Versata Software, Inc. v. Callidus Software, Inc.
Addressing the denial of a stay pending the covered business method (CBM) review of some, but not all, asserted claims in a district court action, the U.S. Court of Appeals for the Federal Circuit concluded that it was an abuse of discretion to not stay the entire case. In its decision, the Federal Circuit embarked on its own analysis of the four factor test for granting a stay pending CBM review and concluded that each factor strongly favored a stay. Versata Software, Inc. v. Callidus Software, Inc., Case No. 14-1468 (Fed. Cir., Nov. 20, 2014) (Chen, J.).
Versata Software sued Callidus Software for infringement of three patents related to the management and tracking of sales information by financial services companies, and Versata counterclaimed for infringement of its own patents. Before Versata identified the asserted claims, Callidus filed petitions seeking CBM review under § 101 of all claims of one patent and some claims of the other two patents. The district court declined to consider a stay until the Patent Trial and Appeal Board (PTAB) made a decision on whether to grant institution based on the petitions.
The PTAB ultimately granted the petitions, but Versata had since identified the asserted claims, which included claims that were not the subject of any CBM petition. Callidus then filed another set of petitions seeking CBM review of the remaining claims. After, the district court granted a stay on the first patent, but denied a stay on the remaining two patents, Callidus filed an interlocutory appeal to the Federal Circuit.
The Federal Circuit noted that the America Invents Act (AIA) permits de novo review of decisions on stays pending CBM review, but concluded that the district court was wrong even under an abuse of discretion standard.
On the first stay factor, simplification of the case, the Federal Circuit explained that a stay may be warranted even when the CBM review does not address all claims or invalidity defenses in the litigation, particularly because estoppel attaches to invalidity defenses that are advanced in the CBM review. The Court took judicial notice that the PTAB had since granted the second set of CBM petitions on all remaining claims and concluded that the first factor strongly favored a stay.
On the second factor, whether discovery is complete and a trial date has been set, the Federal Circuit explained that the district court erred by evaluating the circumstances at the time of its decision rather than at the time the stay was requested. The Court concluded that while a trial date had been set, the case had not yet progressed to a point that disfavors a stay because fact discovery was still ongoing, no depositions had been taken, expert discovery had not yet begun, and no claim construction had issued.
On the third factor, undue prejudice or tactical advantage, the Federal Circuit disagreed that Callidus was seeking a tactical advantage by staying Versata’s case while moving forward on its own claims because Callidus had asked for a stay of the entire case.
On the fourth factor, reduced burden of litigation, the Federal Circuit explained that the district court erred by looking backwards to Callidus’ preliminary motions to transfer venue and dismiss the case. The Court instructed that district courts should consider the matter prospectively and on that basis concluded that the fourth factor was tied to the first factor and also favored a stay.