Patent Law Roundtable: Discovery Interference

1997 – Article
The Recorder, July 1997, pages 26-34.


As intellectual property interests are more and more fiercely contested, an arcane but significant controversy is brewing over how much information parties may obtain through discovery in patent proceedings.

Under present rules, administrative patent judges who hear patent interferences -- U.S. Patent and Trademark Office proceedings that settle the claims of competing inventors -- will grant motions permitting wide-ranging discovery only when "the interest of justice so requires."

With budget constraints and rising caseloads prompting tighter hearing schedules, APJs are less amenable to hearing discovery disputes. Attorneys who litigate interferences say the entire process denies them access to meaningful discovery.

As a result, some in the patent bar have called for a rule change that would liberalize discovery in patent interferences.

On March 12, members of the American Intellectual Property Law Association's Interference Committee met with APJs Ian Calvert and Fred McKelvey to air their views. At the end of the meeting, the judges told the attorneys to come up with a unanimous position, hopefully one that doesn't cost the PTO more to implement than the present system.

Unfortunately no proposal, much less a cost-reducing one, has garnered unanimous support in the interferences bar. A sizeable group of interferences practitioners says the discovery rule -- 37 CFR 1.687, substantively unchanged since 1971 -- is fine as it is.

With interferences a multimillion-dollar matter for companies and their counsel, the discovery question is likely to continue generating lively debate in the patent bar.

To help focus this controversy, Intellectual Property invited three prominent patent attorneys to discuss their very differing views on how the PTO can retool discovery in interferences.


Charles Gholz is a litigation partner in the Arlington, Va., office of Oblon, Spivak, McClelland, Maier & Neustadt.

Barbara McCurdy is a partner in the Washington, D.C., office of Finnegan, Henderson, Farabow, Garrett & Dunner.

Liza Toth is chief patent counsel with Acuson Corp., a Mountain View-based manufacturer of medical diagnostic ultrasound systems.

CHARLES GHOLZ: Let's spend a few minutes on what a patent interference is, then talk about how the current interference discovery system works, and then go into our discussion of the various ways that we would like to see it changed.

First, a patent interference is administrative litigation handled before the Board of Patent Appeals and Interferences, an administrative agency within the Patent and Trademark Office. The triers of fact are administrative patent judges. Most of them are career government employees who have risen from the ranks as patent examiners or members of the solicitor's office, i.e., the lawyers that represent the Patent and Trademark Office in litigation. When two or more entities have made the same or substantially the same invention at pretty much the same time, and each entity would be entitled to a patent but for the existence of the rival entity or entities, interferences are declared to sort out who did it first.

Over the years the scope of patent interferences has expanded enormously until now we litigate in patent interferences any issue concerning validity or enforceability which could be litigated in a district court patent infringement action.

In federal and state court litigation, very, very sweeping discovery is permitted. Interferences aren't like that. It is not all that unusual to have in one's file a document which one recognizes would be extremely useful to an opponent, and to never have to yield it up because of the limitations with discovery in patent interferences. The question we're here to discuss today is whether that leads to just results. I think that it doesn't.

Now, I would like to describe the current system, which is pretty much the opposite of what happens in district court. In district court, one asks for documents that one thinks are relevant, and one's opponent has to produce those documents, unless it has a very good excuse not to. The burden is on the opponent to go to the judge and persuade the judge that there is a very good reason why the documents shouldn't be produced or the deposition shouldn't be taken. Judges tend to be hostile to discovery disputes, and a common reaction is "Just turn it over. Go away and leave me alone."

Interferences are pretty much the dead opposite of that. There are, in fact, three kinds of discovery that we get involved in, but two of them are not very interesting. The first kind is when everybody agrees and we can voluntarily exchange discovery. The second kind of discovery that we have is on motion in advance of the trial. The standards in the rule, which is 37 CFR 1.687(c), for such a motion are that, quote, "Upon a motion . . . brought by a party within the time set by an administrative patent judge under §1.651 or thereafter as authorized by §1.645, and upon a showing that the interest of justice so requires, an administrative patent judge may order additional discovery."

The operative language there is "upon a showing that the interest of justice so requires." It is my experience that the judges are very reluctant to find that the interest of justice so requires. And judges are just as reluctant, in my experience, to get involved in discovery disputes in interferences as they are in district court.

BARBARA McCURDY: I've found that varies from judge to judge, the willingness to be involved in discovery issues, but probably generally I would agree that they would rather not be involved in that kind of a dispute.

GHOLZ: Well, with district court judges it varies, too. But the point is none of them really likes discovery disputes -- or very few of them -- and it's hard to get their attention. And the burden is on the party seeking discovery to get it, and the tendency of the judge is to say "Don't bother me."

LIZA TOTH: Right. Unless you have persuasive reasons.

GHOLZ: Yes. We all get discovery occasionally, just not as often as we would like.

TOTH: The default is the other way.

GHOLZ: Exactly. The default is reversed.

The third kind of discovery that we have in the current system is the one that irritates me the most. That is, during trial, during the actual testimony -- which to outsiders, to noninterference specialists, looks like a discovery deposition -- if one can ascertain the existence of a specific document, one can then demand production at that time, right there in the middle of trial. Opposing counsel often says that he or she doesn't have that document and, furthermore, it's back in the files somewhere, he or she doesn't know where, on the other side of the continent. That certainly has been my experience.

TOTH: I believe you, Chico, nine times out of 10. By the same token I'm sure if you can identify a smoking gun, you can probably get it.

GHOLZ: Eventually, yes. The point here is, only very cooperative opposing counsel will agree to have the documents along with them.

McCURDY: I agree that more often than not -- since particularly the defending attorney doesn't know in advance what questions are going to be asked -- the document is not going to be anywhere in the room, or in the vicinity, or anywhere nearby, such that you could continue the deposition, and that is a difficulty with that particular rule. It doesn't certainly help with the speed of getting on with the interference. It is disruptive, and it isn't the most logical way to proceed, presuming the documents that have been identified are truly relevant documents that would really further the action. To the extent they are not, I'm not sure that the procedure is all that bad. But in the case of a really relevant document, the procedure makes getting to a just end difficult.

GHOLZ: And expensive. I want to underline that. This system, which is less expensive than district court litigation, still is much more expensive than it has to be, in significant part because of the discovery problem.

TOTH: Wait a minute. I understand it would cost some amount of money to reschedule. But that would pale in comparison to the expense of unbridled civil litigation discovery.

GHOLZ: Well, we're here to talk about possible substitutes for the current system. Before we do that, do we have agreement that the current system is not good? It's terrible, in fact. That's my view. Barbara?

McCURDY: Well, I would like to present some defense of the PTO discovery rules. What the PTO has done is made the discovery rules a lot more focused, hopefully with the result that the things that are subject to discovery are really pertinent to the issues in the interference. For example, they require the parties requesting discovery to tailor their requests to meet the interest-of-justice standard. There is a question about what that standard means. But I think the PTO has assisted by providing a number of unpublished decisions specifically directed to discovery. My understanding is that since 1980 there are about 150 decisions available at the board for practitioners to take a look. Among other things, they require the parties to tailor their requests to the subject matter of the counts, to specific issues that can be raised in the interference and to specific documents and things in possession of the other party. I contrast that to district court-type discovery, which is -- as Liza has pointed out -- wide open and expensive and difficult.

GHOLZ: Let's talk about some substitutes. Liza, you have publicly stated the view that, better than the current system, there would be no discovery at all. I disagree heartily. Liza, why don't you say why you think that's a good idea.

TOTH: Okay. I don't think we need to get more restrictive than we are now. I don't want to go to an absolute-zero level of discovery. But I think what we have now is probably close to right, with some modifications that could improve things.

First of all, in terms of what needs to be proven in interferences, the affirmative proof -- affirmative records of what's been done when -- is more important than the negative proof, with the sole caveat of the abandonment issue. But [affirmative proof should proceed in] a train, from early conception, to reduction, to diligent practice, clearly showing the progress of the product to market. I think the affirmative train is by far the most important thing in establishing priority.

This is not to say there aren't issues of abandonment, especially in concealment, because there are. I think when you look at the positive record, as opposed to negative records, that tells you an awful lot. Also the APJs are not equipped to handle great volumes of discovery. That's another reason I would prefer to stick with the current system. But in terms of improvements, we could think about incorporating phone depositions for some of the early rounds of these depositions and identifying documents that are needed by phone, and then maybe having a final deposition in person.

Also if more adjournment time is needed, that should be provided by rule. So when you book your flight, Chico, you make sure you book enough time so there would be adjournment time to look at new documents handed over. Even if we stick with the traditional way of taking testimony, and doing it in person, it would cost less than the money spent in any kind of comprehensive discovery. I think [that] of the three of us, I'm definitely the more extreme in not wanting to open up the discovery at all from here.

GHOLZ: Do you think that's because you are house counsel, or was that your view when you were in private practice?

TOTH: That's part of why I'm not in private practice. As outside counsel, which I was for a very long time, I saw a whole lot of discovery, and I will say that the cost-benefit ratio is miserable. The clients are not necessarily served by that, and we all know that other countries don't engage in the same kind of discovery that we do. I'm not saying that they should revert totally, but it's certainly something to talk about. And yes, being in-house counsel I am more aware than ever of the disruptive nature of discovery on a running, ongoing business.

GHOLZ: All right. The next possibility to be introduced is wide-open discovery, the kind that existed in district courts prior to the recent changes in the Federal Rules of Civil Procedure. While I have seen discovery abuses, I suggest that [wide-open discovery] is much more likely to lead to a just result.

And I do want to make the point that there is a benefit to be weighed against the cost. There are frequently documents in your files that you don't want your opponent to see. This is not simply suppression and concealment. These also can be best-mode documents. They can be documents that relate to potential fraud issues. If the other side gets to ransack my files, if they get to look at all of the documents, the probability of their finding a document in there which could be determinative obviously goes up. Under our current system it is very probable that the bad documents will not come out. The opponent will not be able to ask the right questions, particularly under the time constraints, and those bad documents will simply never see the light of day. If we had wide-open discovery, it would change the results in a lot of interferences.

Now, Barbara has the intermediate view about ways of getting more discovery than we have now without running up the price astronomically.

McCURDY: My proposal I guess starts with the concept of what Liza is calling "affirmative proof." I like that term . . . which I'm calling "discovery," but really it is affirmative proof of your case-in-chief. My proposal is that, sometime early in the interference, the parties should have an exchange of the documentation that relates to affirmative proof. And whether that's your priority case, including documents on conception, reduction of practice, perhaps diligence, or whether that includes a patentability position that you are going to take, it would advance things considerably if early in the interference the parties were required to identify their issues and exchange the documentation upon which they were going to base their position.

It would help to have that happen before the preliminary motion period, which is a very expensive part of the interference. One of my concerns about the discovery procedure is the difficulty during cross-examination to develop documents and get documents and have an effective cross-examination. But I think a lot of Chico's position presumes the existence of a smoking gun. You are referring to them as "bad documents."

GHOLZ: I picked that phrase up from one of your partners. He says in every case there is a bad document. I agree.

McCURDY: I think "bad," but maybe not "dispositive." My feeling is that in many cases there is not a smoking gun.

GHOLZ: True.

McCURDY: There may be something a creative lawyer could create into a smoking gun or create an issue around, but I don't think that's true in every case. And my concern is that opening up the files of each side probably has limited benefit in the long run. I think there are benefits to the existing system; I would just like to see it tweaked so that we wouldn't have the difficulties we do have in getting any sort of documentation from people until after positions are set and dates are set forth and motions are prepared identifying the issues. If we put the document exchange more up front, then the parties would be better able to address the issues in a less expensive, more expeditious way.

TOTH: Actually, that makes a lot of sense, what Barbara is saying. You are not really talking about expanding the scope of discovery. You are just talking about trading what you are going to trade up front.


TOTH: By the time you get to the examination period, you already know what to expect, or you have a better idea.

McCURDY: Yes. If a party plans to attack patentability as part of their strategy, then they present the documents upon which they are basing their attack. If a party is planning to prove priority of invention, and not rely upon a filing date, they present their evidence of that, perhaps not just the first conception reduction to practice, but subsequent reductions to practice as well, I think it would resolve some of the difficulties in interferences, especially the cost factor.

And there is another thing, and something we haven't yet talked about, which is the time for getting decisions, both on preliminary motions and in the interference generally, is longer than satisfies many clients.

TOTH: Right.

GHOLZ: Well, I don't agree with Barbara's suggestion for a couple of reasons. Simply exchanging documents in a priority case is seldom very useful. You need the context. What you really need are the 37 C.F.R. 1.672 declarations. Those are the declarations which set forth the parties' case, explains what the document means, and how it all goes together.

And we are all friends here, but in the heat of litigation sometimes the velvet gloves come off. I don't think that I could count on the goodwill of all practitioners to make this system work. I think that there would have to be the possibility of a sanction to make something like this work. And if we have the possibility of a sanction, then people are going to file motions and the judges are going to have to decide those motions. It seems to me this is going to take more attorney time than the current system.

McCURDY: I guess I have not developed the sanction end of the procedure and how that would work. Perhaps it could work in a way that -- well, to make it completely punitive such that you could never introduce a document that you didn't exchange in the beginning would seem to be too severe: You'd have to uncover every single stone. I guess what I envision is a procedure whereby the primary documents are exchanged, and where there is perhaps some repercussion for not exchanging those primary documents, and not so much repercussion for not exchanging what I would call secondary kinds of documents.

GHOLZ: Who gets to decide what are primary documents?

McCURDY: Maybe that's the APJ. I guess it's from the standpoint of a motion to exclude certain documents for not having been provided. That is not such a difficult motion to decide, something an APJ could make more easily than they could control far-reaching, district-court kinds of discovery.

GHOLZ: I would like to briefly raise one more issue and get comments from each of the participants on this. Currently most interferences involve evidence concerning who did what in the United States. However, as a result of NAFTA, first, and now GATT, we will shortly begin handling interferences where proofs will be offered of who did what in foreign countries, in documents in foreign languages in the files of foreign corporations. Liza, how do you see that impacting on our discovery problems in patent interferences?

TOTH: Well, I guess this reinforces my view that the less the better. Once you start getting into translations and requiring any kind of discovery -- whether it be Barbara's list or your full-blown discovery -- the cost becomes totally astronomical. If anything, I think GATT and NAFTA should either keep us where we are with discovery or even move to the more extreme view that you and I talked about.

GHOLZ: Liza, do you have any fear that foreign interferents will be less forthcoming than American interferents?

TOTH: I'm sure there is that risk because other people are not used to any discovery at all, and there will have to be some alignment of the system.

GHOLZ: Barbara?

McCURDY: Well, I think in the recent changes to the rules, the PTO anticipated that kind of issue and did ensure in the rules chat discovery would be available where a foreign entity sought to introduce a priority case.

GHOLZ: Well, I don't chink anybody would argue that the rules provide we're going to get discovery from foreigners the way we get it from Americans. The view that I have heard expressed is that foreigners can't be trusted, that they will simply lie, and that they will not produce documents in their files. I should disclose that my law firm represents a lot of foreigners and I strongly disagree with that view. But I don't really know either, because we have not done discovery from foreigners before. It will be very interesting to see how that works because the foreigners don't currently deal with legal systems that involve discovery. But I think if you have full-blown discovery and get all the documents and are able to look through the files, you will more likely find the important stuff than with Barbara's list. It will be easier for people who want to be non-forthcoming to conceal bad documents with a list kind of discovery than it would be where the opponent simply gets to look through the files altogether.

Wouldn't you agree, Barbara?

McCURDY: You would certainly see more documents if the files were wide open. And the point with this new possibility of priority cases involving foreign companies is a difficult one because I think the translation issue will make it more difficult. I think the unfamiliarity with U.S. discovery procedures -- unfamiliarity and probably hostility towards discovery procedures -- is something that we are going to have to deal with. Again, my solution there is not wide-open discovery, it's something more tailored.

GHOLZ: All right. Liza, do you have any more comments on what you would like to see happen with discovery?

TOTH: No. I think I've pretty much said what I needed to say. Thanks.

GHOLZ: Okay. Barbara?

McCURDY: Well, I would like to say, from a historical perspective, there was a time where broad discovery, district court-type discovery, was available in patent interferences. And it was not really until 1971 that the PTO implemented a discovery rule. And before that time, various courts had construed §24 of Title 35 as allowing for parties to go to district court and obtain discovery. And this was done. There are a number of reported cases where parties in an interference would go in a separate proceeding and seek discovery before a district court. So there is some precedent to this wide-open discovery that Chico is talking about.

I'm not sure it worked very well. I think the district courts were rather uncomfortable with it. The district courts and appeals courts really construed it differently: that is, whether parties were entitled to discovery as [a] right, or whether the PTO had to approve it. And after the PTO implemented its rule, I think most of the courts really backed off and decided not to grant such discovery unless it was authorized by the PTO.

In fact, now the PTO does have a rule saying that if you get evidence in such a manner, it's not admissible unless you first seek the permission of the APJ. I think the PTO is essentially controlling parties' access to district courts in that way, by implementing their own rules and also tailoring rules to what is admissible evidence in an interference.

GHOLZ: Well, I disagree that what happened prior to 1971 is comparable to what I am advocating. Those were ancillary proceedings before district court judges, who did not have any expertise in interference law. That system worked very badly. The system I'm proposing is one where the APJ, who does understand interference law, would be responsible for the discovery.

I know from talking to people in the Patent and Trademark Office that they are at least aware of substantial unhappiness from the bar with the current system. I have reason to think that they are considering internally some changes. I don't know what that is. They are talking about it internally. Lawyers don't usually agree about things. Patent lawyers don't usually agree about things. Interference specialists very seldom agree about things. Yet one of the few things we had substantially unanimous agreement on in the Interference Committee meeting, at the American Intellectual Property Law Association meeting in October, was that the current discovery system is bad and should be changed. I hope that the Patent and Trademark Office will implement some useful changes in the near future.

© 1997 The Recorder

Reprinted with permission. This article is also published in The Recorder, July 1997, pages 26-34.