Inter Partes Reexamination Digs a Patent Graveyard

By Robert Asher.

March 2009 IP Update

We reported two years ago that inter partes reexamination held great promise as a tool for challenging patents. Our analysis at that time showed a success rate of 3:1 for requesters challenging patents in inter partes reexamination. We can now report that the advantage for challengers has only grown.

The Hatch-Waxman Act rewards makers of generic drugs for the risk and expense of litigating challenges to a pioneer drug company’s patents: 180 days of exclusive marketing rights, if the patent challenge succeeds. Procedurally, the generic drug maker files an abbreviated new drug application (ANDA) for drugs that are the bioequivalent of previously approved drugs.
When the approved drug is covered by patents still in force, the ANDA filer submits a so-called Paragraph IV certification, declaring that those patents are invalid. This declaration is itself an act of infringement, entitling either party to commence an infringement lawsuit. Increasingly, pioneer drug companies have settled such litigations with reverse payments. See our May 2008 article.
The courts have taken conflicting views of such payments. The FTC and at least one appeals court regards them as per se antitrust violations. Other courts, applying a “rule of reason,” believe that, as long as the pioneer drug company does not seek to expand the scope of its patent through the settlement process, reverse payments do not offend the antitrust laws. See our December 2008 article.

Of the first 250 inter partes reexaminations, 92 cases have now gone to decision, in the form of 48 reexamination certificates and 44 appeals to the Board of Patent Appeals and Interferences (the “Board”)[1]. The success rate has now climbed to 4:1.

Our study of the 250 reexaminations appears, in table form, at our domain www.reexamination.com. The data given for each reexamination include the number of challenged original and added claims and the status of these claims.

The procedural advantages enjoyed by a requester in inter partes reexamination are incontrovertible. Unlike patent prosecutions in the U.S. Patent and Trademark Office (USPTO), a patent owner in inter partes reexamination is denied an opportunity to discuss the case with the patent examiner. All activity is conducted in writing. The patent owner does not have the benefit of a negotiation with the examiner to help arrive at permissible claim language.

Harsh results are encountered by the patent owner who does not get the amended claim language quite right. For example, in inter partes reexamination number 6, a new claim 16 was added during reexamination, but rejected for indefiniteness.

Even though the patent owner, NEC Corp., submitted amended claim language on appeal that would clearly have passed muster with the Board, the examiner refused to enter the amendment once the case returned to the examiner after the appeal decision. As prosecution had already closed on the indefiniteness rejection, it was too late for such an amendment, and now it remains to be seen whether the Board will bend the rules to allow the amendment as the case reaches the Board for the second time on appeal.

The requester in inter partes reexamination has the further advantage of being able to submit arguments to the USPTO on each filing by the patent owner. (In an ex partereexamination, by contrast, the requester is barred from participation in the proceeding other than by initiating it or responding to an optional patent owner statement.) If either party is unhappy with the decision by the examiner, the requester may participate in an appeal before the Board and, if necessary, again in the Federal Circuit.

The downside of inter partes reexamination is that the requester gives up the opportunity – which is available in a district court proceeding – to raise invalidity based on the prior art. While this certainly weighs in the calculation whether to pursue an inter partes reexamination, it must be noted that the success rate in court at invalidating patents is nowhere near the record being compiled in inter partes reexaminations.

The power of reexamination was made clear in Translogic Technology, Inc. v. Hitachi, Ltd. (Fed. Cir. 2007). A district court found a patent valid and infringed and awarded monetary damages. Acting in a parallel reexamination at the USPTO that was conducted contemporaneously with the trial, an examiner found the same patent invalid for obviousness.

When the findings from both proceedings were appealed to the Federal Circuit, the appellate court declined to consider the merits of the appeal from the district court verdict. Instead, it affirmed the USPTO’s rejection of the patent in reexamination and vacated the district court decision.

While the Federal Circuit’s action appears reasonable in view of the USPTO’s invalidity determination, it bears noting that a finding of invalidity is made against a much different standard in the reexamination context than in court. In reexamination, the claims of a patent are given their broadest reasonable interpretation and lack any presumption of validity.

In court, by contrast, an accused infringer must make a clear and convincing case of obviousness of the claims as they have been construed by the trial judge. While the district court’s decision in the Translogic case may have been entirely correct, the patent owner lost the benefit of that decision in the concurrent attack in reexamination.

Reexamination is, in short, a potent additional tool in the arsenal of the accused infringer. As our statistics show, inter partes reexamination, in particular, has proven to be an exceptionally effective method for killing patents.

[1] An appeal from an examiner’s decision upon reexamination is taken, in the first instance, to the Board. A further appeal, if necessary, may thereafter be had to the Federal Circuit.