Comparison of Federal Court, ITC, and USPTO Proceedings in IP Disputes TOM ENGELLENNER Pepper Hamilton, LLP IP in Japan Committee Meeting AIPLA MWI Meeting, Phoenix, AZ January, 2014

Comparing Court , ITC and USPTO Proceedings Federal District Court proceedings International Trade Commission (ITC) proceedings New mechanisms for challenging patents under the AIA Key features of Inter Partes Review (IPR) proceedings Some Statistics for the first year of IPR availability Stays of Federal Court and ITC Cases Comparisons and Conclusions

Patent Infringement And Invalidity Trials In the Federal Courts

Patent Litigation in the Federal Courts 35 U.S.C. 271 provides: whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. 35 U.S.C. 281: A patentee shall have remedy by civil action for infringement of his patent. 35 U.S. C. 282: (a) A patent shall be presumed valid. . . (b) The following shall be defenses . . . : (1) noninfringement, (2) invalidity of the patent or any claim in suit

Rise of Patent Suits in the Federal Courts Source: PWC 2013 Patent Litigation Survey

Top 5 Patent Forums in Federal Courts (2010)

Typical Federal Court Patent Suit Budget

Disposition of Patent Suits in the Federal Courts Source: PWC 2013 Patent Litigation Survey

The US International Trade Commission

Patent Litigation at the ITC 19 U.S.C. 1337 provides: [T]he following are unlawful, and when found by the Commission to exist shall be dealt with, in addition to any other provision of law, as provided in this section: . . (B) The importation into the United States, the sale for importation, or the sale within the United States after importation … of articles that— (i) infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under title 17; or (ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent.

Rise of Patent Suits at the Int’l Trade Comm. Source: David Hill, Report to WIPO on US Patent Litigation (2012)

Comparison of District Court & ITC Proceedings Fed. District Ct. ITC Decision maker Federal District Judge or Jury Administrative Law Judge subject to Commission and Presidential Review Timing Average time to Initial Determination: 12 months Average time (to trial): 28 months Burden of Proof for Invalidity Patent Presumed Valid Clear and convincing evidence to the contrary is needed Average Cost $1-10M: $2,100,000 $10-25M: $3,554,000 >$25M: $5,911,000 $1-10M: $1,967,000 $10-25M: $3,410,000 >$25M: $6,242,000 Source : AIPLA Economic survey (2013)

Typical ITC Patent Suit Budget

Federal Court and ITC Budget Comparison

Alternatives to Litigation New AIA Alternatives to Litigation

The America Invents Act The America Invents Act (AIA) established several new mechanisms for challenging issued U.S. Patents: Inter partes review Post grant review Cover business method review Derivation proceedings All of these new proceedings are conducted before a new “Patent Trial and Appeal Board.”

Comparison of AIA Proceedings IPR CBM PGR Grounds 102 & 103 but only patents and printed publications 101 (ineligible subject matter) 112 (enablement or written description) & all102/103 prior art Timing Pre-AIA patents: Anytime Post-AIA patents: 9 months after issue and after termination of PGR challenges Anytime if sued or threatened by PO. 9 months after issue and after all PGR challenges are terminated Available only for Post AIA patents: Must be filed within 9 months of grant Standard Receivable likelihood success More likely than not that a claim is invalid More likely than not that a claim is invalid

Key Features of IPR proceedings

Key Features of IPR Proceedings Initiated by a Petition (and fee payment): Formal recitations Must identify all challenged claims and recite all grounds for review 60 pages or less, 14pt. font, double spaced Must be accompanied by all supporting evidence PTAB expects in most cases the evidence will include one or more expert declarations. What does a reference disclose? What does the reference mean to a person skilled on the art? Why a feature in inherent in the prior art?

Key Features of IPR Proceedings Patent Owner (PO) Initial Response (optional): Decision to Initiate Proceedings PO takes discovery of Petitioner’s Expert(s) Patent Owner Response (with PO’s Expert Declarations) and Motion to Amend Claims (only one opportunity) Petitioner takes discovery of PO’s expert(s). Petitioner’s Reply (w/ rebuttal declarations) and Opposition to Amendments PO discovery of rebuttal experts PO’s Reply Trial (Oral Hearing) ~~~~~> Final Written Decision

Typical Inter Partes Review Budget

Comparison of Federal Court, ITC & IPR Costs

IPR Statistics 9/16/2012 to 9/15/2013 Special thanks to Yasser El-Gamal, Ehab Samuel and Peter Siddoway who compiled some of the following data for the AIPLA http://www.aipla.org/learningcenter/live_webinars/Pages/Wednesday,-October-9,-2013-Webinar.aspx

Statistics 483 petitions filed in the first year

Statistics Most IPR petitions have been against NPEs

Statistics About 6% of IPRs involve Japanese companies

Statistics During the first year, about 8% (37) of the IPR petitions resulted in settlements (20 before, and 17 after, institution)

Statistics 403 of the 483 petitions (83%) were related to pending patent litigation between the same parties

Statistics The 403 Petitioners involved in related Federal Court litigation has filed for stays 159 times But Petitioners are very unlikely to get a stay at the ITC

Forum Comparison USPTO (IPR) ITC DISTRICT CT Grounds 102 & 103 but only patents and printed publications 101 (ineligible subject matter) 112 (enablement or written description)& all102/103 prior art 112 (enablement or written description) & Presumption of validity? No. Petitioner need only show that it is more likely than not that a claim is invalidity Yes. Respondent must prove invalidity by clear and convincing evidence Yes. Defendant must prove invalidity by clear and convincing evidence Collateral effect of invalidity? Conclusive on all other proceedings Not conclusive unless affirmed by the CAFC Not conclusive on other proceedings unless affirmed

Forum Comparison (Continued) USPTO (IPR) ITC DISTRICT CT Jury Trial? No Yes Timing 12 months from Initiation to Decision 12 Months from Initiation to Initial Determination Average time to trial: 28 months Damages? Injunction? Maybe Resolve Infringement Costs ~$300K – 500K ~$2M - $6M

Thanks for your attention! Questions? Tom Engellenner Pepper Hamilton, LLP High Street Tower, 19th Floor 125 High Street Boston, MA 02110 +1-617-204-5189 engellennert@pepperlaw.com www.postgrant-counsel.com Name