Green-Arrow IP Helping Entrepreneurs Manage IP

I just attended an excellent webinar by WilmerHale IP attorneys Stephen Muller and Richard Goldenberg titled "Reexamination as a Litigation Strategy."  I'm providing this write-up as a primer for Green-Arrow IP clients on this increasingly important part of IP law and strategy.  I'll post a link to the original presentation when it becomes available on Wilmer's site.

What is reexamination, and why should an entrepreneur care?

Consider the following scenario.  You are a tech company, and you're merrily going along selling your products and gaining new customers when you receive a letter stating that you are infringing the patent owned by entity X (the patentee).  Entity X is willing to discuss licensing their technology for a fee, and if you don't want to discuss a license, entity X will file suit to stop you from selling your technology (which would kill your company).  What to do?

This sort of thing happens more often as your company becomes more successful, and entity X can be a competitor or a patent holding company that does not even practice the technology themselves.  In either case, you will carry out the following analysis.  First, you will explore whether their patent is valid in the first place.  Second, you will examine whether you are in fact infringing their patent.  If you want to make the second argument, you'll have to proceed to suit or settle.  If you can make the first rgument, that the patent is not actually valid, then you can pursue a reexamination.  

In reexamination you inform the USPTO that there is a significant problem with the patent, and that it shouldn't have been allowed in the first place.  If the patent office agrees, they will open the patent for reexamination (almost starting the patent process over from the start), and they may find that all of the original claims are rejected.  No claims, no infringement.  Game over for entity X.

How do you prove that a patent is invalid in reexamination?

Reexamination is not exactly like starting over, however, since the patent office will only consider prior art challenges based on patents or printed publications. So, your goal is to find a piece of prior art that the examiners missed the first time and that knocks out the patent.  Now, "printed publications" can include almost anything, like the proverbial german thesis where the only copy is in the university library.  Knocking out patents using reexamination has become such an important tool that there are even firms that will crowdsource finding this prior art.  These companies use the web to offer a bounty to anyone who can uncover a publication (no matter how obscure) that predates the patentee's work.  Someone in Prague may find it in an obscure journal never published in english.  Once one or more such publications (or patents, including foreign patents) is discovered, they are submitted to the PTO along with a request for reexamination.  If the publication is on-point, then it is a very bad day for entity X.

Why?  Because it costs less.

In reality, most such scenarios play out for bigger companies that entity X thinks can pay a large settlement (or large infringement award if the case goes to trial).  So in most cases, reexamination is part of a larger litigation strategy.  But as an entrpreneur, it's worth keeping these things in perspective.  Patent litigation costs are typically in the millions of dollars.  Reexaminations are usually conducted for between $25K and $150K according to the WilmerHale partners.  So if you can't afford to launch a full-scale litigation fight, and you have some really strong invalidating prior art, then reexamination (or the threat of it) can be a very powerful tool.

How successful is it?

The USPTO grants reexamination approximately 90% of time, and for the less expensive reexamination (the one where you sit by the sidelines and let the PTO consider the new prior art) about 10-15% of the time, all of the claims in the patent are cancelled.  Not bad odds, but not great.  For the more expensive form of reexamination (where you stay involved in the case) approximately 50% of the time the PTO finds that all claims are invalid.  A pretty high percentage, and a total win for the defending team.

Caveats?  Sure, aren't there always?

Patent litigation is complicated business, and so the choice is rarely as simple as whether to pursue reexamination or to litigate.  You'll usually want to do some of both.  You'll want to get expert advice when developing a litigation strategy (the folks at Wilmer are well known for this, and hopefully you'll be in a financial position to use a top-tier firm).  But in the meantime, you'll want to know that reexamination exists as a tool when you think you can prove the original patent invalid.  

It's also possible to lose in reexamination, since the patent may survive the reexamination and the patentee may be able to amend the claims to make it even more obvious that you're infringing.  This is a good day for entity X and a bad day for you.

Not also that if you are a tech company that owns some patents, and you send a "nasty-gram" to another company telling them that you think they're infringing your patent, you can at the very least expect them to look at invalidating your patent and potentially filing a reexamination as part of their "negotiating strategy."