Seeking a stay in district court litigation pending post-grant proceedings1 can be a powerful tool for a party sued for patent infringement. Often, the decision to stay the case hinges on the extent to which the stay would simplify the issues. The simplification factor generally weighs in favor of a stay when every asserted patent claim in the litigation is subject to review.2 The decision may be less clear when the Patent Trial and Appeal Board (the “Board”) declines to institute review on all asserted patent claims or if all of the asserted patent claims were not challenged in a requested (but not yet granted) petition for post-grant review.3 Nevertheless, courts have imposed stays in cases that cover more than the specific patents and claims implicated by a pending post-grant proceeding, and the Federal Circuit addressed the issue recently in Versata Software. v. Callidus Software.
Stay Pending CBM Review
In Versata v. Callidus, Versata initially brought suit against Callidus for infringement of three patents.4 Prior to Versata’s identification of specific asserted patent claims, Callidus filed a first set of CBM petitions challenging all claims of one of Versata’s patents, but only selected claims of the remaining two patents.5 Versata subsequently asserted patent claims that were not covered in the first set of CBM petitions. After the Board instituted review of each challenged claim of the three patents, the district court stayed the case with respect to the first patent but declined to do so as to the other two. In the district court’s view, a stay pending CBM review as to the two remaining patents would “not significantly limit the parameters of the litigation.”6 Callidus subsequently appealed, and, during the pendency of that appeal, the Board instituted CBM review of a second set of CBM petitions filed by Callidus challenging the remaining claims of Versata’s other two patents.7
On appeal, the Federal Circuit reversed the district court’s decision declining to stay the case as to Versata’s remaining two patents based on a review of the district court’s findings as to each of the stay factors identified in the America Invents Act (“AIA”). Section 18(b)(1) of the AIA identifies four factors that a district court should consider when deciding whether to grant a stay pending a CBM review: (A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; (B) whether discovery is complete and whether a trial date has been set; (C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and (D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
As to the simplification factor of the stay analysis, the Court took judicial notice of the fact that the Board had recently instituted review of the remaining patent claims in the second round of CBM petitions.8 In finding that the simplification factor strongly favored a stay, the Court noted that “[t]he review of every claim of each of Versata’s asserted patents leaves little doubt that issues will be simplified.”9 Although this fact alone may have been enough for the Court to decide that the simplification factor favored a stay,10 the Court went even further, holding that the district court erred by applying a “categorical rule” disfavoring a stay “if any asserted claims are not also challenged in the CBM proceeding.”11 Rather, “[s]tays can be warranted even when a CBM proceeding does not address all asserted patents, claims, or invalidity defenses.”12
The Federal Circuit’s decision in Versata v. Callidus and prior district court cases provide some guidance as to when courts would consider imposing stays that cover more than the patent claims challenged or subject to CBM review. For example, courts have imposed complete stays when only a handful of claims remain unaffected by a CBM proceeding or if the only remaining claims depend from claims subject to review.13 Additionally, a Northern District of California decision, to which the Federal Circuit cited in support of its holding inCallidus, stayed an entire case when only one of two asserted patents were being reviewed by the Board, in part because the Board’s decision likely would provide further guidance to the parties and the court “regardless” of the result.14Having decided that a stay would provide such guidance, the court was disinclined to proceed with the other patent in “piecemeal” fashion.15 In Callidus, the Federal Circuit also suggests that the similarity of the claims under review to those claims not subject to review may be relevant to determining whether the simplification factor favors granting a stay.16 Such similarities may have implications not only as to validity issues decided following Board review, but also as to potentially common claim construction issues and discovery that may be related to commonly-accused products.
The existence of other claims (both patent and non-patent) is another obstacle that may militate against imposition of stay. For example, an attempt by a defendant to seek a partial stay of a case only as to plaintiff’s patents based on a CBM review while still proceeding with its own patent counterclaims may implicate another prong of the stay analysis, as it rings of a tactical advantage to the defendant. However, a stay of the entire case, including the defendant’s unaffected patent counterclaims, eliminates that tactical advantage.17Additionally, determining how the existence of a non-patent claim (e.g., breach of contract) affects the stay calculus depends on the relationship of such a claim to the outcome of a CBM review. If no such relationship exists, then staying the case pending the CBM review will not simplify the issues.18
Stay Pending IPR
Given that Courts generally consider the simplification factor on all decisions to stay a case,19 the Callidus decision may spur more complete stays based not only on CBM review but on IPR as well. However, the standard for institution of an IPR (reasonable likelihood the petitioner will prevail)20 is less stringent than that of a CBM review (more likely than not unpatentable).21 As such, with an IPR there may be a higher likelihood that a claim will not be held unpatentable after review, meaning that a stay may not result in a reduction of issues. On the other hand, some courts have taken the position that even a decision that ultimately allows a patent to survive review will still provide clarity and guidance on the remaining issues to be decided in the case.22 Additionally, while a final decision on CBM review merely precludes a petitioner from asserting in litigation that a “claim is invalid on any ground that the petitioner raised during that [CBM],”23 the estoppel provisions for IPR are more stringent, prohibiting a petitioner from asserting in litigation “that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partesreview.”24 As such, following the outcome of a decision on IPR, the number of invalidity issues that can be raised in litigation are potentially fewer than those that could be raised following a CBM review.
Just as with CBM review, district courts have imposed stays as to an entire litigation when only some of the patent claims are the subject of an IPR. In such cases, the courts often have only a few remaining patent claims that are related in some way to the claims at issue in the IPR.25 However, consistent with the holding in Callidus, courts sometimes impose broader stays as to different patents and non-patent claims when doing so has the potential to reduce the remaining issues in the case, reduce the discovery burden when the same products have been accused of infringement across all the patents, and reduce the burden on the court of holding multiple hearings and trials in piecemeal fashion.26
The new AIA post grant proceedings provide a new forum for deciding invalidity issues in a potentially faster and cheaper venue than district court litigation. As parties avail themselves of these options, they would do well to keep in mind that obtaining a stay of district court litigation during pending post-grant proceedings remains a possibility as a further way to limit costs. Even when cases include patent claims, alternative patents, and non-patent claims that are not at issue in the post-grant proceedings, courts have imposed broader stays with the hope of reducing the issues following both IPRs and CBM reviews. The Federal Circuit’s recent decision in Versata v. Callidus provides further support and guidance for seeking such a stay.