By Paul F. Morgan and Gary B. Cohen

S. 23: Five Different Reexaminations!

By Paul F. Morgan and Gary B. Cohen

With editorial assistance by Bruce Stoner

S.23, as recently passed by the Senate, contemplatesfive differentPTO patent reexamination systems. That may not beimmediately obvious, because they have different names. Note these S.23 Sections and their titles:

Sec. 5. Post-grant review proceedings (Numbers 1 and 2 below)This Section includes two different, time-correlated,inter partesreexaminations:1. an extensive revision of Chapter 31, entitled “Inter partes review,”35 U.S.C. §§311-319,and 2. a new Chapter 32 of much broader scope,but 9 months from issuance time limited, entitled “Post-grant review,” 35 U.S.C. §§321-329.

Sec. 10. Supplemental examination (Number 3 below)This Section,35 U.S.C. §257, introduces abroad new ex partepre-litigation reexamination system for eliminating inequitable conduct defences in patent litigation.

Sec. 18. Transitional program for covered business-method patents(Number 4below)This Sectionwould provide,for a term of only 4 years,a limited subject matter version of “Post-grant review” (2 above) with special D.C. litigation stay proceedings and other unusual provisions.

Existing ex partere-examinations:S.23 would retainall of existing Chapter 30,35 U.S.C. §§301-307, with some minor changes to§§301, 303 and 306.

Summarized and highlighted beloware key legal and practice differences that will exist between these 4 newreexaminations(and as compared to the two existing reexaminations)if S.23 becomes law, after their respective effective dates. Directly quoted S.23 text has been used below where possible, and some key words have been italicized for emphasis.The italicization and other notes in this pro bono academic summary are for clarifications, and are not intended asany commentary on the appropriateness of any reexaminations or the subject 34 pages of new legislation thereon.

Also note that extensive USPTO rulemaking would be required, as expressly requested or authorized at several places in S.23.That rulemaking will undoubtedly add additional requirements.Furthermore, the three inter partesreexaminations (1,2 and 4 below) would be entirely handled by the (renamed) Patent Trial and Appeal Board. The Board might be expected toadd additional requirements, especially if it handles these reexaminationsas it has interferences in recent years. The transfer to the Board of interpartesreexaminations was previously recommended in a PTO public hearing and a PTO Congressional report.The interference litigation experienced Board APJ attorneysare expected to be better qualified to handle the conflicting declarations, discovery,other evidence, and delaying tactics, in these three inter partesreexaminations.

1. “Inter partes review”

Key features of S.23 Sec. 5 Chapter 31, as rewritten on pp. 34-48 as §§311-319, are providedbelow,especiallythose differing from the current inter partesreexamination system whichthis would replace. Inter partesreexaminationhas been increasingly utilized in recent years, especially for patents in litigation.

SCOPE:THE SAME: For §102 and/or §103 issues only, and only on the basis of prior art patents or printed publications. (Presumably still available for as long as a patent remains enforceable even for back damages -- up to 6 years after patent expiration.)

CONDUCTED BY: The Board (Not the Central Reexamination Unit (CRU))

TIMING LIMITATIONS: NEW: Not until after the later of 9 months from the grant of thepatent or issuance of a reissue, or, if a “post-grant review” [see below] was instituted under new Chapter 32, after its termination. Plus, per §315,it cannot “be instituted or maintained if the petitioner or real party in interest has filed a civil action challenging the validity of a claim of the patent.” {Query, does this mean only a DJ action, or would it encompass a counterclaim?}Also, it “may not be instituted if the petition requesting the proceeding is filed more than 6 months after the date on which the petitioner, real party in interest, or his privy is served with a complaint alleging infringement of the patent.” The latter apparently addresses defendants filing inter partesreexaminations belatedly yet attempting to stay the litigation.

INITIATION:By petition, from “a person who is not the patent owner” - but essentially the same.(But see THRESHOLD below.)

THRESHOLD: NEW: §314 -The Director must first determine that the information presented in the petition and any response filed shows that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition”and decide that in three months. That decision is “final and nonappealable”. N.B. Unlike the rest of this Chapter 31, this new and higher threshold would apply immediately after its enactment.

JOINDER: “If the Director institutes an inter partes review, the Director, in his discretion, may join as a party ... any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.”

DISCOVERY, SANCTIONS, HEARING & FINAL DETERMINATION: NEW:

The Director is authorized by section 316 to “... set forth standards and procedures fordiscovery of relevant evidence, including that such discovery shall be limited to —

(A) the deposition of witnesses submitting affidavits or declarations; and

(B) what is otherwise necessary in the interest of justice;”

Section 316 further authorizes:

“[P]rescribing sanctions for abuse of discovery, abuse of process, or any other improper use of the proceeding, such as to harass or to cause unnecessary delay or an unnecessary increase in thecost of the proceeding;”

“[P]roviding for protective orders governing the exchange and submission of confidential information;”

“[P]roviding either party with the right to an oral hearing ..; and requiring that the final determination ... be issued not later than 1 year after the date on which the Director notices the institution of a review under this chapter, except that the Director may, for good cause shown, extend the 1-year period by not more than 6 months, and may adjust the time periods in this paragraph in the case of joinder under section 315(c).”

AMENDMENT & MOTION LIMITATIONS:NEW:

“..the patent owner may file 1 motion to amend the patent in 1 or more of the following ways:

(A) Cancel any challenged patent claim.

(B) For each challenged claim, propose a reasonable number of substitute claims.”

“Additional motions to amend may be permitted upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 317, or as permitted by regulations prescribed by the Director.”

SETTLEMENTS: NEW:§317: “An inter partes review instituted under this chapter shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed. If ... terminated no estoppel ... shall apply to that petitioner.” This differs from present reexaminations or interferences, which can continue on to a final decision (which may remove claims)even if there are requests to the contrary or settlement agreements by the parties. However, settlement agreements between the parties must be recorded here in the same manner as for interferences.

ESTOPPEL:NEW IMPORTANT: §315(e): Estoppel of “The petitioner ... or his real party in interest or privy...”“with respect to a claim onany ground that the petitioner raised or reasonably could have raised during an inter partes review of the claim that resulted in a final written decision under section 318(a).” This applies to PTO, civil or ITC actions. This provision adds the word “reasonably” but deletes the present §317 last paragraph exception for newly discovered, unavailable at the time, prior art. Since this proceeding is limited to patent or publication prior art, that presumably limits its estoppel effect to only those two invalidity grounds. Note that “privy” can be a somewhat indefinite legal term. Even a narrow dictionary definition such as “a person participating directly in or having a derivative interest in a legal transaction” leaves “derivative interest” undefined.

LITIGATION STAYS: ? No provision, unlike present inter partes re-examination §318. But not prohibited.

APPEALS:They are“pursuant to sections 141 through 144.” But a provision in Sec. 6 only allows appeals of inter partesreexaminations to go directly to the Federal Circuit

Note that there is considerable other text in existing Chapter 31 that is not carried over into this new Chapter 31. What effect any of that may have is unclear.

2. “Post-grant review”

Key features of new Chapter 32, §§321-329, on p. 49-61 in S.23 Sec. 5 as passed by the Senate. Some of the features similar to those of the new inter partesreexamination(above) are not repeated here.

Author query: how often will this new “Post-grant review” system be used? Most patent suits are not brought on brand-new patents (issued for less than 9 months), whichthis system is limited to. Plus, this new system has a dangerously broad scope of fatal estoppels (see below), and provides no express litigation stays. Plus, its usage seems likely to require relatively large legal costs and PTO fees, especially with discovery being made available. Although this is a form of “opposition system,” a comparison to EPO or JPO opposition system usagewould bemisleading for several reasons, including those noted in the preceding sentence.

SCOPE:VERY BROAD “..1 or more claims of a patent on any ground that could be raised under paragraph (2) or (3) of section 282(b)(relating to invalidity of the patent or any claim).” Note, however, that S.23, Sec. 15, on p.90, would eliminate failure to disclose the best mode as a “basis on which any claim of a patent may be cancelled or held invalid or otherwise unenforceable.”

CONDUCTED BY: The Board

TIMING / LIMITATIONS:“A petition for a post-grant review shall be filed not later than 9 months after the grant of the patent or issuance of a reissue patent.” Also, a post-grant review “..may not be instituted or maintained if the petitioner or real party in interest has filed a civil action challenging the validity of a claim of the patent.” Does that mean only a DJ action? Also, it is not allowed against reissued clams that are identical to or narrower than original claims.

INITIATION:By a petition by “a person who is not the patent owner.” The patent owner then has 2 months to object to it.Affidavits or declarations of supporting evidence and opinions must be included with the petition.

THRESHOLD: “..the Director [must determine] that the information presented in the petition, if such information is not rebutted, would demonstrate that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable.” Or “..a showing that the petition raises a novel or unsettled legal question that is important to other patents or patent applications.” Note these differences from any other reexamination threshold. The Director’s determination is “final and nonappealable.”

JOINDER:The Director can consolidate plural post-grant reviews into one, and provide for stays, transfers, consolidations or termination of other proceedings.

DISCOVERY, SANCTIONS, HEARING & FINAL DETERMINATION:

See some of the similar provisions for inter partesreexaminations, above.

Plus “..discovery shall be limited to evidence directly related to factual assertions advanced by either party in the proceeding”Also, “..the final determination in any post-grant review be issued not later than 1 year after the date on which the Director notices the institution of a proceeding under this chapter, except that the Director may, for good cause shown, extend the 1-year period by not more than 6 months, and may adjust the time periods in this paragraph in the case of joinder under section 325(c).”

AMENDMENT & MOTION LIMITATIONS:

“The patent owner may file a response to the petition after a post-grant review has been instituted..”

“.. the patent owner [may] file with such response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the response;”

The patent owner may only file 1motion to amend the patent, as in the new interpartesreexamination, above.

ESTOPPEL: Those estopped are“The petitioner ... or his real party in interest or privy” as to “... a claim on any ground that the petitioner raised or reasonably could have raised during a post-grant review of the claim that resulted in a final written decision under section 328(a).” This applies to PTO, civil or ITC actions. Note that since this proceeding allows almost any invalidity ground to be raised, this “reasonably could have raised” estoppel will be correspondingly extremely broad. Would there possiblybe exceptions for grounds only discoverable from inventors or original patent owners? Note again that “privy” may be somewhat indefinite.

SETTLEMENTS: §327: “A post-grant review instituted under this chapter shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed. If ... terminated no estoppel... shall apply to that petitioner.” See the notes above regarding the virtually identical provisions of §317 for inter partesreexaminations.

LITIGATION STAYS:There is no express provision for stays, other than prohibiting the stayingof preliminary injunctions in infringement suits filed within 3 months of patent issuance. There is no other prohibition against granting stays.

APPEALS: “... pursuant to sections 141 through 144.” However,a Sec.6 provision only allows these Board decisions to go directly to the Federal Circuit.

3. Sec. 10. “Supplemental examination”

Key features in S.23 Sec. 10 on pp. 81-84 as §257

Author note: Although in the indicated form and process of existing ex partereexaminations, this new ex partereexaminationsystem is solely for use by the current patent owner, is very much broader in scope, and is expressly for the elimination of inequitable conduct defenses in litigation. This Section was added as a late Committee amendment in the last term of the Senate, and the authors are not aware of any serious independent analysis thereof other than by Professor Dolak of the Syracuse University Law School. Accordingly, the Authors have tried to point out some important questions as to what is covered or not covered in this relatively short Section 10 of S. 23.

SCOPE: UNLIMITED: “A patent owner may request supplemental examination of a patent in the Office to consider, reconsider, or correct information believed to be relevant to the patent.”

“During the reexamination, the Director shall address each substantial new question of patentability identified during the supplemental examination, notwithstanding the limitations therein relating to patents and printed publication or any other provision of chapter 30.”

There are no indicated exceptions, no definition or limitation of “information,” and no requirement to specifically identify or alert the PTO as to which of the “information” submitted was of inequitable conduct concern, or a prior accusation, if any. Perhaps these and further definitions of the scope of Sec. 10 in general will be the subject of PTO rulemaking. Sec. 10 itself does not provide many details. However, as noted infra, PTO rulemaking is broadly authorized just for this Section, stating that: “The Director shall promulgate regulations governing the form, content, and other requirements of requests for supplemental examination, and establishing procedures for conducting review of information submitted in such requests.”

CONDUCTED BY: “The Director” Although this could mean that examiners in either the technology centers or in the CRU will perform this examination, the CRU would seem the logical locale. “The reexamination shall be conducted according to procedures established by chapter 30, except that the patent owner shall not have the right to file a statement pursuant to section 304.” An extra fee is authorized to be added to the regular Chapter 30 ex parte reexamination fee.

TIMING & OTHER EXCEPTIONS OR LIMITATIONS:NONE OTHER THAN:

“This subsection shall not apply to an allegation pled with particularity, or set forth with particularity in a notice received by the patent owner under section 505(j)(2)(B)(iv)(II) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.355(j)(2)(B)(iv)(II)), before the date of a supplemental-examination request under subsection (a) to consider, reconsider, or correct information forming the basis for the allegation.”

“In an action brought under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 1337(a)), or section 281 of this title, this subsection shall not apply to any defense raised in the action that is based upon information that was considered, reconsidered, or corrected pursuant to a supplemental-examination request under subsection (a) unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought.”

Criminal, antitrust and FTC unfair competition actions are expressly not prevented by this Sec. 10 supplemental examination process.

However, there is no apparent restraint on using this supplemental examination system even if there is concurrent normal patent litigation in which fraud or inequitable conduct is already being asserted or litigated?

INITIATION: “Request” by the patent owner

THRESHOLD: “...whether the information presented in the request raises a substantial new question of patentability.” “If a substantial new question of patentability is raised by 1 or more items of information in the request...” This is apparentlythe same “substantial new question of patentability” (SNQ)threshold test as for both currentreexaminations.

JOINDER:NONE

DISCOVERY, SANCTIONS, ORAL HEARING & FINAL DETERMINATION:

“The Director shall promulgate regulations governing the form, content, and other requirements of requests for supplemental examination, and establishing procedures for conducting review of information submitted in such requests.”

Author questions: There is no specific discovery indicated. Does the PTO intended to somehow decideex parte even on-sale, public use, or 112 issues, and/or the credibility and accuracy of present declarations versus prior declarations used in obtaining the patent, solely on whatever facts, and characterizations of those facts, are provided by the patent owner in this proceeding? Will the PTO use 37 CFR 1.105 to request information?

The Director is empowered to consider, but is not required to consider,misconduct issues and resulting sanctions (presumably by conducting PTO disciplinary proceedings) for “misconduct in connection with matters or proceedings before the Office.”