The EDTex Conundrum Presented by Inter Partes Review

The Eastern District of Texas is a favorite forum of patent trolls in substantial part because its judges have demonstrated a substantial disinclination to stay litigation pending reexamination. Many presume that this historical bias will translate into a similar disinclination to stay litigation pending pending inter partes review. However, refusing to stay a case pending inter partes review will give rise to various case management conundrums.

The practical reality is that the petitioner (usually the defendant in the lawsuit) will be estopped from pursuing at trial any validity defense which reasonably could have been raised in the inter partes review. The time to trial in the Eastern District of Texas is around 25 months, which is about seven months after an inter partes review filed contemporaneously with the complaint should result in a final written decision. (assuming the maximum six month “front end” and assuming further that the PTAB does not extend the one year period in which the trial is to be completed by statute). Under the new inter partes review model, estoppel attaches at the time of the written decision. In most cases this would be amount to a 5-6 years acceleration of estoppel as compared to the old, inter partes reexamination system. Unless the parties settle the inter partes review (in which case they will likely also settle the lawsuit) the defendant will be estopped from pursuing any defenses at trial which could have been raised in the inter partes review proceeding.

That in turn creates a conundrum:   Should the court’s and the parties’ resources be spent on issues which are in all likelihood going to be rendered moot before trial?  Even if the district court is not substantially concerned with the parties’ expenditures, judicial economy weighs heavily against dedicating the court’s limited resources to adjudication of the substantial motion practice which arises from fact and expert discovery relating to soon-to-be-moot issues.

Perhaps the judges in the Eastern District of Texas will consider staying only that portion of a case which is directly implicated by an inter partes review.  But that too is fraught with difficulties.  How does one logically separate and silo, for discovery purposes and otherwise, defenses which are based on patents and printed publications from those which are based on public uses, offers for sale and other defenses which are not subject to inter partes review?  Often times the latter set of defenses relate to the commercial versions of the systems and processes set forth in patents and printed publications at issue in the inter partes review.  The subject matter of the two groups of defenses usually overlaps to a significant degree.

In many, perhaps most, cases there may not be any practical way to effectively and efficiently bifurcate discovery and the associated motion practice in a way that prevents expenditure of the court’s and the parties’ resources on issues which will necessarily be rendered moot by the inter partes review while still allowing the case to proceed on issues to which the inter partes review estoppel will not apply.  It may be that even the Eastern District of Texas finds that most cases should be stayed pending inter partes review.

To date, roughly half of inter partes review filings have been directed at patent trolls, likely for the purpose of transferring the dispute to the lower cost forum. The chart below classifies, to the extent clear from the public filings, patent owners into NPEs and industry. Those patentees that do not fall neatly into either category are classified as “other.” (Click to Enlarge)

troll stats

Texas courts may take a “wait and see'” approach as to the efficacy and speed of the new PTAB proceedings. However, based upon the volume of filings to date, the public seems convinced that there is a new sheriff in town.