The face of patent litigation in the U.S. has evolved greatly in the last 5 years with respect to patent reexamination. For patent litigators, throughout the U.S. and especially the Northern District of Illinois, the emergence of this now seemingly reliable strategic option is an important case management consideration. Indeed, if not adequately considered in the course of litigation counseling, reexamination ignorance may create malpractice opportunities for unsuccessful defendants.
Defendants, as well as those concerned with patents clouding their competitive landscape are increasingly requesting patent reexamination at the USPTO. When prior art patents and printed publications can be effectively presented to enable the USPTO to reject original patent claims, the expectation is that the prosecution of the reexamination proceeding will result in cancellation or amendment of original patent claims.
The sudden growth in reexamination filings can be attributed to several factors. These factors include, the emergence of the “non-practicing entity”(NPE) problem, the eligibility of inter partes reexamination for post 1999 patent application filings, and the efforts of the USPTO and Congress to overhaul the reexamination process, first with legislation overruling the Portola Packaging decision in 2002, and with creation of a special USPTO unit in 2005.
In 2005, the USPTO established the Central Reexamination Unit (CRU) to exclusively handle all reexaminations, whether ex parte or inter partes within the Office. The CRU created a procedure by which every reexamination proceeding is processed by a team (3) of experienced primary examiners. The CRU has greatly improved the responsiveness and quality of patent reexamination.
With respect to NPEs, reexamination is an attractive strategy as an active reexamination may shut down (i.e., stay) an otherwise costly litigation by forcing the dispute away from the high cost battle of district court litigation, back to the PTO. At the PTO, the NPE’s leverage of contingency litigation counsel and forced discovery costs are removed. Moreover, the standard of review in reexamination for proving unpatentability is much more favorable to a challenger as compared to the district court action. In federal district court the standard to invalidate a U.S. patent is “clear and convincing evidence.” Whereas, in reexamination, the US PTO can establish unpatentability by a “preponderance of evidence,” and unexpired claims are given their broadest reasonable interpretation. See 37 C.F.R. 1.555(b)(2)(ii).
Upon conclusion of a reexamination, canceled or amended claims will present the challenger with freedom to operate either through non-infringement of the altered claims, or decrease liability through the doctrine of intervening rights.
With this background in mind, a review of a recently asserted malpractice claim is presented along with a discussion of the new Local Patent Rules of the Northern District of Illinois as they pertain to concurrent reexaminations.
In Ecast Inc. v. Morrison & Foerster L.L.P. (Superior Court for the State of California, County of San Francisco) Ecast, a former client of MoFo, sued the firm for malpractice. The compliant stemmed from MoFo’s defense of Ecast in a patent infringement suit in the Northern District of Illinois. In the suit, six patents were asserted against Ecast by Rowe International Corp and Arachnid Inc. (Rowe International Corp., and Arachnid, Inc. v. Ecast, Inc., Rockola Mfg. Corp., and View Interactive Entertainment Corp. (click here for much more about this case from the Chicago IP Litigation Blog’s archives).
Notably, at paragraph 25 of the complaint, it is alleged that:
Once Defendants undertook to represent Ecast in the Rowe case, Defendants failed to sufficiently explain and advise Ecast of the benefits Ecast could have derived by filing a request for reexamination of the patents-in-suit. Proper pursuit of a patent reexamination could have resulted in a stay of the Rowe litigation for a substantial period of time. Although technically a stay, the reexamination process often serves to effectively end the patent litigation in many cases and could have terminated the Rowe case. (emphasis added)
Paragraphs 28-29 go on to allege that:
Had Ecast been properly advised of the benefits to be gained by the reexamination process, mainly a significant stay of the Rowe case possibly leading to avoidance of all further litigation risks, legal fees and expenses, then Ecast would have chosen to pursue reexamination. Ecast would have pursued reexamination and it would likely have been successful because approximately one month after new counsel substituted in as counsel of record for Ecast in the Rowe case, a reexamination of the Arachnid patents was sought by Ecast and granted by the Patent and Trademark Office. The reexamination resulted in a finding that there was a substantial question as to the patentability on all the Arachnid patents. Under these circumstances, the claims are often modified or cancelled.
Because the reexamination was pursued at such a late date and in such close proximity to the commencement of trial, no stay of the Rowe case was imposed because Ecast’s request came too late.
Surely, whether or not reexamination would have truly benefited Ecast is speculative, likewise, the likelihood of obtaining a stay is quite subjective, varying significantly in accordance with the stage of reexamination as well as the perception of reexamination efficacy/efficiency in each forum. Nevertheless, a failure to properly counsel a client on the potential benefits of reexamination, as alleged here, appears to be a significant risk going forward.
With respect to the timing discussion of the complaint, a late filing of a reexamination request may have become even more critical in view of new local patent rule, LPR 3.5, which requires:
Absent exceptional circumstances, no party may file a motion to stay the lawsuit pending reexamination in the U.S. Patent Office after the due date for service of the Final Contentions pursuant to LPR 3.2. (emphasis added)
In other words, since the request for a stay must be presented in the above time frame, and as reexamination may take time to advance to a point favorable to a challenger (i.e, final rejection or appeal stage) it is n ow of even greater importance that reexamination be explored and if necessary instituted at the earliest possible point in a dispute.
Patent Reexamination, concurrent with, or even in place of more traditional litigation practices is becoming increasingly commonplace. While patent reexamination was once viewed as an ineffective procedure, and critics may still cite inefficiencies, significant strides have been made at the USPTO to present a viable post grant challenge mechanism. In view of recent developments in the Northern District of Illinois, practitioners would be well advised to explore reexamination options with clients early in the representation.
Scott A. McKeown is a partner with Oblon, Spivak, McClelland Maier & Neustadt and a team leader of the Reexamination and Reissue Practice Group. He is a founder and frequent contributor to patentspostgrant.com
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