A decision to stay patent infringement litigation falls within a federal court’s power to control its docket. But in determining whether to stay litigation pending the Patent Office’s inter partes review (IPR) of the patent, courts still are guided by three factors: (1) whether the stay will simplify the litigation, (2) whether a stay would unduly prejudice (or present a clear tactical disadvantage to) the patent owner, and (3) whether the litigation has progressed to some advanced stage (e.g., discovery is complete, a trial date is set, etc.). Yet since the Supreme Court’s 2018 decision in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018) (discussed here), courts in the Eastern District of Texas have erected an unnecessarily high bar for stay-movants to leap.
Simplification: Most IPRs are petitioned to persuade the Patent Trial and Appeal Board to cancel a patent asserted in litigation. After all, without a patent, there is no basis for the infringement litigation. Logically, the IPR may well simplify the litigation—often obviating it altogether, if not construing and cancelling some claims or estopping the petitioner from later raising the same challenges in litigation. Virtual Agility, Inc. v. SalesForce.com, Inc., 759 F.3d 1307, 1314 (Fed. Cir. 2014), This is the “most important factor bearing on whether to grant a stay.” British Telecomms. PLC v. IAC/InterActiveCorp, Case 18-366-WCB, Slip Op. at 10 (D. Del. Sept. 11, 2020) (Bryson, C.J., sitting by designation).
Progress: An IPR petition must be filed within the year following service of a federal court complaint alleging infringement. That’s not an arbitrary window, rather it’s one that Congress purposely wrote into the statute to offer accused infringers a “reasonable opportunity to identify and understand the patent claims relevant to the litigation.” 157 Cong. Rec. S5429 (daily ed. Sept. 8, 2011) (statement of Sen. Kyl). If discovery were typically completed within that year, maybe Congress would have offered a shorter window. No matter, Congress expressly rejected a shorter, six-month window. Id. Suffice it to say, typically discovery is not complete within that year. Even if a court has ambitiously set a future trial date, that date is always subject to change, especially these days, during the COVID-19 pandemic. British Telecomms., Slip Op. at 10 (Bryson, C.J.) (granting stay motion due to ex parte reexamination, despite conclusion of fact discovery and setting of trial date because, “in light of the COVID-19 pandemic, it seems highly unlikely that the present schedule will hold”). And as patent lawyers know well enough, a federal court trial on a patent not concerning a bio/pharma invention is exceptionally rare, as an overwhelming majority of such cases settle before trial. In short, by the time an IPR petition has been filed, litigation has not progressed to any advanced stage.
Prejudice: Like the stay itself, an IPR is petitioned to prejudice (tactically disadvantage) the patent owner because it’s ostensibly easier to convince the Board the claimed invention is not patentable than it is to convince a jury the patent is not valid. But there is nothing unduly prejudicial in having the Patent Office review whether claims in the patent were improperly issued in the first instance, especially because Congress, in authorizing administrative review, sought to limit unnecessary and counterproductive judicial review. See Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents; Final Rule, 77 Fed. Reg. 48679, 48680 (Aug. 14, 2012) (link) (noting Congress and the Patent Office designed IPRs “to establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs” (emphasis added)); see also, H. Rep. No. 112-98, Part I, at 48 (2011) (link) (explaining the purpose of post-grant proceedings is to offer “quick and cost effective alternatives to litigation”); 157 Cong. Rec. S952 (daily ed. Feb. 28, 2011) (link) (stating that post-grant proceedings “would also provide faster, less costly alternatives to civil litigation to challenge patents”) (stating that of Sen. Grassley); id. at S5319 (daily ed. Sept. 6, 2011) (link) (stating that post-grant proceedings, including inter partes review, will provide “an inexpensive substitute for district court litigation and allows key issues to be addressed by experts in the field”) (statement of Sen. Kyl). Prompt enforcement of patent rights ”is insufficient, standing alone, to establish the undue prejudice necessary to defeat a stay motion.” British Telecomms., Slip Op. at 12 (Bryson, C.J.).
On balance, a court should grant a stay, even if it later lifts the stay because the Board denied the IPR petition. That discretionary course is particularly sensible for courts plagued by a busy docket and the difficult logistics of assembling a jury atop all of the other complexities civil litigation imposes on its participants during the pandemic. See, e.g., Caravan Canopy Int’l, Inc. v. Home Depot U.S.A., Inc., Case SACV 19-1072 PGS, Slip Op. at 3-4 (C.D. Cal. Aug. 19, 2020) (granting a stay motion and noting that even though it is speculative to argue simplification before the Board makes an institution decision, many courts have ultimately decided that saving scarce judicial resources sways the analysis in favor of a stay, especially when a stay will be relatively short (citations and quotations omitted)). Resources may be better directed to a focused assessment of the patent’s validity before the Patent Office, rather than a march toward a jury trial. The work of a U.S. district judge in conducting a trial during the pandemic, said one judge, can seem a lot like “building an airplane while you’re flying it.” Federal Judges Reinventing the Jury Trial During Pandemic, United States Courts (Aug. 26, 2020), https://www.uscourts.gov/news/2020/08/27/federal-judges-reinventing-jury-trial-during-pandemic. Unsurprisingly, some district judges are not interested in doing that, favoring, rather, the IPR process. See QXMédical, LLC v. Vascular Solutions, LLC, Case 17-CV-1969 (PJS/TNL) (D. Minn. July 7, 2020) (extending a stay in view of pending third party IPR petitions on the patents-in-suit and noting that “[i]n addition to the efficiencies to be gained by awaiting the outcome of the IPR process, the impact of the COVID‐19 pandemic on the Court’s operations means that, as a practical matter, it will likely be at least a year before the Court can resume lengthy civil jury trials”). In stark contrast, IPRs before the Board have continued, uninterrupted and unencumbered by the obstacles federal courts face. Andrei Iancu, A seamless transition to all-virtual hearings, U.S. Patent and Trademark Office (Sept. 18, 2020), https://www.uspto.gov/blog/director/entry/a-seamless-transition-to-all
Nevertheless, a recent order in Arbor Global Strategies LLC v. Samsung Electronics Co., Case 2:19-cv-00333-JRG-RSP (E.D. Tex. Aug. 10, 2020), illustrates a questionable basis courts in the Eastern District of Texas have introduced to deny future stay motions. Arbor sued Samsung for patent infringement seeking only monetary damages and no injunction. Arbor does not make any products or compete with Samsung. A stay would delay Arbor’s recovery, if it prevails in a trial. Initial disclosures, infringement and invalidity contentions, discovery requests, and claim construction briefing had all begun, but a claim construction hearing, depositions, expert discovery, summary judgment briefing, and a trial had not. There was more work ahead for the parties and the court than behind them. Yet, in its calculus of determining whether to grant Samsung’s stay motion, the court said both of these factors—prejudice and the stage of the litigation—were neutral, rather than favoring a stay. Arbor Order at 3‑4; cf. Smartflash LLC v. Apple Inc., 621 F. App’x 995, 1005 (Fed. Cir. 2015) (holding that the district court abused its discretion when it denied a pre-trial stay motion, explaining that “[d]espite the substantial time and effort already spent in this case, the most burdensome task is yet to come”); Bio-Rad Labs., Inc. v. 10x Genomics, Inc., Case 18-1679-RGA (D. Del. June 2, 2020) (stating that “stays are favored when the most burdensome stages of the case—completing discovery, preparing expert reports, filing and responding to pretrial motions, preparing for trial, going through the trial process, and engaging in post-trial motions practice—all lie in the future” (internal quotation omitted)).
The Arbor order approvingly cites the court’s pre-pandemic order last year in Peloton Interactive, Inc. v. Flywheel Sports, Inc., Case 2:18-cv-00390-RWS-RSP (E.D. Tex. Aug. 14, 2019). In both Peloton and Arbor the court offered a peculiar view of whether a pending IPR could ever simplify issues in litigation. Samsung’s IPR petitions challenged all of the patent claims Arbor asserted in the litigation. The Board had yet to decide whether to institute Samsung’s petitioned IPRs when the Arbor court took up Samsung’s stay motion. Noting as much, the court asserted there is a “universal practice” to deny a stay motion when the Board had not yet decided the petition. Said the court: “unless the Board indicates there is a serious chance it will invalidate all the asserted claims, the Court will not needlessly wait to rule on the remaining asserted claims. Essentially, there is no reason to delay the inevitable.” Arbor Order at 5. Does that make good sense?
Consider that the Board’s IPR institution decisions never indicate whether there is a “serious chance” of invalidity of any claim. Consider also that federal court trials in patent cases are exceptionally rare. There are enough instances where courts have stayed litigation—awaiting the Board’s institution decision—that one may legitimately challenge the court’s unsupported suggestion that there is a meaningful collection of sensible decisions denying a stay because of an uncertainty in whether the Board will grant an IPR petition. See, e.g., Caravan Canopy, Slip Op. at 4; see also, PureCircle USA Inc. v. SweeGen, Inc., Case SACV 18-1679 JVS (JDEx), Slip Op. at 4 (C.D. Cal. June 3, 2019) (collecting cases and stating that “courts in this District have adopted the majority position that even if IPR has not yet been instituted, the simplification factor may still weigh in favor of a stay” (emphasis added)). As the Federal Circuit has noted, even a Board decision denying an IPR petition may simplify litigation. See Aylus Networks, Inc. v. Apple, Inc., 856 F.3d 1353, 1362 (Fed. Cir. 2017) (holding “that statements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be considered for claim construction and relied upon to support a finding of prosecution disclaimer”). The Eastern District of Texas should reconsider its “universal practice.”
But perhaps an even more interesting aspect of the representative Arbor order is its short commentary about the relevance of the Supreme Court’s 2018 decision in SAS. The order notes that SAS “require[s] the Board to either institute on all the claims [challenged] in the petition or none at all.” Arbor Order at 6. Before SAS, the Board’s decisions explained on which challenged claims the Board was instituting review. But after SAS, supposes the district court, the Board’s decisions to institute IPRs might not explain whether all challenged claims are potentially unpatentable. Id. And without that explanation, the IPR might not simplify issues for litigation. The court offers no support for its supposition, and a recent survey of 400+ post-SAS IPR institution decisions reported in a Law360 article (link) suggests the opposite. Specifically, the authors found that more than 80% of the Board’s institution decisions addressed whether there was reasonable likelihood of success with respect to all of the challenged claims. Continuing, the court said that Samsung, in a renewed stay motion, “may need to show that the Board is likely to invalidate every asserted claim—a showing that may require more than just pointing to a successful petition.” Id. That’s an unnecessarily high bar to set, unless, perhaps, you are hell bent on building an airplane while flying it.
How has this new factor played out so far? Poorly, at least for Samsung. You see, the court is assessing this new factor with the other three factors at times and in ways that make a stay practically impossible. For example, in another case involving Samsung, the court earlier this year denied Samsung’s pre-institution stay motion because the court deemed the motion “inherently premature,” and—contrary to the Federal Circuit’s Aylus Networks decision—said that “if the PTAB denies institution of the IPRs, there will be no simplification of the case before the Court at all.” Solas OLED v. Samsung Display Co., Case 2:19-cv-00152-JRG, Slip Op. at 1 (E.D. Tex. Feb. 4, 2020). A mere six months later, after the Board instituted IPRs on all of Samsung’s petitions, the court conceded that the institution of the IPRs weighed in favor of a stay, but nevertheless denied Samsung’s renewed stay motion because the litigation had now progressed to a stage where the court could (and did) weigh that factor against a stay. Solas OLED v. Samsung Display Co., Case 2:19-cv-00152-JRG, Slip Op. at 1 (E.D. Tex. July 17, 2020). Of course litigation progressed! The court ensured that progress when it denied the pre-institution stay motion. Litigation would not, however, have progressed at all had the court exercised prudent discretion and granted Samsung’s pre-institution stay motion. The IPRs will proceed and present the potential for a conflict if the Board cancels the claims shortly after the district court upholds them—a conflict the district court could easily avoid and a conflict that Circuit Judge Bryson recently noted is “unseemly and should be avoided if possible.” British Telecomms., Slip Op. at 17. Alas, the court and the case participants continue their march towards the airplane hangar and the potential conflict.