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Federal Circuit Weighs in on Stays for Post-Grant Review

July 24, 2014
Post by Blog Staff

The Federal Circuit has issued an opinion in VirtualAgility Inc. v. Salesforce.com, Inc., providing clarification regarding how court should properly determine whether to stay litigation during later-requested post-grant PTO proceedings. Under the America Invents Act, a district court is permitted, but not required, to grant such a stay. The statute also provides a list of four factors that the district court is to consider when deciding whether to grant a stay of litigation:

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

(B) whether discovery is complete and whether a trial date has been set;

(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

In January 2013 VirtualAgility Inc. ("VA") sued Salesforce.com, Inc. and a group of other businesses for infringement of U.S. Patent No. 8,095,413. Salesforce then filed a petition with the Patent Trial and Appeal Board (PTAB) for a post-grant review of the patent under the Transitional Program for Covered Business Method Patents (CBM Program), asserting that all of the claims were patent-ineligible.

In May of 2013, Salesforce and the other defendants filed a motion to stay district court proceedings in accordance with AIA Section 18(b)(1). In denying the motion, the District Court took into account the four factors provided by statute. The District Court conducted its own
review of the file history, and determined that the PTAB would not likely cancel some or all of the claims, despite the he PTAB’s determination that the claims of the ’413 patent are more likely than not invalid. The district court therefore determined that the first factor, simplification of the issues, was either neutral or slightly against a stay. The district court also determined that the fourth factor, burden of litigation, had substantial overlap with the first and would only slightly favor a stay. The court decided the second factor favored a stay because it was early on in the litigation, and the third factor weighed against a stay because VirtualAgility would suffer from lost market share and consumer goodwill, in addition to the fact that "VA would be unduly prejudiced 'because certain witnesses are of an advanced age.'"

The Defendants appealed the denial of the motion to stay to the Federal Circuit, which reversed the district court and concluded that the balance of the factors favored a stay pending the outcome of the CBM review. The court held that the district court's review the PTAB's determination that the claims of the ’413 patent are more likely than not invalid was an error as a matter of law because under the statutory scheme district courts have no role in reviewing the PTAB’s determinations regarding the patentability of claims that are subject to CBM proceedings.

The Federal Circuit agreed with the district court's determination that the second factor weighed in favor of a stay, but disagreed with the district court's determination that the third factor weighed heavily against a stay. In concluding that the undue prejudice factor weighed only slightly against a stay, the Federal Circuit held that the district court erred in failing to take into account the fact that VA did not move for a preliminary injunction, and that if VA needed injunctive relief as soon as possible it would have pursued a preliminary injunction, or filed suit earlier.

Ultimately, with three factors heavily favoring a stay and one slightly against a stay, the Federal Circuit Court of Appeals reversed district court and remanded the case with instructions to grant the motion to stay the litigation pending CBM review at the PTO.

The full opinion is available here.


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