Over the last several months large law firms have opened Reexamination Practice Groups and even starting blogs dedicated solely or in part to exploring the issues presented by Reexamination. And as I am writing, PLI is presently hosting day 1 of a two day Reexamination and Reissue program at its San Francisco headquarters. The program titled Reissue and Reexamination Strategies and Tactics with Concurrent Litigation 2010, will also take place February 11-12 in New York City. There is no denying that Reexamination practice is on the increase, and is likely to continue to rise in the coming years, and this is true even if Congress does not enact patent reform and usher in an entirely new and perhaps more useful post-grant review process.
The popular press has even started picking upon on Reexamination proceedings because they are increasingly being used both during and after litigations as an important defense strategy as an attempt to escape infringement determinations. In high profile cases where a lot of money is on the like requests for reexaminations are used and arguments made that the underlying claims should never have been issued, or at least should be narrowed, as a result of newly discovered prior art. Ideally, at least from the defense perspective, if a defendant were to initiate a Reexamination proceeding at the United States Patent and Trademark Office the district court would stay litigation proceedings and give the Patent Office time to sort the matter out. Increasingly that is becoming more difficult to do, hence the need to pursue a dual strategy of concurrently litigating and engaging in Reexamination. In any event, several recent decisions I came across thanks to the Docket Report, a daily newsletter that sends to your inbox dozens of recent district court orders, demonstrate the difficulty associated with convincing a district court to stay a litigation pending Reexamination.
On January 5, 2010, in National Oilwell Varco, L.P. v. Auto-Dril, Inc., the United States District Court for the Eastern District of Texas denied the defendant’s motion to stay based on a pending reexamination of the patent in suit. The district court explained that three factors are typically considered when determining whether to grant a stay, and these are: (1) whether a stay would unduly prejudice the non-moving party or present a clear tactical advantage to the moving party; (2) whether a stay would simplify the issues in question and the trial of the case; and (3) whether discovery is complete and whether a trial date has been established. The district court denied the stay because a stay would prevent the defendant from seeking an injunction to prevent ongoing infringement and given that the parties are direct competitors a denial of timely enforcement of the plaintiff’s patent rights would unduly prejudice the plaintiff. Additionally, the district court pointed out that the plaintiff alleged that the defendant was thinly capitalized company and did not possess great resources. The thin capitalization issue was not discussed in any length, but obviously weaving together the fact that with a stay no injunction could be sought and the defendant does not apparently possess funds to pay an ultimate damage award weighed heavily in the court’s determination, and rightly so.
According to Michael Specht, a director in the Electronics Group of Sterne, Kessler, Goldstein & Fox and Editor of The Reexamination Center, “the Court’s analysis is similar to other recent decisions by courts to deny stay requests. When, as in this case, the litigation involves two competitors currently competing in the market that relies on the patented technology in-suit, courts are far more likely to deny the stay request.” Specht went on to say: “courts such as the Eastern District of Texas, Delaware, Eastern District of Virgina and Northern District of California that handle many patent cases appear increasingly less likely to grant a stay request than courts that have less familiarity with patent suits.”
In another recent decision, on December 23, 2009, in Telecommunication Systems, Inc. v. Sybase 365, Inc., the United States District Court for the Eastern District of Virginia declined to order a stay of the proceedings pending the outcome of an inter partes reexamination. The district court did recognize that the inter partes reexamination raised significant questions of patentability, but also pointed out that the Patent Office almost always grants reexamination requests, which is indeed very true. Moreover, the district court pointed to a recent statement by Judge Newman of the Federal Circuit, who stated in a concurring decision that that average pendency for inter partes reexamination is 41.7 months, which can hardly be considered appropriately fast. Adding this together with the fact that the Eastern District of Virginia, known as the Rocket Docket, “holds the record for fastest disposition of patent cases, resolving cases on average within half a year,” it was easy for the district court to conclude that the patent owner would be significantly prejudiced by the staying of litigation proceedings.
Moreover, in Telecommunication Systems the Eastern District of Virginia acknowledged that “granting a stay might arguably simplify issues for trial and conserve judicial resources, these benefits are greatly outweighed by the prejudice TCS would face if a stay were granted.” Similarly, the Eastern District of Texas acknowledged “[s]ome of the claims at issue in this litigation may change as a result of the reexamination, but the Court is of the opinion that justice will be better served by addressing that contingency when and if it occurs as opposed to indefinitely staying the case pending reexamination.” Thus, even though judicial resources would be conserved and reexamination may moot some or all of the claims, neither district court was willing to stay the pending litigation and wait for the Patent Office. This is no doubt due to the fact that reexamination proceedings can take years, and eventually the Federal Circuit will be the ultimate decision-maker, so why not allow dual proceedings to continue and then let the Federal Circuit make the determination in a consolidated appeal?
Despite the length of time it takes to get the Patent Office to issue a final decision in a reexamination proceeding, they are becoming more popular, as the charts below demonstrate.
Reexaminations are not appropriate in all situations because during reexamination the Patent Examiner will only consider printed publications and issued patents. What this means is that some of the best, most reliable evidence that could be used to demonstrate invalidity is unavailable, such as public use, knowledge, or the existence of an on-sale bar. Nevertheless, if you do have a publication or issued patent that demonstrates invalidity then reexamination may be the way to go because it is a far less expensive alternative to litigation, requests for reexamination are liberally granted and it opens another front in the fight to challenge a patent. Having said this, reexamination is hardly a panacea given that litigations are increasingly not being stayed and damage awards or settlements may need to be made prior to a final reexamination ruling, as was the case in the RIM v. NTP epic battle that ultimately had saw RIM pay more than $600 million to avoid the issuance of a permanent injunction despite continuing reexamination proceedings at the Patent Office.
Now, a word to Congress. If you are going to get around to a more hearty post-grant review of patent application could you please fund the Patent Office properly so it doesn’t take 3.5 years for them to reach a final determination?
Join the Discussion
5 comments so far.
The Mad HatterMay 28, 2010 07:39 am
The limited material that you can use in a Patent re-exam is also an issue. In IP Innovation v. Red Hat and Novell, the defendants did a demonstration on an older model computer (1986 Amiga) in court, and this helped get the IP Innovations patent invalidated. According to my understanding the US PTO won’t accept working product as evidence in a re-exam.
Novell Press Release
Media Interview of Red Hat exec
Paul F. MorganJanuary 12, 2010 11:19 am
As I have been saying for many years [and recently for an FTC study and the new PTO Director] here is further independent confirmation that the desirable increasing attempts to reduce patent litigation and its large economic burdens with reexaminations [especially inter partes reexaminations, which have a stay statute] is being frustrated by denials of litigation stays due almost entirely to continuing gross PTO delays of all reexaminations in gross violations of their statutory “special dispatch” requirement. This could be easily corrected simply by reassigning a small number of competent examiners from normal [statistically vastly far less important] activities to reexaminations.
popJanuary 11, 2010 08:51 pm
Considering that half of new businesses fail in the time it takes for them to process a re-exam I would say it is unreasonable as well.
I’ve been waiting two and a half months on a ninety day check that should be coming that feels like it was forever ago.
I could be wrong but it seems to me that a stay could actually wind up costing the company all the money they may have to pay you.
Gene QuinnJanuary 11, 2010 08:07 pm
Thanks for the comment. If you can put your fingers on the Sedona paper you reference I would love to see it. You can send me a message via contact form at: http://ipwatchdog.com/about/gene/#F
Thanks for reading.
FanJanuary 11, 2010 07:22 pm
Timely article. The problem with the CRU (Central Reexamination Unit) is the same one that afflicts the PTO’s patent prosecution units – namely, longer and longer pendency and backlog. There was a paper put out by the Sedona Conference (last year, I believe) that estimated that it takes 2-4 years to get a reexam through the CRU and then another 2-4 years through the Board of Patent Appeals (and another year or so for the case to be heard by the Federal Circuit).
These are completely unacceptable timelines. Particularly, since a defendant may request a reexam in a first case and then even if that case doesn’t get stayed, there is a much higher likelihood that any subsequent cases filed by the patent holder will get stayed because of the pending reexam (and the fact that the subsequent case hasn’t gotten very far along).
One other comment: My experience with the CRU is that they suffer from the same “Reject, reject, reject” mentality that afflicts the PTO, in general. Sad state of affairs.