September 19, 2015
By: Thomas M. Sullivan
The America Invents Act (AIA) introduced a number of new post-grant proceedings for challenging issued patents. However, parties facing the specter of dubious patent claims should not overlook an avenue that has been available for 35 years – ex parte reexamination.
Reexamination allows a party to submit prior art consisting of patents or printed publications to the Patent Office and have the Patent Office re-open examination to determine whether the issued claims are anticipated or obvious based on the prior art. Reexamination is only one of several options for challenging the validity of an issued patent. Other options for challenging validity include federal court litigation, post-grant review, inter partes review and covered business patent review.
Among the new AIA proceedings, inter partes review has received the most attention due to the relatively high rate of reviewed claims that have been invalidated as a result of an inter partes review. While there are certainly benefits to using the inter partes review process, in many situations, ex parte reexamination still remains a valuable tool for challenging the validity of claims in an issued patent.
Reexamination is an appealing option for several reasons. First, it is generally a lower-cost option compared to challenging the validity of a patent in federal court or through an inter partes review proceeding. According to the recently-published AIPLA 2015 Report of the Economic Survey, legal fees associated with conducting an ex parte reexamination average about $20,000 with a 90th percentile cost of about $50,000. In contrast, legal fees associated with conducting an inter partes review through the Patent Trial and Appeal Board (PTAB) hearing stage (not including subsequent appeals) are an order of magnitude greater, averaging about $335,000 with a 90th percentile cost of about $600,000. This discrepancy may, in large part, be attributable to the fact that the petitioner does not get to participate in ex parte review proceedings, in contrast to the significantly different adversarial nature of an inter partes review. The average cost of legal fees associated with the validity portion of federal court litigation is even greater than both types of USPTO agency procedures.
Second, the standard used by the USPTO in determining whether to grant a request for an ex parte reexamination has a lower threshold than that used for inter partes review. A challenger of a patent seeking review through reexamination merely has to demonstrate that a “substantial new question of patentability” exists for the claims being challenged. In contrast, to initiate inter partes review, the challenger must meet the higher threshold of showing that there is a “reasonable likelihood” that at least one of the challenged claims is unpatentable. According to Docket Navigator, so far in 2015, 41% of petitions for instituting inter partes review have been denied entirely, with another 26% only partially granted. While 2015 is not necessarily representative in terms of historical numbers, it may be indicative of current trends regarding the handling of relevant petitions. In contrast, requests for ex parte reexamination have historically been granted 92% of the time. As a result of the higher threshold for inter partes review, an IPR petition is more likely to be denied than is a petition for ex parte reexamination.
Third, there is no standing requirement for seeking ex parte reexamination. That is to say, a party does not have to show that it has suffered or been threatened with any injury from the patent. In fact, because there is no standing requirement, the patent challenger may remain anonymous throughout the proceedings, which is, itself, a strategic consideration that adds to the appeal of reexamination. In contrast, a party must show an immediate and real substantial controversy with the patent holder before it can obtain a declaratory judgment in federal court and must identify itself and meet certain timing and estoppel requirements to initiate inter partes review.
Fourth, no legal estoppel is created by an ex parte reexamination. The requester is not required to submit all known prior art, allowing the requester to keep something in its back pocket should the matter end up in federal court. And the requester may request a second reexamination relying on alternative prior art if the outcome of the first reexamination is undesirable. In stark contrast, once a final decision has been issued in an inter partes proceeding, the challenger is estopped, or prevented, from challenging the patent claim’s validity in federal court or through a second inter partes review or any other administrative procedure on any ground that the petitioner raised or reasonably could have raised during inter partes review. This strict standard essentially requires that a challenger place all its eggs in one basket when it comes to challenging a patent’s validity on anticipatory or obviousness grounds in an inter partes review.
Finally, several perceived advantages of inter partes review over ex parte reexamination have narrowed recently.
One perceived advantage of inter partes review is the ability to obtain a stay pausing concurrent court proceedings upon implementation of an inter partes review, but recent statistics cast doubt on that perception. According to Docket Navigator, so far in 2015, 63.5% of motions to stay pending reexamination have been granted, while only 60% of such motions have been granted pending inter partes review. Notably, this data represents a departure from historical outcomes and can be considered in determining which type of USPTO proceeding to pursue.
One advantage enjoyed by challengers to date under inter partes review is the limited availability of claim amendments by the patent holder seeking to narrow the claims to avoid the prior art. However, this advantage appears to be shrinking. In reexamination, patent owners may narrow claims to overcome rejections over asserted prior art. One of the signature characteristics of the first years of inter partes review has been the limited opportunity for patent owners to amend claims over the course of the proceedings. Following criticism from both patent owners and judges, the PTAB has recently established new rules making amendment practice more flexible. Going forward, this previous advantage for inter partes review may be reduced if not essentially eliminated.
The advent of new procedures created by the AIA has opened up the options for a party to challenge a patent’s validity. Ex parte reexamination, however, still remains a top choice for economically invalidating a questionable patent claim.
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