Direct Competition between Parties does not Preclude Reexamination Stay

Scott Daniels | November 9, 2012

At the risk of being boring, we continue to report trial court decisions on motions to stay infringement actions pending completion of parallel reexamination.  We do so because of the significant consequence of such decisions: specifically, the transfer of a dispute from the court to the Patent Office.  In most stay decisions, the considerations of “the stage of the litigation” and “possible simplification” favor a stay.  It is the third consideration – potential prejudice to the patentee from a stay – that often weighs against the grant of such motions.  In particular, trial judges have been quite reluctant to stay an action where the parties are direct competitors in the market for the patented product.

Of late, however, even this factor of direct competition between the parties often does not defeat reexamination stay motions.  For instance, in Phil-Insul Corp. v. Airlite Plastics, 2012 U.S. Dist. LEXIS 159077 (D. Neb.), the patentee opposed a stay because it competed directly with the accused infringer who sought the stay.  Magistrate Judge F.A. Gossett acknowledged the patentee’s argument, but was not persuaded.

First Plaintiff has itself delayed litigation with Defendants. Plaintiff waited over one and a half years since [an earlier reexamination], before commencing this infringement action. Plaintiff also chose not to include Defendants in the Reward Wall action, which was filed over a year before this suit. Second, Plaintiff decided not to seek a preliminary injunction against Defendants in this action, which tends to suggest that Plaintiff would not be unduly prejudiced by staying this litigation. Third, Plaintiff admits that it offered Defendants a license to the Patent before filing this suit.

 (Emphasis added).

To be sure, there are many judges who remain reluctant to stay infringement actions.  Still, a body of case law is developing rapidly, justifying reexamination stays.  In particular, many judges now closely scrutinize the bona fides of a patentee’s allegations of prejudice.

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