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Trial Judge Terminates Injunction After PTO Issues Advisory Action in Reexamination


Written by Scott M. Daniels
Westerman Hattori Daniels & Adrian, LLP
Author of the US PTO Litigation Blog
Posted: July 26, 2010 @ 3:24 pm

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Japanese language version via WHDA Reexam Blog.

The sequence of events of In re Swanson is well known. A jury determined that the patent was valid and infringed. The trial court’s judgment based on the jury’s verdict was affirmed by the CAFC. The accused infringer then filed a reexamination request, and the PTO rejected the claims. The CAFC affirmed the rejection, despite having earlier found the claims to be valid – the CAFC reconciled these apparently contradictory results by noting that validity is a different issue at the PTO than it is in court. This surprising outcome in Swanson is one of the reasons that reexamination is so popular among accused infringers.

Judge James Cohn of the Southern District of Florida has now taken the Swanson approach one step further – in Flexiteek Americas v. PlasTEAK (Case No. 08-60996-civ-Cohn/Seltzer) he has withdrawn a permanent injunction on basis of an advisory action in a reexamination, which found the patent-in-suit to be invalid.

Flexiteek had accused PlasTEAK of infringing U.S. Patent No. 6,895,881 (for synthetic teak paneling). Before trial, Judge Cohn granted summary judgment against PlasTEAK on the issues of anticipation and obviousness because of its “repeated failures to set forth the basis of these affirmative defenses.” At trial in June 2009, the jury found that Plasteak literally infringed the ‘881 patent.

Judge Cohn enjoined Plasteak in February from further infringement of the ‘881 patent. The judge also acknowledged that PlasTEAK had filed a request for reexamination at the PTO the previous November, and included in the injunction the qualification that “[u]pon any decision by a court or the United States Patent and Trademark Office that renders the ‘881 Patent invalid or unenforceable, PlasTEAK may petition this Court to terminate this Permanent Injunction.”

In the meantime, the reexamination had proceeded quickly: PlasTEAK’s reexamination request was granted, the sole claim was rejected as both anticipated and obvious, the rejection was made final, and on June 3, 2010, the examiner issued an advisory action maintaining the prior rejections.

On the basis of this advisory action, Judge Cohn terminated the injunction. He began his analysis by citing Swanson for the holding that a prior court determination of patent validity is “not binding on subsequent litigation or PTO reexaminations.” Swanson articulated “the difference between a defendant in a civil case failing to meet its burden to demonstrate that a patent is invalid versus a determination by the PTO that a patent is invalid,” Judge Cohn explained. He continued that his own judgment here was even less “binding” than in Swanson because it was based on PlasTEAK’s failure to answer discovery, as opposed to the jury verdict in Swanson.

Judge Cohn added that “the PTO’s Advisory Action is not only the most recent decision regarding the ‘881 Patent’s validity, it is a decision made after a thorough examination of the matter conducted by a body which holds particular expertise in such issues.” He concluded that the PTO’s determination of invalidity should control.

The Flexiteek patentee had argued that it would be injured more by a termination of the injunction than PlasTEAK would be injured by maintenance of the injunction. Judge Cohn disagreed: “it is far more difficult to determine how much money Defendants could have made if the Permanent Injunction stands and the PTO’s decision is upheld, as opposed to the amount of damages suffered by Plaintiff if the Permanent Injunction is terminated and the PTO’s decision is reversed.”

It must be noted that Judge Cohn’s willingness to terminate his own injunction on the basis of the PTO’s advisory action, as opposed to a CAFC ruling of invalidity, is his own. And his decision is certain to be appealed. Still, Judge Cohn’s decision is another step in the shift of authority on patent issues from the courts to the PTO.


About the Author

Scott M. Daniels is a partner in the Washington, DC law firm of Westerman Hattori Daniels & Adrian, LLP, and is the author of the firm's US PTO Litigation Blog. Daniels has 30 years of experience in patent litigation, particularly litigation at the U.S. International Trade Commission. He now leads the litigation and reexamination groups at WHDA. He is also a regular contributor to the PLI Patent Law Practice Center.

11 comments
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  1. Scott,

    Nice post.

  2. Note the key distinction over a normal District Court decision that: “The judge ..[cleverly] .. included in the injunction the qualification that “[u]pon any decision by a court or the United States Patent and Trademark Office that renders the ‘881 Patent invalid or unenforceable, PlasTEAK may petition this Court to terminate this Permanent Injunction.” ”
    That made the injunction subject to that contingency, retained jurisdiction even though this was otherwise a final decison, and removed any requirement that the reexamination had to be final [i.e., even if there was a CAFC appeal.]

  3. In the meantime, the reexamination had proceeded quickly: PlasTEAK’s reexamination request was granted, the sole claim was rejected as both anticipated and obvious, the rejection was made final, and on June 3, 2010, the examiner issued an advisory action maintaining the prior rejections.

    One has to ask why the USPTO didn’t notice this at the time the patent was issued? The USPTO should be responsible for the legal costs of both parties in the dispute, since the dispute was caused by the failure of the USPTO.

    Wayne

  4. Mad Hatter-

    You raise a good point, and the answer is an easy one. It is a matter of resources. Unfortunately, the law is set up to pretend that patents are all valid upon issuance. That is probably a necessary aspect to the entire system, but patent examiners get maybe 15 to 20 hours to close a file from the time they start. So to do their job properly they have to read the entire application, dissect the claims, review and dissect the prior art, issue a first rejection, consider whatever prior art the applicant sends in, consider the arguments, amendments and additional claims and then issue a second rejection, then invariably deal with after final rejection amendments and likely find time to fit in an interview with the applicant or applicant’s representative. The truth is they just don’t have the time they need for us to truly presume that ALL patents have only valid claims. Add onto that the fact that about 98% of patents probably never matter to any business deal. So the USPTO gets to a threshold of certainty based on limited resources and the reality that most patents won’t matter. Of course, if they could predict which would matter they could spend more time and resources, which is unfortunately impossible to predict.

    I hate the gaming of the system and unnecessary (in my opinion) slowness, but there is an answer to the question you pose. Realistically I am not sure what we can do about it, and I don’t like it any more than you do, but it is a part of the system. That is why reexamination exists, and it probably should be used far more often than it is.

    I hope all is well up north!

    -Gene

  5. Are examiners equally limited in the hours they have to examine an application during reexamination?

    How often is the art used to deny a patent supplied by a third party?

    How much time did that third party spend in locating that art?

    I think that these are important questions that we should have answers to before making any assumptions that the examiner did not have enough time to properly do his job.

  6. Gene,

    Resources are only part of the problem. The regulations are also at fault (which of course means that the regulators are also at fault). The answer is simple – if the USPTO issues a patent which is later invalidated, the USPTO should be responsible for the damage caused.

    Something along the lines of an automotive accident fault regime could work.

    Wayne

  7. Mad-

    I hear you and I understand what you are saying. It is logical, but unfortunately not realistic. First, the government can’t be held liable for such things as a practical matter. Second, there is a huge difference in the standard. In litigations defendants will spend many millions of dollars looking for prior art. During the application phase applicants spend maybe $2,000 to $3,000 and the Patent Office spends a handful of hours, maybe the equivalent of another $2,000 to $3,000. So the reality is a lot more can and will be found when there are millions of dollars spent than when there is $4,000 to $6,000 (or less) spent.

    This is a rationale approach in theory because there is no need for exhaustive research on the 98% that don’t wind up mattering. I do completely agree with you that something needs to be done with respect to the damage that is caused. There is also damage caused to those who invest in what they legitimately believe is a valid patent only to have is taken away after many millions of dollars (or more) have been invested. I am increasingly thinking that some kind of speak now or forever hold your piece review of patents by industry may be the way to go, with diminishing ability to challenge in out years. If it matters speak up, but don’t think you can spend millions later looking for prior art stuck away in a cave somewhere once you infringe.

    Any thoughts on this? What would you like to see happen? Not sure we will agree, but our debates do help me work out my own thoughts.

    Stay well.

    -Gene

  8. Gene,

    Why shouldn’t the USPTO be held responsible for it’s problems? Other government agencies are held responsible for their problems. Current regulations don’t provide the public with a means of taking action against the USPTO for it’s failings. Of course it’s always possible that a litigant who is negatively affected by a problem at the USPTO could sue the agency successfully. If this was to happen, the impact would be interesting, to say the least.

    As to the ‘98%’ which don’t matter, if they don’t matter, why issue patents for them? Let’s take a look at a patent – US Patent # 5581986 – Low polluting lawn mower. What do you think of this?

    Wayne

  9. Mad-

    I’m not saying that the USPTO shouldn’t be held responsible for its problems, and they sure have created problems for themselves that the Kappos Administration is trying to solve. Many years of mismanagement have had its toll for sure. But there is no way to hold the patent office responsible in court for mistakes they make. Additionally, you cannot hold anyone responsible for doing something that is impossible to do. It is impossible not to make mistakes and in the time given to the Office 100% certainty cannot exist.

    In terms of the 98% that don’t wind up mattering, the question is whether you can know what will ultimately matter and in many if not most cases there is no way of knowing. I have also seen some stupid patents (as far as I am concerned) that have been quite lucrative. For example there is a patent on diapers for birds. That seems silly but the inventor has made well over $1 million on the invention. It is hard, very hard to know what will wind up matter in terms of business.

    I am all for getting patents correct, and I would like to see the Patent Office have more examiners and more time for examiners to get it right. I think if examiners had more time the accuracy would be much greater. If laws were changed, such as inequitable conduct, that could lead to regulations forcing more applicant and attorney input, which would lead to more accuracy and faster handling of cases that deserve to be granted and that deserve to be kicked out quickly, leaving more time for harder cases.

    There are plenty of things that can and should be done. At this point I am not a fan of taking it out of the Patent Office because they are moving in the right direction. I am all for remembering the errors of the past and encouraging Congress to give the PTO the tolls they need in terms of funding and law to do better.

    Don’t get me wrong, I understand well what you are saying. Mistakes cost money and it is fundamentally unfair to expect citizens and corporations to bear the burden, but that is our system.

    -Gene

  10. Mad-

    By the way, in terms of the lawn mower patent, that seems rather ridiculous if you ask me. I am hesitant to come out with a definitive statement without doing some basic research. Coming out too strong without more than a cursory review is jumping to conclusions and I won’t do that. What I will do is say that after reading claim 1 I would be amazed if prior art couldn’t be found. Additionally, while I am not a fan of the Supreme Court’s KSR obviousness decision, I don’t think this patent could issue today under the current obviousness laws.

    There are always going to be patents like this. Having spent some time looking for silly patents every now and again these types of things have grown more rare over the last several years. Stupid patents that are on their face ridiculous ought not to issue and there is no excuse. I think some examiners figure, what’s the harm. The right approach is to give a fair examination that allows reasonably drawn claims and rejects claims that are too broad.

    Thanks for point that out though. That is a great teaching patent for many reasons.

    -Gene

  11. I’m not trying to suggest that the USPTO needs to be perfect, but I am suggesting that it needs improvement. Part of the problem is reputation, at the present time the USPTO has issues with it’s reputation, both on the Trademark and Patent sides. Some of the problems have been caused by bad court decisions, and the lack of response by the office to those decisions.

    As to whether or not Kappos can fix the problems, we’ll just have to wait and see. Myself I have doubts – but I’m sometimes too cynical.

    As to the lawnmower patent, the same technology has been used in automobiles and forklifts for years. In my opinion that would make it’s use in a lawnmower obvious (as an aside, I was involved in the development of several propane fuel systems while I was still capable of working).

    Wayne