under-construction
1 January 2012BiotechnologyEldora Ellison and Eric Steffe

A new framework: challenging patents in changing times

Final procedural rules have not yet been implemented by the US Patent and Trademark Office (USPTO), and it remains to be seen how the USPTO will adjudicate the new proceedings created under the America Invents Act (AIA). Despite these changing times, at least one thing is certain: on September 16, 2012, inter partes re-examination (IPX) proceedings will be replaced by inter partes review (IPR).

While these two proceedings for challenging patents share many features, there are important differences. The biotech industry has had cold feet when it comes to challenging patents by IPX, which is perhaps remarkable in light of the ‘success rate’ that patent challengers have enjoyed in this proceeding.

According to USPTO statistics, only 11 percent of IPX certificates confirmed all claims as being patentable; in 44 percent, all claims were cancelled and in 45 percent the claims were amended. Such claim cancellations and amendments are particularly significant to challengers when the patent is involved in concurrent litigation, and 70 percent of patents undergoing IPX are involved in litigation.

For example, claim amendments may extinguish past damages, as well as create intervening rights to continue to sell a product. And the recent In re NTP case confirms that it is fair game to attack a patent’s asserted priority date in re-examination, even when the patent arises from a series of continuation applications.

Such NTP-style attacks should be of particular interest to challengers in the life sciences, particularly pharma and biopharma, since enablement and written description issues arise frequently in these technical areas.

In pharma and biopharma, product launch dates projected to occur years from now may make companies hesitant to instigate any proceeding prior to September 16, 2012. Further, the new IPR proceedings do have certain features that patent challengers may find attractive.

For example, in contrast to IPX, which is available only to challenge patents filed on or after November 29, 1999, IPR will be available for challenging any patent. Second, IPR proceedings should be resolved more quickly than experience has shown it has taken to resolve IPX proceedings.

Third, IPR will allow for limited discovery and can be settled without creating an estoppel, neither of which is available for IPX. Finally, IPR will be decided directly by Administrative Patent Judges (APJs), who may be more likely to appreciate nuanced legal arguments.

Under IPX proceedings, APJs are not involved until appeal, after examiners in the Central Re-examination Unit have first decided the case. Therefore, for companies with product launch dates in the future, knowledge that IPR proceedings are available may provide some comfort.

Nonetheless, there are several reasons such companies should consider IPX before it goes by the wayside.

Some parties will be barred from seeking IPR

Although IPR will be available for any patent, it will not be available to all potential challengers. IPR will not be available to a challenger (or its privies) that had been served with a complaint for infringement of the patent more than one year before petitioning for IPR.

An accused infringer who was served before September 16, 2011, will be time-barred from petitioning for IPR on the patent in suit. Other accused infringers must also be cognisant of the one-year time bar. Additionally, IPR is not available to a challenger who sought a declaratory judgment of invalidity of the patent prior to petitioning for IPR.

The nine-month waiting period for IPR may be undesirable

IPR will not be immediately available upon issuance of a patent. Rather, IPR proceedings can first be brought after nine months following issuance of the patent, or after nine months following issuance of a reissue patent.

For a patent that is involved in a post-grant review (PGR) proceeding, IPR cannot be brought until conclusion of that proceeding. It appears that it was an oversight for Congress to make the nine-month waiting period for instigating IPR effective before PGR becomes available to patent challengers.

With limited exceptions, PGR is available only for patents filed after March 16, 2013. When effective, petitions to instigate a PGR proceeding will be permissible for nine months after a patent or a broadening reissue patent is issued.

The ninemonth waiting period for IPR was intended to work in conjunction with the nine-month window for petitioning for PGR. Accordingly, for example, if a problematic patent issues on September 4, 2012, IPR may not be sought until June 5, 2013.

“THE OPTIMAL STRATEGY FOR CHALLENGING A PATENT IS, OF COURSE, FACT-DEPENDENT AND INTER PARTES REVIEW MAY PROVE TO BE AN EFFECTIVE PROCEEDING.”

Once IPX is replaced by IPR, the nine-month waiting period for petitioning for IPR may eliminate the possibility of using an inter partes challenge at the USPTO as leverage in settlement or licensing negotiations.

Likewise, an accused infringer may be unable to point to an IPR proceeding as a factor to be considered by a court in deciding a motion for a preliminary injunction. Additionally, the USPTO will limit the number of IPR proceedings that can be filed in each of the first four years. Once the annual limit is reached, later-filed petitions will be deemed untimely.

IPR typically will be more expensive than IPX

Although IPX is not inexpensive (USPTO fee of $8800), IPR proceedings will be much more expensive. The USPTO has proposed that the fees will be based on the number of challenged claims, as follows:

  • 1 to 20 claims—$27,200
  • 21 to 30 claims—$34,000
  • 31 to 40 claims—$40,800
  • 41 to 50 claims—$54,400
  • 51 to 60 claims—$68,000
  • Each addtional 10 claims—$27,200

What’s more, because of the 50-page limit imposed on any petition for IPR, it may be desirable to file multiple petitions for IPR, challenging only certain claims in each petition. Thus, the USPTO filing fees may be staggering. In addition to the increased fees, the cost of taking depositions and entertaining settlement negotiations must be considered.

Double patenting cannot form the basis for attacks in IPR

Even if timing and cost are not barriers to IPR, IPX offers at least one substantive advantage over IPR: whereas challenges for double patenting can be brought in re-examinations, they cannot be brought in IPR. The USPTO cites In re Lonardo to support its view that double patenting is an appropriate ground for rejecting claims in re-examinations, noting that “[i]n giving the Director authority under 35 USC § 303(a) in determining the presence of a substantial new question of patentability,

Congress intended that the phrases ‘patents and publication’ and ‘other patents or publications’ in section 303(a) not be limited to prior art patents or printed publications”. In contrast, the authority granted to the USPTO under the AIA is more limited for IPR. Under 35 USC § 311, patent claims may be challenged in IPR “only on a ground that could be raised under section 102 or 103 ...”.

So, absent some future court decision or legislation to the contrary, it appears that neither statutory double patenting under 35 USC § 101 nor judicially-created obviousness-type double patenting can be asserted in IPR.

A challenger in IPX has the last word

A further strategic consideration is that the challenger has a better opportunity to have the ‘last word’ in IPX than in IPR. In IPX, upon issuance of an office action, the patentee responds first and then the challenger rebuts the assertions of the patent owner before the USPTO issues another action.

In IPR, the challenger files a petition, the USPTO institutes IPR, the patent owner opposes the petition and optionally files a motion to amend the claims, the petitioner then files a reply and any opposition to the motion to amend, and the patent owner then files a reply to the motion to amend.

At that point, the petitioner is limited to filing observations on the cross-examination of any declarants who supported the patent owner’s reply, and the patent owner may file a short response to the observations. Each observation or response must be concise and “should not exceed a single, short paragraph”. So a challenger files the final papers in IPX but not in IPR.

IPX has a more flexible estoppel horizon

Another timing consideration stems from when the estoppel, if any, arises following each proceeding. In IPX, any estoppel arises only after all appeals are final. And appealing from the Central Reexamination Unit to the Board of Patent Appeals and Interferences and then on to the Court of Appeals for the Federal Circuit can take many years, significantly delaying and providing significant flexibility with regard to the estoppel concern.

In contrast, any estoppel in IPR proceedings will arise much sooner. Not only is an IPR proceeding expected to be shorter than a typical IPX proceeding, IPR proceedings will be heard by the board and there will be no appeals within the USPTO. Although IPR decisions can be appealed to the Federal Circuit, the estoppel arises upon a final written decision of the board.

Consequently, any risk of estoppel that arises in IPX is more attenuated than in IPR, lessening the risk that an estoppel will arise before any litigation is over.

A further mitigating factor that actually applies to both IPX and IPR is that, even if a challenger attacks a patent and fails, the risk of later being enjoined in a patent infringement suit is minimised for companies that are not in direct competition with the patentee, in view of the Supreme Court’s decision in eBay Inc v MercExchange, LLC.

The optimal strategy for challenging a patent is, of course, fact-dependent and IPR may prove to be an effective proceeding. However, companies that face problematic patents should fully consider requesting IPX before this proceeding becomes unavailable.

Eldora L. Ellison is a director at Sterne, Kessler, Goldstein & Fox. She can be contacted at: eellison@skgf.com

Eric K. Steffe is a director at Sterne, Kessler, Goldstein & Fox. He can be contacted at: esteffe@skgf.com