First published in LES Insights
A Massachusetts court recently granted a motion to stay an infringement litigation involving 11 patents pending the outcome of inter partes review proceedings of 2 of the 11 asserted patents. Although the court acknowledged that a stay would not eliminate the need for a trial, the court found that a stay would simplify or streamline issues for trial because the case was still in its infancy; the 11 patents shared similar inventive disclosures; and the patent owner, a non-practicing entity, identified no specific prejudice that would result from a stay.
Under the Leahy-Smith America Invents Act, inter partes review (IPR) provides an expedited procedure for challenging the validity of a patent before the U.S. Patent and Trademark Office (PTO) and its Patent Trial and Appeal Board (PTAB). To avoid unnecessary duplication, trial courts may consider staying a district court case, either in part or in full, until the PTAB reaches a decision on the validity of the challenged patent claims. Deciding a motion to stay while an IPR is pending is largely a case-specific inquiry. The court has discretion in determining whether granting a stay is appropriate and focuses on the following three factors: (1) the stage of the litigation; (2) whether a stay will simplify the issues in question and the trial of the case; and (3) whether a stay will unduly prejudice or present a clear tactical advantage to the nonmoving party. Recently, in ACQIS, LLC v. EMC Corp.,1 the U.S. District Court for the District of Massachusetts ordered that a case be stayed in its entirety until a decision issued in IPRs filed by the defendant on 2 of 11 patents-in-suit.
ACQIS, LLC sued EMC Corporation for infringement of 22 patent claims from 11 different patents, all directed to modular computer systems. ACQIS originally filed its case in the Eastern District of Texas, where the court consolidated it with three related infringement suits against other defendants. The court granted EMC's motion to transfer the action against EMC to the District of Massachusetts, delaying the effect of its ruling until after the court issued its claim construction ruling. In the interim, EMC filed IPR petitions challenging 3 of the 11 patents-in-suit. The PTO instituted IPRs of just 2 of the 3 patents, involving 3 of the 22 asserted patent claims. After the Texas court transferred the action to Massachusetts, EMC moved the court to stay the case in its entirety pending the outcome of the IPRs.
The ACQIS Decision
In evaluating the first factor, the stage of the litigation, the court noted that document and written discovery were currently underway but not yet complete. No depositions had been taken, expert discovery had not yet begun, and dispositive motions had not yet been prepared or filed. ACQIS argued that significant discovery had already occurred, referring specifically to nearly 1.5 million pages of documents already produced. But the court found that third parties had produced the majority of the documents and ACQIS would have incurred a large portion of the associated costs irrespective of the case against EMC, because of the overlap with the other cases filed by ACQIS. The court also focused on the fact that the original scheduling order had been vacated as a result of the transfer, and thus, at the time, there was no trial date, nor any set deadlines for discovery or dispositive motions. Ultimately, the court concluded that notwithstanding the fact that substantial discovery had taken place and a claim construction opinion had been issued, the parties and the court still faced a significant amount of work. In light of all of these considerations, the court found that the stage of the litigation weighed moderately in favor of a stay.
Regarding the second factor—whether a stay would lead to simplification of the issues and trial of the case—ACQIS argued that the outcome of the IPR proceedings would not eliminate the need for a trial or greatly simplify the issues, because only 2 of the 11 patents-in-suit and 3 of the 22 patent claims were under review in the IPRs. Although the court acknowledged that the IPRs most likely would not eliminate the need for a trial, it found that this factor still weighed slightly in favor of a stay. The court agreed with EMC that even though not all asserted patents and claims were involved in the IPRs the issues would still be streamlined due to the “significant overlap” between the 3 patent claims under IPR and the remaining 19 patent claims at issue in the litigation. In reaching its finding, the court noted that the patents-in-suit come from three patent families sharing similar inventive disclosures and the same key inventive aspect. Thus, the court found that the IPRs were likely to result in simplification of the issues regardless of their outcome and that denying a stay or only granting it in part could result in costly inefficiencies whereby portions of discovery or motion practice would have to be revisited after the IPRs.
The court also found that the third factor, whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party, weighed in favor of a stay. The court first stated that ACQIS had not identified any actual prejudice that it would suffer if the entire case was stayed. One important consideration that the court focused on was that ACQIS is a non-practicing entity that does not sell products and, thus, is not directly competing with EMC. The court also found that even if the case were stayed, ACQIS would still have all of its legal and equitable remedies available and ACQIS identified no reason that monetary damages would be insufficient.
Finally, the court disagreed with ACQIS that EMC had unreasonably delayed in filing its IPR petitions or in moving for a stay. EMC filed its IPR petitions shortly after ACQIS served its infringement contentions, which identified the specific claims ACQIS asserted. The court found EMC's timing reasonable, in light of the vast number of claims in the asserted patents, fees for filing IPR petitions, and the PTAB's page limits for petitions. Moreover, EMC filed its motion to stay around one month after the PTO instituted the IPRs, which the court also found to be a reasonable amount of time. Thus, the court concluded EMC had acted reasonably and that a nine-month stay of the entire case until a decision issues in the IPRs was unlikely to cause undue prejudice or present a clear tactical disadvantage to ACQIS.
Having determined that all three factors weighed in favor of a stay, the court granted EMC's motion to stay the case in its entirety pending a decision in the IPRs.
Strategy and Conclusion
This case illustrates the far-reaching impact that the IPR challenges to patent validity can have on the pendency and resolution of patent litigations, holding that a stay of the entire litigation was appropriate even when only a portion of the asserted patents were challenged in the co-pending IPR proceedings.