Equitable Intervening Rights a Function of USPTO Delay?
Whether a narrowing patent reissue application or broadening patent reissue application, USPTO pendency delay is significant. As discussed yesterday, narrowing reissue applications appear to fare no better than regular U.S. applications, and broadening reissue applications have been known to take as long as 10 years to complete.
Of course, amendments made during patent reissue will result in absolute intervening rights defense for potential infringers. As damages for such amended/new claims will not begin to accrue until issued, Patentees have nothing to gain by dallying during patent reissue prosecution. In fact, as demonstrated by a recent district court ruling, significant pendency delay may in fact create a further limit on available damages for amended/new claims under the doctrine of equitable intervening rights.
As a quick review, 35 U.S.C. 252 presents two flavors of intervening rights in the reexamination/reissue context: absolute intervening rights, and equitable intervening rights.
The doctrine of absolute intervening rights requires that claims of the reexamination/reissue that are not substantially identical to those of the original patent, cannot lead to liability for any infringement pre-dating the newly added/amended claims of the reexamination/reissue.
On the other hand, the doctrine of equitable intervening rights (“may provide”) is judicially administered in accordance with the principles of equity to protect business investments made prior to the issuance of the newly added/amended claims.
So, for example, if a significant investment were made by a defendant prior to patent reissue, and the defendant was found to infringe the new/amended claims, the damages available could be limited to a reasonable royalty under principles of equity. In determining whether or not equitable intervening rights might apply, the passage of time since the time of initial investment is a critical factor.
Last week, in denying a temporary restraining order in Medicis Pharmaceutical and Corp, and AlyZan Inc., v. Stiefel Laboratories Inc., (here) the defendant argued that the plaintiff should not be entitled to equitable relief (i.e., TRO) based on unclean hands. One aspect of this defense was that the doctrine of equitable intervening rights applied to the claims of reissue patent RE 41,134. In this regard, the court explained:
. . . .Stiefel claims it should not be barred from making and selling a product when substantial preparations were made prior to the issuance of an asserted reissue patent. The asserted’ 134 patent is a reissue of the ‘275 patent. In other words, the patentee sought to correct any defects in the original patent. Medicis sent a cease and desist letter to Connetics (Steifel’s predecessor) in 2004 about the Velac® formula (predecesssor of Veltin™) possibly infringing the ‘275 patent (predecessorto the ‘134 patent). Connetics responded and explained why it did not believe infringement was occurring. The patentee then initiated reissue proceedings in November 2004, informing the PTO that Connetics’ assertions of invalidity caused the applicant to reevaluate the claims in the patent. The patent was not reissued until February 2010 – six years later– and all the claims in the reissued ‘134 patent were “substantially changed.”
In the intervening six years, Stiefel asserts it acted “in good faith” to develop Veltin™ and worked “diligently” with the FDA to approve the product. Defendant states that it has invested substantial resources in research and development, clinical trials, marketing, etc. and should not be shut down on the eve of its launch date simply because Medicis chose to pursue a reissue of the ‘275 patent rather than enforce it. (emphasis added)
Clearly, the lengthy pendency of patent reissue proceedings is working in favor of potential infringers.