When faced with the assertion of a patent of dubious validity, prospective defendants increasingly resort to patent patent reexamination. Once a suit is filed, the opportunity to obtain a stay of an ongoing district court infringement action pending a parallel patent reexamination is a major benefit of the USPTO proceeding. Courts have the inherent power to manage their dockets, including the authority to stay patent infringement litigation pending the conclusion of a USPTO patent reexamination. A stay of the court proceeding enables defendants to halt, or altogether avoid cost prohibitive litigation discovery, which can be rather lengthy and painful.

For this reason, patent reexamination parallel to a district court is often initiated in an attempt to stay the more cost prohibitive court proceeding. In deciding whether or not to stay the court proceeding the courts look to many factors. (See factor based analysis here) 

If the Court proceeding is not stayed, both proceeding will proceed on parallel tracks. Should the Court proceeding continue on to the CAFC, can you try to persuade the appellate court to stay the proceeding pending the outcome of the reexamination?

This situation was considered by the CAFC yesterday in Synqor Inc., v. Artesyn Technologies Inc., et al. At issue in the appeal are five patents relating to power converter circuitry. While the suit has been pending, inter partes patent reexaminations were initiated by the defendants at the USPTO. While the court upheld the validity of the patents, to date, the reexaminations proceedings have been quite unfavorable to the Patent Holder.

In considering whether or not to stay the appeal, the CAFC explained:

The power of the Court to stay proceedings is incidental to its inherent power to control the disposition of the cases on its docket. See Landis v. North Am. Co., 299 U.S. 248, 254 (1936). Here, we cannot say the appellants have shown that staying proceedings for such a lengthy period of time is warranted. [Defendants] reliance on this court’s decision in Standard Havens Prpds., Inc. v. Gencor Indus., 996 F.2d 1236 (Fed. Cir. 1993) to support a contrary conclusion is unpersuasive.

This court in Standard Havens directed the district court to stay its damages proceedings until the PTO reexamination proceeding became final. In that case, the PTO’s proceedings were complete and the decision of the BPAI was on appeal before another district court. Here, however, the court is being asked to stay proceedings at the relative end of the litigation process pending a lengthy administrative process that even the appellants predict will take at least 10-14 months to complete. Under these circumstances, we deem it appropriate to deny the motions to stay.

Going forward, with the accelerated schedule of Inter Partes Review & Post Grant Review (12-18 months in total), the ability to stay court procedings pending USPTO proceedings is likely to be greatly enhanced.

When considering whether or not to stay a parallel litigation in view of a pending patent reexamination a district court will consider several factors. While delay is common to all stayed cases, the degree of delay caused by patent reexamination can be considered prejudicial. For this reason, especially when it comes to inter partes patent reexamination, the average length of the proceeding can be instructive to the Court.

Hoping to convince the Court of a prejudicial delay, Patentees will argue that inter partes patent reexamination takes on the order of 5-7 years to complete through appeal, citing those cases that have been fully contested through appeal. Defendants, on the other hand, will cite to published USPTO statistics that indicate inter partes patent reexamination pendency to be an average of 36 months, including appeal. (As pointed out previously, the 36 month statistic is skewed by the small number of completed inter partes patent reexaminations that have been fully contested through appeal).

However, regardless of the statistical theory advanced to the court, what neither theory considers is that historical statistics are weighed down by years of past USPTO practices. As one plaintiff found out recently, the USPTO has greatly streamlined the processing of inter partes patent reexamination relative to past practices.

In LG Electronics USA Inc. et al. v. Whirlpool Corp. et al. (DCNJ), the Court denied Whirlpool’s bid to stay the action last January pending inter partes patent reexamination of the patents in suit. The Court determined at the time that the reexaminations could very well take more than five years and the motion was denied without prejudice.

More recently, Whirlpool was successful in securing a six month stay. Thereafter, LG requested reconsideration. In considering the request, the Court noted:

[I]n its motion for reconsideration, LG insists that the Court was under a false impression that the reexaminations were moving quickly [when deciding to grant the six month stay] and that a final determination is imminent. LG would have the Court ignore what has actually taken place and substitute statistical evidence of the average pendency of inter partes reexamination. This argument is questionable at best. In its February 2011 opinion denying a stay of the case, the Court relied on a prediction that reexamination could take longer than five years. Specifically, in its January opposition brief, LG noted that the average pendency of inter partes reexamination was over 36 months, not including appeal.

In its opposition to the second motion to stay, and in its current brief to the Court, LG offers the same argument, namely that the entire reexamination process, including all appeals, is statistically likely to take as long as four years. Statistical evidence is clearly unconvincing in the face of an actual timeline. It became apparent that reexamination had proceeded much faster than expected, a fact the Court noted during the October 4, 2011 hearing. In particular, three of the four reexaminations have rendered actions closing prosecution and have issued right of appeal notices in under 12 months, far short of LG’s 36 month prediction.

(emphasis added) full decision here

It may be that the the Court was interpreting LG’s 36 month prediction to refer to the examination phase alone. (i.e., ”not including appeal”).  Actually, the 36 month figure is published by the USPTO is the average time to NIRC. (so, it does include appeals, but these numbers are skewed as explained in the link above)

Still, statistical debates aside, the issuance of a RAN within 12 months is a significant improvement over past IPX time lines.

The existence of a competitive relationship between the litigants is often times an important consideration to district court judges considering a stay pending patent reexamination. When weighing the equities whether or not to grant a motion to stay the court action pending USPTO reexamination the trend has been to deny motions for direct competitors. This is because, when staying a litigation dispute between competitors, there is a danger that the delay could cause erosion of market share, customer loyalty, or other intangible business factors….not so with patent trolls.

Patent trolls, also known as “non-practicing entities” to some, do not compete with their infringement targets in the marketplace. Not surprisingly, courts have begun to emphasize the “troll” factor as favoring a stay of the litigation.As explained most recently in Mission Abstract LLC. v. Beasley Broadcast Group Inc. (DED),

Mission Abstract and Defendants are not direct competitors. In fact, Mission Abstract is a non-practicing entity, which does not manufacture or sell the products covered by the patents in suit and seeks to collect licensing fees. (D.I. 43 Ex. E) The relationship between the parties is “[ o ]f particular importance” because “[ c ]ourts are generally reluctant to stay proceedings where the parties are direct competitors.” Vehicle IP, LLC, 2010 WL 4823393, at *2. Because Mission Abstract is a non-practicing entity, this factor favors a stay.

(emphasis added, full order here)

Of course, the courts look to several factors in analyzing the competing interests between parties. Primarily, whether (1) a stay will unduly prejudice, or present a clear tactical disadvantage to, the non-moving party; whether (2) a stay will simplify the issues and trial of the case; and whether (3) discovery is complete and a trial date has been set. Still, in many jurisdictions, patent trolls already have one strike against them

This case was brought to my attention by the great Docket Navigator.

When faced with the assertion of a patent of dubious validity, prospective defendants increasingly resort to patent patent reexamination. Patent reexamination can be a cost effective mechanism to dissolve the dispute, or at the very least, shift some leverage to the prospective defendant relative to willfulness, intervening rights, claim construction, etc.

Once a suit is filed, the opportunity to obtain a stay of an ongoing district court infringement action pending a parallel patent reexamination is a major benefit of the USPTO proceeding. Courts have the inherent power to manage their dockets, including the authority to stay patent infringement litigation pending the conclusion of a USPTO patent reexamination. A stay of the court proceeding enables defendants to halt, or altogether avoid cost prohibitive litigation discovery, which can be rather lengthy and painful.

For this reason, patent reexamination parallel to a district court is often initiated in an attempt to stay the more cost prohibitive court proceeding. In deciding whether or not to stay the court proceeding the courts look to many factors. (See factor based analysis here) Perceptions as to whether or not a stay is warranted will vary significantly, even though the same analysis is performed by each judge/court.  Attitudes vary across courts (ITC v. EDTX, v NDCA), even amongst judges of the same court.

Often times, the conduct of the litigating parties can be another factor impacting the court’s analysis.

Recently, in Dura Global Technologies LLC. et. al., v. Magna International Inc. et al. (EDMI), the court considered staying an ongoing litigation between the parties based on a pending ex parte patent reexamination of the patent at issue (U.S. Patent 6,766,617). In considering the factors, the court noted the unusual claim additions made during the ongoing USPTO proceeding:

After considering the parties’ arguments and the facts of this case, the Court finds that staying this case will simplify the issues and allow the Court to handle this case more efficiently. Dura has added a tremendous number of new claims to the ‘617 Patent and over 500 claims remain at issue in the reexamination. It makes sense for the USPTO to determine the patentability and final language of these claims before the parties continue with the case. Many of these claims could be amended or canceled during the reexamination proceeding. While the Court’s current Scheduling Order provides that claim construction will not begin until the results of the reexamination are reasonably known (i.e., the USPTO issues a “notice of allowance”), the parties would still have to expend money conducting discovery when the claims in the patent are not yet final.

(emphasis added)

Interestingly, the new Inter Partes Patent Review statute attempts to address this issue by providing that an amendment may be introduced to propose “a reasonable number of substitute claims”, which would seem far less than 500.

This case was brought to my attention by the great Docket Navigator.

The initiation of patent reexamination parallel to a district court patent infringement proceeding has become quite routine over the past few years. The use of such a parallel reexamination proceeding offers many benefits to defendants, such as helping prove objectively reasonable behavior to avoid a finding of willful infringement, creating a further prosecution history estoppel/disclaimer record for Markman purposes, establishing an intervening rights defense, or demonstrating materiality of a reference underlying an inequitable conduct defense. Yet, one of the most common defendant uses of a parallel patent reexamination is the ability to shut down a district court proceeding altogether in favor of USPTO reexamination proceedings.

Stays pending patent reexamination are granted quite routinely, albeit inconsistently. Depending upon the court, a case may be stayed based upon the mere filing of a request for reexamination, or upon grant even though such requests are granted in roughly 95% of cases. Likewise, once a case is stayed, serial requests for patent reexamination, if tolerated by the judge, can ensure that the validity case remains with the USPTO indefinitely.

So, for those plaintiffs subject to a stay that are being damaged by continued infringement, aside from battling the a continuous stream of patent reexaminations requests for years on end, is there a way to resume the litigation battle without waiting for the reexamination(s) to end?

If you fail to get through to a particular district court judge that decides to stay your case, have you considered going around him? The “ITC end-around” has been used several times over the past year, most recently by Westinghouse Solar.

Westinghouse sued Zep Solar in a U.S. District Court for infringement of U.S. Patents Nos. 7,406,800 and 7,987,641.

In defending the suit, Zep filed a request for patent reexamination of the ‘800 Patent. The USPTO granted the request for reexamination and promptly stayed the case pending the outcome. In the reexamination, the USPTO canceled claims 1-4, 7-9, 11 and 12 of the ‘800 patent. Thereafter, Zep filed a second reexamination directed to the remaining three claims. The second reexamination is ongoing. Reexamination of the ‘641 Patent is also ongoing.

Westinghouse moved to lift the stay but the court denied the motion pending results of the second reexamination. At that point Westinghouse opted for the ITC end-around.

The tactic is simply to take the same dispute to the ITC, where stays pending patent reexamination just don’t happen, and where a stayed district court proceeding of the same dispute is the norm. To date, the ITC mandate to expeditiously adjudicate 337 actions has led to relatively few stays pending reexamination. In some cases, stays have been entered and later reversed by the full Commission. (See Tessera Decision here).

With stays becoming commonplace, and new, speedier post grant proceedings making such decisions even easier for district court judges, patent disputes are expected to continue to migrate away from district courts to the ITC.

A few days back, I explained the very unusual, abbreviated stay entered in MONKEYMedia Inc. v. Apple Computer, et al (WDTX). In order to ensure that the parallel reexaminations advanced, the Court ordered the parties to expedite their submissions to the USPTO, in addition, the Court ordered the USPTO to “expedite” the reexamination proceedings.

Only a couple of days after issuing the original Order, the judge had a change of heart. No, not because his Order was stretching the bounds of his jurisdiction relative to the USPTO, but due to the “monkeying around” of MONKEYmedia (couldn’t resist).

It seems Monkey Media, prior to the Order, had requested an extension of time (60 days) to respond to an Office Action in at least one of the reexaminations. Interestingly, this would have reset the due date to October 15…giving the USPTO one week to decide the issues under the previous Order. (i.e., Court ordered resolution by October 24th). Yet, the request for extension was denied by the Office.

MONKEYmedia then informed the court, after the Order was issued, that they intended to seek reconsideration of their request. Needless to say, the court was not amused, modifying the previous Order as follows (Modified Order here):

Obviously, the PTO cannot expedite its reexamination if the parties drag their feet. This Court ordered an abbreviated stay in this case on the assumption that all parties were interested in resolving matters quickly and in the hope that the case could retain its place on the Court’s busy civil docket. MONKEYmedia in particular was adamant any delay would be both wasteful and inequitable. However, because MONKEYmedia is apparently no longer in any hurry, neither is the Court. This case will proceed when the PTO has fully reexamined [the patents] and come to a final conclusion, a process whose length will be dictated primarily by the actions of the parties before the PTO.

Ouch.

This case was brought to my attention by the great Docket Navigator.

Last Friday, the patent infringement action MONKEYMedia Inc. v. Apple Computer, et al (WDTX) was stayed pending the outcome of several patent reexaminations (U.S. Patents 6,393,158; 7,467,218; and 7,890,648). Interestingly, the stay is of a limited duration, 3 months, to allow time for the reexaminations to progress. In order to ensure that the reexaminations advance, the Court ordered the parties to expedite their submissions to the USPTO. What sets this decision apart from other is that the Court also ordered the USPTO to “expedite” the reexamination proceedings. (Order here)

Aside from the legal debate about whether or not the Judge has jurisdiction over the PTO, and whether or not the USPTO will follow the Order….lost on many is the fact that the USPTO would already do what the judge is asking, Order or not.

As noted in MPEP 2286:

Where a< request for ex parte reexamination * indicates (A) that it is filed as a result of >an order by a court or< an agreement by parties to litigation which agreement is sanctioned by a court, or (B) that litigation is stayed for the filing of a reexamination request >, the request< will be taken up by the examiner for decision 6 weeks after the request was filed >, and all aspects of the proceeding will be expedited to the extent possible<. See MPEP § 2241. If reexamination is ordered, the examination following the statement by the patent owner under 37 CFR 1.530 and the reply by the requester under 37 CFR 1.535 will be expedited to the extent possible. Office actions in these reexamination proceedings will normally set a 1-month shortened statutory period for response rather than the 2  months usually set in reexamination proceedings. See MPEP § 2263. **>Response periods< may be extended only upon a >strong< showing of sufficient cause. See MPEP § 2265. >Action on such a proceeding will generally take precedence to any other action taken by the examiner.< See generally In re Vamco Machine and Tool, Inc., 752 F.2d 1564, 224 USPQ 617 (Fed. Cir. 1985); Gould v. Control Laser Corp., 705 F.2d 1340, 217 USPQ 985 (Fed. Cir. 1983); Loffland Bros. Co. v. Mid-Western Energy Corp., 225 USPQ 886 (W.D. Okla. 1985); The Toro Co. v. L.R. Nelson Corp., 223 USPQ 636 (C.D. Ill. 1984); Digital Magnetic Systems, Inc. v. Ansley, 213 USPQ 290 (W.D. Okla. 1982); Raytek, Inc. v. Solfan Systems Inc., 211 USPQ 405 (N.D. Cal. 1981); and Dresser Industries, Inc. v. Ford Motor Co., 211 USPQ 1114 (N.D. Texas 1981).

(emphasis added)

While many would bemoan this provision as “…well that is what the PTO says, but that is not what happens,” the section also qualifies the commitment with the proviso that the proceeding “will be expedited to the extent possible.” Currently, the agency is under severe budget restraints and patent reexamination proceedings are being initiated in record numbers.

So, now we are back to the original question, is the USPTO bound by the October 24, 2011 deadline of the Order?

There would seem to be enough case law to protect the agency from District Court interference. Emerson Elec. Co.v. Davoil, Inc., 88 F.3d 1051 (Fed. Cir. 1996) (discussing conditions fo stay being predicated on reexamination action of parties) See also Patently-O discussion of Singer Co. v. P.R. Mallory & Co., 671 F.2d 232 (7th Cir. 1982) (Court may not order disruption of USPTO proceedings). An Order essentially asking the USPTO to drop everything else in favor of a particular reexamination would appear to cause a disruption of all other reexamination proceedings being handled by the CRU examiners responsible for these reexaminations.

Moreover, from a policy standpoint, compliance with the Order would very likely encourage every defendant to seek the same relief from their court when arguing in favor of staying their case. As the USPTO already does everything possible to expedite such cases, by their own rules, it would not appear to be in the USPTO’s best interest to cater to the wishes of individual judges in this regard.

This case was brought to my attention by the great Docket Navigator.

Courts have the inherent power to manage their dockets, including the authority to stay patent infringement litigation pending the conclusion of a Patent Office reexamination. For this reason, patent reexamination parallel to a district court/ITC litigation is often initiated in an attempt to stay the more cost prohibitive court proceeding.

Perceptions as to whether or not a stay is warranted will vary significantly, even though the same analysis is performed by each court. (See factor based analysis here). Attitudes vary across courts (ITC v. EDTX, v NDCA), even amongst judges of the same court.

Thus, a threshold determination for any defendant becomes:

How does Court/Judge X view requests for patent reexamination?…and is there somewhere I can find this information?

Statistics for 2008-2011 are found below for many of the major district courts. (click to enlarge)

There are many database services that will provide such information, some at a significant cost. This report was easily generated using the Docket Navigator Database, I find this service more cost effective and user friendly than others.

Former Microsoft founder Paul Allen has made headlines recently by asserting the patents of his company, Interval Licensing against the 11 industry stalwarts (Apple, Google, Facebook, NetFlix, AOL and others). The case was initially stalled when the court found the opening complaint lacking in detail, but this formality was quickly corrected. Last week, however, a much more significant roadblock was placed in the path of Mr. Allen’s litigation endeavor—-patent reexamination. A judge in the Western District of Washington has halted the proceedings against all 11 defendants pending patent reexamination.

As most readers of this blog realize, obtaining a stay of an ongoing district court infringement action is one of the many benefits of patent reexamination parallel with litigation. Defendants that are able to obtain a stay pending patent reexamination can avoid cost prohibitive litigation discovery during the course of the USPTO proceeding, which can be rather lengthy. 

In addition to cost savings, there are also tactical advantages to the USPTO proceeding. Unlike the courts, in patent reexamination, the USPTO does not recognize the presumption of validity. Moreover, the USPTO does not require the “clear and convincing” standard to demonstrate invalidity in patent reexamination, but employs the more liberal ”preponderance of the evidence” standard. As such, defendants can enhance the strength of their invalidity defense via patent reexamination. So, in essence, Interval Licensing is now facing a new challenge that must be overcome before the litigation resumes, and at much longer odds.

In considering if Interval Licensing’s interests would be prejudiced by a delay in the litigation of a length necessary to reexamine the patents at issue, the court  emphasized the fact that Interval licensing is a holding company (known as a patent troll to some).

The full decision may be found (here). In deciding whether Interval Licensing would be prejudiced by a stay, the court explained:

[T]he Court is not able to find undue prejudice to Interval Licensing by granting the stay. Interval Licensing, a holding company, does not compete with Defendants and there is no danger it will lose customers, market share, or other intangible benefits. Rather, it can likely be compensated for damages suffered even if a stay is issued. The Court also does not believe that the stay will produce a clear tactical disadvantage to Interval Licensing.

As pointed out in past posts, stays are disfavored between direct competitors, but courts are increasingly willing to halt patent infringement suits that are initiated by those (trolls) that are not actively competing in the marketplace. Silicon Valley may now enjoy a lengthy reprieve as the battle shifts to the USPTO.

This case was brought to my attention by the great Docket Navigator.

TiVo’s patent battles have been making headlines for quite some time now. Last week, the battle with EchoStar finally concluded with a $500 million dollar payout. During this dispute, TiVo’s “Time Warp” patent (6,233,389) escaped two separate challenges in patent reexamination relatively unscathed.

TiVo continues to battle AT&T and Microsoft over the same digital video recorder technology. In 2009 TiVo sued AT&T in Eastern District of Texas for infringement of several patents, including its Time Warp patent. As a result of that lawsuit, Microsoft has stepped in to the fray in Texas in an attempt to aid their customer AT&T. 

Perhaps more interestingly, in addition to joining forces with AT&T in Texas, Microsoft has sought to pound TiVo into submission in Texas by initiating multiple retaliatory suits of their own. Since January of 2010, Microsoft has pursued TiVo at the International Trade Commission (ITC), and Western District of Washington on 4 of their patents. In a separate suit filed the Norther District of California another 7 Microsoft patents are asserted against TiVo.  

The Washington case is now stayed pending the ITC action, which is set for trial this November.

Last week, the California court stayed further proceedings pending the ex parte patent reexamination of the seven Microsoft patents. The decision to stay this case highlights the difficulty of being a plaintiff the size of Microsoft.

Typically, staying a district court action pending patent reexamination is disfavored when direct competitiors are involved. Rather than considering  the potential loss of market share, customers, and the like, the court emphasized the aggressive, and concurrent actions taken by Microsoft in other fora. The court explained: (full decision here)

. . .Microsoft claims that it will suffer undue prejudice as a result of a stay because staying this case alone will not increase the likelihood of settlement. Opp‟n 11-12. According to Microsoft, because the ITC Investigation and TiVo‟s suit against AT&T will still continue, Microsoft will have no reason to resolve this case. Id. at 11-12. The Court is not persuaded. If the Court were to stay this case, Microsoft is still asserting against TiVo, in the ITC and in the Western District of Washington, patents related to those at issue here. Those actions also involve the same accused TiVo products as those accused in this case. Moreover, the ITC Investigation is set for trial in November 2011, much sooner than trial in this matter would be possible. Therefore, even if this case is stayed, the parties will go to trial against each other twice within the next seven months, as the Eastern District of Texas case is set for trial in October of 2011, and each trial carries with it the potential for injunctive relief. Thus, it is still possible that Microsoft and TiVo will resolve their broader dispute without this litigation. This, in turn, could lead to settlement here.

Prejudice is a hard sell when you have the legal resources and market power of Microsoft.

This case was brought to my attention by the great Docket Navigator.