Digest of VirtualAgility, Inc. v. Salesforce.com, Inc.No. 2014-1232 (Fed. Cir. July 10, 2014) (precedential). On appeal from E.D. Tex. Before Newman, Moore, and Chen.

Procedural Posture: Defendants appealed district court’s denial of their joint motion to stay plaintiff’s patent infringement lawsuit pending post-grant review of the asserted claims. CAFC reversed.

  • Standard of Review: The CAFC held that there was no need to resolve the dispute regarding the appropriate standard of review because even under the abuse of discretion standard, rather than the de novo standard, the district court’s denial of the stay must still be reversed.
  • Stay: The district court considered the four statutory factors set forth in AIA § 18(b)(1).
    • § 18(b)(1)(A): The CAFC held that the district court erred in finding that the first factor, whether a stay will lead to simplification of issues, was neutral or slightly against a stay, due to its improper review of the Patent Trial and Appeal Board (PTAB)’s determination regarding patentability of the claims subject to Covered Business Method Patents (CBM). District courts play no role in such reviews. The CAFC held that this factor weighs in favor of granting the motion to stay.
    • § 18(b)(1)(B): The district court did not err in finding that the second factor, regarding timing, favored a stay. There was no error in waiting until the PTAB made its decision to institute CBM review before it ruled on the motion to stay.
    • § 18(b)(1)(C): The district court erred in concluding that the third factor, whether a stay would result in undue prejudice for one party or tactical advantage for the other, weighed heavily against a stay. It found that a delay would cause plaintiff irreparable harm, including lost market share and consumer goodwill. The CAFC concluded that plaintiff’s failure to move for a preliminary injunction weighs against plaintiff’s claims of undue prejudice. The district court was correct in concluding that a stay gives defendants no tactical advantage. The CAFC held that this factor at best only weighed slightly against a stay.
    • § 18(b)(1)(D): The district court erred in concluding that the fourth factor, whether a stay will reduce the burdens of litigation, weighed only slightly in favor of a stay. The district court improperly reviewed the PTAB determination that all of the asserted claims are more likely than not invalid. The CAFC held that this factor weighs heavily in favor of a stay because the CBM review could eliminate the burden of litigation entirely.
  • Waiver: Defendants’ arguments regarding customers and third parties are waived as they were not previously raised before the district court.

Newman, dissenting:

  • Standard of Review: There should be appellate respect for the district court’s decision regarding a motion to stay because it is within the district court’s range of discretion. The correct standard should be abuse of discretion.
  • District Court Discretion: The district court has discretion not to stay an earlier-filed infringement action during a later-requested post-grant proceeding. The district court fully considered the four statutory factors set forth in AIA § 18(b)(1) and did not abuse its discretion in declining to stay the infringement action.

Hui Li