Absolute Intervening Rights: A Silver Lining to Thwarted Post-Grant Challenges

by Jackson Walker
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Jackson Walker

When faced with allegations of patent infringement, many defendants elect to challenge the validity of certain issued patents using the various post-grant proceedings available with the United States Patent & Trademark Office (“PTO”). In particular, these post-grant proceedings include at least inter partes reviews, post-grant reviews, covered business method challenges and ex parte reexaminations. [1]

Though there are many strategic considerations and benefits to utilizing these proceedings, the most important purpose of these challenges is to invalidate the patents in view of the relevant prior art materials. However, in many instances, rather than invalidating all asserted claims of the challenged patent, the post-grant proceeding will result in at least some new claims after they were amended to survive the validity challenge. This situation often gives rise to the affirmative defense of intervening rights.

The defense of intervening rights allows a party whose products infringe a reissued or reexamined patent to continue to use or sell specific products that were made, purchased, or used before the reissuance or reexamination under certain conditions.

There are two types of intervening rights which each derive from 35 U.S.C. § 252: “absolute” intervening rights and “equitable” intervening rights. “Absolute” intervening rights provide an accused infringer with the right to use or sell a product that was made, used, or purchased before the grant of the reexamination certificate, as long as such activity did not infringe a claim of the reexamined patent that was in the original patent. In other words, when a patentee substantively amends its claims to avoid an invalidity ruling, the defendant is then shielded from allegations of infringement regarding the original claims based on products that existed before the amendments were made.

If an accused infringer shows entitlement to “equitable” intervening rights, a court will allow the continued manufacture, use or sale of additional products covered by the reissued or reexamined patent when the accused infringer made, purchased, or used identical products, or made substantial preparations to make, use, or sell identical products, before the reissue or reexamination date, “under such terms as the court deems equitable for the protection of investments made or business commenced.” While “absolute” intervening rights is focused on existing products, “equitable” intervening rights is broader and, within the court’s discretion, may also capture future products.

The practical effects of an intervening rights defense are three-fold. First, the defendant will not be liable for infringement – or any associated damages – prior to the amendments. Second, the defendant will be able to continue to use or sell its existing products so long as those products were in existence before the amendments were made. Finally, in the case of equitable intervening rights, the defendant may be permitted to continue its current production operations based on the discretion of the court. In many instances, these are each incredibly important allowances as the defendant may have invested many millions of dollars into its current business operations and would like to – at a minimum – recoup its investment and maximize any potential profit.

Traditionally, in interpreting the language of 35 U.S.C. § 252, courts have applied equitable intervening rights to both product (or apparatus) and process (or method) claims. However, the same cannot be said of absolute intervening rights. In particular, certain courts have held that method claims are not subject to the defense of absolute intervening rights while others have applied absolute intervening rights equally to both apparatus and method claims. Without the benefit of any Supreme Court or Federal Circuit ruling on this specific issue, courts have continued to split on this issue leading to uncertainty and inconsistency on this issue.

Recently however, while sitting by designation in the District Court of Delaware, Federal Circuit Judge William Bryson specifically addressed this issue and gave clarification that method claims were not immune to absolute intervening rights as other districts courts have held. See Sonos, Inc. v. D&M Holdings Inc. d/b/a The D+M Group et al, 1-14-cv-01330, D.I. 497 (D. Del. Dec. 7, 2017). In that particular case, Plaintiff Sonos, Inc. asserted a number of claims from U.S. Patent No. 8,588,949, including at least apparatus claim 1 and method claim 16. The court noted that a “significant portion of Sonos’s damages claim in this case pertains to D&M’s alleged infringing activity that took place prior to November 5, 2015, the issuance date of the reexamination certificate for the ’949 patent.” In light of substantive amendments to both claims made during the ex parte reexamination, the court held that Sonos’s allegations regarding apparatus claim 1 were clearly barred by absolute intervening rights. Similarly, because Sonos’s infringement allegations regarding method claim 16 were predicated on Defendants providing a product – in that case software updates which were downloaded by customers – Sonos’s allegations regarding method claim 16 were equally barred by absolute intervening rights. In so doing, the court recognized that:

“[D]rawing a sharp line between product claims and method claims in determining eligibility for absolute intervening rights could result in defeating the purpose of the statute to provide intervening rights for particular goods made prior to the reissue or reexamination. For example, if particular goods were made by a process that is separately covered by a process claim that was also changed upon reissuance or reexamination, absolute intervening rights would be of no benefit to the accused infringer if the patentee could simply assert a parallel process claim against the process that was used to make the very same products that were intended to be protected by absolute intervening rights.”

This ruling – which is the clearest guidance yet on this issue – is particularly promising for defendants whose primary business is predicated on providing products to customers. Not only are these defendants entitled to the shield of absolute intervening rights for apparatus claims, but now they are entitled to the defense for method claims as well. Given the growing trend in utilizing post-grant proceedings in defense of parallel litigation, this clear guidance should allow defendants – and their counsel – to more accurately and precisely defend against infringement allegations by invalidating claims and/or requiring substantive amendments to trigger the intervening rights defenses.

[1] For a more thorough discussion of these post-grant proceedings, namely ex parte reexaminations, please visit https://www.jw.com/ex-parte-reexaminations-overlooked-method-challenging-patents/

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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