All or Nothing Design Patent Reexaminations: On the Rise?

Given the increase in design patent cases being heard by the Court of Appeals for the Federal Circuit in the past two years, it seems an appropriate time to consider trends in design patent reexamination as well. A review of filing trends in design patent reexamination over the past ten years reveals the landscape for both patent owners and third-party requesters.

Between January 1, 1999 and December 31, 2009 the USPTO Official Gazette noticed 5,594 requests for reexamination. Of these, 97 or 1.7% were requests for reexamination of design patents. Of these 97 reexaminations, 85 or 88% were ex parte and 12 or 12% were inter partes.

For reasons explained below, there is reason to predict that design patent reexaminations, particularly third party requests, are likely to rise in the future.

Cumulative statistics released by the USPTO demonstrate steady growth in the number of requests for reexamination being filed generally (particularly inter partes) since the advent of third-party participation in 1999.

The top reasons to anticipate an increase in design patent reexamination filings include: 1) the effectiveness of the proceeding as a defense strategy for accused infringers, 2) the abundance of qualifying printed publications available in the form of product catalogues and images, 3) the high rate of claim cancellation compared to utility patent cancellation rates, and 4) the low rejection rate and lack of significant file wrapper estoppels prompting reexamination to narrow design patent scope.

Who Files Design Patent Reexamination Requests?

Who is making requests for design patent reexamination is interesting. Only 16% of all design patent reexamination requests have been owner initiated. 23% were filed by anonymous third-parties and 58% were requested by known third-parties. The remaining 3% were Commissioner ordered. This trend exists even if we only consider ex partes proceedings. Even then, 78% of all ex parte design patent reexamination requests were filed by a third-party and not by the patent owner. As typically seen in utility patent reexaminations, more than a third or 35% of all ex parte reexaminations are initiated by the patent owner. Also interesting is the origin of the requests where the third-party requester can be identified. In those, 21 or 41% originated from outside the United States. Leading the requests were entities from Taiwan, South Korea, and Hong Kong.

Does Technology Matter?

Interestingly, no single technology area has been a target for design patent reexamination requests. The chart below shows that requests have been spread fairly well across technologies including tools and hardware, furnishings, transportation, and lighting.

Of the 97 design patent reexaminations that have been initiated since 1999, 60 have been issued a Notice of Intent to Issue a Reexamination Certificate (“NIRC”) as of March 26, 2010. Of these concluded proceedings, 29 or 48% emerged with the patent confirmed and unamended. Slightly more, 31 or 52% of the design patents were cancelled entirely.
This differs significantly from official statistics for utility patents, where on average only 11% are canceled entirely in ex parte proceedings and 89% conclude with the patent being confirmed either with amendment (65%) or without (24%) amendment. This difference may be attributed, at least in part, to the fact that design patents contain only one claim (that which is shown in the Figures). A design patent claim is difficult to amend during prosecution without adding new matter. So in essence, a design patent reexamination is an “all or nothing” proposition.

Of the three inter partes design patent reexaminations noticed to date, two have resulted in the patent being canceled. In the third, the final rejection by the Patent Examiner was reversed by the Board of Patent Appeals and Interferences (BPAI) in Vanguard Identification Systems, Inc. v. Patent of Bank of America Corporation (BPAI July 31, 2009, 2009-002973, Control No. 95/000,034, D467,247).

This decision is currently on appeal to the Federal Circuit and marks only the second time that a decision by the BPAI in an inter partes reexamination has been appealed to the Federal Circuit. In the first, Cooper Cameron v. SAFOCO Inc., Nos. 2009-1435, -1459 (Federal Circuit) Reexamination Nos. 95/000,015 and 95/000,017 the appellant voluntarily dismissed the appeal prior to briefing and oral argument. For more see Cooper Cameron Update: Role of PTO in Appeals to Federal Circuit of Inter Partes Reexaminations.

Anticipating an Increase in Design Patent Reexamination Filings

As mentioned before, there are reasons to anticipate an increase in design patent reexamination filings despite no clear filing trends from 1999-2009.

1. Threat of Profit Disgorgement May Prompt a Defensive Reexamination

Patent reexamination has fast become a staple and effective defensive strategy for accused infringers. In the past five years, the impact that post-grant validity challenges can have on staying district court litigation, affecting damages calculations (e.g., willfulness, intervening rights), and even as leverage in settlement negotiations has become well established. As such it is tied to the strategic objectives of defense counsel for accused infringers. Given the additional remedy of the infringer’s profit for design patent infringement under 35 U.S.C. §§ 284, 289, parties accused of design patent infringement may be well advised to consider reexamination as a way to raise the stakes in settlement or invalidate the patent and eliminate the litigation.

2. Abundance of Qualifying Printed Publications to Raise Substantial New Questions

Reexamination is only allowed on the basis of patents and printed publications. 35 U.S.C. §§ 302, 311; 37 C.F.R. §§ 1.510(a), 1.915(b). Thus, the full suite of prior art, such as public use, commercialization, and prior sale are NOT available in reexamination proceedings. However, a substantial new question of patentability can be raised in a design patent reexamination with a prior art reference that merely shows a similar design. There is no requirement that the reference contain any written description. This makes available to the reexamination requester an abundance of prior art which would not be applicable in a utility patent reexamination, including product images and catalogues. In a recent third party initiated reexamination, the patent owner’s own prior catalogs formed the basis for a substantial new question of patentability. See Control No. 90/010,699 on D569,863, Assigned to Crestron Electronics, Filed September 23, 2009 by RGB Systems.

3. High Rate of Cancellation and Success for Third-Party Requesters

As noted above, of the 60 concluded design patent reexaminations, only 29 or 48% of the patents emerged confirmed. That is, 31 design patents or 52% were cancelled, compared with 11% cancellation rate in ex parte utility patent reexaminations. While this appears significant, design patents contain only a single claim. Therefore, design patent reexaminations are “all or nothing” propositions. The “single” claim issue may skew the statistics and are not easily comparable to their utility patent counterparts. That is because most utility patents have more than one claim and some claims may be amended, some cancelled, some confirmed, and some added during the course of a reexamination. Nevertheless, the mere perception that a third party requester has a “better than fifty-percent chance” of cancelling a design patent by throwing it into reexamination can have a significant impact on litigation and the strategy employed in defending against design patent infringement claims.

4. Low Rejection Rate and Lack of Significant File Wrapper Estoppels

Dennis Crouch reported (see “Design Patent Rejections” by Dennis Crouch, Patently O’ , January 19, 2010) that during prosecution, 81.6% design patents receive no rejection and only 1.2% are rejected on the basis of prior art, 18.2% are rejected for § 112 or other formality violations. Because of this, most design patents issue with very little file wrapper estoppels or comments in the record which help interpret and, in some cases, narrow the scope of the patent. Even if a design patent survives reexamination, it is likely that through the process comments will be made by the examiner, and/or the patent owner that distinguish the patented design from the prior art, and in doing so, can help to avoid infringement. Thus, a design patent reexamination may be viewed as “successful” to the requester even if the patent survives, but it’s scope is significantly narrowed during prosecution.

For all of these reasons, design patent owners who enforce their patents are likely to see an increase in requests for reexamination filed against them, especially in cases were there are significant damages at stake. The potential for disgorgement of the infringer’s profit coupled with a better than fifty percent success rate may encourage an accused infringer to use reexamination as a tool to extract a more favorable settlement or even avoid liability for infringement.

This guest editorial provides a summary of findings. Additional statistics and analysis can be found by visiting First Comprehensive Study of Design Patent Reexaminations, at The Reexamination Center.