October 2012

Is the New Supplemental Examination a Complete Replacement for Owner Initiated Ex Parte Reexamination?

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By Dennis Crouch

This essay focuses on supplemental examination but, perhaps surprisingly, the essay does not consider inequitable conduct inoculation. The ability of supplemental examination to cure inequitable conduct has received a significant amount of attention. However, supplemental examination is likely to have a broader value for patent owners. In particular, supplemental examination offers an expanded and beneficial avenue for patent owners to subtly enter ex parte reexamination. In its official estimates, the USPTO predicts that patent owners will entirely stop filing ex parte reexaminations. Rather, in the USPTO’s estimation, 100% of the cases that would have been filed as owner-filed reexaminations will now be filed as supplemental examinations. The USPTO writes:

[T]he Office estimates that it receives approximately 110 requests for ex parte reexamination filed by patent owners annually. In view of the benefits to patent owners afforded by supplemental examination under 35 U.S.C. 257(c), the Office is estimating that all 110 requests for ex parte reexamination that would have been filed annually by patent owners will instead be filed as requests for supplemental examination. However, the Office is also estimating that more than 110 requests for supplemental examination will be filed annually due to a combination of: (1) the benefits to patent owners afforded by supplemental examination; (2) the fact that the “information” that may form the basis of a request for supplemental examination is not limited to patents and printed publications; and (3) the fact that the issues that may be raised during supplemental examination may include issues in addition to those permitted to be raised in ex parte reexamination (e.g., issues under 35 U.S.C. 112).

See Changes To Implement the Supplemental Examination Provisions of the Leahy-Smith America Invents Act and To Revise Reexamination Fees; Final Rule, 77 Fed. Reg. 48827 (2012). Although not suggested by the USPTO, there is some thought that the supplemental reexamination will also take some demand away from the current reissue system.

As a starting point on this topic, it is useful to remember that ex parte reexamination has been left virtually unchanged by the America Invents Act (AIA). The greatest exception is not a process change but rather a seven-fold increase in the price-tag for filing a request for ex parte. This takes the price from $2,500 to almost $18k. Ex parte reexaminations will still be conducted by examiners in the central reexamination unit (CRU) and the Board (now the PTAB) will handle first level appeals. The AIA “clarifies” the law that adverse decisions from the PTAB may be appealed only to the Court of Appeals for the Federal Circuit and that the patentee has now right to file a civil action in district court to overturn an adverse decision during the reexamination.

The reissue process was also left untouched except that the AIA removes the “without any deceptive intention” language from 35 U.S.C. § 251. The reissue statute now reads as follows:

Whenever any patent is, through error without any deceptive intention, deemed wholly or partly inoperative or invalid, by reason of a defective specification or drawing, or by reason of the patentee claiming more or less than he had a right to claim in the patent, the Director shall, on the surrender of such patent and the payment of the fee required by law, reissue the patent for the invention disclosed in the original patent, and in accordance with a new and amended application, for the unexpired part of the term of the original patent. No new matter shall be introduced into the application for reissue.

However, unlike reexaminations, reissue fees associated with reissue applications have been kept low – remaining mostly equivalent to fees associated with original prosecution. For patents in litigation (or likely to be litigated) the fee differential will be a relatively minor factor in the ultimate choice. However, that fee differential could be quite important for more average patents – those part of a large portfolio but that would become more valuable if given a secondary review. Since this post is getting quite long, I’m going to save the comparison between supplemental examination and reissues for a different post.

Comparing Supplemental Examination with Ex Parte Reexamination: The process of supplemental examination is quite similar to that of ex parte reexamination. You can think of ex parte reexamination as having two main parts: (1) request stage; and (2) examination stage. At the request stage, the USPTO must decide whether the reexamination request raises patentability issues that are significant enough to warrant full reexamination. If the issues presented are not significant enough then the reexamination request is denied and the case is over. However, if the issues are deemed significant then the patent is fully reexamined. That reexamination can result in claims being cancelled, amended, or confirmed as patentable. In many ways, supplemental examination can be seen as simply changing name of the request stage. For supplemental examination, the request stage is the supplemental examination. In that stage, the USPTO is simply conducting a cursory review to determine whether the issues presented in the supplemental examination request raise a substantial new question of patentability. If not, then the supplemental examination is concluded (with a certificate). If substantial questions are raised then a full reexamination is ordered and conducted. As in the request stage of ex parte reexaminations, supplemental examination is completed very quickly (3-months) and without any additional outside input beyond the request itself.

Supplemental examination offers four primary benefits for a patent owner as compared with directly filing a request for ex parte reexamination:

  • When a patent owner files a reexamination request on its own patent, it has to first convince the USPTO that its patent has a problem. With supplemental examination, the patentee need not make any such statement. Rather, the supplemental examination request simply points to material that should be considered with minor explanation and the PTO makes the judgment as to whether the submitted material raises any substantial new questions of patentability. This helps patentees avoid potential prosecution history issues that often trap patentees in the reexamination process. This may also mean that the supplemental examination document request is less expensive to prepare.
  • In ordinary circumstances, Ex parte reexaminations are instituted based upon printed publications or patents. Supplemental examination can be used to raise all sorts of issues based upon “any supporting document” or legal issue (such as patentable subject matter).
  • If the PTO concludes that no substantial question of patentability is raised by the request then, with supplemental examination, it issues a “supplemental examination certificate” that the patentee can take and show to a district court judge and jury. While the decision in supplemental examination is effectively the same as a denial of a request for ex parte reexamination, the cognitive impact is different. In the ex parte reexamination scenario, the PTO merely denied a request to review the case. On the other hand, in the supplemental examination scenario, the PTO actually conducted a supplemental examination; determined that the submitted issues do not raise a substantial question of patentability; and issued an official certificate saying as much.
  • As discussed elsewhere, the supplemental examination also provides the inoculation against inequitable conduct charges.

There are some downsides to supplemental examination, but in most cases it will be a better option when compared with an owner-requested ex parte reexamination.

The GAIN Act Stacks 5-Years of Market Exclusivity for Antibiotics

Patent

Guest Post by Jacob S Sherkow. Sherkow is a fellow at Stanford Law School's Center for the Law and Biosciences. This post originally appeared on Sherkow's Stanford Site.

This week's New Yorker has an interesting article on the rise of antibiotic resistant gonorrhea (subscription required). What caught my attention was its discussion of something called the GAIN Act ("Generating Antibiotic Incentives Now")–a new law that apparently seeks to encourage pharmaceutical research of antibiotic resistance by giving pharmaceutical companies manufacturing a "qualified infectious disease products" (QIPDs) an additional five years of market exclusively–with or without a patent. The Act comes as title VIII to Senate Bill 3187, the Food and Drug Administration Safety and Innovation Act (the "FDASIA"). The FDASIA generally concerns the regulation of user-fees for FDA drug approval. (That is, allowing pharmaceutical companies to pay for part of the FDA approval process.) There are a few surprising things about the law: (1) Despite the high level of congressional partisanship, it was passed rather quickly. The bill went from being introduced in the House to receiving the President's signature in just over a month. (2) Although it seems like the additional protections afforded to manufacturers are significant–and concern a broad variety of public interests–there has been almost no discussion of the Act in the popular press. And (3), a number of companies–some of which were already conducting Phase III trials of qualifying drugs when the bill was passed–seem to have benefited. The GAIN Act is a relatively complex piece of legislation that requires detailed analysis, but for now, I'll briefly review the broad outlines.

"Non-IP" Market Exclusively

Prior to the GAIN Act, several classes of new drug applications (NDAs) received statutory market exclusivity, independent of whether the underlying drugs were protected by a patent. New drugs–that is, new active ingredients–received four to seven-and-a-half years of protection from the date of application. (21 U.S.C. § 355(c)(3)(E)(ii).) Old drugs with new uses received three years. (Id. § 355(c)(3)(E)(iii).) And drugs for a "rare disease or condition"–as designated by the Secretary of DHHS–received seven years. (Id. § 360bb(a)(1).) During these "exclusivity periods," FDA could not approve another version of the same drug, even if those drugs were not protected by a patent.

The GAIN Act

The GAIN Act adds a class of applications to that list–"qualified infectious disease products" or QIPDs. (Like drugs for "rare diseases and conditions," QIPDs are to be determined by the Secretary.) If the QIPD fits any of the three categories, above (i.e., a new drug, an old drug with a new use, or a drug for a rare disease), then its market exclusivity is automatically extended by five years. This means that new drug QIPDs will have a minimum statutory protection of nine years; old drug/new use QIPDs will have a total of eight years of protection; and rare disease, i.e., "orphan" QIPDs will have a whopping twelve years of "non-IP" market exclusivity.

As for what qualifies as a QIPD, it's up to the Secretary, although the statute lists several "superbugs" as suggestions. Interestingly, the GAIN Act provides that once an application has been classified as a QIPD, that designation–and its attendant exclusivity–cannot be taken away, even if the Secretary removes a "bug" on the statutory list of QIPDs. Because the exclusivity periods in the GAIN Act are as long, or longer, than any Secretary will have his or her job (because, presumably, a new President, after eight years, will replace the Secretary), previous Secretaries' QIPD designations will have significant "dead hand control" on future ones'.

GAIN vs. Patent Terms

There has long been concern that patents do not provide enough incentives to drug companies to develop new as opposed to follow-on drugs. (There are a number of proposed reasons for this: FDA approval uncertainty, the length of the approval process, increased patent litigation, patent thickets and licensing concerns, and others.) The current wisdom is that, on average, a pharmaceutical patent will have an "effective patent life"–the amount of patent protection lasting after the FDA approval process–of about fourteen and-a-half-years. The reality is likely shorter due to recent backlogs at the patent office and the increasingly aggressive challenges from generic manufactures. Regardless, the GAIN Act now appears to offer protection on par with patents, with the added advantages of being immune from challenges from competitors or "de-listing" by the Secretary. These seem like fairly significant protections and may even obviate the need for patents in some instances.

The core question, of course, is whether the GAIN Act, with its generous protections, will spur enough innovation in a critical public health area that it's worth the hit to other researchers and consumers. Only time will tell, but a more thorough vetting of the Act would be to everybody's gain.

Inter Partes Reexaminations: USPTO Can Only Consider References from the Request that Were Found to Raise a Substantial Question of Patentability

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By Dennis Crouch

Belkin v. Kappos (Fed. Cir. 2012) (Appeal of Inter Partes Reexam No. 95/001,089)

OptimumPath’s U.S. Patent No. 7,035,281 broadly covers a wireless router with onboard authentication and is based upon an application filed in the year 2000. When Belkin filed its inter partes reexamination request, it argued that a set of four prior art references render all 32 claims unpatentable. The USPTO partially granted Belkin’s request. However, the USPTO found that only one of the four references (“Pierce”) raised a substantial new question of patentability, and the Pierce-SNQ only related to claims 1-3 and 8-10 of the ‘281 patent. The USPTO thus rejected the request as to the remaining claims 4-7 and 11-32. Further, the USPTO also rejected the notion that the four-reference combination raised a SNQ with regard to claims 1-3 and 8-10.

Belkin filed a petition to challenge the partial denial. Since the reexamination had been granted as to claims 1-3 and 8-10, Belkin only challenged the USPTO’s adverse decision regarding the other claims. That petition was duly denied. As prosecution developed, the Examiner (supported by the BPAI) determined that the lone reference (Pierce) did not actually anticipate claims 1-3 or 8-10. Further, the USPTO refused to consider the four-part combination obviousness argument that had been rejected at the request stage. The BPAI then confirmed the Examiner’s decision – holding that the Board did not have the power to now decide that the combination of references raise a SNQ of patentability because that determination is not appealable under 35 U.S.C. § 312(c).

The USPTO differentiates between petitions and appeals and according to the Board, Belkin erred by failing to timely petition to challenge SNQ determination rather doing what it did (waiting to appeal that determination after receiving an adverse examiner decision0.

Now, the Court of Appeals for the Federal Circuit (CAFC) has affirmed the Board decision – holding that

The proper course of action was for Belkin to have petitioned the Director to review the determination that the arguments relying on the [other three references] did not raise a substantial new question of patentability pursuant to 37 C.F.C. § 1.927. Belkin did not do so, and thus that decision became final and non-appealable, rendering those issues beyond the scope of the reexamination.

One problem raised by this decision by Judge Lourie and joined by Chief Judges Rader and Judge Wallach is that it conflicts with the MPEP.

MPEP § 2648 identifies a hypothetical situation parallel to Belkin’s – where an inter partes reexamination request on a particular claim is granted based upon one set of prior art but denied based upon another set of prior art. According to the MPEP, no petition challenging the partial-grant may be filed with regard to that claim and that once granted, the reexamination will consider “all prior art.”

[N]o petition may be filed requesting review of a decision granting a request for reexamination even if the decision grants the request as to a specific claim for reasons other than those advanced by the third party requester. No right to review exists as to that claim, because it will be reexamined in view of all prior art during the reexamination under 37 CFR 1.937.

MPEP § 2648. The Federal Circuit decision here considered the conflict created by the MPEP and ultimately determined that the MPEP does not carry the weight of law and thus is easily discarded. The court writes:

[T]he MPEP does not have the force of law, and is only entitled to judicial notice as the PTO’s official interpretation of statutes and regulations with which it is not in conflict. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1180 n.10 (Fed. Cir. 1995).

This holding here (following Molins) becomes even more important under the AIA as the PTO has received a substantial additional amount of rulemaking authority for determining the proper methodology of conducting the array of post-grant challenge options. Here we have a re-affirmance that the USPTO’s statements in the MPEP will not be given the same deference that will be due to rules promulgated and printed in the code of federal regulations (CFR). The court noted that this decision should not be seen as offering any guidance as to how the AIA will be interpreted (since this case applies the old law regarding inter partes reexaminations).

Limit Scope of Reexamination: The court here goes on to hold that the Patent Act strictly limits the prior art that the USPTO can apply in considering challenged claims during reexamination. In particular, in the reexamination the PTO can only consider the prior art that the director found raised the substantial questions of patentability. The court writes:

In any event, in order to reconcile what may otherwise appear to be conflicting provisions, we hold that, under the statute, available prior art may only be considered to answer the specific questions of patentability found by the Director.

In a footnote, the expressly refuses to rule on a situation where the patentee amends claims or adds new claims during the reexamination. Thus, in those situations, the PTO might have the power to consider other references.

We do not reach the issue of what prior art references the PTO may or may not consider during reexamination in response to an amended or substituted claim.

The problem with this holding on the “statute” is that the court does not actually identify the statutory provision that lead to its conclusion. I suppose that the best statute on point is Section 312(c) that limits the appeal of SNQ determinations. If we allow a requester to force the consideration of additional references by appealing to the BPAI – then that begins to look like an appeal of the SNQ determination. That seems to be a fairly weak argument and perhaps that is why the court did not spell it out.

For its part, the Board was likely thinking of this case as an important stake-in-the-ground to limit the scope of the new post grant review regimes (that the Board is handling directly rather than the CRU). The importance is evidenced by the fact that the case was decided by an expanded 5-judge panel which included Board Vice-Chief Judge James T. Moore and Judge Allen MacDonald as added members.

Trans-Border Active Patent Inducement under Akamai

Patent,

By Dennis Crouch

This post discusses Professor Holbrook’s new essay on the extraterritorial consequences of the recent Akamai decision.

In Akamai v. Limelight, an en banc Federal Circuit (CAFC) expanded the scope of liability for actively inducing patent infringement (inducement). Under the old rule, an active inducement charge required proof that an induced third party actually practiced the patented method. Akamai loosened that constraint a bit. Under the new rule, actively inducing infringement of a patented method no longer requires underlying infringement by the third party. The court replaced that element with a requirement of proof that each step of the patented method be performed. Thus, the difference between the old and the new is that active inducement no longer follows the single infringing actor rule that is *still* applied in the context of direct infringement. Under the new rule, a defendant could be held liable for active inducement even when it took three different actors to collectively perform the patented-steps. The statutory basis for active inducement is 35 U.S.C. §271(b) (“Whoever actively induces infringement of a patent shall be liable as an infringer.”). At least as interpreted, the statute does not provide any help in understanding which of these two interpretations (old & new) are correct.

Akamai raises a host of further more detailed question about application of the newly revised doctrine.     

In his most recent essay, Professor Timothy Holbrook (Emory) focuses on one of his specialties – international application of the patent laws – and considers how the new law of inducement applies in the international and trans-border patent infringement context.

The crux of Holbrook’s essay begins with the statutory definition of direct patent infringement that uses the phrase “within the United States” as a territorial limitation on patent infringement actions. 35 U.S.C. § 271(a). The old rule of active inducement was linked to this definition and thus included an implicit territorial limitation as well. In Akamai, the court decoupled active inducement from the direct infringement definition of 271(a) and challenges whether (and how) a territorial limitation will be applied moving forward.

One suggestion is that the Federal Circuit should rely upon its control-and-beneficial use doctrine developed in NTP v. Research-in-Motion, 418 F.3d 1282 (Fed. Cir. 2005), to determine whether the territorial limits of the patent laws bar an inducement action. However, NTP is a deeply unsatisfying opinion and has little basis in the law, and such an extension of that opinion would have even less basis in law. Holbrook suggests that when portions of the induced activity occurs in another country, the court should focus on whether the patentee bringing the infringement action has a parallel patent in that other country. If so, then the inducement action can move forward. On the other hand, the absence of such parallel patents suggest that the trans-border inducement action unduly extends US law. Holbrook writes:

The baseline principle would be as follows: if there would not be infringement of the patent in the foreign country, then there would be no infringement of the United States. As I have advocated elsewhere, this approach takes into account potential conflicts with foreign law, which is one of the justifications for the presumption against extraterritoriality.

I should note that Holbrook has offered his solution more broadly as a replacement for the NTP test.

For patentees, the interesting result of Professor Holbrook’s approach is that provides an additional incentive for patentees obtain foreign patent protection because that protection bolsters their US patent rights. In this sense, it gives an edge to non-US innovators who are already much more likely to obtain foreign rights than are US based entities. The approach also offers a straightforward avenue for someone to receive the benefit of practicing the invention without paying royalties and without infringement liability. The approach would be to identify countries where the patent is not protected and induce performance of some steps of the method there. However, in most cases that approach is likely too far-fetched for most situations.

Read the essay: Timothy Holbrook, The Potential Extraterritorial Consequences of Akamai, forthcoming in the Emory International Law Review (2012) online at http://ssrn.com/abstract=2154277.