Thursday, August 04, 2005

WHY PATENTEES NEED TO BE CAREFUL AFTER A POST-MARKMAN SETTLEMENT (AKA THE DOWNSIDE OF CONTINUATIONS - PART I): In many cases, patentees who are on an enforcement binge (particularly holding companies) also have continuations pending in the USPTO. Eventually, someone decides to put up a fight, and the patent goes into litigation. During the course of litigation, defendants will inevitably claim invalidity, and provide the court with prior art. Subsequently, a Markman hearing will usually take place, and in many cases, a settlement is often reached just after the hearing (which, incidentally, is when cases are most vulnerable to summary judgment).

As soon as a settlement is reached, at least one of the parties will begin issuing press releases, claiming victory in the litigation (defendants typically describe this as "reaching a settlement on favorable terms"). Interested outsiders read the news and begin wondering what all of this means to them.

You need more information, but you're not sure where you can get it.

Enter the continuation.

Under 37 C.F.R. 1.56, patentees are required to disclose all information "material to patentability." The "old" rule (but still valid) was that information is "material" if there is a substantial likelihood that a reasonable examiner would consider it important in deciding to allow the application to issue as a patent. Under the "new" rule, information is "material" when there is a prima facie case of unpatentability or if the information is inconsistent with patentability arguments contained in the record.

This means that, if a patentee has pending continuations before the USPTO at the time of litigation, he/she has a duty to disclose all material information from the litigation into the record of the continuation (inventor testimony, arguments from both sides that affect the claim scope, Markman ruling, etc.). Failure to do so would open the patentee to an inequitable conduct charge, and could potentially render the remaining continuations unenforceable. If the patentee known what's best, all of the material documents get filed in the USPTO.

Since the USPTO provides the transactional history of published applications, the entire litigation record submitted by the patentee gets published as well. This means that you have the opportunity to peek at the litigation record, along with all the newly cited art.

Such is the case with DataTreasury and their high-profile case against JP Morgan. One of the asserted patents (US Patent 5,910,988), has a number of continuations that are pending in the PTO. One of the continuations already has the documentation entered into the PTO file, and is published on the USPTO website.

If you check out the image files, you will see that a lot of documents were submitted into the file (1,000+ pages of Non-Patent Literature (NPL) documents). And while you can't directly view the NPL documents online, you can easily order them from the USPTO. If you aren't inclined to wade through such a mass of documents, you can still get a good idea of what was filed by viewing the Information Disclosure Statements (IDS) that identify each of these documents (since December 2003, DataTreasury submitted over 30 pages identifying prior art).

To be continued . . .

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