Today’s post comes from Guest Barista C. Lee Thomason, a registered patent attorney and senior litigator at Frost Brown Todd LLC, in Louisville, who keeps track on developments in patent litigation.

New “Amendment” to Patent Reform Act of 2005 will makes Inequitable Conduct determinations as simple as a three-ring circus.

Rep. Lamar Smith has pared back his proposed Patent Reform Act of 2005, including the provisions that take inequitable conduct out of the federal courts and put patentees to in administrative fora, while the litigation proceeds on other related issues.

Before this “Amendment in the Nature of A Substitute to H.R. 2795”, the proposed bill set some standards for an administrative investigation and determination to precede action in a court on the inequitable conduct defense. The amended bill deletes the timetables, the preliminary and final determinations, etc., and frees the Special Office to investigate however “the Director determines is appropriate.” Deleting the details suggests a lack of consensus on most of the ‘what and how’ aspects of the proposed non-judicial investigation. More importantly, such an unguided mandate makes it hard to compare whether a “Special Office” investigation or determination can work better, cheaper, or be more prompt and predictable than the way the issues now are handled by U.S. District Courts. After all, was not the promise of reducing the cost to litigate “state of mind” issues in patent cases, as set out in the NAS and FTC studies, one provoking cause of the call for such “reform” bills?

My previous post, on 22 July, compared the Patent Reform bill timetables (now-deleted) with actual times from pleading to decision in some recent court cases. There, I suggested that the Special Office proceeding would take 15 months plus the time for the actual investigation, which was no more expeditious than the timeframe for decision in those recent cases.

With no administrative timetable now proposed in §136(d)(3)B) – whatever “is appropriate” – my next avenue of inquiry is: what is the worst havoc that the “Amendment” allows an infringer to craft around a colorable claim of inequitable conduct. I think that the grandest fracas would be (1) a suit pleading invalidity, unenforceability and attempted monopolization, and (2) a “referral” per §136(c) of the alleged inequitable conduct for a Special Office investigation, and (3) if you time it right, a post-grant opposition proceeding per §321 of the proposed Reform bill. That three-ring circus should keep the patentee occupied, whilst the infringement continues, for a good long while!

The suit, and related discovery, will proceed at least in regard to Markman and infringement issues, plus the validity and antitrust counterclaims, and any unclean hands or patent misuse claims. Those continue, because the proposed bill only takes the inequitable conduct issue from the court. Simultaneously, the patentee fights the suit, and also, must defend the Special Office investigation. However, the infringer sits freely in the balcony observing that administrative inquest. Then, just to complete the triple-threat, the infringer or “A person” can request that the “patent be reconsidered” under §321. This administrative procedure confines itself to limited issues of “patentability,” and so, a well-advised infringer can have opposition and court proceedings going simultaneously. Who knows, whether the claims interpretation decision in the opposition, or that which comes after the Markman hearing, will best suit the infringer’s plans? As stated in §325(d)(4), the court’s claim interpretation is interlocutory and until that is “final and non-appealable” it cannot be binding in the opposition.

Double-teaming on “patentability” also provides a benefit, because that the opposition evaluates validity under a “preponderance of the evidence” standard, per §332(a). This provides a good dress-rehearsal, before the court requires the infringer/opposer to make a clear and convincing case of invalidity. Altogether, this lays the groundwork for the end-game of the Special Office proceeding, because unenforceability requires a finding that the uncited or misrepresented art “resulted in the issuance of, …one or more invalid claims” per §136(d)(1)(A) & (3)(B)(1). Even a “substantial question” finding might shake the patentee’s resolve to litigate. §325(a)1). If the infringer/opposer has art or a misrepresentation that may support invalidating a claim, then the circus could close with one grasping the ring of “unenforceability” back in court. Only a patent attorney, or Ph.D. in actuarial science, can enjoy calculating all of the risks, costs, and rewards involved in making this triple-play work to one’s advantage.

The Reform bill does try mildly to curb having a parallel suit and opposition. The court’s action on the validity issue can be stayed, if (and there are 4 ifs) the patentee requests a stay, if the infringement suit was filed “within” three months of issuance, if the “Director determines” the issues overlap, and determines a stay would not be “contrary to the interests of justice.” §325(d)(3). The purpose behind the “three months” is unknown (Note to self: calendar ANDA generic filing 91 days after patent grant!). Separately, the opposer has to present its opposition request not “later than 9 months after the grant of the patent.” §323.

To make maximum mischief for the patentee, in multiple fora, one needs to yank out the rug between 3 and 9 months after issuance. Then, the Reform bill enables the infringer/opposer to double-team on the validity issue with parallel discovery. In the opposition, depositions of those who gave affidavits accompanied the request are the only discovery allowed, as of right. §328. The determination made in the opposition can estop the opposer in the court case, subject to the big “Exception” in §336(a)(2) that “additional factual evidence …could not reasonably have been discovered” in the opposition. That exception often could apply, due to the opposition discovery being limited to depositions of those “submitting an affidavit” and, with “such depositions limited to cross-examination on matters relevant to the affidavit.” §328(a). “Gee, Judge (whine), all I got was ‘limited’ discovery over in that opposition.”

Many months later, anyone “dissatisfied” with the ruling in the opposition can appeal, §334, while the court case and the Special Office proceeding continue. Once the Special Office determines if there was inequitable conduct, then that issue goes back to court, and once it rules, then the main case (infringement, validity, misuse & antitrust) can be appealed.

With good timing, a determined and well-budgeted infringer/opposer can make the patentee suffer through the panoply of proceedings that the Reform bill permits, and in some respects, requires. We are to be assured, though, that this proposed “Reform” legislation serves to “improve” the system, to “reduce” costs and inefficiencies of litigation, and to “modernize” the Patent Office, all of which is funded by fees charged to inventors.

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