Liberal Stay Policy Thwarts Patent Suits in New Jersey

Non-practicing entities or “patent trolls” are generally those plaintiffs that seek to enforce patent rights against an industry in which they themselves do not compete. Stated another way, an NPE’s only business is patent litigation.

Often times the patents an NPE is enforcing were purchased from a traditional technology company for the sole purpose of exacting royalties from the relevant industry. In the hands of an NPE, which has no technological industry subject to a patent counter suit by their industry targets, the NPE patents become especially powerful weapons of economic coercion.

Over the last decade, law firms have recognized the efficacy of NPE litigation campaigns and have signed on in great numbers to get a piece of the action. Typically, an NPE will team up with a law firm that will conduct the campaign on their behalf in exchange for a contingent fee arrangement. (i.e., percentage of the collected settlements). This profiteerring business model has lead to a significant proliferation of patent infringement suits.

Just not in New Jersey.

When faced with the high cost of a patent infringement suit defendants increasingly avail themselves of post grant patent alternatives offered by the USPTO, such as patent reexamination or a new patentability trial proceeding of the America Invents Act (AIA). On this basis, defendants will seek to stay the higher cost court proceeding in favor of the lower cost USPTO proceeding. In those cases that are stayed, the patent troll business model begins to unravel. Yet, in many districts, the grant of the stay is far from certain and based on many factors.

The New Jersey district courts, however, are increasingly recognized for their liberal stay policy. In fact, they have rarely, if ever, declined a motion to stay pending USPTO review of the patent. This is the case not only for disputes involving patent trolls, but any patent case. As recently made clear in Synchronoss Technologies inc. v. Asurion Mobile Applications, Inc. (DNJ) (here) the court explained:

[W]hile courts balance the costs and benefits associated with staying a matter pending reexamination of a patent by the PTO, courts have noted that granting a stay pending reexamination is favored. . . .The Court finds that stays pending reexamination are freely given in this District, as “almost every reported New Jersey District Court opinion that has considered the issue has granted a stay where a reexamination request was pending.”

Of course the new patentability proceedings of the AIA provide a significant improvement in speed relative to reexamination model. With New Jersey courts providing stays in almost every case of  the slower, reexamination model, it would seem wise for patent plaintiffs of all kinds to avoid the Garden State…especially patent trolls.

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