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A Winning Patent Infringement Defense: Reexamination Creates Intervening Rights, Erases $29.4 Million Verdict


Written by Scott M. Daniels
Westerman Hattori Daniels & Adrian, LLP
Author of the US PTO Litigation Blog
Posted: October 6, 2011 @ 1:44 pm

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Companies accused of patent infringement are increasingly looking at patent reexamination at the Patent Office as an attractive avenue for challenging the patent’s validity. Reexamination offers a number of well-known advantages as a forum for such validity challenges over District Court, among them the absence of a presumption of validity and a lower burden of proof. Less well-known, however, is the potential for reexamination to eliminate an accused infringer’s liability for past damages – even if the PTO confirms the validity of a patent in reexamination, the accused infringer might be entitled to “intervening rights,” effectively eliminating past damages, if the patent owner amends its claims to distinguish its invention over the prior art. Even when the patent owner succeeds in the reexamination, if it also amends its claims, it can lose its right to collect damages for infringement occurring prior to the end of the reexamination.

This possibility of “intervening rights” received a big boost last week with the CAFC’s decision in Marine Polymer Techs. v. HemCon, finding that such rights may be created even without an amendment of the claims if the patent owner presents arguments in reexamination that “effectively amend” the claims.

Specifically, the CAFC panel held that an argument made by the patentee traversing a rejection in reexamination constituted a disclaimer of patented subject matter; this disclaimer triggered absolute intervening rights for the accused infringer under 35 U.S.C. §§ 252 and 307(b), thereby eliminating all damages for the period before the issuance of the reexamination certificate. The Court also suggested that the accused infringer might also be protected by equitable intervening rights for the period after issuance of the reexamination certificate and sent the case back to the trial court for further fact-finding.

Marine had sued HemCon for infringement of the patent. The trial judge issued summary judgment of literal infringement. At trial last September, the jury found that the patent was valid and awarded damages of $29.4 million for past infringement, and the trial judge issued a permanent injunction barring future infringement. A year before the trial started, however, HemCon requested reexamination. Though Marine’s patent ultimately emerged from the reexamination without cancelation or even amendment of the independent claims, Marine was forced to make an argument in the reexamination that resulted in the jury’s verdict and the judge’s injunction being vacated by the CAFC.

The patent claimed a polymer that is made from the glucose-based polymer chitin, and that is useful in stopping bleeding in serious wounds. The main claims required that the polymer be “biocompatible.” The patent specification disclosed that biocompatibility of a composition could be tested by any of four methods; a composition’s score on these tests ranges from zero (for no reactivity) to four (for moderate or severe reactivity) on a biological reactivity scale. The trial judge construed the claims narrowly, finding that “biocompatibility” meant polymers “with low variability, high purity, and no detectable biological reactivity” (emphasis added).

The reexamination examiner, in contrast, construed “biocompatibility” broadly as meaning “low variability, high purity, and little or no detectable reactivity” (emphasis added). The examiner acknowledged the trial judge’s construction of the independent claims, but found it to be inconsistent with six dependent claims that recited biological reactivity scores of one or two, i.e., scores greater than “no detectable biological activity.” The examiner reasoned that the independent claims could not be construed as requiring polymers with no reactivity, when the dependent claims expressly allowed polymers with some reactivity. Applying this broad construction, the examiner rejected the claims over three prior art references.

Marine traversed the rejection by asserting that the trial judge’s narrow construction of “no reactivity” was correct and by canceling the dependent claims that permitted some reactivity. The reexamination examiner bought the argument and withdrew the prior art rejection. The examiner explained that after cancellation of the dependent claims, he agreed with the trial judge’s narrow claim construction of “biocompatible.” A few months after the conclusion of the trial, the PTO issued a reexamination certificate canceling the six dependent claims and confirming the patentability of the claims found by the trial court to be infringed.

In the meantime, HemCon appealed trial court’s ruling to the CAFC, arguing that there could be no infringement because Marine’s arguments in reexamination had created intervening rights. The CAFC agreed with Marine.

The CAFC determined that the original, broad construction of “biocompatible” by the reexamination examiner was correct. As had the examiner, the CAFC relied on the six dependent claims which recited polymers with some reactivity, as well as on the patent specification, to find that the independent claims infringed by HemCom encompassed polymers that exhibited some reactivity. Marine’s arguments in reexamination that the claims covered only polymers with no reactivity, the CAFC continued, constituted a clear disclaimer of claimed subject, effectively amending the scope of the claims.

This “amendment in effect” triggered 35 U.S.C. §§ 252 and 307(b) which grants absolute intervening rights to an accused infringer, barring actions for infringement where (1) the scope of claims has been substantively amended in reissue or reexamination, and (2) the accused products are made before the reissue date or issue date of the reexamination certificate. Although there had been no actual amendment of the claims, “arguments made to the PTO during reexamination can amend the scope of claims for purposes of the intervening rights doctrine.” The CAFC added that “a contrary rule would allow patentees to abuse the reexamination process by changing claims through arguments rather than changing the language of the claims to preserve otherwise invalid claims and, at the same time, avoid creating intervening rights as to those claims.”

The CAFC went even further, determining that there could also be “equitable intervening rights” which would bar an infringement action against products made after the reexamination certificate issue date, provided (1) that those products were identical to the products made before that issue date, or (2) that the accused infringer had made “substantial preparations” before the issue date for making those post-issue date products. Since a determination of equitable rights involves analysis of a number a factual issues not already addressed, the CAFC remanded the case to the trial court for further consideration.

There was, however, a dissent by Judge Alan Lourie who does not accept the “amendment in effect” argument. For him, there is “threshold requirement in §§ 307(b) and 316(b) that intervening rights apply only to amended or new claims.” Since that threshold requirement was not satisfied, there could be no intervening rights.

Certainly, there are arguments to be made for both sides, and given the amount of money at stake and the jurisprudential significance of the intervening rights issue, we strongly expect that Marine will request en banc review of the panel decision. But just as clearly, the CAFC panel decision last week in Marine Polymer Techs. v. HemCon will do more to popularize reexamination than all the proselytizing by all the reexamination lawyers and bloggers ever could.

NOTE: A version of this article was originally published by Mr. Daniels on his Reexamination Alert blog.


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.

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  1. This moves us closer to a new normal on all patent applications, where a filing date may not be the determination of the date of the prior art. If the claims are changed during prosecution, which they almost usually are, then the date of issue becomes more important.