Reexamination Legislation: Reform or Retrogression
"The difficulty in life is the choice. The wrong way always seems the more reasonable."
George Moore [1852-1933]
At last year's seminar, we considered the ex parte reexamination protocol in the context of down-side risks to the patentee associated with amendments and arguments that are part-and-parcel of a reexamination proceeding. This year we will consider the new inter partes reexamination protocol in the context the upside opportunity for the third-party requestor. Doomsayers have predicted that this expanded reexamination protocol will suffer the ignominious fate of non-use since employing this protocol inter alia precludes the reexamination requestor from litigating issues that were, or could have been, raised during the reexamination. It is too soon to predict the level of usage of this new tool for challenging the scope of a patent, much less the doomsayers' dire consequences but the fact that the tool is available will doubtless catalyze closer scrutiny by patent applicants during initial examination of the patent application. This impact upon the patentee is addressed.
II. BACKGROUND ON THE NEW LAW 2
The inter partes reexamination procedure was enacted to fill a need that exists for a cost-effective route to challenge the validity of a patent in the face of new art not previously considered by the Patent Office during the initial examination. Previously, the only alternative available was an ex parte procedure that provided very limited participation by third party requestors assuming that the Patent Office granted the request for reexamination. 3 Such limited participation by the patent's challenger destined that the ex parte protocol to limited use because the reexamination requestor was effectively precluded from making a rebuttal to the patentee's statements in support of the patentability of the original or modified claims. Under these circumstances, there was little incentive for the patent's challenger to come forward in that forum since, by doing so: (a) it's best prior art defense would be exposed and (b) once exposed, the patentee had opportunity, without risking rebuttal, to either defend the patent's original claims or amend the orginal claims sufficiently little to still encompass commercially important aspects of the invention. Such a result gave the ex parte challenger the worst of all worlds, and hence the ex parte procedure was seldom utilized. Challengers typically opted instead in favor of litigation by means of a declaratory judgment action. Against this dismal backdrop for reexamination, the inter parties legislation was born.
The inter partes reexamination will be available for patents that are filed on or after November 29, 1999.4 It is not retroactive to patents with earlier filing dates. When it is available, it will coexist with the ex partes reexamination. That is to say, a person requesting reexamination can choose to proceed either ex partes per §302 or inter partes through §311. If the requester is the patent holder, the inter partes procedure is usually moot. For third parties, the new procedure gives considerable advantages over proceeding ex partes and, as such, is the proper reexamination procedure to choose. Based on the request and its accompanying documents, the Commissioner must decide within three months whether the request presents a "substantial new question of patentability" and, if so, order an inter partes reexamination. 5
The Commissioner's order for reexamination creates and extinguishes several rights for the parties. Most significantly, it is through this order that a third-party's subsequent litigation rights are estopped. 6 The patent owner gains the right to stay "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." 7 Additionally, both parties (and all privies to either) lose their right to file additional requests for reexamination until the current reexamination is completed. 8
The inter partes reexamination is "conducted according to the procedures established for initial examination under the provisions of sections 132 and 133." 9 Like in the ex parte reexamination, the patent owner is allowed to propose amendments to existing claims and to add new claims. 10 The third-party is allowed to file written comments each time that a patent owner files a response to a PTO action on the merits. 11 In the event that the patent's validity is upheld, the third-party is allowed to appeal the decision to the Board of Patent Appeals and Interferences but not further to the Court of Appeals for the Federal Circuit. 12 While either party is allowed to participate in the other's appeal to the BPAI, the third-party is probably barred from participation in a patent owner's appeal to the Federal Circuit. 13 Where possible, Congress imported the language of the ex partes sections into the inter partes sections. This could likely result in similar application of ex partes case law to the new inter partes procedure.
III. CONCERNS RAISED BY THE NEW LAW
An inter partes reexamination has a very limited scope. It is only available if a third-party has additional documentary prior art that applies to one or more claims of the patent. 14 Given this, the situation in which a party would have to make the choice between litigation and reexamination collapses into this: a party (usually one who is at risk of an infringement action) has a potential silver bullet to wield against a patent-holder and does not want to waste it. All other claims—invalidity due to enablement, invalidity due to novelty, noninfringment, inequitable conduct, etc.—are outside the scope of a reexamination and, therefore, can only be argued in district court. But the bullet of previously uncited prior art allows the option of the less-expensive inter partes reexamination. Where is this bullet better shot? The informal consensus at the January 2000 AIPLA meeting was that there will be much more bang for the buck in district court. The problem with using the new reexamination, goes the argument, is its estoppel of future litigation and restricted appeal rights. The estoppel concern is necessarily driven by a presumption that the PTO is more likely than a district court to uphold a patent's validity. Roughly half of the ex partes reexaminations are conducted by the patents' original examiners. 15
Although reexamination is conducted without the presumption of validity that reigns in court, conventional wisdom maintains that examiners are loath to admit mistakes made during their original examinations. They want to justify their original patent grants and, therefore, will strive to maintain patent validity during reexamination. Even when different examiners conduct the reexamination, similar effects of cognitive dissidence lead to heightened efforts to uphold their fellow examiners' original decisions. The estoppel requirement asks a third-party requester to permanently commit their precious prior art to a decision-maker that is predisposed to rule against them. This problem is exacerbated by the restricted appeal rights available to them. While the third-party requester's only available appeal is still within the PTO, the patent holder may appeal adverse decisions to the traditionally patent-friendly Federal Circuit. And, if this situation were not bad enough, the third-party requester is also restricted from participating in the patent owner's appeal to the Federal Circuit! When compared with traditional district court litigation, the new reexamination is still unacceptably biased against a third-party requester. Its only advantage is its cost savings over litigation. But this savings is offset by an enhanced likelihood of losing the patent suit.
IV. ADDRESSING THE CONCERNS
On March 25, 1999, the executive director of the AIPLA appeared before the U.S. House Subcommittee on Courts and Intellectual Property and fully endorsed the inter partes reexamination portion of the American Inventors Protection Act. The director said that "the AIPLA strongly supports the amendments which would be made by Title V to permit the public to have limited participation in the reexamination process." Recognizing the challenge of establishing an alternate, less expensive means of challenging patent validity while preventing a patent owner from being unduly harassed, the director added that "the AIPLA believes that Title V strikes the needed balance between these competing goals far better than existing law." 17 This endorsement came at a time when the proposed American Inventors Protection Act still allowed third-party appeals to the Federal Circuit, still allowed a third-party to participate in patent-owner appeals to the Federal Circuit, and still conditioned estoppel on a third-party's federal Circuit appeal request. 18 Let's consider those concerns.
The loss of the appeal right to the Federal Circuit should not prevent a third-party from choosing the inter partes reexamination. A third-party would have had very little chance overturning a decision of the Board of Patent Appeals and Interferences at the Federal Circuit. This opinion is based on several factors. To begin with, the Federal Circuit has traditionally been very reluctant to rule against the PTO in contested patent cases. From 1995 to 1998, the Federal Circuit has on average only reversed the PTO every one out of ten cases. 19 This minimal number of reversals is even more significant when considered in context of the then-prevailing review standard—the strict court/court standard the Federal Circuit had used when reviewing PTO decisions. This standard, which allowed more the Federal Circuit a more unrestrained review, has since been disallowed by the Supreme Court in Dickenson v. Zurko. 20Zurko now requires the Federal Circuit, when reviewing PTO decisions, to use the more deferential "court/agency" standard established by the Administrative Procedures Act. 21 Given this very recent change, a third-party requestor would have been in a very unsatisfying position. They would have been attempting to appeal a decision of patentability to a court that is traditionally patent-owner friendly, has a history of affirming PTO decisions, and that must now treat those decisions with increased deference. Thus, reexamination requestors seemingly lose very little by having lost this right.
In addition, reexamination requestors do not lose much by virtue of the change that eliminated their appeal participation rights. The appeal from which the third-party is excluded is between the patent owner and the PTO. The third-party's interests will very likely be well represented by the PTO. The Federal Circuit, according to Zurko, must accept the findings of the PTO if they conclude that "a reasonable mind [could] accept a particular evidentiary record as adequate to support a conclusion." 22 The third-party, throughout the reexamination and appeal to the BPAI, will have had ample opportunity to create an evidentiary record sufficient to support the decision. Indeed, it was the record as created by the third-party that first established a "substantial new question of patentability" and ultimately convinced the BPAI that the patent was invalid. As it is very likely that the third-party would obtain leave of the Court to submit an amicus brief and possibly participate in oral argument under Rule 29 of the Federal Rules of Appellate Procedure, all that is lost by the exclusion is the right to argue before the Court as a named party, seemingly a small loss.
The inter partes reexamination provides a two-tiered challenge to patent validity. This is the nearly identical to the current practice of litigation—since the U.S. Supreme Court so rarely takes patent validity cases, litigation is essentially two-tiered. Since reexamination is a much less expensive and time-consuming option, it starts any comparison with a sizable advantage. For litigation to overcome such cost and time savings, it must provide other significant advantages. There are, indeed, certain perceived benefits to litigation. As previously discussed, there is a legitimate concern that reexamination may be inherently biased against third-party requesters. Litigation, presumably, does not suffer from such bias. Litigation also has the advantage of not allowing for the rewriting of the patent during the proceeding. Litigation allows a much more active role for the third-party than is allowed in reexamination. And ironically, the problem that initially prompted the development of the reexamination procedures—the high cost of litigation—may be viewed by those for whom the expense is acceptable as an advantage of litigation.
The new inter partes reexamination provides in §318, that a "patent holder may obtain a stay of any pending litigation" involving claims of the patent. 23 The ex parte reexamination procedure, on the other hand, holds no similar language. This difference seems to indicate an intent to relieve the pressure of this power-play—Congress has specifically included a provision to allow patent holders to force reexamination-eligible issues into this more efficient venue. Were a third-party to attempt to litigate prior-art validity issues against a patent holder who prefers reexamination, they would find themselves in a very uncompromising position. Since a third-party may participate in the reexamination only if "the order for inter partes reexamination is based upon a request by [the] third-party requester," the reexamination would function essentially ex parte.24 Granted, a similar reading of §315(c) means that the third-party would not be not estopped from asserting invalidity based on the prior art used in the reexamination. 25 But if the patent survives reexamination, the third-party would have the considerable disadvantage of arguing against the enhanced validity inherently given to reexamined patents, against claims potentially reworked to more clearly cover the third-party's activities, and without the benefit of the availability of their best prior art.
V. CONCLUSION AND OUTLOOK
Parties accused of infringing a patent for which they possess undisclosed prior art must make a mutually exclusive decision between litigation or inter partes reexamination. Litigation may not be the obvious choice. Reexamination offers the obvious advantage of saving considerable time and money. Both routes provide two layers of justice—district and circuit courts versus examiner and BPAI. Moreover, despite the conventional wisdom, the statistics show that reexamination does not hold a pro-patent bias. Reexamination allows a third-party to influence revisions of the patent claims in the least expensive manner. The procedural limits on party involvement in reexamination as compared to litigation work against both parties and specifically counter certain advantages that patent owners hold in court. Since the third-party can not prevent a patent holder from filing a request for inter partes reexamination and staying pending litigation, the choice between litigation and reexamination may be no choice at all. Indeed, since a third-party would be excluded from such reexamination proceedings, choosing litigation might very well be the obviously bad choice.
1. Dale L. Carlson is a partner and co-chair of the patent practice group at Wiggin & Dana, as well as Adjunct Professor for Intellectual Property Law at Quinnipiac University School of Law. Jason Crain is a third year law student at Yale Law School, and a law intern at Wiggin & Dana.
2. Public Law 106-113, signed into law on November 29, 1999 by President Clinton, having the short title "American Inventors Protection Act of 1999". The newly created inter partes reexamination procedures are codified in newly created Chapter 31 of Title 35 of the United States Code. These new procedures supplement, but do not supplant, the ex parte protocol available under Chapter 30, Title 35 of the United States Code.
3. See generally Chapter 30 of Title 35 of the United States Code.
4. See American Inventors Protection Act of 1999 is Law, Talis Dzenitis, www.uspto.gov/web/offices/dcom/olia/aipa/summary.htm (An official PTO summary of the new law stating that "subtitle F takes effect on the date of enactment and its provisions apply to any patent that issues from an application filed on or after that date.").
5. 35 U.S.C. §§ 312 and 313.
6. 35 U.S.C. §315(c).
7. 35 U.S.C. §318.
8. 35 U.S.C. §317(a).
9. 35 U.S.C. §314(a).
11. 35 U.S.C. §314(c).
12. 35 U.S.C. §§315(b)(1) and 134(c).
13. This exclusion, though not specifically expressed in the statute, is a likely reading of 35 U.S.C. §315—the Appeals section. Section 315(b)(2) says that a third party requester may "be a party to any appeal taken by the patent owner under the provisions of section 134." In conformity with the interpretive technique of expresio unius, the inclusion of a provision allowing participation in a §134 appeal (an appeal to the BPAI), argues against a right of participation in any other appeal. Moreover, since earlier versions of the bill stated that a third party requester could "be a party to any appeal taken by the patent owner," see H.R. 1907, § 306, as introduced in the House (emphasis added), the more restrictive final version can arguably be seen as an indication of Congressional intent. Though beyond the scope of this paper, this is hardly a closed point: expresio unius is only a tool of interpretation—it is not a technique of finality. Also, the specific language authorizing third-party participation in patent-owner Federal Circuit appeals could be argued to have been removed for reasons of statutory efficiency since a party-at-interest could already join an appeal to the Federal Circuit. Ultimately this question will be litigated and the result will either reject third-party participation in Federal Circuit appeals and thereby maintain the reexamination as this paper presumes it, or it will allow participation and strengthen the inter partes reexamination beyond this paper's presumptions.
14. 35 U.S.C. §§ 311 and 301.
15. See The Advisory Commission on Patent Law Reform, note 96.
16. Committee Print, the American Inventors Protection Act: Hearings before the Subcommittee on Courts and Intellectual Property, Committee of the Judiciary, U.S. House of Representatives, 106th Cong (March 25, 1999) (statement of Michael K. Kirk).
19. The following statistics were reported by the PTO from 1994 – 98:
Year Total # of Cases Decided Reversales
(# and %)
(# and %)
Affirmed or Dismissed
(# and %)
1995 60 8-13% 6-10% 46-77% 1996 52 5-9% 10-19% 34-65% 1997 56 4-7% 4-7% 47-84% 1998 27 3-11% 4-15% 20-74%
Patent and Trademark Office Annual Report, Table 25 - Cases in Litigation, 1995-98.
20. Dickenson v. Zurko, 527 U.S. 150, 119 S.Ct. 1816, 1824 (1999).
22. Id at 1823.
23. See note 31, supra.
24. 35 U.S.C. §314(b)(1)
25. 35 U.S.C. §315(c) ("A third-party requester whose request for inter partes reexamination results in an order under section 313 is estopped from asserting at a later time, in a civil action arising in whole or in part under section 1338 of title 28, United States Code, the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings.").