Federal district courts are inclined to stay patent litigations when requested by patent challengers on the basis that the patent-in-suit is undergoing an AIA review proceeding at the USPTO; and those not so inclined, specifically in the Eastern District of Texas, have been corrected by the Federal Circuit. But this favorable disposition toward stays occurs only up to a point. That point appears to be when the trial verdict has been rendered – even if that verdict is contrary to the PTAB’s determination.
A stay is not automatic under the AIA. The courts reserve the power to control their own dockets. The courts generally weigh three to four factors in determining whether to grant a stay, such as undue prejudice to the patentee. Stays are generally granted if the USPTO review petition has been accepted and promises to address invalidity for all or nearly all of the patent claims at issue in the litigation. The touchstone for the courts seems to be how best are judicial resources conserved. It is a perspective which tips the balance toward letting the USPTO address invalidity first. But once the court has obtained a trial verdict, its resources have essentially been spent and the situation is changed.
This demarcation was first addressed by the Federal Circuit in Smartflash LLC v. Apple Inc., 621 Fed. Appx. 995 (Fed. Cir. July 30, 2015). There, Smartflash had filed separate suits in E.D. Texas against Apple and Samsung alleging infringement of the same patents. During the course of these cases, Apple and Samsung filed CBM petitions with the PTAB and moved to stay the litigations. The district court (J. Gilstrap) denied the motions without prejudice to refile if any of the petitions were granted. While the parties awaited the PTAB’s decisions, the Apple case went to trial and the jury returned a verdict in favor of Smartflash. Thereafter, the PTAB instituted CBM review of all asserted claims. Apple filed a motion to stay post-trial activity in its case; and Samsung filed a renewed motion to stay its litigation which was about to go to trial. The district court denied both stay requests. In both instances, the court considered the significant resources already expended made the stays unwarranted.
The Federal Circuit affirmed the district court’s denial of stay for Apple pending CBM review where the case had already gone to trial, but reversed for Samsung. The Court of Appeals agreed that the district court and the parties had already spent nearly all the time and resources required for determining Apple’s liability in the litigation. As for Samsung’s situation, the Court viewed the fact that Samsung had yet to go to trial as a “critical distinction.” Calling trial “the most burdensome task yet to come,” the Court concluded that, because a determination from the PTAB that all the asserted claims are patent ineligible would spare the parties and the district court the expense of any further litigation, the district court had abused its discretion when it denied Samsung’s motion to stay.
More recently, in a patent case that had been tried, appealed, and the mandate returned from the Federal Circuit to enter the judgment against the adjudged infringing defendant, this logic was also used by the district court to reject a motion for relief from judgment under Fed. R. Civ. P. 60(b), which had been presented as an alternative argument in addition to a motion to stay. The adjudged infringer’s motions were based on a PTAB final written decision in a collaterally brought IPR invalidating three of the five patent claims on which the patentee had been awarded damages. In that case, WesternGeco LLC v. Ion Geophysical Corp., 2016 WL 2344347 (S.D. Texas May 4, 2016 Order), the magistrate judge followed Federal Circuit analysis and recommended that the district judge deny the motion to stay because “[a] stay cannot simplify the trial; it has already occurred.” As for the alternative approach for obtaining a stay under Rule 60(b), he recognized Rule 60(b) allowed the courts to vacate judgment when appropriate “to accomplish justice,” but reasoned that, because the defendant received the full court process to litigate the validity of the patent claims, the defendant got its justice, even when the court’s judgment is potentially contrary to the determination of an agency review in a collateral proceeding.
To hold that later proceedings before the PTAB can render nugatory that entire process, and the time and effort of all of the judges and jurors who have evaluated the evidence and argument would do a great disservice to the Seventh Amendment and the entire procedure put in place under Article III of the Constitution.
The courts are sounding a warning to defendants wishing to stay their patent lawsuits based on USPTO post-patent reviews: such motions that rely on PTAB decisions after the court has rendered a trial verdict are doomed.