Reexamination is an attractive alternative to litigation for achieving freedom to operate.
Patents can have a huge impact on the fortunes of device manufacturers. A manufacturer found infringing a patent may be subject to sizeable monetary penalties. For example, in 2011 a jury awarded Medtronic more than $100 million in its suit against NuVasive for infringing Medtronic patents through the sale of surgical implants, retractors, and anterior cervical plates. In addition, after losing a patent fight, an order barring further sales of the infringing product is likely, and this can exact an even greater cost than a one-time monetary judgment.
Given the potential cost from a finding of infringement, manufacturers frequently respond to such allegations by mounting a vigorous and multifaceted legal defense to ensure that they are free from these huge liabilities as they pursue their business. Among the available options a challenge to the validity of an asserted patent can often provide the most viable defense.
The United States Patent and Trademark Office takes seriously its responsibility to grant patents only for products that represent an inventive advance over the state of the art. However, it is often forced to decide what is inventive with incomplete information. Moreover, many patent-seekers take a short-term view, pressing to obtain a low-cost patent without paying much attention to whether that patent will withstand a later challenge. As a result, many patents that are issued contain invalid claims, and attacking an invalid patent is often the best way for a medical device manufacturer to achieve freedom to operate.
A challenge of a patent’s validity may be made either in court or before the Patent Office through a reexamination proceeding. With reexaminations, someone challenging a patent presents a case of invalidity to the Patent Office. After review, the Patent Office may ultimately confirm that patent claims represent a real invention or reject the claims as unpatentable, a ruling that will cancel the patent claims and make them no longer available to assert in litigation.
During the proceedings, the patent holder may also end up having to amend the claims in such a way that the claims no longer cover products of interest. As a result, reexamination is an attractive tool as an alternative to, or in combination with, litigation in working around a patent, particularly for a manufacturer faced with a high-stakes accusation of infringement. Under the America Invents Act (AIA), recently enacted by Congress, challenging a patent within the Patent Office may prove to be an even more attractive option.
A More Favorable Forum
With the America Invents Act, most of which will go into effect in September 2012, Congress has taken steps to make the Patent Office a more favorable forum for challenging patents. Under the AIA, Congress has adopted procedures to speed up the process, expanded the ability of a challenger to participate in a challenge, and expanded what would be considered a question to the validity of an issued patent that can be reconsidered by the Patent Office.
In fact, if a serious challenge to the validity of a patent is presented to the Patent Office, the changes under the AIA are intended to almost guarantee that the Patent Office will provide a definitive answer before litigation works its way through the courts. For manufacturers worried that a lingering dispute about a patent is damaging their business, this faster resolution can be critical.
Other procedural changes will also make it more enticing to resolve questions of a patent’s validity through the Patent Office. For example, it will now be possible to end proceedings in the Patent Office through a settlement. In addition, a limited ability to obtain evidence—which is currently an advantage of challenging a patent through litigation—will also be afforded litigants.
To achieve these benefits under the AIA, what is now called inter partes reexamination will be replaced by “inter partes review” and “post-grant review” procedures. These procedures are similar to each other in that both are initiated by a third party challenging the validity of an issued patent. However, post-grant review must be requested within nine months of issuance and allows almost any type of defect in a patent to be the basis for a challenge. Possible defects include confusing claims or claims that seek to block competitors from using concepts that extend beyond the scope of what was legitimately disclosed in the patented invention.
Inter partes review, on the other hand, will be limited to challenges based on prior art documents as in current reexamination practice. This review will focus on determining whether a patent claims something that can truly be regarded as an invention in light of these prior art documents.
A procedure called ex parte reexamination will substantially remain the same. In this proceeding, a challenger presents to the Patent Office a question about the validity of a patent and then relies on the Patent Office to resolve that question without further input from the challenger. For challengers ex parte reexamination, though it will move at a slower pace than the new post-grant review proceedings, will still have characteristics that will be desirable in some circumstances. Because the challenger does not fully participate throughout the proceeding, an oft-cited advantage is that the challenger is not bound by the result if the Patent Office finds that the claims are valid. As a result, the challenger can raise questions of validity again in court. In addition, ex parte reexamination likely entails a lower procedural cost than the other options.
Is Reexamination The Right Choice?
Choosing how to challenge the validity of a patent in a high stakes dispute can be central to resolving the dispute on favorable terms. While reexamination at the Patent Office can yield good results, not all challenges can be heard within the Patent Office. As mentioned, during a nine-month window following grant of a patent, almost any grounds of invalidity can be raised in a Patent Office proceeding. After that, challenges may be based only on patents and printed publications that demonstrate that what is claimed in a patent was not inventive when the patent was filed.
Moreover, even when validity of a patent can be challenged in the Patent Office, it does not follow that the Patent Office is the more favorable venue for that challenge. Some cases of invalidity are best presented in court. For example, if the challenge to a patent is based on a “story” that is best told by live witnesses, a court is likely the better choice.
In contrast, when the challenge requires an understanding of multiple technical concepts, the Patent Office may be the better venue. Information about the validity of a patent might better be presented to the Patent Office rather than to a random selection of average citizens in order to allow the experts there to reevaluate whether what is sought to be patented is truly an invention.
Challenging a patent’s validity through the Patent Office does hold one important advantage, because the Patent Office applies a more lenient standard than is used in court. In court, a patent issued by the Patent Office is presumed valid, and clear and convincing evidence of invalidity must be presented for a court to accept invalidity of the patent as a defense to a charge of infringement. In contrast, the Patent Office in reexamination is not bound by its prior decision to grant the patent and will find claims in a patent invalid if that appears to be the most likely scenario.
Furthermore, the Patent Office will invalidate claims if there is any reasonable interpretation that the claims can be considered invalid. In contrast, a court will attempt to divine the true meaning of the claims and should only invalidate them based on this interpretation.
There are numerous other factors that can sway a decision about where to proceed. These include the likely somewhat lower cost of proceeding before the Patent Office, the likelihood that a patent might be strengthened if the patent is amended during a proceeding in the Patent Office, the number of claims in the patent, the remaining life of the patent, and the length of time since a suit alleging infringement was filed. For those challenging the validity of a patent, the overriding concern is likely to be which forum provides the best chance of success.
There are several important issues to consider before moving forward with a patent challenge:
Effectively draft the request. When the factors point toward a challenge within the Patent Office, one of the most important pieces of the puzzle is ensuring that the request for reexamination be effectively drafted. Though there are many licensed patent attorneys, few have the extensive experience necessary to prevail in a reexamination. Ironically, patent examiners seem to apply a different standard when evaluating a request to reexamine a patent than an examiner might apply in making a rejection of a patent application during routine prosecution. Practitioners used to the rules of normal examination frequently get tripped up.
For a request to be granted under the new regime, it must establish a prima facie case that at least one claim is invalid by a preponderance of the evidence. The long-term goal is not to have the request granted but to have the patent invalidated.
Carefully consider what evidence is needed. To streamline the process, a requester will be expected to submit a complete case, including evidence such as declarations, with the request. While all the details for challenging a patent under AIA are not yet known, it is likely that there will be limited opportunities for a challenger to submit evidence or new grounds for invalidity once the process is under way. Further streamlining the process, there will be no possibility of appeal within the Patent Office or to a district court (which generally affords an opportunity to further develop evidence.) Any appeal will go directly to the U.S. Court of Appeals for the Federal Circuit.
Additionally, discovery will be allowed, but limited and consistent with the nature of the proceedings, to the factual assertions made by either party. In inter partes review that means discovery is largely limited to depositions of declarants, if declarations are submitted. However, in a post-grant review challenges are permitted on a wide range of grounds and discovery may be broader.
In short, it is important for a legal practitioner preparing a challenge to envision where the proceeding will end up before it even starts. The request must reflect this long-term vision.
Consider strategies that may give rise to intervening rights. Once the proceeding is underway, a critical element is likely to be whether amendments to the claims will be made by the patent owner. Amendments can strengthen a patent. On the other hand, amendments can give rise to “intervening rights.” This means that enforcement of the patent is limited to activities initiated before the amendments were made. When there is already an infringer, making amendments that give rise to intervening rights can sink litigation. An effective strategy for a challenger is to attempt to use this to its advantage.
Be careful of estoppel. For inter partes review and post-grant review of a patent, estoppel still applies if the proceeding goes to a final decision on a challenged claim. Estoppel is a complex legal theory, but it essentially means that the price of challenging a patent through the Patent Office is that any issues decided or that could have been decided in the proceeding cannot be presented later in court.
The obvious point is that pursuing such a proceeding should be undertaken only by those willing to vigorously press for invalidity. Though, a more subtle point is to build a fallback position that is not barred by estoppel. This can be done by drawing a clear line around issues that could not have been raised in the Patent Office so that they can still be used as a defense in litigation. In addition, use the Patent Office challenge to build a record that the challenged patent does not cover a product of interest, which is also an important defense in litigation.
Expect complicated procedural rules. Those contemplating a post-grant challenge should be warned not to cavalierly assume that these proceedings are just like litigation—or just like normal patent prosecution. The Patent Office is likely to enact rules that put its distinctly patent-like spin on these proceedings, and the rules of practice before the Patent Trial and Appeal Board are expected to be modeled after rules currently in place for interference proceedings, which are known to require special skills to navigate.
Expect quick proceedings. Both of the new proceedings will be streamlined, with a mandate that they be completed within one year from the Patent Office’s decision granting a request for review. Although the process could be extended for 6 months for good cause, the full proceeding is likely to be over in 15 to 24 months from the date when a proper request for review is submitted. That time is faster than most district courts take to resolve issues of patent validity. This time scale will place a premium on foresight and preparation.
Understand the interplay with litigation. The new Patent Office challenges will be more of an either/or choice with litigation, placing a premium on evaluating a case and picking the better forum. A challenge must be requested within one year of a suit enforcing the patent. In addition, a requester is not allowed to maintain a declaratory judgment action in court while making a post-grant challenge but can pursue a counter-claim for invalidity if sued.
However, the existence of a post-grant review shall not be a basis for denying a preliminary injunction if an infringement action is filed within three months of patent grant. Furthermore, by utilizing—or opposing—stays in a litigation it can sometimes be possible to adjust the relative timing of the proceedings in court and in the Patent Office to ensure that the decision of the Patent Office controls. A decision on validity in litigation does not automatically end a reexamination proceeding.
Understand the interplay with a settlement. A new strategic consideration now permitted under the AIA is settlement of post-grant challenges. Any settlement agreement must be in writing and recorded with the Patent Office, but it can remain confidential. The possibility that a reexamination can be privately settled after being declared by the Patent Office may make reexamination a more attractive option for disputes when a business resolution, rather than complete victory, is the goal.
In addition to expanding the role of reexamination, this new settlement dynamic will place a premium on a patent practitioner’s ability to surmise how the Patent Office will decide a reexamination in order to guide clients in strategizing settlement scenarios. This skill may be particularly important if there should be a judgment in a parallel proceeding in district court, which doubtlessly will leave one party dissatisfied but does not automatically terminate the reexamination under the new regime.
An Attractive Option
Patent challenges in the Patent Office will continue to provide an important tool for challenging the validity of a patent to obtain freedom of operation. These challenges will likely prove to be an even more attractive tool under the new regime. However, to use it effectively, it will be important to understand how it may be used instead of—or in addition to—litigation. Such an understanding will be important for both patent challengers and patent holders alike.
Janice A. Vatland is a shareholder in the Boston intellectual property firm of Wolf, Greenfield & Sacks and a member of the firm’s reexamination practice group. She can be reached at email@example.com.
Edmund J. Walsh is a shareholder in the Boston intellectual property firm of Wolf, Greenfield & Sacks and cochairman of the firm’s reexamination practice group. He can be reached at firstname.lastname@example.org.