• Challenging a Competitor’s Patent in the Patent Office: Great When it Works, but Failure Increases the Risk of a Court-Issued Injunction
  • November 9, 2016 | Author: Thomas J. Tuytschaevers
  • Law Firm: Sunstein Kann Murphy & Timbers LLP - Boston Office
  • Recent developments in an infringement dispute in San Francisco yield valuable lessons regarding the hazards that may befall a company that challenges the validity of a rival’s patent in the United States Patent and Trademark Office. If the company loses its challenge, it may be that much more vulnerable to a preliminary injunction in subsequent infringement litigation.

    Illumina, Inc. sells gene-sequencing equipment in the clinical laboratory market, where it competes with Qiagen, N.V and its subsidiaries. In April 2016, Qiagen introduced its new GeneReader NGS system with a vigorous marketing campaign that seemed to be asking for trouble: It claimed that the new system works in the “same way as Illumina’s machines.” Illumina sued Qiagen and its subsidiaries for infringing US patent 7,566,537, and took the unusual step of asking the trial court for a preliminary injunction to halt the sale of Qiagen’s new product during the litigation.

    As its name implies, a preliminary injunction in a patent case is a pre-trial order prohibiting an accused infringer from selling its product during the infringement trail. It is a “drastic and extraordinary” remedy because it takes effect before infringement is proven, and before trial has even begun. (Patent suits often take two years or longer to get to trial.) If granted rashly, a preliminary injunction causes potentially grievous harm to the accused infringer’s business, but if denied, risks irreparable injury to the patent owner.

    Consequently, a court will grant a preliminary injunction only if the patent owner can show that (1) it is likely to prove the alleged infringement at trial; (2) it is likely to suffer irreparable harm if the injunction is not granted; (3) in measuring the hardship of an injunction on the accused infringer against the hardship of continuing infringement on the patent owner, the balance of hardships weighs in the patent owner’s favor; and (4) an injunction is in the public interest. Despite the attractiveness of the preliminary injunction, patent owners rarely seek them, and courts rarely grant them, because the burden of proof is so high.

    In Illumina v. Qiagen, however, Illumina was successful thanks in large part to assistance from Qiagen itself. First, Qiagen chose to mount a difficult defense: It did not deny that Illumina was likely to succeed in showing infringement, so argued instead that Illumina’s patent was invalid in view of certain prior art. An invalidity defense is difficult because U.S. law presumes a patent to be valid, so while the patent owner needs only to prove infringement by a preponderance of the evidence (i.e., that infringement is more likely than not), the accused infringer must prove invalidity by the higher “clear and convincing evidence” standard.

    Second, Qiagen’s Intelligent Bio-Systems (“IBS”) subsidiary had previously exhausted its strongest invalidity defense in an inter partes review (“IPR”) of the patent at the USPTO. An IPR allows a petitioner to challenge a patent’s validity over prior art, but that opportunity comes at a cost: Under federal law, neither the petitioner nor “the real party in interest or privy of the petitioner” may later challenge the validity of the patent in court based on that same prior art or on any other ground that the petitioner raised or reasonably could have raised during that IPR.

    In response to a previous infringement suit involving the same patent and older IBS products, IBS had convinced the USPTO to institute the IPR based on a particular combination of prior art references, but the USPTO declined to do so on a second combination of prior art. The USPTO concluded the IPR by confirming the patent’s validity. This had the consequence of prohibiting IBS and its privies from opposing Illumina’s preliminary injunction based on the first combination.

    Qiagen nevertheless vigorously argued to the trial court that Illumina was unlikely to succeed on the merits of its infringement case, by alleging invalidity of the patent based on the second combination of prior art references.

    Fortunately for patent owner Illumina, the trial court was not swayed by Qiagen’s arguments, and indeed was convinced that Illumina was likely to succeed on the merits, and likely to suffer irreparable harm if the injunction were not granted. Moreover, the judge found that the balance of hardships weighed in Illumina’s favor (Qiagen’s potential business losses, the court wrote, are “the price of its election ‘to build a business on a product found to infringe’”), and that “the public is best served by enforcing patents that are likely valid and infringed.”

    Not only did the trial court take the rare step of granting a preliminary injunction prohibiting Qiagen and its subsidiaries from selling its new product in the U.S., but the Court of Appeals for the Federal Circuit affirmed the injunction a few days later. As of this writing the case is headed for trial.

    It would be easy, but unfair, to second-guess the defendants’ strategies. For example, IBS might have saved its best invalidity argument for trial rather than committing it to the IPR. On the other hand, the higher burden of proof at trial (clear and convincing evidence of invalidity) suggests that IBS was wise to raise the issue in the IPR, which has a lower (“preponderance of the evidence”) standard of proof.

    Qiagen might also have argued that it should not be prohibited from repeating IBS’s previous invalidity defense to the trial court, on the basis that Qiagen was not the “real party in interest or privy” of IBS, since Qiagen was not a party to the IPR, was not a party to the previous patent suit, and in fact IBS was not a subsidiary of Qiagen when that suit began.

    Indeed, Illumina raised that “privy” question by arguing that Qiagen should be barred from presenting its invalidity defense even on the second combination of prior art references. The trial court could have easily avoided the “privy” issue, however, by citing recent Federal Circuit decisions holding that the prohibition simply “does not apply to grounds raised in an IPR petition, but not instituted” in the IPR. In any event, the trial court concluded that Qiagen’s invalidity argument was “weak,” and did not undermine Illumina’s likelihood of success on the merits.

    Illumina v. Qiagen shows that an accused infringer, or a company that fears it may be charged with infringement, should carefully weigh the risks and benefits, to itself and its privies, of petitioning for an IPR as opposed to presenting an invalidity defense at trial. Alas, there is no one-size-fits-all answer to the question of how best to stage one’s defenses.