Toward a Post-Grant Patent Opposition Proceeding in the United States

Earlier this year, Representative Lamar Smith (R-Texas) introduced a wide-ranging patent reform bill (H.R. 2795) in the United States Congress that would, among other things, provide a post-grant patent opposition system for challenging issued U.S. patents.   Although this is not the first time that such a proposal has been made to Congress—Representative Howard Coble (R-North Carolina) submitted a similar proposal in 2000 that did not pass—this time there appears to be a substantially greater likelihood that post-grant opposition will be enacted into law. 

Arrayed in support of post-grant opposition are the United States Patent and Trademark Office (“USPTO”), major corporations seeking an alternative and less costly forum to federal district court, most of the intellectual property bar associations, and other governmental organizations.  The Patent Office, in particular, is eager to provide a low-cost forum for resolving patent validity disputes, partly because it provides a solution to the oft-cited problem of bogus patents.  Post-grant opposition provides a way for the USPTO to correct these problem patents.

Corporate lobbying for post-grant opposition is largely a reaction to the extremely high costs associated with patent litigation in the federal district courts and also a response to the rise of the so-called patent trolls (see related article entitled “Beware the Patent Troll,” below). 

Harmonizing the United States’ patent laws with other major patent systems, in particular the European Patent Organization (“EPO”), is another major incentive for the U.S. to adopt post-grant opposition.  The EPO opposition proceeding is often used, with around 7 percent of all issued patents subjected to opposition.  In Europe, an opponent can file a request to have an issued patent reviewed again for patentability during a nine-month period beginning when the patent is granted.  After this period expires, the patent cannot be opposed.

Post-grant review is not a new concept in the United States.   Since 1981, U.S. patents have been subject to an ex parte reexamination process.  This process, however, as its name implies, does not provide any meaningful participation by the third-party requestor, beyond the initial filing request, which has led to its being used only infrequently.  Moreover, patent lawyers have been reluctant to advise clients to consider ex parte reexamination due to a general distrust in the Patent Office’s ability to “fix” the problem patent.  In reaction to this limited use of the ex parte system, Congress passed an inter partes reexamination system in 1999 as part of the American Inventors Protection Act (“AIPA”), which provides substantial participation by the third-party requestor and which was designed to provide a viable alternative to challenging patent validity in federal court.  This system, unfortunately, has been used even less than the ex parte reexamination process it was designed to fix because of several procedural flaws in the statute.  Thus, in its 21st Century Strategic Plan, the USPTO actually proposed scrapping the inter partes reexamination process in favor of a post-grant opposition system. 

Ex Parte Reexamination

Since 1981, approximately 7,500 ex parte reexamination requests have been filed at the USPTO, about 90 percent of which have been granted due to the low threshold required to kick off the proceeding—the USPTO applies a test known as a “substantial new question of patentability” in deciding whether to reexamine a patent.  The reexamination can even be based on prior art that was before the USPTO examiner who issued the patent in the first instance.

Ex parte reexamination is a limited procedure, however, especially from the viewpoint of the third-party requestor.  The only validity issues that can be raised in the reexamination are those based upon prior patents and printed publications.  Evidence of prior public use or prior public knowledge is not admissible in the reexamination, and neither are issues relating to the best mode or enablement requirements of the patent’s specification or inequitable conduct.  Moreover, the third-party requestor’s ability to participate in the proceeding is limited to the initial filing of the request for reexamination and a single response to the optional patent owner’s statement if the reexamination is granted.  Although the reexamination is open to public inspection and the third-party requestor is provided with copies of the subsequently filed papers, he cannot respond further to any of these papers, nor can he appeal to the USPTO or the federal courts if dissatisfied with the outcome of the reexamination.

Although limited in scope and participation, the ex parte reexamination proceeding still provides many advantages over testing validity in the district court: (i) costs are very low; (ii) there is no disruption to the requestor’s business; (iii) the burden of proof in reexamination is a preponderance of the evidence, not the much higher “clear and convincing evidence” standard required in a district court validity challenge; (iv) the claims of the patent are given the “broadest reasonable interpretation,” which will tend to make them easier to reject over the prior art; and (v) continuing examination is likely to result in additional legal estoppels on the patent owner and may provide for intervening rights if the claims are substantially amended in response to the prior art. 

Despite these advantages, many patent lawyers are still reluctant to advise clients to pursue an ex parte reexamination because of the continuing distrust in the USPTO’s ability to apply the best prior art.  Recently, however, the USPTO changed its rules so that reexamination filings are assigned to an examiner other than the one who issued the patent in the first instance; it also instituted an internal review board, called a Patentability Review Conference, to consider the actions of the examiner in the reexamination proceeding prior to certifying the reexamined patent for issuance.  Statistically speaking, however, most patents will emerge from a reexamination in some form.  Patent claims are completely cancelled in only about 12 percent of the filings.  About 30 percent of the time, all of the claims are confirmed, and in the remaining 58 percent of cases, the claims are modified in some way. 

Oftentimes, the possibility of filing an ex parte reexamination surfaces only after a federal lawsuit is filed and the defendant becomes motivated to seek out the best prior art.  In cases where the defendant’s noninfringement position is weak, the prior art is compelling, and in jurisdictions where juries have tended not to find U.S. patents invalid, filing an ex parte reexamination request can be the best option.  When this happens, the defendant typically moves to stay the litigation pending the outcome of the reexamination proceeding.  The decision on whether to stay the case, however, is within the court’s discretion and typically becomes much more difficult the later the stay request is made into the litigation.  Therefore, in deciding whether to file an ex parte reexamination request during a pending litigation, it is important that the defendant/requestor move as quickly as possible after the suit is filed to engage the reexamination, and that the initial request is as complete and detailed as possible so as to ensure that the USPTO examiner assigned to the reexamination fully appreciates the relevance of the prior art.

Inter Partes Reexamination

In response to the limited use of the ex parte reexamination proceeding, Congress passed into law an inter partes reexamination proceeding in 1999 as part of the AIPA.  The concept of the inter partes proceeding was to provide the third-party requestor with an opportunity to be heard in the reexamination process, and thus serve as an alternative forum to federal district court.  The USPTO predicted that during the first year following the law’s enactment, approximately 400 such reexaminations would be filed.  By 2005, it predicted that there would be 600−700 inter partes filings per year.  But, due to several procedural flaws in the statute, the inter partes system has been used even less often than the ex parte system it was designed to improve upon.  In fact, as of June 2005, only about 80 inter partes requests had been filed. 

Substantively, the inter partes reexamination system is quite similar to the ex parte process.  Validity issues are limited to prior patents and printed publications, the burden of proof is a preponderance of the evidence, and the claims will be given their broadest reasonable interpretation.  Procedurally, however, there are many differences in the two processes.  The inter partes proceeding allows the third-party requestor to respond substantively to the office actions generated by the USPTO and also to the amendments filed by the patentee.  If the third-party requestor believes that the USPTO has not properly rejected the claims, he can then appeal the examiner’s decision to the Board of Patent Appeals and Interferences (“BPAI”), and also to the Federal Circuit, if necessary.  

Unfortunately, three flaws were present in the inter partes statute when enacted.  First, the proceeding was limited to issued patents that were filed on or after November 29, 1999, and thus initially only a very small number of patents were eligible for the proceeding.  Second, the third-party requestor was permitted to appeal only to the BPAI, not to the Federal Circuit, while the patentee could appeal all the way to the Federal Circuit.  That flaw was remedied in 2002 when Congress modified the inter partes statute to permit a Federal Circuit appeal by the third party.  Third, the inter partes statute contains an ambiguous estoppel provision that disables the third-party requestor from raising an issue in a subsequent federal district court lawsuit that it raised “or could have raised” in the inter partes proceeding.  Furthermore, the third-party requestor is estopped from subsequently challenging fact determinations made by the USPTO during the reexamination.  The “estoppel” is certainly the greatest impediment to the widespread use of the inter partes proceeding.  In a November 2004 report to Congress on the progress of the inter partes system, the USPTO conceded that the statute had been a complete failure in that it was not being used as an alternative to litigation, and it recommended that these procedural flaws be remedied.

2005 Post-Grant Opposition Proposal

Along with the introduction of post-grant opposition, the recently introduced patent reform bill proposes two fixes for the inter partes proceeding.  First, the “could have raised” portion of the estoppel provision would be deleted, so that only issues that were actually raised and argued before the USPTO would be subject to an estoppel.  And second, the temporal restriction on which patents are eligible for inter partes reexamination would be removed so that all issued patents are subject to the proceeding.

The proposed post-grant opposition system enables a requestor to file an opposition to an issued patent within nine months of the date of patent issuance.  If the patent owner files an infringement suit within three months of issuance, however, then he may be able to stay any opposition request filed within the nine-month window while the infringement suit proceeds.  Unlike the two reexamination proceedings, any of the grounds for finding a patent invalid may be considered in the opposition proceeding, including prior public use or knowledge by others, and compliance with the written description and enablement requirements.  Similar to reexamination, the USPTO would apply a “substantial question of patentability” test in determining whether an opposition request should be granted.  This test would appear to be an even easier test to meet than the reexamination standard where the “substantial question” must be “new.”  Moreover, as in reexamination, the burden of proof in establishing that a patent claim is unpatentable in the opposition proceeding is a preponderance of the evidence, not the clear and convincing standard required in a district court action.

Procedurally, the opposition is engaged by filing an opposition request, which may include affidavits presenting factual evidence and/or expert opinion testimony.  In response to this request, the USPTO will then determine whether a “substantial question of patentability” is presented, and if so, then the opposition request is granted.  Following this determination, the patent owner then has an opportunity to file a response to the opposition request and may also present affidavit evidence, including expert testimony, to counteract the evidence submitted by the requestor.  Deposition discovery is then permitted, but only as to persons who submitted affidavit evidence on the part of the requestor or the patent owner.  No other discovery is permitted unless authorized by the panel of three administrative patent judges assigned to the opposition.  Following the patent owner’s written response, either party to the opposition can request an oral hearing before the panel, or the panel may call for an oral hearing on its own.  The panel may permit the parties to file briefs in advance of the hearing and may also permit live cross-examination of any persons who submitted affidavit evidence.

Following the hearing, the panel issues a written decision as to the patentability of the claims at issue in the opposition.   Either party may then file a request for reconsideration if dissatisfied with the written decision and thereafter may file an appeal to the Federal Circuit.  As with the inter partes reexamination proceeding, the opposition proposal includes an estoppel provision, but this is limited to issues that were raised by the opposer and actually decided by the panel.  Furthermore, an exception to the estoppel provision provides that the opposer would not be estopped from presenting new evidence material to a decided fact that could not have reasonably been discovered during the opposition proceeding. 

Will Post-Grant Opposition Pass?

Although it is impossible to predict whether the post-grant opposition proposal submitted by Representative Smith will ever pass into law, it is clear that substantial forces are pressing Congress to provide additional relief for patent litigants weary of the high costs and procedural disadvantages of defending a patent infringement suit in federal court—particularly where the patent holder is “trolling” for a quick tribute.  Something similar to the current proposal is likely to find its way into law—it’s only a matter of when and exactly what form the post-grant opposition will take.  One hopes that, unlike the introduction of the inter partes system, this time Congress will put in place a system that is truly an alternative to litigation in the district courts.

Beware the Patent Troll

Although abusive patent practices have always been part of the patent litigation system, it does seem as if there are many more individuals, shell corporations, and even law firms entering the business of acquiring unused patents for the purpose of licensing and enforcement.   These parties are sometimes referred to as “patent trolls.”  The patent troll typically acquires unused, and generally obscure, patent rights and then attempts to extract licensing fees from large corporate entities, oftentimes with the aid of a contingent-fee patent litigation firm experienced at maximizing the pain associated with defending against a charge of infringement. 

The patent troll will not hesitate to pull the litigation trigger because he knows that the high costs, disruption to business, and potential for injunctive relief typically will cause the big corporation to settle well before trial.  And, with the aid of a contingent-fee firm, the patent troll has no real downside risk to filing suit because he has no product on the market that may otherwise form the basis of a counterclaim if the defendant owns a large patent portfolio.  Moreover, the troll, like all patent holders, is heavily armed in litigation with the presumption of patent validity, the sometimes mystical but always unpredictable process of claim construction, and the highly subjective doctrine of equivalents.

Large corporate entities would be wise to stay on the lookout for the patent troll.


David B. Cochran
Telephone: 1.216.586.7029

Dave, a partner in the Cleveland Office, is an electrical engineer and patent attorney.   He has prepared, filed, and obtained hundreds of patents for clients in the United States and throughout Europe, South America, and Asia. Prior to joining Jones Day, Dave worked as an electrical engineer for IBM and NASA, where he developed technical experience in the areas of semiconductor processing and fabrication, circuit design and simulation, semiconductor physics, laser electronics, software, embedded computer systems, control systems, power supply systems, and high-resolution imaging devices. Dave holds three U.S. patents and one European patent related to his work for IBM.


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