Since the America Invents Act’s institution of inter partes review (IPR) and covered business method review (CBMR) in September 2012, over 1,700 AIA petitions have been filed. That number is still on the rise, with nearly a third of those petitions filed in the last four months alone. These statistics are not surprising. For the defendant accused of patent infringement, these AIA proceedings have several potential advantages over litigation, including faster resolution, lower cost, a broader claim construction, no presumption of validity, a lower burden of proof (preponderance of the evidence), a patent-savvy judge, a high probability of success, and another form of settlement leverage. Given these potential upsides, defendants should be evaluating whether to file AIA petitions in almost every patent infringement litigation.
However, the potential advantages of AIA proceedings can be achieved primarily if the related litigation can be stayed or is on a substantially slower track than the AIA review. The AIA requires the Patent Trial and Appeal Board to decide whether to institute an IPR or CBMR within six months of the petition and, once instituted, the PTAB must issue its final decision within 12 months thereafter (with a possibility of six additional months for good cause).
Whether to file an AIA petition as part of your litigation strategy, therefore, depends to a large extent on the litigation case schedule and stay practices in the jurisdiction in which the litigation is pending. A defendant will also want to consider whether a potential transfer venue may be a better forum for an AIA petition and stay motion.
This article looks at three of the busiest patent litigation forums — the Eastern District of Texas, the Northern District of California, and the District of Delaware — and compares their typical scheduling orders and stay practices to help determine whether filing an AIA petition in that jurisdiction would be the right strategy. All of these jurisdictions evaluate stay motions for IPRs based on three related factors: the stage of the litigation, whether the stay will simplify the issues in the case, and whether the nonmoving party will be unduly prejudiced or tactically disadvantaged by the stay. For CBMRs, a fourth factor is also used — whether a stay will reduce the burden of litigation on the parties and the court.
The Eastern District of Texas
Courts in the Eastern District of Texas typically issue a preliminary docket control order at the initial scheduling conference setting forth a proposed case schedule. That order contains several dates which may not be moved “without good cause” — meaning something more than mere agreement of the parties. Those immovable dates include both the date for the Markman hearing and the trial date. Recently courts in the Eastern District have been setting Markman hearings no more than nine months from the initial scheduling conference, and trials no more than 18 months out.
Given this tight trial timeline, a strategic comparison of the likely PTAB review schedule to the court’s docket control order should be done as early as possible to determine the likely interplay between the PTAB review and the district court litigation — both for evaluating the chance for a stay and to ensure that, if no stay is granted, the best arguments for each respective forum can be preserved if both proceedings are simultaneous. For example, will invalidity contentions need to be served prior to your petition being filed? Will claim construction positions already have been exchanged prior to the PTAB’s institution decision (the decision of whether to accept the petition)? Will summary judgment be heard prior to a final decision by the PTAB?
To date, the Eastern District of Texas has mostly denied motions to stay. Oftentimes, the Eastern District will first defer its decision on whether or not to grant a stay until after the PTAB has issued its institution decision. This approach favors an eventual decision to deny a stay: if infringement and invalidity contentions, written and document discovery, and Markman briefs have already been exchanged by the time the court substantively evaluates the motion to stay, the plaintiff’s argument that it will be materially disadvantaged by a stay given the progress of the case will likely carry more weight. It should be noted, however, that the Federal Circuit recently reversed an order from the Eastern District of Texas denying a motion to stay pending a CBMR. Similarly, Judge John Love (who generally has granted stays more often) recently granted a stay pending a CBMR, and stated that stays pending a CBMR should rarely be denied. Thus, although the case law needs further development, stays pending at least a CBMR may now be more likely in the Eastern District of Texas.
Nevertheless, a defendant in the Eastern District of Texas considering an AIA petition (and particularly an IPR) must give serious consideration to whether it is willing to proceed concurrently in both forums and, additionally, whether it is willing to seek mandamus if the court denies its stay motion. In addition, it must understand that at least the cost and timing advantages of a PTAB review may be lost. Also, because of the high likelihood that the review will proceed concurrently with the district court litigation, the defendant needs to recognize it may have to constantly reconcile its positions in two proceedings: for example, it may have to give heightened attention to crafting claim construction positions in its AIA petition that are sufficiently reasonably broad to be accepted by the PTAB, while also not inconsistent with defendant’s concurrent non-infringement positions in the district court litigation. And, given the potential estoppel that may result from the PTAB review, it must ensure it has other strong defenses in the district court litigation that may still be relied upon if the patents survive PTAB review (e.g., non- infringement, prior use, on sale bar, inequitable conduct, and/or laches or equitable estoppel).
The Northern District of California
The Northern District of California has to date been on the opposite end of the spectrum from the Eastern District of Texas, almost always granting a stay during PTAB review. This is especially true where the parties are not direct competitors (for example, where the plaintiff is a nonpracticing entity) and where discovery is not yet complete and no trial date has yet been set. In fact, the Northern District recently granted a stay even where infringement and invalidity contentions were served, substantial discovery had been exchanged, and two of the patents were previously construed in the Eastern District of Texas.
The Northern District of California bases the majority of its stay decisions on the “simplification of the issues” factor, acknowledging that AIA proceeding may entirely eliminate the need for the litigation if the claims are cancelled and that the AIA proceeding will, at minimum, provide the “expert opinion” of the PTAB on the claims if some survive. This, combined with the fact that defendants will be estopped from making the same arguments in the district court that were raised in the PTAB proceeding, appears to have convinced the Northern District that the issues for its consideration will be substantially simplified if a stay is granted.
Defendants facing infringement allegations in the Northern District (especially from nonpracticing entities) should give favorable consideration to seeking PTAB review — especially given the substantial cost savings and shorter time to resolution.
The District of Delaware
The District of Delaware has been less consistent as to whether it will grant a stay pending PTAB review, with decisions depending more on the judge and circumstances of the particular case. Like the Eastern District of Texas, the District of Delaware will often defer its stay decision until after the PTAB has issued its institution decision. Once a PTAB review has been instituted, however, the District of Delaware carefully weighs each of the relevant factors and makes a stay determination on a case-by-case basis. Certainly, it seems unlikely that where discovery is complete, claim construction decided, and summary judgment briefed, the court will grant a stay. In contrast, where no scheduling order is yet in place and no discovery has yet been exchanged, the court will be more willing to entertain the possibility of staying the litigation. Where there are multiple patents asserted in the case, but only some challenged in front of the PTAB, defendants can expect a partial stay at best.
What is clear, however, is that defendants have a longer time to evaluate the strengths and weaknesses of filing an AIA petition, given the slower litigation track in the District of Delaware. While the District of Delaware has a form scheduling order in patent cases, the parties are largely free to set the dates to be included therein and to extend non-court-involved deadlines as necessary. Negotiating with plaintiff to set Markman and summary judgment deadlines further out in the schedule allows defendants contemplating seeking AIA review more time to evaluate the strengths and weaknesses of doing so, and increases the likelihood that a stay will ultimately be granted.
Defendants accused of patent infringement should always evaluate filing an AIA petition as part of litigation strategy. Making the filing, however, may be more beneficial in jurisdictions with a proven track record of granting stay motions (such as the Northern District of California) or that employ longer case schedules (such as the District of Delaware). Defendants in the Eastern District of Texas should be prepared to face an uphill battle with respect to getting a stay and to proceed concurrently before both the court and the PTAB if they ultimately decide to seek PTAB review.
The article was first published in Law360, New York.