EDTX Denial of CBM Stay Deemed Abuse of Discretion

Back in March I recounted the curious case of VirtualAgility Inc., v. Salesforce.com Inc., et al. (EDTX). In this dispute, Salesforce.com sought a stay of the EDTX litigation pending Covered Business Method (CBM) review of the VirtualAgility patent. The CBM petition was filed with the USPTO Patent Trial & Appeal Board (PTAB) on May 24, 2013 as CBM2013-00024.

The EDTX determined that a stay was unlikely to simplify the issues for trial based upon an independent assessment of the CBM. This was despite the fact that the PTAB went forward with the CBM (i.e., determined that all of the claims were more likely than not unpatentable on multiple grounds), and the patentee had already amended their claims. Thereafter the case was effectively stayed anyway pending interlocutory appeal to the CAFC (a right newly provided by the CBM statute).

At the CAFC, the parties debated whether or not the Court’s review of the stay denial should be de novo under Section 18(b)(2) of the America Invents Act (AIA). (statute says review may be de novo). The Court avoided this issue by finding that, in any event, the decision of the EDTX to deny the stay was an abuse of discretion.

The Court explained that not only were the factors considered by the lower court not in favor of the patentee, but, heavily favored the petitioner. Moreover, the Court found that the EDTX’s second guessing of the PTAB to be particularly inappropriate.

Congress clearly did not intend district courts to hold mini-trials reviewing the PTAB’s decision on the merits of the CBM review. To do so would overwhelm and dramatically expand the nature of the stay determination. If the district court were required to “review” the merits of the PTAB’s decision to institute a CBM proceeding as part of its stay determination, it would undermine the purpose of the stay.  . . .The stay determination is not the time or the place to review the PTAB’s decisions to institute a CBM proceeding.

The district court’s decision regarding the first and fourth factors was based predominantly on its improper review of whether the PTAB was correct in its determination that the claims of the ’413 patent were more likely than not invalid. After this review is removed from the calculus, the remaining evidence of record weighs heavily in favor of a stay. We find it significant that the PTAB granted CBM review on all asserted claims of the sole asserted patent. And it determined that all of these claims were more likely than not unpatentable on two separate, alternative rounds.

(emphasis in original) (decision here)

The dissent largely takes issue with the delay caused by post-grant proceedings and the potential for gamesmanship, but relies mostly on case law involving patent reexamination, not the speedier PTAB proceedings.

Going forward, stays pending an active CBM review (i.e., one that is ordered, not just filed) should be easier to come by in the EDTX.