IP Briefs: Demystifying the Patent Reform Act and its Impact on Company IP Strategy - IP stakeholders should focus on both patent procurement and enforcement strategies to maintain harmony between IP

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IP Briefs: Demystifying the Patent Reform Act and its Impact on Company IP Strategy
IP stakeholders should focus on both patent procurement and enforcement strategies to maintain harmony between IP assets and company business strategy


BioPharm International
Volume 20, Issue 1

For the patentee, the new willfulness standard will require greater diligence and quicker decision capabilities if it is to implement early written notice. The written requirement also may promote excessive mailings offering patent licenses. Because the notice would be sufficient to trigger a declaratory judgment action, it will require an affirmative decision by the patentee to pursue an infringement claim to ensure preserving a home forum advantage. Litigation will be simplified because theories relating to what constitutes knowledge will be eliminated. However, discovery will be bifurcated. The Substitute also disfavors willfulness theories appealing to a jury because it will be tried to a court.

Elimination of Best Mode

H.R.2795 will eliminate the subjective best mode requirement.12 Prosecution strategy will require a decision on whether disclosing the best mode to ensure coverage of the commercial embodiment outweighs the commercial advantage of maintaining the best mode as a trade secret. Litigation theories likely will be reduced because there will be fewer opportunities to tell a good "state of mind" story having jury appeal.

Inequitable Conduct

The Act attempts to codify the law related to inequitable conduct before Patent and Trademark Office proceedings, making the office the sole forum for resolution and requiring assertions during litigation to be referred to it.13 Inequitable conduct as a defense to infringement would render a patent unenforceable only after a finding of invalidity and where a claim was allowed due to reliance on an intentional misrepresentation by the patentee. Clear and convincing evidence will be required to prove reliance and the intentional misconduct.14

This provision attempts to address concerns that inequitable conduct is improperly overused as a defense to infringement by requiring the conduct to affect validity. It requires fraud on the Patent Office in order to be used as a defense. Although it may deter improper use during litigation, the proposed reform opens the door to other acts of misconduct during ex parte proceedings and likely will not be as strong of a deterrent as the current law.

PROVISIONS IMPROVING PATENT QUALITY

Postgrant Oppositions

The Act will establish third party rights to challenge the validity of a patent through postgrant opposition proceedings.15 In the original bill, both a nine-month period after grant and a six-month period following notice of infringement would be provided to oppose the patent.16 The Substitute would eliminate the second window of opportunity. Invalidity must be proved by a preponderance of the evidence. Limited discovery through cross-examination of affiants or deponents would be allowed. However, the opposer would be estopped from raising any issue of law or fact actually decided in a subsequent proceeding, and opposition proceedings will be stayed where an infringement action has been filed within three months of the patent grant.

The proposed opposition procedures raise a number of issues requiring coordination with potential litigation strategy. The lower burden of proof for establishing invalidity would be attractive compared to the clear and convincing defense standard17 and may encourage aggressive defensive strategies between competitors. However, an opposer should delay filing until three months after grant to avoid triggering an automatic stay and the higher evidentiary standard if an infringement action precipitates. The patent holder will be motivated to file suit within the three-month window to ensure the higher burden for establishing a successful defense and to reduce the possibility of concurrent proceedings.

Because of the estoppel provision, a threshold strategy decision for any opposer will be whether to assert some or all issues of invalidity. The opposer will have the option of holding some issues in abeyance and avoiding estoppel in the event litigation ensues. In weighing this decision, an opposer should consider the likelihood of litigation and of proving invalidity by clear and convincing evidence, and whether the defense has a theory more likely to appeal to a jury than to a panel of patent examiners. The possibility of settlement also should be considered because termination of the proceedings can avoid estoppel.


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