The Software IP Report

Does a “Covered Business Method” Patent Review Warrant a Stay of Litigation?

A court in the Eastern District of Texas has declined to stay litigation where the United States Patent and Trademark Office is conducting a “Covered Business Method” review of the patent-in-suit under Section 18 of the America Invents Act.  VirtualAgility, Inc. v. Salesforce.com, Inc., Civil Action No. 2:13-cv-00011-JRG (E.D. Texas Jan. 9, 2014).

The court succinctly summarized the procedural history prior to the defendants’ motion to stay:

VirtualAgility filed  suit on January 4, 2013 against Salesforce and the other Defendants for allegedly infringing U.S. Patent No. 8,095,413 (the “‘413 Patent”). On May 24, 2013, Salesforce filed a petition for Covered Business Method (“CBM”) review of the ‘413 Patent under the AIA. On May 29, 2013, all Defendants jointly filed the instant motion seeking a stay of proceedings pending the PTO’s final resolution of the CBM review. On November 19, 2013, the Patent Trial and Appeal Board (“PTAB”) granted Defendants’ petition and instituted a CBM review of all claims of the ‘413 Patent.

In determining whether to grant a stay, the court considered the four factors laid out in the statute as follows, first noting that Congress did not include an automatic stay provision in the CBM transitional program.

The first factor was “whether a stay will simplify the issues in question and streamline the trial.”  The court did not accept the defendants’ argument “that the CBM review will simplify the issues . . . because the review may result in some or all of the claims being canceled.”  First, the court noted that the ’413 patent had “gone through a lengthy prosecution process” over 12 years, during which the USPTO had considered over 60 references.  The fact that the defendants had cited new references in the CBM proceeding was not persuasive.

Also, the court noted that during the prosecution of the ’413 patent, the examiner had made, and the applicant had overcome, a rejection under 35 U.S.C. § 101.  Further, the court was not swayed by the fact that the PTAB had held certain claims unpatentable under Section 101 in SAP Am., Inc. v. Versata Development Group, Inc., No. CBM2012-00001 (PTAB June 11, 2013).  In this case, the court thought the claims were distinguishable.  Here, the patent examiner had made the ground of rejection, subsequently overcome by the applicant, that carried the day in the SAP case, that claims recited “a generic general-purpose computer elements that failed to constitute ‘a meaningful limitation’ of the claim.”

A second factor, the status of the case, weighed in favor of a stay.  Discovery had begun, but fact discovery had more than six months to go.  Nonetheless, the court thought this factor outweighed by other factors.

For example, considering the third factor, the court agreed that the plaintiff and one of the defendants were competitors, and the plaintiff would be prejudiced by a stay.  Even if a CBM review only took 12 months, the plaintiff could be prejudiced by loss of market share.  Further, any time a case is stayed, the danger of witnesses becoming unavailable or forgetful must be taken into account.  Therefore, the potential prejudice to the plaintiff weighed “heavily against granting a stay.”

Likewise, the fourth factor, the burden on the court and the parties, weighed against a stay, albeit slightly.  While “a stay will relieve the parties’ burden of litigating the validity of the ’413 Patent in this Court and before the PTAB at the same time” this would be the case “in all cases involving CBM reviews.”  Congress could not have thought this burden by itself would justify a stay, or “the statute would have been written differently.”

Accordingly, taking the factors into account, one weighed slightly and another heavily in favor of denying the stay, while other factors weighed in favor, and slightly in favor, of granting the stay.  Therefore, the motion for a stay was denied.

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