The Surprising Efficacy of Inter Partes Reexaminations

An Analysis of the Factors Responsible For Its 73% Patent Kill Rate And How To Properly Defend Against It

     By Andrew S. Baluch and Stephen B. Maebius, Foley & Lardner LLP[i]

INTRODUCTION

In creating inter partes reexamination, Congress hoped to provide a faster, cheaper alternative for resolving questions of patent validity in the U.S. Patent & Trademark Office (USPTO) rather than in the courts.  As a measure of the procedure’s growing popularity and availability, the rate of requests for inter partes reexamination has steadily increased each year, totaling over 308 since the procedure was created in November 1999.[ii]  But, while the pace of reexam requests continues to increase, the end results of completed proceedings have received relatively little attention.

Here, we report the outcomes of all inter partes reexaminations completed as of August 2008.  Surprisingly, the proceedings displayed a high 73% “kill” rate (complete elimination of all claims targeted by the requesters) — a rate which is far above that in litigation (33%)[iii] and ex parte reexamination (12%)[iv]. 

Is the high kill rate explained by the fact that especially weak patents were targeted?  Did the patent owners simply give up because the patents were commercially unimportant?  Or is inter partes reexamination truly the best procedure for a party to use in the U.S. to invalidate a patent? 

For both requesters and patent owners, the present study highlights the factors and strategies favoring success in inter partes reexaminations.  Although the reported statistics appear to favor requesters, a patent owner has unique procedural tools at its disposal both in the courts and at the USPTO.

KEY FINDINGS

·         Requester’s Success Rate:  Third-party requesters succeeded in having all claims cancelled or disclaimed in 73% (22) of the first 30 completed inter partes proceedings in which a certificate issued.  These early certificates are likely skewed in favor of quick dispositions in which the patent owner simply failed to respond to a first Office action, which occurred in 43% (13) of the proceedings.  However, when the patent owner did respond to the first Office action, the requester’s success rate fell to 53% (9 out of 17).  In any event, the requester’s likelihood of a complete victory in inter partes reexams is substantially greater than that in ex parte cases during the same period: only 12% of all ex parte reexams since January 2000 resulted in all claims being cancelled.[v]

·         Pendency:  The inter partes proceedings had an average pendency (measured from request date to certificate issue date) of 33.3 months.  Like the requester’s success rate, the overall pendency is skewed by the numerous early cases in which the patent owner simply failed to defend its patent.  Eliminating these uncontested cases dramatically increases the average pendency up to 42.5 months.

·         Grounds of Rejection:  In a first Office action, obviousness was the sole ground of rejection in only 20% (6) of the proceedings, whereas anticipation was a ground of rejection in 73% (22) of the proceedings.  Nevertheless, obviousness-only rejections did not improve the patent owner’s chances of success: 83% (5 out of 6 obviousness-only cases) resulted in all claims being cancelled or disclaimed.

·         No Board Decisions:  None of the first 30 inter partes reexamination certificates was the product of a Board decision.  Only one party, a patent owner, filed a notice of appeal, but then dropped the appeal by declining to file an appeal brief.  In all cases where examiners found claims to be patentable, the third-party requesters did not bother to appeal the finding.

·         Litigation:  Five (17%) of the 30 inter partes reexaminations involved concurrent litigation between the patent owner and third-party requester.  The causes of action were split:  2 declaratory judgment (DJ) actions brought by the third-party requester, and 3 infringement suits brought by the patent owner.  The only still-pending cases involve reexaminations favoring the plaintiff:  one DJ action in which all reexamined claims were cancelled, and one infringement suit in which all reexamined claims were confirmed.

[READ THE FULL REPORT]

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[i]  The authors are patent attorneys at Foley & Lardner LLP and further acknowledge their past and current involvement in both ex parte and inter partes reexaminations.  The views expressed herein are solely those of the authors and should not be attributed to their firm or any of its clients.  Comments may be directed to smaebius@foley.com.

[ii] USPTO Inter Partes Reexamination Filing Data (Sept. 30, 2007).

[iii] See Kimberly A. Moore, Judges, Juries, and Patent Cases – An Empirical Peek Inside the Black Box, 99 Mich. L. Rev. 365 (2000) (between 1983 and 1999, validity was upheld in 67% of cases — 64% of bench trials; 71% of jury trials).

[iv] See Dennis Crouch, Ex Parte Reexamination Statistics II, Patently-O, available at http://www.patentlyo.com/patent/2008/06/ex-parte-reexam.html (posted Jun. 25, 2008) (between January 2000 and June 2008, all claims were cancelled in 12% of proceedings).

[v] See Crouch, supra.  See also USPTO Ex Parte Reexamination Filing Data (Dec. 31, 2007) (reporting 12% cancellation rate for all ex parte reexams initiated by third-party requester).

Comments

[Malcolm Mooney]

"In any event, the requester's likelihood of a complete victory in inter partes reexams is substantially greater than that in ex parte cases during the same period: only 12% of all ex parte reexams since January 2000 resulted in all claims being cancelled."

That's not surprising since ex parte reexams are primarily used by the patentee to put "new" art in front of the Examiner and get an allowance over the art (the mythological rationale being that the patent is now "bulletproofed" with respect to that art during litigation). One problem with the current reexam format is that rather than reexamining the originally filed claims in light of the new art (i.e., starting from scratch), the reexamination starts with the claims that were issued. Thus, any Examiner oversights and errors during the original prosecution tend to be ignored rather than highlighted by the PTO with the admonition to the applicant: we screwed up the first time and we aren't going to let it happen again.

"Or is inter partes reexamination truly the best procedure for a party to use in the U.S. to invalidate a patent?"

Ding, ding, ding! The only exception is where you have a very weak case for invalidity but you think you could convince an ignorant jury to take your side (of course, on appeal you'll get screwed anyway but timing is everything).

Let's face it: the only reason everybody doesn't use the inter partes reexam to tank patents is because the litigators would have you believe that it's the So Risky You'd Be Insane To Try It. But ask yourself why they might be pushing that viewpoint.

[Just Visiting]

"One problem with the current reexam format is that rather than reexamining the originally filed claims in light of the new art (i.e., starting from scratch), the reexamination starts with the claims that were issued."

It's not immediately intuitive (even with your explanation) why starting from the original claims would be a good idea. Perhaps you could expand on this a bit?

[curious]

I agree with Just Visiting.

[Mark Nowotarski]

Interesting results. Before you lean too heavily on the calculated averages, however, you have to take into account the very small sample size which can lead to large uncertainties in the actual kill rates. For example, for the 17 cases where the patent owner responded, the luck of the draw can give you a 53% kill rate even if the actual mean was as low as 20% (assuming binomial statistics). Still significantly better than ex parte and cheaper than litigation.

[Malcolm Mooney]

"It's not immediately intuitive (even with your explanation) why starting from the original claims would be a good idea. Perhaps you could expand on this a bit?"

That's why I wrote the next sentence in my previous comment. Think about it and let me know if you're still confused.

[Steven Sereboff]

What a pity. The law changed almost a decade ago, and we still don't really know whether it has value. I applaud the authors on their work and their honest. This is a very complex subject and I agree that the analysis is crippled by the sample size. I would expect that post-KSR the kill rate jumped for both inter parte and 3rd party/ex parte reexams.

[smashmouth football]

"[T]he only reason everybody doesn't use the inter partes reexam to tank patents is because the litigators would have you believe that it's the So Risky You'd Be Insane To Try It."

I think the commonly held conventional wisdom explains a large part of the very high kill rate found in this study. Only the weakest patents have been subjected to inter partes reexamination, ergo the kill rate is high.

Someone please remind me of the basis of the conventional wisdom. Is it the ghost of Blonder Tongue/collateral estoppel combined with the more limited means of attack available to the 3d party, as compared to litigation?

[Paul F. Morgan]

This is a good article and very timely in view of the CAFC in Cooper v Dudas just "clarifying" that inter partes reexaminations can be filed on patents with "original" application filing dates BEFORE 11/29/99 if those patents issued from applications which were RE-filed as continuations or divisionals any time after 11/29/99.
I think even Ex Parte reexamination success rates for ADVERSE parties may be even better than indicated, because a complete claim "kill" is often unnecessary. A substantive amendment of any attacked claim in reexamination may either avoid infringement or create an "intervening rights" defense.
I wondered if the authors might be accepting PTO pendency statistics for reexaminations that ignore the many important reexaminations delayed for no good reason for many years, especially on patents in litigation. [I would like to see THOSE average reexamination pendency numbers separately.] However they did helpfully note ONE very misleading PTO "averaging" - the PTO's averaging-in of the reportedly 43% [that seems surprisingly high?] of inter partes reexaminations that were completely uncontested. Also, the "Methodology" section of their full report suggest that they looked at the all the actual PTO files of inter partes reexaminations.
I hope that all of the more recent reexaminations (now reportedly all assigned to the special reexamination team in the PTO) will be handled much faster, but "I'm from Missouri" until I see independently confirmed statistics. The PTO has continued to blatantly ignore the statutory "special dispatch" requirement for all reexaminations for too many years.
A leading article on this subject not cited here is: "What's Really Happening in INTER PARTES Reexamination", by Joseph Cohen, Journal of the Patent and Trademark Office Society (JPTOS) March 2005.

[Scott]

I have seen this article at least 20 times in the last 4 years, citing the same stats, just written by others. The only fact that appears to be indisputable is that interpartes reexams take forever.

[Publius]

"The only fact that appears to be indisputable is that interpartes reexams take forever."

Not ALL inter-partes reexams take forever. Check out 95/000209 (Cooper patent involved in Cooper Techs. v. Dudas), and the RIM v. NTP reexam. The PTO can git-er-done when it has a dog in the fight.

[Scott]

Neither case you cite has been terminated. Moreover, both have been ongoing for years. I don't consider going to the Board, a completion of the reexam. In the NTP case, the appeal has sat idle for almost a year now. Like I said, they take forever.

[MaxDrei]

pds offers re-exam as a cure-all for the present ills of the system. See the parallel "Greg Aharonian" thread. Would he care to comment now, in this thread?