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Is The Eastern District of Texas Thwarting the America Invents Act?

Posted By Scott A. McKeown On 11 March 2014 @ 7:15 In Business Method Patent Challenge, Inter Partes Review, Patent Trial & Appeal Board | Comments Disabled

Time to Adapt - Clock [1]

Refusal to Stay Pending CBM Unusual

Last week I discussed the creation of a “Track B” docket by the Eastern District of Texas (EDTX) and explained how this docket could force some defendants [2] away from the more cost effective alternatives of the USPTO’s Patent Trial & Appeal Board (PTAB). On the heels of the Track B announcement, the Court issued a second denial of a stay of the patent dispute between VirtualAgility Inc., v. Salesforce.com Inc., et al. (here [3]) pending PTAB review. In this case, a Covered Business Method (CBM) challenge was filed against the patent at issue. By way of reminder, CBM is the proceeding created by Congress that does all but mandate a stay pending CBM…..at least outside of Texas.

The CBM proceeding is noteworthy in several respects [4], but perhaps of greatest interest to patent challengers is the degree to which courts are expected to defer to the USPTO. That is to say, when faced with the decision to stay or proceed to trial on a qualifying business method/e-commerce patent, Congress was very emphatic throughout the legislative history that a stay is justified in almost all circumstances. If there were any question as to the intent of Congress, an unsuccessful movant was given the right of de novo interlocutory review to the CAFC.

It would seem unlikely that a district court would deny a motion to stay pending CBM proceedings only to have the certain interlocutory review effectively provide the same relief. Indeed, the CBM proceeding will only advance further by the time the CAFC considers the matter on de novo review. Yet, that is exactly what is happening in VirtualAgility.

Salesforce.com sought CBM review of the VirtualAgility patent in CBM2013-00024 in May of 2013 and instituted in November of the same year. Since the initial motion to stay was denied and appealed to the CAFC, the patentee has even attempted to amend their claims. Final oral argument is scheduled before the PTAB in July. Yet, the EDTX strangely continues the case (in limited respects as the CAFC has issued a temporary stay), even noting the need for supplemental construction should the amended claims survive.

Of note, the Court explains:

That Congress instituted a four-factor test, rather than an automatic stay provision, under AIA § 18(b) speaks volumes about Congressional intent that such a stay is not a given but “must rest on the facts of each particular case.” VirtualAgility, Inc. v. Salesforce.com, Inc., 2:13-CV-00011-JRG, 2014 WL 94371, at *2 (E.D. Tex. Jan. 9, 2014) (citing Sightsound Techs., LLC v. Apple, No. 11–1292, 2013 WL 2457284, at *1 (W.D. Penn. June 6, 2013)).

. . .Defendants assert that the motion to amend “further underscores how issues are simplified (AIA factor 1), and burdens are reduced (AIA factor 4),” because, absent a stay, “this Court could be faced with new claims to construe on the eve of trial.” (Dkt. No. 144 at 1 (emphasis added).) This result, however, will only occur if the PTAB finds some or all of the original independent claims unpatantable, thereby necessitating the proposed amendments. Defendants made no attempt at showing how such conditions triggering the amendments would likely arise. Nor have they challenged the Court’s previous finding that cancellation of some or all the claims was unlikely . . .

The claims of the patent are rejected on 101 and 102 grounds. Should make for an interesting CAFC decision in the weeks ahead that I predict will change the perspectives of the EDTX on CBM proceedings.


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URLs in this post:

[1] Image: http://www.patentspostgrant.com/wp-content/uploads/2014/03/CBM-Stay.jpg

[2] this docket could force some defendants: http://www.patentspostgrant.com/lang/en/2014/03/new-track-b-scheduling-in-edtx-to-benefit-trolls

[3] here: http://www.patentspostgrant.com/wp-content/uploads/2014/03/16c21d5a-e587-7519-dafc-87c28f010e2b0__.pdf

[4] noteworthy in several respects: http://www.patentspostgrant.com/lang/en/2012/10/shut-it-down-business-method-patent-challenges-to-force-stays

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