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Grant of stay while preliminary injunction motion pending abuse of discretion
January 05, 2009
In a recent decision, the Federal Circuit found that a district court's grant of a stay pending inter partes reexamination without considering the patentee's pending motion for a preliminary injunction was an abuse of discretion. The Federal Circuit held the grant of the stay effectively denied the preliminary injunction motion, thereby making the stay order appealable. The court then held the district court should have considered the preliminary injunction motion and, after considering the four preliminary injunction factors, made a determination regarding the injunction before staying the proceedings for the reexamination.

More detail on Procter & Gamble Co. v. Kraft Foods Global, Inc. after the jump.

Procter & Gamble (P&G), makers of Folgers coffee, is the owner of U.S. Patent 7,169,418 directed to a plastic container for storing and marketing coffee grounds. The P&G patent issued on January 30, 2007. On March 8, 2007 Kraft, makers of the competing Maxwell House coffee, filed a request for inter partes reexamination of the '418 patent. The request for reexamination was granted on June 7, 2007, and the USPTO simultaneously confirmed the patentability of every claim. Kraft then introduced a plastic container of their own in July 2007.

P&G filed suit roughly a month later and requested a preliminary injunction. Kraft requested a stay of the litigation pending the result of the reexamination, as it had appealed the examiner's decision to confirm the patentability of the claims to the Board of Patent Appeals and Interferences. Reasoning that consideration of the injunction request would require construing the claims of the patent, the district court removed the hearing on the injunction from its docket and indicated that it would consider the motion after claim construction disputes were resolved provided that the stay was not granted. At a later hearing, the district court granted the stay and, without providing any supporting analysis, stated that plaintiff's pending motion for a preliminary injunction is moot.

P&G appealed the order, claiming that it was effectively a denial of the request for a preliminary injunction. P&G argued that the district court abused its discretion by effectively denying the motion for the injunction without performing the appropriate four factor analysis and that the district court's order granting the stay violated 35 U.S.C. § 318, which provides that a patent owner can request a stay pending inter partes reexamination. Kraft argued that the appeal was premature because the stay order was not a final judgment on the merits nor did it expressly deny the injunction. Kraft further argued P&G was unable to demonstrate irreparable harm without immediate appeal.

The Federal Circuit vacated the stay. The court first addressed Kraft's jurisdictional arguments. The Federal Circuit turned to 28 U.S.C. § 1292, which provides that the Federal Circuit has exclusive jurisdiction over appeals from interlocutory orders granting, continuing, modifying, refusing or dissolving injunctions in any case over which the court would have jurisdiction of an appeal of a final judgment under 28 U.S.C. § 1295. Based on this understanding, the court held there would be jurisdiction over the appeal if the trial court's stay order had the practical effect of denying P&G's motion for a preliminary injunction. The Federal Circuit found the district court's statement that the motion for the preliminary injunction was moot effectively denied the motion, and was therefore sufficient to confer jurisdiction under § 1292.

The court then turned to P&G's argument that the denial of the injunction was an abuse of discretion because the district had not analyzed the four-factor injunction test. The court agreed with P&G that it was an abuse of discretion for the district court to effectively deny the motion for a preliminary injunction without first considering the likelihood of P&G's success on the merits, the irreparable harm to P&G if the injunction was not granted, the balance of hardship between the parties, and the public interest. The court particularly emphasized the current posture of the inter partes reexamination proceedings at the PTO and specifically ordered the district court to consider this situation when evaluating the likelihood of success on the merits on remand.

Finally, the court turned to P&G's argument that the district court's stay order violated § 318. Specifically, P&G argued that the text of the statute only allowed the patent owner to obtain a stay of the pending litigation such that the district court was without power to stay the litigation at the request of Kraft. The statute provides that once inter partes reexamination is granted, "the patent owner may obtain a stay of any pending litigation which involves an issue of patentability of any claims of the patent which are the subject of the inter partes reexamination order, unless the court before which such litigation is pending determines that a stay would not serve the interests of justice." The Federal Circuit disagreed, noting that prior to the enactment of the statute, district courts had the power to issue stays pending reexamination. Citing the principle that statutes will not be assumed to alter the backdrop of existing law sub silentio, the court held district courts still have the power to stay the litigation based on the inherent power to control the disposition of its docket. As a result, the Federal Circuit concluded the statute should be read an enabling a patentee to obtain a stay of district court proceedings more readily than it could otherwise when its patent is subject to inter partes reexamination by the PTO.

Based on this reasoning, the Federal Circuit vacated the stay and remanded the case for consideration of the motion for a preliminary injunction. The court noted that generally a stay of litigation and a preliminary injunction are typically mutually exclusive options as both rely upon the determination of likelihood of success on the merits (the injunction requires a likelihood of success on the merits while the stay relies upon substantial new questions of patentability in the reexamination process which naturally brings likelihood of success into question).

To read the full opinion on Procter & Gamble Co. v. Kraft Foods Global, Inc., click here.

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