Katz Patent Reexaminations: A Change in Momentum Favoring RAKTL Targets


On March 26, 2004, the Director of the United States Patent & Trademark Office issued reexamination orders regarding four patents from the Katz Patent Portfolio, representing nearly 350 separate claims. [1] Although the orders require reexamination of only a fraction of the claims in the Katz Patent Portfolio, likely these Director-initiated reexaminations will invigorate prior art searching efforts and requests for reexamination proceedings by companies Katz has approached about taking a license.

The Katz Patent Portfolio

The Katz Patent Portfolio includes over 50 patents and literally thousands of claims regarding customer service applications that incorporate one or more of the following features:

  • Toll Free - Toll Free Number
  • Auto Attendant - Automated Attendant
  • ACD - Automated Call Distribution
  • VRU - Voice Response Unit
  • CTI - Computer Telephone Integration
  • Speech Recognition

The patents have been asserted against a wide range of interactive technology, including automated forms of: customer service, securities trading, merchandising, prepaid services, telephone conferences, registration, home shopping, as well as functions involved in securing information from databases by telephone, interactive cable transactions, and various other uses of 800, 900 and local numbers.

According to press releases by Ronald A. Katz Technology Licensing, L.P. ("RAKTL", pronounced "rack tel"), companies that have licensed the portfolio include: American Express, AT&T, Bank of America, Equifax, Home Shopping Network, IBM, Merck & Co., Microsoft, Sprint, T. Rowe Price Associates, The Vanguard Group, and MCI (now WorldCom).

RAKTL's licensing efforts gained significant momentum following a claim construction decision which led to the settlement of its litigation with AT&T in November 2000.

A Change In Momentum

Recently, however, the momentum appears to be changing. The USPTO has been criticized for following practices that allow inventors, such as Mr. Katz, to build far reaching patent portfolios based on relatively narrow initial applications. In October 2003, the Federal Trade Commission criticized and suggested changes to a number of USPTO practices that Mr. Katz relied upon. Also, last January, a federal district court in Nevada found 14 patents of Jerome Lemelson to be unenforceable because Lemelson's delay in securing the asserted patent claims is unexplained and unreasonable. Some have suggested that the same fate now awaits the Katz patents. Developments such as these, coupled with the perception that RAKTL's licensing demands are overreaching and unreasonable have caused some RAKTL targets to coalesce into industry working groups that coordinate efforts to identify prior art, shahare information and cooperate on public policy issues raised by RAKTL's efforts.

Look For More Activity Among RAKTL Targets

The USPTO decision to reexamine some of RAKTL's patent claims is an unusual and very significant development that is likely to encourage further cooperation among RAKTL's targets for several reasons.

First, the USPTO rarely orders reexaminations. Under current guidelines, the USPTO Director is to order reexamination on his own initiative when it is apparent that (i) an examining procedure has not been followed which has resulted in the issuance of a claim in a patent that is prima facie unpatentable and (ii) there is a compelling reason to order reexamination. This is a higher standard than that applied by the Director in determining whether to initiate a reexamination in response to a request by the patent holder or public. By indicating that this higher standard has been met with respect to some Katz patents, the Director-ordered reexaminations likely will encourage RAKTL's targets to give prior art searching a fresh look.

Second, it is likely that at least some Katz patent claims will be narrowed as a result of the Director-ordered reexaminations. According to Patent Office spokesperson Brigid Quinn, since 1981 when the reexamination procedure was established, the office has received nearly 7,000 requests for reexams through March 2004, including only 165—or about 2%—ordered by the Director. Of those 165 Director-ordered reexams, about 13% resulted in confirming all reexamined claims, about 19% resulted in cancelling all reexamined claims, and about 68% resulted in some narrowing of the reexamined claims. In other words, based upon the USPTO's track record, it is much more likely than not that a Director-ordered reexam will result in some narrowing of the reexamined claims.

Third, again according to Spokesperson Quinn's records, of the other 98% of requests for reexamination [2] about 91% led to reexamination proceedings having the following results:

Request ByReexamined Claims
Patent HolderPublic
23%30%All Confirmed
7%12%All Cancelled
70%58%Some Narrowed

These past outcomes likely will get a fresh look in light of the Director-order reexaminations and cause some companies targeted by RAKTL to reconsider previous decisions not to invest in prior art searching. Of course, there is always the risk that claims not narrowed through a reexamination will become stronger, but because so many RAKTL licensees already appear to have assumed the strength of the claims anyway, many current RAKTL targets may see little downside risk.

Fourth, the Director-ordered reexaminations may spur additional RAKTL targets to join one of several collaborative working groups that have combined and coordinated otherwise separate prior art searching efforts. (Other collaborative responses by RAKTL targets have included joint license negotiation efforts.)

What Should You Do If Targeted By RAKTL To Take A License?

The change in momentum is significant and recent developments must be taken into account. There is no one-size-fits-all approach in responding to RAKTL's overtures to take a license. For some companies, a license may be cost-effective and sensible. For other companies, litigation may be sensible and some are having modest success. [3]

Requesting a USPTO reexamination may also be a sensible response for those companies that can identify prior art that raises a substantial new question of patentability as to at least one patent claim. And, of course, these and other strategies sometimes may be pursued simultaneously.

Regardless of the approach, however, every company should follow developments closely and proceed with a willingness to rethink and refine its strategy in light of significant developments—such as the Director-ordered reexaminations.

Shaw Pittman's patent attorneys have counseled a wide variety of clients in connection with the Katz Patent Portfolio, including those in the financial services, transportation, telecommunications, energy, retail, and software industries. Through this activity, we have gained insight regarding the portfolio, past licensing practices and negotiation strategies. We welcome the opportunity to assist clients in their discussions with RAKTL and decisions with respect to litigation, reexamination, and other alternatives.


  1. See the Addendum to this Alert at http://www.shawpittman.com/katzreexamorders for copies of the orders.
  2. About 43 percent of those requests came from patent holders themselves and another 55 percent from the public.
  3. In a bit of good litigation news for RAKTL targets, Verizon California, Inc. recently obtained summary judgment that certain Katz patent claims are invalid for failing to comply with the written description requirements of 35 U.S.C. § 112. See Order Re Verizon's Motion For Summary Judgment And Katz's Motion For Summary Judgment, Verizon California, Inc. v. Ronald A. Katz Technology Licensing, L.P., No. 01-CV-09871 RGK (RCx) (C.D. Cal. December 3, 2003).

If you have any questions regarding this article please contact:

Lawrence J. Gotts
larry.gotts@shawpittman.com
703.770.7604

Michael D. Bednarek
michael.bednarek@shawpittman.com
703.770.7606

Mark Koehn
mark.koehn@shawpittman.com
703.770.7690