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''Trashing'' Your Competitor's ''Garbage'' Patents: A Comprehensive Strategy to Influence Competitors' Patent Rights, Contributed by Rakesh H. Mehta, Ph.D., and

Tuesday, December 27, 2011

An unfortunate scenario often occurs in the business world today: Company A comes across a patent owned by Company B describing an "invention" Company A knows to be an old idea and not really an invention at all. To make matters worse, Company A has an existing or pipeline product that falls within the scope of that non-inventive patent, making that patent very troublesome for Company A. This scenario is unfortunate in today's legal landscape because Company A can do very little to stop that "garbage" patent from issuing or remaining in force. So what is the good news? The landscape is about to change drastically. Coming September 2012, patent tools will be available that allow a party to challenge a competitor's patents or patent applications at the patent office. Effective combination of these tools into a proactive patent strategy can provide a business with a significant leg up over the competition. This article will address the background of patent rights, as well as offer strategic advice based on the 2012 new rules for companies seeking to proactively weigh in on a competitor's patent rather than litigate.

Patent Law Basics

Under U.S. patent law, inventors can be awarded patent rights, i.e., the right to exclude others from practicing the invention for a limited time, for the fruits of their inventive labor. However, patent rights are not conferred on an inventor as a matter of course. Instead, the inventor must file a patent application with the United States Patent and Trademark Office ("USPTO"). That patent application is rigorously examined to determine the scope of legal protection it merits ("claim scope"). During examination, the USPTO must be convinced that the invention is both novel and nonobvious, meaning that it should not have been known or disclosed before the patent application was filed, and that it should not be an obvious variation of an existing technology. In essence, the examination procedure is a "negotiation" between the inventor and the USPTO. During that negotiation, the inventor attempts to obtain the greatest possible claim scope, while the USPTO attempts to concede the minimum possible scope to satisfy novelty and nonobviousness. How does the USPTO determine novelty and obviousness? A USPTO patent examiner searches for and identifies relevant printed documents (prior art references) that predate the filing date of the patent application. Then the examiner builds a case that the invention was identically disclosed in the prior art, or was obvious from one or more prior art references. Thus, the claim scope will be determined by (1) the number of prior art documents and their relevance to the invention, (2) the patent examiner's skill in assessing the invention against the art, and (3) the patent examiner's rigor in determining patentability. Once the negotiation ends, the USPTO issues a patent to the applicant. That patent is presumed valid in court, and can be used by the patent owner to prevent others from making, using, or selling the patented invention, or to generate income by licensing the patent rights to others wishing to practice the invention.

State of the Patent World Today

In today's legal landscape, once a patent application publishes, the negotiation between a patent applicant and the USPTO becomes public information. As a result, a company can witness the progress of a competitor's patent application, but it cannot effectively participate in the negotiation process. To illustrate, if a company learns of a competitor's patent application when it is published, and knows of a prior public disclosure of the "invention" (e.g., the same idea was published in a scientific journal before the application was filed), the company cannot directly share that knowledge with the patent office. Similarly, if a company learns that a competitor has been issued a patent that lacks novelty, it has only a few legal tools available at the USPTO to challenge the validity or limit the scope of that patent. As a result of this limited ability to intervene in the patent application process or effectively challenge a patent at the USPTO, a company is often resigned to simply securing a legal opinion that the patent is invalid and holding it as "ammunition" in the event the company is sued. Such a "wait and see" approach is problematic because legal opinions of invalidity, though they can be utilized as part of an affirmative defense at trial, do not actually protect the company from being sued for infringement of an invalid patent. This is detrimental to the alleged infringer given the high cost of litigation, and because it is often difficult to escape such a lawsuit early on an invalidity defense – frequently the validity of the patent is determined during trial, when most of the litigation costs have been incurred.

Future of Competitive IP Strategy

The good news is that the future of competitive IP strategy is bright. The America Invents Act ("AIA"), which was passed in September 2011, provides sweeping changes to the U.S. patent laws, including several changes intended to provide alternatives to patent litigation. More specifically, the AIA introduces new tools that allow a company to directly intervene in determining the eventual scope of a competitor's patent during the "negotiation" process. When used in combination, these tools can create a cost effective, non-litigation, patent strategy that can be used to gain a competitive advantage while mitigating the risk and costs of litigation. Being proactive and acting early are the keys to this strategy. Delay in challenging a competitor's patent comes with a price—a higher burden of proof and a higher likelihood of later lawsuit. The new laws provide three opportunities for third parties to weigh in on patent scope and validity with the USPTO: (1) preissuance submission, (2) post grant review, and (3) inter partes review. These tools are discussed individually below. Strategies to combine these tools, including a discussion of where decision points lie and important factors to consider at these times, are also detailed below.

Preissuance Submissions

The first opportunity to weigh in on the "negotiation" between the USPTO and the patent owner is called "preissuance submission by third parties" ("PIS").1 Under the PIS procedure, within six months after the USPTO publishes a patent application, a third party can submit to the USPTO relevant publications as well as comments describing the impact on patentability of the invention. The examiner is obligated to consider the submitted prior art and the third-party remarks during the examination procedure. Thus, PIS enables a third party to act as a "guest negotiator" to assist and augment the examiner's wherewithal, as opposed to being relegated simply as an onlooker in the present procedure. Under the PIS procedure, the third party can submit remarks anonymously, which is one of its most advantageous facets. The third party only needs to have a belief that submitted publications are relevant to patentability of the invention. Furthermore, a submission at this stage does not foreclose the third party from submitting any references at a later stage, e.g., in litigation or in other USPTO proceedings. Consequently, the PIS submission poses very little risk. In fact, a third party should almost always avail itself of the opportunity to submit PIS publications.

Post-Grant Review

Under a second new procedure, within nine months after a patent is granted, a third party can institute a post-grant review (PGR) challenge against the patent.2 This challenge amounts to a second review of the patent in light of all available grounds of patentability. Under PGR, the third party plays the role of "examiner" by repeatedly submitting evidence and arguments, and thus actively participating in the back-and-forth negotiation between the USPTO and the patentee. PGR can be highly advantageous, because it allows a company to challenge a competitor's patent before it is even asserted, thereby removing an otherwise constant litigation threat during patent term. This allows for an upfront determination of a patent's validity, before committing significant resources to the relevant market. If the third party has an infringing product, an early d

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