So many things going on in the patent world here and in the USA to write about, but so much work, so little time to blog.
There’s been a lot of talk lately about imposing fee-shifting in US patent cases, with Judge Rader encouraging district court judges to be more liberal about award attorneys’ fees, Supreme Court oral arguments this week about fee-shifting, possible changes to the pleading requirements in patent cases per the Federal Rules of Civil Procedure, and Congress contemplating several bills that would impose some sort of a “loser pays” system in patent cases. Chances are if you’re reading this blog you’re already familiar with these issues, and if you’re not then have a look at Patentdocs, PatentlyO or one of the other popular patent blogs where these issues have been discussed frequently in recent months.
This post is about a different aspect of the “loser pays” notion, one that I got to thinking about after David Hricik pointed it out a few weeks ago: in post-grant proceedings before the USPTO (formerly called re-examination, now going under a variety of names thanks to the AIA), there’s no provision for fee shifting, and if you think the post-grant proceeding was brought frivolously, you can’t even sue in court for abuse of process or malicious prosecution. So some people are now saying that a secondary troll market has sprung up, in which patent holders who were victorious in court find themselves being threatened by people or shell corporations, who say they’ll institute post-grant proceedings at the PTO to challenge those same patents unless the patent owners pay tribute. What goes unsaid is that without the threat of misconduct sanctions in the PTO proceedings, it’s a lot easier to cheat.
Israel has two ways to challenge patents before the PTO: in post-examination, pre-grant oppositions; and in post-grant cancellation proceedings. The two types of proceedings are basically the same, except that procedurally the post-grant challenger has to come in with all guns blazing – i.e. he opens the proceedings by filing both his pleadings and written evidence at the same time – whereas the pre-grant opponent merely needs to make some generic pleadings and can file his written evidence much later. In either case though, the ILPTO treats the proceedings as being akin to court proceedings, and imposes costs on the loser (what in the USA are called attorneys’ fees, plus in some cases expert witness fees).
Traditionally, the ILPTO pretty much treated those costs as lip service, awarding attorneys’ fees far below the actual amounts spent. Coupled with the low cost of filing an opposition, in certain industries this meant that certain local companies almost routinely opposed patent applications of certain foreign companies. It just made good business sense: the mere filing of the opposition would delay grant of the patent by a few years, during which time there was no patent for the applicant to enforce, and when all was said and done the opposer would be subject to maybe a few thousand shekels’ penalty, at worst. At best, the applicant would fold or the ILPTO would determine that a patent shouldn’t be granted, in which case the applicant would have to pay something to the opposer.
In the last 8-10 years, there has been a rise in the amounts the ILPTO has been willing to award. Although I haven’t done an empirical study (any law students out there looking for a good project to research?), it appears to me that the large awards have invariably been given to challengers who prevailed in oppositions to patent applications. This just gives more impetus to parties here to oppose. And while there’s not a “shake-down” industry here as far as I know, there’s not really a disincentive to oppose either.
This brings us to a recent decision involving one of Israel’s serial opposers, Unipharm. Unipharm routinely opposes patent applications of large, foreign pharmaceutical companies. It’s a strategy that has worked well for Unipharm, and if anyone were to call Unipharm an “opposition troll”, it’s response would probably be, “Our oppositions are meritorious, as evidenced the fact that we win many of them.” One of the unusual aspects of Unipharm’s oppositions is that it handles many of them largely pro se, at least during the initial phases of the opposition. In the case at hand, Unipharm opposed Lundbeck’s patent application no. 173788; shortly after Unipharm filed its pleadings, Lundbeck withdrew the patent application. For purposes of awarding fees, the ILPTO treats such a withdrawal as a loss and says that the applicant has to pay. (I may post on the propriety of that arrangement another time). Unipharm then asked for an award of costs: 40,000 shekels for the time of the company’s general manager (for 80 hours of work invested in the opposition), 1500 shekels for secretarial time, and 2000 shekels for the opposition filing fee.
The Commissioner ruled that Unipharm was only entitled to 3500 shekels, 2000 for the fee and 1500 for secretarial time. He reached this conclusion on the basis of two primary factors: first, since the GM was a salaried employee, his work on the opposition was part of his regular pay and therefore the company wasn’t entitled to compensation for what he did in connection with the opposition; and second, because Unipharm hadn’t brought any sort of detailed breakdown of the time or expenses involved.
It’s unclear whether this decision represents a temporary departure from the general trend of awarding higher costs to opposers who prevail in ILPTO oppositions, or signals an actual change in the trend in the opposite direction.