Reexamination Stay Granted Despite Direct Competition between Parties

Scott Daniels | October 9, 2012

Judge Josephine Staton Tucker’s recent decision, granting a reexamination stay motion in Inogen, Inc. v. Inova Labs, Inc. (2012 U.S. Dist. LEXIS 144598), strongly suggests a growing inclination among trial judges to stay infringement actions pending completion of reexamination proceedings at the Patent Office.  Judge Tucker refers repeatedly to the “reasonable likelihood of success” now applied by the PTO to determine whether to grant either an inter partes reexamination or one of the new post-grant proceedings created by the AIA; she finds that this elevated standard at the PTO for institution of a proceeding, (as compared with the “substantial new question of patentability”), means that such proceedings, once begun, are more likely to result in amendment or cancelation of the patent claims.

Judge Tucker began her analysis of the accused infringer’s stay motion, by reciting the customary three-part test:

(1)whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party.

Applying the test, she stated that case was in its early stages.

With respect to simplification, Judge Tucker acknowledged the PTO statistics submitted by the parties regarding survival rates in reexamination, but added that she was “hesitant to rely heavily on these statistics, as Congress recently amended the standard for granting a request for inter partes reexamination.”  Further, the Judge inferred a Congressional intent “to partially shift the merits determination earlier, to the petition stage of reexamination, likely resulting in a decrease in petitions granted, but an increase in amended or cancelled claims after a request has been granted.”  For her, this means that where requests for inter partes reexamination are granted, “there is an even higher likelihood than under the prior standard that the issues in this action will be simplified by the reexamination. On the other hand, as discussed below, if the [the PTO denies a request], the stay will be relatively short.”

The key consideration, however, was the issue of prejudice, since the patentee had argued that it directly competed with the accused infringer and that a stay of the action would result in loss of market share and consequent irreparable harm.  Evidence of such direct competition between the parties has in the past been the primary basis for trial judges to deny reexamination stay motions.

Judge Tucker first faulted the patentee for “wait[ing] a month after filing its Complaint before serving the Complaint on” the accused infringer, and for not requesting a preliminary injunction, “suggesting that monetary damages will adequately compensate” the patentee in the event that infringement is ultimately determined.  Since this is true for most patentees in infringement actions, it was Judge Tucker’s second comment that will most interest reexamination practitioners:

given the recent change to the inter partes reexamination standard, it is unclear whether the inter partes reexamination process will take as long as current statistics suggest. If the USPTO does not grant either of the requests for reexamination, the stay will be in place no longer than three months. If the USPTO grants either or both of the requests, the significance of that decision under the elevated standard for reexamination combined with the possibility of a shorter reexamination process, the early stage of this litigation, and [the patentee’s] failure to move for preliminary injunctive relief suggest that a stay is appropriate.

Accordingly, Judge Tucker granted the stay motion.

Increasingly, trial judges perceive that post-grant challenges to patentability at the PTO move at a much faster pace than in the past.  This perception, coupled with the PTO’s higher standard for instituting such proceedings, means that judges are more likely to regard post-grant proceedings at the PTO as a means for simplifying issues for trial and less likely to work a prejudice on the patentee.

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