Reexamination As An Alternative To Litigation

One of the main concerns of many companies is the ever-increasing cost of patent enforcement. The probative costs of patent litigation can have a chilling effect on innovative businesses and can result in forced settlements, ie, entering settlement rather than incurring attorneys' fees, costs and lost employee time. So the question is: if your company faces the prospect of defending a patent infringement action, is there an alternative to the expensive and time consuming process of litigating a patent in federal court?

Congress attempted to answer this question back in 1980 by enabling reexamination of a patent by the U.S. Patent and Trademark Office, and making relatively recent changes to the reexamination process to increase its effectiveness. However, despite Congress's attempts to create an effective alternative to litigating questionable patents, the prevailing view is that, in most instances, reexamination does not replace litigation. This is because reexamination, even under the relatively new inter partes procedure, has a different purpose than that of litigation.

Reexamination Procedures

A request for reexamination, which can only be made for prior art patents or publications, can be made by anyone, anonymously or not, directly to the Patent Office. Reexamination was initially implemented as an ex parte process, meaning that after a certain point only the patentee participates in the process with the Patent Office. After request is filed, the Patent Office determines within 3 months “whether or not a substantial new question of patentability affecting any claim of the patent is raised by the request and the prior art cited therein, without consideration of other patents or printed publications.” The patent owner is not permitted to file a statement or response to the request for reexamination prior to the Patent Office's determination.

If the request for reexamination is granted, then the Patent Office issues an order for ex parte examination setting a period of not less than 2 months within which the patent owner may file a statement on the new question of patentability, including proposed amendments. The conventional wisdom is for the patent owner not to file a statement, since doing so will permit the requestor to file a response to

the statement. Thereafter, the reexamination then proceeds the same as would a normal patent application, without participation of the third party requestor, except with shortened response times.

Improvements To The Reexamination Procedures

In recent years, there has been an effort to strengthen reexamination as a more acceptable alternate forum than litigation for challenging the validity of patents.

In 1999, Congress passed the American Inventors Protection Act, which created inter partes reexamination procedures. The process is similar to ex parte reexamination, except that the requestor is served with all papers issued by the Patent Office or filed by the patent owner, and allotted time to submit written comments on any response filed by the patentee. The requestor must be identified and is estopped, except in limited circumstances, from asserting validity arguments during subsequent litigation that were raised or could have been raised based on the prior art that was the subject of the inter partes reexamination.

In another attempt to improve the public's confidence in the reexamination process, the Patent Office, in August 2000, adopted the policy of assigning, with limited exceptions, the reexamination request to a primary examiner different from the examiner that was involved in the examination of the original patent application. The Patent Office also requires the examiner to hold a “patentability review conference” with two other experienced examiners before issuing a final rejection or issuing a reexamination certificate. The purpose behind the conference is to consider all issues of patentability, and to “diminish the perception that the patent owner can disproportionately influence the examiner in charge of the proceeding.”

In November 2002, the inter partes procedures were again amended to permit the third-party requestor to appeal an adverse decision by the Board of Patent Appeals and Interferences to the Federal Circuit, and be a party if the patent owner appeals to the Federal Circuit. These new appeal provisions were intended to reduce the negative effect of the estoppel on the third-party requestor. The reexamination procedures were also amended to permit the use of prior art regardless of whether or not the prior art references were considered by the Patent Office during preparation of the patent that is the subject of the reexamination request.

The Current Reexamination Procedures Are
Not a Substitute For Litigation

The most apparent benefit of reexamination is that it provides an inexpensive approach for challenging patent validity. There are no questions of jurisdiction or venue, nor the expense of a full litigation. Claims undergoing reexamination are not accorded the presumption of validity under 35 U.S.C. '282, and the patentability of the pending claims are determined on a “preponderance of the evidence” standard instead of the “clear and convincing evidence” standard applied by the federal courts to issued patent claims.

Yet, reexamination in its current form is simply not structured to be a substitute for litigation. The underlying rationale of a reexamination proceeding is to increase the reliability of the Patent Office's action in the issuing of a patent. It creates an opportunity to “start over” in the Patent Office with respect to the limited areas involved, and to reexamine the claims, and to examine new or amended claims, as they would have been considered had they been originally examined in light of all of the prior art of record in the reexamination proceeding. Litigation and reexamination are distinct proceedings with distinct parties, purposes, procedures and outcomes. In litigation, a litigant attacks the validity of a patent and must prove it by clear and convincing evidence. In a reexamination, the examiner is not attacking the validity of a patent, but is conducting a subjective examination of the claims in light of the prior art.

There are inherent limitations in using reexamination to test the validity of a patent. The Patent Office has limited resources and is not equipped to resolve issues such as inequitable conduct, infringement, prior use, prior offers for sale and a number of other possible invalidity grounds. There is no opportunity for the taking of discovery, presenting and cross-examining expert witnesses, or meaningful oral discussions with the Patent Office examiners by third party requestors. At best, the Patent Office merely determines the patentability of the claims, or any amendments to those claims, over a limited set of prior art.

Reexamination Statistics

The track record of the Patent Office provides guidance on the results that can be expected in reexamination proceedings. The Patent Office has granted more than 90% of the requests filed over the past 5 years. Thus, it is likely that once a request is filed, the request will be granted and the patent will go into reexamination. See Table 1, below.

The option to petition for inter partes reexamination just became available when the patent statutes were amended in 2000. Only one inter partes request was filed in 2001, four requests in 2002 and 21 requests in 2003. The Patent Office granted all but three of the requests. The low number of requests may result from the limitation that inter partes reexamination is available only for original applications filed on or after Nov. 29, 1999. However, a number of factors may play an equal part in the low number of requests, including the untested new procedures, the estoppel effect on future validity arguments, the view that the participation by third-party requestors is limited, and the effect of third party requestors not being able to appeal to the Federal Circuit, which procedure was recently changed. See Table 2, below.

[IMGCAP(1)]

Yet, despite these apparently favorable statistics, there appears to be a natural tendency of the Patent Office to try to confirm the propriety of its original decision to grant the patent. Over the last 5 years, an average of 337 petitions for reexamination were filed annually, with the average number of reexamination certificates issued being 240 ' thus, on average, more than 71% of the reexaminations concluded with claims being allowed in one form or another. Of course, such statistics are inapplicable to individual patents, but this is indicative of a trend.

The Role Of Reexamination

Regardless of its effectiveness as a substitute for litigation, reexamination does have its potential uses, for both a patentee and a patent challenger.

For the patentee, reexamination can be used to salvage possibly invalid claims, and to strengthen the patent by citing prior art to the Patent Office. The patentee may also consider filing for reissue to accomplish the same outcome and to correct errors in the patent. Many practitioners take every relevant prior art reference, including arguments made in litigation proceedings, and submit them to the Patent Office to give the patent a “presumption of validity” over the cited prior art. However, claims cannot be broadened in a reexamination proceeding. Thus, the best that the patentee can accomplish is to maintain the same scope of the patent coverage, and in fact may end up narrowing the scope of the claims.

The uses of reexamination for a patent challenger are more varied. Reexamination can be used to clear the patent, or limit the scope of the patent so as to permit entry into the market where timing is not crucial. There is no need to have a product about to go to market or already in the market as a prerequisite to filing a request for reexamination, as would be required for declaratory judgment jurisdiction to challenge a patent's validity in federal court.

A threat of reexamination can be used as a bargaining chip in settlement negotiations. Pendency of a reexamination can make it more difficult for the patentee to enforce its patent in court, since most courts will stay an action for patent infringement pending the outcome of a reexamination proceeding.

Reexamination is also a useful pretext to licensing since the question of whether or not to license often comes down to the subjective belief in the strength of validity of the patent. Reexamination proceedings can be used to provide the Patent Office's “view” of the viability of the patent.

In the context of litigation, reexamination is generally not advantageous when invalidity is the strongest defense. However, if there exists defenses other than a prior art patent or printed publication that is equally strong or stronger, then there is should be no real loss in submitting a request for reexamination. The difficulty in this evaluation, of course, is that the strength of any defense is difficult to predict since it is usually not until the conclusion of fact discovery, and often expert discovery, that the parties have a real indication of the strength of a patent's validity.

In this context, reexamination can have a dual role of challenging validity while also being used as a tactic by a patent infringement defendant to delay the proceedings. From the above statistics, it is likely that a well-reasoned request for reexamination will be granted by the Patent Office. Once in process, reexamination can take anywhere from 6 months up to several years. A request to stay litigation proceedings can be made based solely on the filing of the request ' and likely to be granted by the court. Courts give deference to the Patent Office and liberally grant a stay of pending litigation until resolution of reexamination proceedings.

The reasoning behind a court's preference for reexamination over litigation is that the patent claims may be found invalid or altered, ending the case or raising the possibility of non-infringement. If the patent survives the reexamination, the litigation proceedings continue, but the likelihood of resolution through settlement is greater since the patent has been “tested.” In such a situation, the alleged infringer could be in a much worse position because the most relevant art would have been “considered” and the reexamined claims would be entitled to the presumption of validity over this prior art. This would make it far more difficult to address the matter in court if the litigation were to continue, and would result in an estoppel as to such prior art if the reexamination proceedings were inter partes.

There are potential tactical uses for reexamination during litigation proceedings. The Patent Office permits an admission by the patent owner, whether of record in the file or in a court record, to be considered in combination with a patent or printed publication in determining whether a substantial question of patentability is raised, or in rejecting the claims during the reexamination. The result is that admissions obtained during litigation can be used against the patentee during the reexamination. Equally, positions and statements from the reexamination proceedings can be used against the patent owner during litigation. Thus, reexamination can provide a complementary avenue to litigation.

An important countervailing consideration is that once started, a reexamination cannot be stopped by either party ' neither party can control nor discontinue the proceeding, ie, the Patent Office will take the matter to a conclusion even if the parties do not cooperate. The incentive to settle a dispute is reduced considerably after a reexamination is filed since the patentee has nothing to lose by waiting until the conclusion of the reexamination.

Is reexamination an alternative to litigation? When used in the appropriate context and taking into account its limitations, the answer is that it can be a substitute ' but only in limited circumstances. Its use simply requires careful thought and consideration.

One of the main concerns of many companies is the ever-increasing cost of patent enforcement. The probative costs of patent litigation can have a chilling effect on innovative businesses and can result in forced settlements, ie, entering settlement rather than incurring attorneys' fees, costs and lost employee time. So the question is: if your company faces the prospect of defending a patent infringement action, is there an alternative to the expensive and time consuming process of litigating a patent in federal court?

Congress attempted to answer this question back in 1980 by enabling reexamination of a patent by the U.S. Patent and Trademark Office, and making relatively recent changes to the reexamination process to increase its effectiveness. However, despite Congress's attempts to create an effective alternative to litigating questionable patents, the prevailing view is that, in most instances, reexamination does not replace litigation. This is because reexamination, even under the relatively new inter partes procedure, has a different purpose than that of litigation.

Reexamination Procedures

A request for reexamination, which can only be made for prior art patents or publications, can be made by anyone, anonymously or not, directly to the Patent Office. Reexamination was initially implemented as an ex parte process, meaning that after a certain point only the patentee participates in the process with the Patent Office. After request is filed, the Patent Office determines within 3 months “whether or not a substantial new question of patentability affecting any claim of the patent is raised by the request and the prior art cited therein, without consideration of other patents or printed publications.” The patent owner is not permitted to file a statement or response to the request for reexamination prior to the Patent Office's determination.

If the request for reexamination is granted, then the Patent Office issues an order for ex parte examination setting a period of not less than 2 months within which the patent owner may file a statement on the new question of patentability, including proposed amendments. The conventional wisdom is for the patent owner not to file a statement, since doing so will permit the requestor to file a response to

the statement. Thereafter, the reexamination then proceeds the same as would a normal patent application, without participation of the third party requestor, except with shortened response times.

Improvements To The Reexamination Procedures

In recent years, there has been an effort to strengthen reexamination as a more acceptable alternate forum than litigation for challenging the validity of patents.

In 1999, Congress passed the American Inventors Protection Act, which created inter partes reexamination procedures. The process is similar to ex parte reexamination, except that the requestor is served with all papers issued by the Patent Office or filed by the patent owner, and allotted time to submit written comments on any response filed by the patentee. The requestor must be identified and is estopped, except in limited circumstances, from asserting validity arguments during subsequent litigation that were raised or could have been raised based on the prior art that was the subject of the inter partes reexamination.

In another attempt to improve the public's confidence in the reexamination process, the Patent Office, in August 2000, adopted the policy of assigning, with limited exceptions, the reexamination request to a primary examiner different from the examiner that was involved in the examination of the original patent application. The Patent Office also requires the examiner to hold a “patentability review conference” with two other experienced examiners before issuing a final rejection or issuing a reexamination certificate. The purpose behind the conference is to consider all issues of patentability, and to “diminish the perception that the patent owner can disproportionately influence the examiner in charge of the proceeding.”

In November 2002, the inter partes procedures were again amended to permit the third-party requestor to appeal an adverse decision by the Board of Patent Appeals and Interferences to the Federal Circuit, and be a party if the patent owner appeals to the Federal Circuit. These new appeal provisions were intended to reduce the negative effect of the estoppel on the third-party requestor. The reexamination procedures were also amended to permit the use of prior art regardless of whether or not the prior art references were considered by the Patent Office during preparation of the patent that is the subject of the reexamination request.

The Current Reexamination Procedures Are
Not a Substitute For Litigation

The most apparent benefit of reexamination is that it provides an inexpensive approach for challenging patent validity. There are no questions of jurisdiction or venue, nor the expense of a full litigation. Claims undergoing reexamination are not accorded the presumption of validity under 35 U.S.C. '282, and the patentability of the pending claims are determined on a “preponderance of the evidence” standard instead of the “clear and convincing evidence” standard applied by the federal courts to issued patent claims.

Yet, reexamination in its current form is simply not structured to be a substitute for litigation. The underlying rationale of a reexamination proceeding is to increase the reliability of the Patent Office's action in the issuing of a patent. It creates an opportunity to “start over” in the Patent Office with respect to the limited areas involved, and to reexamine the claims, and to examine new or amended claims, as they would have been considered had they been originally examined in light of all of the prior art of record in the reexamination proceeding. Litigation and reexamination are distinct proceedings with distinct parties, purposes, procedures and outcomes. In litigation, a litigant attacks the validity of a patent and must prove it by clear and convincing evidence. In a reexamination, the examiner is not attacking the validity of a patent, but is conducting a subjective examination of the claims in light of the prior art.

There are inherent limitations in using reexamination to test the validity of a patent. The Patent Office has limited resources and is not equipped to resolve issues such as inequitable conduct, infringement, prior use, prior offers for sale and a number of other possible invalidity grounds. There is no opportunity for the taking of discovery, presenting and cross-examining expert witnesses, or meaningful oral discussions with the Patent Office examiners by third party requestors. At best, the Patent Office merely determines the patentability of the claims, or any amendments to those claims, over a limited set of prior art.

Reexamination Statistics

The track record of the Patent Office provides guidance on the results that can be expected in reexamination proceedings. The Patent Office has granted more than 90% of the requests filed over the past 5 years. Thus, it is likely that once a request is filed, the request will be granted and the patent will go into reexamination. See Table 1, below.

The option to petition for inter partes reexamination just became available when the patent statutes were amended in 2000. Only one inter partes request was filed in 2001, four requests in 2002 and 21 requests in 2003. The Patent Office granted all but three of the requests. The low number of requests may result from the limitation that inter partes reexamination is available only for original applications filed on or after Nov. 29, 1999. However, a number of factors may play an equal part in the low number of requests, including the untested new procedures, the estoppel effect on future validity arguments, the view that the participation by third-party requestors is limited, and the effect of third party requestors not being able to appeal to the Federal Circuit, which procedure was recently changed. See Table 2, below.

[IMGCAP(1)]

Yet, despite these apparently favorable statistics, there appears to be a natural tendency of the Patent Office to try to confirm the propriety of its original decision to grant the patent. Over the last 5 years, an average of 337 petitions for reexamination were filed annually, with the average number of reexamination certificates issued being 240 ' thus, on average, more than 71% of the reexaminations concluded with claims being allowed in one form or another. Of course, such statistics are inapplicable to individual patents, but this is indicative of a trend.

The Role Of Reexamination

Regardless of its effectiveness as a substitute for litigation, reexamination does have its potential uses, for both a patentee and a patent challenger.

For the patentee, reexamination can be used to salvage possibly invalid claims, and to strengthen the patent by citing prior art to the Patent Office. The patentee may also consider filing for reissue to accomplish the same outcome and to correct errors in the patent. Many practitioners take every relevant prior art reference, including arguments made in litigation proceedings, and submit them to the Patent Office to give the patent a “presumption of validity” over the cited prior art. However, claims cannot be broadened in a reexamination proceeding. Thus, the best that the patentee can accomplish is to maintain the same scope of the patent coverage, and in fact may end up narrowing the scope of the claims.

The uses of reexamination for a patent challenger are more varied. Reexamination can be used to clear the patent, or limit the scope of the patent so as to permit entry into the market where timing is not crucial. There is no need to have a product about to go to market or already in the market as a prerequisite to filing a request for reexamination, as would be required for declaratory judgment jurisdiction to challenge a patent's validity in federal court.

A threat of reexamination can be used as a bargaining chip in settlement negotiations. Pendency of a reexamination can make it more difficult for the patentee to enforce its patent in court, since most courts will stay an action for patent infringement pending the outcome of a reexamination proceeding.

Reexamination is also a useful pretext to licensing since the question of whether or not to license often comes down to the subjective belief in the strength of validity of the patent. Reexamination proceedings can be used to provide the Patent Office's “view” of the viability of the patent.

In the context of litigation, reexamination is generally not advantageous when invalidity is the strongest defense. However, if there exists defenses other than a prior art patent or printed publication that is equally strong or stronger, then there is should be no real loss in submitting a request for reexamination. The difficulty in this evaluation, of course, is that the strength of any defense is difficult to predict since it is usually not until the conclusion of fact discovery, and often expert discovery, that the parties have a real indication of the strength of a patent's validity.

In this context, reexamination can have a dual role of challenging validity while also being used as a tactic by a patent infringement defendant to delay the proceedings. From the above statistics, it is likely that a well-reasoned request for reexamination will be granted by the Patent Office. Once in process, reexamination can take anywhere from 6 months up to several years. A request to stay litigation proceedings can be made based solely on the filing of the request ' and likely to be granted by the court. Courts give deference to the Patent Office and liberally grant a stay of pending litigation until resolution of reexamination proceedings.

The reasoning behind a court's preference for reexamination over litigation is that the patent claims may be found invalid or altered, ending the case or raising the possibility of non-infringement. If the patent survives the reexamination, the litigation proceedings continue, but the likelihood of resolution through settlement is greater since the patent has been “tested.” In such a situation, the alleged infringer could be in a much worse position because the most relevant art would have been “considered” and the reexamined claims would be entitled to the presumption of validity over this prior art. This would make it far more difficult to address the matter in court if the litigation were to continue, and would result in an estoppel as to such prior art if the reexamination proceedings were inter partes.

There are potential tactical uses for reexamination during litigation proceedings. The Patent Office permits an admission by the patent owner, whether of record in the file or in a court record, to be considered in combination with a patent or printed publication in determining whether a substantial question of patentability is raised, or in rejecting the claims during the reexamination. The result is that admissions obtained during litigation can be used against the patentee during the reexamination. Equally, positions and statements from the reexamination proceedings can be used against the patent owner during litigation. Thus, reexamination can provide a complementary avenue to litigation.

An important countervailing consideration is that once started, a reexamination cannot be stopped by either party ' neither party can control nor discontinue the proceeding, ie, the Patent Office will take the matter to a conclusion even if the parties do not cooperate. The incentive to settle a dispute is reduced considerably after a reexamination is filed since the patentee has nothing to lose by waiting until the conclusion of the reexamination.

Is reexamination an alternative to litigation? When used in the appropriate context and taking into account its limitations, the answer is that it can be a substitute ' but only in limited circumstances. Its use simply requires careful thought and consideration.