Reexamination Stay Granted even though Parties are Direct Competitors

Scott Daniels | May 10, 2012

A trial judge’s decision on whether to stay an infringement action pending completion of a parallel reexamination, is obviously critical, in some cases determines the outcome of the litigation.  In making this decision, trial judges tend to fall into one of two camps: those judges who are attracted to stays because of their potential to simplify the dispute and who are therefore normally inclined to grant a stay, and those judges who are more concerned that a stay would unduly prejudice the patentee and who are therefore normally inclined to deny a stay.  For the second group, the fact that the patentee and the accused infringer are direct competitors is often the kiss of death for a stay motion – those judges almost always deny the stay motion because they conclude that the patentee could not be fairly compensated for its loss of market share to the accused infringer during the stay, even if the patentee ultimately prevails in both the reexamination and the infringement action. 

Despite the long odds against the grant of a stay where the parties compete, Defendant Owens Corning in Air Vent v. Owens Corning, 2012 U.S. Dist. LEXIS 64294 (W.D. Pa. May 8, 2012) found an antidote to the “direct competitor problem.”  The patentee Air Vent had opposed the Owens Corning’s stay motion, arguing that it would “suffer undue prejudice as a result of a stay because Owens Corning is a direct competitor and a ‘protracted delay’ will allow Owens Corning to gain market share at the expense of Air Vent’s permanent loss of market share” (emphasis added).

Owens Corning replied that “there are several other competing products in the market in which Air Vent competes, such as other competitors that sell plastic roof ridge ventilators, as well as other competitors that sell roll ventilators and off-ridge ventilators.”  The availability of these non-infringing alternatives meant that any loss of market share by Air Vent could not be presumed to be caused by Owens Corning’s continued infringement during a stay.  

Judge Terrence McVerry agreed with Owens Corning, finding “that the fact that there are other competitors in the market undermines Air Vent’s assertion of undue prejudice because of loss of market value” (emphasis added).  Judge McVerry therefore stayed the case.

Judge McVerry’s grant of the stay is particularly notable for the fact that Owens Corning’s motion overcame additional adverse circumstances.  First, Owens Corning had waited eight months from the filing date of the complaint, to request reexamination.  This delay troubled Judge McVerry who stated that the “Court is not persuaded that the delay in seeking reexamination is justified.”  Second, the prospect for simplification of the issues had not yet crystallized because the Patent Office has not determined whether it even will grant the reexaminations.  Still, despite these adverse facts, Owens Corning prevailed.  The case now shifts to the Patent Office where Owens Corning enjoys all the well-known advantages of reexamination. 

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