How to litigate under the new US patent law

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President Barack Obama signed into law the America Invents Act of 2011 (AIA) on September 16. While most of the discussion around patent reform has focused on prosecution and post-grant procedures, there are aspects of the new law that will change litigation as well. Many of the changes are already in effect, while others will not be implemented for up to 18 months or longer. This article provides a concise explanation of the most important aspects of the AIA relating to patent disputes, and offers some considerations and recommendations in view of the immediate changes to the patent law.

Most commentators on the American Invents Act have focused on how it changes US patent prosecution practice. However, the recently passed patent reform bill will have a significant impact on patent litigation strategies. While the full effect of the new law with respect to litigation may not be felt for some time, there are concrete steps that companies can take now in order to be better prepared for the future.

In the past several years, one of the more popular forms of patent litigation was pursued by private parties with no patents at all. So-called false marking litigations sought penalty damages on behalf of the US government based on the inappropriate marking of products with patent numbers. Because false marking suits were previously considered qui tam actions, third parties with no vested interest in the outcome of the case could bring such suits and then split the profits with the government. Many such false marking cases were premised on the marking of a product with an expired patent number.

But amended section 292(b) of the patent law provides only actual damages due to competitive injury suffered by a private party as a result of any act of false marking, and retroactively eliminates penalty damages. The new law contrasts sharply with the prior version of section 292, which provided a statutory penalty of up to $500 per instance of false marking. Further, under amended section 292(b) the making of a product marked with an expired patent number is not a false marking if the patent covered the product when in force.

Further, it is worth noting that so-called virtual marking in reference to postings on the internet has been explicitly codified. The law now states that it is acceptable to mark a patent by "fixing thereon the word 'patent' or the abbreviation 'pat.' together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent".

• In-house counsel should anticipate that the number of false marking suits filed will drop significantly.

• Consideration should be given to stop any current plans to change or alter manufacturing equipment that marks products with expired patent numbers to save cost.

• Counsel should continue to be aware of marking implications on damages recovery in later litigation.

Amendments to section 273 present a new prior use defence against patents issued on or after the date of enactment. The new defence allows a defendant, on a claim-by-claim basis, to defeat an assertion of patent infringement. In order to do so, a defendant must prove a prior commercial use (internal or external) or sale of a product or process that would otherwise infringe an asserted claim if such a use or sale occurred: 1) one year before the effective filing date of the asserted patent or 2) one year before the date on which the claimed invention was disclosed to the public (for example, a publication by the inventor).

• In-house counsel should consider reviewing technical and invoice level sales document retention policies and consider any appropriate changes that would assist in preservation of documentation to prove prior use. It is always best to have documentary evidence.

In summary, the new section 299 joinder provision does not allow a group of defendants to be joined in the same patent law suit unless any right to relief "aris[es] out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process" and "questions of fact common to all defendants or counterclaim defendants will arise in the action". Furthermore, the new law expressly states that "accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit".

Accordingly, plaintiffs may now face a significant hurdle to filing large multi-defendant patent suits. The new joinder provision will be particularly applicable to patent suits filed against multiple defendants where the accused instrumentalities share nothing more than general common functionality. The new joinder provision applies to "any civil action commenced on or after" the date of enactment.

• In-house counsel should leverage this new joinder provision to attack improper joinder of multiple defendants, particularly in those instances where accused instrumentalities only share a common general function.

• A motion to transfer a patent litigation to a more favourable or proximate district court may be more successful if a plaintiff is forced to file its patent suit separately against your company in reaction to the new joinder rules, or loses a motion to sever. In many instances, the speed with which a motion to transfer is filed depends on 1) selection of an appropriate declarant, and 2) identification of appropriate facts relative to the originating district. Accordingly, in-house counsel facing numerous multi-defendant cases should consider always having a declarant on-deck and a set of facts prepared for each of the most active district courts for patent litigation (such as the Eastern District of Texas, District of Delaware, Northern District of California) if transfer from such districts to another district is generally desirable.

Amendments to section 282 eliminate so-called best mode as a defence to patent infringement. Under both the old and the new patent law, section 112 requires that a patent application "set forth the best mode...of carrying out the invention". Failure to disclose such a best mode was a defence in litigation. However, the new law expressly eliminates this defence to patent infringement. The best mode defence is eliminated for cases filed on or after the date of enactment (September 16).

• Consider reevaluation of any opinions based in part on best mode as a potential issue or defence, and similarly revisit any business decisions relating to any such analyses or opinions.

• Patent applicants should still, of course, fully comply with the enablement and written description requirements.

Under new section 298, failure to obtain advice of counsel cannot be presented to a jury as a fact to prove wilful infringement or intent to induce infringement of any asserted patent.

• In-house counsel should continue to consider whether an opinion of counsel is valuable, as such opinions may still be useful to illustrate lack of wilful infringement and reasonable conduct in the face of accusations and notifications of infringement.

In addition to the immediate changes noted above, the new law creates a number of new procedures to challenge the validity of issued patents which can be useful during and before any patent disputes. Under the old law, ex parte and inter partes reexamination were the two post-grant proceedings available to challenge the validity of a patent. The AIA creates four new post-grant proceedings: Post-grant review (PGR), Inter partes review, a transitional programme directed at business method patents, and Supplemental Examination.

The new post-grant review procedure (PGR) may be started by a third party challenger and allows participation by the third party challenger, much like the current inter partes reexamination procedure. PGR may be requested within the first nine months of patent issuance. Further, any requested PGR must be completed within 12 months of its initiation at the USPTO, and there is a limited six month extension for good cause.

PGR may be premised on any defences that would also be available in court (such as invalidity, indefiniteness, lack of written description). Also, PGR is conducted by a board of three administrative judges, and not initially by a patent examiner. Under the new PGR, a litigant in a later patent infringement action cannot raise as a defence challenges to validity that could have reasonably been raised but were not raised in a PGR. A limited form of discovery is available during a PGR. The new PGR procedure becomes available one year after the date of enactment, and only on those patents filed under the new first-inventor-to-file system. Patent applications that claim a priority 18 months or later from the date of enactment will be governed by the first-inventor-to-file system. The new PGR procedure is available one year after the date of enactment to support the new transitional programme directed to business method patents, as discussed below.

Similar to the new PGR discussed above, the new inter partes review procedure may be started by a third-party challenger, and allows continued participation by the third-party challenger. An inter partes review may be requested following the termination of any PGR requested for a patent, and if no such PGR has been filed, nine months after patent issuance. Inter partes review must also be completed at the USPTO within 12 months of its initiation, and there is a limited six month extension for good cause.

Unlike PGR, inter partes review may only be based on anticipation or obviousness challenges using only patents or printed publications. Similar to PGR, inter partes review will be conducted by a board of three administrative judges, and not initially by a patent examiner. There will also be a limited form of discovery, similar to PGR.

Under inter partes review, a litigant in a later patent infringement action cannot assert challenges to validity that could have reasonably been raised that were not raised. The new inter partes review procedure becomes available one year after the date of enactment, and will be applicable to any issued patent, including those issued before the date of enactment.

How the new post-grant system will affect litigation

Post-grant review The new post-grant review (PGR) procedure is significantly different than current reexamination practice, including changes that make PGR more attractive to litigants. For example, the new PGR procedure provides a patent office forum to challenge patents on grounds other than patents and printed publications, which are the only grounds allowed for the ex parte and inter partes reexamination procedures (for example, under PGR third party challenges based on written description are allowed). The new PGR procedure is also significant in that it must be completed within 12 months (with the potential of a six month extension), as noted above. Inter partes review The new inter partes review is significant because it allows third parties to interactively challenge patents with filings dates before November 29 1999, which contrasts with inter partes reexamination which is expressly only applicable to patents with filing dates on or after November 29 1999. This is significant because litigants in the past may have been hesitant to file an ex parte reexamination request on a patent-in-suit with a filing date of before November 29 1999, due to the inability to be further involved during the reexamination process. As with PGR discussed above, the new inter partes reexamination procedure is significant because of its speed (12 months and potential six month extension). Along these lines, it remains to be seen whether there will be an increase in litigation stays granted pending inter partes review because of its speed. Business methods The ability to challenge covered business method patents may cause a reduction of patent suits and charges of infringement relating to business method patents. The new transitional programme provides a parallel forum to challenge validity of a covered business method patent with a lower standard of proof (namely, preponderance rather than clear and convincing). Along these lines, effectiveness of the new transitional programme may depend on the frequency of litigation stay decisions pending a challenge under the programme, which will be guided by explicit language in the AIA. Supplemental examination The new supplemental examination procedure provides parties with a mechanism to strengthen portions of a patent portfolio that the party intends to assert in litigation or include in a licensing programme.

The new law introduces a special post-grant review for so-called covered business methods to transition to a time when problematic business method patents are no longer granted by the USPTO. The new transitional programme goes into effect one year from the date of enactment, is available for only eight years, and applies to covered business method patents that have already been issued or are issued in the future. A covered business method patent is defined as:

• For purposes of this section, the term ''covered business method patent'' means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service (as that term is defined in section 1002(15) of Public Law 15 111-203), except that the term does not include patents for technological inventions.

The new procedure is not generally available as a means to challenge a covered business method patent. Rather, the procedure is only available if a party has already been sued or "charged with infringement", as set forth in the new language. While the phrase charged with infringement is not well defined within the new law, it is clear the procedure is intended as a parallel challenge in the context of litigation. It remains to be seen what the threshold is for the stipulation that a patent must have been charged with infringement.

The transition programme utilises the new PGR procedures explained above. As a challenge in the patent office, validity of a covered business method patent is evaluated on a preponderance of the evidence standard (meaning it is more likely than not that the patent is invalid), and not a clear and convincing standard. The scope of the claims in any challenged covered business method patent cannot be broadened during a challenge. Further, much like the current inter partes reexamination procedure, estoppel applies to those challenges of validity that reasonably could have been raised but were not raised. Because the new transitional programme utilises the new PGR procedures, any challenge under the programme must be completed within 12 months of its initiation at the USPTO, and there is a limited six month extension for good cause.

The new supplemental examination procedure is provided to remove concerns about inequitable conduct (or fraud on the USPTO), and to strengthen other aspects of an issued patent. In general, supplemental examination allows a patentee to present certain information to the USPTO, if that information was not previously properly considered during regular examination. The new supplemental examination procedure will be conducted much like the current ex parte reexamination procedure, but is not limited to patents and printed publications. This new procedure will not remove the threat of patent unenforceability under certain circumstances, including prior allegations and pending patent enforcement actions. Supplemental examination will be available one year after the date of enactment, and will be applicable to any issued patent, including those issued before the date of enactment.

Paul S Hunter

Andrew R Cheslock

© Paul S Hunter and Andrew R Cheslock 2011. Hunter is a partner and Cheslock is an associate with Foley & Lardner in Madison, Wisconsin and Washington DC, respectively

On managingip.com

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