United States: Three Ways To Challenge A Patent - Pro And Cons

Last Updated: January 27 2014
Article by Craig W. Kronenthal and H. Wayne Porter

An inter partes review (IPR) is a newly established mechanism for challenging patent validity through an evidentiary proceeding before the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office. Under the right circumstances, an IPR may be a viable option. Other options include traditional ex parte reexamination and district court litigation. Discussed below are five areas to consider when choosing the best option in any particular case.

DISCOVERY

A third party requesting ex parte patent reexamination will have no real discov- ery opportunities. For example, ex parte reexamination does not allow a third party requestor to depose experts or other parties from whom a patent owner may submit declarations in support of patentability.

Litigation can go to the other extreme. Rule 26(b) of the Federal Rules of Civil Procedure permits discovery so long as it "appears reasonably calculated to lead to the discovery of admissible evidence." As a result, the discovery process often becomes a lengthy and costly component of litigation. Indeed, some believe that the discovery process is used to drive up expenses and consume resources in hopes of squeezing opponents into a settlement.

Although inter partes review discovery lies somewhere between these two ex- tremes, it is still quite limited in scope. The IPR rules establish the right to cross-ex- amine a declarant and require the parties to share information that is inconsistent with their positions. For additional discov- ery parties must reach an agreement, or seek additional discovery by motion if an agreement cannot be reached.

Thus far, motions to the PTAB for ad- ditional discovery have been overwhelm- ingly unsuccessful. Parties have had dif- ficulty persuading the PTAB that additional discovery is necessary in the interest of justice, and the PTAB has often noted that the time constraints of the IPR process do not allow for additional discovery.

MOTIONS

Motions are not a part of ex parte reexami- nation. Once a third party files a request for reexamination, that party may have no opportunity to participate in or influence the outcome of the reexamination proceed- ings. The third party requestor is limited to a single reply if the patent owner responds to the request for reexamination.

In practice, many patent owners do not respond to requests for reexaminations so that they can deprive third party requestors of that reply. Moreover, the third party is prohibited from communicating with the reexamination examiner, whereas patent holders are allowed to participate in inter- views with the examiner.

Litigation generally stands at the other extreme in this area, as well. A wide variety of motions may be filed in district court litigation. Individual courts have their own local rules governing motion practice. Such local rules may dictate page limits, content requirements, deadlines for filing and re- sponding, and how motions are to be filed (e.g., whether motions need to be electroni- cally filed). Often local counsel is employed to ensure that the local rules are met.

Although motion practice is also a component of IPRs, it is more tightly controlled than in district court litigation. For example, 37 C.F.R. Section 42.20(b) requires prior PTAB authorization before filing a motion. Filing a motion without PTAB approval could result in expunge- ment of the motion with prejudice. This factor can impact costs and expediency of IPRs. Although it is too early to reach conclusions, the preauthorization require- ment can be expected to cut down on the number of motions filed, and keep motions narrowly tailored to specific issues. When authorizing motions, for example, the PTAB often provides guidance on the is- sues to be addressed.

CLAIM AMENDMENTS

One of the largest factors weighing against challenging a patent through ex parte reexamination is that it allows the patent holder to add or amend its claims and improve its position. The only restrictions are that the amended or new claims must be supported by the original application and must be narrower in scope than the issued patent claims. The only limit on the number of new claims that may be added is the patent owner's willingness to pay extra claim fees.

In practice, many patent holders use reexamination as an opportunity to amend or add claims that more clearly cover an allegedly infringing product. Although new or amended claims only have prospective effect, they can still be quite valuable if the reexamined patent has a significant remaining term. Indeed, some patent holders request ex parte reexamination to solidify a patent by adding and/or amend- ing claims to improve their position in preparation for litigation.

Patent claims cannot be amended dur- ing district court litigation. For this reason, parties seeking to invalidate a patent have previously chosen to forego reexamination and pursue only litigation.

Patent claims can be amended during an IPR, but the ability is quite limited. In an IPR, as in reexamination, claims may not be amended to enlarge the scope of protection. In addition, claim amend- ments must be in response to a ground of unpatentability involved in the IPR. When the patent holder amends a claim, the pe- titioner (the party that requested the IPR) may argue that the amendment represents a concession that the issued claims are in- valid. Patent holders may thus be reluctant to amend.

Furthermore, 37 C.F.R. Section 42.121(a)(3) limits patent holders to a reasonable number of substitute claims in an IPR. The rule creates a presumption of a one-for-one paradigm, in which one claim can be added when one claim is canceled.

On a more practical level, applicable IPR page limits restrict the ability of a patent owner to make amendments. Amendments are made through a motion to amend, which is limited under 37 C.F.R. Section 42.24(a)(1)(v) to 15 pages. The motion must include a claim listing, a dis- cussion of support for added or amended claims, and how the amended claims distinguish over the asserted prior art. It can be difficult to squeeze all of this into 15 pages if there are more than a few new or amended claims. Although the IPR rules allow patent owners to request additional pages, the PTAB has not been shy about rejecting such requests.

TIME

The time frames for district court litiga- tion vary widely. Some venues are consid- ered "rocket dockets," but it is nonethe- less common for patent litigation to last several years. Ex parte reexamination is generally considered to be faster, although this is not always the case. On average, the pendency of an ex parte reexamina- tion from request filing date to certificate issue date is 27.9 months.

An IPR is likely to be faster than ex parte reexamination or litigation. The PTAB is required to decide whether to institute an IPR within six months from the filing of a petition and to reach a deci- sion within 12 months, extendable to 18 months upon a showing of good cause.

SETTLEMENT

Once a request for ex parte reexamination is granted and a reexamination is ordered, nei- ther the patent owner nor a third party requestor can stop the reexamination. The USPTO will reexamine the patent and allow and/or reject claims regardless of any subsequent settlement or other agreement between the patent owner and the third party. Thus it may be difficult for a third party to negotiate a favorable license while a patent is under reexamination, as the patent owner will have to continue fighting for pat- ent validity regardless of whether a dispute with the third party requestor is resolved.

In contrast, the time, money and resources associated with district court litigation often motivate parties to settle. Indeed, most patent suits terminate as a result of settlement. When patent suits do settle, the settlement terminates the trial and the terms of settlement can often be kept confidential. The assurance that the terms of settlement will be kept confi- dential can be an influential factor in the willingness of a patent owner or patent challenger to settle.

Settlement considerations may play into whether a party chooses to institute an IPR. Unlike ex parte reexamination, the PTAB may terminate an IPR without reaching a decision. However, the PTAB does not have to terminate the trial if the parties settle.

As for the terms of settlement, 37 C.F.R. Section 42.74(c) provides for keep- ing settlement details secret and separate from the file of the IPR. However, the same rule also provides for making such details available to government agencies on writ- ten request and to other persons upon a showing of good cause.

All three options for challenging pat- ent validity have benefits and drawbacks. The best option will depend on particu- lar circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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