Patent Reform May Not Cure a Potential for Bias Against Patentee in Inter Partes Reexamination

Authored by Leslie A. McDonell

The use of inter partes reexamination in place of costly litigation, or in tandem with it, has become a well-accepted strategy for those seeking to invalidate a patent for which infringement allegations have been raised. Inter partes reexamination has been viewed as pro-challenger, in part because very few patents (less than 10%) emerge from the inter partes reexamination process in the same form that they entered. Rather than changing this picture, at least initially, the new post-grant challenge procedures proposed in the patent reform legislation will merely add another set of tools to the patent challenger's arsenal. This article explores a perceived bias against the patent holder in inter partes reexamination as well as the effect that patent reform legislation may have on the process.

A Powerful Tool

Inter partes reexamination is widely recognized as a powerful tool for an accused or potential infringer in combination with ongoing litigation, or as a less-expensive alternative to litigation. These reexaminations are procedurally complicated, relatively fast-paced and can place a huge burden on the patent holder to defend its patent without the presumption of validity that the patent would be entitled to in a district court.

As part of the American Inventors Protection Act of 1999, Congress enacted legislation providing for inter partes reexamination in response to criticism that the ex parte reexam was too heavily weighted in favor of patentee. The Act was an attempt to procedurally limit the patentee's power to influence ex parte proceedings by allowing a third-party requester to participate at each step of the proceeding instead of the very limited participation allowed in ex parte reexamination and by prohibiting patentee interviews with the examiner—one of the most highly used tools in ex parte reexam. In an effort to improve the quality of reexaminations and reduce pendency, the USPTO created the Central Reexamination Unit ("CRU") in 2005 to handle both ex parte and inter partes reexaminations.

Inter partes reexamination is available only for patents that issued from applications filed after Nov. 29, 1999. The first inter partes reexam was filed in 2001 and it was the only one filed that year. In the first three months of 2011, an average of more than a dozen requests for inter partes reexamination were filed each week. From 2001 to the end of March 2011, the USPTO reports that 1,195 inter partes reexamination requests have been filed. Although a small number of requests never make it past the preliminary processing stage, of those that do, reexamination is ordered in more than 95%. As of the end of March 2011, only 253 reexamination certificates had been issued by the USPTO on patents involved in inter partes reexamination:  29 of those 253 certificates confirmed all claims of the patent (12%), 109 certificates issued with claim changes (43%), and 115 certificates cancelled all claims of the patent (45%).¹  Even though these statistics are an improvement over the past several years (at least from the patentee perspective), it is easy to see why the CRU is often called the Central Rejection Unit; 88% of patents that have emerged from inter partes reexamination have lost some or all claim scope.

The Procedural Rules

It is not just these statistics that appear to disproportionately disfavor the patentee in inter partes reexamination. The procedural rules are also heavily weighted against the patent owner. For example, the third-party requester in an inter partes reexamination has an unlimited amount of time to plan a strategy of attack on the patent, secure experts to support its position, and prepare written submissions. The third-party requester has no page limit on the request itself or on the number of references cited. Nor is the third-party requester limited to citation of new art. Art that has been presented to the examiner during prosecution may nonetheless be cited in reexamination as long as it raises a substantial new question of patentability ("SNQ"). Accordingly, the third-party requester may cite a reference that was technically before the examiner in ex parte prosecution if: 1) the old reference is used in a new combination, 2) the old reference is applied in a new way, 3) the old reference is accompanied by evidence that the examiner misinterpreted it, or 4) the old reference was cited in an information disclosure statement, but not discussed by the examiner or applicant during prosecution. The third-party requester may present an unlimited number of grounds for reexamination based on the cited references, and may submit an unlimited number of declarations in support of those grounds.

Once a request for reexamination is accepted, it is common for the first office action on the merits to base rejections on most, if not all, of the SNQs presented by the third-party requester. Further, it is not uncommon, particularly in biotechnology and chemical cases, to see a first office action on the merits that is 60-80 pages long, presenting dozens of grounds of rejection. Yet in spite of the potential for being faced with an overwhelming volume of material to address, the patent owner is given only two months to respond to the first office action and is limited to a 50-page submission, excluding claim amendments, but including declarations to the extent that they are considered to include argument rather than just an explanation of a reference. For example, if the declaration analyzes the combinability of references, or makes arguments as to whether a reference does or does not anticipate, it will be counted against total page limit. Petitions for extension of time to respond or to increase the page limits must be requested well in advance of the original due date in order to allow time for the USPTO to act on the petition. And extensions of time and/or page limits are sparingly given.

After the patentee has made a submission in response to the first office action, the third-party requester may file comments and even additional declarations to rebut the patentee's remarks. If the patentee has amended the claims, the third-party requester may raise non-art patentability issues against the claims as well. After the third-party requester gets this second bite at the apple, the examiner issues an action closing prosecution ("ACP"), which is similar to a final office action and limits claim amendments by the patentee. Because of the significant volume of material submitted and the examiner's own short time frame for issuing the ACP, it is again not uncommon to find that the USPTO's position has changed very little from the initial office action. It is also not surprising to see the USPTO refuse to enter new claim amendments after issuing an ACP.

The disadvantage to the patent holder often increases in high-stakes cases. For example, an accused infringer in a litigation involving more than one patent may file serial requests for inter partes reexamination, keeping the patent owner constantly scrambling to meet deadlines in the various cases. Moreover, even if the patentee manages to be among the few that come through inter partes reexamination with all claims intact, there is no guarantee that the same issues will not be raised again in litigation, in spite of the estoppel provisions in the reexamination statute. One defendant in a multi-defendant case can file an inter partes reexamination request, and although that specific party is estopped from raising the same issues in the litigation, the other defendants are not, even when a joint defense agreement is in place.

Will the Proposed Legislation Improve the Situation?

It should be clear by now that the potential prejudice to a patent holder in an inter partes reexamination is significant. However, it is less clear what the proposed patent reform legislation will do to improve the situation. Under the proposed legislation, inter partes reexamination will be phased out over approximately four years and be replaced by post-grant review (within the first nine months after a patent issues) and inter partes review (any time after the first nine months after a patent issues). One important negative for the patent holder is that during post-grant review, a third-party may challenge an issued patent on any ground of invalidity, whereas under the current system, all challenges are limited to prior art grounds. On the positive side, the threshold inquiry for accepting a request for either post-grant review or inter partes review is higher than the "substantial new question" threshold now in place. A petition for post-grant review will be granted when the information submitted by the challenger, if unrebutted, demonstrates that it is "more likely than not" that at least one claim of the patent is invalid. This standard is much like the prima facie case of invalidity that a patent examiner must make during prosecution. A request for inter partes review must establish a "reasonable likelihood" that at least one claim of the patent is invalid. This threshold is similar to the standard applied by district courts for determining whether to issue a preliminary injunction.

The change in the standard for accepting a request for post-grant review or inter partes review may result in the acceptance of many fewer petitions, but because all such standards are subjective, there is no guarantee that this will be the case. Unfortunately, an even more expedited schedule for these new proceedings than currently exists in inter partes reexamination will increase the patent holder's burden. Thus, in spite of the raised standard for accepting a request for post-grant review or inter partes review, the establishment of increased opportunities for challenging issued patents and the mandate to complete each proceeding within a one-year time frame may do little to protect patentees from overly burdensome post-grant challenges.

Endnotes
¹  http://www.uspto.gov/patents/ IP_quarterly_report_March_2011.pdf

This article first appeared in the August 2011 issue of IP Strategist. 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 author and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.