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Procedure in patent enforcement and invalidity actions

The Federal Rules of Civil Procedure, procedural decisional law and any local or judge-specific rules govern civil litigation proceedings, including patent infringement actions. Proceedings in a patent infringement action can be divided into seven phases: due diligence investigations, pleadings, discovery, patent claim interpretation, summary judgment motions, trials and post-trial proceedings.

i Due diligence

The due diligence phase includes review of the client's patent portfolio to identify patents that appear to be infringed by products that are identified in the market, preparation of infringement claim charts to track the correspondence of each element of the patent claim to features in the apparently infringing products, investigation of defendants to determine the appropriate court for the litigation and estimating the likely monetary awards and injunctive relief that should be awarded. With that information, one may prepare a basic business case for proceeding with litigation.

Selection of patents for litigation should reflect the likely interpretation that will be accorded to each element of the claims, the opportunity to obtain information demonstrating that the accused products meet each of those limitations and optionally an investigation of whether those patents are susceptible to invalidity challenges.

Identification of products that are likely to be found to infringe those patents may be possible from simple examination of the product, or might require sophisticated reverse engineering. The preparation of infringement claim charts is a systematic means of evaluating infringement. The claim chart documents the basis for later infringement allegations and satisfies rules in some courts that require the chart as part of a complaint.

US district courts hold original and exclusive jurisdiction over actions arising under the Patent Act. There are 89 judicial districts spread across the 50 states, with a total of 94 districts including the territories of the United States. Until recently, patent infringement actions were routinely filed in the judicial district believed to be most favourable to the patent owner's interests (often the Eastern District of Texas). However, starting in May 2017, patent venue (the proper district for a case) has been changed to benefit defendants. The US Supreme Court narrowly interpreted the first prong of the patent venue statute – which allows suit wherever a corporate defendant 'resides' – by interpreting a corporation's residence to mean its state of incorporation rather than wherever it distributes products. Soon thereafter the US Court of Appeals for the Federal Circuit narrowly interpreted the other prong – which allows venue wherever the defendant has committed acts of infringement and has a regular and established place of business – so that the presence of remote employees, without more, does not confer the status of a 'regular and established place of business'. The restriction of the venue laws has dramatically reduced the number of patent infringement cases filed in the Eastern District of Texas, preferred by patent owners, and increased the number filed in Delaware, New York and Illinois, where many companies are incorporated or headquartered. For example, in the first quarter of 2017, the last quarter before the Supreme Court's decision, 129 patent cases were filed in Delaware, but that number grew to an average of 216 cases for each of the following three quarters. In 2018, Delaware is on track to surpass the Eastern District of Texas as the top district for the filing of patent cases.

ii Pleadings

Patent litigations are initiated by the filing of a complaint. Historically, patent infringement complaints were only required to provide a short and plain statement of the claim, showing that the pleader is entitled to relief – the model form only required an allegation of jurisdiction, that the plaintiff owns the patent, that the defendant has been infringing the patent 'by making, selling and using [the device] embodying the patent', that the plaintiff has given the defendant notice of its infringement and a demand for an injunction or monetary damages. However, from 1 December 2015, those simple rules were revised in favour of more detailed pleadings. While the new standards continue to evolve, a common interpretation of the new rules requires that the complaint contain an identification of representative claims from each patent, some description of the patented functionality, identification of the accused products and a description of corresponding functionality in such products. A few courts require more, such as alleging element-by-element that the patent claims are used in the accused products. When a court finds that a complaint lacks sufficient detail, there are generally opportunities for amending or submitting a wholly new complaint with additional details. The patent owner must file the complaint with the appropriate court and serve a copy of the complaint upon the defendants. A defendant served with a complaint must respond within 21 days (plus any extensions of time). If the complaint is defective due to lack of jurisdiction, failure to state a recognised claim, failure to name all necessary parties, or other reasons, the defendant may file a motion to dismiss. Absent a motion to dismiss, the defendant must file an answer to the complaint. Answers are issue-by-issue admissions, denials, or denials based on lack of information. Failure to deny any allegation in the complaint, except for the amount of damages, can constitute an admission of that allegation. Answers must also include any affirmative defences, which are reasons why the defendant should not be subject to any claim for relief even if the allegations in the complaint are proven true. Common affirmative defences include unreasonably delayed claims, defendant's licence under the patent, past payment or resolution of the dispute in a prior litigation. Any affirmative defences that are not included in the answer may be found waived. In some courts, the complainant must respond to the affirmative defences. Failure to respond to a complaint in a timely manner can result in a default judgment where the court rules in favour of the plaintiff without further proceedings. However, in many instances, the courts have exercised discretion to permit late responses in order to avoid a default. Depending upon the complexity of the issues, the court may allow submission of later discovered information that was not available when the original complaint or answer were filed, or even allow amendments to the complaint and answer later in the litigation.

iii Discovery

The discovery phase of US civil litigations involves the exchange of information between the parties and, if necessary, obtaining information from third parties, that might later be used as evidence at trial. After service of the complaint is completed, the parties must prepare a proposed discovery plan for submission to the court. Within 14 days after the discovery plan, all parties must make initial disclosures (without awaiting discovery requests) that identify the names and contact information for likely witnesses, copies of documents upon which the party will use to support its claims or defences, a calculation of damages and any insurance agreements. In most circumstances, the court will hold a scheduling conference within 90 days of service of the complaint and as soon as practicable the court will issue a scheduling order that limits the time to join other parties, amend the pleadings, complete discovery and file motions. The period for conducting discovery varies widely, but in complex patent infringement cases, fact discovery may last for about a year and expert discovery for an additional six months. Fact discovery includes the exchange of documents and inspection of equipment, interrogatories (written answers to questions from the opposing party), and depositions (out-of-court sworn oral testimony of a witness that is transcribed by a court reporter for possible later use at trial). Expert discovery includes the exchange of written reports disclosing all facts and opinions that an expert witness intends to rely upon at trial, followed by deposition of the experts. Discovery is often the most expensive phase of patent litigation. Parties may move for a protective order limiting discovery requests that are irrelevant or where the burden or expense of producing the evidence outweighs its likely benefit. Parties also sometimes agree to forego certain types of discovery owing to expense.

iv Patent claim interpretation

In 1996, the Supreme Court held in Markman v. Westview that the interpretation of patent claims is a legal issue for judges to decide and does not require jury consideration. Many judges now conduct Markman hearings early in the procedural schedule. Following the US Court of Appeals for the Federal Circuit's guidance, trial courts consider the evidence of proper claim interpretation in the following order of importance: first, the intrinsic evidence, including the claims, specification and the prosecution history and, then (optionally), extrinsic sources such as dictionaries and expert testimony. Based on the hearing, the judge may issue an order construing (interpreting) the patent claims at issue. The resolution of patent claim interpretation disputes relatively early in the proceedings often provides a basis for settlement or summary motions regarding infringement or validity issues.

v Summary judgment motions

Any party may file a motion for summary judgment on issues where the facts are not in dispute and the judge can resolve the issue as a matter of law. After issuance of a Markman claim interpretation, infringement and invalidity issues may be ripe for summary motions. The success rates for summary motions are highly variable depending on the district. In 2017, patent owners obtained summary judgment 27 per cent of the time, while motions against patent owners were granted 25 per cent of the time. Since July 2014, 36 per cent of motions for summary judgment of invalidity for lack of patentability under 35 U.S.C. Section 101 have been successful in light of the Supreme Court's 2014 Alice ruling that 'abstract ideas' are not patentable.

vi Trial

Although about 4,600 patent infringement complaints were filed in 2017, typically only about 3 per cent of those complaints culminate in a trial. Many cases are settled, some are resolved by summary judgment and others are withdrawn owing to lack of interest or litigation resources.

The median time to trial for patent cases in the US district courts is about 30 months. While some courts like the Eastern District of Virginia routinely proceed to trial in 12 months, most courts are slower and many individual cases are delayed (stayed) pending inter partes review (IPR) of the validity of the patent at the PTO. Courts vary widely in the rate at which they exercise their discretion to stay patent litigations pending an IPR; however, some studies indicate that up to 70–80 per cent of patent cases with a co-pending IPR validity challenge are stayed pending completion of the IPR proceeding.

Plaintiffs and defendants have a constitutionally guaranteed right to a jury trial, but upon agreement of both, a judge can decide in lieu of a jury. While a well-educated and experienced judge might more easily comprehend the complex technology at issue in many patent cases, about 80 per cent of patent infringement cases that go to trial are tried to a jury, probably because plaintiffs have generally obtained higher success rates and larger monetary damages before juries instead of judges.

Trials are formal hearings where witness testimony, documents and physical evidence are examined to resolve disputed issues of fact. The jury is then instructed by the judge on the applicable law in order to reach a verdict on the issues – typically, whether the patent is infringed by the accused device, whether the patent is valid and the appropriate monetary damages. Counsel for the parties play an active role in presenting evidence, including questioning the witnesses. Trials typically begin with counsel providing opening statements to foreshadow the evidence that will be presented, followed by testimony from fact and expert witnesses and typically ending with counsel providing a closing argument on how the evidence should be interpreted. The average duration of patent infringement trials is eight days.

vii Post-trial proceedings

Jury verdicts can be challenged by motions for judgment as a matter of law (JMOL). Those motions ask the judge to consider whether the evidentiary record is sufficient to support the verdict of the jury. And if a defendant made a pre-verdict JMOL motion on damages, then that motion can be reasserted after the verdict. JMOL motions are often coupled with motions for a new trial and can result in significant reductions in damage liability.

The complexity of the technology and legal issues has led many judges and judicial districts to adopt special procedural rules for patent litigations – rules that are often further tailored for the special circumstances of individual cases.