The Patent Reform Act of 2009 (Senate Bill, House Bill), recently unveiled by Congress, includes new provisions that could be used as patent litigation tools. Patent infringement lawsuits are brought before United States federal courts, and the United States Patent and Trademark Office (USPTO) does not adjudicate patent infringement. The USPTO serves as the gatekeeper for deciding whether to issue patents and provides out of court means for determining some validity issues, including inventorship issues via patent interferences, post patent grant prior art validity issues via patent reexamination and post patent grant claim scope issues via reissue. The 2009 Patent Reform Act includes a post-grant review proposal that allows a petitioner to challenge validity of a newly issued patent in a cancellation proceeding.
Rather than litigate patent validity in court before a lay judge or jury, patent litigators have sometimes relied upon PTO expertise in this arena as part of patent litigation strategy. Proponents of employing PTO mechanisms, such as reexamination, as a litigation tool have touted the USPTO’s expertise in determining patent validity, as opposed to leaving a prior art call to a lay court or jury, often not well versed in the technology at issue, nor with the ins-and-outs of patent validity.
Additionally, PTO proceedings can be loss costly than litigation. For example, if a defendant files an ex parte reexamination request, the level of involvement of the defendant in is minimal, as opposed to significant involvement required by a lawsuit. Ex parte reexamination is generally less expensive than litigation for the patent holder too. With an inter partes reexamination, the parties both participate throughout the proceeding, so cost savings is not as great as with ex parte reexamination, but other litigation expenses may still be avoided.
The 2009 Patent Reform amendments include post grant review, which may be filed up to one year after the patent issues. If the PTO determines that there is a substantial question of patentability for one of the claims at issue, the proceeding continues. As with reexamination, a cancellation petition may be based upon prior art. Additionally, unlike reexamination proceedings, a cancellation petition may also be based upon witness testimony and the bill includes processes for conducting discovery relating to factual assertions made by the requester and patent holder, as well as provisions for accepting expert witness opinions. Unlike reexamination proceedings which may last years (an average of two years for ex parte reexamination and substantially longer for inter partes reexaminations), the bill includes a one year deadline for completing the validity determination. The time limit will, in effect, serve to reduce cost to the parties of participating in a cancellation proceeding.
As incentive to patent defendants weighing litigation strategy options, the bill provides that the presumption of patent validity required in court does not apply in cancellation proceedings and that a cancellation petitioner only must establish a substantial question of patentability by a preponderance of the evidence. This is a lower standard than the clear and convincing standard required to challenge patent validity in court. However, there is a trade-off -- unlike court, the patent holder is allowed to amend the patent claims to overcome validity challenges, and similar to reexamination proceedings, the end result may be amended but intact claims. The bill also provides settlement provisions, allowing the parties to mutually drop the post grant review at any time prior to the PTO issuing a decision. The bill states that no estoppel applies to a petitioner for dropping the cancellation request.
The bill includes provisions for the PTO to permissively stay the post grant review proceedings, if the patent is currently in infringement litigation. The bill prohibits a party that unsuccessfully challenged patent validity in court from subsequently instituting cancellation proceedings on grounds that they raised or could have raised in the litigation. Similarly, the bill prevents the petitioner from subsequently raising invalidity defenses in litigation or reexamination on grounds raised during cancellation proceedings. The bill also prohibits a petitioner from filing more than one cancellation request. Basically, you get one shot, so pick your forum and grounds wisely.
Most of the time, due to the one year time limitation, cancellation proceedings will not be an option. However, for instances where a defendant is sued in the first year of a patent’s life or a potential defendant is on notice of an issuing patent (such as instances where the defendant has been approached by a patent holder having a portfolio of patents including pending applications which subsequently issue), there is a new tool to consider as litigation strategy. Post grant reviews may provide a less expensive mechanism for determining validity issues and benefit from the expertise of the PTO. Similar to stays pending reexamination, it is likely that federal courts would stay litigation pending cancellation proceeding results (assuming that a test similar to the three factor test employed for granting stays pending reexamination is satisfied, which generally is more likely satisfied if the defendant files the stay request early on in the suit rather than on the eve of trial). Thus, a new defense strategy, similar to litigation defense strategies involving reexamination, may likely emerge where the defendant files a cancellation request and a declaratory judgment complaint, seeking to stay the litigation but keeping control of the forum by virtue of the DJ suit.
Post grant review gives one more consideration for patent litigation strategy and appears to be an attempt by Congress to provide means for quicker and less costly resolution of patent validity issues.
If you have a patent issue, or wish to register a patent, you may contact one of our patent attorneys for a free evaluation or call 866.936.7447 (International Toll Free).