Patent Litigation Stayed Before PTO Grants Reexam Request

Just last week I wrote an article about district courts being increasingly reluctant to order a stay of a pending patent infringement litigation even when the United States Patent Office has granted reexamination. To quote the words of Lee Corso of ESPN College Football fame, “not so fast my friend!” Courtesy of the Docket Report daily patent litigation newsletter, I recently stumbled across the Order of the United States Federal District Court for the Southern District of Georgia in E-Z-Go v. Club Car, Inc. On January 12, 2010, the Southern District of Georgia issued a stay even though the United States Patent and Trademark Office has not yet granted the request for inter partes reexamination of the patent in suit. Holy psychosis Batman! Obviously there is a wide difference of opinion among district court judges with respect to whether to stay pending patent litigation pending reexamination.

While attempts to obtain a stay are not always successful, as illustrated recently by the January 5, 2010, refusal to order a stay by the United States District Court for the Eastern District of Texas in National Oilwell Varco, L.P. v. Auto-Dril, Inc., and the December 23, 2009, refusal to order a stay by the United States District Court for the Eastern District of Virginia in Telecommunication Systems, Inc. v. Sybase 365, Inc., given that the decision to order a stay of patent litigation pending reexamination is discretionary, much depends upon where you are litigating the case, and according to Tara Williams, a patent litigator with the Law Offices of James Scott Farrin, “it is becoming more common for defendants to request a stay pending a reexamination proceeding.”

Michael Specht, a director in the Electronics Group of Sterne, Kessler, Goldstein & Fox and Editor of The Reexamination Center, says that the decision of the Southern District of Georgia “appears to be consistent with Courts’ increased willingness to order stays before the PTO grants a reexamination request, provided other factors favor a stay.” But isn’t it a little odd that the district court ordered a stay prior to the the Patent Office granting reexamination? Apparently not. Specht pointed out that “courts appear willing to take as a given that if a reexamination request is made, it will be granted.” With upwards of 90% of requests for reexamination being granted by the Patent Office, it does seem like a foregone conclusion that the USPTO will at least want to take another look at the overwhelming majority of patents when asked to do so.

Specht also provided this analysis a couple other recent cases cases where a stay was ordered without the Patent Office having made a decision on the reexamination request:

Specifically, in the past month, at least two other stay orders have been issued in which the PTO had not made a determination to grant or deny a pending reexamination request. In the case of Alien Technology v. Intermec in the United States District Court of North Dakota, the Court granted a stay before the PTO made a determination on a pending reexamination request. The stay was conditional in that it was to last until mid-February 2010 or until the PTO decision on the reexamination. In the present case, the Court essentially made the stay conditional on the PTO decision, when it noted that the stay may be lifted if the PTO denies the request. In Synventive Molding Solutions v. Husky Injection Molding Systems in the District Court of Vermont, the Court denied a motion to stay litigation pending reexamination. The Court’s order issued before the PTO decision on a reexamination request. In fact, Husky’s reexamination request had not been granted a filing date because of an incomplete filing. While the Court denied the request, the denial did not appear to hinge on the stage of the reexamination, but rather on other factors. The Court never mentioned the stage of the reexamination in it analysis, suggesting that this was a non-factor.

Still, I can’t help but believe ruling of the Southern District of Georgia is at least a little bizarre, although admittedly, I am projecting a bit here since my view tends to be more in line with those district court judges that refuse to grant a stay of litigation. While it is true that the USPTO will grant the overwhelming majority of requests for reexamination, and while it is true that the overwhelming majority of those cases result in either the loss or modification of claims, the Patent Office takes several years to conclude many, if not most, reexamination proceedings. Allowing the status quo to continue in the meantime seems fundamentally unfair, particularly given that a patent is a wasting, time limited asset.

“I tend to view things from the perspective of an independent inventor, or small entrepreneur,” says Tara Williams, who primarily represents inventors and small businesses on a contingency basis in patent litigation. “From that perspective, the stay can greatly prolong the patent enforcement process, and may impact the patent holder’s ability to maintain the infringement suit, and thus it’s value. The granting of a stay, as well as the increasing tendency for courts not to grant preliminary injunctions, allows the infringement to continue during the pendency. For a small inventor who may have little or no market presence, this result essentially keeps the small inventor out of the market to the point where re-entry is not possible, or is worthless.”

It should come as no surprise to anyone that I agree with Tara Williams. As an entrepreneur I just shudder to think about the delay that is imposed while a patentee waits for the Patent Office to go through the excruciatingly slow reexamination process. As a former law professor, and one who has taught both Patent Litigation and Civil Procedure, I find it extremely distasteful that the entire process would be made to drag out for so long. For example, assuming the USPTO gets through a completed reexamination in 3 years, and there is no appeal to the Federal Circuit, then the patent owner starts a patent litigation, which itself would last at least 2 to 3 years in the best of situations, except perhaps in the Eastern District of Virginia, where it might last for 6 to 8 months, which is a problem all onto itself.

Perhaps 6 years later the patent owner has a resolution of the patent litigation, and now gets to stand in line for the inevitable appeal to the Federal Circuit, which may send the case back to the district court. When patent litigations are stayed pending reexamination the entire patent infringement litigation ordeal can easily string out for a decade. I say let the litigations proceed on a parallel path along with reexamination. Perhaps if the litigation ends before the reexamination proceeding issue a stay then so the reexamination can catch up and then have the appeal to the Federal Circuit, which is inevitable given the frequency with which they overrule district courts, should be consolidated. By proceeding with parallel paths simultaneously the entire matter can get to the Federal Circuit quicker, and they will be the ones who ultimately decide what happens anyway.

In any event, Specht believes we will see more situations where defendants will file requests for a stay before the Patent Office makes a decision on whether to grant a reexamination request. He said: “As long as the PTO’s reexamination request grant rates remain so high, I think it is likely that Court’s will continue to grant stays where the totality of the other factors favor a stay.” He is undoubtedly correct. While there will be some judges who simply will not want to delay litigation, there will be others who will be all too happy to let the Patent Office sort out the mess first, and if they are going to grant more than 90% of the requests that should mean we will continue to see extreme differences in the way the various district courts handle requests for stays pending reexamination.

Now, before leaving this topic, let me plant a seed for future debate. Patent Reform efforts have continued over the years to push post-grant review procedures. With the mess the way it is now, with how long it takes the Patent Office to handle reexamination proceedings and with as many requests as they grant, if Congress is going to provide enhance post grant review in the future they had better pony up the funds! Funds are needed now at the USPTO as it is. The USPTO simply cannot withstand any more unfunded mandates while at the same time serving its vital role in our innovation based economy.