THE DOWNSIDE OF CONTINUATIONS (PART II): In yesterday's post, I mentioned how active litigation during the course of filing continuations at the USPTO can give the public a "free peek" at the documents and prior art asserted during the lawsuit. Today I will explain how this situation can present pitfalls for the patentee/plaintiff.

First of all, unless the court ruled on the validity of the patent in light of the cited art, an early settlement can effectively create a body of "lingering prior art" that has the potential of clouding the scope of the entire patent family. In the case of holding companies, when they begin enforcement of a patent, they don't simply sue one company and leave it at that - they have a hit list of 10 to 50-or-more companies that they send letters to, seeking lincenses for the patent. Of course, these companies talk to other companies, who then talk to the press, and before you know it, you have a sizable body of nervous companies wondering if they are going to be sued next.

This is where the information contained in the continuation can become valuable for potential defendants. If the defendant(s) in the original lawsuit made it through a Markman hearing, chances are that someone spent a lot of time and money putting up the defense. Search firms are typically hired to scour for prior art, and patent attorneys sift through mountains of documents to identify the most damaging prior art they can find. The fact that the case settled shouldn't necessarily mean that the art wasn't any good (although sometimes that can be the case). Just as defendants wants to escape infringement, the plaintiffs don't want patents to be invalidated. Accordingly, plaintiffs will often discount the settlement offer to entice the defendant to settle without a validity challenge, which in turn allows the plaintiffs to continue the fight with other defendants (this is often where the "settlement on favorable terms" phrase comes from).

But one problem with validity challenges in court is that the defendant is hampered by the rule that requires a court to presume that an issued patent is valid. As such, invalidity can only be proven by "clear and convincing" evidence (which, in general, is pretty tough to do). Also, during the claim construction, courts must also construe the claims in a way that preserves validity.

But the situation is different in the USPTO, which does not presume patents to be valid.

Determining what the prior art teaches is a question of fact, and the application of the prior art to the claims falls under the preponderance of the evidence standard, which is much more lax than "clear and convincing." And because the USPTO falls under the Administrative Procedures Act, review by the Federal Circuit of USPTO findings is limited to "substantial evidence", which is more deferential than the "clearly erroneous" standard. Thus, the handicaps that defendants must deal with in court don't necessarily translate to the USPTO.

So what can be done with this information?

If the litigation record and prior art is published in a continuation, it does not follow that the art was cited in the original patent. In fact, since it is already an issued patent, there is no duty whatsoever on the patentee to make it part of the original USPTO record. However, through reexamination, you can make it part of the record.

When staring your reexamination analysis in these situations, you can effectively leech off the litigation record (I call this a "parasitic approach"), and use it to quickly establish the invalidity position of the prior defendant. Since someone has already spent a good deal of time preparing the challenge, but was unable to execute it in court due to settlement, this can give you a much-needed head start in your evaluation of the patent. If, in fact, a "killer reference" exists in the pile, you have effectively established an invalidity position in about half the time it took the original defendant to do the same (if not more).

To be continued . . .