Inter Partes Review – Heads I Win, Tails You Lose

By Robert Asher. Co-Chair of our Patent Practice Group

 

Inter partes review is, plain and simple, a tool for killing patents.  In light of rules implemented by the USPTO and judicial interpretations of the America Invents Act, it would be careless to refer to these proceedings as a litigation alternative. Litigation in courts offers opposing parties an opportunity to discover and present evidence in support of their respective positions. At the end of the litigation, a judgment typically resolves the contested issues between the parties. If Congress intended inter partes review (IPR) to result in an equivalent sense of closure for patent owners, that goal remains frustratingly elusive.

By way of background, IPR was passed into law to replace previous inter partes reexamination challenges to patents in the patent office.  Inter partes reexaminations were getting bogged down by the filing of unlimited new patent claims and claim amendments, multiple patent examiner actions and multiple levels of appeal.

By contrast, IPR commences at the level of the Patent Trial and Appeal Board (PTAB), severely limits the ability to amend claims, and proceeds according to strict time limits.  To satisfy the rapid timetable when presented with multiple grounds for challenging claims of a patent, the PTAB will often “institute,” i.e., go forward with, an IPR on only some of the grounds and as to only some of the patent claims.

By statute, the PTAB’s institution decision is not subject to appeal.  The PTAB has therefore had unfettered discretion in deciding which patent claims, and which grounds for challenge, it will consider in an IPR.  The Federal Circuit Court of Appeals recently addressed the question of whether the PTAB can limit the scope of an IPR in this manner.

In Synopsys, Inc. v. Mentor Graphics Corp., the Federal Circuit examined the statute governing IPRs and found the different wording in two of its provisions highly significant. A proceeding may not be instituted, under 35 U.S.C. § 314(a), unless “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”

In addressing the end-point of an instituted IPR, however, the statute provides that the final written decision must issue with respect to “any patent claim challenged by the petitioner.” 35 U.S.C.§ 318(a).  Because Section 318(a) does not use the language “the claims challenged in the petition,” the PTAB may, said the court, issue a final decision only as to the claims and grounds on which it instituted review.(More)

May Sellers of Patented Products Retain Rights after a Sale?

By Samuel Petuchowski, Ph.D.. A member of our Patent Practice Group

A question of patent law, now likely bound for the Supreme Court’s last word, concerns whether a patent owner retains any say over subsequent use and resale of a patented product once the product has been sold. That question arose recently in Lexmark International, Inc. v. Impression Products, Inc., a case that occasioned a flurry of amicus curiae briefs in the Federal Circuit Court of Appeals. The Federal Circuit, convening the full court at its own initiative, has delivered the opinion that “it depends.”

US law traditionally disfavors encumbering the sale of goods with conditions on any future sale – so called restraints on alienation. For example, the first-sale doctrine under the Copyright Act entitles the purchaser of a copy of a copyrighted work to sell or otherwise dispose of that work without authorization from the copyright owner. 17 U.S.C. § 109(a).

The US Patent Act, however, contains no such provision.  But an uncodified judicial principle of long standing (enunciated by the Supreme Court in 1853) provides for “exhaustion” of a patent owner’s rights in a patented article as soon as the patent owner sells it. Oddly, the exhaustion doctrine, as interpreted thus far, does not apply if the product is sold by a licensee and the restrictions are imposed by the patentee under the license. One of the issues argued in Lexmark was whether that distinction should stand.  Lexmark makes and sells printers and toner cartridges that contain patented features. Impression acquires used Lexmark cartridges, refurbishes them, and then resells them–in competition with Lexmark. Lexmark sued Impression for patent infringement.

The trial court in Lexmark acknowledged the Federal Circuit’s 1992 ruling in Mallinckrodt Inc. v. Medipart, Inc. that upheld a restriction—against reuse by the customer—imposed on the sale of a patented article (a nebulizer used for taking X-rays) when the restriction was otherwise lawful and within the scope of the patent grant^[i]. The lower court held, however, that the Mallinckrodt decision had been effectively overridden by the Supreme Court’s unanimous 2002 decision in Quanta Computer, Inc. v. LG Electronics, Inc. The district court read Quanta as disallowing a restriction built into sales of a product subject to a patent, although in the Quanta case, the product was sold by a licensee of the patent owner rather than by the patentee itself.

Several facts in the Lexmark case sharpened the issues that came before the Federal Circuit on appeal, and those for which review is now being sought in the Supreme Court. For one thing, Lexmark has a two-tier pricing policy, whereby toner cartridges may be purchased either at full price, in which case no restriction on reuse or resale is imposed, or at a 20% discount, subject to an express single-use/no-resale restriction that requires the purchaser to return the used cartridge only to Lexmark. Moreover, the discounted single-use cartridges contain a special chip that must be replaced if the cartridge is conditioned for reuse, so no one can reasonably assert that they lacked notice of the condition attached to the sale. All of the cartridges subject to litigation, as it now stands, are of the discounted, single-use/no-resale variety.

A second twist is that some of the Lexmark toner cartridges reconditioned and resold by Impression were acquired outside the US.  Patent exhaustion principles that are recognized under US law might not shield an importer from an assertion of patent infringement for the act of importing a patented article into the United States. And, indeed, the Federal Circuit adhered to its earlier holding in Jazz Photo Corp. v. International Trade Comm’n (2001) that when a patentee sells, or authorizes the sale of, a product outside the US, it does not authorize the buyer to import that product into the US. (More)