Reexamination Amendments Made for an Improper Purpose – A New Basis For Invalidity Under 35 U.S.C. § 305

Patent reexamination is already a tricky process.  For accused infringers, the decision to seek reexamination is sensitive because the asserted patent may be stronger if a reexamination certificate issues.  For patent owners, reexamination face the risk of cancellation, as well as resulting in the de facto delay of any assertion efforts.

The Federal Circuit’s recent Southwestern Bell Telephone Co. v. Arthur A. Collins, Inc. decision² adds a new wrinkle to the law of reexamination.  It has been more than a decade since the Federal Circuit first held that a reexamination amendment that fails to comply with the requirements of the reexamination statutes results in the invalidity of the affected claim.³  In most such situations, the claim is pronounced invalid because it conflicts with the statutory prohibition on “enlarging the scope” of claims prosecuted during reexamination.⁴  But the Federal Circuit’s unpublished Southwestern Bell II decision held, for the first time, that claims added for an “improper purpose” can be invalidated in later litigation even if they are not impermissibly broadened and were not challenged by the U.S. Patent and Trademark Office during reexamination.⁵  This decision counsels a cautious approach for prosecutors characterizing the amendments they make during ongoing reexaminations, as well as adding another invalidity arrow to the quivers of litigators defending against reexamined patents.

Amendments Under the Reexamination Statutes

The original reexamination statutes of the patent code include 35 U.S.C. §§301-307, which were enacted December 12, 1980.⁶  Among these was § 305, whose second and third sentences read as follows:⁷

§ 305 Conduct of Reexamination Proceedings

…In any reexamination proceeding under this chapter, the patent owner will be permitted to propose any amendment to his patent and a new claim or claims thereto, in order to distinguish the invention as claimed from the prior art cited under the provisions of section 301 of this title, or in response to a decision adverse to the patentability of a claim of a patent.  No proposed amended or new claim enlarging the scope of a claim of the patent will be permitted in a reexamination proceeding under this chapter.

The legislative history of the reexamination statutes reveals that they were enacted with the intent of achieving three principal benefits.  Reexamination of patents by the United Stated Patent and Trademark Office (“PTO”) would “(i) settle validity disputes more quickly and less expensively than litigation, (ii) allow courts to refer patent validity questions to an agency with expertise in both the patent law and technology, and (iii) reinforce investor confidence in the certainty of patent rights by affording an opportunity to review patents of doubtful validity.”⁸  The Federal Circuit has noted that the record of both the interested public and the Congress “reflect a serious concern that reexamination not create new opportunities for abusive tactics and burdensome procedures.”⁹  Accordingly, “the PTO was authorized to reexamine an issued patent only within strictly defined limits.”¹⁰  These limits have been summarized by the Federal Circuit as follows:¹¹

Even when the door to the reexamination gate is opened, the PTO is not freed from the limitations Congress placed on the reexamination process.  Whatever the basis on which reexamination is granted, it was intended to deal only with substantial new questions of patentability, essentially those based on prior art that was not before the examiner during an earlier examination.

Thus, the longstanding precedent of the Federal Circuit has been that reexamination proceedings are limited to the narrow statutory mandate enacted by Congress.

The Freeman Decision

The particular restrictions contained in § 305, and reproduced above, were first addressed by the Federal Circuit in In re Freeman.¹²  Dr. Freeman applied for and was granted a U.S. patent, which was later reissued with additional claims.¹³  Dr. Freeman then sued an alleged infringer in a U.S. district court, which construed the claims and found the patent to be both invalid and not infringed under that construction.¹⁴  The district court’s construction and non-infringement holding was affirmed on appeal to the Federal Circuit.¹⁵  Upon filing reexamination of his reissued patent, Dr. Freeman “admittedly amended the reissue claims to avoid this [i.e., the district court’s] interpretation of the claims.”¹⁶  The PTO examiner rejected the amendments as impermissibly broadened under § 305, which was affirmed by the PTO’s Board of Patent Appeals and Interferences.¹⁷  On appeal, the Federal Circuit affirmed the Board’s holding, finding that Dr. Freeman had indeed broadened his claims in violation of § 305.¹⁸  The Court also addressed, in dicta, Dr. Freeman’s argument that he should be allowed to “relitigate the issue of the scope of the reissue claims during reexamination:”¹⁹

[T]he ability of a patentee to amend claims during reexamination must be seen in light of the fundamental purpose of reexamination – the determination of validity in light of a substantial new question of patentability.  Thus, amendment of claims during reexamination is limited to amendment in light of prior art raising a substantial new question of patentability.²⁰  Dr. Freeman has never argued that the amendments to the last clause of each of the independent reissue claims were made to distinguish those claims from any prior art.  Rather, during reexamination, Dr. Freeman candidly stated that “the claims have been amended in this proceeding consistent with [his] amendments and purpose in filing the reissue application but now with the benefit and knowledge as to how a reader could misconstrue [his] intent.”  It is clear that the amendments to the last clause of each of the independent reissue claims had nothing to do with a substantial new question of patentability.

Thus, Dr. Freeman’s amendments were made neither to “distinguish the invention” from the prior art cited in his reexamination, nor “in response to a decision” rejecting his claims, which are the only reasons “permitted” for amendments under § 305.  The Freeman decision did not address what effect, if any, these unpermitted amendments would have on the validity of a patent in later litigation.

Post-Freeman Adjudications of Allegedly Improper Amendments Under § 305

Several district courts have relied on Freeman to invalidate claims that were amended for reasons not specifically permitted by § 305, even though the holding in Freeman itself did not reach that far.  In Total Containment Inc. v. Environ Products Inc., a patentee proposed new claims during reexamination after rejection of the originally pending claims.²¹  In a later paper, the patentee added another claim, stating that it “could not have been presented earlier, since the undersigned did not become aware of a third party sump riser unit until after receipt of the August 31, 1993, Office Action.”²²  After a bench trial, the Eastern District of Pennsylvania court analyzed whether claim 19 was invalid in view of this prosecution history record:²³

[T]he court must determine whether the amendments were submitted to distinguish the invention from prior art cited in the reexamination request or in response to a decision adverse to the patentability of a claim of the patent. . . . This requires an inspection of the file histories for the patents in suit.

* * * *

Claim 19 does not comply with the statute. It was submitted because of a potentially infringing apparatus, not because it distinguished the invention from prior art raising a substantial new question of patentability. It violates 35 U.S.C. § 305 and is, therefore, invalid.

Notably, the Total Containment court characterized Freeman as holding that a “claim submitted during reexamination was properly rejected by the PTO when patentee’s attorney admitted that the amendment had nothing to do with a substantial new question of patentability.”²⁴

A similar result was reached in Cordis Corp. v. Medtronic AVE, Inc. (“Cordis I”).²⁵  There, after a rejection by the PTO, the patentee submitted a response paper that amended the original claims and added new claims, which included the following remarks:²⁶

Claims 1, 13, 24, 35 and 37 have been amended in accordance with the discussions with Examiner Thaler at the above-noted interviews, and in subsequent telephone discussions on July 13, 1998.  Added claims 44-59 are all narrower in scope than the original claims, and provide specific protection for aspects of the disclosed invention which have been incorporated into competitive products and methods.

After a jury verdict finding the new claims invalid, the patentee moved for judgment of law that § 305 had not been violated.²⁷  The Delaware district court reviewed the analysis in Freeman, noting that there was “no indication in the prosecution history that claim 44 was added to distinguish the invention as claimed from the prior art, or in response to the original rejection of claim 1 for obviousness.”²⁸  After finding that “claim 44 was added solely to cover competitors’ stents, and not for a permissible reason under § 305,” the court denied the patentee’s motion, letting the invalidity judgment stand.²⁹

On appeal, the Federal Circuit reversed the district court’s ruling.³⁰  Noting that the  reexamination paper at issue also stated that it was “[r]esponsive to the Office Action mailed June 1, 1998,” the Federal Circuit held that new claim 14 was not submitted for an improper reason and was therefore not invalid for violation of § 305.  In doing so, the presence of the remarks accompanying claims added in reexamination was analyzed as follows:³¹

Section 305 does not require the patent owner to include an express statement that the new claims distinguish the prior art or remarks indicating how the new claims distinguish the prior art references.  If the claims fail to distinguish the prior art, the claims will be rejected on the appropriate grounds; for that reason, it may frequently be in the patent owner’s interest to include such remarks, but they are not necessary to satisfy section 305.

Notably, the Federal Circuit did not anywhere address the reasoning of Freeman in reaching its conclusion.³²

While the Cordis appeal was pending, in Southwestern Bell Telephone, L.P. v. Arthur A. Collins, Inc. (“Southwestern Bell I”), a third district court held invalid claims added for reasons unpermitted by § 305.³³  Collins, the patentee, had asserted its patent against Northern Telecom (“Nortel”) in the Eastern District of Virginia, receiving a summary judgment of non-infringement later affirmed by the Federal Circuit.³⁴  Collins initiated reexamination, and before a PTO rejection issued, submitted a Patent Owner’s Statement stating that it was adding new claims “to preclude any interpretation of the claims in accordance with the district court’s opinions... in the litigation with Nortel.”³⁵  The added claims were deemed patentable by the PTO, and were the subject of a later declaratory judgment action by Southwestern Bell against Collins in the Northern District of Texas.³⁶  In granting summary judgment of invalidity of the added claims, the Texas court noted that “Collins has presented no evidence to contradict its stated purpose for amending the ‘589 patent.”³⁷  The court cited Freeman and held that “preclusion of the application of a prior claim construction is not a proper purpose for amendment under 35 U.S.C. § 305.”³⁸  The Texas court later granted summary judgment of non- infringement, and Collins appealed both holdings.³⁹

On appeal, Collins argued that it properly initiated reexamination, as its reexamination request cited “all prior art references that were raised during the previous Nortel litigation.”⁴⁰  Collins also asserted that the newly-added claims “were narrower in scope to distinguish the prior art raised” by Nortel, and that its remarks merely “provided the PTO with [Collins’s] views on the proper construction of the subject claims.”⁴¹  Collins attempted to distinguish Freeman on the basis that there was no finding by the Texas court that the added claims were improperly broader than its original claims.⁴²

Southwestern Bell countered that the Texas court properly invalidated the added claims, again relying on the language of Collins remarks in its Patent Owner’s Statement.⁴³  Southwestern Bell also pointed out that Collins had failed, both in its arguments before the Texas court, as well as in its appellate brief, “to identify what, if any, specific prior art or adverse decision by the examiner motivated [Collins] to add 12 new claims.”⁴⁴ 

The Federal Circuit’s Southwestern Bell II Decision

In its unpublished Southwestern Bell Telephone Co. v. Arthur A. Collins, Inc. (“Southwestern Bell II”) decision dated May 27, 2008, the Federal Circuit affirmed the Texas district court’s ruling that the reexamination claims added by Collins were invalid as resulting from “reexamination for improper purpose.”⁴⁵  The Court, relying on Freeman, held that “[c]laim amendments during reexamination are limited to amendment in light of prior art raising a substantial new question of patentability.”⁴⁶  In agreeing with the reasoning of the Texas court, the Federal Circuit noted there was “no evidence” that Collins had added its new claims for any reason other than to overcome the previous adverse claim construction ruling by the Virginia district court.⁴⁷  Accordingly, the Court held, for the first time, that claims are invalid if added for a purpose unpermitted by § 305.

The ruling in Southwestern Bell II is arguably not consistent with the holding in Cordis II.  The Cordis II panel did not address the Court’s previous Freeman decision.  In addition, the panel in Cordis II appeared to discount the patentee’s stated reasons for adding reexamination claims, a position somewhat at odds with the Federal Circuit’s other precedent, which supports analyzing the prosecution history to determine the reasons for amendments.⁴⁸

Conclusion

Prosecutors should take note of the Southwestern Bell II decision, as it teaches that all reexamination claim amendments and additions should be characterized, if at all, as distinguishing over the prior art or responsive to a PTO rejection, and that any unnecessary comments regarding other possible purposes should be omitted.  Under Southwestern Bell II, litigators potentially have a new tool to invalidate reexamined patent claims if the prosecution history supports amendment for improper purpose.  Furthermore, because Festo dictates that the purpose of an amendment must be determined on the prosecution history alone,⁴⁹ arguments for invalidity based on this reason may be well-suited for summary judgment.

Endnotes