I. Introduction

Parties to patent disputes increasingly find themselves facing the complex issues that arise when a patent at issue in litigation is in concurrent reexamination proceedings before the United States Patent and Trademark Office. In these situations, the same patent claims may be analyzed and interpreted with different outcomes because of the differences between the two forums and their applicable timelines, rules, and purposes and because different participants and decision makers are involved. These differences substantially affect the ability of patent holders to enforce their patent rights and the ways that accused infringers can defend themselves against potentially invalid patents. For example, a significant difference between patent validity assessments in PTO reexaminations and in connection with district court litigation is the applicable standard of proof. In district court, a patent is presumed to be valid unless and until the accused infringer presents clear and convincing evidence of invalidity; in contrast, in reexamination proceedings the PTO evaluates challenges to validity based on a preponderance of evidence standard and with no presumption.1 Because patents do not enjoy a presumption of validity in a reexamination and validity challenges are considered under a lower standard of proof, an accused infringer may have an easier time challenging a patent’s validity in reexaminations before the PTO than in the district court.

As one might expect, the concurrent and independent proceedings in these uniquely distinct forums can raise a variety of challenges, risks, and strategies for both patent holders and accused infringers. Problems may arise, for example, when the PTO and the courts arrive at different conclusions regarding validity or patentability in relation to the same patent claims. Although some courts may look to the PTO’s reexamination office actions and determinations for guidance, the mere fact that a patent is found to be valid in reexamination does not guarantee the same result in the related litigation. In an even more troubling scenario, a patent determined by the district court to be valid and infringed may be later found invalid by the PTO in reexamination, thereby erasing the patent holder’s success and efforts in the district court.2 The interplay between reexamination and litigation with its attendant issues is a poignant area of interest for patent holders and accused infringers alike.

We address below some of the strategic considerations that arise most frequently in this “parallel universe.”3

II. Strategic Considerations in Concurrent Patent Litigation and Reexamination

A. Ex Parte or Inter Partes Reexamination? Strategic Considerations

Parties considering whether to seek reexamination of a patent at issue in litigation should carefully consider which type of reexamination procedure, ex parte or inter partes, will best suit their objectives as the two procedures differ considerably.

The ex parte reexamination procedure, which has been around since 1981, is arguably considered the more traditional—and is certainly the more frequently used form of reexamination procedure. Under the ex parte process, any person including the patent holder, can file a request for the PTO to reexamine any claim of an issued patent based on prior art patents or printed publications that may relate to its patentability.4 The request can be filed at any time during the enforceability of the patent and may even be done anonymously. As discussed in more detail below, additional ex parte reexaminations or an inter partes reexamination can be filed even while an ex parte proceeding is already pending.

Third party requesters have a limited role in ex parte proceedings. After the request for reexamination is submitted, the patent holder may, but is not obliged to, file a response to the request within two months.5 If the patent holder does respond to the reexamination request, the third party requester has the right to respond to the patent holder’s statement. After that point, however, the third party requester’s ability to participate in the ex parte reexamination proceedings ends. Moreover, responding to the reexamination request is optional, many patent holders choose not to file an initial response in order to preclude the third party requester from the ability to present counter arguments. In this situation, the third party requestor has no further right to participate in the reexamination proceeding after filing the initial request. Other than to receive copies of office actions and patent holder’s filings. The third-party requester also has no right to appeal the PTO’s decisions.

Some critics have argued that the ex parte reexamination procedures too heavily favor the patent holder since communications and exchanges are limited to just the patent holder and the PTO. Indeed, ex parte proceedings allow the patent holder to fully present its case to the examiner without interference from third parties. In addition, the patent holder has the opportunity to amend or add patent claims during the reexamination to avoid any prior art, thereby strengthening the patent. Thus, a patent holder can seek to amend what might be questionable patent claims or add new dependent claims through the ex parte reexamination process virtually unchallenged.

On the other hand, ex parte reexamination provides potential advantages to accused infringers. Compared to litigation as a venue to challenge patent claims, ex parte reexamination is relatively inexpensive. The PTO cannot award fees or costs or expenses so there is no exposure even for a weak request. The accused infringer is also not subject to discovery in an ex parte proceeding. Additionally, the ability to file ex parte reexamination requests anonymously may benefit a requester concerned that its products could infringe the patent claims by preventing the patent holder from identifying the potentially infringing products and amending or adding claims to read on the products through the reexamination. Partially due to criticisms that ex parte reexaminations did not provide a route for third parties to participate substantially in the proceedings, Congress created an optional inter partes reexamination procedure.6 Any patents issuing from original applications filed in the United States on or after November 29, 1999 can be reexamined in an inter partes reexamination. Inter partes reexamination requests cannot be filed anonymously – they must identify the real party in interest filing the request.7

In inter partes proceedings, third party requesters, including accused infringers, may actively participate in the reexamination process before the PTO. The third party requester has the right to file a response and comments to all submissions made by the patent holder, can comment on the examiner’s office actions, can raise additional arguments to support invalidity, and can cite additional prior art to rebut a response by the patent holder if the prior art was not known before the request was filed.8 However, the third party does not have the right to respond to all of the patent holder’s submissions, such as petitions for extensions of time. In inter partes proceedings, third party requesters can appeal the PTO’s decisions. Inter partes reexamination is generally less costly than litigation.

Inter partes reexaminations, however, do impose significant potential limitations which third party participants do not face in ex parte reexamination proceedings. Unlike the case with ex parte proceedings, in inter partes proceedings, the requestor may not initiate multiple proceedings. If an inter partes reexamination has already been filed, third parties may not subsequently request either an ex parte or a further inter partes reexamination.9

Importantly, in inter partes reexaminations the third party requester cannot later challenge in district court litigation or before the ITC the validity of any claim determined to be valid or patentable by the PTO in the reexamination on any ground that the requester raised or could have raised in the inter partes reexamination.10 The requester is also estopped from subsequently challenging in litigation any fact determined in the inter partes reexamination (unless the fact is found to be incorrect based on information that was unavailable at the time of the reexamination).

It is also important to be aware that litigation proceedings can also create estoppels applicable to the inter partes reexamination. Once a final decision has been entered against a party in litigation finding that the party has not sustained its burden of proving the invalidity of any patent claim in suit, that party and its privies cannot later request inter partes reexamination on the basis of the prior art that was raised or could have been raised in the civil action.11

B. Considerations Related To The Length of Reexamination

Increasing focus is being placed on the amount of time it takes for a patent to emerge from the reexamination process. The amount of time it takes for the PTO to reexamine patent claims plays a significant role in the extent to which reexamination is a viable option for an accused infringer or a patent holder. If reexamination proceedings drag on forever, the patent holder may be potentially prejudiced in its ability to enforce its patent rights. But, if the PTO is too hasty in reexamining the patent claims, the process will not be an effective alternative forum for an accused infringer to challenge patent claims. Essentially, unless the reexamination process is efficient but thorough, parties may be better off resolving disputes about patent validity through litigation proceedings. As discussed more fully below, the anticipated length of reexamination proceedings is often a factor considered by courts in evaluating whether to stay litigation pending the completion of the reexamination. Depending on other factors involved, staying litigation until the PTO makes a reexamination determination can be prejudicial to the patent holder’s ability to assert its patent rights. On the other hand, not staying the litigation may force the accused infringer to spend substantial time and resources on duplicative efforts in different forums.

The PTO is mandated to conduct reexaminations with “special dispatch.”12 The PTO’s most current statistics show that the average pendency of reexamination proceedings is 25.4 months for ex parte reexaminations and 36.2 months for inter partes reexaminations.13 However, the actual amount of time that any individual reexamination proceeding can take may vary significantly.14 Accordingly, because reexaminations can be used to strategically delay progress in concurrent litigation, both plaintiffs and defendants in patent disputes should pay close attention to reexamination pendency statistics. A copy of the PTO’s most current reexamination statistics, is attached.

C. Strategic Considerations When Facing Multiple Reexamination Proceedings

A significant issue in dealing with concurrent litigation and reexamination is that there are no restrictions on how many ex parte reexamination requests can be filed on the same patent or even the same patent claims. Accordingly, a patent holder may find itself dealing with multiple and “rolling” reexamination requests, or an accused infringer may find itself contemplating whether to file multiple requests.

From the accused infringer’s perspective, filing multiple ex parte reexamination requests may be an effective way to deal with situations where a patent holder fails to disclose or improperly portrays prior art or where the accused infringer later discovers prior art that was not disclosed in a prior reexamination. However, multiple reexamination requests can also come back to haunt the requester. Each reexamination request limits the universe of possibilities for the PTO finding a substantial new question of patentability (“SNQ”) because the PTO considers whether that SNQ has already been raised.15 Additionally, the district court judge may interpret a defendant’s request for multiple reexaminations as a dilatory tactic, especially if the defendant is also requesting a stay of the concurrent litigation based on the pending reexamination proceedings.

A patent holder faced with multiple ex parte reexaminations is not, however, without recourse. The patent holder can request that multiple proceedings on the same patent be merged. Although the decision of whether to merge proceedings is in the PTO’s discretion, merger is typically granted where the patent holder can show that doing so will result in efficiency and expediency, furthering the “special dispatch” obligations of the PTO.16

D. Establishing A Substantial New Question of Patentability When Relying on Previously-Cited Art

A requester seeking either an ex parte or inter partes reexamination of a patent must show that the prior art references submitted with the request raise a “substantial new question of patentability” (“SNQ”). The SNQ requirement prevents third parties from filing multiple reexamination requests based on references that have already been examined by the PTO in a prior reexamination.

The Federal Circuit’s decision in In re Swanson17 addressed the definition of an SNQ and has impacted the way a requester meets the threshold requirements for a reexamination. Previously, requesters were prohibited from obtaining reexamination based on “prior art previously considered by the PTO in relation to the same or broader claims.”18 In 2002, however, the ex parte reexamination statute, 35 U.S.C. § 303(a), was amended to expressly allow a finding of SNQ based on previously-cited prior art.19 In In re Swanson, the Federal Circuit held that a prior art reference which was used to reject claims in the original prosecution could raise a SNQ if it was presented in a “new light.”20 Interpreting In re Swanson, practitioners have presented multiple examples of situations when old art can present a “new light,” such as where:

  • the original examiner misunderstood the actual technical teaching of the prior art,
  • the original examiner failed to consider a part of the reference containing the newly-cited teaching, or
  • the original examiner applied the reference to a limitation or claim different from the limitation or claim to which the reference is sought to be applied.21

Old art does not raise a SNQ if the original examiner understood the actual teaching, but made a mistake in the rejection.22 Obviously, determining what the original examiner did or did not understand, consider, or apply can open up an entirely new dispute in itself. One thing is certain, however: patent holders cannot guarantee that they are in the clear as to previously cited references before the PTO, and accused infringers should not discount already-cited prior art as a potential basis to challenge patent validity before the PTO.

E. Staying Litigation Pending Reexamination

Requests for litigation stays pending reexamination proceedings are an increasingly common occurrence. Frequently, an accused infringer will attempt to stay a patent infringement suit when challenging the validity of the asserted patent in reexamination.23 In some circumstances a plaintiff patent holder may seek to stay litigation proceedings in order to confirm or strengthen the validity of its patent through reexamination. The decision as to whether to stay concurrent litigation pending reexamination is within the district court’s discretion. In considering whether to issue a stay, courts typically consider the following factors:

1.Whether a stay will cause undue prejudice or a create a clear tactical advantage to the non-moving party;

2.Whether a stay will simplify the issues to be determined at trial; and

3.Whether discovery is complete and whether a trial date has been set. 24

The inherent delay caused by reexamination alone is usually insufficient to establish undue prejudice to the patent holder,25 and courts have in many instances granted stays due to the potential prejudice to the defendant in having to litigate a lengthy and costly trial over claims eventually found invalid by the PTO in reexamination.26 However, numerous courts have also refused to stay litigation “lest the trial schedule be manipulated or unduly delayed.”27

Indeed, courts that grant stays typically do so where the cases are in their nascent stages.28

Courts also look to any delay by the moving party (typically, the accused infringer) in requesting either a reexamination or in moving for a stay. For example, in Esco Corp. v. Berkeley Forge & Tool, Inc., the District Court for the Northern District of California denied the defendant’s motion to stay pending an inter partes reexamination since the defendant had been on notice of the plaintiff’s infringement accusations for months but made no effort to seek reexamination until it became apparent that litigation was inevitable.29 Denying the defendant’s motion to stay, the Court also relied upon the defendant’s delay after litigation was initiated in moving to stay the litigation based on the reexamination.30

In cases where the reexamination requester is the party seeking to stay the litigation, courts may consider whether the requester sought an ex parte or an inter partes reexamination. District courts, especially in the Eastern District of Texas, have begun to recognize that defendants who choose ex parte reexamination, instead of utilizing the potentially binding inter partes examination process provided by Congress, may be using reexamination as a tactical device to delay the case and drive up litigation costs.31

For example, in Affinity Laboratories of Texas, LLC v. Dice Electronics, LLC,32 the Court denied the defendants’ motion to stay, finding that the defendants failed to act with dispatch in seeking reexamination. The District Court for the Eastern District of Texas significantly observed that the “[d]efendants’ failure to choose the congressionally provided option of a binding inter partes reexamination smacks of a litigation tactic designed to bog down rather than expedite, resolution of this case.”33 The Affinity Laboratories Court further observed that, in opting for ex parte instead of inter partes reexamination, the defendants

[have] reached back in history to the non-binding “no risk for me” ex parte reexamination process, allowing all Defendant [sic] to lay behind the log, hoping for favorable developments with the passage of time. Instead of streamlining the process, [the defendants’] choice guarantees the imposition of additional costs on [the plaintiff], and indicates a lack of desire to resolve the issues in the case in a timely manner.34

Accordingly, an accused infringer contemplating whether to seek reexamination of the patent holder’s patent would be well-advised to consider how the type of reexamination proceeding requested could subsequently impact its ability to seek a stay of the litigation.

Finally, both patent holders and accused infringers involved in patent litigation should be aware of the growing practice of courts imposing conditions in order to grant a stay.

Some examples of conditions that courts have placed on defendants in granting a stay include:

  • Estopping the defendant from arguing invalidity in the litigation based on any prior art considered by the PTO in reexamination;35
  • Requiring the defendant to submit all evidence of relevant prior art to the reexamination proceeding;36
  • Prohibiting the defendant from instituting any further reexamination proceedings.37
  • Authorizing limited background discovery on certain topics to preserve evidence even if a stay is granted;38 or
  • Requiring the defendant to post a bond or other security;39

It is important to keep in mind, however, that not all courts are amenable to conditions on stays.40

F. Meeting the Duty of Disclosure in Reexamination While Complying With Protective Orders in Litigation

Another important topic when dealing with concurrent patent litigation and reexamination is the potential tension between a patent holder’s need to satisfy its duty of disclosure to the PTO in reexamination and also comply with a protective order in effect in the concurrent litigation. Parties in reexamination owe a duty of candor and good faith to the PTO. This duty requires that the parties disclose all information of which they are aware that are material to patentability in the reexamination.41 Conflicts may potentially arise between this duty of candor and a party’s duty to keep information confidential under a protective order in a concurrent litigation proceeding. For example, if the patent holder acquires confidential information in the litigation subject to a protective order that impacts the validity of the patent, is the patent holder required to disclose that information to the PTO under its duty of candor? In at least one case, the Eastern District of Virginia has held that the patent holder cannot do so. Despite the patent holder’s disclosure obligations to the PTO, the Court in TeleCommunications Systems, Inc. v. Mobile 365, Inc.42 held that the patent holder violated the terms of the protective order in the district court litigation by submitting materials covered by the protective order to the PTO without authorization. Accordingly, the duty of candor to the PTO does not give parties full reign to disclose information from the litigation without first considering whether such information is confidential under the protective order.

Parties negotiating a protective order in patent litigation should also consider how each provision in the agreement might play out in a reexamination proceeding. The protective order should clearly address how the provisions might or might not cross-apply between the litigation and the reexamination.

G. Reexaminations and Willfulness

The use of reexaminations to defend against potential liability for willful infringement is another key issue that arises when dealing with concurrent patent reexamination and litigation. In In re Seagate Technology, LLC,43 the Federal Circuit redefined the standard for finding willful infringement, holding that willful infringement exists where an accused infringer acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent” and the “objectively defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.”44 Thus, to show willful infringement, the accused infringer must have known or should have known that the patent was valid. Based on the new standard laid out in Seagate, many accused infringers accused of willful infringement have argued that the existence of pending reexamination proceedings must be considered when evaluating willfulness. Their argument is that the PTO, by virtue of granting the reexamination request, has raised a substantial question as to the patent’s validity, thereby negating the possibility of willful infringement by the accused infringer.

Courts applying Seagate have refused to impose a blanket rule regarding the impact of reexamination evidence on a willfulness claim. Instead, they note that the PTO’s recognition of a substantial question of patentability is but one factor among the totality of circumstances that must be considered in evaluating a claim of willful infringement.45 Although some courts have found that reexamination evidence defeats a finding of willfulness, other courts have precluded such evidence, particularly where the evidence would be presented to a jury.46 These courts typically examine the status of the claims in the reexamination proceeding at the time of the willfulness determination, finding that the weight of the reexamination evidence depends on whether the reexamination proceedings are complete and whether the patent claims have undergone substantive changes in reexamination.47

H. In re Bilski and Challenging Patentable Subject Matter in Reexamination

A case currently before the United States Supreme Court, In re Bilski,48 may bring the issue of subject matter patentability challenges to the forefront of reexamination issues. In Bilski, the applicants sought to patent a method of hedging risk in the field of commodities trading.49 In the original examination, the PTO applied the “technological arts” test and rejected the claims under Section 101; because the invention was “not implemented on a specific apparatus and merely manipulate[d] [an] abstract idea and solve[d] a purely mathematical problem without any limitation to a practical application,” it was not directed to the technological arts.50 The patent applicant appealed to the Board of Patent Appeals and Interferences, which held that the examiner should have applied a transformative-based analysis, but that even under this analysis, the claims were still ineligible for patent protection.51 Rejecting both approaches, the Federal Circuit held that the applicable test for subject matter patentability of a process patent was the machine-or-transformation test, which provides that a claimed process is patent-eligible under Section 101 if:

  1. It is tied to a particular machine or apparatus, or
  2. It transforms a particular article into a different state or thing.52

The Supreme Court’s clarification of the applicable test for patentability of a process patent may bring subject matter eligibility challenges to the forefront of patent disputes, including in reexamination proceedings. Currently, patent claims may only be challenged in PTO reexaminations based on prior art printed publications and patents.53 Unlike in district courts, an accused infringer may not challenge a patent on the basis of public use, prior sale, inequitable conduct, and, particularly, statutory subject matter under 35 U.S.C. § 101 in reexamination. This impacts the available routes for an accused infringer to best challenge a patent. A challenger with strong invalidity as well as subject matter eligibility arguments may be deterred from using reexamination to assert any validity challenges based on prior art printed publications because of the inability to concurrently argue subject matter eligibility challenges in the same forum. Considering the fact that courts may stay litigation pending reexamination, an accused infringer who opts for reexamination may forfeit the ability to promptly challenge the patent on all available grounds.