Stays/District Courts : US PTO Litigation Alert™

Apple Wins Stay of Infringement Action in Favor of PTO’s Post-Grant Review of Covered Business Method Patent

Scott Daniels | June 7, 2013

Judge Donnetta Ambrose of the Western District of Pennsylvania has stayed the infringement action SightSound Technologies v. Apple, 2013 U.S. Dist. LEXIS 79319, pending resolution of the PTO’s post-grant review of the patent in issue.  Judge Donnetta began her analysis by citing the AIA standard for considering a stay request:

1)         whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

2)         whether discovery is complete and whether a trial date has been set;

3)         whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

4)         whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court. 


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District Court Developments

Scott Daniels | February 15, 2013

Two reexamination issues that frequently face District Court trial judges in patent infringement actions are (1) whether to stay the action pending completion of a parallel reexamination proceeding at the PTO and (2) whether to bar the patent owner’s litigation attorneys from participating in the reexamination.  This week saw interesting examples of both.

STAYS

In Reiber v. TDK, 2013 U.S. Dist. LEXIS 19658, Judge William Shubb issued the tersest, yet most nuanced stay decision we have ever seen.

Considering the stage of the litigation, the potential simplification of the proceedings, and the potential for undue prejudice or tactical disadvantage to the plaintiffs should a stay issue … the court finds that the balance of the equities favors a stay as to dispositive motions, any Markman hearings, the final pretrial conference, and trial, but does not favor a stay as to discovery, discovery-related motions, and status (pretrial scheduling) conferences.

In a single sentence Judge Shubb identified and analyzed each of the three factors required for determination of whether to stay his case.  He then split the baby in half, suspending the substantive events of the litigation, but allowing discovery between parties to continue.


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Litigation Stays Likely to be More Common with New AIA Post-Issuance Procedures

Scott Daniels | December 28, 2012

Our expectation has been that trial judges would feel more comfortable staying infringement actions to allow for completion of the new AIA post-issuance PTO proceedings, than for completion of reexaminations.  That expectation appears to be correct, if last week’s stay ruling in Semiconductor Energy Laboratory v. Chimei Innolux, et al. (8:12-cv-00021) is any indication of what is to come.

There, SEL sued Chimei Innolux and several other companies, including Acer, Viewsonic and VIZIO, in the Central District of California for infringement of six LCD patents.  Chimei replied, inter alia, by filing petitions at the Patent Office for inter partes review of each of the six patents.  Although the Patent Office has not yet ruled on those petitions, Chimei and the other accused infringers moved the trial court to stay the infringement action until completion of the expected IPR proceedings.
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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.

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.


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Some Courts Stay Infringement Actions even where Parties are Direct Competitors

Scott Daniels | August 16, 2012

All trial judges apply the customary three-part test when ruling on a defendant’s motion to stay a patent infringement action pending completion of a reexamination proceeding at the Patent Office, specifically a balance of factors: (1) the stage of the litigation, (2) the likelihood that reexamination would simplify the issues for trial, and (3) whether the patent owner would be unduly prejudiced by the requested stay.  Judges have been most inclined to deny a stay where the parties are direct competitors and delay of the infringement is likely to damage the patentee in a way that cannot be later cured by an award of damages, i.e., where there is prejudice to the patentee from potential loss of market share.

Lately, however, a number of trial judges have concluded that a stay is justified even though the parties directly compete.  In DuPont v. MacDermid, the patent owner opposed a stay motion, asserting, inter alia, that it and the accused infringer competed directly against one another in the market for the patented product and that it would lose market share during a stay, for which it could not later be adequately compensated.  2102 U.S. Dist. LEXIS 101678 (July 23, 2012).  Magistrate Judge Tonianne Bongiovanni acknowledged the patent owner’s concern regarding “eroding … market share and … substantial loss of profits and goodwill.”  But she determined that such loss could be compensated in the event that the patent owner ultimately prevailed on the merits.  Her determination on this point seems to have been strongly affected by the fact that the patent owner had not sought a preliminary injunction – if loss of market were truly irreparable, why hadn’t the patent owner tried to stop as soon as legally possible?


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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).


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What Happens after the Reexamination Stay is Lifted?

Scott Daniels | April 20, 2012

 An extremely popular strategy for a defendant accused of patent infringement is (1) to request reexamination of the patent and then (2) to convince the trial judge that the reexamination will simplify the issues to be tried, so that he or she should stay the litigation pending completion of the suit.  But how does the trial judge treat the defendant if, several years later, the Patent Office confirms the patentability of the claims and the litigation resumes?  Not very well, the defendant learned this week in Cardiofocus v. Cardiogenesis, 2012 U.S. Dist. LEXIS 54892.

The case had resumed after being stayed for two years for reexamination of the two patents-in-suit, where some of the claims were disclaimed, and the other claims were confirmed.  Judge Nathaniel M. Gorton of Massachusetts was asked to rule on a series of summary judgment motions offered by the parties.  Judge Gorton’s analysis, of course, dealt carefully with the merits of each motion.  And yet there was also an edge to the judge’s comments, suggesting that he did not regard the detour of the case to the Patent Office, requested by the defendant, to have been helpful.


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Reexamination Stays: What about Prejudice to Defendant if Stay is Denied?

Scott Daniels | March 13, 2012

The case law on reexamination stays shows that there are two categories of trial judge: those who are attracted by the possibility of the reexamination simplifying issues for trial and who are therefore likely to grant stay motions, and those who are especially concerned about the prejudice a stay might cause patent owner. 

Magistrate Judge Douglas Arpert of the New Jersey District Court appears to fall within the former category, in view of his Order last Wednesday to stay Monosol RX v. Biodelivery Sciences Int’l (10-cv-5695) pending completion of PTO’s reexamination of the three patents-in-suit.  Although the infringement case was in its early stages and the PTO granted the three reexamination requests, the patent owner vigorously argued that the parties were direct competitors and that it would be prejudiced by the stay.  But Magistrate Judge Arpert was unconvinced, noting that “Plaintiff did not seek a preliminary injunction in this matter and [so] the Court declines to impose any restraints with respect to Defendants’ business activities at this time.”


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Inter Partes Reexaminations Moving More Quickly, at least most of the Time

Scott Daniels | February 28, 2012

There is a good deal of anecdotal evidence that the PTO is handling inter partes reexaminations very expeditiously, some might even say precipitously.  Yet, from time-to-time, an outlier case arises casting doubt on the capacity of the reexamination system to substitute for the District Courts as an efficient arbiter of prior art validity issues.

Such a case is Tempo Lighting v. Tivoli (95/000,067) where, today, the PTO Board of Appeals confirmed the rejection of two of the claims in reexamination, but reversed the rejection of the remaining 11 claims.  The PTO docket does not show an inordinate amount of activity caused by the patent owner or the requester (though there was a brief period of abandonment).  The request was filed at the end of 2004, followed by multiple non-final rejections, an action closing prosecution in May 2009, a right of appeal notice in June 2010, the patent owner’s appeal brief in September 2010, and an oral hearing at the Board this past November.


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