The New World Of Patent Litigation Under The America Invents Act

Friday, May 18, 2012 - 15:19

Editor: Please tell our readers about your patent litigation practice at Weil Gotshal.

Bobrow: Our patent litigation practice is a national practice comprising about 60 lawyers, many of whom have technical backgrounds, and all of whom devote all of their time to patent litigation and counseling. Four of our offices have significant patent litigation capability – Silicon Valley, where I am, Houston, Washington, DC and New York. Our practice ranges broadly, and we practice in all of the active patent litigation venues, including the district courts in Delaware, California, Texas, Virginia, and others, as well as the International Trade Commission in Washington, DC and the Federal Circuit Court of Appeals. Our practice is weighted towards the technology space, broadly defined, but we do a lot of work in the life science space as well.

Editor: How will the America Invents Act change your practice in the manner in which you counsel clients?

Bobrow: There are a number of important changes that the America Invents Act has brought about that we certainly will be focusing on, one of which is a procedure called “post-grant review.” This brand new procedure, similar to a procedure that has been in place in Europe for years, allows a third party to challenge a patent’s validity within the first nine months of the patent’s issuance. We haven’t had a procedure quite like that before. For those clients in industries that track their competitors’ patents and applications, this may be an important procedure for challenging patents soon after they issue. I think this procedure is going to be used quite a bit, in part because it’s potentially a less expensive way to challenge a patent than in full-blown litigation, although there are some litigation-like features in post-grant review, including limited discovery.

Another new procedure initiated by the Act is the supplemental examination procedure. This allows patent owners to bring information to the Patent Office to clean up the prosecution of a patent so that the patent is less susceptible to enforceability challenges and to cure mistakes made during prosecution. This new procedure likely will make it even harder for accused infringers to mount successful challenges to a patent based on an allegation of inequitable conduct. This is a procedure that patent owners likely will take advantage of with some frequency.

Editor: What parts of the Act are currently in effect? What parts come into play in March 2013?

Bobrow: A number of provisions already are in effect. For example, the provision of the Act that abolished “best mode” as an invalidity defense, the provision dealing with joinder of parties, which makes it harder to join multiple different defendants in a single patent litigation, the provision putting restrictions on false-marking claims – all have gone into effect. There are really two more important dates that are coming up for implementation of the Act. The next important date is September 16, 2012, at which time the procedures for post-grant review, supplemental examination, and inter partes review all become effective. In March of 2013, the prior art provisions broadly named “first inventor to file” – provisions that change the landscape of what is considered to be prior art –  and the provisions dealing with derivation of an invention from someone else all go into effect.

Editor: How does the Act make it more difficult for non-practicing entities or “patent trolls” to extract sums from patent holders? What other procedures does it introduce to head off patent disputes?

Bobrow: There are a couple of ways that the Act makes it more difficult for a non-practicing entity to bring suit. When the Act was enacted in September 2011, it immediately placed important restrictions on false-marking claims, virtually eliminating them except where a false-marking claim is brought by a competitor to recover for competitive injury. Then there also are a number of restrictions in the Act on the ability to join multiple defendants in a single lawsuit. Before the enactment of the America Invents Act, some patent owners were filing suits in which they named 20, 30, 40 or even more defendants in the same lawsuit. Now non-practicing entities will have to file separate lawsuits (with some exceptions), which is an impediment due to higher transaction and court costs.

Editor: What is being done to enhance the patent expertise of district court judges who hear so many of these disputes?

Bobrow: Generally when patent cases are filed in a district, they can be assigned to any federal district court judge and, by local rule, are often initially assigned to magistrate judges, too. In January 2011, Congress enacted a pilot program so that district courts in the program could assign patent cases to a small set of district court judges in each district. If a judge who is not in the program receives a patent case, that judge can transfer it to a judge who is in the pilot program. The concept is that those judges in the pilot program will handle more patent cases and thereby become more efficient and more expert at handling them. When I last reviewed the pilot program, it included 14 district courts, including the Southern District of New York, the Eastern District of New York, the Eastern District of Texas, the Central District of California and the Northern District of California.

Editor: What is being done to transfer the large number of cases from the Eastern District of Texas and the District of Delaware to other venues? Why do you think these transfers are needed?

Bobrow: The Eastern District of Texas and the District of Delaware are still popular districts for patent litigation. The judges in those venues handle a great many patent cases and are quite efficient in dealing with them. The Federal Circuit Court of Appeals has developed some jurisprudence that has made it easier to secure a transfer from any venue, whether in Texas or Delaware or wherever someone might file, to a more appropriate venue taking into account all of the different facts and circumstances. In many instances, patent cases are filed in districts that have very little to do with the parties, the patent, the products that are accused of infringement, the witnesses and documents, and the like. The Federal Circuit, beginning three or four years ago, has taken a lot of cases from the district courts on a mandamus basis and has clarified the standards for transfer under Section 1404 of the United States Code. As a result of this jurisprudence, it is more difficult for patent owners to keep cases in districts they consider favorable but that have little connection to the underlying dispute.

Editor: How do your cases in overseas jurisdictions, particularly the European courts, differ from those brought before the U.S. courts?

Bobrow: Speaking in terms of litigation in Europe versus litigation in the United States, there are significant differences. For example, German courts are much faster than U.S. courts in getting cases to trial, there is no discovery, and there is typically fee-shifting with the losing party paying the other side’s legal fees. Importantly, there is a vast difference in the way that the German courts conduct these proceedings. The proceeding is bifurcated in the sense that the court where the patent infringement lawsuit is brought is really only looking at the issue of infringement, not at the question of validity of the patent, whereas in the United States, the district court will look at both validity and infringement in the same proceeding.

Editor: The ITC is now a favored forum for contesting infringing goods cases from overseas. What are the advantages of bringing cases to this forum?

Bobrow: Certainly speed is one of the biggest advantages compared to bringing an action in a district court. Basically, the administrative law judge will set a target date for completion of the investigation that is about 16 months or less from initiation. A patent owner will have a hearing on its patent much more quickly than in a district court. The statutory remedy is seen as advantageous in allowing the petitioner to get an order excluding the infringing products from the United States. There is more certainty that the remedy will be available to the patent owner than injunctive relief in a district court, where there’s much more of a balancing of the equities. At the ITC, the eBay four-factor test for injunctive relief doesn’t apply. Another advantage to the patent owner is that there are no counterclaims at the International Trade Commission.

Editor: What about the cease and desist order, which can be gotten on goods already in the country?

Bobrow: Yes, cease and desist is another remedy that’s available at the ITC. It’s pretty common when it’s shown that there’s commercially significant inventory in the United States. But that hasn’t been the case in the proceedings that I’ve been involved with.

Editor: There has been a robust market in purchasing of patents in recent times. What do you conclude is the reason for such purchases?

Bobrow: I agree. One reason relates to the lifecycle stage of the companies that are making these purchases. When companies are in their emerging stages, they typically do not have many patents. As they grow, they face competitors who are more established and who have had time to develop patent portfolios. Often these emerging companies will face the risk of patent infringement suits by companies with very large patent portfolios, and in many cases the emerging companies are at a disadvantage because they may only have a relatively small portfolio of patents to use in a counterattack. So, as a defensive strategy, an emerging company may look to buy a portfolio of patents so that it will have an arsenal of patents that it can use against competitors to level the playing field. In effect, this is a strategy of mutually assured destruction: the emerging company is hoping that by purchasing a portfolio of patents, it will deter competitors from launching a first patent strike.

Also, if a company is looking at going into a technology area or going into a market where the company believes that there are important patents, it may wish to purchase those patents so that they don’t end up in the hands of companies or others that could prevent them from entering the market.

Editor: How can companies reduce their IP litigation costs?

Bobrow: One way is to really focus on reducing e-discovery costs, one of the main drivers of litigation cost. There are model e-discovery rules that have been proposed, such as the model order proposed by Chief Judge Rader of the Federal Circuit Court of Appeals, which will have a meaningful effect in reducing the scope of electronic discovery. This model order, for example, places default limits on the number of email custodians whose emails need to be searched. A number of district court judges have used this order, and the Eastern District of Texas used it as the basis for its model e-discovery order. Essentially, pursuing litigation strategies to reduce the number of e-discovery custodians and e-discovery searching, document review, and data hosting is one significant way to reduce cost. A second way is for companies to hire lawyers who really know their business and understand their technology. Hiring counsel who can handle cases efficiently because they know your business, your intellectual property, your witnesses, your documents, the legal issues you face and the like can save a considerable amount of money. Finally, one thing that we find very effective is to have budget meetings with clients as often as quarterly where we discuss the plan for the case so that the client and the lawyers can truly focus on and prioritize the important elements of the case, expending efforts only on the matters of strategic importance to the case.

 

Please email the interviewee at jared.bobrow@weil.com with questions about this interview.