By Scott A. McKeown
| March 13, 2014
NDCA vs. EDTX

NDCA vs. EDTX


Prior to the passage of the America Invents Act (AIA) many district courts were less than impressed with the lenghty pendencies of patent reexamination proceedings at the USPTO. For this reason, motions to stay a litigation pending patent reexamination were often denied based upon the perceived prejudice of a 5-6 year delay (typical of reexaminations through appeal). The patent challenge proceedings of the AIA (IPR, CBM and PGR) were specifically designed, at least in part, to remedy the pendency issue.

The new patent challenge proceedings of the AIA are conducted before the USPTO's Patent Trial & Appeal Board (PTAB) and must conclude, by statute, within 12 months of trial order. (There is a provision allowing for 18 month schedules in exceptional cases but the PTAB has yet to avail themselves of that exception). Many districts across the country have recognized the improved speed of the PTAB. Not surprisingly, the success rate for staying cases pending USPTO review has significantly improved.

That said, there are still significant differences of opinion on the PTAB —across districts, and even across judges of a same district. 

Perhaps most pronounced, is the different attitudes of the EDTX and NDCA on the PTAB.In a recent Order of the NDCA staying Evolutionary Intelligence LLC, v. Sprint Nextel et al., (here) which was transferred out of the EDTX, the court explained with respect to improved speed:
The AIA requires a final determination by the PTO in an IPR proceeding within one year, which may be extended up to six months based upon a showing of good cause. Id. § 316(a)(11). “For comparison, the old reexamination proceeding averaged over thirty-seven months in the second quarter of fiscal year 2013.” Pi-Net Int’l, Inc. v. Focus Business Bank, C-12-4958 PSG, 2013 WL 4475940, at *2 (N.D. Cal. Aug. 16, 2013). In the Pi-Net case, the court noted that such a “promise” of shorter proceedings may convince even “skeptical” judges to exercise their inherent discretion to stay cases pending IPR proceedings at the PTO.

On the topic of the potential for simplification, the court recognized the likelihood of claim cancellation/amendment, explaining:
Defendants argue that a stay would simplify the issues before the court because the entire infringement dispute will become moot if the PTO invalidates the claims in the IPR proceeding. The parties cite statistics showing that: (1) the PTO has granted 81% of IPR petitions (and another 10% settled before the PTO decided on the petition) . . . and (2) in the context of the old inter partes reexamination proceeding, 42% of inter partes reexaminations (from 1999 through September 13, 2013) resulted in all claims being cancelled or disclaimed, Dkt. No. 106-10, McCrary Decl. Exh. G. These figures indicate that there is a high likelihood that at least one of the eight IPR petitions will simplify the issues for trial.

. . .In sum, while there is no guarantee that an IPR will eliminate all the claims at issue, the higher standard to initiate an IPR (“reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition” as opposed to “substantial new question of patentability”) raises at least some likelihood that certain challenged claims will be struck down or amended if the PTO grants the petitions. In addition, the limited statistics available to the court indicate that the PTO will probably grant one of the IPR petitions, at least with respect to some of the asserted claims. The IPR proceedings will likely simplify the issues for trial, and thus this factor also favors granting a stay.

Contrast this policy level perspective with the fact intensive analysis of the EDTX in VirtualAgility Inc., v. Salesforce.com Inc., et al., which, interestingly enough, was denied a transfer to the NDCA. In the initial decision denying a stay pending a pending CBM (here) the court explained the expedited schedule of the PTAB was still prejudicial in some cases:

Defendants  . . . further argue that any prejudicial effect would be minimal because the CBM review occurs in an expedited 12-month time-frame. . .


While the Court is mindful that CBM review generally proceeds on an expedited twelve-month time-frame from the date the PTAB institutes review until it issues a final written decision,  . . . as opposed to inter-partes reexamination that could take up to twenty-four months, the Court is not persuaded that potential loss of market share and consumer goodwill during the intervening one year would necessarily impose only minimal prejudice on VirtualAgility.



Here the Court found that a 12 month delay was prejudicial for a direct competitor dispute. (The question of whether or not VirtualAgility was, in fact, a competitor was in dispute). As to the potential for simplification, the Court explained:




The first statutory factor requires the Court to consider whether a stay will simplify the issues in question and streamline the trial. Defendants argue that the CBM review will simplify the issues in this case because the review may result in some or all of the claims being cancelled. The Court, however, is not convinced that such a result is probable.



The court went on to conclude that based upon the lengthy prosecution and previous reexamination of this patent, and the fact that there were only two grounds of unpatentability in the CBM, that the challenger was unlikely to succeed. (despite the PTAB determination under the more likely than not standard).


While the Court seemed persuaded that the case presented unique facts, it is not at all uncommon for a business method patent application to remain pending at the PTO longer than most. Likewise, it is fairly common for a CBM or IPR to include art previously considered by the PTO, and less than 4 grounds of unpatentability due to page limits. I pointed out earlier this week that since this initial decision the patentee has presented a contingent amendment and  the denial of the stay is now on appeal to the CAFC.


Districts allowing litigation to proceed in parallel with faster PTAB challenges might soon face a jarring re-calibration of perceptions in the months ahead.

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