Judges: Bryson, Gajarsa (author), Dyk

[Appealed from N.D. Cal., Judge Hamilton]

In Proctor & Gamble Co. v. Kraft Foods Global, Inc., No. 08-1105 (Fed. Cir. Dec. 5, 2008), the Federal Circuit vacated a stay order and remanded for consideration of the merits of The Proctor & Gamble Company’s (“P&G”) motion for preliminary injunction.

P&G owns U.S. Patent No. 7,169,418 (“the ’418 patent”), which is directed to a plastic container intended to replace conventional metal cans for marketing and storing ground, roast coffee. After the ’418 patent issued, Kraft Foods Global, Inc. (“Kraft”) filed a request for inter partes reexamination of the ’418 patent. The PTO granted Kraft’s request for reexamination, but simultaneously confirmed the patentability of every claim of the ‘418 patent. A month later, Kraft introduced a plastic coffee container for its Maxwell House brand of ground, roast coffee.

P&G sued Kraft for infringement of the ‘418 patent and filed a motion seeking a preliminary injunction against Kraft’s continued use of its plastic containers. Kraft, in turn, filed a motion for a stay pending its appeal to the BPAI of the examiner’s decision on reexamination, confirming the patentability of the claims of the ‘418 patent.

The district court removed from its calendar the scheduled hearing for P&G’s preliminary injunction motion, stating that it could not determine P&G’s likelihood of success on the merits without construing the claims. The district court further stated that it would reschedule the hearing: (1) if it did not grant Kraft’s motion to stay, and (2) after any claim construction disputes had been resolved. The district court subsequently granted Kraft’s motion to stay the case and concluded, without analysis, that “plaintiff’s pending motion for preliminary injunction is moot.” Slip op. at 3.

P&G filed a notice of appeal and Kraft filed a motion for the Federal Circuit to dismiss the appeal for lack of jurisdiction. Kraft argued that: (1) the appeal is premature because the district court’s stay order is not a final judgment on the merits and does not expressly deny an injunction; and (2) P&G cannot demonstrate that it would suffer irreparable harm without an immediate appeal. A motions panel of the Court denied Kraft’s motion to dismiss, reasoning that (1) the district court’s statement characterizing P&G’s preliminary injunction motion as moot might be an express denial; and (2) “an order argued to have the effect of denying a request for preliminary injunction ‘readily satisfies’ the requirement to show irreparable harm.” Id.

On appeal, the Court concluded it had jurisdiction pursuant to 28 U.S.C. § 1292(c)(1) because the district court’s order had the practical effect of denying P&G’s motion for preliminary injunction. Because the Court concluded it had jurisdiction to review the effective denial of P&G’s motion, it concluded it also had jurisdiction over the district court’s decision to stay the case pending reexamination before the PTO. Turning first to the denial of P&G’s motion for preliminary injunction, the Court concluded that the district court abused its discretion by effectively denying the motion without considering and balancing the four required factors: “(1) the likelihood of the patentee’s success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest.” Id. at 7 (quoting Oakley, Inc. v. Sunglass Hut Int’l, 316 F.3d 1331, 1338-39 (Fed. Cir. 2003)). The Federal Circuit concluded that the district court expressly refused to consider the first three factors when it stated it could not evaluate P&G’s likelihood of success without first construing the claims, and when it refused to consider arguments regarding irreparable harm and the balance of hardships unless the stay was not granted. Accordingly, the Federal Circuit concluded that the district court abused its discretion by issuing the stay, thereby effecting a denial of P&G’s preliminary injunction motion, without balancing the four factors.

The Court further noted that, on remand, the district court should consider the current posture of the inter partes reexamination proceedings at the PTO when evaluating P&G’s likelihood of success on the merits. The Court, however, cautioned that “the PTO does not appear to equate the ‘substantial new question of patentability’ standard for whether reexamination should take place with the ‘substantial question of validity’ standard by which a defendant may prevent a patentee from demonstrating a likelihood of success on the merits.” Id. at 8 (citations omitted). The Court also noted that, on remand, the district court’s consideration of the four factors may require it to interpret the claims, which are presently under review by the PTO. The Court advised the district court to monitor the proceedings before the PTO to ascertain whether its construction of any of the claims of the ‘418 patent has been impacted by further action by the PTO or any subsequent proceedings.

Turning next to the district court’s stay order, the Court rejected P&G’s argument that the district court lacked the authority to stay the case at Kraft’s request because 35 U.S.C. § 318, the statute authorizing a stay once an order for inter partes reexamination of a patent has been issued, only authorizes a stay upon the request of the patentee, not of an accused infringer. Reminding that “[t]he Supreme Court has long recognized that district courts have broad discretion to manage their dockets, including the power to grant a stay of proceedings,” the Court concluded that a defendant may seek a stay under the district court’s inherent power. Id. at 10-11.

For the same reasons that the Court vacated the effective denial of P&G’s motion for preliminary injunction, the Court vacated the stay and remanded to the district court, noting that the district court “remains free to exercise its discretion and stay this case pending reexamination should either party so move.” Id. at 11. The Court cautioned, however, that “both a preliminary injunction and a stay ordinarily should not be granted at the same time.” Id. Specifically, the Court noted that a grant of a preliminary injunction followed by a stay of the district court proceedings “could subject an accused infringer to unfair and undesirable delay in reaching a final resolution.” Id. at 12.