September 13, 2013
Authored by Mark J. Feldstein, Ph.D. and Robert A. Pollock, Ph.D.
Notice that an inter partes review (IPR) has been filed against your patent is rarely good news. The consequences can be severe: your issued patent can be invalidated or narrowed. IPR legal standards and procedural rules are also weighted against the patentee. And the pace is fast. Preparation, planning, and a thorough understanding of the unique IPR procedures, however, can reduce the chances of losing valuable patent rights.
The new IPR procedure, available since Sept. 16, 2012, entails a trial before the U.S. Patent and Trademark Office's (PTO) Patent Trial and Appeal Board where the patentability of issued claims is reconsidered in light of prior art identified by the challenger. In principle, all the claims could be upheld, but the odds of the patent emerging unscathed are very low.
Although, as of September 2013, the PTO has issued only two final opinions in IPR actions,1 historical data for a related proceeding (inter partes reexamination) make it clear that inter partes PTAB proceedings do not favor the patentee. Only about 11 percent of patents emerged with all claims intact, while 42 percent had all claims invalidated.2 Forty percent suffered claim amendments—potentially inhibiting the patentee's ability to prove infringement in litigation.
One reason for the harsh odds is that, unlike in district court, the statutory presumption of validity and burden on the challenger to prove invalidity do not apply. Instead, an IPR petitioner need only prove unpatentability by a "preponderance of the evidence." The board also applies the "broadest reasonable" construction of the claims. This is another difference from the district court that can serve to weaken the claims over the prior art. Not surprisingly, these standards tilt the results of IPR towards invalidity. The board has even invalidated claims previously upheld in a district court.
The fast pace of IPR presents further challenges for the patent owner. By statute, the board must issue a final determination within 12 months (or 18 months upon a showing of good cause) of instituting trial on an IPR. And while the challenger may have nearly unlimited time to prepare an attack, the patent owner could be surprised by, and unprepared for, the challenge.
For example, before instituting a request for IPR, the challenger has ample time to thoroughly investigate the prior art, develop positions, consult experts, and conduct testing. Once the challenger's IPR petition is filed, however, the patent owner has only three months to prepare and file a preliminary response presenting procedural or substantive reasons that the IPR should not proceed.
The preliminary response, which is optional, is not intended to fully address the merits of the challenger's petition. However, the PTO has indicated that it will entertain arguments that the cited references do not constitute prior art or lack a material element of the challenged claims, that the prior art teaches away from the claimed invention, or that the challenger's claim construction is unreasonable.
Preliminary responses have successfully averted the institution of an IPR about 10 percent of the time.3 Successful responses to date have argued that the challenger's invalidity arguments were incomplete or unsupported, and that the challenger failed to construe the claims or provide adequate support for a proposed claim construction.
While preventing initiation of an IPR is not likely based on the statistics to date, the patent owner did file a response in nearly every case (30/32) where the PTO denied a request to institute an IPR.4 And, as discussed below, the filing of a preliminary response extends the time for the board's decision on instituting the IPR. This extra time can be invaluable to the patentee, who should use it to prepare its substantive response under the assumption that the IPR will be instituted.
If the board nevertheless believes that "a reasonable likelihood exists for the petitioner to prevail in at least one of the claims," it will institute the IPR within three months of receiving the preliminary response, or six months from the filing of the challenger's petition if no response is filed. Although the number of reported decisions is still small, the board has been granting close to nine in 10 IPR requests.5
The time pressure on the patentee is not limited to the preliminary response. Once the IPR is instituted, the patentee has only three months to prepare and file its substantive response. The patentee's response is the core of its defense, and it should address every argument raised in the challenger's petition, along with supporting documents, affidavits, and expert declarations. However, the response is limited to 60 pages. This puts great pressure on the patent owner to act quickly as soon as the challenger's IPR request is filed, with focused attention to the most important points.
An IPR challenger will seek to show that the prior art anticipates or renders obvious the claimed invention under 35 U.S.C. §§ 102 and 103, respectively. The patentee's arguments in response are generally directed to (1) interpreting the claim terms and thus the scope of applicable prior art; (2) demonstrating why cited references do not qualify as prior art; and (3) arguing why the targeted claims are patentable in light of the prior art references.
The patentee also has some ability to amend the claims to further distinguish over the prior art. Ideally, these arguments and amendments will be layered such that the patentability of a claim does not rest on a single position. The patentee's defense must, however, be well planned. It must consider long-term strategy, including effects on commercial competitors as well as ongoing or anticipated litigation.
The construction of claims can be critical to the outcome of an IPR. Indeed, a narrower construction is almost always preferred to distinguish over prior art. While the board will apply the "broadest reasonable interpretation," that construction must be consistent with the specification.
It can be important for the patentee to direct the board to the context of the specification to undermine an overbroad interpretation advocated by the challenger. Care must be given, however, to not limit the claims by argument in a way that creates new noninfringement positions for the challenger. Indeed, forcing the patentee to take a narrow claim construction position may be the challenger's principle motivation.
There are also many ways to attack the asserted references and reference combinations. Among these are several avenues to wholly disqualify an alleged prior art reference. New evidence, not available during the original prosecution, can also be used to defeat rejections and actually strengthen the patent.
For example, at least for patents examined under the pre-America Invents Act rules,6 it may be possible to "swear behind" the reference based on the patentee's prior invention. This entails submitting evidence that the invention was conceived prior to the publication date of the reference (or, in the case of a patent document, its filing date). It may also be possible to overcome an allegedly anticipatory reference by proving that it is not enabled or that a claim element is not inherent in its disclosure.
Obviousness defenses include all of the arguments commonly employed during normal patent prosecution to show that the claims are patentable in light of the prior art. These include the lack of motivation to combine references, lack of reasonable expectation of success, teaching away from the claimed invention, and the failure of others. New nonobviousness arguments also may have become available through continued research or because the claimed invention has since been embodied in a commercial product. These can include evidence of commercial success, recognition and praise by experts in the field, and unexpected properties or benefits of the claimed invention.
The board accepts evidence supporting all of the above contentions in the form of affidavits and expert declarations. Thus, inventors and coworkers may need to be located and asked to sign affidavits attaching relevant notebook pages and experimental data "swearing behind" the date of a reference. Likewise, experts must be retained to consider, then present, declaration evidence explaining the prior art or other evidence of the patentability of the invention.
Each of these endeavors represents an investment in time and money, and it will typically be necessary to focus on only the most promising arguments, given budgetary constraints, page limits, and the short response time allotted to the patentee.
In conjunction with the substantive response, a patent owner may file a motion to amend or replace the challenged claims to address the challenger's arguments. This is important because it presents the patentee with an opportunity, not available in the district court, to strengthen its claims over the prior art. Ideally, judicious amendments can be made to avoid the prior art while still maintaining the claim's competitive value.
Of course, the challenger will be afforded an opportunity to address claim amendments with new arguments and expert declarations. Any subsequent claim amendments require either a joint request by both parties or a showing of good cause.
The great majority (372 out of 441) of IPRs are filed while there is an ongoing litigation involving the patent. These statistics undoubtedly reflect the perception that an IPR provides better odds of invalidating a patent as compared with a district court.
To avoid a loss of rights, it is critical that the patentee coordinate its IPR defense with its litigation objectives. To this end, it may be preferable, or even necessary due to protective order constraints, to have dedicated IPR counsel who have experience before the board.
A patent owner contemplating an enforcement action should also consider whether the accused infringer might respond with an IPR challenge to patent validity. Where this appears likely, the patentee could do a further search of the art, collect or develop new evidence of nonobviousness, and have experts retained and at the ready as part of its pre-enforcement due diligence. Depending on what is uncovered, the patentee may even pursue an ex parte reexamination to strengthen its patent and neutralize any newly discovered prior art.
The patent owner also can proactively coordinate civil litigation positions with its IPR defense. And, even where there is no concurrent litigation, the IPR strategy should nevertheless reflect the patent owner's business objectives, such as maintaining claims to support a revenue stream or claims that prevent copycat competition.
For example, a patent narrowed by an IPR such that it no longer blocks the competitor's formerly infringing product is of limited, if any, value. Similarly, an unwary patentee defending against an obviousness attack before the board may unwittingly provide support for its opponent's attack on enablement in a related civil action. Such situations can be minimized if the IPR and litigation teams have a coordinated strategy or common objective.
IPR notices in the context of concurrent litigation provide both opportunities and special challenges. For example, an IPR offers an opportunity to amend claims that otherwise might be found invalid in civil litigation, and surviving the proceeding prohibits the challenger from making those same arguments in court.
On the other hand, a patentee will often labor under an information deficit in proceedings before the board. Not surprisingly, the IPR challenger will construe claims to encompass the prior art, to avoid a finding of infringement in litigation, or both. Although the patentee will know what prior art is asserted, information regarding the challenger's proposed products and noninfringement theories is frequently unavailable due to the narrow limits on IPR discovery.
Pre-suit investigations and discovery in the litigation, however, may help address the information deficit to some extent. Although protective orders may prevent litigation counsel from sharing the details of the challenger's proposed products, their input into the legal strategy can be useful in crafting a comprehensive position.
Concurrent litigation also involves a complex calculus regarding likelihood that the civil action is stayed. At one end of the spectrum, a declaratory judgment action is automatically stayed if the challenger has a pending IPR petition.
In the context of an infringement suit, the challenger has up to one year in which to petition for IPR. There is a reasonable likelihood that a district court would grant a request to stay the case, particularly where filed early in the one-year period, but this varies from court to court.7
At the other end of the spectrum, proceedings before the International Trade Commission can be expected to proceed despite a copending IPR. This makes an ITC action against the challenger, where available, a potentially useful option for the patent owner to enforce the patent before the IPR is final.
An IPR need not be a fight to the death. It can be terminated at the request of both parties any time before the board issues its final written opinion. Many factors can bring a challenger to the settlement table.
For example, IPR rules prevent a challenger from rearguing in any subsequent proceeding any issue raised, or that could have been raised, in an IPR. Because this estoppel does not attach before the board issues its final decision, settlement can be quite attractive to the challenger who feels that its case has not gone well and would like to either cut its losses or try its hand with similar arguments in district court.
A patentee's bargaining position may also depend on other factors. The patentee should, for example, consider any available bargaining chips, whether in the form of licensing terms and financial compromise or offensive measures such as filing an infringement suit and seeking an injunction. Some patentees have also responded to attacks in the PTO by advancing proceedings against their opponent's portfolio.
The time pressures, and potential finality, of an IPR challenge weigh in favor of advance preparation. The early retention of experts can reduce the time crunch faced after receiving an IPR notice. Similarly, advanced due diligence on important patents in your portfolio may reveal opportunities to strengthen your position before your patent is challenged.
If problem areas are identified early, the simplest option may be to address the issues in a continuation application, if one is available. Alternatively, the patentee may choose to file a reissue application or request ex parte reexamination to address newly discovered art. In addition, and particularly if the investigation suggests the possibility of a later charge of inequitable conduct, the PTO will consider, reconsider, or correct any information the patent owner considers to be relevant to the patent in a supplemental examination procedure.
Finally, perhaps the best early warning of an IPR attack comes from your competitors. Competitive intelligence, including monitoring your competitors' patent publications, can not only identify which of your patents might be targeted, but also suggest bargaining chips for future settlement negotiations.
For example, by understanding your opponent's interest in the field, you might obtain blocking claims in a continuation application or even challenge one of your competitor's key patents by filing your own IPR. Moreover, as interference proceedings are still an option for many patents, you might find that it is possible to instigate an interference threatening an important aspect of your competitor's portfolio.
While many factors in an IPR favor the challenger, the patentee can respond to preserve, and potentially even strengthen, its position. The bottom line is that preparation, as well as the ability to act quickly but strategically, is most important in defending the patentee's position. This includes maximizing the time for preparing its substantive response to the IPR, considering offensive strategies against the challenger, and developing backup claim positions that maintain the scope—even if narrower—necessary to support its ultimate business objectives.
Endnotes
1 UKing Universe, Inc. v. Chang-Kang Chu, IPR2013-00212, Paper No. 9 (July 12, 2013) (all claims cancelled where patent owner "abandoned" the patent and did not respond to the board's Order to Show Cause); ZTE Corp. v. Contentguard Holdings, Inc., IPR2013-00134, Paper No. 34 (Aug. 6, 2013) (all involved claims canceled and adverse judgment entered at the request of the patentee).
2 http://www.uspto.gov/patents/stats/inter_parte_historical_stats_roll_up_EOY2012.pdf.
3 As of September 2013, patent owners filed preliminary responses in 136 cases. Of those that have been adjudicated, 112 have been instituted and 20 dismissed.
4 IPR2013-00105 was dismissed as an incomplete petition.
5 As of September 2013, the board has ruled on 166 requests to institute an IPR, granting 143 and denying 23.
6 This applies to patents having at least one claim with an effective filing date prior to March 16, 2013.
7 As of September 2013, 75 motions for stay have been filed in related district court actions. 33 have been granted and 19 have been denied. The sole request for stay in a related ITC action was denied. See Certain Microelectromechanical Systems and Products Containing the Same, Inv. No. 337-TA-876, Order No. 6 (Int'l Trade Comm'n 2013).
Reproduced with permission from BNA's Patent, Trademark & Copyright Journal, Vol. 86, No. 2129, 9-13-13. Copyright © 2013 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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