United States: Patent Litigation

In the U.S., the federal courts have jurisdiction over patent disputes. A patentee can file an infringement action in any district in which an alleged infringer (1) resides or is incorporated, or (2) has committed an act of infringement and has a regular and established place of business. Patent validity challenges known as inter partes reviews (IPRs) or post-grant reviews (PGRs) may also be brought before the U.S. Patent and Trademark Office (USPTO), Patent Trial and Appeal Board (PTAB). Additionally, the U.S. International Trade Commission (ITC) tries patent cases regarding imported goods, and the Court of Federal Claims hears civil claims for monetary damages against the U.S. government, including patent infringement claims. Finally, parties can agree to arbitrate any dispute relating to patent validity or infringement.

With a few exceptions (e.g., when no damages are sought), a party may request a jury trial in the district court. Only the PTAB has technically trained specialist patent judges. And while district court judges are generalists, many in the most active courts—the Western and Eastern Districts of Texas, District of Delaware, and the Central and Northern Districts of California—have significant patent experience. Typically, PTAB proceedings are faster and less expensive than litigating in the courts, but they do not resolve infringement claims and cannot award damages or injunctive relief. The ITC also cannot award damages, but it can bar infringing products from entering the U.S. by issuing an exclusionary order and prevent sales of imported goods with a cease and desist order.

District court patent cases typically comprise the following phases: (1) pleadings, after which a party may move to dismiss all or part of the case, e.g., for failure to state a claim; (2) fact discovery, which includes document production, as well as inventor, fact witness, and corporate witness depositions; (3) claim construction by the court, also known as a Markman hearing; (4) expert discovery comprising written reports and depositions on patent validity and infringement; (5) summary judgment on issues where there are no disputed facts; and (6) trial. Infringement and validity are tried together under the same claim construction. The district court has discretion regarding how the trial is conducted, and may bifurcate issues of liability and damages or hear them concurrently.

The majority of cases are resolved by settlement, and trial decisions are rare. In recent years, the median time to trial in the district court has been approximately two years and nine months. However, the speed at which district court patent cases proceed is highly case- and judge-dependent, and can vary significantly. IPRs and PGRs proceed significantly quicker than district court litigation, reaching a determination in 18 months. Such challenges are often initiated by defendants in infringement actions, who may seek to stay the district court dispute pending resolution of the PTAB proceedings. The ITC also moves more quickly than the district courts, providing final determinations within 16 to 18 months.

There is no formal expedited procedure, but in the district court, the parties may agree or the court may order that the case proceed on a fast schedule. PTAB proceedings are intended to move quickly. The Leahy-Smith America Invents Act (AIA) requires that the PTAB issue a final written decision within one year of instituting a trial, which typically occurs six months after the petition is filed. While it may, for good cause, extend the statutory period by up to six months, the PTAB generally strictly adheres to the one-year deadline for a final decision. Similarly, the ITC is required by statute to complete its proceedings at the earliest practicable time.

All substantive patent appeals are heard by the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) and typically take between 15 and 18 months from the lower tribunal decision. Leave to appeal is not required, but standing is required both at the time of filing and throughout the appeal. As such, a petitioner’s standing to appeal from a PGR or IPR with no underlying district court infringement action has been a hotly contested issue in recent years. The right to appeal can also be waived, e.g., by failing to make the argument below. The standard of review depends on the issue. Legal issues, such as claim construction, are subject to de novo review. The Federal Circuit considers whether there was clear error in any fact finding by the court or whether substantial evidence supported findings of fact made by a jury or the PTAB. For most other issues, the Federal Circuit will look for an abuse of discretion. The majority of appeals relate to final judgments, although some interim decisions can be appealed. The Federal Rules of Civil Procedure allow a defendant to seek a stay of enforcement of a monetary judgment by providing a bond or other security, or upon the district court’s order. Unless the district court orders otherwise, however, an appeal will not stay an interlocutory or final judgment for an injunction or an order that directs an accounting in a patent infringement action. Decisions by the Federal Circuit in patent cases are subject to review by the U.S. Supreme Court. This review is discretionary, meaning the Federal Circuit is often the final arbiter of issues in a patent dispute.

Direct infringement occurs when a party makes, uses, offers to sell, sells, or imports in or into the U.S. any patented invention during the term of the patent without the patentee’s permission. In the case of a patented process, direct infringement requires that each and every step of the method is performed by or attributable to a single actor.

Direct infringement also occurs when a party, without authority, imports into the U.S. or offers to sell, sells, or uses within the U.S. a product which is made by a process patented in the U.S., provided such product has not been materially changed by subsequent processes or become a trivial and nonessential component of another product.

In general, no infringement occurs when a product is made and used in another country. A party may, however, be liable as an infringer for supplying components of a patented invention in or from the U.S. (1) in a way that actively induces their combination outside the U.S. in a manner that would have infringed in the U.S., or (2) that are especially adapted for an infringing use and not a staple article of commerce with substantial non-infringing uses.

There are two types of indirect infringement: induced infringement and contributory infringement.

To prove induced infringement, a patentee must show that the accused infringer actively encouraged infringement, knowing that the induced acts constituted patent infringement, and that the encouraging acts actually resulted in direct infringement. For example, a party who knowingly supplies a product with instructions for use in an infringing manner may be liable for inducement.

To prove contributory infringement, a patent owner must show that the accused infringer supplied a component of a patented invention, that is a material part of that invention and not a staple article of commerce with substantial non-infringing uses, knowing that the component was especially made for an infringing use. For example, a party who knowingly supplies a product for combination with a device in an infringing manner may be liable for contributory infringement.

The knowledge requirement of either indirect infringement theory can be satisfied by a showing of wilful blindness.

The scope of patent protection is defined by the claims. When in dispute, the court may hold a Markman hearing to determine the meaning of the contested claim terms. In construing the claims, the court will primarily consider the intrinsic evidence—the claims, specification, and prosecution history. The court may also consider extrinsic evidence, such as dictionaries.

Infringement requires each and every element of the claim to be literally present in the accused product or process. Infringement may also be found under the doctrine of equivalents (DOE) when a claim element is not literally present, if the accused product or method contains an equivalent of the missing element. An equivalent must be insubstantially different from the claim element: it must perform substantially the same function, in substantially the same way, to achieve the same result. Prosecution history estoppel bars the application of DOE to recapture claim scope surrendered by amendment or argument during patent prosecution. DOE also cannot be used to cover the prior art or alternative unclaimed embodiments described in the specification. The patentee bears the burden to prove infringement by a preponderance of the evidence.

Non-infringement and invalidity are the primary defences in patent infringement disputes. Defendants may also raise equitable defences such as (1) prosecution laches, where there has been an unreasonable and unexplained delay in prosecution, (2) estoppel, which precludes a party from asserting a patent contrary to its prior conduct or a prior judicial determination, (3) unclean hands, where the patentee’s misconduct bars enforcement of the patent, or (4) inequitable conduct or fraud on the USPTO, which renders the patentee unenforceable.

U.S. patents are presumed valid. In the district court, the burden is on the patent challenger to prove invalidity by clear and convincing evidence. A patent is invalid if it (1) is not directed to patent eligible subject matter, (2) is not new compared to (i.e., anticipated by) a single prior art reference, (3) would have been obvious from a prior art reference, either alone or in combination with other prior art, and (4) fails to provide a written description of the invention or enable any person skilled in the art to make and use the invention without undue experimentation. A patent may also be invalid for non-statutory or ‘obviousness-type’ double patenting if its claims are not patentably distinct from the claims of an earlier expiring commonly owned patent. While the specification of a patent should describe the best mode of practising the invention, a failure to do so is no longer a ground of invalidity for an issued patent.

The AIA definition of prior art applies to all patents and applications with an effective filing date on or after March 16, 2013. Pre-AIA law continues to apply to all earlier filed patents and applications. Pre-AIA law generally defines prior art by reference to the invention date, allowing inventors a one-year grace period to file their patent applications. Under the AIA, the prior art need only pre-date the effective filing date of the challenged patent, although there continues to be a limited exception for the inventor’s own work published less than a year before the patent application.

To invalidate a patent based on anticipation, a single prior art reference must disclose each element, either explicitly or inherently, arranged as in the claim. Prior art may be combined to prove obviousness, provided a person of ordinary skill in the art would have had a reason or motivation to make the combination. Under pre-AIA law, certain categories of prior art cannot be used to show obviousness, provided that the prior art and the invention at issue were either: (1) owned by the same person or subject to an obligation of assignment to the same person; or (2) made under a joint research agreement.

The district court can correct obvious errors in patent claims, but a party may not otherwise amend a patent during district court litigation. In PTAB proceedings, a patentee may move to amend, but such motions are typically not successful. The party initiating the PTAB proceedings also has an opportunity to oppose any such motion to amend. The PTAB may permit amendment if (1) it responds to an argument raised in those proceedings, (2) does not expand the scope of the claims or introduce new subject matter, and (3) is otherwise patentable.

Typically, a patent’s term is 20 years from its effective filing date. Patent term adjustment (PTA) and patent term extension (PTE) are, however, available for delays caused by the USPTO and the U.S. Food and Drug Administration, respectively. PTA may apply to any patent if a statutory delay occurs or the application is pending for more than three years (excluding time consumed on certain defined acts). PTE is only available for patents covering a product, or a method of manufacturing or using a product, that is subject to regulatory review before it can be commercially marketed or used, e.g., pharmaceuticals. Only one patent per product can receive PTE; PTE is only available for the first regulatory review period for a product; and it is capped at five years or 14 years from the date of marketing approval.

Parties rely on experts to provide testimony on technical matters concerning all aspects of patent litigation. Each party retains their own expert(s), although the court also has the power to appoint an expert. In the courts and before the PTAB, experts are required to provide written reports setting forth their qualifications, the materials they considered, and their opinions. Experts are deposed on those reports. And in district courts, experts also testify and are cross-examined at trial. Experts owe a duty to the court to be truthful and to provide independent, objective, and unbiased testimony. A party may file a Daubert motion to exclude the testimony of an expert who does not possess the requisite level of expertise or used questionable methods to obtain data or form opinions.

The U.S. does not have a saisie-contrefaçon procedure or compulsory pre-complaint discovery. Once litigation has commenced, parties may obtain discovery regarding any matter that is relevant to a party’s claim or defence and proportional to the needs of the case. Attorney-client communications and work product are privileged and protected from discovery, however. Fact discovery encompasses requests to produce documents or inspect property, written responses to interrogatories, as well as fact witness depositions. Parties can also subpoena documents and testimony from third parties with knowledge of relevant facts. A party dissatisfied with the sufficiency of a discovery response or a deponent’s testimony may bring a motion to compel the requested discovery. In the district court, parties may also use requests for admissions, which ask a party to admit or deny the truth of a factual matter, to narrow the disputed issues. Before the PTAB, the scope of discovery is narrower: it is usually limited to the exhibits cited by a witness and depositions.

The patentee bears the burden to prove infringement, and as noted above, may avail itself of fact discovery to obtain relevant information. The burden may be reversed if the patentee can show that there is a substantial likelihood that an accused product was made by the patented process, and that despite making a reasonable effort, the patentee was unable to determine if the process was actually used. However, these requirements are difficult to establish, and this procedure is rarely used.

Parties protect confidential information disclosed during patent litigation by requesting a protective order. A protective order typically defines those who can view the confidential information and may also place restrictions on their ability to engage in related patent prosecution. Co-plaintiffs or co-defendants may also enter into common interest agreements that allow them to share confidential and/or privileged information. Briefs or other court filings that include confidential information may be filed under seal or in redacted form to maintain confidentiality. But given the public interest in court proceedings, judges can be reluctant to close the courtroom during trial and as a result, confidential information may become public at that time.

There are two types of adversarial post-grant proceedings: PGRs and IPRs. PGRs can raise any ground of invalidity and must be filed within nine months of a patent’s issue or reissue date. After the PGR-period, a party may still bring an IPR but the grounds are limited to anticipation and obviousness based on patents and printed publications. These PTAB proceedings can be brought before any district court litigation. Also an accused infringer will often file a PTAB petition after it has been sued for patent infringement in the district court. But if a party first files a district court action challenging a patent’s validity, it cannot later bring a PGR or IPR on the same patent. The district court has discretion whether to stay a first-filed litigation pending resolution of a later-filed PTAB proceeding, and will consider the status of the litigation and whether the stay will simplify the issues. If the district court challenge is brought after the PTAB petition, the action will be stayed until the patent owner files a motion to lift the stay, the patent owner files an action or counterclaim alleging infringement, or the petitioner files a motion to dismiss the action. A party may also seek re-examination of a patent by the USPTO by raising a substantial new question of patentability.

The U.S. is a common law jurisdiction. The U.S. Supreme Court and Federal Circuit decisions are binding precedent in the district courts. Other district court decisions may be persuasive authority but are not binding. Similarly, foreign prosecution histories and decisions may be considered by the courts, but there is a presumption against giving preclusive effect to foreign decisions.

Federal district courts have exclusive jurisdiction over patent infringement claims, and an accused infringer can only be sued where (1) it resides or is incorporated, or (2) has committed an act of infringement and has a regular and established place of business. Foreign defendants with no place of business in the U.S. can generally be sued wherever they are subject to personal jurisdiction. Generally, courts will decline to rule on questions of infringement or validity of foreign patents due to considerations of comity, judicial economy, convenience, and fairness. Anti-suit injunctions are available in specific circumstances, but are rare.

ADR in patent cases includes mediation and arbitration. These ADR procedures are often specified in license and settlement agreements. By statute, the award of an arbiter is final and binding between the parties to an arbitration.

To support a claim, the alleged infringement must occur during the patent’s term—typically, 20 years from the effective filing date—and the statute of limitations is six years. Prior to commencing an infringement litigation, a plaintiff must conduct a reasonable pre-suit investigation to ensure that all allegations satisfy existing law and will have evidentiary support after discovery is completed. A party may be sanctioned if it fails to do so.

Generally, the patentee is the only party with standing to bring an infringement action, although an exclusive licensee with all substantial rights in the patent may also bring suit. Determining whether a licensee has standing is a fact-intensive inquiry that requires examination of the rights conferred to the licensee as well as those retained by the patentee.

A party may bring a declaratory judgment action in district court to invalidate a patent, if it can establish a harm attributable to the patent, e.g., a threat of being sued for infringement. Any party may initiate an IPR or PGR, provided it has not already commenced a declaratory judgment action on the same patent in the district court. Similarly, any party may seek re-examination of a patent by the USPTO by raising a substantial new question of patentability.

Preliminary injunctions (PIs) and temporary restraining orders (TROs) are available in patent litigation proceedings. They are infrequently granted, however. Courts use a balancing test to determine whether to grant a PI that considers: (1) the moving party’s likelihood of success on the merits of the underlying claim, (2) the likelihood that the moving party will suffer irreparable harm without an injunction, (3) whether the harm to the moving party in the absence of an injunction outweighs the harm to the non-moving party if an injunction is granted, and (4) whether an injunction serves the public interest. Ex parte TROs require the moving party to show that it will suffer immediate and irreparable injury before the adverse party can be heard in opposition, as outlined in the Federal Rules of Civil Procedure. If preliminary relief is granted, the court may require a plaintiff to post a bond to cover the defendant’s damages if the relief is later found to be improper.

The remedies for patent infringement include actual damages, enhanced damages, and a permanent injunction barring future infringement. Monetary damages in the form of a reasonable royalty are the most common remedy sought and awarded in patent cases.

A patentee who proves liability for patent infringement is entitled to damages equal to at least a reasonable royalty. That is, an estimation of the royalty rate that a reasonable patentee and reasonable accused infringer would have agreed upon during a hypothetical arms-length negotiation conducted at the time the alleged infringement began. In some cases, a patentee may obtain damages for lost profits due to the infringement. The district court may also increase the actual damages, up to three times, in egregious cases of culpable behaviour.

District courts grant permanent injunctions consistent with equitable principles and require that the patentee demonstrate that: (1) it has suffered an irreparable injury, (2) monetary damages are inadequate to compensate for that injury, (3) considering the balance of hardships between the parties, an injunction is warranted, and (4) an injunction would not harm the public interest. Permanent injunctions are more common in cases involving direct competitors. Ongoing royalty payments are available in cases where the court does not grant a permanent injunction.

The Declaratory Judgment Act can be employed to obtain a declaration of invalidity or noninfringement. Courts do not issue advisory opinions, and as such, a declaratory judgment plaintiff must establish that the totality of the circumstances indicates that an actual case or controversy exists. This is often satisfied by showing an objectively reasonable apprehension that the declaratory judgment plaintiff will face an infringement suit. Note that a party that brings a declaratory judgement claim to invalidate a patent cannot later challenge the same patent at the PTAB.

Patent litigation can be a costly enterprise, with attorneys’ fees and expert fees making up the bulk of expenses. In a patent case where $1-25 million is at stake, the average cost of the case through a final judgment is $2.8 million. Appellate costs are less than trial court costs, but may still be significant.

Recovery of costs is not the norm in patent cases, however, a district court may award reasonable attorneys’ fees to the prevailing party in exceptional cases. District courts are given significant latitude in determining what constitutes an exceptional case. Wilful infringement, objectively baseless claims, litigation-related misconduct, and fraud are examples of conduct that may result in an award of attorneys’ fees.

The most active patent litigants in recent years have been technology companies and pharmaceutical companies. With the COVID-19 pandemic came greater research and development investment in medical technology, as well as pressure on the health sciences sector to innovate. Accordingly, life sciences litigation is likely to continue to be a significant portion of U.S. patent litigation, particularly cases concerning personalised medicine, precision medicine-related tools, vaccine technology, and medical devices. High-volume technology with established commercial success such as semiconductors, robotics, and alternative fuels are also expected to be the subject of major patent infringement lawsuits.

Patent eligibility is likely to remain a contentious patent litigation issue over the next year. The U.S. Congress has considered reforms to the patent laws, including to patent eligibility. Any new legislation is likely to create additional litigation, even if it ultimately improves and clarifies certain rules.

Patent eligibility is one of the substantive areas of patent litigation most in need of reform. The U.S. Supreme Court’s 2014 Alice Corp. v. CLS Bank International test has led to inconsistent results from district courts and split decisions from the Federal Circuit.

The COVID-19 pandemic has been a driver of some of the biggest challenges and opportunities facing the international patent system. Technological advances in video conferencing is likely permanent after the pandemic, and may provide greater collaboration, more access to courts, and reduced travel costs.