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October 31, 2013 Articles

Filing a Renewed Motion to Stay Litigation

Issues and strategies to keep in mind when requesting a patent reexamination.

By Erwin Cena

It is not uncommon during patent litigation for a party to request inter partes reexamination of one or more of the patents at issue. The most recent statistics from the U.S. Patent and Trademark Office (USPTO) indicate that 66 percent of inter partes reexamination requests are tied to litigation. After petitioning for reexamination, a party may move to stay litigation pending the outcome of the reexamination. If the court denies the motion or grants a stay only to lift it at a later date, the party challenging the patent's validity can file a renewed motion to stay litigation.

A renewed motion relies on the same legal factors as the original motion. Therefore, the motion's success is often entirely contingent on persuading the court that new developments in the reexamination proceedings warrant a stay. At the same time, because the timing of a renewed motion to stay is likely to occur when discovery is at a more advanced stage or even completed, the moving party will need to explain why the advanced stage of the case does not weigh against a stay. This article discusses the considerations in filing a renewed motion to stay and identifies some of the pertinent case law and arguments helpful to parties seeking a stay.

Same Legal Factors Apply to Renewed Motions to Stay
Factors often considered in a motion to stay apply to renewed motions to stay. The factors include (1) whether a stay will simplify the issues and trial, (2) whether discovery is complete and a trial date is set, and (3) whether a stay would present a clear tactical disadvantage to or unduly prejudice the non-moving party. EMG Tech., LLC v. Pepper Snapple Grp., Inc., No. 6:10-CV-536, 2012 U.S. Dist. LEXIS 104543, at *5 (E.D. Tex. Mar. 13, 2012).

Simplification of Issues and Trial
Staying litigation pending reexamination is sometimes desirable because the latter may result in the "cancellation, clarification, or limitation of claims." Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1428 (Fed. Cir. 1988). This is not simply conjecture—the most recent USPTO statistics indicate that between November 29, 1999, and September 30, 2012, the USPTO granted 94 percent of all inter partes reexamination requests. Only 11 percent of the reexamination certificates issued confirmed all claims. The remaining certificates either cancelled or amended claims.

To see the benefits of staying litigation pending reexamination, one need not look further than the Federal Circuit's recent opinion in Fresenius v. Baxter, 2013 U.S. App. LEXIS 13484 (Fed. Cir. July 2, 2013). In Fresenius, the court addressed the issue of whether "the cancellation of claims by the PTO is binding in pending district court infringement litigation."  Id. at *13. Answering in the affirmative, the court vacated the district court's judgment in favor of Baxter Healthcare Corporation, which included an award to Baxter of $14.266 million, plus interest, royalties, and costs. Id. at *46. The Federal Circuit remanded the case with instructions to dismiss. Id.

With the above in mind, a renewed motion to stay may gain better traction with the court if the movant can demonstrate that developments at the USPTO create an even greater potential for simplifying issues and trial. For example, the court may look favorably on a renewed motion to stay based on an action closing prosecution (ACP) or final office action that rejects the asserted claims. See, e.g., Cellectis S.A. v. Precision Biosciences, Inc., No. 5:08-CV-00119-H, 2010 U.S. Dist. LEXIS 91043, at *17 (W.D.N.C. Aug. 31, 2010) (finding that ACPs rejecting claims, coupled with amendments from the patentee, compel a stay more so than initial office actions). ACPs that reject some but not all of the pertinent claims may still support a stay. See Oy Ajat, Ltd. v. Vatech Am., Inc., No. 10-4875 (PGS), 2012 U.S. Dist. LEXIS 43443, 63, 2012 WL 1067900 (D.N.J. Mar. 29, 2012) (explaining that even if only some of the asserted claims are rejected, "significant aspects of this litigation may be altered"). At least one court has stated that a stay may be appropriate even if an ACP affirms the subject claims. See Pragmatus AV, LLC v. Facebook, Inc., No. 5:11-CV-2168 EJD, 2012 U.S. Dist. LEXIS 14824, at *11 (N.D. Cal. Feb. 6, 2012) (citing USPTO statistics indicating that the Board of Patent Appeals and Interferences affirms the examiner only 43 percent of the time).

Even if the challenged claims survive reexamination, a stay can sometimes simplify litigation because the parties challenging the patent are estopped from asserting the same invalidity arguments made during reexamination. See 35 U.S.C. § 315(c) (party requesting inter partes reexamination is estopped from asserting in a civil action "the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings"). This can simplify litigation strategy for both sides and can sometimes decrease the resources needed to grapple with invalidity issues.

Those seeking a stay also often argue that the court and parties will benefit from the USPTO's "expert" evaluation of the subject patents. See Ethicon, 849 F.2d at 1426. Reexamination may also be less expensive than litigating validity in courts. Id. (citing the legislative history behind the reexamination statutes). The reexamination process can also provide the district court with "a richer prosecution history" in rendering future decisions. See AT&T Intellectual Prop. v. Tivo, 774 F. Supp. 2d 1049, 1053 (N.D. Cal. 2011).

Procedural Posture
By the time a party makes a renewed motion to stay, the litigation is likely at a more advanced stage. For instance, unlike a motion to stay at the outset of litigation, when a renewed motion is made, there is a good possibility that the trial date has been set and the parties commenced or completed fact discovery and even engaged in a Markman hearing. Certainly, the sooner a party renews a motion to stay, the better. Courts, however, have granted motions to stay despite the setting of trial dates, passage of claim construction, and commencement of discovery. See, e.g., Cellectis S.A., 2010 U.S. Dist. LEXIS 91043, at *8 (granting a stay despite nearly complete fact discovery and completion of claim construction because "[c]utting off further, and potentially futile, expenditure of time and resources by both the parties and the Court weighs in favor of granting a stay even at this stage of the litigation"). Even if the parties filed motions for summary judgment and claim construction occurred, a stay may be warranted to avoid the cost of a potential second trial after reexamination. See 3M Innovative Props. Co. v. Dupont Dow Elastomers LLC, No. 03-3364, 2005 U.S. Dist. LEXIS 44877, at *7 (D. Minn. Sept. 8, 2005).

Undue Prejudice
Despite the issuance of an ACP or final office action rejecting claims, the patentee may argue that it will suffer undue prejudice because (1) the reexamination process, plus any appeals, may take several years to complete; (2) during a stay, the alleged infringer will continue to harm the patentee irreparably by gaining market share; and (3) damages will be insufficient to compensate the patentee for harm suffered during the stay.

With regard to the first argument, it is well established that delay is inherent in the reexamination process and "does not constitute, by itself, undue prejudice." AT&T Intellectual Prop., 774 F. Supp. 2d at 1054. An ACP can also indicate that "any stay would not be for an extended period of time." Duco, Inc. v. Aker Subsea, Inc., No. H-11-2858, 2012 U.S. Dist. LEXIS 95033, at *9 (S.D. Tex. July 10, 2012). As for the second argument, there is no presumption that the patentee will suffer irreparable harm. See ValueClick, Inc. v. Tacoda, Inc., 2009 U.S. Dist. LEXIS 127025, at *3 (C.D. Cal. 2009) (explaining that otherwise, "stays pending reexamination would rarely be granted").

With regard to the third argument, there is also no presumption that money damages are inadequate. See Nutrition 21 v. United States, 930 F.2d 867, 872 (Fed. Cir. 1991). Rather, the party opposing the motion to stay should marshal the facts to explain why damages are insufficient if necessary. At least one court has indicated that the fact that the patentee and alleged infringers are direct competitors, by itself, is also not dispositive of undue prejudice. See Smarter Agent, LLC v., LLC, 889 F. Supp. 2d 673, 676 (D. Del. 2013).

When filing a renewed motion to stay, the moving party should, of course, address the court's previous concerns in denying or lifting a stay. The movant should also be prepared to discuss the issues above. Ultimately, such a motion is fact-intensive and, to some extent, philosophical—is it better to conserve the parties' and the court's resources, or is it preferable to give the patentee his or her day in court? This may be an unsettling prospect not only for practitioners but their clients as well.

Keywords: litigation, intellectual property, patent reexamination, Patent and Trademark Office, USPTO, cancellation of claims

Erwin Cena – October 31, 2013

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