abusive Litigation Practices: Moderate – Trolls will just work around it by filing 100 page complaints against smaller companies knowing full well most will settle.
Likelihood of Becoming Law: Moderate/Low – Also hurts legitimate high-tech industries that may need discovery for detailed assertions.

5. Stricter Requirements for Software Related Patents: Computer related inventions are often claimed functionally, which leads to a claim scope that is not enabled by most patents (i.e., every known process for implementing the function). The USPTO is already training examiners to reject such claims as lacking written description, and forcing applicants into means-plus-function claiming where possible.
Impact on Abusive Litigation Practices: Moderate/Low – The current inventory of patents will keep the troll machine going for another decade at least.
Likelihood of Becoming Law/USPTO Practice: High – USPTO is already working on this issue.

6. Modification to PGR Estoppel Provision: CBM estoppel only applies to issues actually raised in the proceeding. PGR on the other hand applies to anything raised, or “reasonably could have been raised.” Since it is possible to file a PGR for any statutory ground of invalidity, the concern is that an unsuccessful PGR will destroy all invalidity defenses in a later litigation. It has been argued that this stricter estoppel was an scriveners error in the statute. The proposal is to adopt the CBM standard for estoppel.
Impact on Abusive Litigation Practices: Low – Practically speaking PGR, due to its 9 month window, is of little value in abusive litigation scenarios.
Likelihood of Becoming Law: Low – Bio/Pharma Lobby doesn’t want generics using PGR to challenge valued drug continuatons on 101/112 grounds.

7. Modification of USPTO Claim Construction: It is proposed that the USPTO apply the same claim construction and presumption of validity as applied in the distrcit courts in IPR, PGR and CBM proceedings.
Impact on Abusive Litigation Practices: Helps Trolls
Likelihood of Becoming Law: Low – Application of presumption of validity to USPTO post grant proceedings is a non-starter. Will not go anywhere in present form. Expect this concept to morph into provision requiring USPTO to uses Philips v. AWH for all post grant proceedings (including reexamination and reissue).

Look for an entirely new bill from Senator Leahy incorporating many of the more favored concepts, as well as more focused bills from others as we approach September.

– See more at: https://www.patentspostgrant.com/lang/en/2013/08/which-patent-reform-initiative-will-be-taken-up-in-september#sthash.y18g4Rby.dpuf

1. Real Party in Interest: Several bills note that it is often difficult to ascertain the true owner of a patent. It is explained that shell companies are created to assert the patent while the true owners remain hidden from the public. The proposed legislation/executive action would require a stricter idenitfication of owenership at the USPTO.
Impact on Abusive Litigation Practices: Insignificant – most trolls don’t need, or care about anonymity.
Likelihood of Becoming Law: High – few will oppose/lobby against this one.

2. Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High – With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High – Identical bills already in both Senate and House on same points, limited lobbying to oppose.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate – Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low – Plaintiff bar has kept this control from personal injury suits for years, don’t see it happening here.

4. Heightened Pleading Standard for Patent Cases: Patent trolls notoriously abuse the pleading form practice of patent litigation to withold important information from their adversary for as long as possible, such as infringed claims, accused products, etc. Several proposals would get away from such “notice pleading” and require specific products be accused, claims identified, etc.
Impact on Abusive Litigation Practices: Moderate – Trolls will just work around it by filing 100 page complaints against smaller companies knowing full well most will settle.
Likelihood of Becoming Law: Moderate/Low – Also hurts legitimate high-tech industries that may need discovery for detailed assertions.

5. Stricter Requirements for Software Related Patents: Computer related inventions are often claimed functionally, which leads to a claim scope that is not enabled by most patents (i.e., every known process for implementing the function). The USPTO is already training examiners to reject such claims as lacking written description, and forcing applicants into means-plus-function claiming where possible.
Impact on Abusive Litigation Practices: Moderate/Low – The current inventory of patents will keep the troll machine going for another decade at least.
Likelihood of Becoming Law/USPTO Practice: High – USPTO is already working on this issue.

6. Modification to PGR Estoppel Provision: CBM estoppel only applies to issues actually raised in the proceeding. PGR on the other hand applies to anything raised, or “reasonably could have been raised.” Since it is possible to file a PGR for any statutory ground of invalidity, the concern is that an unsuccessful PGR will destroy all invalidity defenses in a later litigation. It has been argued that this stricter estoppel was an scriveners error in the statute. The proposal is to adopt the CBM standard for estoppel.
Impact on Abusive Litigation Practices: Low – Practically speaking PGR, due to its 9 month window, is of little value in abusive litigation scenarios.
Likelihood of Becoming Law: Low – Bio/Pharma Lobby doesn’t want generics using PGR to challenge valued drug continuatons on 101/112 grounds.

7. Modification of USPTO Claim Construction: It is proposed that the USPTO apply the same claim construction and presumption of validity as applied in the distrcit courts in IPR, PGR and CBM proceedings.
Impact on Abusive Litigation Practices: Helps Trolls
Likelihood of Becoming Law: Low – Application of presumption of validity to USPTO post grant proceedings is a non-starter. Will not go anywhere in present form. Expect this concept to morph into provision requiring USPTO to uses Philips v. AWH for all post grant proceedings (including reexamination and reissue).

Look for an entirely new bill from Senator Leahy incorporating many of the more favored concepts, as well as more focused bills from others as we approach September.

– See more at: https://www.patentspostgrant.com/lang/en/2013/08/which-patent-reform-initiative-will-be-taken-up-in-september#sthash.y18g4Rby.dpuf

Upcoming CLE Programs

For those seeking CLE in the coming weeks, the following programs cover post grant topics. First, TechTransferCentral.com offers “Patent “Trolls” Under Fire: Strategies Tactics & Legislation Impacting University Patents and Licensing” on October 22nd 1-2PM (webinar). Next, on Thursday, October 24th  the AIPLA Annual Meeting includes: Post-Grant Challenges Strategy & Outcomes.

New USPTO Rules of Professional Conduct in Effect

Non-registered practitioners may, in limited circumstances, be permitted to appear before the Patent Trial & Appeal Board (PTAB) on a pro hac vice basis. 37 C.F.R § 42.10(c). Previously, in IPR (IPR2013-00010) (order here), the requirements for the motion and accompanying declaration were outlined.

As the Rules of Professional Conduct have been updated since the issuance of the above order, a new Model Order has been issued (here) to update factor (vi) so that it now properly references Part 11, rather than Part 10 of Title 37, Code of Federal Regulations (which was deleted in May of this year).

Recalibrating Indemnification Notice & Control Post AIA

Patent indemnification provisions are a fixture of modern contractual agreements for the exchange of technological goods. The indemnification clause, whether express or introduced by default via the Uniform Commercial Code (UCC), essentially warrants that the contracted goods are free from claims of patent infringement. In the event of a claim of patent infringement, the indemnity clause obligates the Seller/Supplier to defend against the claim in some manner, typically funding the defense, or taking over responsibility for the defense effort.

While the body of law pertaining to contractual interpretation has remained largely unchanged in recent years, the passage of the America Invents Act (AIA) has altered the landscape as to patent defense practices. In particular, the battle against the dreaded patent troll has shifted more toward the post grant patent challenge proceedings of the Patent Trial & Appeal Board (PTAB). Since many multi-defendant disputes are shifting to the PTAB for resolution it is imperative that indemnitors account for this eventuality in their contractual agreements.

A typical indemnification clause defines a condition that triggers the defense obligation. In the patent defense context, the trigger may be a claim of infringement or notice letter tendered by the patentee. Many indemnity clauses include a notice obligation, which defines a set period by which the indemnified party must notify the indemnitor of the occurrence of the triggering event. Another common aspect of the indemnification clause is an identification of which party will control the defense.

Going forward, fashioning these common aspects of indemnification provision should be done with an eye toward the new PTAB estoppel and statutory bar requirements. This exercise will be especially important for organizations operating in technology spaces commonly targeted by non-practicing entities.

First, estoppel has changed under ther AIA.

In the old inter partes reexamination context, statutory estoppel was limited to the requester of the reexamination proceeding. The statutory estoppel of Inter Partes Review (IPR) extends to the real-party-in-interest (RPI) or privies of the Requester or RPI. See 35 U.S.C. § 315(e)(2). While the USPTO’s view is that the touchstone of privity is control and contribution to a PTAB filing, a later privity determination of the courts may look to the nature and depth of the business relationship. In such instances, the indemnitor might desire heightened control and notice of IPR challenges, even where indemnification is waived.

Second, the ability to file an IPR challenge is limited in duration.

The importance of a timely demand for indemnity can be especially critical. Once served with a complaint for infringement, the defendant has 12 months to seek IPR. If a timely demand is not made by the indemnified party (e.g., after a typically delayed Answer to the complaint), and/or the indemnifying party requires a set period to review and assess liability under the demand, valuable time may be lost. That is, if the indemnitor seeks IPR on behalf of the indemnified party, the same 12 month statutory bar would apply to the indemnitor.

As the estoppel for Covered Business Method (CBM) challenges is limited to issues actually raised, and there is no 12 month time window, the above considerations are primarily related to IPR practice. When PGR becomes available for the first inventor to file patents issuing from applications filed on or after March 16, 2013, the same concerns would apply, albeit the time window is shorter, and keyed to patent issueance rather than service of the complaint.

The PTAB has quickly become the busiest forum in the U.S. for patent trials. With their heightened speed and more favorable standards for patent challengers relative to traditional court based options, organizations would be wise to account for this shift in defense strategies in their indemnification clauses.

 

 

 

 

Does the 12 month Window of 35 U.S.C. 315(b) Ever Reset?

Petitioners seeking Inter Partes Review (IPR) must be mindful of the statutory bar of 35 U.S.C. § 315(b). This provision precludes IPR on any patent once 12 months have elapsed after service of a complaint alleging infringement of that patent. The rationale for the statutory bar of 315(b) is straightforward. That is, IPR was designed to be a true alternative to patent litigation, not an adjunct process that was typical of the inter partes patent reexamination proceeding it replaced. By mandating that an IPR filing be brought earlier in the litigation timeline, Congress hoped to avoid duplicative proceedings, avoid patentee harassment, and enhance the ability of the Patent Trial & Appeal Board (PTAB) to provide a timely resolution to such business disputes.

315(b) went into effect on September 16, 2012. As written, the statute was understood to be retroactive, and immediately foreclosed IPR as an option for many late stage litigants. For this reason, there was an unprecedented surge of inter partes patent reexamination filings in the weeks leading up to September 16, 2012. Still, there were some open questions as to the flexibility of the 12 month window. How would repeated assertions of the same patent be treated by the PTAB, did the window reset? What about patents that had been reexamined and included new claims?

Over the first year of IPR, the PTAB has answered many of these questions looking at the plain language of 315(b), which is reproduced below.

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)

The first question as to the impact on repeated law suits was explored early on in MacAuto USA v. BOS gmbH & Co. KG (IPR2012-00004). In MacAuto, the PTAB made clear that an earlier complaint that was dismissed without prejudice, was treated consistent with the F.R.C.P, that is, as if it never existed. So, in the case of such a dismissal, the window would effectively reset.

A similar issue was raised in Universal Remote Control Inc. v. Universal Electronics Inc. (IPR2013-00168). In Universal, there was no dismissal without prejudice. The PTAB explained:

Petitioner submits “[t]here is nothing in the text of section 315(b) that addresses the subject of multiple lawsuits involving the same patent or that requires that the one-year grace period be applied to the filing of the first of such multiple lawsuits.” Pet. 7. We agree that the plain language of the statute does not address the subject of multiple lawsuits involving the same patent. We disagree, however, that the one-year grace period applies only to the last of a chain of multiple lawsuits or that the filing of a later lawsuit renders the service of a complaint in an earlier lawsuit to be a nullity as Petitioner argues. The plain language of the statute does not include such a restriction.

This holding was reiterated more recently in Accord Healthcare Inc. USA v. Eli Lilly & Company (IPR2013-00356)

A week back, a petitioner (IPR2014-00008) has challenged the retroactive nature of 315(b) as it applies to complaints served prior to enactment of the statute. Specifically, the petitioner argues that the language of 315(b) “is served” is an expression of prospective application only (i.e., complaints served after September 16, 2012). The argument analogizes the situation to the interpretation of the ex post facto reach of criminal statutes, citing a 2010 decision relating to sex offender registration statutes. Given that criminal statutes are interpreted to favor defendants, and to avoid ex post facto application, I would not expect this argument to be given serious consideration by the PTAB.

Finally, the statute recites the language “the patent.” At least one IPR is exploring the impact of a later suit that asserts claims that did not exist in the first complaint; that is, claims added by reexamination certificate. While the PTAB has yet to decide this issue, it is expected that the difference between patent reissue and reexamination will be noted in the same way as done by the CAFC in Aspex Eyewear. In other words, claims added in reexamination do not create a new patent.

In short, unless a first complaint was dismissed without prejudice, the petitioner clock doesn’t restart under 35 U.S.C. § 315(b).

Upcoming CLE Programs

For those seeking CLE next week, the following programs cover post grant topics. First, TechTransferCentral.com offers “Patent “Trolls” Under Fire: Strategies Tactics & Legislation Impacting University Patents and Licensing” on October 22nd 1-2PM (webinar). Next up, on October 24th comes the AIPLA Annual Meeting, which includes the Thursday morning program: Post-Grant Challenges Strategy & Outcomes.

Simplification of PTAB Trial Grounds May Not Help CAFC

Under the old inter partes patent reexamination model, patentees were often faced with 10+ grounds of rejection. The numerosity and overlap in these rejections rendered USPTO processing quite tedious and resource intensive. For at least this reason  these proceedings would take upward of five years to make their way through the USPTO.

With the inefficiencies of inter partes patent reexamination still fresh on the minds of the Patent Trial & Appeal Board (PTAB), it is not surprising that the Board has attempted to simplify such issues for Inter Partes Review (IPR) and Covered Business Method (CBM) patent challenges (and presumably PGR). In the PTAB Trial Orders to date, grounds of unpatentability that are deemed “redundant” are filtered out at the close of the preliminary proceeding and trial is ordered going forward on the strongest grounds (as determined by the panel of PTAB judges). However, in view of the recent CAFC decision in Rexnord Industries LLC. v. Kappos (CAFC 2013), this redundancy determination may only serve as  a temporary reprieve for patentees.

In Rexnord, the third party requester presented several grounds of rejection relative to a key claim feature. The focus of that reexamination then switched to a subset of references. The examiner rejected the claims based on the chosen subset of references, the Patentee appealed (i.e. Rexnord was appellee). On appeal to the PTAB, the examiner was reversed and the claims were confirmed as patentable. On rehearing, Rexnord pointed out that other rejections outside of the focused subset explicitly demonstrated the feature found distinguishing by the Board. However, the Board denied the argument as waived since it was not presented in the appellee briefing. On appeal to the CAFC, the USPTO advanced the same waiver theory.

The CAFC explained that the USPTO’s concept of waiver was incorrect for appellees:

When [patentee] appealed the examiner’s decision, Rexnord was not barred from presenting this argument in defense of the examiner. The PTO states in its brief on this appeal:

“Just as this Court does not entertain arguments made outside of appellant’s opening brief, see, e.g., In re Watts, 354 F.3d 1362, 1367 (Fed. Cir. 2004); In re Schreiber, 128 F.3d 1473, 1479 (Fed. Cir. 1997), the Board has a rule that similarly bars the presentation of new arguments outside appellant’s opening brief (absent circumstances not alleged here), see 37 C.F.R. § 41.79(b). PTO Br. 24.”

We observe that Rexnord was not the appellant before the Board, and that the premise is an incorrect statement of the appellate process. On judicial review, the correctness of the decision appealed from can be defended by the appellee on any ground that is supported by the record, whether or not the appellant raised the argument. See Jaffke v. Dunham, 352 U.S. 280, 281.

Of course, PTAB analysis in IPR and CBM proceedings is no longer an appeal process, but instead the actual trial. As such, the PTAB can maintain their procedural position that redundant grounds are not part of the ordered trial. Yet, if inter partes patent reexamination is any kind of barometer of likely IPR and CBM outcomes, the petitioner will most often times be the appellee in a subsequent CAFC appeal. In this situation, redundant grounds may be argued as being part of the trial record (i.e., raised in a both the petition filed and supporting declaration). Indeed, the USPTO has defined “proceeding” to include the preliminary proceeding as well as the trial phase (37 C.F.R. § 42.2).

Going forward petitioners would be wise to fully develop all grounds of unpatentability, especially in their declaration so that some may come back from the dead, as needed, on appeal.

Early Determination Calibrates Plaintiff Expectations

Inter Partes Review (IPR) and Covered Business Method (CBM) proceedings of the Patent Trial & Appeal Board (PTAB) begin with a Trial Order that includes substantial guidance on matters of claim construction. Typically, key terms at issue in the proceeding are expressly construed by the panel of administrative patent judges (APJs). While such constructions are not binding per se on a parallel litigation proceeding, in some circumstances such findings can be nevertheless devastating to a litigation campaign, and, disruptive at a far earlier date than a typical Markman Order.

For example, in many cases involving non-practicing entities (NPE), an overly broad claim construction is advanced for the purpose of capturing the products/processes of an entire industry. At the PTAB, the broadest reasonable interpretation is applied. Naturally, if the PTAB does not agree with the NPEs claim interpretation some 5-6 months after petition filing, such is strong evidence that the plaintiff’s case will not go according to plan. In fact, the CAFC has found interpretations of the USPTO in this context to be persuasive evidence. See St. Clair Intellectual Property Consultants, Inc. v. Canon Inc., (Fed. Cir. 2011, non-precedential)

In other contexts, where the claim interpretation analysis is more akin to a district court analysis, such as in an expired patent or means-plus-function claim, the PTAB Trial Order can arguably supplant a Markman analysis.

This was most recently demonstrated in IPR2013-00152 (Universal Remote Control Inc. v. Universal Electronics), when construing means-plus-function claims, the PTAB will simply deny trial on claims that are deemed indefinite under 35 U.S.C. §112 (f). (Order here)

As indicated in the claim interpretation section, supra, we are unable to arrive at an interpretation of the requirements of claim 16 due to the lack of disclosed structure corresponding to the recited “means for assigning,” “means for indicating,” and “means for setting.” A lack of sufficient disclosure of structure under 35 U.S.C. § 112, sixth paragraph renders a claim indefinite, and thus not amenable to construction. See In re Aoyama, 656 F.3d 1293, 1298 (Fed Cir. 2011) (quoting Enzo Biochem, Inc. v. Applera Corp., 599 F.3d 1325, 1332 (Fed. Cir. 2010) (“If a claim is indefinite, the claim, by definition, cannot be construed.”). In the circumstances of this case, we conclude that the information presented in the Petition and the Preliminary Response does not show there is a reasonable likelihood that Petitioner would prevail in its challenge of claim 16 in an inter partes review.

This determination was provided by the PTAB within 6 months of filing the petition. Here the fact finding of the PTAB is akin to that performed in the district courts with respect to 112 support. Compare this result and expense to that which would be required to reach a Markman decision of a typical district court trial schedule.

USPTO Operations Unaffected by Government Shutdown….For Now

With many government agencies shutting down all but the most essential operations today, including the International Trade Commission (ITC), the USPTO remains open. With roughly 4 weeks of funding available, the USPTO expects to maintain operational status. Likewise, the Court of Appeals for the Federal Circuit (CAFC) appears to be safe at least for another week.

The last time the government shut down for a protracted period, 1995, the USPTO was largely unaffected as a fee funded agency That said, if the impasse were to extend beyond 4 weeks, the agency will implement a contingency plan to ensure that statutory mandated review periods for patent reexamination (90 day review period) and PTAB proceedings (12-18 month trial period) are not jeopardized. Also, IT support will remain to ensure that patent applications can continue to be e-filed.