It's been proposed that the Model Order will streamline the case more effectively and decrease cost for the litigants. One question I have is whether the limits imposed by the Model Order supersede how a patent owner elects its claims early in the case, or whether the Model Order works within the confines of the local rules to limit claims following claim construction. If the limits are imposed on top of the disclosures set forth in the local rules, very little is achieved by the Model Order, except perhaps to limit issues during expert discovery. I suspect that the Model Order is an attempt to cut down the number of claims and prior art references before expert discovery starts. Because the Model Order is triggered after a Defendant provides Instrumentality Documents, the defendant has already chased down prior art and created a number of invalidity charts for all asserted claims. Maybe at the start of the case patent owner provided infringement contentions for 40 asserted claims across the 2 patents. The Model Order is silent about the number of claims that a patent owner can assert at the beginning of a case. Sure, the claims and prior art references are later limited, but you still need to go through the exercise of challenging every claim asserted at the beginning of the case.
This is why, in my opinion, the Model Order benefits a patent owner more than a defendant. Yes, the reduction in asserted claims is a benefit to a defendant. A patent owner often knows, following claim construction, which claims will get dropped for trial. Patent owner maintains an advantage by waiting to just before trial to identify those claims to a defendant. The Model Order speeds up this identification to the benefit of the defendant. The tradeoff for limiting claims earlier under the Model Order is a drastic reduction in prior art references.
To discuss how the Model Order impacts a case, let's apply the Model Order to the context of an Eastern District of Texas patent litigation. We'll also include the ED Texas local patent rules. Below are exemplary due dates for patent litigation activities using the following shorthand references:
PO = patent owner; D = defendant; LR = ED Tex local rules; MO = Model Order
- PO files a complaint asserting infringement against D involving 2 patents
- 10 days prior to Case Management Conference - PO provides infringement contentions to D (LR 3-1)
- 45 days after infringement contentions - D provides invalidity contentions to PO (LR 3-3); D provides Instrumentality Documents to PO (LR 3-4)
- Phase I - 40 days after Instrumentality Documents served - PO provides preliminary election of asserted claims identifying 10 claims/patent; max 32 claims (MO ¶ 2)
- Phase I - 14 days after preliminary election of asserted claims - D provides preliminary election of asserted prior art identifying 12 references/patent; max 40 references (MO ¶ 2)
- Phase II - 28 days after Court's Claim Construction Order - PO provides final election of asserted claims identifying 5 claims/patent; max 16 claims (MO ¶ 3)
- Phase II - 14 days after final election of asserted claims - D provides final election of prior art identifying 6 prior art references/patent; max 20 references (MO ¶ 3)
Consider the claim-to-reference ratios under the different phases:
Phase I - 10 claims/12 references/patent; max of 40 references - 1.2 references/claim (section 103 arguments severely limited)
Phase II - 5 claims/6 references/patent; max of 20 references - 1.2 references/claim (section 103 arguments even more limited)
Let's look at some of the ratio dynamics from the different Model Order phases for a two patent case. For the preliminary election, a patent owner would identify 20 claims across 2 patents. A defendant would be limited to a total of 24 prior art references, and no more than 12 prior art references per patent. If we assume that there are a mix of method and system claims, the prior art will need to be tailored to the claim sets. If there are 5 system and 5 method claims, and the best argument is obviousness, it's conceivable that you can quickly be up against the prior art reference limit very quickly. Consider the following hypothetical claim breakdown and prior art ("PA-x"). As you'll see, we easily can have 13 prior art references (PA-A to PA-M) for one of the asserted patents, where these references could be used in 2 reference combinations to invalidate each asserted claim. Thirteen prior art references is too many under the Model Order, and more importantly, a defendant is at a huge tactical disadvantage because it does not yet know what claim construction issues will impact this identification.
Claim 1 - system - PA-A, PA-B, PA-C
Claim 2 - depends from claim 1 - PA-A, PA-B, PA-C
Claim 3 - depends from claim 2 - PA-A, PA-B, PA-C
Claim 9 - system - PA-A, PA-D, PA-E
Claim 10 - depends from claim 9 - PA-A, PA-E, PA-F
Claim 15 - method - PA-A, PA-G, PA-H
Claim 16 - depends from claim 15 - PA-A, PA-G, PA-H, PA-I
Claim 17 - depends from claim 15 - PA-A, PA-G, PA-H, PA-J
Claim 22 - method - PA-K, PA-L, PA-M
Claim 23 - depends from claim 22 - PA-K, PA-L, PA-M
In our hypothetical, the Court has now issued its claim construction order. Let's see what happens. In Phase II, patent owner now elects 5 claims per patent. To really put pressure on the defendant, patent owner makes its selections with an eye towards the prior art reference limits - defendant can only use 6 prior art references/patent, and the references must be selected from the previously identified group.
Claim 3 - system - depends from claims 2, which depends from claim 1 - PA-A, PA-B, PA-C
Claim 9 - system - PA-A, PA-D, PA-E
Claim 10 - system - depends from claim 9 - PA-A, PA-E, PA-F
Claim 16 - method - depends from claim 15 - PA-A, PA-G, PA-H, PA-I
Claim 23 - method - depends from claim 22 - PA-K, PA-L, PA-M
Under this selection, patent owner selected claims and only PA-J automatically falls off. Defendant must now select 6 prior art references against these 5 claims. PA-A must be selected because it is used across a number of claims. Because this is an obviousness case, the defendant needs at least 2 references per claim. The minimal set of 2 references per claim are in bold above. Now we see the real problem. The Defendant must select 7 prior art references to have at least a single two reference combination for the section 103 challenge. Of course, a Court is very likely to allow that 7th reference even though the number of total references would exceed six. Here's the problem, though. The Defendant is left with only a single invalidity defense against each of the 5 claims. Was this really the intent of the Model Order? If a defendant wants more than a single invalidity challenge against each claim, it now has to go ask the Court for permission via motion practice?
This is not an extreme example. I find it somewhat interesting that the Committee cited the Katz case as an example where a Court imposed limits in litigation. I was involved with different defendants challenging the Katz patents dating back to 2002. There were a number of reasonably good prior art references. I reviewed hundreds of references. The claims for each patent were pretty diverse. The Court, however, never limited the number of prior art references that could be applied against any asserted claim. Yes it makes sense to limit, in some way, the number of prior art references. Defendants do this over time and through vetting, and it's normally done when working with an expert to prepare the expert report.
If the number of prior art references are required to be limited, I don't think the references should be limited by patent, but rather by claim. I'm not certain what the right number of references per claim should be without seeing the patent claims, but the number should be at least 10 and then maybe pared down to 6 or so - for each claim. Maybe cap the total number of references per patent to 20-30. I also don't believe the first election of limiting the prior art should take place before claim construction. Sometimes prior art is selected to meet the defendant's proposed construction of a term and another reference is selected that meets patent owner's proposed claim construction. There are a number of reasons why prior references are identified against claims that don't fit with the proposed numerical limits.
The current Model Order is a big win for a patent owner because it eliminates viable defenses for the sake of a numbers game. I have been involved with the creation of thousands upon thousands of invalidity charts and contentions. This is not an easy process. Different prior art references describe technology in different ways. After you have focused on particular disputes, the better prior art reveals itself. The methodology is more like an issue narrowing process as more information about positions is learned. Until a defendant reads a responsive report by the patent owner's expert, a defendant is not really sure about the strength of its invalidity case. The Model Order forces you to make choices well in advance of expert discovery. If the Model Order is followed by the Court, It will now be even more difficult for a defendant to defend itself. I can't believe that was the intent of the Model Order.