January 27, 2015
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Challenging Patents Before the USPTO: Looking Ahead to a World of Patent Reexaminations, Post-Grant Reviews and Inter Partes Reviews
For several years now, both houses of Congress have debated legislation that would significantly increase a party's ability to challenge its competitors' patents in actions before the U.S. Patent and Trademark Office (USPTO). A newly-proposed proceeding, known as a Post-Grant Review proceeding (PGR) will provide an early and comprehensive basis for challenging patents. Additionally, the current Inter Partes Reexamination process may be replaced by, or supplemented with, an Inter Partes Review (IPR) proceeding for challenging patents. This article outlines the contours of these mechanisms for challenging patents, and discusses their potential substantial impact on corporate competitors and patent rights.
Current Patent Reexaminations Proceedings
To understand the likely impact of the proposed PGR and IPR, one needs a baseline understanding of the current procedures for challenging patents before the USPTO. Currently, the most common mechanisms for challenging patents before the USPTO are ex parte and inter partes reexamination proceedings. Both types of reexamination proceedings must be based upon the existence of a prior art patent(s), a printed publication(s) or an admission of the patent owner that raises a substantial new question of patentability (SNQ) due to alleged lack of novelty and/or obviousness. Ex parte reexamination can be requested for any patent during its period of enforceability, whereas inter partes reexamination can be requested only for a patent issuing from an application filed on or after November 29, 1999. In ex parte reexamination, third parties who request reexamination are not allowed to file papers or interact with the examiners once the reexamination is ordered (and after any patent owner's statement), whereas only a third party requester not in privity with the patent owner can request an inter partes reexamination proceeding and has full participation rights in the proceeding, including appeals. The third party requester's right to participate fully in the inter partes reexamination proceeding typically has a substantial impact on the outcome of the proceeding. Additionally, in an ex parte reexamination, only the patent owner may have substantive discussions, including interviews, with the examiners, whereas no substantive discussions such as interviews can take place by either the patent owner or the third party requester in an inter partes reexamination. Statistically, ex parte and inter partes reexamination proceedings have led to amendment or cancellation of a significant percentage of the patent claims challenged in the reexamination, which has made this a favored defense strategy for accused infringers. Additionally, a large number and a signficant percentage of ex parte and inter partes reexaminations involve patents that are concurrently involved in litigation in the U.S. district courts and/or the U.S. International Trade Commission (USITC), and the possibility of patent reexamination should be considered by all parties involved in patent litigations.
As currently envisioned, the Post-Grant Review proceeding (PGR) will open up a new avenue for a party to challenge its competitor’s patents in proceedings before the USPTO. In contrast to reexamination proceedings, PGR can be based on virtually any ground of unpatentability. Thus, a party seeking PGR, i.e., the "cancellation petitioner," will have a newfound ability to challenge patents for lack of enablement, lack of an adequate written description and/or lack of novelty based on prior public use or prior sale of the invention. Additionally, lack of novelty and/or obviousness over the prior art also will be a basis for challenging patents by PGR. In contrast to parties who request patent reexamination, a cancellation petitioner will not need to identify a "substantial new question of patentability" raised by the prior art relied upon during PGR. The House bill proposes that a petition requesting PGR can be granted if there is simply a "substantial question of patentability." The current Senate bill requires the petitioner to show by unrebutted evidence that at least one patent claim is "more likely than not" unpatentable. Additionally, a cancellation petitioner ostensibly could request PGR on the ground that the patent claims non-statutory subject matter, e.g., in light of the Supreme Court's recent decision in Bilski v. Kappos. Further, the Senate bill broadly would permit petitions for PGR on the ground that the challenged patent presents "a novel or unsettled legal question that is important to other patents or patent applicants." Thus, the proposed legislation provides a cornucopia of potential bases for challenging patents, and it creates a new pathway for obtaining rapid adjudication of new or unsettled questions of law.
Importantly, as with patents facing reexamination, the USPTO will not presume the validity of a patent undergoing PGR. Additionally, unpatentability must be shown by a preponderance of the evidence, rather than by the heightened clear-and-convincing-evidence standard that must be met when invalidating a patent in U.S. district court or during an investigation by the USITC. Further, in view of the ability (albeit limited ability) to amend patent claims during PGR, the claims will be given their broadest reasonable construction in light of the specification, rather than the potentially more narrow construction that is utilized in district court or in the USITC. Thus, like patent reexaminations, PGR proceedings will provide a fertile ground on which competitors may challenge patents.
Under the proposed legislation, all patents potentially will be subject to PGR for a limited time period after issuance. As proposed, PGR can be requested for any patent that is issued on or after the effective date of the legislation, irrespective of the patent's filing date. However, the time period during which one can request PGR is not unlimited. Under the Senate Bill, petitions for PGR must be filed within nine months of issuance of the patent, or within nine months of a reissued patent that broadens the claims of the patent. Additionally, if the cancellation petitioner has been sued for alleging infringing the patent, the petition must be filed within three months of the date on which a responsive pleading is due in the litigation. The House bill is marginally more generous and limits the corresponding time period to one year from issuance or reissuance of the patent. In view of the limited time period during which a party will be able to petition for PGR, corporate competitors will have increased incentive to monitor prosecution and issuance of third-party patents so as not to miss out on the opportunity to challenge such patents by PGR. Conversely, patent owners in competitive fields will have increased incentive to prepare and prosecute high quality patent applications and to obtain a thorough initial patent examination by the USPTO. Additionally, patent owners will have an increased incentive to "lie low" and wait until the time window for seeking PGR is closed before asserting their patent rights against competitors.
PGR will be adjudicated by a Patent Trial and Appeal Board (PTAB) that will supplant the existing Board of Patent Appeals and Interferences (BPAI), and a three-judge panel will decide PGR proceedings. In this regard, PGR will differ significantly from current reexamination practice in which a trio of patent examiners of the Central Reexamination Unit (CRU) makes a determination as to the patentability of the challenged patent claims. Rather, this aspect of PGR will likely more closely parallel interference proceedings, where a single Administrative Patent Judge (APJ) presides over the interference proceeding throughout its pendency, and a three-judge panel hears oral arguments and issues a decision. In view of the involvement of APJ's, rather than patent examiners in the CRU, parties to PGR proceedings will be more willing to advocate arguments that require a sophisticated and nuanced understanding of patent law than are parties to a reexamination. Additionally, if interferences are any indication, APJ's are likely to be open to disposing rapidly of issues raised in PGR proceedings on procedural grounds, or on any other ground in an effort to obtain resolution of the proceeding. Once PGR is initiated, the proceeding will move rapidly. Both pending bills propose that PGR be concluded within one year, absent good cause for a short extension. Thus, to handle the case load that will likely be created by institution of PGR proceedings, there will be a need for a substantial increase in the number of APJ's and in the resources available to such APJ's.
Although detailed regulations that will govern PGR have yet to be formulated, PGR procedure will likely share many similarities to procedures in patent interferences. As with interferences and patent reexaminations, parties in PGR proceedings will be able to submit direct testimony in the form of affidavits or declarations of experts or other witnesses. However, witnesses providing written statements in reexaminations are not cross-examined, whereas witnesses in interferences routinely are cross-examined by deposition. Both pending patent reform bills provide for limited discovery during PGR proceedings. It is unlikely, however, that PGR will involve any substantial amount of live testimony before the PTAB. While APJ's in interferences may on rare occasions hear live testimony, the CRU examiners do not hear any live testimony in inter partes reexaminations and have interviews only in ex parte reexaminations. Also, patent interferences, unlike patent reexaminations, allow parties to seek discovery beyond the cross-examination of witnesses. In practice, it is unusual for the BPAI to grant such additional discovery; thus, this aspect of interferences differs sharply from district court litigation. The PTAB is likely to take a similar approach in determining whether to grant discovery in PGR proceedings, particularly in light of the contemplated statutory mandate to conclude such cases within one year absent good cause. Oral arguments in PGR also are likely to be streamlined, as they are in interferences (viz., typically one-hour long), rather than mirror lengthy district court-style proceedings. Thus, while PGR proceedings involving critical patents may become hotly-contested "PTO litigations," the procedural limitations placed on such proceedings may make PGR an attractive alternative or adjunct to challenging patents in district court litigation.
As compared with patent reexaminations, PGR may become a more effective strategy for driving settlement of concurrent litigation between the parties. "Settlement" between the parties to an inter partes reexamination will cause the USPTO convert the proceeding into a de facto ex parte reexamination (with no substantive communication or interview right), and the USPTO will continue to reexamine the once-challenged patent. Thus, once the reexamination "train" has "left the station," third-party requesters cannot completely stop it and thus cannot offer such relief during settlement negotiations. Under the proposed legislation, settlements between parties to PGR proceedings will terminate the proceedings, thus providing patent challengers with more leverage at the negotiation table. In the event that a settlement is not reached, a party who is dissatisfied with the outcome of a PGR proceeding can appeal to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). In contrast, neither the patent owner nor a cancellation petitioner may appeal the USPTO's original determination of whether to initiate PGR.
Once instituted, PGR proceedings are likely to become a weapon of choice in the arsenal of patent competitors. Notwithstanding the limited time window for initiating PGR, the proceedings as currently contemplated will provide an unparalleled mechanism for challenging patents.
Inter Partes Review
The pending patent reform legislation also proposes to institute an Inter Partes review proceeding (IPR), which may be instituted against all patents in force on or after the effective date of the legislation. Under the Senate bill, IPR would replace the current inter partes reexamination process, and would be available only after closure of the time period for PGR. The House bill is more lenient and does not eliminate inter partes reexamination, nor limit the timeframe for requesting IPR. In contrast to requests seeking patent reexamination, which must identify a "substantial new question of patentability," petitions seeking IPR will need to establish a "reasonable likelihood" that the petitioner would prevail with respect to at least one challenged claim. Thus, patent challenges in IPR proceedings ostensibly can be based on the same patentability issues considered during original prosecution. It is doubtful, however, that the USPTO will be inclined to revisit patentability issues it has already decided during original prosecution.
As with PGR proceedings, the pending legislation provides that the PTAB will oversee IPR proceedings, thus providing yet another burden for APJ's to carry. Additionally, the Senate bill provides for depositions and oral arguments, which invariably will make IPR more complex and litigious than inter partes reexaminations, which lack such procedures. As with the proposed PGR proceedings, the proposed IPR proceedings must be concluded within one year of being initiated (or within 18 months, if good cause exists). Such time constraints, along with the attractiveness of IPR and PGR as mechanisms for challenging patents, may lead to an overwhelming case load for the PTAB. Thus, there likely will be significant pressure on the APJ's to dispose of IPR proceedings as efficiently as possible.
The Future World of Reexaminations, PGRs and IPRs
If enacted as currently envisioned, patent reform legislation will provide potential patent challengers with significant additional options for attacking the patents of their competitors. It remains to be seen, however, how patent owners will effectively navigate a world that permits multiple serial or simultaneous attacks on a single patent. For example, in the wake of the proposed legislation, a single patent may be challenged in an ex parte reexamination, in a district court litigation, in a USITC investigation, in a post-grant review proceeding, and in an inter partes review proceeding. Although the likelihood of a single patent becoming involved in all of the above-mentioned proceedings may be more "fantasy" (or nightmare!) than real, corporate competitors would be wise to consider a multi-pronged strategy for attacking key competitive patents. When faced with patents that create significant roadblocks to competition, having a comprehensive strategy for lodging — or defending against — multiple attacks will be critical for surviving in the brave new world.
 See H.R. 1260 and S. 515 as amended on March 4, 2010. There are significant differences between these bills that would need to be resolved in conference in order for the legislation to pass in this Congress. Due to other political issues, there may be insufficient floor time for this legislation to be passed in this session.
 Patents also can be challenged in interference proceedings; however, the challenger must have a competing patent application that claims the same or substantially the same invention as the patent. For further information regarding the use of interferences to challenge patents, please see the authors' companion article published by the National Law Review on July 8, 2010 at http://www.natlawreview.com/node/2068. A single patent under the current legal regime could be challenged by an interference, an ex parte reexamination, and an inter partes reexamination at the same time. One or more of these proceedings could be merged or stayed by the USPTO, but the time to complete all three through appeals could be years.
 A comprehensive treatment of patent reexamination and concurrent patent litigation is found in Sterne et al., Reexamination Practice with Concurrent District Court Litigation or Section 337 USITC Investigations, The Sedona Conference Journal, Vol 10.
 It is the application filing date rather than the priority date that controls the availability of an inter partes reexamination proceeding.
 As of March 31, 2010, USPTO records indicated that only 24% of ex parte reexamination certificates confirmed all claims without cancellation or amendment; only 8% of inter partes reexamination certificates confirmed all claims without cancellation or amendment.
 Under the proposed legislation, PGR will not be able to be based on failure to comply with the "best mode" requirement.
 Competitors sometimes prepare a so-called "pocket reexamination" to entice patent owners to settle disputes or face the risk that the competitor will file the reexamination request carried in his or her "pocket" to the negotiation table.
 Existing inter partes proceedings will continue to be handled under the current law until completion.
 Under the proposed legislation, the current Central Reexamination Unit will continue to handle ex parte reexaminations. However, some critics of the proposed PGR and IPR argue that the USPTO has grossly underestimated the work load increase and additional expense these processes will have on the agency.
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