Parallel District Court and ITC Patent Infringement Actions and PTO Interferences

Apr 2001 – Article
Patent World, April 2001, page 19 and The John Marshall Law School News Source No. 1 (Winter 2001) at page 30.




By Charles L. Gholz[2]

Table of Contents

I. Introduction

II. The Same or Different Counsel?

III. Making Use in Each Venue of Information and Documents from the Other

IV. Stays of District Court Patent Infringement Actions Pending Disposition of PTO Interferences

V. Claim and Issue Preclusion Effects

VI. Conclusion

I. Introduction

Approximately fifty percent of all interferences in the Patent and Trademark Office ("PTO") involve a patent and one or more patent applications.[3] Many patent applications are filed to cover a commercial product. By definition, the claims in the patent designated as corresponding to each count and the claims in each application designated as corresponding to that count interfere--or, at least, the APJ thought that they interfered when he or she declared the interference. It follows that, in many cases, the applicant's or applicants' commercial product(s) at least arguably infringes at least one claim in the patentee's patent. This leads to the possibility of parallel district court and International Trade Commission ("ITC") patent infringement actions and PTO interferences.

In fact, parallel district court or ITC patent infringement actions and PTO interferences are fairly common. This paper examines some of the common problems and opportunities presented by that situation.

II. The Same or Different Counsel?

The first question that house counsel or the management of a company confronted by such a situation or potential situation will have to answer is whether to use the same counsel or different counsel to handle the two actions.[4] If house counsel or the management of the company decides to use the same counsel (i.e., not only the same individual lead counsel, but the same trial teams), efficiency is arguably promoted, at least in the sense that everybody on the two trial teams knows what's going on in both venues. However, the procedures in the two venues are extremely different, and, practically speaking, there are few if any individuals who have a great deal of day-to-day familiarity with the procedures in both venues. That almost inevitably leads to the presence of specialists in the procedure of each venue on the relevant trial team. Thus, even if the lead counsel on the two trial teams is the same individual, the composition of the two trial teams should be different.

Once the decision has been made that the composition of the two trial teams will be different, the decision has to be made whether there will be any overlap between the composition of the two trial teams. There are several possible scenarios.

One possible scenario is that both trial teams will be drawn from the same firm. In that scenario, the individual lawyers usually will at least know each other at the outset, and perhaps they will even be accustomed to working with each other in such situations. Thus, even if the leaders of the two trial teams are different, house counsel can reasonably expect a great deal of cooperation between the trial teams and efficiency in sharing and exploiting information.

The other extreme is that each of the two trial teams is drawn exclusively from a different firm. In that situation, it is highly likely that neither the leaders nor the members of the two trial teams will have had any prior experience in working with each other, which can lead to problems ranging from the purely mechanical (for instance, one team uses WORD®, and the other teams uses WORD PERFECT®) to the fundamental and philosophical (including having conflicting theories of the case). While both team leaders will have professional, ethical, and practical incentives to cooperate to work out all such differences quickly and efficiently, this scenario imposes a substantial burden on house counsel to "ride herd" over the situation to ensure that the two teams "work and play well together" to further the best interests of their mutual client. Put otherwise, house counsel should be an active member of both trial teams.

There is a third, intermediate possible scenario. That is that at least one member (not necessarily the leader) of each trial team be a member of the other trial team. I think that that is a very desirable scenario, particularly if house counsel is unable or unwilling to be an active member of both trial teams. Obviously, it tends to run up the costs. However, in comparing the costs of this scenario to the costs of the second scenario, house counsel must be careful to factor in a generous estimate of the cost for his or her own time. It has been my experience that house counsel tends to compare only the numbers in the bills of outside counsel. However, that is a grossly inaccurate way to compare the costs of these two scenarios.

There are, of course, factors besides the size of the anticipated bills to be considered in choosing among these scenarios.

One additional factor to be considered is the geographic proximity of the two candidate firms. Thanks to advances in electronic interchanges, this factor is less important than it used to be. However, there is simply no substitute for sitting down around a conference table and arguing out positions face-to-face. Hence, there is much to be said for at least having the two teams within a short taxi ride of each other.

A second, and very delicate, consideration is the personalities of the two (or more) candidate teams leaders. This has often been referred to as the "two scorpions in a bottle" problem. If at least the two team leaders do not get along reasonably well, many gross inefficiencies can be introduced into the process. For my part, I often enjoy working with attorneys from another firm, particularly since the experience usually gives me the opportunity to learn how other good lawyers handle problems that we also face. However, every candidate team leader in his right mind will tell house counsel much the same thing. Accordingly, my advice is to call around. The "interference bar" is relatively small, certainly much smaller than the "district court patent litigation bar" and probably about the same size as the "ITC patent litigation bar." Those of us who do this for a living have reputations--including, no doubt, reputations for being cooperative or for being uncooperative. I invite you to compare those reputations.

III. Making Use in Each Venue of Information and Documents from the Other

It is the sad truth that there is virtually no discovery in patent interferences.[5] Thus, it is more likely that the interference team will benefit from information and documents obtained in the district court litigation than vice versa. However, occasionally we interference practitioners can reciprocate. Particularly if the district court proceeding is stayed (a subject covered in the next section), the interference team may obtain documents from the other side and/or answers to questions on cross-examination that the district court litigation team will be able to use in the district court proceeding.

Most district court patent infringement actions are governed by a protective order. Most patent interferences are not.[6] That means that, typically, anything that the interference team gets, the district court litigation team can use--but not necessarily vice versa. The trick here is to be sure that the district court's confidentiality order permits any information or documents obtained during the district court proceeding to be used in the interference proceeding.

The argument against permitting use in the interference proceeding of information and documents obtained in the district court proceeding is that the file of the interference proceeding will become publicly accessible at the end of the interference proceeding. 37 CFR 1.11(e). However, the response to that argument is two-fold. First, even under the new procedures, interference proceedings last approximately two years, which means that confidentiality is unlikely to be a concern by the end of the interference proceeding. Second, while the file of the interference proceeding is legally publicly accessible, interested third parties are often unaware of the existence of the publicly accessible file and/or have surprising difficulty getting physical access to the file.

Even if the district court's protective order does not permit use of information and documents obtained in the district court proceeding in the interference proceeding, the trial section of the Board of Patent Appeals and Interferences ("BPAI") will accept and act upon such information and documents.[7] However, the use of such documents and information in the interference proceeding can lead to the filing of a motion for holding of contempt in the parallel district court proceeding,[8] so that is an obviously undesirable course of action. The desirable course of action is to obtain a protective order in the district court proceeding that clearly and unequivocally permits the use of information and documents obtained in the district court proceeding in the parallel interference proceeding.

As for use in the district court proceeding of information and documents obtained in the interference proceeding, the judgment in the interference proceeding is usually obtained before trial in the district court, and it has issue preclusive effect in the district court.[9] However, the judgment in the interference proceeding (1) will probably not decide infringement issues[10] and (2) will definitely not decide damages issues. Hence, there is very likely to be a district court trial after the interference proceeding is concluded. That is, either the patentee will win the interference proceeding (in which case the district court will likely try infringement and, possibly, damages after the interference is over) or an applicant will win the interference proceeding (in which case the applicant's application will probably mature into a patent, and the applicant will likely sue the patentee and/or the other applicant or applicants for infringement as soon as its patent issues). Both or all parties should bear these possibilities well in mind during the pendency of the interference.

While, as previously mentioned, the BPAI has no effective discovery as such, its bizarre rules governing cross-examination provide an occasionally effective, if indirect, tool for what amounts to discovery. Specifically, the BPAI's standing order (a copy of which is given every interferent at the outset of each interference)[11] contains in § 46 entitled "Guidelines for cross-examination" a set of rules which give cross-examining counsel an astounding ability to roam far beyond the ambits of each witnesses's testimony on direct--and there is ordinarily no APJ present during cross-examination to rule on objections made by the defending attorney.[12] Moreover, the defending counsel may not be alert to the possibility that the cross-examining counsel is using the cross-examination to mine for information usable in the parallel district court proceeding. The net effect of these facts is that, if one interferent puts up witnesses who know facts useful to the other interferent's position in the parallel district court proceeding, the other interferent may be able to obtain information in the interference proceeding that it can use in the district court proceeding.

IV. Stays of District Court Patent Infringement Actions Pending Disposition of PTO Interferences[13]

As the district court said in Bayer AG v. Novartis Crop Protection Inc., 55 USPQ2d 1509, 1511-12 (M.D.  La. 2000 F)[14]:

there is no reason why litigation between the same parties, embracing common issues, should be prosecuted simultaneously. To do so would create an economic hardship on the parties and also result in the ineffective administration of justice. It seems more efficient to allow the administrative study of the patent to conclude before this matter moves toward trial. Additionally, this Court agrees with the Court in Childers [Foods, Inc. v. Rockingham Poultry Marketing Co-op, Inc., 203 F. Supp. 794, 133 USPQ 648 (W.D. Va. 1962)] that a ruling by the Patent Office, with the expertise possessed in the sorts of issues to be addressed in this case, would be helpful in making a determination of this cause on the merits. Moreover, if the patent held by Bayer is held to be invalid in the Interference proceeding, this case may be disposed of in its entirety.

Accordingly, the district court granted Novartis's motion for a stay.[15]

Actually, the district underestimated the potential impact of the proceedings in the interference on the patent infringement litigation. While it appreciated that a judgment in the interference adverse to Bayer would result in the cancellation of the claims in Bayer's patent pursuant to 35 USC 135(a), it apparently did not appreciate that a judgment in the interference adverse to Novartis would have issue preclusion effect in the infringement action.

Both a district court and the PTO have the power to stay their proceedings in favor of the other. The power of a district court to stay a proceedings is "incidental to the power inherent in every court to control the disposition of the causes on its docket...." Landis v. North AmericanCo., 299 U.S. 248, 254 (1936).[16] Similarly, the PTO may stay an interference pursuant to 37 CFR 1.645(d), which states that "An administrative patent judge may stay proceedings in an interference." However, the trial section of the BPAI has held that it will ordinarily not stay an interference pending the outcome of a parallel district court proceeding. Anderson v. DionexCorp., 53 USPQ2d 1041 (PTOBPAI 1999); and Rosenthal v. Mowrey-McKee, 50 USPQ2d 1863 (PTOBPAI 1999) (non-precedential).

Determining whether or not to grant a stay of district court proceedings "calls for the exercise of judgment, which must weigh competing interests and maintain an even balance." Landis, 299 U.S. at 254. One interest which favors granting the stay is the efficient administration of justice. Rather than duplicate the efforts of the PTO, a district court may choose to defer to the PTO, which "possesses substantially more technical expertise" in deciding matters of priority and patentabilitiy. NL Chemicals, Inc. v. Southern Clay Products, Inc., 14 USPQ2d 1561, 1565 (D.D.C. 1989); American Telephone & Telegraph Co. v. Milgro Electronics Corp. 416 F. Supp. 951, 953, 193 USPQ 242, 244 (S.D.N.Y. 1976) (concluding that "simultaneous maintenance of two proceedings is an unnecessary duplication of judicial and agency effort"); and Wireless Spectrum Technologies, Inc. v. Motorola Corp., 57 USPQ2d 1662, 1664 (N.D. Ill. 2001) ("If the PTO with its unique expertise determines that all or some of the '453 Patent's claims are invalid, that determination will either dispose of this case entirely or at least aid the Court in adjudicating this case.") In addition, district courts have given weight to the fact that, if the PTO grants judgment to the applicant rather than the patentee, the corresponding claims in the patent are canceled, rendering the district court proceedings moot. Research Corp. v. Radio Corp. of America, 181 F.Supp. 709, 712, 124 USPQ 401, 403 (D. Del. 1960); and Wireless Spectrum Technologies Inc., 57 USPQ2d at 1664. Moreover, courts have said that, even if the challenged claims are upheld by the PTO, its ruling will "facilitate the magistrate judge in determination of the issues before him...." R.M. &G. Products Inc. v. R.E.F. Golf Co., 32 USPQ2d 1220, 1223 (N.D. Ohio 1994). In addition to the efficient use of judicial resources, not duplicating the efforts of the PTO in court is a more efficient use of the parties' resources, and it can reduce the "economic hardship" of simultaneously litigating the same or substantially similar issues in two tribunals. Research Corp., 181 F.Supp. at 711, 124 USPQ at 403; and Wireless Spectrum Technologies, Inc., 57 USPQ2d at 1663.

Any decision of the PTO in an interference is reviewable in a district court (35 USC 146) or in the Court of Appeals for the Federal Circuit (35 USC 141). Therefore some courts are not swayed by opposition to a stay based on the differences in procedure between the PTO and the courts. For example, the plaintiff in NL Chemicals, Inc. v. Southern Clay Products, Inc., 704 F.Supp. 299, 11 USPQ2d 1076 (D. D.C. 1989), opposed staying a 35 USC 291 patent-patent interference suit in favor of a pending PTO interference. The plaintiff, NL, contended that a stay would deprive it of "due process equivalent to the district court proceedings, would deprive NL of the ability to present live testimony and cross-examine defendants' witnesses before the finder of fact, and would deprive NL of trial by jury." 704 F.Supp at 300, 11 USPQ2d at 1078. The court rejected those arguments, relying on the ability of the plaintiff to obtain review of the PTO's decision in a district court or the Court of Appeals for the Federal Circuit. 704 F.Supp at 301, 11 USPQ2d at 1078; see also Research Corp., 181 F.Supp. at 712, 124 USPQ at 403 (finding no merit in plaintiff's assertion that the Federal Rules of Civil Procedure are more accommodating to the trial of the cause than are the rules of the PTO on the rationale that the PTO's decision is reviewable in a district court under 35 USC 146).

While the efficient use of judicial and economic resources may favor granting a stay, there are circumstances which tip the balance in favor of denying a motion to stay. One such factor is that the district court litigation has proceeded to the point of trial. In Chiron Corp. v. Abbott Laboratories,1996 U.S. Dist. Lexis 317 (ND Cal. 1996), the court held that "This action has progressed too far for it to be equitable to stay these proceedings — potentially for a number of years — in favor of those before the PTO." Id. at *8. The court could not determine when the interference was filed, so it did not know whether the last hour declaration of the interference was the fault of the defendant or the PTO. However, the court held that an applicant "should not sit idly by while litigation is proceeding and seek an interference close to the culmination of that litigation." Id. If the application had been pending for some time and the PTO was to blame for the delay, "that, in and of itself, speaks to the wisdom of not further delaying the litigation by waiting on the PTO." Id. at 9; see also Amersham Int'l v Corning Glass Works, 108 FRD 71, 228 USPQ 782 (D. Mass. 1985) (stay denied where interference was declared after suit had commenced, discovery had resulted in the exchange of thousands of pages of documents, and depositions were scheduled to begin in a few weeks). On the other hand, see Clintec Nutrition Co. v. Abbott Laboratories, 1995 WL 228988 * 3 (N.D. Ill. 1995) (stay granted 11 months into litigation during the midst of discovery); Implant Innovations, Inc. v. Nobelpharma AB, 1994 WL 68498 *3 (N.D. Ill. 1994) (stay granted after little if any discovery had been taken); Emhart Industries, Inc. v. Sankyo Seiki Mfg. Co., 1987 WL 6314* 4 (N.D. Ill. 1987) (stay granted 18 months into litigation after substantial discovery conducted); and Wireless Spectrum Technologies, Inc., 57 USPQ2d at 1664 (stay granted when the patentee "agreed to suspend the onset of discovery...until the PTO determined whether it would declare an interference," and, "[a]ccordingly, this case has not progressed beyond the initial pleadings stage...."). One of the reasons the advanced state of the litigation disfavors granting a stay is that, after extensive and expensive discovery has taken place, a stay may actually increase rather than reduce economic hardship. General Foods Corp. v. Struthers Scientific and International Corp., 309 F.Supp. 161, 162, 164 USPQ 609, 610 (D. Del. 1970).

Another factor which weighs in favor of denying the motion to stay is if the interference will not dispose of all the issues in the litigation. For example, in General Foods the litigation involved other patents as well as claims of unfair competition that would not be decided by the interference. 309 F.Supp. at 162, 164 USPQ2d at 610. These claims were so intertwined that a stay of only part of the litigation "would not materially reduce the discovery and the expense of the other phases of the litigation not affected by the stay." Id.

V. Claim and Issue Preclusion Effects

It should come as no surprise to anyone that the BPAI gives issue preclusion effect to the judgments of district courts in patent infringement actions.[17] It may, however, come as a surprise to some that, pursuant to precedent from the Court of Claims as adopted by the Federal Circuit in South Corp. v. United States,[18] the district courts must give claim and issue preclusion effect to the judgments of the BPAI in interferences. That precedent is Coakwell v. United States, 292 F.2d 918, 130 USPQ 231 (Ct. Cl. 1961). In that opinion, the court said that:

It is obvious that a decree of the District Court [pursuant to 35 USC 146] upholding the action of the Patent Office, affirmed on appeal, would be a final adjudication of the question [of priority] and would be res adjudicata in all other courts, and defendant would not be heard to say in this court that plaintiff was not the first inventor. Where the losing party fails to effectively review the Patent Office action in one of the courts[,] and it becomes final, it is equally binding on the parties. ***

[The United States, which was the assignee of the interferent] has had "its day in court." It had the opportunity to present before the Patent Office and the District Court all the facts and advance all the arguments presented here. It is this opportunity that is the basis of the rule of res adjudicata. We think it should be applied here. Defendant should not be permitted to relitigate an issue already litigated and finally decided.[19]

While the Federal Circuit has not had occasion to apply Coakwell, it has issued a number of opinions relating to the claim and issue preclusion effects of infringement actions on TTAB proceedings. The most recent of those, and the logical starting point for any interferent interested in this issue, is Jet Inc. v. Sewage Aeration Systems, 223 F.3d 1360, 55 USPQ2d 1854 (Fed. Cir. 2000).

In Jet Inc., the Federal Circuit cited Young Engineers, Inc. v. USITC[20] for the proposition that, on such issues, it "will receive guidance from [the] Restatement (Second) of Judgments (1982)...." That is not surprising. Over the years, the Federal Circuit has cited the Restatement (Second) of Judgments in at least 38 cases, and it has always followed it. Accordingly, I think that one can safely conclude that, when the issue of the claim and issue preclusion effect of a judgment of the BPAI comes to the Federal Circuit, it will not only follow Coakwell, it will follow the Restatement (Second) of Judgments--which is entirely consistent with Coakwell.

Claim preclusion will, I think, seldom be a problem. The only time that I can think of when the issue of claim preclusion will come up will be when the board has entered judgment that a patentee is "not entitled to" a claim that is the subject of a count for a declaratory judgment of invalidity in a parallel declaratory judgment action. However, since the board's judgment will result in automatic and retroactive cancellation of the patentee's claim pursuant to 35 USC 135(a), that issue should be moot in the parallel declaratory judgment action.

The issue of issue preclusion based on the board's judgment could, however, arise in numerous ways. When it does, the district court could, and should, look not only to the guidance supplied by Coakwell and the Restatement (Second) of Judgments, but also to the (highly noncontroversial) guidance supplied by Jet Inc. There the court said that:

The doctrine of issue preclusion (also sometimes known as "collateral estoppel"), which serves to bar the revisiting of "issues" that have been already fully litigated, requires four factors:

1)      identity of the issues in a prior proceeding;

2)      the issues were actually litigated;

3)      the determination of the issues was necessary to the resulting judgment; and

4)      the party defending against preclusion had a full and fair opportunity to litigate the issues.[21]

Applying that guidance to the judgments of the BPAI, validity issues (both as to priority and as to patentability over the prior art) can be and often are raised in interference proceedings; those issues are usually "actually litigated"; the determination of those issues is often "necessary to the [panel's] resulting judgment"; and the party defending against preclusion (i.e., the party that lost the interference) "had a full and fair opportunity to litigate the issues" under the standards enunciated by the Supreme Court in United States v. Utah Construction & Mining Co., 384 U.S. 394 (1966).[22] Hence, I anticipate little practical problem with the application of issue preclusion based upon judgments of the BPAI.

However, it is worth noting that, since the Federal Circuit's enunciation of the doctrine of issue preclusion requires both that the issue was actually litigated in the first proceeding and that the determination of the issue was necessary to the resulting judgment, the scope of the issue preclusion will be presumably be much narrower than the scope of 37 CFR 1.658(c) interference estoppel in the PTO. According to that section:

A judgment in an interference settles all issues which (1) were raised and decided in the interference, (2) could have been properly raised and decided in the interference by a motion under § 1.633(a) through (d) and (f) through (j) or § 1.634, and (3) could have been properly raised and decided in an additional interference with a motion under § 1.633(e). A losing party who could have properly moved, but failed to move, under § 1.633 or 1.634, shall be estopped to take ex parte or inter partes action in the Patent and Trademark Office after the interference which is inconsistent with that party's failure to properly move, except that a losing party shall not be estopped with respect to any claims which correspond, or properly could have corresponded, to a count as to which the party was awarded a favorable judgment. [Emphasis supplied.][23]

VI. Conclusion

The interplay between patent interferences and parallel district court or ITC patent infringement actions is often complex and highly entertaining. It gives both (or all) parties many opportunities to consider--some of which have reasonably well developed rules and some of which do not.

Published in Patent World, April 2001, page 19 and The John Marshall Law School News Source No. 1 (Winter 2001) at page 30.

[1] This is a slightly revised version of a paper presented at the John Marshall Law School's 45th Annual Conference on Recent Developments in Intellectual Property Law in Chicago on February 23, 2001.

[2] Partner in and head of the interference section of Oblon, Spivak, McClelland, Maier & Neustadt, P.C.; Arlington, Virginia. My direct dial telephone number is 703-412-6485, and my E-mail address is

[3] The other approximately fifty percent involve two or more patent applications and no patent.

[4] Of course, it is theoretically possible that house counsel will handle one or both of the actions themselves. However, in my experience that has been relatively rare. For purposes of this section, I will assume that house counsel or the management of the company has decided that both actions are going to be handled by outside counsel and that the decision to be made is whether to retain one or two outside law firms to handle the two matters.

[5] See Gholz, Patent Interferences--Big Ticket Litigation With No Effective Discovery, 4 Intellectual Property Today No. 9 at page 10 (1997).

[6] See Gholz, Compelled Testimony, Testimony Broad and Protective Orders in Interference Proceedings Under the New Rules, 67 JPTOS 239 at 252-58 (1985).

[7] This became an issue in interference No. 104,311, the file of which is not yet available to the public, and a panel of the trial section so indicated during oral argument.

[8] That is what happened in the district court proceeding that paralleled interference No. 104,311.

[9] See Gholz, The Decisions of the Board in an Interference Are Entitled to Issue-Preclusive Effect in a Parallel Patent Infringement Action but not Vice Versa, 6 Intellectual Property Today No. 8 at page 8 (1999), and see generally Gholz, Collateral Estoppel Effect of Decisions by the Board of Patent Interferences, 30 DePaul L. Rev. 789 (1981), 65 JPOS 67 (1983).

[10] But see Gholz, Juris