Scott M. Daniels

There is a tremendous amount of unrealized (“un-monetized”) value in the patent portfolios of many large companies. Yet, for one reason or another, such companies have chosen over the years not enforce their patents in court or through a licensing campaign. In recent times, however, a few of these companies have, one-by-one, started to transfer their patent rights to patent holding companies that are quite willing to enforce those patents. What does the large company receive in return for its patents?

Do patent applicants appealing a rejection of their claims from the Patent Trial and Appeals Board have a chance of success at the Court of Appeals for the Federal Circuit? What about patentees appealing to the CAFC from rejections in reexamination proceedings? The candid answer is not much of a chance. Of course, every case is different and needs to be considered on its own merits. Yet, the standards for review of Board decisions, followed by the CAFC, significantly favor affirmance of those decisions.

Something a bit out of the ordinary occurred earlier this month in the ITC investigation Certain Devices for Mobile Data Communication, 337-TA-809. There, Unwired Planet had accused Apple and Research-In-Motion of infringing four patents related to data transmission with cellular phones. A trial before the ITC’s Administrative Law Judge Gildea was scheduled to begin October 15, but shortly before that date, Unwired withdrew its Complaint and filed a motion with the Judge Gildea to terminate the investigation. Unwired’s problem was that the Judge had previously construed the asserted claims to require that the mobile devices do not contain “a computer module,” thereby precluding a finding of infringement by the accused devices that do contain module computers. Unwired, however, has not entirely given up on its infringement allegations against Apple and RIM – rather, Unwired continues to pursue those claims in a parallel infringement action in Delaware.

A story of such potential liability is now playing out in Taser International v. Stinger, (Case No. 2:09-cv-289 (D. Nev.)). Taser, the developer of the TASER weapon for use by law enforcement, originally sued Stinger Systems for selling devices that infringed a number of Taser patents. In the course of the action, however, Stinger issued a series of press releases regarding its patent dispute with Taser, among them a press release reporting on a parallel reexamination proceeding. In a second action, Taser accuses Stinger, Stinger’s CEO and Stinger’s attorney of various business torts, all centering on allegations that Stinger, ita CEO and its attorney issued misleading press releases, damaging Taser’s reputation and stock price. According to Taser, one press release issued by Stinger in May 2007, caused its stock price to drop $40,000,000.

The CAFC’s split panel decision this past week – In re Construction Equipment Company – extends the PTO’s authority to reexamine a patent even where its validity has already been adjudicated and confirmed by the courts. Yet the CAFC once again fails to explain how a PTO reexamination finding that a patent is invalid effects an earlier judicial determination that the same patent is valid and infringed.

Companies accused of patent infringement are increasingly looking at patent reexamination at the Patent Office as an attractive avenue for challenging the patent’s validity. Reexamination offers a number of well-known advantages as a forum for such validity challenges over District Court, among them the absence of a presumption of validity and a lower burden of proof. Less well-known, however, is the potential for reexamination to eliminate an accused infringer’s liability for past damages – even if the PTO confirms the validity of a patent in reexamination, the accused infringer might be entitled to “intervening rights,” effectively eliminating past damages, if the patent owner amends its claims to distinguish its invention over the prior art. This possibility of “intervening rights” received a big boost last week with the CAFC’s decision in Marine Polymer Techs. v. HemCon, finding that such rights may be created even without an amendment of the claims if the patent owner presents arguments in reexamination that “effectively amend” the claims.

The focus of the litigation now shifts to the Patent Office. How Allen’s patent claims will fare in that forum is unknown, but certainly his odds of maximizing the monetary value of his patent portfolio are diminished. Reexamination has been ordered by the PTO for all four Allen patents, and in one (the ‘314 patent), a non-final rejection has issued. Had Allen chosen a different court and his cases not been stayed, his patents would still be in reexamination. Yet, his court trials would likely be completed before the reexaminations, with obvious advantages for him.

At the end of December, we learned that Microsoft had petitioned the PTO Director to order reexamination of the ‘449, and this morning that petition has been released to the public. It shows that Microsoft’s chances at the Patent Office are not so long after all, that Microsoft’s argument for reexamination are stronger than many thought. The concerns about the “clear and convincing” standard being abandoned by the Supreme Court may not be justified – there is a real prospect that the Microsoft-i4i dispute could be resolved in the reexamination, without the need for the Supreme Court to reassess the burden of proof standard for accused infringers.