In a 2-1 decision, the Federal Circuit in VirtualAgility, Inc. v., Inc., held that the district court abused its discretion in denying a motion to stay pending CBM review.

Specifically, the Court determined that the district court misapplied the four-factor test codified in AIA Section 18(b)(1) as follows:

  • Simplification of Issues: This factor heavily weighed in favor of granting a stay because the PTAB “expressly determined that all of the claims are more likely than not unpatentable” when it instituted CBM review. The Court held that “[t]he district court erred as a matter of law to the extent that it decided to ‘review’ the PTAB’s determination that the claims of the [] patent are more likely than not invalid in the posture of a ruling on a motion to stay,” deeming the district court’s challenge of that determination an “improper collateral attack on the PTAB’s decision to institute CBM review.”
  • Whether Discovery is Complete and a Trial Date Set: The district court correctly found that this factor favored a stay because the litigation was “still at its infancy.” Though not impacting the decision, the Federal Circuit clarified that “the time of the motion is the relevant time to measure the stage of litigation,” not the time of the ruling.
  • Undue Prejudice: The district court “erred in finding that the undue prejudice factor weighed heavily against a stay … at best, this factor weighs slightly against a stay.” The Court noted that “the evidence of competition [between the parties] is weak and the patentee’s delays in pursuing suit and seeking preliminary injunctive relief belie its claims that it will be unduly prejudiced by a stay.”
  • Reducing Burden of Litigation: While confirming that this factor must be separately weighed, the Court held that this factor weighed heavily in favor of a stay for many of the same reasons outlined in the first Simplification of Issues factor.

Judge Newman dissented, stating that the decision “effectively creates a rule that stays of district court litigation pending CBM review must always be granted,” even though the AIA does not make stays mandatory and the district court retains “discretionary authority to manage its cases.”

This decision provides additional support for defendant-petitioners seeking stays pending CBM review when CBM petitions and stay motions are filed early in litigation, and particularly after receiving the PTAB’s decision to institute CBM review.