A finding of prosecution laches requires the proof of two elements: (i) the patentee’s unreasonable and unexplained delay in prosecution; and (ii) prejudice to the accused infringer or the public that is attributable to the delay.
The patent examination process is inevitably lengthy from the time of the initial filing and examination to the allowance and issuance of the patent. As of May 2021, the USPTO estimates an average pendency of 17 months from filing to the mailing of a first Office Action. The lengthy pendency of patent applications can lead some applicants to take advantage of and exploit the patent system to unreasonably delay the prosecution of patent applications, and in some instances extend the patent term far beyond the lifetime of the original parent application―especially in patent applications filed before the USPTO’s June 8, 1995, implementation of rules under the General Agreement on Tariffs and Trade (GATT) following the enactment of the Uruguay Round Agreements Act in 1994. Under GATT, patent terms expire 20 years from the filing date of the earliest application to which priority is claimed, instead of expiring 17 years from the issue date, which ultimately altered prosecution strategies.
To avoid unreasonable delays and to prevent applicants from exploiting the patent system to unreasonably delay the prosecution of applications that may prejudice the rights of others, an issued patent can be held unenforceable under prosecution laches―as in a recent case, Personalized Media Communications, L.L.C. v. Apple, Inc., No. 2:15-CV-01366-JRG (E.D. Tx. Aug. 5, 2021).
Personalized Media Communications (PMC), the assignee of U.S. Patent No. 8,191,091 (‘091 patent), drawn to a “Signal Processing Apparatus and Methods,” which was issued May 29, 2012, asserted the ‘091 patent against Apple, alleging Apple’s digital rights management technology, FairPlay, infringed the patent. A jury found Apple liable for infringement and awarded PMC approximately $300 million in reasonable-royalty damages as a running royalty. The court held a bench trial on Apple’s assertion of prosecution laches, an equitable defense against infringement.
A finding of prosecution laches requires the proof of two elements: (i) the patentee’s unreasonable and unexplained delay in prosecution; and (ii) prejudice to the accused infringer or the public that is attributable to the delay. See Hyatt v. Hirshfeld, 998 F.3d 1347, 1360 (Fed. Cir. 2021). The accused infringer can establish prejudice through showing evidence of intervening rights such that “either the accused infringer or others invested in, worked on, or used the claimed technology during the period of delay.” Cancer Rsch. Tech. Ltd. v. Barr Lab’ys, Inc., 625 F.3d 724, 731 (Fed. Cir. 2010).
Delay
The district court determined that Apple had demonstrated that PMC engaged in unreasonable and unexplained delay in the prosecution of the ‘091 patent.
The asserted ‘091 patent issued from U.S. Patent Application No. 08/485,507 (’507 application), filed June 7, 1995, as part of the influx of patent applications during the “GATT bubble” to take advantage of having the patent term calculated based on the issue date versus the earliest filing date under GATT. The ‘507 application claimed priority to an application filed in 1987. The 1987 application was a continuation-in-part of an application filed in 1981. At filing, the ‘507 application contained just one claim, intended as a placeholder. The ‘507 application was one of 328 applications that PMC filed during the GATT bubble, many of which merely contained placeholder claims, which would be amended and expanded upon during prosecution.
The court relied upon numerous factors in determining that PMC engaged in unreasonable and inexcusable delay in prosecuting the ‘091 patent. It noted that the asserted independent claim of the ‘091 patent was first presented for examination in a different application in 2003, eight years after the initial filing, and reintroduced in 2011 in the ‘507 application, 16 years after filing.
Prior patents have been found to be unenforceable for prosecution delays of shorter duration. See Woodbridge v. United States, 263 U.S. 50, 53, 56 (1923) (applying prosecution laches based on a nine-and-a-half-year prosecution delay); In re Bogese, 303 F.3d 1362, 1369 (Fed. Cir. 2002) (applying prosecution laches based on an eight-year prosecution delay).
The court also found the contents of PMC’s filings problematic. PMC’s 328 GATT bubble applications were unusually long, comprising about 600 pages of text and figures each. PMC also submitted thousands of references with the filing without any indication of their relevance to the claimed subject matter; one reference in the prosecution of the ‘091 patent was drawn to beehives. See April 7, 1997 Information Disclosure Statement (citing U.S. Patent No. 33,189, drawn to “Improvement in bee-hives” as prior art that applicant deemed would be material to patentability). The number of pending claims in PMC’s applications increased exponentially following the entry of post-filing amendments drawn to the actual claimed subject matter. One examiner estimated the total number of pending claims across PMC’s applications to be approximately 20,000. The excessive number of pending claims rendered it nearly impossible to analyze the claims in the determination of priority, satisfaction of written description and ascertainment of double patenting issues, which would inevitably lead to delays in prosecution.
The court also noted delays at the USPTO caused by PMC’s filings. The USPTO suspended prosecution of PMC’s applications multiple times during the period of delay as a result of its excessive filings. Prosecution was suspended to allow the USPTO and PMC to determine a consolidation agreement and for conducting multiple reexamination proceedings of PMC’s issued patents. The court also noted further delays from holding certain applications in abeyance pending resolution of prosecution of other applications as part of the consolidation agreement between the USPTO and PMC.
Based on the totality of the circumstances, the court determined that Apple met its burden in establishing unreasonable and inexcusable delay in prosecuting the ‘091 patent.
Prejudice
The court also determined that Apple had developed intervening rights during the period of PMC’s delay in prosecuting the asserted ‘091, which ultimately prejudiced Apple.
In finding prejudice to Apple, the court noted that PMC did not present claims drawn to the technology at issue for examination until at least 2003, eight years after PMC filed its 328 applications. PMC could have pursued claims drawn to the instruct-to-enable-signal-based decryption method at issue much earlier in prosecution, but PMC instead chose to file hundreds of applications merely containing placeholder claims. During this period, Apple continued to invest time and resources into the development of the accused FairPlay technology. Apple developed the version of FairPlay that the jury found to infringe the ‘091 patent by 2005, 10 years after the filing of the ‘507 application and seven years prior to issue of the ‘091 patent. The court also noted that PMC engaged in licensing negotiations with Apple during prosecution of the ‘091 patent and never identified the ‘091 patent to Apple until the filing of its complaint in the present case.
PMC sued Apple over claims issued in 2012 that were first sought in 2003 as part of an application filed in 1995. The 1995 application claimed priority to an application filed in 1987, and the 1987 application was a continuation-in-part of a 1981 parent application. The court determined that this chain of events leading to the eventual issuance of the asserted ‘091 patent was far from coincidence. Accordingly, the court held that Apple has made a showing of prejudice through its significant investment of time and resources into the development of FairPlay during the period of PMC’s delay.
Having successfully shown unreasonable and inexcusable delay in prosecuting the ’091 patent and prejudice based on the delay, the court held the ‘091 patent to be unenforceable as a result of prosecution laches, extinguishing Apple’s liability for infringement of the ‘091 patent.
Conclusion and Analysis
Personalized Media Communications comes off of the heels of Hyatt v. Hirshfeld, in which the Federal Circuit held that the USPTO may assert prosecution laches against an applicant who similarly made hundreds of patent application filings during the GATT bubble and managed to delay prosecution of the claims between 12 and 28 years from filing. See Hyatt, 998 F.3d at 1354, 1367.
Prior to GATT, in which patent terms were determined based on the issue date, applicants could strategically delay prosecution through the filing of continuation applications, which would keep a patent application family pending indefinitely. This would allow the market to develop prior to obtaining a patent with the goal to encompass a competitor’s products and technology. Such patents became known as “submarine” patents.
Following the USPTO’s implementation of rules under GATT, the patent term of a patent application family is determined based on the earliest filing date. Although it is still possible post-GATT to delay the introduction of patent claims and stake out the market in the hopes of encompassing a competitor’s product, applicants and stakeholders should weigh the potential risks and rewards of such a strategy. A lengthy stakeout and delay of the introduction of patent claims encompassing a competitor’s product comes with the risk of a shortened patent term and possibly under Personalized Media Communications, an unenforceable patent due to prosecution laches. The risks of a shorter patent term and an unenforceable patent may outweigh any rewards resulting from a license agreement with a competitor.
While there are reasonable delays during prosecution, such as filing a divisional application on the issue date of an allowed parent application as a patent, applicants should diligently prosecute their applications at the USPTO or risk the application of prosecution laches, which would render any issued patent unenforceable. The goal of the patent system, through a grant of a temporary monopoly, is to “promote the Progress of Science and the useful Arts”. U.S. Const., Art. I, § 8, cl. 8. Unreasonable and inexcusable delay in patent prosecution that prejudices the public is precisely the opposite, as it stifles the progress of research and innovation envisioned by the patent system.
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