Patents Post Grant Blog

 

–E.D. of Texas Defendants Seek to Ride Off Into the Sunset– 

The E.D. of Texas is well established as the premiere plaintiff forum for patent holders, speedily deciding patent cases, and finding patents invalid relatively infrequently. Similarly, the emergence of patent reexamination as an effective tool in avoiding litigation costs by staying a concurrent litigation has proved effective in the E.D. of Texas sporadically at best; Judge Ward and Judge Davis in particular very rarely, if at all, stay an action in favor of a pending patent reexamination.  

Since In re TS Tech, 551 F.3d 1315 (Fed. Cir. 2008), a motion to transfer to a more convenient venue from a Texas court has become a marginally effective defendant strategy.  Now, as a matter of course, defendants will seek transfer of a patent infringement case to a more “convenient” forum.  Of course, convenience is rarely a mere issue of geography, but rather a basis for moving the dispute to a less patent friendly forum. In the eyes of defendants, less patent friendly would describe practically any other forum. Yet, as noted in the chart below, infringement cases seeking transfer in 2008-2009[1] increasingly sought California as a destination of “convenience.” 

A closer look at the 2008-2009 cases however, may reveal more than just a simple transfer strategy, but a two-step, tactical dance. This two step process includes a transfer out of Texas, followed up by a motion to stay the case pending reexamination in the new forum.

As shown on the chart, close to 50% of transfer requests identify a California court as the more convenient forum. Certainly, with Silicon Valley companies frequently targeted by non-practicing entities (i.e., “trolls”) in the E.D. of Texas, the N.D. of California is a natural choice as a more convenient location. Likewise, one would expect there to be a less “pro-patent” bias based on the local technology based economy. Still, in addition to these obvious benefits to the transfer out of Texas, the seemingly increasing willingness of such courts as the N.D. of California to stay a concurrent litigation pending reexamination may be the greater value to defendants fleeing Texas courts.

For examplary fact patterns, See Chrimar Systems, Inc. v. Garrettcom, Inc., et al 2:09CV00085 U.S. Pat No. 7,457,250 Ex Parte 90/009,513 Motion to Transfer Granted NDCA, Judge William H. Halsup (case closed pursuant to stipulation); Mediostream Inc. v. Microsoft Corp 2:08CV00369 U.S. Pat No. 7,283,172 Inter Partes 95/001,283;  U.S. Pat No. 7,009,655 Inter Partes 95/001,284 Motion to Transfer Denied: NDCA; and Plantronics, Inc. v. Aliph, Inc. et al 6:09CV00024 U.S. Pat. No. 5712453 Ex Parte 90/010,731 Motion to Transfer Granted: NDCA, Magistrate Judge Patricia V. Trumbull.

As noted in a previous post, whether or not to stay a patent infringement litigation concurrent with a pending reexamination is a factor based determination.   However, the N.D. of California is becoming well known for knee jerk reactions with regard to staying cases pending reexamination.  As discussed in another post on this same topic, the mere filing of a reexamination request may suffice to stay a litigation in the N.D. of California.  

More recently, in Spectros Corp. v, Thermo Fisher Scientific, Inc., No. 4:09cv01996 (N.D. Cal.) Judge Saundra Brown Armstrong granted defendant’s motion to stay the patent litigation of a California based plaintiff corporation pending the outcome of reexamination of the patent-in-suit.  In the judge’s order, the plaintiff’s prejudice argument was rejected, explaining that  “the prejudice claimed by the Plaintiff applied equally to any case where reexamination is sought. It is for that reason that court’s have found ‘that delay inherent in the reexamination process does not constitute, by itself, undue prejudice.’ Moreover, Plaintiff ignores that the reexamination process was enacted by Congress to provide certainty in the validity of patent rights and to provide a faster, less expensive remedy than litigation when the validity of a patent is at issue.”  After weighing the facts the judge chose to stay the litigation despite the fact that the reexamination proceedings could take five to seven years with appeals to conclude.[2]

In a post last month, we explained that plaintiff forum selection should include an analysis as to the ”reexamination friendliness.”  As can be appreciated, depending upon the location and judge of a given federal district court, the odds of a case being stayed can vary quite significantly.  Indeed, even after a plaintiff has selected a seemingly desirable forum, the game is not over; the ability of a defendant to transfer from a plaintiff-friendly forum to a forum that is reexamination friendly, such as the N.D. of California, and subsequently seek a stay of the litigation can be an especially effective, Texas Two-Step.

 

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[1] 64 Motions were analyzed in total.

 [2] Perhaps the Plaintiff overplayed the prejudice factor to the detriment of others, still, many district courts point to such delays as clearly prejudicial, especially when direct competitors are involved as is the case here.