Scott Daniels | March 7, 2011
The universally accepted standard for a court to determine whether to stay a patent infringement case pending completion of a reexamination proceeding is clear and seemingly objective. A court is to apply its discretion in light of the following factors:
(1) whether discovery is complete and a trial date is set, i.e., is the case in its early stages;
(2) whether reexamination would likely simplify, or perhaps eliminate, issues from the litigation; and
(3) whether a stay would unduly prejudice the patentee, or whether the stay is requested by the accused infringer for some tactical reason.
Yet the standard is commonly applied in an extremely subjective manner, so that a number of practitioners have commented that the identity of the judge is the best predictor of the outcome of a stay motion.
We believe that the problem is not with the trial judges, but with the standard itself. That standard reflects two compelling, but contradictory, interests: one, the basic right of the patentee to exclude others practicing the claimed invention during the term of the patent, and the other, the obvious benefit to the court and to the parties from the PTO resolving major issues, thereby reducing the cost and complexity of the litigation. Trial judges, earnestly trying to do what is right, bring different life experience to their decisions, and therefore accord very different significance to these conflicting interests.
To assess our understanding, we randomly selected from the past month 12 decisions on motions for a reexamination stay. In eight instances the case was stayed, in four it was not. What we saw, again and again, was much greater emphasis being placed on either the prejudice to the patentee from a stay, or on the benefits of simplification through reexamination. The other countervailing factor was acknowledged, but treated as being much less significant. This was true regardless of the specific facts of the case.
Where the trial judge granted the stay, the trial judges clearly had high expectations regarding the expertise of the PTO and the likelihood that reexamination would eliminate issues from the litigation. One court stated that the “Patent Office’s expert analysis” would simplify the issues and facilitate settlement of the case. Another noted the Patent Office statistics, indicating that a high percentage of patent claims were either amended or canceled. Two other courts quoted from an earlier decision that even where there is no claim amendment or cancelation, reexamination would give a “richer prosecution history [that would be] available to inform the claim construction.” Still another court saw the value in simplification of the patent issues even though the case included several non-patent counts that, obviously, could not be simplified by reexamination.
By contrast, the question of potential prejudice to the patentee from delay, received somewhat less consideration. Several courts quoted from an earlier decision that delay is merely an “inherent” feature of reexamination. One acknowledged that reexamination delays could be prolonged, but opined that if delays were allowed to control the outcome of the motion, no case would ever be stayed for reexamination. Another found that the patentee’s assertion of harm from the reexamination delay was only “speculative” and that prejudice to the patentee should preclude a stay only in a “clear case.” In one case, the judge concluded that there could be no actual prejudice to the patentee because it had not requested a preliminary injunction. And all the judges doubted that the accused infringer had requested reexamination to achieve some tactical advantage over the patentee.
Where the requested stay was denied, on the other hand, the judges were clearly very concerned that the reexamination delay would irreparably damage the patentee by curtailing its statutory right to exclusivity of its claimed invention. One judge warned that reexamination delays were indefinite and often prolonged, and that the patentee’s “market loss is difficult to measure in monetary damages.” Another stated that there was no adequate compensation for the patentee’s potential loss of goodwill. Still another judge cited the PTO statistics regarding the period for reexamination, but cautioned that appeals could greatly lengthen that period.
The judges who denied a stay were skeptical that the reexamination would simplify any issues. One pointed out that the accused infringer could reargue its invalidity arguments, even if it lost at the PTO, since it had requested ex parte, not inter partes, reexamination, and therefore was not bound by the PTO’s decision. In another case, the judge complained that there was no discovery in reexamination.
The fact that a stay was granted in eight out of the twelve cases we examined should not be taken as a suggestion that stay motions are twice as likely to be granted as not – the number of cases we looked at was simply too small. On the other hand, there is a clear pattern of trial judges genuinely struggling to apply a standard that is not susceptible to objective application. Unfortunately, there is little likelihood of a change being made to the “universally applied standard” in view of the CAFC’s reluctance to consider interlocutory appeals of stay grants in the absence of “irreparable consequences,” as shown last Friday by the Court’s dismissal of such an appeal in Sorensen v. Lexar Media.