Historically, most district judges were unwilling to grant a motion to stay a patent lawsuit pending Ex Parte or Inter Partes Reexamination. Although the Inter Partes Reexamination often resulted in rejection of some or all claims, the process for Inter Partes Reexamination was years long and no estoppel would apply against the defendant until the process came to a final conclusion after appeal. Ex Parte Reexamination often does not result in a change to the claims, which makes stay of litigation unproductive.
The post grant proceedings that changed in September 2012 via the America Invents Act (“AIA”) replaced the Inter Partes Reexamination procedure with Inter Partes Review. The Inter Partes Review process was in part driven by the policy decision of encouraging more invalidity challenges to be done in the PTO, and encourage judges to grant more stays by speeding up the process and effect. This happens by accelerating the point where estoppel bars re-litigation of the same invalidity arguments in district court litigation and by making the estoppel broader so that it bars re-litigation of not just references raised in the process, but also others that could have been raised. One of the predicted outcomes of this change would be that district judges would be encouraged to issue stays pending Inter Partes Review. The Ex Parte Reexamination procedure was not modified and remains as it was prior to the passage of the AIA. There have been several recent ruling on motions to stay that have issued out of the Eastern and Southern Districts of Texas involving both the pre-AIA and current post grant proceedings that illustrate the potential impact of the change in the law.
EASTERN DISTRICT OF TEXAS
EX PARTE/INTER PARTES REEXAMINATION:
Last month, Judge Gilstrap issued a ruling in the VoltStar Technologies case denying the defendants’ request to stay the case pending the outcome of Inter Partes Reexamination. See VoltStar Technologies, Inc. v. AT&T Inc. et al., Case No. 2-12-cv-00082 (E.D. Tex. Aug. 22, 2013) (Gilstrap, J.). Timing was the biggest factor against a stay. The Court was not persuaded that “there is no risk of injury to [plaintiff] or its market share,” that even with an ACP, the “proceedings in this matter are still far from complete and may take years to conclude.” The Court also noted that since the accused product has allegedly been discontinued, it would make it more “difficult to secure testimony and evidence” of witnesses who “are more likely than otherwise to leave [defendants]….” The narrow scope of the estoppel as limited to the references actually raised by the defendant made efficiency subject to the defendants’ decision on how it would proceed in the PTO. Judge Gilstrap opined that “to the extent that estoppel may simplify any issues in the case, its effect is speculative and limited.” The Court acknowledged that the early stage of the case weighed “slightly in favor of granting a stay”: fact discovery cutoff 5 months away, trial 10 months away, some discovery with one defendant, none with the other, and no claim construction statement or proposed terms, but that ultimately the delay and limits on estoppel effect outweighed the benefits of a stay.
Two other recent rulings from East Texas on motions to stay pending Inter Partes Reexamination were also denied. See VirnetX, Inc. et al. v. Apple Inc., Case No. 6-12-cv-00855 (E.D. Tex. July 22, 2013) (Davis, J.) and Portal Technologies v. Yahoo! Inc., Case No. 2-11-cv-00440 (E.D. Tex. Jan. 3, 2013) (Gilstrap, J.). At the end of August, Judge Mitchell denied a motion for stay pending Ex Parte Reexamination. See Macrosolve, Inc. v. Antenna Software, Inc., et al., Case No. 6-11-cv-00287 (E.D. Tex. Aug. 30, 2013) (Mitchell, J.).
INTER PARTES REVIEW:
In May of this year, Judge Payne granted a motion to stay pending Inter Partes Review, the procedure that replaced Inter Partes Reexamination under the AIA, and in that case, the ruling was dependent on a stipulation by the remaining defendant that it would “not contest in this action the validity of any claim determined by the PTO to be patentable on any ground that [defendant] raised or could have raised in the IPR proceedings.” See Achates Reference Publishing, Inc. v. Symantec Corp., et al., Case No. 2:11-cv-294 (E.D. Tex. May 31, 2013) (Payne, J.).
SOUTHERN DISTRICT OF TEXAS
The Southern District of Texas has been more receptive to stays in both Ex Parte/Inter Partes Reexamination and Inter Partes Review. Recent rulings on opposed motions to stay pending Ex Parte Reexamination and Inter Partes Review in the Southern District of Texas have been granted. In Judge Lake’s ruling pending Inter Partes Review, the Court’s stay was conditioned (similar to Judge Payne’s analysis) upon the defendant being estopped from “arguing that the patents alleged in this action, or any claim in the patents, is invalid on ‘any ground’ that [petitioner] ‘raised or reasonably could have raised during that inter partes review.’” See e-Watch, Inc. v. FLIR Systems, Inc., Case No. 4-13-cv-00638 (S.D. Tex. Aug. 8, 2013) (Lake, J.). In the Emtel case, Judge Rosenthal found that all three of the test factors weighed in favor of a stay pending Ex Parte Reexam. Emtel, Inc. v. LipidLabs, Inc., et al., Case No. 4-07-cv-01798 (S.D. Tex. April 19, 2013) (Rosenthal, J.).
Approximately 10 to 15 rulings per month have been rolling out from district courts on motions to stay pending pre-AIA reexamination and current Inter Partes Review so we’ll see what September brings from these Texas district courts. Factors that courts often look at as a “test” when deciding motions to stay litigation pending reexamination are discussed in Soverain see Soverain Software LLC v Amazon.com, Inc., 356 F.Supp.2d 660, (E.D. Tex. 2005).