In VIRTUALAGILITY INC. v. SALESFORCE.COM, INC., Appeal No. 14-1232, the Federal Circuit reversed the district court's denial of a motion to stay pending a post grant review under the transitional program for covered business method (CBM) patents.
SalesForce filed a petition for CBM review four months after VirtualAgility (“VA”) brought suit. Immediately thereafter, SalesForce moved the district court to stay the litigation pursuant to AIA §18(b)(1) pending a decision by the Patent Trial and Appeal Board. VA opposed the CBM petition, but also filed a motion to amend its patent claims contingent on the claims’ invalidation. Six months later, the PTAB granted SalesForce’s petition. Two months after the PTAB decision, the district court denied defendants’ motion for a stay. Defendants appealed pursuant to AIA § 18(b)(2).
AIA § 18(b)(1) instructs district courts to consider the following four factors when deciding whether to grant a stay: (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 denial thereof, will reduce the burden of litigation on the parties and on the court.
Without deciding the proper standard of review, the Federal Circuit held that the district court’s denial of the motion to stay was incorrect even under the abuse of discretion standard. The Federal Circuit determined that the district court improperly considered the merits of the PTAB’s determination that the claims of the asserted patent were “more likely than not invalid.” The Federal Circuit determined that, once the PTAB determination was removed from the analysis, factors (A) and (D) strongly favored granting a stay because a finding of invalidity by the PTAB would dispose of the entire litigation: the ultimate simplification of issues. The Federal Circuit considered the fact that VA filed a motion to amend the claims to weigh further in favor of a stay so as to avoid unnecessary claim construction. The Federal Circuit further determined that factor (B) strongly favored a stay because the case had been in the early stages of the litigation when the motion to stay was filed. With respect to factor (C), the Federal Circuit determined that VA’s one-year delay before filing suit and its failure to seek a preliminary injunction weighed against its claim that it would suffer undue prejudice from a stay in the litigation.
Judge Newman dissented, arguing that the district court did not abuse its discretion in balancing the four-factor test for staying litigation. She noted that a stay of litigation is not available as a matter of right when a petition for post-grant review is filed in the PTO. The majority, Judge Newman argued, effectively created a rule for an automatic stay in the case of a pending PGR proceeding.