In appealing the denial of its request that further litigation in the Eastern District of Texas be stayed in favor of recently instituted CBM review, Apple has urged the Federal Circuit to ignore the fact that trial had already occurred, and a jury verdict rendered, in the Texas action. In its appeal brief, Apple argues that it was unfairly denied a stay that was granted to other parties facing litigation on the same patents who have yet to proceed to trial.
Apple was sued in the Spring of 2013 by Smartflash. Nearly a year later, Apple filed CBM Petitions raising defenses under Sections 102 and 103. At the same time, Apple sought a stay of the litigation, which the District Court denied as premature. In the Fall of that year, the PTAB denied the majority of Apple’s petitions.
Shortly thereafter, Apple filed additional CBM petitions, this time raising defenses under Section 101. Apple did not seek a stay at the time it filed these petitions.
The case proceeded to trial against Apple in February 2015. The jury returned a verdict of $533 million against Apple and in favor of Smartfish. The District Court has not yet entered final judgment in light of pending post-trial motions, including Smartfish’s request that the damages against Apple be tripled to $1.6 Billion.
In March, 2015, the PTAB instituted review on Apple’s additional petitions. In April, 2015, Apple moved to stay further proceedings in the District Court pending the conclusion of the PTAB’s review. The District Court denied Apple’s motion.
In denying Apple’s motion, the Judge Gilstrap of the Eastern District of Texas noted that “the most important factor bearing on whether to grant a stay is the prospect that the PTAB proceeding will result in simplification of the issues before the Court.” Judge Gilstrap noted that the Court had already addressed, at numerous stages, the invalidity defenses raised by Apple. According to Judge Gilstrap, “[f]rom the Court’s perspective, there is nothing left to simplify.” [at 12] Ominously, Judge Gilstrap’s opinion denying Apple’s request also lessened the significance of the PTAB’s review in Section 101 cases. Judge Gilstrap noted that unlike PTAB reviews under Sections 102 and 103, where having the prior art “first considered by the PTO, with its particular expertise” may advantage the Court, Section 101 presents purely a legal issue in which the importance of the PTAB’s determination is “diminished.” [Id.]
In its appeal, Apple asserts that the District Court focused too heavily on the resources already expended in the litigation. Apple argues that the sole focus should be whether a stay would reduce the burden of any litigation remaining. According to Apple, Congress designed the America Invents Action (AIA) to used “instead of, rather than in addition to, civil litigation.” [at 11] (citing remarks of Sen. Schumer). Apple assets that to advance this purpose, Congress created an independent, statutory ground for stays in CBM reviews that “places a very heavy thumb on the scale in favor of a stay.” [Id.] Urging the Federal Circuit to mandate a near automatic rule in the case of motions to stay in favor of CBM review, Apple again quote Senator Schumer’s remarks that “[i]t is nearly impossible to imagine a scenario in which a district would not issue a stay.” [Id.]
Apple concludes its appeal with a plea for equal treatment. Apple complains that litigation against that other parties who have yet to proceed to trial was stayed and they—but not Apple—will ultimately enjoy the benefits of the CBM review. Protesting that it potentially faces a “significant competitive disadvantage” as a consequence, Apple urges that the asserted claims “should be eligible against all or none.” [at 23]
Should the Federal Circuit accept Apple’s arguments, it will represent the first time that a stay was entered in favor of CBM review after trial in the underlying case had proceeded to verdict.