Optimizing Reexamination Patent Strategy At The U.S.

Patent Office For Your IP Business Model

Robert Greene Sterne

Sterne, Kessler, Goldstein & Fox, PLLC

Washington, DC

LES Meeting � Orlando, Florida

October 21, 2008iManage No. 890998v1

Overview of Reexamination

Part I: IP Business Model Summary

Part II: Reexamination Fundamentals

Part III: Reexamination Statistics

Part IV: Reexamination Timelines

Part V: The Parallel Universe of Reexamination at the U.S. Patent and Trademark Office (USPTO) and Federal Court/USITC Proceedings

Part VI: Examples of The Impact of Reexamination on IP Business Models-Both For Patent Owner and Accused Infringer

Part VII: 10 Reexamination Essentials To Remember

Part I � IP Business Models

� We will discuss 5 Examples of how Reexaminations

have dramatically impacted IP Business Models

� IP Model #1 -- One Way Licensing of Patents

� IP Model #2 -- Cross Licensing of Patents

� IP Model #3 -- Enforcement of Patents

� IP Model #4 -- Sale or Securitization of Patents

� IP Model #5 -- Negotiating Leverage For Patent Owner

Part II � Reexamination Fundamentals

� Two Types of Reexams

�Ex Parte Reexam

�Inter Partes Reexam

Part II � Reexamination Fundamentals

(cont�d)

� Ex Parte Reexam

� Created By Congress In 1980

� Goal Of Congress Was To Provide Quality

Check On Issued Patents

� Both Patent Owner And Third Party Requester

Have Standing To File Reexam Request

� Once Request Ordered, Only Patent Owner

Has Standing To Prosecute At The USPTO

� Patent Owner Can Interview With The Patent

Examiner On The Merits During Prosecution

Part II � Reexamination Fundamentals

(cont�d)

� Inter Partes Reexam

� Created By Congress In 1999

� Goal Of Congress Was To Provide Fast, Low Cost, And Effective Alternative To District Court Litigation For Evaluating The Validity Of Patents

� Only Third Party Requester Not In Privity To Patent Owner Has Standing To File Inter Partes Reexam Request

� Both Patent Owner And Third Party Requester Have Standing In Reexam Prosecution Once Ordered By The USPTO

� Neither Patent Owner Nor Third Party Requester Can Contact Patent Examiner On Substantive Matters Once Reexam Has Been Ordered By USPTO

� Can Result In Estoppels In Concurrent Or Future Litigation

Part II � Reexamination Fundamentals

(cont�d)

� A Reexamination Can Only Be Filed Asserting Patent And Printed Publication As Prior Art.

� Other Types Of Prior Art Cannot Be Considered Even If Related To Patent Or Printed Publication --e.g., Sale, Public Use, Known By Others, Etc.

� Other Statutory Attacks On Patents Also Cannot Be Considered - - e.g., Patentable Subject Matter, Enablement, Written Description, Best Mode, Clarity Of Claim Language, Inequitable Conduct, Etc.

� Only Claims Addressed In The Reexam Request Are Examined - Not All Claims In Patent May Be In Play.

Part II � Reexamination Fundamentals

(cont�d)

� Since 2005 All Reexams Are Handled By A Special Unit In

The USPTO Called The Central Reexam Unit (CRU)

� Highly Experienced Patent Examiners (Currently 58

Examiners Having On Average 18+ Years Of Examining

Experience) Are Assigned To CRU

� Quality In The Reexamination Is The Focus Of CRU Reexam

Proceeding-Do Not Use �Count� Performance System

� Three Patent Examiners Assigned To Each Reexam

� Patent Examiners Do Not Search - - They Rely On Patents

And Printed Publications Asserted By The Requester In The

Reexam Request

Part II � Reexamination Fundamentals

(cont�d)

� Goal Of CRU Is To Issue Final Office Action or

Reexamination Certificate Within 24 Months From Request

� Appeals From CRU Go To The Board Of Patent Appeals &

Interferences (BPAI)

� Appeals From The BPAI Go Either To The United States

District Court For The District Of Columbia Or Straight To The

United States Court Of Appeals For The Federal Circuit

� Impact Of The April 30, 2007 Supreme Court Decision Of

KSR V. Teleflex (Lowering The Burden On Examiners To

Assert Obviousness Of Combining References To Teach Or

Suggest Claimed Subject Matter) At CRU Is Significant

Part III � Reexamination Statistics

� Over 90% Of All Reexamination Requests Result In Reexaminations Being Ordered (Even If Patent Has Been In Prior Litigation)

� TOTAL REEXAM REQUESTS (% ORDERED): Inter Partes -353 (96%); Ex Parte -9060 (92%)

� ALL CLAIM CANCELLED: Inter Partes - 86%; Ex Parte - 10%

� CLAIMS CHANGED: Inter Partes - 17%; Ex Parte - 64%

� ALL CLAIMS CONFIRMED: Inter Partes - 8%; Ex Parte -26%

� CONCURRENT LITIGATION: Inter Partes - 52%; Ex Parte26%

� Inter Partes Requests Increased From 21 In 2003 To 126 In 2007

� Ex Parte Requests Increased From 392 In 2003 To 643 In 2007

EX PARTE

Re-exam

Request

Filed

Order

Granted

First Official

Action

Examination with

special dispatch

Order

Granted

Re-exam

Request

Filed Requestor

Reply

Patent

Owner

Statement

(Optional)

Examination

with special

dispatch

No further 3rd

party participation

First

Office

Action

Final

Rejection

Decision

Right to

Appeal

LEGAL

BODY

INTER

PARTES

USPTO FEDERAL COURT

Central Re-exam. Unit

BPAI

0

Appeal

BPAI

Appeal

Decision

Federal Circuit

Appeal

Decision

Federal Circuit

App

eal

Decision

Central Re-exam. Unit

3rd

party participation

Re-examination Timeline - Overview

2 mo. 2 mo.3 mo.

3 months 12 � 24 months 12-18 months 12-18 months

12-18 months 6 months � 1 yr. 12-18 months

All reexams, including appeals to the BPAI, are handled with special dispatch. However, inter partes reexams and reexams with concurrent litigation are given special "priority" over other reexams. Such reexams with priority should be completed closer to the earlier range of the time periods noted on the timeline. Even so, some reexams with priority due to litigation are more complex and can take longer.

3-5 yrs.1-2 mo.

15-27 mo.

15-27 mo.

Months

3 months

3 months 27 - 45 mo.

END

3-5 yrs.

*Average time to certificate issue based on USPTO data published September, 2008

27 - 45 mo.

28.5 mo.

24 mo.

Certificate Issue*

(May result in

multiple appeals)

Action

Closing

Prosecution

(ACP)

Patent

Owner

Comments

Patent

Owner

Response

Due

Requestor

Response

Due

OG Publication

Deny for

Informalities

1-3 months

First Office

Action

Re-exam Order

Grant

2 months 30 days

1-2 months

30 days

3rd

Party

Comments

1 month

Key

Events

Right to

Appeal

Notice

Appeal to

BPAI

30 days

Examiner

Review

Re-examination Timeline � Inter Partes - USPTO

Central Re-examination Unit Stage

Initial Processing Active Examination

1 CRU is frequently �bouncing� re-exam requests based on informalities, requestor often given 30 days to rectify or must re-file the re-exam and start over.2

CRU must grant or deny re-exam within 3 months. Deadline set by statute and taken seriously.3

For inter partes re-exam, first Office Action on merits usually accompanies order granting re-exam request, but may come after within up to 6 months.

4Extension of time generally not permitted for patent owner absent sufficient cause.

5Extension of time not permitted for requestor.

6Examiners encouraged to conduct proceedings with special dispatch and close prosecution quickly. Inter partes reexam with priority due to concurrent litigation may be completed

closer to the earlier time in the time period ranges above unless unusual complexity is involved.7

Evidence of non-obviousness, if any, should be of record before ACP issued.

Notes:

Initial Processing:

Active Examination:

0 Timeline 15-27 mos.

2

3

4 6

5

1

7

New Office Action Continue

0 � 6 months

Examiner

Review

Re-exam

Request

Filed

End

Part V � The Parallel Universe of Reexamination and Federal

Court and USITC ProceedingsIn re Translogic and Translogic Technology, Inc. v. Hitachi, Ltd et al.

Part V � The Parallel Universe of Reexamination and

Federal Court and USITC Proceedings (con�t)

In re Swanson

�484 patent filed

§103 rejection of claims 10, 11

based on Morison or Bauer in view

of Peurifoy and Deutsch

�484 patent granted

2/23/83 2/23/919/7/84

2/23/98

Abbott sues Syntron for

Infringement of �484 patent

Judgment that Syntron failed to

prove claims anticipated or obvious

in light of Deutsch

10/4/01

Federal Circuit affirms

judgment that Deutsch did

not anticipate asserted claims

2003

Reexamination filed

SNQ based on Deutsch

§103 rejection based on

Deutsch and Tom

Board affirms

Examiner rejection

9/26/03 11/15/04 5/29/07

present

appeal

filed

Part VI � Examples of Impact of

Reexamination on IP Business Models

� IP Model #1 � One Way Licensing Of Patents

� Business As Licensee

� Used To Challenge The Assumption That Patents Being

Asserted For Requiring License Are Valid

� Reduction In Royalty Rates

� Harder To Close License

� Business As Licensor

� Strengthen Patents And Avoids Challenges By

Licensees To Validity

� Increase Value Of Overall Assets

� Speeds Up Negotiations As Less Room For Attack

Part VI � Examples of Impact of

Reexamination on IP Business Models (con�t)

� IP Model #2 � Cross Licensing Of Patents

� Used To Change The Negotiation Metrics

� Target Most Valuable Patents In Portfolio

(Either Your Own Or The Other Sides)

� Used To Force Cross License And

Strengthen Own Position

Part VI � Examples of Impact of

Reexamination on IP Business Models (con�t)

� IP Model #3 � Enforcement Of Patents

� Business As Accused Infringer

� Reexam Filed In Many Significant Litigations Since 2006

� One Big Question Is Whether District Court Will Grant A Stay Of The Litigation Until The Reexamination Process Is Completed

� USITC Will Not Grant A Stay Of The Procedures Until The Reexamination Process Is Completed

� Reexam Used To Reduce Reasonable Royalty Rate, Especially Involving Patents Asserted By Non Practicing Entities

� Business As Patent Holder

� Understand Risks And Weaknesses Of Patents Before Starting Multimillion Dollar Litigation

� Understand Strengths Of Portfolio To Determine Which Assets To Assert

Part VI � Examples of Impact of

Reexamination on IP Business Models (con�t)

� IP Model #4 � Sale Or Securitization Of

Patents

�Reexam Acts To Reduce Or

Strengthen Value Of Patent

�Make Sale Or Securitization More

Problematic Or More Valuable

Part VI � Examples of Impact of

Reexamination on IP Business Models (con�t)

� IP Model #5 � Negotiating Leverage For

Patent Owner

� Increased Leverage Produced By Reexam -

Either Because Bolster Validity Of Patent

For Your Own Patents Or Weaken Validity

Of Patents For Patents Asserted Against

You

� Increases Length And Complexity Of

Negotiation

10 Reexam Essentials To Remember

� Reexam Is Prosecuted In USPTO (CRU; BPAI)

� Reexam Only Considers Patent And Printed Publication Prior Art

� 2 Types: Ex Parte And Inter Partes

� Patent Owner Or 3rd Party Requester Can File Ex Parte Reexam Request

� Only 3rd Party Requester Can File Inter Partes Reexam Request

� Inter Partes Reexam Only Available For Patents Issuing From Applications Filed On Or After November 29, 1999 And Can Raise Estoppels In Litigation

� Once Reexam Filed It Cannot Be Stopped As Part Of Settlement

� Reexam Coexists With Parallel Federal Court And USITC Proceedings Involving The Same Patent

� Reexam Can Find Patent Invalid Even Though Parallel Proceedings Have Already Found The Same Patent Valid (In Re Translogic), Even Asserting The Same Prior Art (In Re Swanson)

� Reexam Often Filed As An �Insurance Policy,� Especially In Litigations Involving Non Practicing Entitles, To Reduce Reasonable Royalties

Detailed Information On The Leading Edge Of

Reexamination Practice and Procedure Can Be

Found At www.skgf.com

� See, e.g., Sterne, Robert Greene, et al,

�Reexamination Practice with Concurrent District

Court or USITC Patent Litigation�, The Sedona

Conference On Patent Litigation 2008, The Sedona

Conference, Sedona, AZ (October 17, 2008)

(www.thesedonaconference.org)

� Pdf of this article can be found at:

(http://www.skgf.com/media.php?NewsID=472 )

Dialogue Session

� Questions

� Comments

� War Stories

� Observations

THE END

For additional Information Contact:

Robert Greene Sterne

Sterne, Kessler, Goldstein & Fox, PLLC

Washington, DC

E-mail: rsterne@skgf.com

(Direct Dial): 202-772-8555