Heathcote Holdings Corp., Inc. v. Suncast Corp., No. 11 C 1010, Slip Op. (N.D. Ill. Jul. 25, 2012) (Zagel, J.).
Judge Zagel held that the America Invents Act (“AIA”) provisions limiting false patent marking standing to persons that suffered a competitive injury, even in ongoing cases, was not an unconstitutional taking. Defendant allegedly marked several different snow shovel models with stickers indicating that the shovels were covered by expired design and utility patents - the allegedly false marking. After the filing of the suit, the AIA retroactively required that the plaintiff have suffered a competitive injury in order to have standing to maintain its false marking suit. Plaintiff Heathcote acknowledged that it lacked standing pursuant to the new standard, but argued that the retroactive elimination of its claim was an unconstitutional taking.
The Court held, citing to several decisions in other districts, that Congress was free to create qui tam actions and free to remove them. Congress had the authority to invite private citizens to enforce its laws and the authority to remove that right when Congress decided that the volume of cases was too great, for whatever reason.
The following is a summary of an interview I conducted with Monica Winghart, Article One’s Executive Vice President and General Counsel, about the impact of the new America Invents Act (“AIA”) provisions that went into effect on September 16. Ms. Winghart has more than 15 years of intellectual property experience. Prior to joining Article One, she was Senior Corporate Counsel for The Clorox Company, where she was Director of IP litigation, responsible for patent clearance and portfolio management, lead counsel for the three of the company’s largest business units, and a part of Clorox’s M&A, licensing and transactions teams.
Here are the highlights:
Inter Partes Review (“IPR”)
- The new IPR and post-grant review procedures are “game changing.” They collectively create more “touch points for the PTO & the public to assess the invention over the state of the art than ever before in US patent history.”
- The cost of applying for IPR is significant, but relative to litigation, the fees are not extreme. There will be some sticker shock for companies, and IPR for entire patent families may be cost-prohibitive. But IPR should be a valid litigation alternative in many cases.
- Additionally, the increased scope of prior art that will be considered in IPRs is a positive step.
- The certainty of timing is also an important improvement in the IPR system. Having a reexamination decision within a year in most cases will be a significant draw for companies.
- Overall, the key positive of the IPR rules is the ability to “bring your case” and have the “experts at the patent office . . . really consider your invalidity arguments on the merits” to determine whether or not it is novel.
- Winghart is “almost always pleased with the examiners assigned” to cases she has been involved in. The examiners are “tested and vetted” and develop expertise in the area.
- Winghart acknowledges that we will need the first patents that undergo IPR to be “guinea pigs” to see what level of quality comes out of IPR, but is “excited about the possibility of what could be.”
- The increased IPR standard — “reasonable likelihood to prevail on at least one claim” instead of “substantial question of patent validity” — has the potential to “open the door” to more challenges.
Post-Grant Review (“PGR”)
- The PGR’s nine-month window to file after a patent issues and the consolidation of multiple PGR’s is significant. Winghart “wish[es] we could do it in IPRs.”
- The nine-month window “makes people make a decision and harmonizes to European opposition proceedings.”
- The PGR’s required speed – the PTO must respond within 3 months of the patentee’s statement – is a significant benefit: “Within one year you will understand the challenge to your patent.”
- Winghart has some concerns about the ability to settle and stop either a PGR or an IPR: “there is a little bit of a tension between the settlement piece and the ultimate goal of determining patent quality.” That is interesting in that the flexibility to settle a case after filing a PGR or an IPR is a key enticement to many companies.
The following article was written for my Retail Patent Litigation Blog, and it is just as relevant for Chicago readers. So, I am reprinting it here with minor, Chicago-specific revisions.
BNA has an interesting article by James Pistorino of Perkins Coie and Susan Crane looking at the impact of the America Invents Act (“AIA”) on district court patent litigation filings. The article looks at 2011 data, only one quarter of which is after enactment of the AIA. But even a quarter’s data tells a clear story:
- Delaware leap frogs the E.D. Texas as the district of choice for patent plaintiffs with nearly 50% more filings than the E.D. Texas.
- The number of defendants per case has dropped significantly in almost every district, with the E.D. Texas as a notable exception.
- The number of total defendants sued appears to be remaining relatively steady.
This early data suggests exactly what we expected. Overall, the AIA did not control patent litigation filings, but it did reduce average case size and shift venue. The big question from the study is “why Delaware?” Here are some key reasons:
- Retirement and new judges on the E.D. Texas have increased uncertainty and time to trial in the E.D. Texas, for both plaintiffs and defendants.
- In contrast, Delaware’s bench has remained consistent, and is also experienced with patent litigation.
- A recent transfer denied by Delaware Judge Robinson noted that defendants incorporated in Delaware (as so many are) cannot “complain” about being sued in Delaware.
- While Delaware is not a rocket docket and lacks local patent rules, Delaware is relatively fast and has strong local patent customs with each judge.
Additionally, it is worth noting that the AIA has had little impact on the rest of the top five patent litigation districts – C.D. California, N.D. California and N.D. Illinois.