Strategic Use of Reexamination to Avoid Costly Litigation
If you receive a letter accusing you of patent infringement, what can you do to avoid costly litigation? Everyone knows that patent litigation can be costly. Recent statistics show that the average cost of litigating a patent case all the way to trial can easily be more than $1 million. For many small business owners, defending against a patent infringement suit can be ruinous, even if they ultimately win. What’s the alternative?
I. Reexamination As A Smart Way To Avoid Litigation
A far less costly way to defend against a charge of patent infringement is to seek reexamination of the asserted patent. As an alternative to litigating in court (or in concert with court litigation), reexamination is an administrative process whereby we ask the United States Patent and Trademark Office (USPTO) to take a second-look at the patent. Not only is reexamination far less costly, there are strategic advantages to seeking reexamination, such as preempting or stalling litigation (so you have more time to design around and to defer costs), strengthening your position for settlement, or discouraging litigation altogether.
II. The Advantages of Reexamination Over Litigation
The goal of a reexamination is to get the USPTO to invalidate the claims that are asserted against you or otherwise to get the claims amended to avoid infringement. Though we could seek to invalidate the asserted claims in court, there are drawbacks to litigating the validity of the claims in court. First, courts apply a high standard for invalidity, requiring clear and convincing evidence to invalidate claims. And courts are often reluctant to invalidate claims because patents are statutorily entitled to a presumption of validity. The USPTO does not apply a clear-and-convincing standard. Nor is it bound to presume that the claims are valid. On reexamination, the USPTO will simply determine if the claims meet the statutory tests for patentability.
Second, litigating the validity of claims can be strategically limiting, for courts are bound to either affirm the claims as valid or else invalidate them. There is no middle ground. The reexamination of claims before the USPTO, however, can often result in the claims being amended. If the asserted claims are materially changed during reexamination, you may have “intervening rights.”
“Absolute” intervening rights means that you have the right to use or sell the product that is being accused of infringement if that product was made, used, or purchased before the grant of the reexamination certificate. It basically means than you may sell off existing inventory of a product that infringes the reexamined patent claims without incurring liability for past damages. Absolute intervening rights do not apply to infringing activity that occurs after the reexamination certificate is issued.
However, you could also have “equitable” intervening rights. Equitable intervening rights may provide for the continued manufacture, use, or sale of additional products covered by the reexamined patent if you already made substantial preparations to make, use, or sell the infringing products before issuance of the reexamined claims. Equitable intervening rights protect investments made before the grant of a reexamination certificate, including the continuation of infringing activity after such time. But even these rights do not last forever. They are intended to allow the infringer to receive a fair return on the investment that was originally made when the infringer was relying upon the more narrow scope of the original patent claims before the reissue patent was granted.
So unlike litigation, which is a win-or-lose game, reexamination may offer a third way: get the claims amended so that you can at least avoid liability for any past damages.
III. How To Get Started?
A reexamination can be requested at anytime during the period of enforceability of a patent. To request a reexamination, you must submit a “request for reexamination,” pay a fee, and provide an explanation of new reasons why the patent is invalid based on prior art.
There are two kinds of patent reexamination. In an ex parte reexamination, once your request for reexamination is granted, you cannot actively participate in the proceedings. There is no right for a third party to participate in an ex parte reexamination. The correspondence is strictly between the examiner and the patent owner. And the patent owner alone may appeal or seek court review of the result of the reexamination. The third party requester has no such right.
By contrast, in an inter partes reexamination you can continue to participate in the proceedings. That is, you are allowed to file written comments addressing the issues raised in the action, and you may appeal the result of the reexamination. Since an inter partes reexamination is much more involved than an ex parte reexamination, it can be much more expensive.
According to statistics provided by the USPTO, about 65% of completed ex parte reexaminations resulted in at least some claims being amended or canceled, with 12% resulted in all claims being cancelled. Only 23% of the reexaminations resulted in all claims being confirmed. For inter partes reexamination, about 43% resulted in claims that were either amended or cancelled, with 49% of the reexaminations resulted in all claims being canceled. Only 8% of inter partes reexaminations resulted in all claims being confirmed. Given these statistics, it is clear that reexamination can be well worth the money.
Because ex parte and inter partes reexamination proceedings have led to amendment or cancellation of a significant percentage of the patent claims challenged in the reexamination, it can be a smart defense strategy for accused infringers. So if you are potentially facing a lawsuit for patent infringement, contact our firm at [email protected] for consultation.