Benefit Funding Sys., LLC v. Advance Amer. Cash Advance Centers Inc.

Addressing a motion to stay district court litigation pending a covered business method (CBM) review, the U.S. Court of Appeals for the Federal Circuit upheld a lower court’s ruling staying litigation, finding a district court should not review a determination by the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) that contested claims are more likely than not invalid in the posture of a ruling on a motion to stay. Benefit Funding Sys., LLC v. Advance Amer. Cash Advance Centers Inc., Case Nos. 14-1122; -1124; -1125 (Fed. Cir., Sept. 25, 2014) (Prost, C.J.).

Benefit Funding Systems asserted a patent against a group of defendants.  Later, one of the defendants, U.S. Bancorp, filed a petition with the PTAB requesting CBM review of the asserted claims.  After the PTAB instituted a CBM review on the sole basis of subject-matter eligibility under 35 U.S.C.  § 101, the district court granted the defendant’s motion to stay. The plaintiffs filed an interlocutory appeal, which solely renewed an argument already presented at the district court, claiming the PTAB is not authorized to conduct a CBM review based only upon § 101, and consequently the district court would not be bound by the results.

The Federal Circuit affirmed the district court’s decision under a de novo standard of review, as provided by 35 U.S.C. § 18(b)(2), on the single argument presented on appeal. In only addressing this argument, the Court did not evaluate the four factors used to determine whether to grant a motion to stay, as specified by § 18(b)(1), but it noted that the district court had found that all four factors weigh in favor of granting the stay. In addition, the Court did not address the substantive merits of the plaintiff’s argument, because the Court found the argument to be an impermissible collateral attack.

The Federal Circuit stated that the stay determination is not the time or the place to review the PTAB’s decision to institute a CBM proceeding. Furthermore, the Court found the questioning of PTAB’s authority to conduct the CBM review in disputing an order staying the litigation is also an impermissible collateral attack. The Court went on to explain that a district court, in the context of a stay determination, need not and should not analyze whether the PTAB might, at some later date, be determined to have acted outside its authority in instituting and conducting the CBM review.

Casey G. Campbell