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IP Litigation

EDTX Monthly Wrap-Up – May 2020

June 16, 2020

IP Litigation

EDTX Monthly Wrap-Up – May 2020

June 16, 2020

Back to Fish's Litigation Blog

 

In EDTX, a Good IPR Filed Early Is Better than a Great IPR Filed Late

A recent precedential designation by the United States Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB” or “Board”) could have a significant impact on litigation in the Eastern District of Texas (“EDTX”) with related Inter Partes Reviews (“IPRs”).

On May 5, 2020, the PTAB designated as precedential Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (March 20, 2020). That order provides six factors the Board will consider in determining whether to exercise its discretion to institute IPR when there is a related proceeding pending in district court. Those six factors are:

  1. Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
  2. Proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
  3. Investment in the parallel proceeding by the court and the parties;
  4. Overlap between issues raised in the petition and in the parallel proceeding;
  5. Whether the petitioner and the defendant in the parallel proceeding are the same party; and
  6. Other circumstances that impact the Board’s exercise of discretion, including the merits.

Fintiv, at 6. The district court forum and the parties’ actions there heavily influence the first four factors.

This article will examine the competing strategies plaintiffs and defendants in EDTX should consider when an IPR is either likely or has been filed but does not yet have an institution decision.

Factor 1: Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted

The first factor weighs if it is likely that district court litigation will be stayed if the IPR is instituted. In Fintiv, the PTAB stated that a “district court stay of the litigation pending resolution of the PTAB trial allays concerns about inefficiency and duplication of efforts” and that “this fact has strongly weighed against exercising the authority to deny institution.” Fintiv, at 6. In situations where “there is no stay, but the district court has denied a motion for stay without prejudice and indicated to the parties that it will consider a renewed motion or reconsider a motion to stay if a PTAB trial is instituted . . . [s]uch guidance from the district court, if made of record, suggests the district court may be willing to avoid duplicative efforts and await the PTAB’s final resolution of the patentability issues raised in the petition before proceeding with the parallel litigation.” Id., at 7. Alternatively, where there has been a denial of a stay and the district court “has not indicated to the parties that it will consider a renewed motion or reconsider a motion to stay if a PTAB trial is instituted, this fact has sometimes weighed in favor of exercising authority to deny institution under NHK.” Id.

Plaintiffs considering forums in which to file their case should analyze how the PTAB will view each forum’s treatment of stays pending IPR. Choosing a forum such as EDTX, where stay requests receive critical analysis and are not guaranteed, will benefit the patent owner when arguing for denial of institution of an IPR. It may even dissuade the petitioner from filing at all.

It is widely understood that EDTX courts will not stay litigation until after the PTAB institutes an IPR. This has caused some defendants to save resources and not seek a stay until after the institution decision. That may no longer be the best course of action because the first factor of the new test considers if there is evidence that the district court will stay the litigation. Defendants should consider if it is better to ask for a stay immediately upon filing the IPR petition, even if they expect that the motion will be denied, just to give the court an opportunity to state whether it will consider a stay after institution. Such an order could then be used as evidence in the IPR proceeding. Of course, such a plan could backfire if the court provides guidance that a stay is unlikely.

When evaluating the likelihood of positive guidance about a future stay, Defendants should keep in mind the three factors EDTX courts typically consider when determining whether to grant a stay pending IPR: “(1) whether the stay will unduly prejudice the nonmoving party, (2) whether the proceedings before the court have reached an advanced stage, including whether discovery is complete and a trial date has been set, and (3) whether the stay will likely result in simplifying the case before the court.” Uniloc 2017 LLC v. Samsung Elecs. Am., Inc., No. 219CV00259JRGRSP, 2020 WL 1433960, at *2 (E.D. Tex. Mar. 24, 2020).

Factor 2: Proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision

The second factor compares the timing of the district court trial date and the IPR final written decision. The PTAB’s analysis of this factor is straightforward. “If the court’s trial date is earlier than the projected statutory deadline” then the Board will generally weigh this “fact in favor of exercising authority to deny institution.” Fintiv, at 9. “If the court’s trial date is at or around the same time as the projected statutory deadline or even significantly after the projected statutory deadline, the decision whether to institute will likely implicate other factors discussed herein, such as the resources that have been invested in the parallel proceeding.” Id.

When evaluating IPR petitions related to cases in EDTX, the Board will nearly always find that the trial date is well before the statutory deadline for a final written decision.

Unlike some other jurisdictions, parties in EDTX courts typically get Markman hearing and trial dates at the scheduling conference. Consider a typical case schedule in Judge Gilstrap’s court, which schedules trial 16 months after the case is filed:

Timeline of Typical EDTX Patent Case

A defendant considering filing an IPR petition has three big questions to answer: When to file, what claims to include, and what prior art to use? Defendants will nearly always wait until after infringement contentions to file a petition so that they can ensure that they target all claims at issue in the district court. And, because prior art searching takes time and is often done in conjunction with preparing invalidity contentions, many defendants will wait until after invalidity contentions. Factor in the time it takes to prepare quality IPR petitions and supporting declarations, and it is easy to see why the typical IPR petition is filed after invalidity contentions.

If a defendant files an IPR petition shortly after invalidity contentions then the IPR and district court schedules overlay as follows:

Timeline of IPR Proceeding & Timeline of Typical EDTX Patent Case

This timeline shows that even if a defendant is diligent in preparing an IPR petition, the PTAB will find that most EDTX trial dates are still well before the deadline for a final written decision. The new emphasis on this factor at the PTAB may mean that more petitions stemming from EDTX litigation are denied institution because the EDTX trial will resolve the issues more quickly than the PTAB. And we may see fewer IPRs filed.

If defendants suspect a suit is coming, they should consider identifying the best art and at least drafting a detailed invalidity argument before the case starts. If the suit comes as a surprise, defendants should start this upon being served. This will position the defendants to quickly file an IPR soon after receiving infringement contentions, maximizing their chance of institution and stay.

Factor 3: Investment in the parallel proceeding by the court and the parties

The third factor is related to the second factor and weighs the amount of investment the parties and court have put into the underlying litigation. The PTAB stated:

If, at the time of the institution decision, the district court has issued substantive orders related to the patent at issue in the petition, this fact favors denial. Likewise, district court claim construction orders may indicate that the court and parties have invested sufficient time in the parallel proceeding to favor denial. If, at the time of the institution decision, the district court has not issued orders related to the patent at issue in the petition, this fact weighs against exercising discretion to deny institution under NHK. This investment factor is related to the trial date factor, in that more work completed by the parties and court in the parallel proceeding tends to support the arguments that the parallel proceeding is more advanced, a stay may be less likely, and instituting would lead to duplicative costs.

Fintiv, at 9-10.

The claim construction process is, typically, the largest early investment in a case and the Fintiv order specifically mentions it as a sign that the parties and court have “invested sufficient time in the parallel proceeding to favor denial.” Id, at 10. Given the strong wording in this order, defendants would be well served to file IPRs as soon as possible so that the institution decision happens before the claim construction order.

Also, defendants that may otherwise be inclined to file early, low-probability dispositive motions may choose to hold those until after an institution decision if they intend to file an IPR. Forcing the court to dig into the issues will create ammunition for patent owners seeking to have the petition denied.

In general, defendants seeking IPR would be well served to file IPRs as soon as possible to maximize the chance of institution. It may be that a good IPR filed early is better than a great one filed late.

Factor 4: Overlap between issues raised in the petition and in the parallel proceeding

The fourth factor weighs the similarity of the issues in the IPR and district court. Where substantially identical prior art is at issue in both, the “concerns of inefficiency and the possibility of conflicting decisions [are] particularly strong” and “this fact has favored denial.” Fintiv, at 12.

This factor is fully within defendants’ control. In a situation where several other factors point to denial of institution, defendants can choose to use different art in the IPR to tilt this factor in their favor. Another option is for defendants to stipulate that they will not pursue the IPR art in the district court if the PTAB grants institution. Of course, defendants will have to evaluate the benefit gained at the PTAB with the risk that a district court may elect to proceed with the litigation because the issues are different.

Author: Matt Colvin


The opinions expressed are those of the authors on the date noted above and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes only and is not intended to be and should not be taken as legal advice. No attorney-client relationship is formed.

Blog Authors

Intellectual Property Attorney Dallas
Matthew Colvin | Associate

Mr. Colvin represents clients in complex intellectual property litigation, as well as commercial litigation and Hatch-Waxman matters. Mr. Colvin’s legal and technical experience spans a wide variety of technology areas, including network architecture, oil and gas drilling...

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