By Robert T. Pous
and Charles L.
Gholz
On
November 29, 1999, the President signed P. L. 106-113 which, amongst its other
provisions, enacts the long awaited inter
partes reexamination procedures in a newly created Chapter 31 of Title 35
of the United States Code.[1] These new reexamination procedures
supplement the existing ex parte
reexamination under Chapter 30 of Title 35 of the United States Code and create
a new, though still imperfect, avenue for third parties to contest the validity
of a U.S. patent before the Patent and Trademark Office (PTO).[2]
There has long been a need for a way by which members of the public can challenge the validity of a U.S. patent outside of the context of a declaratory judgement action under 28 U.S.C. 2201 or as an affirmative defense in a suit for patent infringement. Contesting validity in a suit for patent infringement is expensive, time consuming and fraught with risk: an unsuccessful challenger may be subjected to considerable monetary damages and an injunction. In addition, the challenger bears the heavy burden of proving invalidity by clear and convincing evidence, even when relying upon prior art which had not been considered by the Examiner during the prosecution of the challenged patent.
To
date, the only alternative avenue has been ex
parte reexamination under Chapter 30 of Title 35 of the United States Code.[3] This permitted a member of the public to
request the PTO to reexamine an issued patent based on prior patents or written
publications which raised a substantial new question of patentability affecting
at least one claim of the patent.[4] However, ex
parte reexamination permits only limited participation by third parties
once reexamination is ordered by the Commissioner,[5] even if
initiated by the third party, and so the Examiner in the ex parte reexamination does not have the benefit of rebuttal
arguments to counter those put forth by the patent owner. As a result, despite the absence of a
presumption of validity during reexamination,[6] ex parte reexamination is generally
viewed as advantageous to the patent owner as compared to an inter partes validity challenge in a
civil proceeding, and so ex parte
reexamination has been little used by third parties.
Indeed,
ex parte reexamination often serves
as an avenue by which the patent owner converts an infringed but invalid patent
into an infringed and valid patent. In
a common scenario, an alleged infringer presents the patent owner with
invalidating prior art during litigation or a negotiation. The patent owner then requests ex parte reexamination based on this
prior art and narrows its claims while taking care to see that they continue to
read on the accused infringer’s technology.
Since the Examiner lacks the benefit of any rebuttal to the patent
owner’s arguments, he or she may not appreciate the claim scope envisioned by
the patentee and may well allow the narrowed, but still overly broad, claims.
The
newly created Chapter 31 of Title 35 of the United States Code permits one to
request inter partes reexamination
under new section 311 rather than ex
parte reexamination under existing section 302. While Chapter 31 introduces certain significant restrictions
(discussed below) on third parties who take advantage of its provisions, it
permits significantly increased third party participation once reexamination
has begun. Specifically, the new
sections 314 and 315 create three important new rights for the third party
requester: (1) the right to file
written comments addressing issues raised by an action on the merits from the
PTO and issues raised by the patent owner’s response thereto, (2) the right to
appeal, within the PTO, any final decision favorable to the patentability of an
original or proposed amended or new claim of the patent, and (3) the right to
be a party to any appeal taken by the patent owner under 35 U.S.C. §134.
Section
314, like section 305, specifies that reexamination "shall be conducted
according to the procedures established for initial examination under the
provision of sections 132 and 133,” except as otherwise provided in section
314. This indicates that ex parte prosecution procedures should
remain the norm, and the ability of the third party to participate in the
reexamination proceedings on an inter
partes basis will be strictly limited to the provisions permitted in
section 314. Specifically, a third
party requester is permitted to file one set of "written comments"
addressing those issues raised by each action on the merits from the PTO and
the patent owner’s response thereto.
Presumably, the third party will not be permitted either to present
comments which address other prior art raised in the initial reexamination
request, but not adopted by the Examiner in the relevant Office Action, or to
raise entirely new issues.
The
fact that new section 314 limits the third party’s comments to "written
comments" appears to preclude the possibility of the third party’s
initiating or participating in Examiner interviews,[7] and it limits
the third party to only a single set of comments filed within thirty days after
the date of service by the patent owner.
However, section 314 does not place any other limits on the nature of
the "written comments." This
raises several questions regarding the possible scope of the written comments.
While
simultaneous multiple inter partes
reexaminations based on requests by the same requester or its privies is
prohibited,[8]
simultaneous inter partes
reexaminations based upon requests by different unrelated requesters, and
putting forth different prior art as raising a substantial new question of
patentability, can still arise and may be merged.[9] In such a case, will a given requester’s
right to submit written comments in the merged proceeding be restricted to
those issues which are both raised by
the Office Action (or the patent owner’s response thereto) and based on the substantial new questions of patentability raised
by prior art for which that party is the requester, or can all third party
requesters comment on all issues raised by an Office Action or a patent owner’s
reply thereto? The PTO may be tempted
to restrict the possible comment scope, even though such a restriction is not
expressly found in section 314, because each requester is arguably not a third
party requester with respect to those substantial new questions of
patentability which it did not raise.
Limiting each third party requester to commenting on only those issues
raised by the prior art which that party cited would “streamline” prosecution
and thereby reduce Examiner workload -- always a PTO goal. Moreover, arguably, it would not affect the
outcome since the comments of the various requesters would be apt to parallel
or repeat one another as to each issue.
However, the argument against such a restriction on the right of the
third party requester seems more compelling: since the third party has given up
its “day in court,” it should have a full opportunity to present written
arguments to the Examiner as to all material issues, whether it raised them or
not.
Another
question is whether the PTO will restrict the right of the third party
requester to submit expert declarations equivalent to declarations under 37 CFR
§1.132 as part of the “written comments.”
Currently no such restriction exists for the limited third party replies
permitted in ex parte reexamination.[10] On the other hand, given the inter partes nature of the reexamination
proceedings under Chapter 31, there will likely be an escalation in the
submission of declarations under 37 CFR §1.132 by patent owners during
reexamination (to back up their arguments in anticipation of rebuttal by the
third party requester), and the PTO may be tempted to place some restrictions
on the scope of the permissible “written comments” to reduce the Examiner
workloads and “streamline” prosecution.
Any
such restriction, however, would be contrary to the goal of making inter partes reexamination a practical
alternative to civil litigation.
Fundamental fairness and the third party requester’s right to submit
written comments addressing issues raised by the patents owner’s response
suggest that the third party requester should be permitted to submit 37 CFR
§1.132 type declarations of a nature commensurate with, and responsive to,
those submitted by the patent owner.[11] Indeed, there is no reason why the third
party requester should not also be permitted to initiate the submission of 37
CFR §1.132 type declarations, even where the patent owner has chosen not to do
so, as long as the third party requester’s declarations address only those
issues raised by the Examiner or the patent owner.[12] This right seems implicit in the right of
the third party requester to submit written comments addressing those issues
raised by an action on the merits from the PTO. Moreover, as a matter of fairness this right should be available
in any administrative proceeding, such as this, that can estop the third party
requester from raising the same issues in court.[13]
Another
question is whether the patent owner’s participation in an Examiner interview
will constitute "an action on the merits from the Patent and Trademark
Office" which will give the third party requester an opportunity to file
written comments under section 314.[14] Under the current rules, a patent applicant
is obligated to submit a complete written statement of the reasons for
patentability presented in any interview.[15] In addition, Examiners are obligated to
complete an Examiner Interview Summary form.[16] Presumably, parallel requirements will be
set out in the PTO rules implementing Chapter 31.[17]
There
is no reason why any Examiner Interview Summary form and/or patent owner
written statement, or their equivalent, should not constitute “an action on the
merits” or response which will trigger the right of a requester to file written
comments. While the third party will
not have the right to attend or participate in the interview, any interview
will almost certainly address the validity of one or more claims in the patent,
and the requester should have the right to submit comments on the patent
owners’s arguments and to reply to points raised by the Examiner or the patent
owner. Otherwise patent owners will use
the interview to bypass the inter partes
provisions of the reexamination; substantive issues will be raised and disposed
of without the possibility of any third party comments or participation.
Since
the third party requester is not permitted to participate in the interview,
there is a concern that if the patent owner and the Examiner reach an agreement
during the interview, the third party requester’s subsequent comments will
oppose a fait accompli and will be
meaningless. In order to preserve the
rights of the third party, it seems that the PTO rules should provide that no
agreement be reached as to any issues discussed during an interview until such
time as the third party requester has had an opportunity to submit its written
comments.
According
to section 315, a third party requester may appeal any final decision favorable
to the patentability of any original or proposed amended claim or new claim of
the patent. The third party requester
may also be party to an appeal taken by the patent owner. The procedural provisions for implementing
the right of the third party to appeal or participate in a patent owner’s
appeal will be spelled out in the rules which are ultimately promulgated by the
PTO. While the provisions of H.R. 1732
are somewhat different from those of Chapter 31, its language concerning
appeals is identical to that of Chapter 31, and so the ultimately implemented
rules may well be identical to the 1995 proposed rules for inter partes appeal in H.R. 1732.[18]
According
to the then proposed 37 CFR 1.949, upon allowance of all of the claims, or the
consideration of the issues and/or grounds of rejection a second time, the
Examiner may issue an Office Action closing prosecution. Following responses by the patent owner and
the third party requester (§1.951), the Examiner may then issue a "Right
of Appeal Notice" (§1.953) setting a time period for either party to
appeal. Following any appeal or cross
appeal by the parties (§1.959), each party is given time periods to file a
brief (§1.963) and a Reply Brief to the Examiner's Answer (§1.971). Either party can request and participate in
an oral hearing (§1.973).
Unlike
ex parte reexamination, a third party
requesting inter partes reexamination
must identify itself.[19] Paragraph (c) of section 315 estops a third
party that requests inter partes
reexamination from later raising the same issues in a court proceeding.[20] Specifically, if the Director orders inter partes reexamination under section
313 in response to a third party request, the requester is thereafter estopped
from later asserting invalidity in a civil action arising under 28 U.S.C. §
1338 “on any ground which the third-party requester raised or could have raised
during the inter partes reexamination
proceedings.” However, the requester
still could assert invalidity based on grounds which could not be raised in
reexamination, such as lack of enablement, failure to disclose the best mode,
or prior use or sale. Also, the third
party could later assert “invalidity based on newly discovered prior art
unavailable to the third-party requester and the Patent and Trademark Office”
at the time of the inter partes
reexamination -- for example, a 35 U.S.C. § 102(e) reference which had not
issued at the time of the reexamination.
Interestingly,
while section 317(b) prohibits a third party requester and its privies from requesting a subsequent reexamination on
grounds which could have been raised in the first inter partes reexamination, the estoppel provisions of section
315(c) limit only the third party itself, not its privies. Thus cooperating entities with a common
interest in invalidating a patent are not estopped from later raising the same
issues in a court proceeding, so long as they are not bound as the third party
requester.
The
requirement for the inter partes
reexamination request to name the real party in interest[21] would seem
to preclude naming a straw man to avoid the estoppel effect of section 315(c),
and it would likely also require naming a parent company as the real party in
interest when a subsidiary is the nominal requester. But otherwise independent members of the public, acting in
concert to some degree to challenge the validity of a patent, are not estopped
under section 315(c) so long as they are not lumped in as real parties in
interest. Thus, if the party with the
smallest liability can be induced to “volunteer” to be the requester, the
others may be insulated from the estoppel effect of section 315(c).
Note
that the proposed 37 CFR 1.911 of 1995 mentions the factors to be considered in
determining “privies.” Paragraph (c) of
37 CFR 1.911 indicates that “a person who is not a party to the reexamination
proceeding but who controls or substantially participates in the control of the
presentation of the reexamination proceeding on behalf of the party is bound by
the determination of issues as though it were a named party.” This suggests that only those who control or
substantially participate in the control of the presentation of the
reexamination will be deemed real parties in interest, and that only such
entities will be bound by the estoppel effect of section 315(c). However, the actual degree of cooperation
which separates those who are merely “privies” from “the parties in interest”
will need to be decided by the courts on a case-by-case basis.
At
first glance, the estoppel effect of section 315(c) appears so draconian as to
effectively deter potential third parties from relying on inter partes reexamination -- especially since the third party
requester is also prohibited from appealing a final decision favorable to the
patent owner beyond the Board of Patent Appeals and Interferences.[22] A third party who takes on the role of a
requester under Chapter 31 thus gives up its “day in court,” as well as court
review, with respect to invalidity issues which can be raised in the
reexamination.[23] However, in some cases the opportunity for
an inter partes challenge in the PTO
may outweigh the loss of an opportunity for a day in court. The post-Zurko[24]
standard of court review of PTO decisions (i.e., no substantial evidence to
support factual findings) is difficult for an appellant to satisfy, and so
little is lost in the prohibition against the third party requester’s appealing
a PTO final decision to the courts.
Balanced
against this are a number of factors which make an inter partes reexamination more appealing to a third party than
a court challenge.[25] First and foremost is the lack of any
presumption of validity in reexamination, which greatly reduces the third party
requester’s burden of proof.[26] Also, most patent Examiners are relatively
expert in making decisions as to patentability based on prior patents and
printed publications. They are less
likely to be swayed by specious patent owner arguments or expert testimony than
might a judge, who may be a non-technical person hearing these types of
arguments for the first time. Indeed,
the high profile that inter partes
reexaminations are likely to have within the PTO will mean that they will
probably be handled by the most senior and experienced Examiners. Finally, the third party’s arguments will
tend to reinforce the Examiner’s natural inclination to be skeptical of patent
owner arguments. This skepticism will
likely also transfer to any appeal within the PTO, where the requester will
take on the familiar role which the Board usually associates with the Examiner:
that of the party traversing patentability.
Once
the Director issues an order under section 313, section 317(a) prohibits both
the patent owner and the third-party requester, and their privies, from filing
a request for a subsequent inter partes
reexamination until after a reexamination certificate has been published,
except as authorized by the Director.[27] This provision is intended to prohibit third
parties, alone or in concert with others, from harassing the patent owner with
multiple simultaneous inter partes
reexamination requests. In addition, if
a final decision in an inter partes
reexamination proceeding instituted by a third-party requester is favorable to
the patentability of any original or proposed amended or new claim of the
patent, then section 317(b) prevents that party or its privies from thereafter
requesting an inter partes
reexamination of any such patent claim on the basis of issues which that party
or its privies raised or could have raised in the inter partes reexamination
proceeding.[28]
Since
all of the claims of a patent are reexamined, even if the initial request specifies
fewer than all of the claims,[29]
this provision would appear to effectively prohibit the requester or its
privies from initiating a subsequent inter
partes reexamination, even if different claims are later specified. As a practical matter, this requires an
accused infringer who wishes to challenge the validity of a patent to be
careful to raise all material prior art issues in its inter partes reexamination request, lest any missed issues later be
raised by the patent owner in the more patent owner friendly environment of an ex parte reexamination proceeding.[30]
Section
317(b) provides the same prohibition against inter partes reexamination after a final decision has been entered
against a party in a civil action arising in whole or in part under section
1338 of Title 28, United States Code, that the party has not sustained its
burden of proving the invalidity of any patent claim in suit. Here, however, the third party presumably
would not be prohibited from requesting inter
partes reexamination for any claims which were not at issue in the
suit. In this case, since the PTO does
not consider itself to be bound by a final court decision affirming validity,[31]
and since the PTO will reexamine all
claims in the patent, this may provide a third party with a back door avenue
for a second “bite” at invalidating the patent claims which were previously
litigated.
Despite
the prohibitions of section 317, merger issues in simultaneous proceedings will
arise. For example, will merged ex parte and inter partes reexamination proceeding be conducted ex parte or inter partes? What about a
merger between an inter partes
reexamination and an application to reissue the same patent, or multiple inter partes reexaminations requested by
unrelated parties? Assuming that the
1995 proposed rules for H.R. 1732 still represent the PTO’s thinking, the PTO
rules implementing Chapter 31 will make an effort to ensure that any merged
proceedings will preserve the third party requester’s right to participate as
to issues within the scope of the inter
partes reexamination. For example,
according to proposed section 1.989(b), an ex
parte reexamination merged with an inter
partes reexamination will be conducted inter
partes. The third party requester
will be able to participate in a merged a inter
partes reexamination and an application to reissue the same patent (section
1.991), although only as to issues within the scope of reexamination; merger
should not give the third party requester the right to comment on, for example,
failure to disclose best mode issues.[32]
Assuming
that the rules that the PTO ultimately promulgates for Chapter 31, like the
1995 rules, do not make the time of filing determinative of the conduct of
merged ex parte and inter partes proceedings, we should not
see the patent owner and third party racing to be first to file at the
PTO. Also, assuming that the third
party requester is permitted to comment on all issues which are raised by an
Office Action or the patent owner’s response thereto, regardless of whether they
were first raised by the third party requester or the patent owner in an ex parte request, issues of timing
should not affect the merits of reexamination proceeding. The third party requester will have an
opportunity comment on all prior art issues during the pendency of the inter partes reexamination.
According
to section 318, once an order for inter
partes reexamination of a patent has been issued under section 313, the
patent owner may obtain a stay of any pending litigation which involves an
issue of patentability of any claims of the patent which are the subject of the
inter partes reexamination order unless the court before which the litigation
is pending affirmatively determines that a stay would not serve the interests
of justice. Thus, a patent owner
seeking a stay has a presumption working in its favor, which may well make the
issuance of the stay almost automatic.
However, a third party requester seeking a stay has no such presumption
working in its favor and, if the third party wants a stay, it must carry its
burden of convincing the judge that a stay is appropriate.
Published in Intellectual Property Today, Vol. 7, No.
3, March 2000, page 37.
Endnotes
[1]35 U.S.C. § 311-318.
[2]The inter partes reexamination procedures of P.L. 106-113 are entirely prospective. They are limited to "any patent that issues from an original
application filed in the United States on or after" the date of enactment
thereof -- i.e., November 29, 1999. See
section 4608. Although the phrase
"original application" is not defined in the statue, it likely means
that inter partes reexamination is
not available for patents based upon continuing applications filed after
November 29, 1999 but claiming the benefit of the filing date of an earlier
patent application under 35 U.S.C. §120.
[3]Although in those instances
where one can provoke an interference via a pending patent application, one can
effectively challenge validity on an inter
partes basis via 37 CFR § 1.633(a).
See Gholz, You Can Use
Interferences to Save Big Bucks in Patent Litigation, 17 Biotechnology Law
Report 737 (1998).
[4]35 U.S.C. § 302.
[5]To be referred to as the
“Director” after March 29, 2000.
Section 4713.
[6]In re Etter, 756 F.2d 852, 225 USPQ 1 (Fed. Cir. 1985)(in banc).
[7]Unlike earlier versions of
the inter partes reexamination
provisions, those included in P.L. 106-113 do not include the right to
participate in Examiner interviews.
[8]Section 317, infra.
[9]Note the current merger
rules in 37 CFR § 1.565; MPEP § 2283.
[10]37 CFR § 1.535. But declarations cannot form the basis of a
rejection. MPEP § 2258.
[11]However, it seems probable
that the PTO will not permit either the patent owner or the third party
requester to cross examine the other party’s declarant.
[12]The PTO might try to limit
the right of the requester to respond with declarations only to rebut those
declarations submitted by the patent owner, in order to reduce the possibility
of a “war of declarations” after every Office Action. If so, this would seem unnecessary. A deterrent to the initiation of declarations by the third party
requester could easily be built in by permitting the patent owner to reply with
a declaration for rebutting any requester declaration that was not itself
submitted merely as a rebuttal to a patent owner’s earlier declaration; a
requester tempted to submit a declaration will be deterred by the knowledge
that it will permit the submission of an unrebuttable declaration from the
patent owner.
[13]Infra.
[14]Assuming that the PTO
permits interviews in inter partes
reexaminations.
[15]37 CFR 1.133.
[16]PTOL 413.
[17]Note that the PTO proposed a
set of provisional rules (proposed 37 CFR 1.901-1.997; Fed. Reg. Vol. 60, No.
155) for the revised reexamination procedures proposed in H.R. 1732. Although never adopted, these proposed rules
would have required a written statement of issues discussed in an Examiner
interview. See proposed section 1.955.
[18]See supra, n. 16.
[19]The “real party in interest”
must be identified. Section 311(b)(1).
[20]The third party requester is
also collaterally estopped from later challenging, in a civil action, any fact
determined during the inter partes
reexamination, except based on information unavailable at the time of the
reexamination. Section 4607. Thus, for example, factual determinations as
to the scope of the prior art are binding of the third party requester, even if
it is later able to challenge the validity of the patent based on that prior
art together with newly discovered prior art.
[21]Section 311(b)(1).
[22]Section 134(c).
[23]This may be unconstitutional
as a denial of due process. Note that
section 4607 itself contemplates that its estoppel effect “may be held to be
unenforceable.”
[24]Dickinson v. Zurko, ___U.S.___ , 119 S. Ct. 1816, 50 USPQ2d 1930 (1999).
[25]The exception is where all
of the claims are clearly invalid, since reexamination gives the patent owner
the opportunity to amend the claims, which is not possible in a court
action. But in this case the patent owner
will likely file a reissue patent application before asserting the patent in
court.
[26]Also, claims of unexpired
patents are given their broadest reasonable interpretation during reexamination. MPEP § 2258.
[27]It is not clear how the
patent owner would request or participate in an inter partes reexamination.
The patent owner already has the obligation to present arguments
supportive of patentability in ex parte
reexamination, and so it would have no need to request inter partes reexamination in order to participate as to these
issues. Also, it is unlikely that a
court would give the results of the reexamination greater deference simply
because it was filed under section 311 rather than section 302. In either case, it is a de facto ex parte proceeding.
The supposed right of the patent owner to request inter partes reexamination may simply be a drafting error in the
statute.
[28]This does not prevent the
assertion of invalidity based on newly discovered prior art unavailable to the
third-party requester and the Patent and Trademark Office at the time of the inter partes reexamination
proceedings.
[29]MPEP § 2258(IV).
[30]There is no restriction
against any member of the public, including the patent owner, requesting ex parte reexamination during the
pendency of an inter partes
reexamination. Such requests can be
based on different, or even the same, prior art as in the pending
reexamination. MPEP § 2240.
[31]MPEP § 2286.
[32]In addition to merger, a
concurrent proceeding may cause the PTO to stay an inter partes reexamination.
See proposed sections 1.987 and 1.993 of 1995.