As anyone who has ever been involved in a patent litigation understands, the costs can be considerably high. The average cost for litigating a patent case to judgment is estimated at approximately $2.7 million. (Report on the Economic Survey, AIPLA, 2011.) Typically, district courts have been the preferred jurisdiction for challenging patents. That may change with implementation of certain provisions in the America Invents Act, on Sept. 16, which establishes administrative procedures for blocking patent applications or invalidating patent claims at the United States Patent and Trademark Office (PTO).

The majority of the provisions that go into effect on Sept. 16 provide new avenues for competitors or an accused infringer to challenge patents and pending patent applications. While it remains to be seen whether any of these procedures will reduce or replace litigation and thereby streamline costs, at a minimum, strategic use of these procedures can narrow the scope of claims and introduce material on patentability as a prelude to litigation, or to leverage a favorable settlement. These strategies, however, must be weighed against the highly regulated and sometimes narrow timeframe for making the challenges and the possible estoppel effect that applies to any subsequent proceeding.

Depending on whether a patent application is pending or has issued, the period for challenging a patent can begin during prosecution of the patent application with the filing of a third-party pre-issuance publication submission or third-party pre-issuance protest (protest) (only available after March 16, 2013). If the patent has been issued, then a challenge can be instituted by filing a request for inter partes review (IPR) or post-grant review (PGR). While these administrative procedures may arguably be more cost effective than litigation, reliance on any of these challenges requires thorough preparation and vigilant attention to the status and merits of the targeted patents and pending patent applications, in the U.S and abroad.

Pre-Issuance Challenges

If a patent application is pending, any member of the public, including private persons, corporations and government agencies, can submit publications that are “potentially relevant to the examination” of the application under pre-issuance publication submission (PPS), or any “fact or information that is adverse to patentability” under protest.

• Publication Submissions

For PPS, a “concise description of the asserted relevance” of each submitted document, including facts and an explanation of how the document is important to the examination of the pending application must be included. Documents that qualify as publications include patents, published patent applications and printed publications. Note that the publications need not be prior art publications. Moreover, the submission can be cumulative of information on the record, so long as the explanation of its relevance is not repetitive of what has previously been submitted. Submissions can also be made for abandoned applications but the examiner will not consider them until the application resumes its pending status by revival or withdrawal of the notice of abandonment. The time period for making the submission is the earlier of the date the notice of allowance is given, or the later of six months after the application is published by the Patent Office or the date of the first rejection of any claim by the examiner.

Of particular interest to those parties concerned with being associated with the submission is that it can be made anonymously, and service to the patent applicant is not required.

• Protest

In contrast to publication submissions, a party seeking to submit information in a protest may submit any information, not necessarily limited to publications, so long as it is related to the patentability of the application. The protest must include a concise explanation of why the identified information is relevant and may include arguments against patentability. Unlike PPS, protests must be served on the applicant. Although protests provide a potentially powerful avenue for third parties to submit information that challenges the patentability of an application, its effectiveness is hampered by a limited timeframe when submissions are allowed. For instance, the protest must be filed prior to the date the application is published by the PTO. If an application has been published by the PTO, consent from the applicant must be given before the protest can be filed and only before a notice of allowance is given or mailed. It should be noted, however, that publication of applications by offices outside the United States — including the World Intellectual Property Organization (applications under the Patent Cooperation Treaty) that designate the United States — will not trigger the publication time period for PPS or protest. Thus, vigilant monitoring of competitors’ publication of foreign applications that enter the United States may provide a good opportunity to submit protest information, particularly given the limited timeframe for filing the protest.

For both types of submissions, participation by the third party ends once the information is submitted. Should a challenger want to participate in the PTO’s review process, he/she must wait until the patent issues. In addition to having the ability to participate, other advantages to challenging patents are present at the PTO, over district court litigation. Patent claims are given their broadest reasonable interpretation, which allows for introduction of a broader scope of prior art. In addition, there is no presumption of validity, so the standard for finding invalidity is lower than that required in district court litigation.

Post-Issuance Challenges

• Inter Partes Review

The inter partes review (IPR) will replace the current inter partes re-examination on Sept. 16, and applies to any patent issued before, during or after that date. This removes one of the hurdles of the previous inter partes re-examination, which applied only to applications filed after Nov. 29, 1999. The PTO will only accept a valid IPR petition nine months after a patent has issued. Within the nine-month timeframe, a post-grant review (PGR) request can be filed as explained in greater detail below.

As in inter partes re-examination, the IPR permits the petitioner to challenge claims as being anticipated or obvious in view of published prior art references. Also, like the current inter partes re-examination, IPR carries with it an estoppel effect barring the IPR petitioner from asserting the invalidity of any challenged claim in any district court action. Unlike inter partes re-examination, IPR expands the estoppel effect to the PTO and the International Trade Commission for any ground the petitioner raised or could reasonably have raised during the IPR proceedings. However, estoppel will not attach if there is a settlement between the parties before a decision on the merits issues. Thus, any party foreseeing litigation should carefully weigh the effectiveness of this proceeding against a charge of estoppel during subsequent proceedings and its utility in settlement negotiations.

IPR differs significantly from the current inter partes re-examination in the procedure, the decision maker, timing and costs. Unlike inter partes re-examination before a patent examiner, the IPR proceeding takes place before a panel of three administrative judges. The procedure is statutorily required to be completed within 12 months from the grant of the IPR (extended to 18 months with good cause). Because the IPR process is set up like a “mini trial,” its attendant costs are significantly higher; filing fees start at $27,200 for 20 claims.

The IPR process begins with the filing of a petition which must identify the challenged claims and the reasons the claims should be invalidated given the cited prior art publications. The patent owner may then offer a preliminary response. If the PTO finds that there is a reasonable likelihood that the petitioner would prevail as to at least one of the challenged claims, it will grant the petition and issue the scheduling order. The parties then conference with the PTO to discuss scheduling and potential motions. Each party has a very limited timeframe to present its positions and file motions, take discovery and amend claims (patent owner) prior to the oral hearing before the panel of judges. The losing party may appeal directly to the Federal Circuit Court of Appeals.

• Post-Grant Review

Unlike IPR, PGR is only available for patents that have a priority date on or later than March 16, 2013. Within the first nine months after a patent issues, a petitioner can raise questions of invalidity under 35 U.S.C. §101, §102, §103 and §112. Unlike IPR, which is limited to only §102 and §103 publication, PGR allows for a broader scope of invalidity challenges. However, there are many similarities between IPR and PGR. As with IPR, any person other than the patent owner may file the petition. Estoppel applies unless the parties settle before a decision on the merits. Likewise, the pendency of the PGR proceeding is no more than one year with a six-month extension for good cause.

The timeframes for filing IPR and PGR are also affected by court actions involving the challenger. Both IPR and PGR must be filed before the challenger seeks a declaratory judgment action invalidating any of the claims in the patent at issue. Further, the IPR petition will not be accepted if it is filed more than one year after the challenger has been served with an infringement complaint by the patent holder.

As summarized above, the implementation of the America Invents Act provides new procedural tools for challenging patents. Patent holders and challengers should be cognizant of these new procedures as alternatives to district court litigation and be mindful of offensive and defensive strategies before the PTO well in advance of any potential patent litigation.n