The Interplay Between PTAB Review Proceedings and Patent Litigation Steve M. Auvil

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TOPICS

• Stays

• Claim construction

• Discovery

• Other

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OVERVIEW OF MOTIONS TO STAY

•  Six of eight contested motions to stay pending either an IPR or CBMR have been granted   Four granted in light of IPRs   Two granted in light of CBMRs   MTS denied in Clouding IP LLC v. Oracle Corp., No. 1:12-cv-00642

(D. Del., Jan. 25, 2013) (oral order) and Everlight Electronics Co., Ltd., et al. v. Nichia Corp., et al., No. 12-cv-11758 (E.D. Mich., Apr. 30, 2013)

•  Four stays granted before PTAB action on petitions •  Two stays granted after PTAB granted petition •  Clouding court denied prior to PTAB action on IPRs •  Everlight court denied after PTAB granted IPR •  Four non-contested stays granted in light of IPRs

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Semiconductor Energy v. Chimei Innolux Corp. et al. No: 8:12-cv-00021 (C.D. Cal., Dec. 19, 2012)

•  Semiconductor Energy sued for infringement of six patents   Answer and counterclaims filed six months after complaint   Motion to stay filed eight months after complaint   First IPR petition filed three days before motion to stay   Other IPR petitions filed shortly after motion to stay

•  Court granted stay and applied three factor test used for stays pending reexam:

1. Whether discovery is complete and whether a trial date has been set   Little discovery had occurred   No court briefs on claim construction   Trial set for 21 months from filing date of motion to stay

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2.  Whether a stay will simplify the issues and trial   Non-moving defendants agreed to be bound by estoppel   Higher threshold to grant an IPR = higher likelihood of simplification

3.  Whether a stay would unduly prejudice or present a clear tactical disadvantage to non-movant

  Filing IPR petition three or four months after extensive infringement contentions not an unreasonable delay

  Plaintiff did not seek PI, did not show prejudice from delay   Defendants and plaintiff not direct competitors

Semiconductor Energy v. Chimei Innolux Corp. et al. No: 8:12-cv-00021 (C.D. Cal., Dec. 19, 2012)

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Capriola et al. v. LaRose Indus. et al., No. 8:12-cv-2346 (M.D. Fla., Mar. 11, 2013)

•  Capriola et al. sued for (inter alia) infringement of one patent   Two IPR petitions filed three months after complaint   Motion to stay filed one day after IPR filing   Stay granted prior to PTAB action on petitions

•  Granting the stay, court noted:   Short timeframe for PTAB action would not prejudice   Higher threshold to grant IPR = higher likelihood of simplification   “In other words, if the PTO declines inter partes review, little time is

lost, but if PTO grants inter partes review, the promise is greater for an important contribution by the PTO to resolution of the governing issues in the litigation.”

  Initial party communications indicated arduous litigation ahead

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Star Envirotech v. Redline Detection et al. No. 12-01861, (C.D. Cal., Apr. 3, 3013)

•  Star Envirotech sued for infringement of one patent   IPR filed two months after complaint filed   Motion to stay filed three months after complaint   Motion to stay granted prior to PTAB action on petition

•  Court examined three factors used for stays pending reexam:

1. The stage of the litigation   Discovery not complete   Trial date not set

2. Whether a stay will simplify issues   Higher threshold to grant IPR = higher likelihood of simplification   Estoppel provisions will simplify

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Star Envirotech v. Redline Detection et al. No. 12-01861, (C.D. Cal., Apr. 3, 3013)

3.  Whether a stay will unduly prejudice the non-movant   Any IPR delay is minimized compared to reexam delay   Plaintiff failed to show undue prejudice from delay   If PTAB rejects motion, only short delay

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Bergstrom, Inc. v. Idle Free Systems, Inc. No. 3:12-cv-50254 (N.D. Ill., Mar. 21, 2013)

•  Bergstorm sued for infringement of one patent   IPR petition filed two months after complaint filed   Plaintiff filed preliminary IPR response five months after complaint filed   IPR granted six months after complaint filed   Motion to stay filed four days after IPR granted

•  Stay granted in a minute order

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Market-Alerts v. Bloomberg Fin. et al. No. 1:12-cv-00780 (D. Del., Feb. 5, 2013)

•  Market-Alerts sued defendants for infringement of one patent   CBMR filed four months after complaint filed   Motion to stay filed five months after complaint filed

•  Granting the stay, court analyzed four factors in Section 18(b)(1) of the AIA:

1. Stage of litigation   No court conferences or schedules   No substantive motions or rulings

2. Simplification of issues   Patent likely covers business method, proper for CBMR

–  Not a “technological invention”   High likelihood of invalidation or amendment in light of prior art

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Market-Alerts v. Bloomberg Fin. No. 1:12-cv-00780 (D. Del., Feb. 5, 2013)

3.  Undue prejudice to non-movant or clear tactical advantage to movant

  Four sub-factors applied: (1) timing of stay request, (2) timing of administrative review request, (3) status of review proceedings, (4) relationship of parties

1) Motion to stay filed less than a month after CBMR petition filed 2) CBMR petition filed less than one month after transitional program

took effect 3) Possible for no PTAB final decision until April 2014 (weighed in favor

of undue prejudice) 4) Parties not direct competitors, plaintiff’s primary business was patent

litigation   Sub-factors taken together weighed in favor of a stay

4.  Reduction of litigation burden   Congress intended to promote stays in light of CBMR   Stay would reduce litigation burden

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Progressive Casualty Ins. v. Safeco et al. No. 1:12-cv-01068 (N.D. Ohio, Apr. 17, 2013)

•  Progressive sued multiple parties for infringement of five patents   Previously stayed twice for ex parte reexams   Initial motion to stay pending CBMR (before instituted) denied without

prejudice   Renewed motion to stay granted after PTAB granted CBMR

•  Court analyzed four factors in Section 18(b)(1) of the AIA

1. Simplification of issues   Probable invalidity or amendment since CBMR instituted

2. Stage of litigation   Discovery not complete   No trial date set

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Progressive Casualty Ins. v. Safeco et al. No. 1:12-cv-01068 (N.D. Ohio, Apr. 17, 2013)

3.  Undue prejudice to non-movant or clear tactical advantage to movant

  Same four sub-factors as Market-Alerts: 1. CBMR petition filed as soon as procedure available 2. Motion to stay filed as soon as CBMR instituted 3. Eighteen month limit for CBMR would not unduly delay or prejudice 4. Parties were competitors, but plaintiff did not prove monetary

damages inadequate – Plaintiff licensed to other competitors

4.  Reduction of litigation burden   Prevent litigating in multiple fora   Conserves judicial resources

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Everlight Electronics Co., LTD, et al. v. Nichia Corp. et al. No. 12-cv-11758 (E.D. Mich, Apr. 30, 2013)

•  Everlight et al. filed for infringement of one patent   Defendants counterclaimed infringement of two patents   Defendants’ IPR petition granted 10 months after complaint filed   Defendants’ motion to stay and sever filed 13 days after IPR petition

granted

•  Denying motion, court analyzed three factors:

1. Prejudice To Non-Movant, Tactical Advantage To Movant   Litigating in two fora would prejudice plaintiffs   Jury would not know defendants also accused of infringement   Parties direct competitors

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Everlight Electronics Co., LTD, et al. v. Nichia Corp. et al. No. 12-cv-11758 (E.D. Mich, Apr. 30, 2013)

2.  Simplification Of Issues   Stay and severance would result in two trials   PTO does not resolve affirmative defenses

3.  Discovery Progress And Trial Date   Discovery likely needed anyway   Trial fourteen months away   Parties can include IPR result in SJ briefings

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UNCONTESTED STAYS IN LIGHT OF AN IPR

• Clearlamp, LLC v. LKQ Corp., No. 1:12-cv-02533 (E.D. Ill., Apr. 17, 2013)

• ADC Technology Inc. v. Kyocera Communications Inc., et al., No. 1:12-cv-06418 (N.D. Ill., Dec. 13, 2012)

• Network-1 Security Solutions, Inc. v. Alcatel-Lucent USA, Inc., No. 6:11-cv-492 (E.D. Tex., Mar. 05, 2013)

• The Board Of Trustees Of The University Of Illinois v. Micron Technology, Inc., No: 2:11-cv-02288 (C.D. Ill., Aug. 24, 2012)

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CLAIM CONSTRUCTION

• “Broadest reasonable interpretation” in review proceedings versus application of Philips in litigation • Less concern about clarifying terms for jury • Consider carefully impact of arguments made in one forum on the other proceedings • Patent owner can disavow claim scope in IPR or CBMR

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DISCOVERY AND LIMITS

•  Discovery much more limited in review proceedings

•  Consider whether discovery in litigation can or should be used in review proceeding and vice-versa   Parties must serve relevant information inconsistent with position

taken during review proceeding (17 C.F.R. § 42.51(b)(1)(iii)) •  Consider litigation protective order restraints on use of CBI

discovered in review proceeding and vice-versa •  Consider incorporating prosecution bar in litigation

protective order

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Mentor Graphics Corp. v. Teresa Stanek Rea, No. 1:13-cv-518 (E.D. Va., Apr. 29, 2013)

•  Mentor Graphics sued Acting Under Secretary Stanek for exceeding authority under § 315(b)   Mentor sued EVE for (inter alia) infringement of one patent   Dismissed pursuant to settlement agreement   Synopsys filed IPR petition six years later   No later than eight days after filing IPR petition, Synopsys acquired

EVE (according to Mentor complaint)   PTAB granted IPR   § 315(b) — “An inter partes review may not be instituted if the petition

requesting the proceeding is filed more than 1 year after the date on which the . . . privy of the petitioner is served with a complaint alleging infringement of the patent. . . . ”

 Mentor’s position: “privy of petitioner” includes petitioner’s predecessor in interest; privy relationship determined at the time of PTAB’s decision, not at time of petition

 PTO’s position: privy relationship must exist at time of infringement complaint

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SAP America, Inc. v. Versata Development Group, Inc., No. CBM2012-00001 (PTAB, Apr. 23, 2013)

 Versata successfully sued SAP for patent infringement (final judgment 09/09/2011)

 SAP appealed to Federal Circuit, did not challenge validity  SAP filed CBMR petition (09/16/12)  PTAB granted CBMR, hearing held (04/17/2012)  Federal Circuit upheld infringement and $391M judgment

(decision 05/01/2013)  What happens if PTAB invalidates patent?

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