New CBM Challenges to Derail Business Method Patent Assertions?
Last September 16th marked the one year anniversary of the enactment of the America Invents Act (AIA). This “patent reform” legislation introduced several new post grant avenues to challenge an issued patent at the USPTO. One of these new options is the very specialized, Transitional Program for Covered Business Method Patents, or “CBM” proceeding.
The CBM option is noteworthy in several respects: first, it is a post grant review challenge that is limited to a special class of patents (i.e., “covered business method” patents); second, only those challengers that have been sued or charged with infringement of a covered patent may petition the USPTO to initiate a CBM proceeding; third, the estoppel is limited to those grounds actually raised in the proceeding (that is, there is no “reasonably could have raised” estoppel); and finally, the CBM statutes include unique controls that virtually ensure that any ongoing litigation at the time of a CBM filing will be stayed pending USPTO review.
As explained above, the CBM proceeding presents an insignificant of estoppel risk. This “free shot” combined with the near certain stay of costly court proceedings presents a “pay to stay” opportunity that qualifying defendants may find hard to resist.
Assuming a petitioner can demonstrate the necessary standing to file a CBM petition, the CBM statutes are designed to guarantee a stay of the parallel court proceeding.
First, the CBM statute mandates that a court considering a motion for stay pending a CBM proceeding apply a four-factor test. Of course, this factor based analysis is already familiar to the courts, however, courts tend to apply a three factor test, namely:
- whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
- whether discovery is complete and whether a trial date has been set; and
- whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party.
The CBM statutes require all courts to consider a fourth step, which almost always weighs in favor of a stay:
- whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
The addition of this fourth factor is designed to tip the scales in favor of staying the district court proceeding. The legislative history of the AIA could not be clearer in this regard explaining that “[s]ince the entire purpose of the transitional program at the PTO is to reduce the burden of litigation, it is nearly impossible to imagine a scenario in which a district court would not issue a stay.” 157 CONG. REC. S1053 (daily ed. Mar. 1, 2011)
As if the above signals to the district courts were not clear enough the CBM statute also provides for interlocutory review of stay determinations; this review is also de novo. As such, even when the district court court refuses to stay the proceeding, it is effectively derailed for the months required to await the result of the interlocutory review.
It would seem foolish for district courts to deny motions to stay pending CBM proceedings only to have the certain interlocutory review effectively provide the same relief. Indeed, the CBM proceeding will only advance further by the time the CAFC considers the matter on de novo review. The CAFC may also consider the practical implications of upholding a stay denial pending CBM, that is, ensuring that two disputes on the same patent make it on their docket in the months ahead.