The USA offers protection of inventions through the intellectual property rights associated with patents or trade secrets. Patents provide broad, time-limited rights to the patentee in exchange for public disclosure of the invention. In contrast, trade secrets are not publicly known; have narrower rights; and, in principle, an indefinite duration.
Patents arise from federal law. Congress created the US patent system based on its authority in the US Constitution, which grants Congress power “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Title 35 of the US Code contains the federal laws related to patents.
Trade secret law is primarily based on state law. Specific definitions vary but, generally, a trade secret must not be known to the public, must confer economic benefit on its holder because it is not publicly known, and the trade secret-holder must take reasonable measures to keep such information secret. Most states have adopted the Uniform Trade Secrets Act, 1979, as amended, or a variation of it, so there is a measure of uniformity among the state laws. In addition to state law causes of action, the Defend Trade Secrets Act of 2016 provides a federal cause of action for trade secret misappropriation.
The statutory language creates a foundation for patents and trade secrets, but the law continues to evolve through case law as courts interpret legal terms and concepts.
Provisional and Non-provisional Applications
The US Patent and Trademark Office (USPTO) conducts the patent approval process and grants any resulting patents. Applicants file either a provisional or non-provisional patent application with the USPTO.
Provisional applications provide a quick and inexpensive way for inventors to establish a US filing date for their invention, which can be claimed in a non-provisional application that is filed later. A provisional application must contain a description of the invention and may include drawings necessary to understand the invention. A provisional application has fewer requirements than a non-provisional application but cannot develop into a patent without a corresponding non-provisional application filed within 12 months.
A non-provisional patent application must include both a description of the invention and claims describing the scope of the protections sought in the patent. A non-provisional application may be filed without a prior provisional application. However, a non-provisional application may gain the benefit of the earlier filing date of a corresponding provisional application if filed within 12 months of the provisional application.
Non-provisional applications undergo substantive examination by the USPTO to ensure compliance with the legal requirements for a patent. As a preliminary matter, a patent must claim patent-eligible subject matter. At a minimum, the US Supreme Court has stated that laws of nature, natural phenomena and abstract ideas are not patentable. Patents must also describe an invention that is novel and non-obvious with sufficient detail that a person of ordinary skill in the art of the invention can make and use the invention without undue experimentation.
The interaction between patent applicants (or their representatives) and the USPTO is called patent prosecution. During patent prosecution, an examiner at the USPTO will review the patent application and information already available to the public to determine whether the patent application meets the requirements for patenting based on the laws found in Title 35 of the US Code, the regulations listed in Title 37 of the Code of Federal Regulations and the guidance provided in the USPTO Manual of Patent Examining Procedure. If the examiner finds evidence that the invention has already been publicly disclosed or discovers another reason that the application does not comply with the patent requirements, the examiner may issue a rejection describing the deficiencies of the patent application. The applicant has an opportunity to respond to the rejection, which may include amending the claims in the application, having a phone conference with the examiner and presenting arguments that the rejection was improper. This process may be repeated until a final rejection or allowance of the application. If the patent application is allowed, the USPTO issues a patent creating enforceable rights for the patentee.
By their nature, trade secrets are not disclosed publicly or registered with any agency. Information becomes a trade secret when the holder takes affirmative action to keep the information secret. This can include physical protection of the information, use of non-disclosure agreements or lawsuits to recover for misappropriation of the trade secrets.
The time required to obtain a patent can vary greatly depending on many factors, including the subject matter of a patent, the number of rejections and appeals during patent prosecution and the type of USPTO examination programme. The USPTO has several patent application initiatives that can expedite patent applications meeting the respective programme requirements. For example, applications qualifying for Accelerated Examination may have a final disposition within 12 months. According to statistics provided by the USPTO, the average time for a final decision on a patent application is about two years, but some take several years.
Patent applicants are not obliged to be represented by a lawyer. However, the USPTO cautions that the patent application process is an undertaking requiring knowledge of patent law and rules, USPTO practices and procedures, as well as knowledge of the scientific or technical matters involved in the particular invention. Because of the complexities involved, most inventors employ the services of registered patent lawyers or patent agents.
The cost associated with obtaining a patent varies with many factors. Administrative fees imposed by the USPTO depend on the type of entity (large, small or micro), the number of claims in the application, the amount of time taken to respond to the USPTO rejections, the use of patent application initiative programmes and other procedural details. Lawyers' fees in connection to the application may also vary depending on the complexity of the application and patent prosecution.
Generally, a patent expires 20 years after its filing date, but this term can vary depending on the timing of the patent application and patent prosecution. Patents issued and applications filed before 8 June 1995 expire either 20 years from filing or 17 years from issue, whichever is later.
Patent applications filed after 8 June 1995 expire 20 years after the earliest effective US filing date. This may be earlier than the filing date of the patent application if it claims priority to an earlier provisional or international application.
Under limited circumstances, a patent term may be extended to account for administrative delays when acquiring the patent. For example, if the USPTO does not issue a patent within three years after its filing date, the patent holder may obtain an extension of patent term equal to the period in excess of three years. For certain drug products and medical devices, a patent may be extended for up to five years to account for the regulatory review conducted by the US Food and Drug Administration (FDA).
A patent gives its owner the right to exclude others from making, using, selling and importing the patented invention. To maintain the enforceability of the patent, the USPTO must receive maintenance fees for the patent, due 3.5, 7.5 and 11.5 years after the date of issue.
The remedies available to the patent holder vary depending on the chosen forum of enforcement. In a district court, a patent holder may seek equitable remedies in the form of a preliminary or permanent injunction and may seek monetary damages for both past and future infringement.
At the US International Trade Commission (ITC), a patent holder may seek cease-and-desist orders and exclusion orders to prevent the importation of patent-infringing goods. The exclusion orders direct US Customs and Border Protection to exclude articles from entry into the USA. A limited exclusion order prevents specified entities from importing the articles and a general exclusion order prevents any entity from importing the articles. The ITC cease-and-desist orders can direct infringers to stop importing infringing articles and to stop sales of infringing articles in US inventory. The ITC cannot award monetary damages.
The USA allows certain extensions of patent terms for administrative delays. Delays by the USPTO in the issue of patents can lead to patent-term extensions for the time of the delay. This extension does not apply to delays resulting from the patent applicant’s actions, including requests for continued examination or appeals. The possible extension for USPTO delays is unlimited.
Certain drug products and medical devices can receive annual patent term extensions if the product is undergoing administrative review by the FDA. These extensions are renewable for up to five years.
Any third party may submit patents, published patent applications or other printed publications as part of a third-party pre-issuance submission. The submission must include a concise description of the asserted relevance of each submitted document. These submissions may be made online at the USPTO website. Submissions must be made before the later of six months after publication of the patent application or the date of a USPTO communication rejecting any claims in the application. However, a notice of allowance for the patent application immediately terminates the timeframe for third-party submissions.
During patent prosecution, the USPTO may issue a final rejection of the patent claims. If the applicant wishes to challenge the final rejection, the applicant may request continued examination or may file an appeal to the Patent Trial and Appeal Board (PTAB). The applicant may appeal PTAB decisions to the US Court of Appeals for the Federal Circuit. Further review may be sought from the US Supreme Court through a petition for a writ of certiorari.
Patent holders must pay maintenance fees to keep patents in force. The payments are due 3.5, 7.5 and 11.5 years after the date of issue. The USPTO allows payment of each fee six months before the due date, but does not allow any other pre-payment of the maintenance fees. Payments that are less than six months past the due date have a surcharge of USD40–160 in addition to the normal fee.
Under some circumstances, a patent can be reinstated after not paying the maintenance fee in a timely manner. The USPTO requires a statement that the delay in payment was unintentional and submission of a petition fee of USD525–2,100 in addition to the required maintenance fees.
During some post-grant proceedings before the USPTO, the patent holder can amend claims of an issued patent. During ex parte re-examination, the patent holder may amend claims to respond to the USPTO’s findings of substantially new questions of patentability. In an IPR proceeding, if the challenged claims are determined to be invalid, the patent owner may seek to add substitute claims.
At any time before the expiration of the patent, a patent holder may seek reissue of the patent to correct certain errors, such as errors in the drawings or specification, or errors in the claimed scope of the invention. No new matter can be added during a reissue. If the reissue is sought within two years of the grant of the original patent, the scope of the claims can be narrowed or enlarged. Otherwise, only amendments that narrow the scope of the claims are permitted.
A patent holder has several options when seeking enforcement of patent rights. District court litigation can provide injunctions, monetary remedies for infringement and declaratory judgments. As discussed above, the ITC can issue exclusion orders and cease-and-desist orders. If an applicable contract provides for alternative dispute resolution proceedings, such as mediation or arbitration, or the parties agree to alternative dispute resolution proceedings, they may be used in lieu of litigation. Alternative dispute resolution proceedings can allow more flexible solutions and a final resolution can often be reached faster and less expensively. Additionally, the ITC and many courts offer mediation programmes.
A third party may challenge the validity of an issued patent through district court litigation or through post-grant proceedings at the USPTO. A party with standing may seek a declaratory judgment of patent invalidity in a district court. As a defendant in a patent infringement lawsuit, a party may argue patent invalidity as a counterclaim or affirmative defence. Patent invalidity may also be raised as a defence in an ITC investigation.
Challenges to patent validity at the USPTO take the form of post-grant review (PGR), inter partes review (IPR), ex parte re-examination and covered business method review (CBM). The timing and type of patent affect which of these proceedings is available to a third party.
PGR is available during the first nine months after the issue of a patent. Any party that is not the patent holder and has not challenged the patent validity in a civil action may request PGR. PGR allows the broadest grounds for challenging patent validity.
After the nine-month window of PGR, a third party may challenge validity through an IPR proceeding. As is the case with PGR, the IPR petitioner must not be the patent holder and must not have challenged the patent in civil litigation, but there is an additional requirement that the petitioner must not have been served a complaint alleging infringement more than one year prior to the IPR petition. The IPR also has more limited grounds to challenge patent invalidity, only allowing arguments of obviousness and lack of novelty based on patents and printed publications.
A CBM review has the most restrictive requirements: at least nine months must have elapsed since the patent was issued; the patent must be a financial product or service patent, excluding technological inventions; the CBM petitioner must have been sued or charged with patent infringement; and the CBM review petition must have been filed before 16 September 2020. The grounds for challenging patent validity in a CBM review are similar to those of PGR.
There are no actions available in the USA for a compulsory licence.
Federal district courts have original jurisdiction over patent matters. Parties may appeal district court decisions to the US Court of Appeals for the Federal Circuit. Decisions of the Federal Circuit are subject to discretionary appeal to the US Supreme Court through a petition for certiorari.
In certain circumstances involving importation of patent-infringing articles, the ITC may have jurisdiction. In an ITC investigation, an administrative law judge makes an initial determination on liability. A party may petition the ITC to review the administrative law judge’s initial determination. After the ITC’s final decision, a party may appeal the decision to the Federal Circuit, with further discretionary appeal to the US Supreme Court.
Two administrative agencies provide a review of patents before administrative law judges. The USPTO has the PTAB, which provides a review of patent application rejections and several post-grant proceedings discussed above. The ITC conducts investigations related to importation of patent-infringing articles. Both PTAB and ITC decisions may be appealed to the US Court of Appeals for the Federal Circuit, with further review available from the US Supreme Court.
There are no prerequisites to filing a lawsuit in a district court, unless the parties’ contract provides otherwise. Lack of pre-filing notice may, however, limit recovery of monetary damages in certain instances.
While individuals are not required to be represented by a lawyer, all federal courts require corporations to have legal representation. It is generally viewed as exceedingly unwise for an individual to pursue patent litigation without experienced counsel. In proceedings before the PTAB, at least one representative of each party must be a registered practitioner of the USPTO.
A patent holder may seek a preliminary injunction to protect the rights of the parties while litigation is pending. Preliminary injunctions require a demonstration:
If a court determines that a preliminary injunction is appropriate, such an order will only be issued if the party seeking it posts a bond in an amount that the court considers proper to compensate the other party should the injunction be determined to have been improperly granted.
Although rarely granted, a patent holder could seek earlier relief through a temporary restraining order. In addition to meeting the requirements for a preliminary injunction, the patent holder must demonstrate that immediate and irreparable injury will result to the movant before the adverse party can be heard in opposition, and certify in writing any efforts made to give notice and the reasons why it should not be required. An ex-parte temporary restraining order may be granted only in the very limited circumstances where providing notice will itself prevent, or interfere with, the ability to obtain relief.
The potential opponent may oppose the preliminary injunction by arguing against the factors described above for granting a preliminary injunction – most particularly that monetary relief at the end of the case will adequately compensate the plaintiff for any injury it incurs. Alternatively, a potential infringer could seek a declaratory judgment of patent invalidity or non-infringement in a federal district court. A party could also seek to challenge patent validity through one of the post-grant proceedings available through the USPTO.
US law limits patent infringement damages to six years prior to the filing of the complaint or counterclaim for infringement. Additionally, the patent holder cannot recover damages for infringement prior to the point the infringer had notice of the infringement. Filing the lawsuit is notice of infringement, but the infringer could have earlier notice based on communications from the patent holder detailing the infringement, or from constructive notice by marking the patented articles with their patent numbers.
In general, a party cannot obtain relevant information and evidence from another party or any third parties before commencing a proceeding in a district court. However, once a lawsuit has commenced, the Federal Rules of Civil Procedure require the parties to exchange initial disclosures of information, including:
Parties may then obtain non-privileged information that is relevant to any party’s claim or defence and is proportional to the needs of the case, considering:
Parties may obtain discoverable information through depositions, requests for production of documents, written interrogatories or requests for admission.
Parties may subpoena third parties to provide discoverable information in the form of depositions or production of documents. Procedures are also available to obtain discovery from third parties located outside the USA through applicable treaties or letters rogatory (formal requests for assistance sent to foreign courts).
A party or any person from whom discoverable information is sought may seek a protective order from the court to limit the scope or use of the information.
Patent litigation follows the same pleading standards as other civil cases. A complaint filed in district court must allege facts that state a claim to relief that is plausible on its face. At a minimum, a patent infringement complaint should identify the patent holder, the relevant patent(s), the accused infringer and the requested relief sought. For claims of indirect infringement, more details are typically required. Preferably, the complaint will provide additional information about the accused infringement, including the claims and elements infringed.
The Federal Rules of Civil Procedure govern amended and supplemental pleadings. A party may amend its pleadings once as a matter of course within 21 days of serving. Other amendments require the opposing party’s written consent or the court’s permission. To account for occurrences after a pleading, a party may supplement its pleadings with the court’s permission.
There are no class actions available in intellectual property cases. However, a patent holder may join multiple accused infringers in a single federal lawsuit if the actions arise out of the same transaction, occurrence or series of transactions. It is not sufficient to have unrelated defendants infringe the same patent.
In situations where joining all defendants in a single case is not possible, there are other options to gain the advantages of consolidated actions. Cases across several districts that share a common question of fact may be co-ordinated for pre-trial proceedings before a Judicial Panel on Multidistrict Litigation. Similarly, multiple cases in the same district may be consolidated to promote judicial efficiency when there is a common question of law or fact.
ITC investigations of patent-infringing articles often involve multiple respondents. Because the ITC only needs jurisdiction over the imported articles and not the infringers, it can be easier for a patent holder to proceed against multiple infringers simultaneously.
Some patent holder actions can limit the ability to enforce a patent against others. Under patent exhaustion – also referred to as the first-sale doctrine – the patent holder’s right to control an individual article ends after an authorised sale. If the patent was procured through improper conduct before the USPTO, it could be unenforceable under the doctrine of inequitable conduct. A patent holder that expands its rights beyond the statutory patent grant may commit patent misuse. Finally, when the patent holder uses its patent impermissibly to gain market share or engages in other anti-competitive behaviour, antitrust laws may limit the enforceability of the patent.
Generally, the party bringing an infringement action must be the patent holder, although an exclusive licensee that owns “all substantial rights” in the patent may bring an infringement action in its own name without joining the patent holder. An ITC investigation requires the party filing the petition to have an interest in the patent and an injury to a domestic industry.
Direct infringement occurs when a person makes, uses, offers to sell, sells or imports in the USA a patented invention without authority. Usually, the patent holder demonstrates this by showing every claim element, or its equivalent, is present in the accused article. When more than one party infringes the patent, there can still be direct infringement if one party directs or controls the actions of another.
A party induces infringement when it actively and knowingly aids and abets another’s direct infringement. The inducer must have knowledge of the patent and actively encourage the acts that result in direct infringement. Induced infringement can result in both parties being jointly and severally liable for the infringement.
Contributory infringement involves supplying a component of a patented invention to another party that performs the direct infringement. The component must not be a staple article or commodity of commerce suitable for non-infringing use, nor can it have substantial non-infringing uses.
There are also rules primarily directed to the pharmaceutical industry. A party may engage in activities (such as testing) to support an Abbreviated New Drug Application (ANDA) for a generic version of an FDA-approved drug – even if that drug is patented – without incurring patent infringement liability. However, filing an ANDA is considered an act of “artificial” infringement if the ANDA applicant seeks approval to engage in the commercial manufacture, use or sale before the patent expiration.
The available remedies for patent infringement are discussed in 6 Patent Litigation Remedies.
An additional potential form of infringement applies to process patents. If a person makes, uses, offers to sell, sells, or imports in the USA a product made by a process patented in the USA during the term of the patent, the person commits infringement under 35 U.S.C. § 271(g). This includes instances where the patented process occurs outside of the USA.
The scope of protection of a patent is determined by its claims, which describe the extent of the protection sought in a patent application. Often, significant dispute arises when determining the precise meaning of terms or phrases in the patent claims.
In 2018, the standard for claim interpretation became more uniform, whether in a district court, the ITC or in a post-grant proceeding at the USPTO. The “Phillips” standard seeks to interpret the claims from the perspective of a person having skill in the relevant art of the invention based on intrinsic and extrinsic evidence. Intrinsic evidence includes the patent’s description of the invention, including the claims themselves, and the patent prosecution history. This means arguments and statements made to the USPTO during patent prosecution may limit how claims are interpreted later. Extrinsic evidence includes dictionaries, treatises and expert testimony. Extrinsic evidence can aid the decision-maker’s understanding of how a skilled person would have understood the claims at the time of the invention.
During patent prosecution, the USPTO uses a slightly different standard for analysing patent application claims. Generally, the USPTO uses the same types of information described above, but seeks to determine the “broadest reasonable interpretation” of the claims for purposes of issuing patents.
An accused patent infringer may seek to avoid liability by proving that no infringement occurred, the patent is invalid or the patent is unenforceable.
Several defences to patent infringement do not require challenging the patent itself, either by showing the accused article does not infringe or showing the use of the patent was lawful. For example, direct infringement requires all the elements of the patent claim be present, so demonstrating missing elements in the article can avoid liability by direct infringement. Showing an implied or express licence can negate the infringement requirement of unauthorised use of a patented invention. In the medical field, gathering data to support an ANDA for a generic version of a patented and FDA-approved drug does not create patent infringement liability – although the filing of the ANDA may. The courts also recognise a more general experimental use exception to liability, but it is a very narrow exception, requiring no commercial motive in the experimental use. Under certain circumstances, prior commercial use of an invention occurring more than a year before the patent application can avoid infringement liability. Finally, infringement damages are limited by law to the six years prior to the filing of the complaint, so infringement before this period would not incur liability.
The accused infringer may also challenge the validity of the patent because there will be no liability for an invalid patent. The grounds for challenging the patent may include lack of patent-eligible subject matter, lack of novelty, lack of enablement or written disclosure, obviousness of the invention, public knowledge or prior offers to sell.
The patent holder’s actions can also be the basis of a defence against infringement. Inequitable conduct can result from improper conduct before the USPTO. Relying on a patent holder’s conduct and representations may create equitable estoppel if the patent holder later acts inconsistently with the reliance. A patent holder that impermissibly expands its rights beyond the statutory patent grant may commit patent misuse. Under patent exhaustion – also referred to as the first sale doctrine – the patent holder’s right to control an individual article ends after an authorised sale. In some circumstances, a patent holder’s failure to keep patents together that are subject to a terminal disclaimer may be used as a defence to patent infringement.
That an accused infringer has its own patent does not, by itself, provide a defence to an infringement claim.
Parties may submit expert reports in connection with the claim construction process to assist the court in construing disputed terms. Parties almost always rely on expert reports and expert testimony in connection with infringement, invalidity and damages issues. Experts are especially effective when a case involves a jury because a good expert can explain complicated information in a clear and understandable fashion.
Courts use specialised claim construction hearings called “Markman” hearings to examine evidence from the parties on the appropriate meaning of the relevant terms in a patent claim. In a district court, patent claim interpretation is performed by the judge, even if there is a jury trial.
In the federal court system, a final judgment of invalidity effectively revokes the invalidated claims of the patent. A decision that the patent holder committed some other actions that prevents liability for patent infringement, such as equitable estoppel or antitrust violations, may make a patent unenforceable.
The ITC makes similar decisions about patents, but its decisions are not binding on district courts. For example, an ITC decision of patent invalidity does not require a district court to treat the patent as invalid, but the district court may reach the same decision based on the persuasive influence of the ITC decision.
In post-grant proceedings, the USPTO may cancel some or all of the claims of a patent. A party challenging a patent in a post-grant proceeding does not need to have the standing necessary in a federal court. However, the ability to appeal the USPTO’s decision to the Federal Circuit may be limited by a lack of standing.
Patent invalidity is examined on a claim-by-claim basis. The remaining claims of a patent remain valid, even if some claims are found invalid.
During some post-grant proceedings before the USPTO, the patent holder can amend claims, but may not enlarge the scope of the claims. During ex parte re-examination, the patent holder may amend claims to respond to the USPTO’s findings of substantially new questions of patentability. In the adversarial proceedings – IPR, PGR and CBM – the patent-owner may file a motion to amend claims.
In district court actions, patent infringement claims and defences may be heard together. Courts have broad discretion to control proceedings to promote judicial efficiency and avoid prejudice to the parties, so some issues may be “stayed”. Typically, a judge rather than a jury will determine equitable defences such as inequitable conduct or laches.
ITC investigations hear all infringement and defences together. The ITC has a shorter timeline than district courts and no juries to consider.
Proceedings challenging patent validity must be heard separately from infringement claims at the USPTO because the USPTO does not determine infringement. Often, there is a related district court case claiming infringement during post-grant proceedings at the USPTO. The district court may stay its proceeding to await the patent invalidity decision of the USPTO.
In district court proceedings, patent litigation is subject to the same rules as other civil litigation: the Federal Rules of Civil Procedure and the Federal Rules of Evidence. Most courts (and some individual judges) that hear a large number of patent cases, such as the District of Delaware or the Northern District of California, have their own supplemental procedures that apply in patent cases.
ITC investigations and post-grant proceedings at the USPTO each have their own procedures, but many of the rules are similar to those in district courts. One notable exception is the right to a jury. Unlike district court proceedings, there is no jury at the ITC or the USPTO.
With respect to federal district court litigation, beyond choosing the particular forum in which to file suit, parties have little ability to influence who will be the decision-maker – unless they agree to waive their rights to a jury trial (which patentees almost never do). In a district court, unless a judge decides an issue in a pre-trial (eg, a summary judgment) or post-trial motion, issues of infringement, invalidity and damages are decided by a jury. Juries do not have technical expertise. There is no requirement that a judge have a technical background to preside over a patent case in district court, and most district court judges do not have technical backgrounds.
In 2011, 14 district courts began a ten-year Patent Pilot Program to enhance expertise in patent cases. New patent cases in those districts are assigned to a random judge. If the randomly assigned judge is not a designated judge in the Program, the judge may transfer the case to a participating judge in the district.
ITC investigations proceed before an administrative law judge. Because a large proportion of ITC investigations involve patents, many administrative law judges have developed substantial experience with patent cases, and many also have technical expertise. The ITC randomly assigns an administrative law judge to new investigations, and assignment is not based on any particular technical background of the administrative law judge.
The USPTO has administrative patent judges. These judges are typically experienced patent lawyers with technical backgrounds. If possible, the USPTO assigns cases to judges based on their technical background.
Appeals from all patent cases at the district courts, ITC or USPTO go to the US Court of Appeals for the Federal Circuit. The judges in the Federal Circuit have significant patent law experience from the many patent-related appeals, but do not necessarily have a technical background.
Settlement of patent disputes is quite common (except in pharmaceutical patent cases). Parties may reach a settlement through a variety of possibilities, such as negotiation, alternative dispute resolution or mediation. Some courts require parties to attempt a resolution before proceeding with a trial. Settlement agreements can terminate the proceedings in a district court, usually without disclosure of the settlement details to the court.
The ITC has a non-mandatory mediation programme to aid resolution of disputes before pursuing a full investigation. After the investigation begins, parties may request termination of the investigation upon reaching a settlement, but a copy of any agreement will be submitted to the ITC in the process. Procedures are available to protect information within the settlement from public disclosure.
Post-grant proceedings before the USPTO follow similar settlement disclosure procedures as the ITC when seeking termination of a trial. The USPTO may continue a proceeding despite the parties’ settlement agreement. This is more likely if the proceeding is nearly completed when the settlement occurs.
Federal courts have inherent authority to control their dockets, including the power to stay proceedings when there are co-pending matters in another forum. The courts may consider several factors when deciding to stay, including the progress of the court proceeding, whether the stay will simplify issues before the court or whether a stay would unduly prejudice a party. When there is a co-pending post-grant proceeding, courts are more likely to stay proceedings if the USPTO proceeding has been instituted.
Generally, decisions reached in different forums are not binding on each other. This means a district court is not obliged to agree with a USPTO decision on patent validity, but the court may find the USPTO decision very persuasive because of its perceived expertise on patents. Similarly, the USPTO may consider the progress and findings of district court litigation or ITC investigations in its own proceedings.
In federal district courts, the patent holder may seek damages for patent infringement and injunctions to prevent ongoing infringement. By statute, damages for infringement should be adequate to compensate for the infringement, but not less than a reasonable royalty. A jury verdict will typically include a damages award, which is then reviewed by the district court judge (if a party files a motion requesting such a review) for compliance with certain legal standards regarding damages. Patent damages are limited to no more than six years before commencement of the lawsuit. In cases of wilful infringement, the courts may award three times the damages. Generally, each party pays its own lawyers’ fees, but in “exceptional” cases, courts may impose fee-shifting to the losing party. In addition to monetary damages, a party may seek an injunction to prevent continued infringement.
The ITC cannot impose monetary damages for infringement, but can issue exclusion and cease-and-desist orders. The exclusion orders direct US Customs and Border Protection to exclude infringing articles from entry into the US. The ITC cease-and-desist orders can direct infringers to stop importing infringing articles and to stop sales of infringing articles in US inventory.
In the US legal system, each party typically pays its own lawyers’ fees and costs. Similar to the description in 6.1 Remedies for the Patentee for successful patent holders, a prevailing defendant may request lawyers’ fees and costs if the case is determined to be “exceptional”. Under US Supreme Court precedent, “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
The available remedies do not vary based on the technical area of a patent.
A successful patent holder in an infringement proceeding does not automatically get an injunction against the infringing party. Similarly, if the district court issues an injunction, its effect is not automatically stayed during appeal. Ordinarily, a permanent injunction is effective upon issue, but a court has broad equitable authority to modify relief. The defendant may seek a stay of the injunction by filing a motion with the issuing court or the appellate court – the US Court of Appeals for the Federal Circuit. When deciding to stay an injunction, the courts balance the likelihood of success on the merits against the equities of the parties and the public.
The appellate procedure for patent litigation is the same as for other civil litigation, except that all appeals in patent cases go to the US Court of Appeals for the Federal Circuit. This includes patent cases from district courts, ITC investigations and USPTO proceedings.
The Federal Circuit can review factual and legal determinations of the proceedings in a lower court, if the errors were properly preserved in its record. The level of deference given to the decision-maker in a lower court varies depending on the type of error. For purely legal issues, such as statutory interpretations and judgments as a matter of law, the Federal Circuit applies a “de novo” standard where the court examines the record to form its own opinion, with no deference to the previous decision-maker. Factual determinations receive more deference, either “clearly erroneous” if the judge made factual determinations, or “substantial evidence” if the jury was the fact-finder. Equitable determinations, such as inequitable conduct, injunctions, or lawyers' fees, are left to the discretion of the trial court judge, so a review of these decisions gets the highest deference, only being reversed for “abuse of discretion”.
Pre-litigation costs vary depending on the complexity of the issues and the amount in controversy between the parties. A patent holder may require legal and technical research for claim charts, warning letters to potential infringers and analysis of potential enforcement options. An accused infringer may accrue legal fees to weigh its options for challenging the alleged infringement through an affirmative defence in a lawsuit, a declaratory judgment of invalidity or non-infringement, or a USPTO proceeding challenging patent validity.
In district courts, the fee for filing a federal civil complaint is fixed by statute, but the Judicial Conference of the United States may prescribe additional fees. Currently, the filing fee is USD350, plus a USD52 administrative fee.
The fee to file an inter partes review (IPR) at the USPTO is USD41,500, and a PGR or CBM request is USD47,500.
The traditional rule in the USA is that each party bears its own costs, but there are limited exceptions to this default rule. The Federal Rules of Civil Procedure allow a party to seek reasonable expenses, including lawyers’ fees, incurred when an opposing party makes improper representations to the court or commits discovery misconduct. These sanctions do not award all costs and lawyers’ fees, only the expenses associated with the violation. In patent litigation, a court may award all costs and reasonable lawyers’ fees to the prevailing party if the case is determined to be “exceptional”, that is “one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
Alternative dispute resolution is common in civil cases, and its use in intellectual property disputes is becoming increasingly common. Parties may use alternative dispute resolution as an alternative to litigation either by mutual agreement, contractual agreement or court order (although a court cannot force the parties to agree to a mediator’s ruling). Some courts offer mediation or special masters for settlement purposes. Parties may prefer alternative dispute resolution to take advantage of its greater flexibility, confidentiality and cost effectiveness. Additionally, a patent owner can avoid the risk of a court’s judgment of patent invalidity.
Assignment of all or part of the rights in a patent must be in writing. The assignee or assignor may record the assignment with the USPTO, but recordation is not required to enforce the assignment.
Generally, the procedure to assign patent rights involves the same type of negotiations as other contract rights. The parties negotiate the terms of the agreement and execute a written assignment contract. An employer’s employment contract may require its employees to assign rights to the employer for inventions developed during employment. Although not required, any assignments should be recorded with the USPTO.
An intellectual property licence must describe the terms of the licence agreement in writing and clearly identify all parties and the intellectual property involved. The licence may be exclusive or non-exclusive. In an exclusive licence, the licensee receives all rights in the patent except ownership of title. This allows an exclusive licensee broader rights, such as the ability to sue for patent infringement. A non-exclusive licence can be granted to more than one party, but a licensee cannot enforce the patent against others. For public policy reasons, a patent licence cannot require payment of royalties beyond the term of the patent. The USPTO allows recording of licences, but recording is not required for a licence to be valid. No approval from the USPTO is necessary for a licence.
Licence agreements are contractual rights; the parties agree to the terms and execute the agreement in writing. Unlike an assignment of a patent, the rights assigned by licence revert to the licensor after the agreed time period.
The year 2020 was unlike any other in our lifetimes. While the deepest imprints on 2020 were marked by the COVID-19 pandemic, and widespread social and political unrest, US patent litigation did not stand still. Of the most important trends and developments in patent litigation for 2021, three stand out.
The COVID-19 pandemic and its impact on district courts and litigants was 2020’s most significant “development” in patent infringement litigation, and promises to greatly influence the practice in 2021. Apart from the growing backlog of cases caused by the general postponement of jury trials, the pandemic put a quick stop to business as usual and required the adoption of new technological tools for various proceedings formerly conducted in person: hearings, conferences, depositions, mediations and, ultimately, trials.
Second is the rise of the Western District of Texas as an increasingly popular destination for many plaintiffs filing patent infringement actions, particularly non-practising entities (NPEs). The Supreme Court’s TC Heartland decision ended the Eastern District of Texas’s reign as the most popular venue for patent cases and many expected a shift west to the Northern and Central Districts of California. The caseload shifted west, but not past the I-35 corridor. United States District Judge Alan Albright’s affinity for patent cases, coupled with the fact that many potential defendants are present in the Western District – which includes hi-tech hubs Austin and San Antonio – has made Judge Albright’s courtroom in Waco the new patent infringement venue of choice.
Third is the impact of (i) the recently developed guidelines of the Patent Trial and Appeal Board (PTAB) for discretionary denials, and (ii) several decisions denying institution when a case was made that disposition by a district court would be faster. The first appears to have ameliorated the perceived “threat” of inter partes reviews (IPRs) as “patent death squads.” Some would argue that the second defers too much to the district courts.
Each of these three trends or developments is examined in turn below.
Patent Litigation in the Time of COVID
The COVID-19 pandemic has severely impacted the operation of state and federal courts. The legal profession’s adoption (with the rest of the business world) of Zoom, WebEx, Microsoft Teams and other desktop videoconferencing technologies has kept many aspects of practice running – in a surprisingly smooth manner. Jury trials, however, have become virtually impossible, particularly given ever-increasing needs for social distancing and avoiding large gatherings as the daily infection rate in the USA continues to accelerate. The growing backlog of postponed trials, and the need to prioritise criminal trials once they are safe to hold, will likely take many months – and perhaps multiple years – to overcome once the justice system resumes some sense of normalcy. In the meantime, lawyers and litigants need to adapt to remote methods of doing things, because such methods are widespread and likely here to stay.
As 2021 dawns, courts around the USA are closed. District judges and their staffs are largely working from home like the rest of us. The courts with the heaviest patent dockets (the District of Delaware, Eastern District of Texas, Central District of California, and the Northern District of California) are all impacted. The Eastern District of Texas tried to continue holding trials, but after at least 15 jurors, court staff, party representatives, and counsel became infected with COVID-19 during a jury trial in the Sherman Division in November 2020, Chief Judge Rodney Gilstrap continued (postponed) all jury trials until at least 1 March 2021.
After the severity of COVID-19 infections and the potentially widespread affect on the country came into focus in mid-March 2020, civil litigation experienced a sudden halt. Eventually, proceedings came back to life. Courts that have long permitted telephone appearances for hearings and conferences adapted quickly, expanding their use of conference calls and many using Zoom or WebEx. As the courts restarted managing civil dockets, they made short work of lawyer resistance to remote depositions and dispositive hearings. Remote depositions are now commonplace, as are remote mediations.
Bench trials continue to be held – remotely by videoconference. Obviously concerned about the growing backlog of jury trials, many judges are encouraging parties to waive their jury demands so that trials via Zoom or WebEx can be scheduled. The PTAB halted all in-person proceedings – including oral hearings (essentially bench trials) on 13 March 2020 – ordering that such proceedings take place by phone or video. The US International Trade Commission (ITC) adopted WebEx as the videoconferencing solution for its Section 337 oral hearings (ie, trials), and has now held several final hearings using that platform.
Statistics generally show that jury trials result in larger damages awards compared to bench trials. Whether because of the in terrorem effect that a prospective jury trial and damages award might provide, or because of other factors, patent infringement litigants have not rushed to waive their jury demands in favour of Zoom or WebEx bench trials. As a result, district courts – particularly the busiest courts for patent litigation – are building up increasingly large backlogs of cases ready for trial. The backlog will likely last for a long time: trials in criminal cases, which have priority, are also backlogged, as are trials in the plethora of other civil cases handled by district courts. Unwinding the backlog will require a lot of work by district judges, magistrate judges and their staffs, and patience by litigants and their counsel.
Recently, the first remote jury trial in a patent case was held via ZoomGov in the Western District of Washington. In Ironburg Inventions Ltd. v Valve Corporation, a jury of eight members found willful infringement by the defendant. District Judge Thomas S. Zilly commented that the technology worked quite well and he would continue to schedule remote trials to alleviate the current backlog.
In the meantime, remote depositions, court conferences and hearings are here for the remainder of the pandemic. Furthermore, many believe (as do the authors of this article) that technology-based proceedings will continue to be used post-pandemic. They generally do not require travel (often a large and unnecessary expense borne by litigants) or large-scale logistics (such as large conference facilities for multi-party cases), and advances in data security – and in the various platforms’ abilities to accommodate multiple screens, the live annotation of exhibits, and other innovations – have removed many of the objections to their use.
Those who are comfortable with the more traditional methods of proceeding – confronting witnesses, ensuring eye contact with the judge, using printed paper exhibits – must now become comfortable with the digital nature of remote proceedings and the tools used to conduct them. Indeed, the importance of developing mastery of the new “digital courtroom” cannot be overstated given the challenges posed by these new environments. Remote depositions can be very cumbersome and frustrating if the taking and defending counsel have not familiarised themselves with the particular platform ahead of time.
Move Over Marshall, There's a New Sheriff in Town: The Rise of Waco and the Western District of Texas
Since the mid-2000s, mention Marshall, Tyler, Sherman, Beaumont or Texarkana to an experienced patent litigator and you would get knowing nods about this string of small Texas towns, tips on their favourite BBQ or Tex-Mex restaurants, and war stories about the big patent wars fought there. The Eastern District of Texas, along with the District of Delaware and the Northern and Central Districts of California, rose to prominence as the primary battlegrounds for major technology companies and their non-practising distant cousins to determine the scope and monetary value of their innovations.
That changed dramatically, however, with the appointment of District Judge Alan Albright to the Waco Courthouse in the Western District of Texas in September 2018. Given the Supreme Court’s venue requirements articulated in TC Heartland, Waco is not where you would expect the new centre of US patent litigation to arise. Deep in the heart of the Texas Bible Belt, Waco lacks the abundance of technology companies commonly found in its District neighbours to the south, such as Austin and San Antonio. Even with Austin’s prominence as a hi-tech hub, the Western District had only 2.5% of the patent cases filed nationwide in 2018.
A former patent litigator, Judge Albright intentionally adopted a combination of patent owner-friendly policies and special court rules to attract patent plaintiffs (the party picking the venue) to his courtroom. As a result, 792 patent cases were assigned to Judge Albright in 2020, the most of any judge in the country by a very wide margin.
So why the recent rush to file in Waco? To be clear, most patent suits filed in Waco are by NPEs looking for a faster and more predictable road to settlement and not necessarily the largest possible jury award. Indeed, the highest award reported in Judge Albright’s courtroom is just under USD11.5 million. While not a de minimis recovery, it is certainly far lower than the top awards reported for the Eastern District of Texas (USD1.7 billion), District of Delaware (USD2.5 billion) or the Northern District of California (USD1 billion). By sacrificing some of the potential upside, however, non-practising plaintiffs filing in Waco know exactly who their judge will be and that the chance of an early invalidation of the asserted patent(s) by either the court or the PTAB is essentially zero.
The case assignment practice used in the Western District guarantees that as long as the case is first filed in Waco, it will be assigned to Judge Albright. This is true even if the location of facilities, witnesses and documents make the case more convenient to another Division in the District. Once assigned to Judge Albright, he retains supervision of the matter even if the case transfers later to Austin or San Antonio at the request of the litigants.
Of particular interest to non-practising plaintiffs, Judge Albright has never granted a pleading stage motion for lack of patentable subject matter (often called “101” or “Alice” motions). Judge Albright’s well-publicised judicial philosophy is that given a patent’s presumption of validity, such motions are appropriate only after claim construction discovery and a Markman order is entered.
Nor does Judge Albright typically grant 28 U.S.C. §1404(a) motions to transfer venue outside of the Western District for the convenience of witnesses and evidence given the large number of technology companies located in Austin. Although recently the Federal Circuit granted Apple’s petition for mandamus seeking a transfer to the Northern District of California, it remains to be seen whether this decision will have a meaningful impact on future decisions to file in Waco.
Judge Albright’s standing Order Governing Proceedings for Patent Cases (OGP), issued 26 February 2020, provides a very accelerated time to trial, usually within 18 months of the initial case management conference. The OGP also, uniquely, stays all discovery other than what is necessary for claim construction until after the Markman hearing and generally limits the number of terms for construction to ten, unless the parties can convince the court that more are required for that case. From the perspective of NPE’s, the restrictions contained in the OGP tend to minimise discovery expenses prior to claim construction and encourage more meaningful settlement discussions once the court’s constructions are known.
In view of his streamlined time to trial, Judge Albright is also predisposed to deny motions to stay his proceedings pending a validity challenge via IPR before the PTAB. Judge Albright has publicly stated that he will not stay cases pending the outcome of an IPR absent special circumstances, since he believes that patent owners deserve jury trials in federal court and that he can “get a patent trial resolved more quickly than the PTAB can.” Without a stay, and in view of a Markman decision and likely trial date before the PTAB could issue a final written decision, the PTAB may increasingly rely on these facts to deny institution of IPRs under 35 U.S.C. §314(b) for cases pending in the Western District.
Taking these features together (ability to pick your judge, low likelihood of early invalidation of the asserted patent, low chance of transfer, lower initial discovery costs and a fast timeline to trial), it is easy to see why the Western District became the overwhelming favourite jurisdiction of NPEs in 2020. Will it continue in 2021? Probably, as long as Judge Albright is at the helm. In many respects, having a large portion of the lower-end NPE cases consolidated in one court with expedited procedures and limited discovery is a reasonable way to keep the cost of such nuisance suits contained. It can also have the salutary effect of lessening the “docket clog” these suits impose on other courts and provide those courts more time to handle the high stakes competitor on competitor cases that increasingly result in billion-dollar recoveries.
Should other judges in the Western District decide they want a larger slice of the patent docket, however, all it might take to throw the current system into chaos would be a change in the way patent cases are assigned (such as a move to the “wheel” approach used in the Northern District of California). Suddenly, the predictability and uniformity of Judge Albright’s approach could completely fall apart as different Judges adopt their own rules and systems. In light of Judge Albright’s enthusiasm for building the largest patent docket in the country, however, significant changes to Western District practice appear unlikely at this time.
Restoring Balance: Increased Discretionary Authority of the PTAB Favours Patentees
The PTAB, an administrative law body of the US Patent and Trademark Office (USTPO), determines disputes over the issuance, reissuance, and – more recently – cancellation of patent claims. The PTAB has become well-known to litigants since the implementation in 2012 of new proceedings for challenging the patentability (or invalidity, if you will) of issued patents, including the popular IPR.
Designed to be an alternative to litigation, an IPR petition must be initiated within one year from service of an infringement action. A patent challenger files a petition outlining the grounds for the alleged unpatentability of claims in the patent. The PTAB evaluates the petition and any preliminary response of the patent owner, and then decides, within six months, whether to institute a review. If a review is instituted, the petitioner and the patent owner are allowed to submit additional arguments and evidence for consideration by a panel of three administrative law judges. Unless there is good cause for an extension of time, a final written decision (FWD) must be issued within another twelve months. The process is usually faster and less costly than litigating the same issues in district court, in part because the proceedings are highly structured and discovery, other than cross-examination of witnesses by deposition, is strictly limited.
IPRs are commonly initiated by patent infringement defendants for several reasons. IPRs are resolved much more quickly than litigation in all but a few courts. They only address patent validity under 35 U.S.C. §§ 102 and 103, and thus provide more downside for the patent owner than the challenger. The challenger’s burden of proof is a preponderance of evidence, compared to the higher standard of clear and convincing evidence in district court. Consequently, the PTAB has been viewed as more favourable to patent challengers than a district court judge or jury – at least historically.
Statistics supported that view. In the years after 2012, IPRs were likely to invalidate at least some – and often all – challenged patent claims. The PTAB instituted proceedings on over 75% of petitions. In over 75% of instituted proceedings, the PTAB held all challenged claims unpatentable and cancelled them. In subsequent years, IPRs became less lethal, but these rates remained above 60%. As a result, some commentators referred to the PTAB as the “patent death squad.”
Over the last few years, however, IPR institution and claims cancellation rates have declined further. In fiscal year 2020, the PTAB instituted IPR proceedings on only 56% of petitions. The PTAB cancelled all challenged claims in only 60% of proceedings instituted. Recent changes facilitating amendment of the challenged claims also provide a mechanism to overcome the challenges presented in the petition. In short, IPRs no longer appear to be the quick and assured way to kill patent claims.
The changes arise in part from the Supreme Court’s 2018 decision in SAS Institute, Inc. v Iancu. The Court held that the PTAB could not “pick-and-choose” the claims and grounds on which it would institute an IPR. Rather, any IPR had to be instituted on all or none of the challenged claims and grounds. Requiring assessment and institution of the petition as a whole may have made institution of marginal petitions less likely, and cancellation of all reviewed claims less common.
The changes also arise, indirectly, from the Supreme Court’s 2016 decision in Cuozzo Speed Techs., LLC v Lee. Relying on 35 U.S.C. §314(a), which provides that the USPTO “may not authorize an IPR . . . unless” it makes certain findings, the Court found “no mandate to institute review.” The Court concluded that institution decisions could not be appealed because “the agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion.” In other words, the PTAB could refuse to institute IPR for any reason.
Since Cuozzo, the PTAB has increasingly relied on its authority to issue “discretionary denials.” In 2016, the PTAB denied institution based on 35 U.S.C. §314(a) alone for just a few petitions. Such denials have increased exponentially since then, however, with over 80 petitions denied in 2019, and over 160 in 2020. This increase has been fostered by the PTAB’s development of precedents for consideration of serial and parallel petitions and, most recently, proceedings in other tribunals.
In 2017, the PTAB asserted its authority to deny “serial” petitions filed by the same petitioner, designating part of its decision in General Plastic Ind. Co., Ltd. v Canon Kabushiki Kaisha as precedential. This decision outlines seven factors to be considered when deciding whether a petition should be denied where a petition was previously filed on the same patent claims. Particularly where:
In 2019, the PTAB asserted its authority to deny “parallel” petitions against the same patent, whether by the same or a different petitioner, updating its Trial Practice Guide to set forth its expectation of one petition per patent. The update acknowledges that two petitions may occasionally be needed, but states that three or more petitions are unlikely to be appropriate. The update also requires that a petitioner submitting multiple petitions rank them by priority, and explain how they differ, why that matters, and “why the Board should exercise its discretion to institute additional petitions.”
Most recently, in May 2020, the PTAB expanded its considerations regarding institution to include co-pending district court litigation, designating its decision in Apple Inc. v Fintiv, Inc. as precedential. In that case, the patent owner argued for non-institution of IPR “due to the advanced state of a parallel district court litigation,” where a trial was set to occur before issuance of the PTAB’s FWD. The PTAB affirmed that this situation could support a discretionary denial of institution because it serves the “efficiency and integrity” of the IPR system.
The decision provides six “NHK-Fintiv” factors to be considered when co-pending litigation exists. When the district court litigation is likely to be stayed and/or the merits of the petition are quite strong, discretionary denial is not favoured. But when the parties and issues overlap, a heavy investment has been made to litigate those issues, and/or where a trial is set for long before the decision date, discretionary denial is favored even when the petition was timely filed. In 2020, these factors were used to deny institution of 85 petitions — almost half of the discretionary denials under Section 314(a).
The reaction has been swift, though opinions are divided. Some companies, including Johnson & Johnson and 3M, have expressed support for the NHK-Fintiv rule. IT companies have strongly opposed the rule.
In August 2020, Apple, Cisco, Google, and Intel filed a lawsuit against the USPTO’s Director Andrei Iancu, alleging that the NHK-Fintiv “rule” violates the America Invents Act because (i) the Act already establishes a limit on when an IPR petition can be filed, and (ii) it is arbitrary and capricious. The USPTO has moved to dismiss the lawsuit as administratively improper. Some petitioners have appealed denials based on NHK-Fintiv assessments, and one filed a mandamus petition. The Federal Circuit has held, however, that it lacks jurisdiction to hear such arguments.
In October 2020, in response to allegations that the NHK-Fintiv rule is invalid because it was not adopted thorough notice-and-comment rulemaking, the USPTO issued a request for public comment. The USPTO received over 800 comments that it is currently reviewing. Whether the new USPTO director will ratify the NHK-Fintiv assessment remains to be seen.
Taken as whole, the USPTO’s recently developed guidelines for discretionary denials have ameliorated the perceived threat of IPRs, as they tend to favour patent owners and raise the bar for institution. Its recent efforts to balance the interests of petitioners in instituting IPRs against patent owner’s interests in proceeding instead in co-pending litigation probably go too far, even if intended to enhance the patent system as a whole. At the same time, its authority and guidelines for denial of potentially meritorious petitions should cause petitioners to better focus and carefully control submissions of IPR petitions.