There is no need to wait for the Patent Office to institute a review. According to a recent order from Magistrate Judge Margolis in the District of Connecticut, the district court may stay a patent litigation as long as the defendant has filed a petition at the Patent Office requesting a patent validity review under the Patent Office’s new Covered Business Method (“CBM”) review program. As part of the American Invents Act, Congress enacted the CBM procedure to provide an alternative to the expensive district court litigation process, allowing defendants to challenge qualifying business method patents at the Patent Office. After the defendant petitions for CBM review, the Patent Office then must decide on whether to institute a review and trial on the validity issues. Many district courts have refused to stay litigations until after the Patent Office decides to institute a CBM review (which can take up to six months after the petition has been filed). But according to Magistrate Judge Margolis’ order, a district court may stay the litigation process even before the Patent Office rules on whether to proceed with the CBM review.
The case was filed by Protegrity, a data security firm, accusing defendant Epicor of infringing two data security related patents. About 10 months after Protegrity filed its lawsuit, Epicor filed petitions for CBM review at the Patent Office, and asked the district court to stay the litigation.
In the granting the stay, the court looked to the four factors in the America Invents Act that a court must consider when determining whether to grant a stay of a litigation pending a Patent Office CBM review:
1) whether a stay, or the denial thereof, 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, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party;
4) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
The court found the first factor strongly favored a stay because CBM review had been requested for all of the asserted claims, noting “the simplification factor gains additional weight when all of the litigated claims are undergoing CBM review.” The court found the second factor favored a stay as well. Despite both parties having already produced substantial amounts of documents, fact and expert discovery was not finished, claim construction briefing had not commenced, and both the Markman hearing and the trial were still months away. Finally, the court found the fourth factor to strongly favor a stay:
“Looking prospectively, . . . it is ‘clear’ that a stay will reduce the future burdens of litigation for the parties and the Court, with respect to fact and expert discovery, claims construction, summary judgment and potentially trial, and particularly on the issues of noninfringement and invalidity defenses, depending on the results of the CBM review.”
Only the third factor did not support a stay in the court’s analysis. Magistrate Judge Margolis found this factor to be neutral, finding that no side gained a tactical advantage. Having found three of the factors weighed in favor of the stay, and one factor to be neutral, the court granted Epicor’s motion to stay the litigation pending the resolution of the CBM petitions.
The American Invents Act and the CBM review at the Patent Office are relatively new, and district courts vary significantly in how they interpret the Act and the stay procedures. As such, before considering and filing motions for stay, it is well worth understanding how your judge views the issue.
The case is Protegrity Corporation v. Epicor Software Corporation, Civil Action No. 3:13-CV-1781-JBA, and pending in the District of Connecticut.