D. Delaware Decision Underscores Rapid Acceptance of IPR by Courts

On September 4, 2013, the District of Delaware issued an Order staying pending litigation between Softview and Kyocera related to pending inter partes review proceedings styled as Kyocera Corporation v. Softview LLC (IPR2013-00004 and IPR2013-00007).  The decision is significant because the same court had earlier denied Kyocera’s motion to stay in view of a pending reexamination proceeding.  As such, while the Court was unwilling to stay the litigation in view of a pending reexamination, it changed course and did stay the litigation in view of a later-filed, pending inter partes review.  Indeed, by the time the Order to stay was issued, fact discovery was complete and the Court’s Markman Order had issued.

The rationale for the Court’s change in heart relied on the fact that, since discovery was now closed, there was less of a likelihood that evidence would become spoiled.  In addition, the IPR covered all asserted claims, versus the reexamination where only some of the asserted claims were rejected. Most importantly, however, and part of a growing trend in the district courts, the Board noted that inter partes review proceedings were more expeditious than reexamination proceedings and such speed supported a stay, especially when the inter partes review process was likely to narrow issues for trial.

49 for 54: Successful Rehash of Old Arguments in Grant of 2 IPR Trials

Innolux’s decision to spread a challenge to a Semiconductor Energy Laboratory patent over two separate IPR cases paid off, as they successfully forced all 33 challenged claims into two trials in cases styled as Innolux Corp. v. Semiconductor Energy Lab. Co., Ltd. (IPR2013-00064 and IPR2013-00065), involving US Pat. No. 7,923,311. Trial was instituted for all 10 challenged claims in the IPR2013-00064 case and all 23 challenged claims in the IPR2013-00065 case.

[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]35 U.S.C. § 325(d) — “…during the pendency of any post-grant review under this chapter, if another proceeding or matter involving the patent is before the Office, the Director may determine the manner in which the post-grant review or other proceeding or matter may proceed, including providing for the stay, transfer, consolidation, or termination of any such matter or proceeding. In determining whether to institute or order a proceeding under this chapter…the Director may take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.”[/pullquote]The ‘311 patent describes a thin film transistor (TFT) and a method for forming the transistor. The patent described numerous problems associated with prior art methods of crystalizing amorphous silicon layers used in devices. The patent went on to claim that layer crystallization by laser irradiation of semiconductor materials in the channel region and the activation of the ohmic contact region of the source and drain provides improvements in electrical conductivity and avoids the prior art problems.

Patent Owner’s primary argument was based on the fact that, during prosecution of the application leading to the ‘311 patent, the Examiner previously considered all of the same prior art references. Following a now established trend, the Board rejected Patent Owner’s arguments because they failed to show that the Examiner considered substantially the same arguments – namely that Petitioner included evidence not considered by the Examiner, such as the Petitioner’s expert declaration. Order at 7. The Board has set a very high hurdle for any Patent Owners who wish to dismiss an inter partes review by arguing that the prior art references have been previously considered.  To date, no argument based on 35 U.S.C. § 325(d) has been adopted by the Board.

Echoing an argument tried in other IPRs involving the same parties, the Board also rejected Patent Owner’s argument that Petitioner failed to identify all real parties-in-interest, arguing that other defendants in co-pending litigation joined in a motion to stay pending the outcome of the present inter partes review and agreed to be bound by its outcome. The Board found that the other defendants did not need to be listed as real parties-in-interest because they did not have any control over the proceeding. Order at 8.

As a last procedural issue, the Board considered Petitioner’s “administrative estoppel” argument, based on the fact that a sister patent was reexamined and that proceeding resulted in many invalidated and canceled claims. At this stage of the proceeding, however, the Board declined this argument, finding that Petitioner had not shown the claims to be patentably indistinct. Order at 9.

After dispensing with the above-procedural issues, the Board provided only a brief claim construction analysis, simply adopting a prior district court construction of “overetching.”  Then, in its obviousness analysis, the Board rejected Patent Owner arguments that: 1) there was no motivation to combine the underlying references (Order at 14-15); 2) as such, the reference taught away from combination (Order at 15), 3) that a combination would render a reference disabled or unfit for its intended purpose (Order at 15), 4) that there would be no need to combine because a problem was already solved (Order at 16), and 5) that the combination would be impossible to manufacture (Order at 16-17).

In the end, although the same patent was spread out over two IPR cases, the Board granted trial on all challenged claims – ignoring a prior determination at the Patent Office based on the rationale that an expert declaration provided with the Petition was new evidence that precluded the applicability of 35 U.S.C. § 325(d).

PTAB Handles First Inter Partes Review “Initial Conference Call”

On Tuesday, January 22, 2013, the PTAB held its first “Initial Conference Call” in an inter partes review, in the case of Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026 (Harness Dickey represents the Patent Owner, Proxyconn, in this matter).  The format of the call was very similar to a Rule 16 Conference before a federal district court judge.  At the outset of the call, the Board clarified certain filings that had occurred in the case, and then proceeded to address the expected formalities of the upcoming trial, including:

[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]Office Patent Trial Practice Guide at 48765 — “The Board expects to initiate a conference call within about one month from the date of institution of the trial to discuss the Scheduling Order and any motions that the parties anticipate filing during the trial.”[/pullquote]

1) Whether the proposed scheduling order was agreeable to the parties;

2) Whether the form Protective Order set forth in the Trial Practice Guide was agreeable to the parties;

3) Whether “Initial Disclosures” were exchanged between the parties, or expected;

4) Whether compelled discovery was expected;

5) What motions each party expected during the trial (including, with respect to certain of the motions identified by the parties, what the party expected to include in the motion); and

6) Whether the parties had discussed potential settlement.

The Board also handled questions and clarifications from the parties and otherwise cleared the deck of all outstanding issues before the next phases of the inter partes review proceeding are to take place.  In sum, the approximately 30 minute phone conference was very reminiscent of an Rule 16 conference in district court litigation and parties should be prepared to address similar topics in an inter partes review “Initial Scheduling Conference.”

Inter Partes Review Possible Where Patent Found Valid at District Court

In a case that will impact the role of Inter Partes Review and Post Grant Review at the Patent Office, the Federal Circuit issued a precedential order denying a petition for rehearing en banc in the case of In re Baxter, Int’l Inc (Fed. Cir. 2011-1073) (originally reported at 678 F.3d 1357).  The concurring opinion of Judge O’Malley (with which Judges Rader and Linn joined) sought to clarify an issue raised by the dissent (Newman, J.) relating to whether an administrative action can nullify a judicial order.  Specifically, Judge O’Malley wanted to clarify that nothing in the underlying ruling prevents the Patent Office from reviewing the validity of a patent, even if a district court has previously found the patent is not invalid.  “A judgment in favor of a patent holder in the face of an invalidity defense or counterclaim merely means that the patent challenger has failed to carry its burden of establishing invalidity by clear and convincing evidence in that particular case- premised on the evidence presented there.” Id.at 2. It is also instructive to note that the Court found that a later review of a patent before the Patent Office is undertaken based on the particular evidence before the PTO, and with a lower burden of proof (preponderance of the evidence).

Importantly, however, the Federal Circuit clarified, and the PTO conceded, that a later finding of invalidity of a patent by the Patent Office (i.e., in an Inter Partes Review) does nothing to alter a prior judicial decision against a specific patent challenger.  For example, if Defendant is found to infringe a patent, but that patent is later deemed invalid, principles of res judicata prevent that Defendant from removing the burden of its loss in federal court.

While the Baxter case was decided in the context of reexamination, there is nothing in the Federal Circuit’s order that would suggest that the holding does not also apply to Inter Partes Review and/or Post Grant Review.  Merely because a patent was found not invalid at the district court level does not prevent that same patent from being subject to Inter Partes Review or Post Grant Review.  That is not to say, however, that the defendant who loses in that district court case can reverse that federal court determination by prevailing at the PTAB.