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  • The opinions, commentary and characterizations provided to this online forum by the authors and moderators are provided for encouraging discussion, thought and debate on important post grant issues. These postings are in no way representative of the opinions of Oblon Spivak et al., or its clients.

AIA Changes to Greatly Increase Stays of District Court Actions?

Posted On: Mar. 28, 2012   By: Scott A. McKeown
Stay pending post grantSpeedy, One Sided Estoppel to Force Judicial Deference

The estoppel provisions of Post Grant Review (PGR) and Inter Partes Review (IPR) are markedly different than those in existence today for Inter Partes Reexamination (IPX). Most importantly, PGR/IPR estoppel attaches upon a written determination of the PTAB, and a final, non-appealable decision of a court will not force the USPTO to vacate a parallel IPR/PGR proceeding. These estoppel features are expected to be a significant driver going forward in motions to stay parallel infringement actions.

Currently, IPX requires all appeals to be exhausted before estoppel can attach. In practice, this means that there is (roughly speaking) a 6 year journey through the Central Reexamination Unit (CRU), Board of Patent Appeals & Interferences (BPAI) and Court of Appeals for the Federal Circuit (CAFC). Starting September 16 2012, IPX will be replaced with IPR. Estoppel in an IPR proceeding will be effective within 12-18 months from the initiation of the proceeding. This is because IPR/PGR proceedings must be concluded in this time frame by statutory mandate.

The speed of IPR/PGR proceedings relative to court proceedings will certainly undermine plaintiff oppositions to a motion to stay. Often times, the strongest plaintiff argument in opposing a stay is that the significant USPTO delay will be prejudicial to the plaintiff.  However, perhaps more compelling will be the shifting of the prejudice argument to the side of the defendant.

Currently, if both an IPX and litigation are running in parallel, the first to conclude (after all appeals) wins. If the court action concludes first, the ongoing IPX is vacated by the USPTO. See Sony Computer Entertainment America Inc. v. Dudas (E.D. Va 2006, discussing race to the finish)

On the other hand, if an IPR is running in parallel to a court proceeding (district court or ITC), and the court action concludes first, a failure to prove invalidity will not impact the ongoing IPR. In this situation, the defendant may be prejudiced by paying damages on a patent later found to be invalid. Recent headlines pertaining to ex parte patent reexamination scenarios have emphasized this soon to be expanding possibility to the courts, and judges are beginning to take notice.

Finally, this Cout is aware that “the Federal Circuit has recently confirmed that the
[US]PTO would not be bound in its reexamination by the determinations of [a district court]”.
Sorensen, 2007 U.S. Dist. LEXIS 66712, at *15. Therefore,
not only is plaintiff unlikely to be prejudiced in these proceedings
by a stay pending the [US]PTO reexamination, but defendants
would potentially be prejudiced by failing to enter a stay… . Not
only could the court and the [US]PTO reach conflicting
determinations, but one possible scenario could result in
irreparable harm to defendant: if this court finds that the patent is
not invalid and the defendant has infringed it, and orders defendant
to pay damages to plaintiff for such infringement, then defendant
would have no ability to recover those damages if at a later date the
[US]PTO determined that the patent is invalid.

[T]his Court is aware that “the Federal Circuit has recently confirmed that the [US]PTO would not be bound in its reexamination by the determinations of [a district court]”. Sorensen, 2007 U.S. Dist. LEXIS 66712, at *15.

Therefore, not only is plaintiff unlikely to be prejudiced in these proceedings by a stay pending the [US]PTO reexamination, but defendants would potentially be prejudiced by failing to enter a stay… . Not only could the court and the [US]PTO reach conflicting determinations, but one possible scenario could result in irreparable harm to defendant: if this court finds that the patent is not invalid and the defendant has infringed it, and orders defendant to pay damages to plaintiff for such infringement, then defendant would have no ability to recover those damages if at a later date the [US]PTO determined that the patent is invalid.

Monosol RX LLC., v. Biodelivery Sciences International Inc. et. al., (D.NJ) Order dated March 7, 2012. (here).

With perhaps the ITC being the only other forum capable of beating the PTO to a conclusion in the 12-18 month time frame, it would seem that district courts would be hard pressed to deny such a defendant motion in the face of such compelling speed and prejudice arguments. As a reminder, an IPR/PGR proceeding is only available to those defendants that file with the USPTO within 12 months of receiving a complaint for infringement; thus, the court case in many instances will be in the early stages. As such, going forward, it is expected that district court proceedings will be stayed should an IPR/PGR be initiated in parallel.

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