Wealth of Ideas Newsletter, May 2010

Remember the landmark ruling last August in the landmark i4i v. Microsoft case? An Eastern District of Texas jury slapped the software giant with a $290 million damages award and an injunction on sales of the version of Microsoft Word 2007 that contained the infringing feature.

Microsoft appealed the verdict before the Court of Appeals for the Federal Circuit, but the CAFC sided with the lower court – although it did extend the deadline on the Word injunction from 60 days to five months after the August 11 order.

Now Microsoft just received more bad news: The results of the patent reexamination they requested on the i4i patent − filed before the jury verdict was issued − are finally available, and all the patent’s claims were confirmed valid! As i4i’s lawyer for the reexamination put it, Microsoft’s bid to invalidate the patent “failed in a dramatic way.”

To better understand the significance of this development, this month we’ll take a look at what the patent reexamination process involves – and how it can be used by both patent owners and accused infringers to either strengthen or invalidate a patent.

Patent Reexaminations: Inter or Ex Partes

First of all, what is a reexamination? Simply put, it’s a process whereby a third party or the inventor can request a review of a patent by a patent examiner to make sure the patent’s claims are still allowable in light of newly-cited prior art (“prior art” is any information that was available to the public at the time the patent application was filed and which might be relevant to whether the invention is novel, non-obvious and, thus, patentable). Whether the entity filing for the reexam is an alleged infringer or the inventor/patent owner, the request for reexamination must be accompanied by prior art that “raises a substantial new question of patentability.”

Reexaminations can be inter partes or ex partes. In inter partes reexamination, the entity who filed the request for reexamination (the petitioner) is allowed to participate in the reexam proceedings; in an ex parte reexamination, all correspondence is between the patent owner and the patent examiner.

Inter partes reexaminations take longer and afford the petitioner a chance to be involved in the process, so they would seem to be the natural choice for a defendant in a patent suit who wishes to make the problem patent “go away.” However, inter partes reexams cost more than ex partes. And there is another important point to consider: After initiating an inter partes reexamination, the petitioner will be barred from introducing at a subsequent trial any defense that was raised – or even could have been raised – in the reexamination process.

Patent Reexams: Risks and Rewards

Defendants in patent lawsuits often initiate reexaminations of the patent(s) that they are accused of infringing. There are two reasons for that: First, the reexam can put the trial “on hold” for months or even years. It takes about three months to find out if the request for reexamination is even granted, and from that point, the reexam certificate with the decision of the examiner takes an average of 37.5 months to issue in an inter partes reexamination.

The second reason alleged infringers initiate reexaminations, of course, is the possibility of invalidating the patents they are accused of infringing. A 2008 report issued by Foley & Lardner LLP found that in the sample of reexaminations they surveyed, around 60% of all inter partes reexaminations resulted in all of the patent’s claims being rejected. Only 12% of the patents in inter partes reexams survived with all of their claims intact, and 28% changed their claims in some way to remain valid.

Clearly, patent reexamination is a risky business – and the statistics are on the side of the infringer! If the patent is invalidated through reexamination, the lawsuit is over, and the defendant doesn’t even have to incur much in the way of legal fees.

So why would a patent owner wish to subject their patents to this kind of risk? First of all, if you don’t file for reexamination, whoever you file a patent infringement lawsuit against probably will. Second, a patent that has been through reexamination and survived is stronger and more difficult to invalidate.

As with most intellectual property matters, whether or not to petition for a reexamination of your own patent (or someone else’s!) is something to carefully consider – and only proceed on the advice of, and with the assistance of, a competent patent enforcement professional.