Supplemental Examination: Inequitable Conduct Amnesty and Beyond

By Dennis Crouch

Introduction to Supplemental Examination: The new supplemental examination procedure is a creation of the America Invents Act (AIA) and is effective as of September 16, 2012. At its most basic, the new procedure allows a patent owner to seek a low-level review of an issued patent to make sure that it was properly issued based upon some newly submitted information. If – on initial review – PTO agrees that the patent is still viable despite the new information the USPTO will conclude the review and issue a certificate indicating that the information presented in the request does not raise a substantial new question of patentability. On the other hand, if the USPTO finds a substantial new question of patentability, then the USPTO will order a full (ex parte) reexamination.

Inoculating Against Inequitable Conduct: Supplemental examination is often tied to inequitable conduct because the new statute indicates that a patent cannot be held unenforceable for failure-to-disclose (or mis-disclosure of) information during a prior examination once that information is considered in a supplemental examination. Professors Jason Rantanen and Lee Petherbridge have identified supplemental examination as an "amnesty program." They write in the Michigan Law Review that:

New § 257 is thus a patent amnesty program. It encourages patent applicants to use any number of strategies that would never have been countenanced under pre-AIA law to obtain patents, and it offers to cure all but the most extreme through filing a supplemental examination request. For example, potential descriptions of a claimed invention in a prior art printed publication, or possible instances of prior patenting of the claimed invention by another, that are known to a patent applicant, and that might have a high probability of barring a patent or limiting claim scope, may not be disclosed during the initial examination. Similarly, sales and public uses that are known to a patent applicant and that may have a high probability of barring the patentability of a claimed invention may be withheld at least until supplemental examination if the applicant likes (and perhaps longer depending on an applicant's risk tolerance). Even the use of false data to obtain the patent in the initial examination can be exonerated by filing a supplemental examination request, which by the statutorily required process can be expected to produce a director's certificate within three months.

Jason Rantanen and Lee Petherbridge, Toward a System of Invention Registration: The Leahy-Smith America Invents Act, 110 Mich. L. Rev. First Impressions 24 (2011).

To be clear, the strategies identified by Rantanen and Petherbridge would violate the professional ethics of a patent attorney or patent agent who deliberately chose that strategy. The argument here is that the supplemental examination rules (coupled with Theresense, Excergen, and their progeny) provide a marginal incentive to applicants to avoid fully complying with the duties of candor and good faith in all dealings with the USPTO. They write "the analysis provided here relates to the marginal effects of a supplemental examination system." In the end, however, it is unclear whether the new incentive will actually change any behavior. I.e., will the availability of supplemental examination mean that some important evidence will now be buried that would have otherwise been disclosed?

There are two statutory exceptions to the inoculation and both relate to times where the patentee waited too long to request the supplemental examination. The statute labels these prior enforcement allegations and prior allegations. Basically, the supplemental examination (and any subsequent reexamination) must be completed prior to the filing of a lawsuit where inequitable conduct may be raised as a defense. In addition, the supplemental examination must be filed prior to the inequitable conduct being alleged in a pleading or Paragraph IV certification. If the patentee fails either prong then the amnesty fails and a court will have power to adjudge the inequitable conduct.

Timing of Declaratory Judgment Actions: The distinction between the two exceptions can be seen in the context of declaratory judgment (DJ) actions. DJ actions are regularly filed in cases where would-be accused infringers take the preemptive measure of asking a court to declare a patent not-infringed, invalid, or unenforceable. Most (but certainly not all) DJ actions filed in the past few years are primarily venue contests and are filed shortly after the original complementary infringement action.

In thinking about supplemental examination amnesty in the context of DJ actions, it is easiest to begin with the understanding that, with two exceptions, the patent cannot be held unenforceable due to inequitable conduct once the patent properly passes through the supplemental examination amnesty program. In the ordinary infringement litigation filed by the patentee, one of the exceptions block the inoculation in cases where the litigation if filed prior to completion of the supplemental examination. This conclusion is based upon the statutory provision explaining that the inoculation "shall not apply to any defense raised [in infringement litigation] unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought." Notice here that the exception to inoculation specifically applies to "any defense." In the declaratory judgment context, the inequitable conduct allegation is not filed as a "defense" but rather as part of the complaint. This means that the § 257(c)(2)(B) exception does not apply to declaratory judgment actions. However, the § 257(c)(2)(A) exception will apply to declaratory judgment actions – leading to the conclusion that supplemental examination will provide amnesty against DJ inequitable conduct actions so long as the request for supplemental examination is filed prior to the filing of a DJ pleading that particularly alleges the inequitable conduct. Here, it appears that to satisfy the filing trigger, the request must meet the requirements set forth in the USPTO's implementation regulations. The USPTO will not grant a filing date to applications that fail to follow those guidelines.

Timing of Supplemental Examinations. In the paragraphs above, I identified instances where the inequitable conduct amnesty is triggered by either the filing of a supplemental examination request or else the completing of the supplemental examination. In many cases, the difference between those two will be minimal. The USPTO has announced its intention to complete all supplemental examination reviews within three months. That interpretation follows the statutory guidance that "Within 3 months after the date a request for supplemental examination meeting the requirements of this section is received, the Director shall conduct the supplemental examination and shall conclude such examination by issuing a certificate indicating whether the information presented in the request raises a substantial new question of patentability." This three-month deadline means that the USPTO will likely be sticklers for the filing requirements and may also mean that the USPTO will frequently order reexamination. The major exception to this quick timeline is that the supplemental examination will not be considered complete for amnesty purposes if a SNQ is raised in a way that triggers the automatic reexamination.

Statutory Provision Section 257: The new supplemental exam procedure is codified at 35 U.S.C. § 257 and reads as follows:

§ 257. Supplemental examinations to consider, reconsider, or correct information

(a) REQUEST FOR SUPPLEMENTAL EXAMINATION.—A patent owner may request supplemental examination of a patent in the Office to consider, reconsider, or correct information believed to be relevant to the patent, in accordance with such requirements as the Director may establish. Within 3 months after the date a request for supplemental examination meeting the requirements of this section is received, the Director shall conduct the supplemental examination and shall conclude such examination by issuing a certificate indicating whether the information presented in the request raises a substantial new question of patentability.

(b) REEXAMINATION ORDERED.—If the certificate issued under subsection (a) indicates that a substantial new question of patentability is raised by 1 or more items of information in the request, the Director shall order reexamination of the patent. The reexamination shall be conducted according to procedures established by chapter 30, except that the patent owner shall not have the right to file a statement pursuant to section 304. During the reexamination, the Director shall address each substantial new question of patentability identified during the supplemental examination, notwithstanding the limitations in chapter 30 relating to patents and printed publication or any other provision of such chapter.

(c) EFFECT.—

(1) IN GENERAL.—A patent shall not be held unenforceable on the basis of conduct relating to information that had not been considered, was inadequately considered, or was incorrect in a prior examination of the patent if the information was considered, reconsidered, or corrected during a supplemental examination of the patent. The making of a request under subsection (a), or the absence thereof, shall not be relevant to enforceability of the patent under section 282.

(2) EXCEPTIONS.—

(A) PRIOR ALLEGATIONS.—Paragraph (1) shall not apply to an allegation pled with particularity in a civil action, or set forth with particularity in a notice received by the patent owner under section 505(j)(2)(B)(iv)(II) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(2)(B)(iv)(II)), before the date of a supplemental examination request under subsection (a) to consider, reconsider, or correct information forming the basis for the allegation.

(B) PATENT ENFORCEMENT ACTIONS.—In an action brought under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 1337(a)), or section 281 of this title, paragraph (1) shall not apply to any defense raised in the action that is based upon information that was considered, reconsidered, or corrected pursuant to a supplemental examination request under subsection (a), unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought.

(d) FEES AND REGULATIONS.—

(1) FEES.—The Director shall, by regulation, establish fees for the submission of a request for supplemental examination of a patent, and to consider each item of information submitted in the request. If reexamination is ordered under subsection (b), fees established and applicable to ex parte reexamination proceedings under chapter 30 shall be paid, in addition to fees applicable to supplemental examination.

(2) REGULATIONS.—The Director shall issue regulations governing the form, content, and other requirements of requests for supplemental examination, and establishing procedures for reviewing information submitted in such requests.

(e) FRAUD.—If the Director becomes aware, during the course of a supplemental examination or reexamination proceeding ordered under this section, that a material fraud on the Office may have been committed in connection with the patent that is the subject of the supplemental examination, then in addition to any other actions the Director is authorized to take, including the cancellation of any claims found to be invalid under section 307 as a result of a reexamination ordered under this section, the Director shall also refer the matter to the Attorney General for such further action as the Attorney General may deem appropriate. Any such referral shall be treated as confidential, shall not be included in the file of the patent, and shall not be disclosed to the public unless the United States charges a person with a criminal offense in connection with such referral.

(f) RULE OF CONSTRUCTION.—Nothing in this section shall be construed—

(1) to preclude the imposition of sanctions based upon criminal or antitrust laws (including section 1001(a) of title 18, the first section of the Clayton Act, and section 5 of the Federal Trade Commission Act to the extent that section relates to unfair methods of competition);

(2) to limit the authority of the Director to investigate issues of possible misconduct and impose sanctions for misconduct in connection with matters or proceedings before the Office; or

(3) to limit the authority of the Director to issue regulations under chapter 3 relating to sanctions for misconduct by representatives practicing before the Office.

As mentioned above, the effective date of the new supplementary examination procedure is September 16, 2012 and applies to all patents.

Costs and Fees for Supplemental Examination: The USPTO has indicated that its plans are to – for the most part – charge a fee for supplemental examination that is roughly equivalent to its expected cost for conducting the supplemental examination. In a prior post, Professor Rantanen explained: "The cost for filing a supplemental examination request remains steep: $5,140 for the initial request plus $16,120 for the ex parte re-examination fee. Both must be paid at the time of initial request, and the $16,120 will be refunded if no re-examination is ordered." In a proposed change in the fee structure, the USPTO has suggested that it lower the costs by a small amount and also allow for a 50% and 75% reduction in fees for small-entity and micro-entity patent owners. Those new fees will not be effective until early 2013.

Regulatory Process: As instructed by the statute, the USPTO has promulgated a set of rules that more fully govern the process of supplemental examination.

Other Purposes of Supplemental Examination: There are strong suggestions that supplemental examination may be useful outside of the inequitable conduct situation. In particular, patentees may want to ensure that defendants can't argue in court that the best references were never seen by the USPTO. Other patentees may rely on supplemental examination as a mechanism for entering reexamination without having to first admit that something is wrong with the patent. I'll save consideration of these strategies for a later post.

4 thoughts on “Supplemental Examination: Inequitable Conduct Amnesty and Beyond

  1. “Amnesty” is not the correct word and leads to a misleading position that “getting away with something” is not only possible but likely, and that after getting away with something, caught, and convicted, that a pardon for the offensive behavior is there waiting.

    What this is is actually a mulligan for correcting things (and those things are actually in full light). The examination still happens in this procedure. The “cure-all” is no less than what would happen had the mistake been examined in the first place.

    I recognize that it is “publish or perish” in academia, but let’s at least not try to mislead with such sensationalism.

  2. Anonymous – The scenario that you propose here is correct as far as it goes. In most DJ cases, the patentee files a counterclaim alleging infringement and, at that point the DJ complainant could allege an inequitable conduct defense to the infringement counterclaim. In that situation, the supplemental examination immunity would only be effective if the supplemental examination (and any subsequent reexamination) had been completed by the time of the filing of the counterclaim. This is true because the counterclaim would be treated as an enforcement action under Section 257.

    In these situations, the patentee’s best course may be to file for supplemental examination and then – with leave of the court – delay filing the responsive pleading that includes the counterclaim until conclusion of the supplemental examination (A process that should only take three months.) The strategy becomes more complicated if reexam is ordered (or is likely to be ordered).

  3. I don’t think this is right with respect to a DJ. At a minimum, once an infringement counterclaim is made against the accused infringer plaintiff, the defendant can then raise IC as an affirmative defense in answering the counterclaim, whether or not IC was raised in the original DJ complaint.

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