Stays in Litigation Pending IPR or CBM Review Vary Significantly Based On Jurisdiction

By: Ryan Murphy

Inter partes review (“IPR”) and covered business method patent review (“CBM”) are useful tools for a defendant accused of infringing a patent in a district court litigation. IPRs and CBMs allow defendants to use an administrative process to determine validity, instead of relying solely on the courts.  Pursuing unpatentability via an IPR or CBM rather than within the district court is generally advantageous due to the shortened timeline, expertise of the agency, and lower costs associated with IPRs and CBMs.  Pursuing an IPR or CBM during a pending patent litigation may also provide the defendant an additional benefit – a litigation stay.  A litigation stay is advantageous to a defendant for many reasons, primarily due to the potential of cancelling the claims asserted in litigation in a timely and economic manner. 

Courts do not automatically grant a litigation stay when an IPR or CBM is commenced during a district court proceeding.  Rather, courts are tasked with making a determination on a case by case basis whether a litigation stay is appropriate.  In the case of an IPR, the court will apply a three factor test to determine whether a litigation stay is appropriate.  "District courts typically analyze stays under a three-factor test: (i) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (ii) whether a stay will simplify the issues in question and trial of the case; and (iii) whether discovery is complete and whether a trial date has been set." Murata Mach. USA v. Daifuku Co., Ltd., 830 F.3d 1357, 2016 WL 4073320, *3 (Fed. Cir. Aug. 1, 2016).  In the case of a CBM, Congress has provided a four factor test codified in the America Invents Act of 2011 to determine whether to grant a litigation stay.  “[T]he court shall decide whether to enter a stay based on-- (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.” America Invents Act of 2011 § 18(b)(1), Pub. L. No. 112-29, 125 Stat. 284, 331 (2011).

In weighing these factors and making a determination of whether to stay litigation, the courts also take into consideration whether the IPR or CBM has been instituted prior to the request for a stay and whether all the claims asserted in litigation are at issue in the IPR or CBM.  Additionally, courts in different jurisdictions appear to weigh these factors slightly differently resulting in inconsistent stay orders across jurisdictions.  

Jurisdiction

As of March 2017, a defendant seeking a litigation stay pending an IPR or CBM will have much different success depending on the jurisdiction as indicated below.

Additionally, courts have been more likely to grant a litigation stay pending a CBM compared to a pending IPR in both the Delaware District and California Northern District courts.  While in the Texas Eastern District, the likelihood of a litigation stay is about the same pending either a CBM or an IPR.

Accordingly, venue of the current litigation must be considered when basing a strategy on potentially receiving a stay of the litigation. While the other advantages of a CBM and IPR remain regardless of jurisdiction, advantages related to a stay must be considered on a case-by-case basis.

Additionally, courts have been more likely to grant a litigation stay pending a CBM compared to a pending IPR in both the Delaware District and California Northern District courts.  While in the Texas Eastern District, the likelihood of a litigation stay is about the same pending either a CBM or an IPR.

Accordingly, venue of the current litigation must be considered when basing a strategy on potentially receiving a stay of the litigation. While the other advantages of a CBM and IPR remain regardless of jurisdiction, advantages related to a stay must be considered on a case-by-case basis.