Inter Partes Reexamination and Inter Partes Review: Weighing Strategic Choices Before the Clock Runs Out

After years of debate and negotiation, the signing of the America Invents Act on Sept. 16, 2011 launched a series of historic changes to U.S. patent law. As the AIA’s one-year anniversary approaches, those changes continue to unfold, and Sept. 16 marks a significant turning point for companies challenging issued U.S. patents, as various mechanisms will be replaced, changed, or added to the challenger’s arsenal.

This article provides a brief overview of the pending transition from traditional inter partes reexamination (which disappears on Sept. 16) to its replacement, inter partes review, and highlights some of the more important considerations companies may be weighing as this deadline approaches.

Traditional Reexamination Options

Companies seeking to challenge the validity of issued U.S. patents outside the courtroom have traditionally had two options at the Patent and Trademark Office: ex parte reexamination, which became available in 1981, and inter partes reexamination, launched almost two decades later in 1999. Both allow a third-party requester—whether or not litigation with the patent owner is pending—to attack a patent as obvious or anticipated based on prior art patents or printed publications.

A PTO examiner first determines whether the third party’s written request satisfies the statutory threshold for initiating reexamination. For an ex parte request, the test is whether it raises a “substantial new question of patentability” as to each challenged claim, and for an inter partes request the threshold is whether there is “a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request.”

If the threshold is met, both versions of reexamination proceed before the examiner in a procedure resembling original prosecution, with possible patent owner appeals to the Board of Patent Appeals and Interferences and the Federal Circuit.

In the ex parte version of the proceeding, the third party’s participation typically ends with the filing of the initial request, although a challenger may seek a form of ongoing participation by filing additional requests for reexamination that raise new issues. Appeals from ex parte reexaminations do not involve the third party requester.

The PTO calculates that, through FY2011, ex parte reexaminations have resulted in either the cancellation of all claims or changed claims 76 percent of the time (with 12 percent of requests resulting in cancellation of all claims, and 64 percent of requests yielding changed claims).

In an inter partes reexamination, the requester has an ongoing opportunity to comment within a (non-extendable) 30-day period after each patent owner response, and the requester can also participate in appeals. After the exhaustion of all appeals, challengers in inter partes reexamination face statutory estoppel that prevents them from re-litigating issues that were raised or could have been raised in the reexamination, or from challenging facts “determined” in the reexamination. (No such formal estoppel is imposed on a requester in ex parte reexamination, where a requester can choose to remain anonymous.)

In addition, patent owners in inter partes reexamination cannot conduct interviews with the examiner, and this eliminates an important persuasive tool available to patent owners in the ex parte version of the proceeding. It is also important to note that inter partes reexamination is available only for patents issuing from an “original application” filed on or after Nov. 29, 1999, although the term has been broadly construed to include, e.g., continuations, continuations-in-part, and divisionals.

Inter partes reexaminations have, through FY2011, resulted in cancelled or changed claims 89 percent of the time (with 44 percent resulting in cancellation of all claims, and 45 percent resulting in changed claims).

In both versions of reexamination, if the resulting claims are not “substantially identical” to the pre-reexamination claims, the patent owner cannot seek damages for alleged infringement before a certificate of reexamination issues, and third-party challengers may enjoy intervening rights.

While, as described above, ex parte and inter partes reexaminations may result in the outright invalidation of claims or the elimination of past damages in a significant portion of cases, they can also be structured to achieve many other benefits. For example, in order to survive the process with any claims confirmed, a patent owner may be forced to take written positions on a variety of issues (from, e.g., claim construction to priority to written description) that can substantially bolster a challenger’s litigation defenses.

A carefully planned reexamination request can tee up these key issues. In addition, reexamination—in which there is no presumption of validity and the examiner will apply a “broadest reasonable construction” standard for claim construction that is broader than the standard applicable in litigation—may also support a stay of court proceedings, and typically proceeds at a lower cost. For these reasons, a thoughtfully deployed reexamination strategy can substantially improve the challenger’s chances of prevailing in a patent dispute.

And as even this brief overview suggests, there are differences between ex parte and inter partes reexamination that may favor one process over the other for a challenger in a particular dispute, even when both are available.

Replacing Inter Partes Reexamination With Inter Partes Review

These historical choices, however, will change significantly on Sept. 16. While ex parte reexamination will remain available and largely unchanged, inter partes reexamination will disappear when it is replaced, on Sept. 16, with inter partes review—an administrative trial proceeding resembling in many respects the post-grant review mechanism that will become available later for patents emerging from the first-to-file regime (effective in March 2013).

For companies that are contemplating a challenge to an issued patent and are deciding now whether to request inter partes reexamination before Sept. 16 or inter partes review thereafter, there are, again, real differences to be considered.

A full discussion of inter partes review—let alone the other choices that will become available, including post-grant review and the hybrid transitional review proceeding for qualifying business method patents that will become available on Sept. 16—is beyond the scope of this article, but the following examples of differences between inter partes reexamination and inter partes review highlight some of the significant factors to be weighed in making such a decision.

Litigation limits and Availability:

Inter partes review—unlike inter partes reexamination—will be available for all issued patents, without regard to their filing dates. However, potential challengers who have already filed suit to attack the validity of a patent, or who have been served with a complaint for infringement more than a year earlier, may not request inter partes review.

In addition, patents cannot be subject to inter partes review for the first nine months after they have been issued. For some challengers, these limitations may temporarily or permanently remove inter partes review as an option.

Estoppel and Duration:

The PTO is required to reach a final written decision on an inter partes review within one year of deciding to initiate the proceeding (with the possibility of one six-month extension). This contrasts with inter partes reexamination, in which there is no formal time limit on the PTO.

The mandatory timeline in inter partes review may provide further support to challengers seeking to stay litigation, and it also has a significant impact from an estoppel perspective. While estoppel attaches to a requester in inter partes reexamination only after the exhaustion of all appeals (which may well be after trial if there is an un-stayed parallel litigation), in inter partes review estoppel (which is further limited to arguments that were raised or “reasonably” could have been raised) will attach at the time of the written decision—i.e., within one year or, with an extension, 18 months from commencement. Estoppel from inter partes review is thus far more likely to come before the conclusion of district court litigation.

Proposed Filing Fees and Page Limits:

While inter partes reexamination requests have no page limit, and—according to the PTO—averaged 246 pages in length between October 2010 and June 2011, the PTO’s initial proposed rules for inter partes review would impose a 50-page limit on petitions. This limit would count any claim charts and must also include a new mandatory discussion of claim construction positions.

Along with this strict new limit on length, the PTO proposes to set the filing fees for inter partes review quite a bit higher than the current $8,800 filing fee for inter partes reexamination. Filing fees for inter partes review would begin at $27,200 for challenging up to 20 claims, with significant increases for additional claims. (Challenging all of the claims of a 90-claim patent, for example, would require a filing fee of $149,600.)

While the PTO may adjust these fees and page limits in its final rules (which are due to be released very shortly after the writing of this article), these provisions may well remain a serious practical concern for challengers comparing inter partes reexamination and review.

Limitations on Amendment Practice:

In inter partes review, with its emphasis on time limits and front-loading, a patent owner’s ability to amend will also be somewhat more constrained than in inter partes reexamination. A patent owner will have the right to file one motion to amend, in which the owner may cancel claims and propose a “reasonable number of substitute claims.” Later motions will be available only if the patent owner demonstrates good cause, or if they are jointly agreed and would materially advance settlement.

The PTO has also proposed to require that motions to amend must respond to asserted grounds of unpatentability. Challengers may find that these limitations on the patent owner’s ability to add or amend claims weigh in favor of inter partes review.

New Provisions for Settlement and Discovery:

In inter partes reexamination, there are no provisions for discovery, and there is also no mechanism for settling the underlying dispute: once a reexamination proceeding has begun, it will (absent a final court decision) continue to a final result at the PTO, whether or not the third party requester has resolved its dispute with the patent owner or ceases to participate.

The inter partes review mechanism, on the other hand, permits limited discovery, including “deposition of witnesses submitting affidavits or declarations” and “what is otherwise necessary in the interest of justice” (with discovery in the latter category expected by the PTO to be “rare”). Depending on the circumstances, the prospect of discovery may or may not be deemed an advantage for a particular potential patent challenger.

There are also provisions for settlement in inter partes review: the proceedings with respect to a particular challenger can be terminated by agreement (and without estoppel against that challenger) before a decision on the merits, and if all challengers have been terminated the PTO will decide whether to proceed to a final decision on the merits. Any settlement agreement or understanding—including any collateral agreement—must be reduced to writing and submitted to the PTO, where the parties may request business confidential treatment.

This greater range of procedural options in connection with settlement may be a factor weighing in favor of inter partes review for some patent challengers.

Added Disclosure Obligations:

It is worth noting that the PTO has proposed to impose a new disclosure obligation on third party requesters in inter partes review. In inter partes reexamination, only patent owners bear a duty of disclosure to the PTO.

In inter partes review, however, the PTO’s proposed rules require that, unless otherwise ordered, third party challengers (as well as patent owners) must disclose “noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding” as part of routine discovery. This additional obligation may give some challengers pause as they compare inter partes review with inter partes reexamination.

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As the discussion above briefly illustrates, there are significant practical and substantive differences between inter partes reexamination and inter partes review—differences that may have a substantial impact on a patent challenger’s strategy and success.

With the one-year anniversary of the AIA rapidly approaching on Sept. 16—when inter partes reexamination disappears, inter partes review takes its place, and other options continue or emerge—companies considering a patent challenge at the PTO face an important decision point as they select their preferred approach from this range of shifting choices.