Xenia P. Kobylarz

The Recorder

September 1, 2006

The fierce court battle between digital video recorder pioneer TiVo Inc. and cable television giant EchoStar Communications Corp. has been shunted to the U.S. Patent and Trademark Office, which may signal the increasing role of that office. If the trend catches on, it could delay outcomes of patent disputes by years.

A rarely used rule lets patents be challenged in a bureaucratic review process rather than in court. In Texas on Monday, U.S. Magistrate Judge Caroline Craven stayed EchoStar`s countersuit against TiVo until the patent office decides on TiVo`s request for such an inter partes exam.

If a case is stayed pending the outcome of the re-examination process, it could mean as much as a seven-year delay before a patent owner can go back to court to enforce their patent, said Lance Johnson, a partner at Roylance, Abrams, Berdo & Goodman.

When that happens, ``we don`t know when the district court might begin the court proceeding again,`` said Johnson, a Washington, D.C., patent lawyer with two clients in the inter partes process. ``Would it be after the examiner ruled on the validity of the patent, or after the ruling has gone through the whole appeals process?``

While it might slow the judicial process, Craven`s move could be attractive to judges, he added.

``Most courts don`t like patent cases to begin with,`` Johnson said. ``If there exists some reasonable possibility that a case could be knocked out entirely or it could be narrowed, then judges are more inclined to stay litigation.``

TiVo sued EchoStar in 2004 and in April, a federal jury in Texas found EchoStar had willfully infringed TiVo`s patents on a ``multimedia time-warping system.`` EchoStar filed its own lawsuit against TiVo in 2005, and the suit had been scheduled for trial early next year, until Craven deferred to the inter partes process.

A RARE MANEUVER

Congress created inter partes re-examination in 1999 to let third parties assert that a patent had been wrongly issued on an invention that was not truly original. It was touted as a better alternative to the director-ordered ex parte re-examination process. Unlike in ex parte, inter partes filers can participate in the re-examination and, like the patent owner, appeal the outcome.

Yet in six years, only 113 inter partes re-examination requests had been filed -- all but eight of which had been granted.

Craven`s ruling and similar ones around the country have some patent attorneys expecting a spike in inter partes bids.

In the TiVo case, the judge held that inter partes re-examination would only streamline ongoing litigation.

Some attorneys were surprised by the ruling because the patent office has yet to decide whether to grant TiVo`s re-examination request. TiVo filed the request in late May, and it takes about three months for the patent office to decide whether to grant one.

``As district courts give more and more weight to the patent office proceeding, it will become a substantial defensive maneuver for defendants,`` said Johnson.

Johnson said many courts perceive inter partes re-examination as ``substantially equivalent to a district court proceeding.``

CHEAPER AND FRIENDLIER?

Peter Zura, a patent attorney at Bell, Boyd & Lloyd in Chicago, said courts` deference to inter partes reviews sends a powerful signal to defendants.

``This could be significant for defendants looking at inter partes re-examination as a means to avoid litigating cases before a court perceived to be pro-plaintiff,`` Zura said.

Patent defendants may also like how much cheaper inter partes is. Patent cases can cost as much as $2 million to litigate. Inter partes proceedings cost $100,000 to $150,000 in legal fees, including the $8,800 filing fee, according to Paul Haughey, a partner at Townsend and Townsend and Crew in San Francisco.

Requests for re-examinations have also increased noticeably over the last three years. The growing popularity may mean defendants think they have a better chance arguing before an experienced patent examiner than a jury, Haughey said.

Right now, only patents filed after inter partes was established can use the process, but Congress is considering a bill to extend the process to all patents.

``I think we`re just seeing the crest of a wave of inter partes filings in the next few months as new actions are filed and new court decisions are handed [down],`` Johnson said.