Strengthening (or Weakening) Patent Protection in the United States

Transcription

1 Strengthening (or Weakening) Patent Protection in the United States Licensing Association (Thailand) Patent Strategies for Licensing October 14, 2014 Paul T. Meiklejohn Dorsey & Whitney LLP 1

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3 Techniques for patent owners to strengthen their patent protection in the U.S. Techniques for potential licensees to weaken the patent owners patent protection in the U.S. Determining Patent Royalties in the U.S. 3

4 Best Patent Claim for Patent Owner High Royalties PLP PA PLP = Potential Licensee s Product PA = Prior Art Claim valid over PA and Infringed by PLP 4

5 Best Patent Claim for Potential Licensee Low or No Royalties PLP No infringement by PLP PA Invalid over PA 5

6 Enforcing Issued Patents Licensing But if potential licensee does not agree to terms the patent owner requires in a license because of alleged weaknesses in the patent, the patent owner has two options Litigation Strengthening his patent in the Patent Office 6

7 Techniques for Patent Owners To Strengthen Their Patent Protection in the U.S. 7

8 Techniques for Patent Owners To Strengthen Patent Broaden Claims to avoid non-infringement Cure inequitable conduct Narrow claims to avoid invalidity 8

9 Techniques for Patent Owners: Patent Office Procedures Reissue Supplemental Examination Ex parte reexamination 9

10 Dealing With Potential Licensee s Arguments Concerning Non-Infringement: Broadening Claims Potential Licensee might argue that patent claims do not cover potential licensee s product Patent owner can broaden claims using the reissue procedure Original Claim Claim on Reissue PLP PLP 10

11 Reissue (35 U.S.C. 251) When can reissue be filed? Any time after issuance, but must file within two years of issuance if you want broader claims Cost to file? $3040 for a large entity Discounted fee of $760 for a micro entity or $1520 for a small entity Additional fees for more than three independent claims, or more than 20 total claims Why use it? Fix errors 11

12 Dealing With Potential Licensee s Arguments Concerning Inequitable Conduct Inequitable Conduct: patentee deliberately withheld material information from Patent Office When a patent owner commits inequitable conduct in procuring a patent, patent is unenforceable Patentee can cure inequitable conduct through Supplemental Examination 12

13 Supplemental Examination (35 U.S.C. 257) When can it be requested? Any time after issuance Cost to request? $16,500 for a large entity, $12,100 of which is refundable if ex parte reexamination is not granted Discounted fee of $4,125 ($3,025 refundable) for micro entity or $8,250 ($6,050 refundable) for a small entity Additional fees for document size Time to complete? With three months of receiving the completed request 13

14 Supplemental Examination Why use it? Cure inequitable conduct: information submitted cannot be used to render the patent unenforceable in district court cases filed after: issuance of certificate that the information does not present a substantial new question of patentability, or The claims survive subsequent ex parte reexamination 14

15 Dealing With Potential Licensee s Arguments As To Invalidity: Reexamination Patent owner s claims might be so broad, they could be, or definitely are, invalid over the prior art Patent owner can use reexamination to try to get Examiner to agree that claims distinguish over prior art Patent owner can amend claims ( narrow them ) in reexamination to distinguish over prior art 15

16 Ex Parte Reexamination (35 U.S.C. 257) When can it be requested? Any time after issuance Cost to request? $12,000 for a large entity Why use it? Discounted fee of $3,000 for a micro entity and $6,000 for a small entity Additional fees for examination of more than 3 independent claims, or for more than 20 total claims Patent owner: can present its best prior art before the examiner without an adversary, and have an opportunity to argue over the prior art or amend the claims Licensee: least expensive post-issuance procedure, and no presumption of patent s validity 16

17 Ex Parte Reexamination Since ex parte reexamination began on July 1, 1981, to September 30, 2013, nearly 13,000 ex parte reexaminations filed 30% filed by the patent owner 68% unassociated with litigation 12% all claims cancelled 66% some claims cancelled or amended 22% no claims cancelled or amended Since ex parte reexamination began on July 1, 1981, to September 30, 2013, nearly 13,000 ex parte reexaminations filed 81% unassociated with litigation 90% order subsequent ex parte reexamination 17

18 Techniques for Potential Licensees to Weaken The Patent Owner s Patent Protection in the U.S. 18

19 Licensee s Goal in USPTO Weaken patents to minimize value in licensing Use prior art to invalidate claims so as to avoid the need for a license Use prior art to narrow claims so as to avoid the need for a license 19

20 Licensee s Goal in USPTO Potential Licensee can use Ex parte Reexamination discussed earlier Post-Grant Review Inter Partes Review 20

21 Licensee s Goal Claims are invalidated over prior art or their scope narrowed so as to exclude the potential licensee s product 21

22 Post-Grant Review (35 U.S.C ) When can it be filed? Within the first 9 months after issuance Cost to file? $12,000 filing fee for up to 20 claims ($250 for each additional claim) If instituted, additional $18,000 fee for up to 15 claims ($550 for each additional claim No fee discount for micro or small entities Time to complete? Within one year of institution 6 month extension for good cause However, only available for patents with a priority date of no earlier than March 15,

23 Post-Grant Review Why use it? Patent can be challenged on any validity grounds Licensee filing for post-grant review can participate in the proceeding Lower burden of proof to invalidate: patent is not presumed valid Between September 2012 and November 14, 2013, 93 proceedings filed 23

24 Inter Partes Review (35 U.S.C ) When can it be filed? (a) 9 months or later after issuance, or (b) after termination of post-grant review Unavailable if filed after one year of petitioner s receipt of service of civil suit, or if petitioner first files a declaratory judgment action Cost to file? $9,000 filing fee for up to 20 claims ($200 for each additional claim) If instituted, additional $14,000 fee for up to 15 claims ($400 for each additional claim No fee discount for micro or small entities Time to complete? Within one year of institution 6 month extension for good cause 24

25 Inter Partes Review Why use it? Licensee filing for inter partes review can participate in the proceeding Between September 2012 and November 2014, 695 IPR proceedings were filed 12% unassociated with litigation Over 70% of reviewed patents were directed to software or electronics technologies 66%: all claims cancelled or disclaimed 23%: some claims cancelled or amended 11%: no claim cancelled or amended 25

26 Determining Patent Royalties in the U.S. 26

27 Determining Royalties for U.S. Patents Total royalty = royalty base x royalty rate Royalty base: the scope of the products on which the patent owner is owed royalties Royalty rate: the percentage rate of payment 27

28 Royalty Base Increasing or Decreasing the Royalty Base: Increasing: Entire Market Value: the value of the entire accused device, and sometimes even non-patented tie-ins, because the patented feature is the basis for the customer demand for the entire device. Patentee must present market evidence that the patented feature formed the basis for the demand Decreasing: Apportionment: the portion of profits for the patented feature which drives customer demand Usually, the smallest salable patent-practicing unit 28

29 Royalty Rate Royalty rate: the Georgia-Pacific factors Non-exclusive list Certain factors may be more or less relevant depending on the facts of the case 29

30 Royalty Base: Example Cornell University v. Hewlett-Packard The patent was directed to a part of a processor, which is a part of a CPU module, which is part of a "CPU brick," which is part of a cell board, which is part of the server 30

31 Royalty Base: Example Cornell University v. Hewlett-Packard The smallest salable unit was the processor, yet the patentee tried claiming the CPU brick as the royalty base without providing evidence of either the CPU brick market or that the patented feature formed its basis for demand 31

32 Royalty Rate: Georgia-Pacific Factors 1. Royalties received for the patent in suit 2. Rates paid by licensee for comparable licenses 3. Nature and scope of the license 4. Licensor s established policy or marketing program 5. Commercial relationship between licensor and licensee 6. Patented product s effect on sales of licensee s other products 7. Duration of patent and term of license 8. Patented product s commercial success 9. Patent s utility and advantages over prior art 10. Patented product s nature, character, and benefits 11. Extent that infringer has made use of patent 12. Royalty rates customary in the industry 13. Portion of realized profit attributable to patent 14. Expert testimony 15. Hypothetical pre-infringement license 32

33 Royalty Rate: Example ResQNet.com, Inc. v. Lansa, Inc. The damages expert for the patent owner purported to emphasize the first Georgia-Pacific factor (royalties received from licensing the patent-in-suit) in determining a royalty rate of 12.5%, but actually relied on the patent owner s licenses (which required extraordinarily high royalty rates) which were unrelated to the patents-in-suit The Federal Circuit vacated and remanded, cautioning the district court about relying on licenses unrelated to the patented technology 33

34 Thank you for your attention! Paul T. Meiklejohn T: (206) F: (206) Dorsey & Whitney LLP 701 Fifth Avenue, Suite 6100 Seattle, Washington