Alerts and Updates

New Rules in the N.D. of California Seek to Accomplish More Efficient Patent Trials, with the Help of KSR

March 10, 2008

Patent litigants, patent rocket dockets, and entities seeking a more streamlined patent litigation should take notice of the U.S. District Court for the Northern District of California's recent modification of its patent trial rules. Much is at stake in choosing where to file a multimillion-dollar patent litigation. Salient factors in selecting a forum include the court's docket backlog and its perception of patents. Now, the local rules are playing a much more prominent role and should be analyzed lest a patent party be beset with frustration and major setbacks. Here, the Northern District of California's recent actions in revising its local rules demand scrutiny by in-house and outside counsel in formulating a patent litigation strategy.

The local patent trial rules of the Northern District of California have been a model for a handful of other jurisdictions seeking to impose similar efficient practices. With new rules effective to patent cases filed after March 1, 2008, the jurisdiction has ushered in a handful of requirements which seek to promote economy and efficiency within the patent trial system and which may be the new template for change in other jurisdictions.

In devising the new rules, the Patent Local Rules Advisory Subcommittee ("the Committee") solicited community comments beginning in October 2006 and, more than a year later, issued a report detailing both the goals and the specifics of the changes.

The Committee's January 2008 report states that the changes are intended to: "(1) update the rules to account for recent legal developments, (2) conform the rules closer to the practices of the judges of the District, (3) address minor technical drafting issues present in the existing rules, and (4) improve the rules based on the accumulated experience of those working with patent local rules in this District and beyond."

The Committee separated the changes into two "broad conceptual" changes and a list of more minor changes. Of the two broad changes, the first new rule is a requirement for parties to identify the 10 most-significant claim construction terms or issues in their joint claim construction statements. These would include claim construction disputes that are outcome-dispositive. This change forces parties to clarify the claim construction issues that are the most pertinent, instead of identifying as many terms as possible for the claim construction hearing. The Committee recognized that the previous practice was employed by parties so that they avoided waiving any rights, but stressed that the "potential glut of terms for construction can impede the claim construction process." Furthermore, the rule is a default rule. As such, certain cases may warrant more than 10 terms to be identified and certain cases may warrant less than 10 terms to be identified. The Committee report stressed that the goal is efficiency. This requirement seems most concerned with judicial efficiency, although there may be some auxiliary effects realized by the individual parties, since the scope of the litigation is limited as well.

The second broad change eliminates the concept of "preliminary" contentions. Now parties will submit only one round of contentions. The contentions can be modified, but only for good cause. Prior to this change, parties set forth preliminary contentions before the Markman hearing. After the hearing, when the parties knew how the claims had been construed, the parties had a right to redraft the preliminary contentions and disclosures as final contentions. In an effort to tie litigants to their positions, the Committee's changes have abolished the modification as a right; now, a party may amend its contentions provided it establishes "good cause." The rules set forth three ways good cause may be established: (1) a party may show that the claim was construed differently from the way proposed by the party seeking to amend its contention; (2) the party has recently discovered material prior art in spite of a previously diligent search; or (3) the party has recently discovered "nonpublic information about the Accused Instrumentality which was not discovered, despite diligent efforts, before the service of the Infringement Contentions." These three ways to establish good cause are discretionary and are considered along with the prejudice to the non-moving party.

With regard to the contentions, the new rules also implement several minor, but very important, changes. For example, the new rules require that the patentee set forth its theories of direct and indirect infringement due to the recent legal developments. And, in light of the Supreme Court's decision in KSR v. Teleflex, if a party is alleging that a patent is invalid under section 103, the party must explain why the prior art renders the claim obvious and must, if applicable, include any relevant combinations of prior art.

Other disclosures are also required by the newly added rules. The patentee must disclose "public use" and "on sale" information related to the claimed invention that occurred before the application date. However, such disclosure is not viewed as an admission that the document is prior art under section 102. The new rules also require parties to disclose all attorney-client information on which they plan to rely. This disclosure is made within 50 days after the claim construction ruling. The Committee stated that the "strengthening of the scienter requirement for indirect infringement" is one reason for requiring this disclosure not solely when the party is going to defend a claim of willful infringement, but also more broadly when the party has waived the attorney-client or work-product protection.

In line with the requirement that parties set forth a limited number of disputed terms for the claim construction hearing is a new provision providing for sanctions for failure to meet and confer in good faith throughout that process. This includes sanctions for failing to meet and confer in good faith to narrow the number of disputed terms. Thus, the new, smaller change parallels the new, broad conceptual change requiring the parties generally to set forth only 10 disputed terms.

What remains to be seen with these changes in the upcoming months are both their effects in the Northern District of California and their adoption in other jurisdictions. The U.S. District Court for the Northern District of Illinois currently requires that a separate notice of claims involving patents or trademarks be filed with a pleading, complaint or counterclaim that states a claim arising under the patent and trademark laws of the U.S. Code. With the exception of rules promulgated by individual judges, many jurisdictions have yet to adopt extensive patent trial rules. Time will tell which jurisdictions will be the next to do so.

For Further Information

If you would like more information about this Alert, please contact Richard T. Ruzich, John N. Maher, Brian McQuillen or any other member of the Patent Law Practice Group.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.