By Lora Friedemann and Nikola L. Datzov
In a recent decision, the District of Minnesota joined several other courts in granting a stay of a patent case while the underlying “Covered Business Method” (CBM) patent is reviewed by the Patent Trial and Appeal Board (PTAB). See, Transunion Intelligence LLC v. Search Am., Inc., 2014 U.S. Dist. LEXIS 24290, at *11 (D. Minn. Feb. 26, 2014). The stay was based on Section 18 of the Leahy-Smith America Invents Act (AIA), which permits a district court to stay litigation while the PTAB considers a CBM patent’s validity. Under the statute, a CBM patent is “a patent that claims a method or corresponding apparatus for performing data processing operations utilized in the practice, administration or management of a financial product or service.”
The Familiar Stay Factors Get a Nudge in Favor of a Stay
In considering whether to grant a stay under the AIA CBM review provision, a court considers four factors: (1) whether a stay “will simplify the issues in question and streamline the trial”; (2) “whether discovery is complete and whether a trial date has been set”; (3) whether a stay would “unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party”; and (4) whether a stay “will reduce the burden of litigation on the parties and on the court.” AIA § 18(b)(1). If it seems like the factors inherently favor a stay, it’s because they do. In fact, the legislative history reveals that there is a “very heavy thumb on the scale in favor of a stay being granted . . . [and] should only be denied in extremely rare instances.” Although most courts have followed the legislative intent in favoring a stay, a stay is not automatic. The court may deny a motion to stay if the parties are competitors or the patent underwent a strong patent prosecution history. See, e.g., VirtualAgility, Inc. v. Salesforce.com, Inc., 2014 U.S. Dist. LEXIS 2286 (E.D. Tex. Jan. 9, 2014).
When to Push the Pause Button
For defendants charged with infringing a CBM patent, the CBM review procedure is a powerful tool. The likelihood of a stay is now an additional benefit that may help defendants reduce the cost and burden associated with patent litigation. Perhaps the most difficult decision for a defendant is when to push the pause button. The recent District of Minnesota decision pointed out that by waiting until the PTAB granted review – rather than upon the petition for a review – the defendant “did everything right.” So while waiting until review has been granted may work to disfavor a stay under the second factor, it undoubtedly bolsters the strength of the remaining factors for the party seeking a stay since the primary basis to grant review requires the petition seeking review to “demonstrate that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable.” 35 U.S.C. 324(a). Waiting until review has been granted, however, may not be necessary as at least one court has refused to treat the grant of review as a “threshold issue.” Unwired Planet LLC v. Google Inc., 2014 U.S. Dist. LEXIS 10564, at *14-15 (D. Nev. Jan. 27, 2014).
Can the Pause Button Also Serve as a “Fast Forward” Button?
Another potential benefit of a motion to stay is that the court may provide its initial outlook on the validity of the patent. In analyzing the first factor noted above, courts have considered and analyzed the likelihood that the PTAB may invalidate the patent. Thus, even if the stay is denied, the court’s analysis on the likelihood of validity or invalidity, particularly in conjunction with well-timed settlement discussions, may not only be a useful means of “pausing” the litigation but potentially even “fast forwarding” it. For instance, in the recent District of Minnesota decision, the court provided clear guidance on its prediction of the review: “Since the beginning of this case, the Court has had grave doubts about the validity of [the plaintiff’s] patents.”