Reexamination Strategies Concurrent with Litigation


The following post comes from Scott A. McKeown, partner at Oblon Spivak, Practice Center Contributor and writer for Patents Post Grant

I.  The Multi-Purpose Litigation Tool

The initiation of patent reexamination for patents subject to concurrent litigation can provide strategic benefits independent of the ultimate outcome of the reexamination. These litigation inspired applications of patent reexamination can be thought of as falling into one of two categories, namely, pre-trial maneuvers or post-trial, damage control.

Pre-trial Maneuvers are those patent reexaminations initiated to potentially enhance a defendant’s battle in the district court.  For example, patent reexamination may be sought as vehicle to stay a district court litigation. Still other defendants initiate patent reexamination concurrent with litigation as a mechanism to leverage more acceptable settlement terms, provide additional prosecution history for claim construction, avoid injunctive relief, demonstrate the materiality of a reference subject to an inequitable conduct defense, or establish objectively reasonable behavior for use in preventing a post-complaint willfulness finding.

Post-trial (damage control) on the other hand, is a litigation inspired use of patent reexamination that seeks to undo the damage inflicted by the ruling of the district court by avoiding a permanent injunction, or by seeking a way to  avoid judgment or continued pursuit of the litigation. Other post-trial/settlement uses of patent reexamination include avoiding permanent injunctive relief, and avoiding future royalties.

The strategies and case studies that follow illustrate patent reexamination as a multi-purpose litigation tool that is increasingly leveraged in the U.S. to improve defensive posture and drive early settlement.  Over 1000 Patent reexamination filings were filed in 2010, the vast majority of which are conducted concurrent to district court and/or ITC litigation.[1]

II. Pre-Trial Strategies

  • The Ability to Stay District Court Litigation

One of  the more common pre-trial strategies is to file a request for patent reexamination in an attempt to secure a stay of the litigation pending the outcome of the USPTO proceeding.

Courts have the inherent power to manage their dockets, including the authority to stay patent infringement litigation pending the conclusion of a Patent Office reexamination.  Moreover, the decision to stay litigation is generally discretionary.  Decisions granting stays of patent litigation are typically reviewed under an abuse of discretion standard.  Such decisions can, in certain circumstances, be quite difficult to reverse on appeal.  Although a patent owner has a statutory right under 35 U.S.C. § 318 to seek a stay of patent litigation pending the outcome of an inter partes reexamination proceeding, such requests can be denied if the judge does not believe that a stay would serve the interests of justice.

Factors Based Analysis

Factors generally considered by district court judges when ruling on motions to stay include whether (1) a stay will unduly prejudice, or present a clear tactical disadvantage to, the nonmoving party; (2) a stay will simplify the issues and trial of the case; and (3) discovery is complete and a trial date has been set.[2]  In ITC proceedings, Administrative Law Judges also consider the stage of the reexamination proceedings, efficient use of the Commission’s resources, and alternative remedies available in federal court.

1. Prejudice

Delay arguably should not be a dispositive issue, as it is common to all stayed cases.  In some cases, courts have found that a delay serves the interests of correctness and finality, by assuring that the Patent Office decision can be taken into account by the court prior to further proceedings.[3]  However, it has been argued, successfully at times, that a delay that is not merely lengthy, but potentially indefinite is prejudicial to the nonmoving party.[4]  Furthermore, the potential efficiency of having some of the issues in the case resolved by the Patent Office has been discounted in certain cases, where it was said to be uncertain when, if ever, the resolution would come.

In some cases in which no injunctive relief is sought, courts have found that a stay would not unduly prejudice the non-movant.  However, in certain other cases, courts have determined that where the parties are direct competitors, a stay would likely prejudice the non-movant.[5]  Sometimes courts consider that witnesses are more likely to be located if discovery is allowed to proceed because witnesses may become unavailable, their memories may fade, and evidence may be lost while the Patent Office proceedings occur.

Furthermore, in granting a stay pending reexamination, courts have required stipulations from the party moving for the stay in an effort to mitigate the prejudice to the non-moving party.  For example, in Visto Corp. v. Research in Motion, [6] as well as the Premier v. Hewlett-Packard and Premier v. Microsoft cases,[7] stays were provided in stipulated form.  In Premier, Judge Folsum wrote that “the Court determines that a stay should be counterbalanced with an appropriate stipulation so that neither side will be prejudiced by the other side getting ‘two bites at the apple.’”[8]  The stipulation effectively required the accused infringers to argue obviousness based only on prior art submitted in the reexamination along with prior art not previously submitted.

Recently, litigants have begun addressing potential prejudice head on by agreeing to self-imposed stipulations.  For example, a party seeking a stay pending reexamination may agree to stipulate to utilizing 37 C.F.R. § 1.953(b) for an expedited Right of Appeal Notice (RAN) to reduce the reexamination duration thus lessening the influence of prejudice towards the non-moving party.  37 C.F.R. § 1953(b) allows the patent owner and all third party requesters to stipulate after the Patentee’s response to the initial office action, that the issues are appropriate for a final action.  The final action includes a final rejection and/or final determination favorable to patentability, and the parties may request the issuance of a RAN.  The request must have the concurrence of the patent owner and all third party requesters present in the proceeding, but in their motion for stay, a party may indicate willingness to stipulate to this procedure, thus offering to accelerate the reexamination proceeding.  Illustrating the effectiveness of offering to mitigate the prejudicial delay inherent to reexamination, the Defendants in TDY Industries v. Ingersoll Cutting Tool requested a stay pending reexamination and agreed not to deal in products allegedly covered by the patent at issue for a predetermined time frame.[9]  The Court found that the Plaintiff’s complaints were substantially mitigated by Ingersoll’s agreement and granted the stay.

2. Simplification

A stay of litigation may streamline trial, simplify or eliminate issues, or reduce consumption of court and party resources.  In 74 % of completed reexaminations, at least one claim of the patent-in-suit was eliminated, amended or otherwise limited.  Accordingly, it has been argued that reexamination can simplify trial by eliminating the need to litigate infringement claims.  However, courts may require a requesting party do more than merely proffer oft-cited reexamination statistics and generic judicial efficiency arguments.  Some courts have found a compelling reason to grant a stay when an inter partes reexamination is proceeding with the same parties.  However, there may be significant complex issues, such as infringement, inequitable conduct, and prior public use that will remain after reexamination, which courts have weighed against granting a stay.[10]

3. Timing

The current stage of the litigation can impact the decision on a motion to stay.  For instance, whether the motion to stay was filed before or after discovery, claim construction, summary judgment motions or trial.  Courts have often found the advanced nature of a case that is approaching trial may weigh against granting a stay.  But the opposite inference—that a suit in the early stages should weigh heavily in favor of a stay—is not necessarily true.  Stays have been denied in some cases even though there was a lack of a trial date and discovery was at its earliest stages.

Nevertheless, it could be argued that the key factors that come into play when a district court judge considers whether to grant a stay are whether the movant is a direct competitor, whether the reexamination is ex parte or inter partes, the stage of the reexamination proceeding, the status of the claims under reexamination, the stage of the litigation, and the status of discovery.  In many cases, it may be best to seek stays early, but some courts have seriously entertained a motion to stay late in a case.  Parties should also consider that stays may affect awards of damages, at least when sought prior to exhaustion of appeals.  Stays may also affect the ability to obtain or maintain injunctions.

As such, one litigation strategy may be to carefully select the type of reexamination with an eye towards increasing the chances of obtaining a stay of concurrent litigation.  Timing is important, but some courts have found that it is never too late.  Parties should consider the district court’s and judge’s record for granting stays.  In certain cases, parties have chosen not to rely solely upon Patent Office statistics.  The results of the particular reexamination of the patent-in-suit, for example, sometimes may be more persuasive to certain judges.

Creative Stay Tactics

Motion to Transfer Followed by a Motion to Stay

(“Texas Two Step”)

In addition to the above mentioned factors, the forum location may have a significant impact on the likelihood of obtaining a stay.  For example, the Eastern District of Texas, well established as the premiere plaintiff forum for patent holders by deciding patent cases quickly and infrequently finding patents invalid, will infrequently stay an action in favor of a pending patent reexamination.

Since In re TS Tech, 551, a motion to transfer to a more convenient venue from a Texas court has become a marginally effective defense strategy.[11]  Now, as a matter of course, defendants seek transfer of a patent infringement case to a more “convenient” forum.  Convenience is rarely a mere issue of geography, but rather a basis for moving the dispute to a less patent friendly forum. From a defendants perspective, less patent friendly describes practically any other forum. Infringement cases seeking transfer in 2008-2009 increasingly sought California as a destination of “convenience.”

A closer look at the 2008-2009 cases however, may reveal more than just a simple transfer strategy, but a two-step tactical technique. This two step process includes a transfer out of Texas, followed by a motion to stay the case pending reexamination in the new forum.

In 2008-2009, close to 50% of transfer requests identified a California court as the more convenient forum.  With Silicon Valley companies frequently targeted by non-practicing entities in the Eastern District of Texas, the Northern District of California is a natural choice as a more convenient location. Likewise, one expects less of a “pro-patent” bias based on the local technology based economy. Still, in addition to these obvious benefits to the transfer out of Texas, the seemingly increasing willingness of such courts as the Northern District of California to stay a concurrent litigation pending reexamination may be the greater value to defendants seeking transfer from Texas courts.[12]

As noted above, whether or not to stay a patent infringement litigation concurrent with a pending reexamination is a factor based determination.   However, the Northern District of California is becoming well known as a favorable forum with regard to staying cases pending reexamination.  The mere filing of a reexamination request may suffice to stay a litigation in the Northern District of California.[13]

Recently, in Spectros Corp. v, Thermo Fisher Scientific, Judge Armstrong granted defendant’s motion to stay the patent litigation of a California based plaintiff corporation pending the outcome of reexamination of the patent-in-suit.[14]  In the judge’s order, the plaintiff’s prejudice argument was rejected, explaining that  “the prejudice claimed by the Plaintiff applied equally to any case where reexamination is sought. It is for that reason that court’s have found ‘that delay inherent in the reexamination process does not constitute, by itself, undue prejudice.’ Moreover, Plaintiff ignores that the reexamination process was enacted by Congress to provide certainty in the validity of patent rights and to provide a faster, less expensive remedy than litigation when the validity of a patent is at issue.”  After weighing the facts, the judge chose to stay the litigation despite the fact that the reexamination proceedings could take five to seven years with appeals to conclude.

In selecting a forum, the plaintiff should analyze the “reexamination friendliness” of the forum.  As can be appreciated, depending upon the location and judge of a given federal district court, the odds of a case being stayed can vary significantly.  Even after a plaintiff has selected a seemingly desirable forum, the ability of a defendant to transfer from a plaintiff-friendly forum to a forum that is reexamination friendly, such as the Northern District of California, and subsequently seek a stay of the litigation, can be an especially effective technique.

As tactics continue to evolve, the “ITC-End Around” may be the answer to the Texas-Two-Step described above.

Click here for McKeown’s full article Reexamination Strategies Concurrent with Litigation .

You can hear more from Scott A. McKeown on the issue of Reexamination and concurrent litigation when he chairs PLI’s Reissue & Reexamination Strategies and Tactics With Concurrent Litigation 2011. The program is offered in San Francisco January 10, 2011 and in New York  February 11, 2011. The web cast is available January 10th.  He will co-chair both events and speak on the topic of Pre-Trial and Post-Trial Reexamination Strategies Concurrent with Litigation

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