April 24, 2015
By J. Derek McCorquindale; Jason L. Romrell; Daniel C. Cooley
Authored by Daniel C. Cooley, J. Derek McCorquindale, and Jason L. Romrell
A unique feature of the America Invents Act1 (AIA) permits an interlocutory appeal if a district court denies a stay of infringement litigation pending review of covered business method (CBM) patents at the U.S. Patent and Trademark Office (PTO). As was widely reported in the summer of 2014, the U.S. Court of Appeals for the Federal Circuit issued its first merits decision on this topic in VirtualAgility Inc. v. Salesforce.com, Inc.2
Shortly thereafter, in September, another panel similarly decided Benefit Funding Systems LLC v. Advance America Cash Advance Centers Inc.3 These decisions came to the court via the authorized interlocutory appeals established by AIA §18(b)(2), and analyzed whether the district courts had properly decided the stay requests under the four-pronged framework prescribed in §18(b)(1).
Intellectual Ventures II LLC v. JPMorgan Chase & Co.4 —an appeal under the same interlocutory provisions—now completes the trilogy. But Intellectual Ventures had a different outcome, divorced from the merits of the case. It was dismissed by the Federal Circuit on jurisdictional grounds. The critical difference was the timing relative to the Patent Trial and Appeal Board (PTAB) institution decision.
In Intellectual Ventures, JPMorgan Chase (JPMC) moved to stay infringement litigation on the ground that it intended to file petitions seeking CBM review of some of plaintiff's patents-in-suit.5 After two CBM petitions were filed, but before an institution decision by the PTAB, the district court denied JPMC's motion to stay. The trial court applied the statutory test of §18(b)(1) and found that since (1) all the patents-in-suit were not implicated in the CBM reviews sought, and (2) the infringement litigation would likely be resolved more quickly than the matters before the PTAB, the assertion that the CBM petitions would "reduce the court's workload was largely speculative, and was offset by [Intellectual Ventures'] right to a speedy trial."6 So, as had been done in VirtualAgility and Benefit Funding Systems, JPMC brought an interlocutory appeal to the Federal Circuit, invoking AIA §18(b):
(b) REQUEST FOR STAY.—
(1) IN GENERAL.—If a party seeks a stay of a civil action alleging infringement of a patent under section 281 of title 35, United States Code, relating to a [CBM] proceeding for that patent, the court shall decide whether to enter a stay . . . .
(2) REVIEW.—A party may take an immediate interlocutory appeal from a district court's decision under paragraph (1). The United States Court of Appeals for the Federal Circuit shall review the district court's decision to ensure consistent application of established precedent, and such review may be de novo.7
At least as of the date of the oral argument, "the PTAB had not acted on the CBMR petitions at issue."8
According to the majority, the JPMC appeal violated the final judgment rule that prevents parties from immediately appealing stay determinations.9 JPMC's assertion that the statute provided it an interlocutory appeal of right under AIA §18(b)(2) was directly questioned by the court:
[W]e have jurisdiction over an immediate interlocutory appeal from a district court's decision on a motion to stay "relating to a [CBMR] proceeding for that patent." Because the district court's order on JPMC's motion to stay considered two CBMR petitions pending before the PTAB, we must decide whether the proper interpretation of CBMR "proceeding" in §18(b)(2) encompasses pending CBMR petitions on which the PTAB has not yet acted.10
Noting that this was an issue of first impression (since in both prior interlocutory appeals under §18(b)(2) the PTAB had already instituted the CBM reviews), the court was required to construe the statute.11
The majority determined that the plain language and congressional record of the AIA supported a reading of §18 that differentiates a "petition" from the CBM "proceeding" itself.12 The majority held that the Federal Circuit's jurisdiction on appeal is lacking until an actual proceeding has been initiated by the PTAB, as opposed to merely petitioned for.13 It concluded that, "[a]bsent the existence of a proceeding, jurisdiction is not conferred upon us by §18(b)(2). . . . For the foregoing reasons, we do not have jurisdiction under §18(b)(2) of the AIA to consider an interlocutory appeal from a decision on a motion to stay until the PTAB institutes a CBMR proceeding."14 The court then dismissed for lack of appellate jurisdiction.
Judge Hughes dissented, finding that the majority's conclusion relied on a "narrow textual analysis" that was "at odds with the overall purpose of the AIA and the specific purpose of the CBM procedure."15 According to the dissent:
[O]ur review extends to stay decisions issued at any stage in the CBM process . . . . If we decline to review stay decisions before CBM review is instituted, parties inevitably will be forced to simultaneously litigate in district court and at the Patent Office. This is inconsistent with the purpose of §18 . . . .16
The dissent thus rejected the creation of so-called "pre- and Post-CBM review institution" appellate jurisdiction, and on the merits would have taken and affirmed the district court's decision denying the stay.17
This Federal Circuit determination of its own appellate jurisdiction has strategic implications upstream. Intellectual Ventures teaches that even if district courts can consider very early stay motions pending CBM review, it leads to an unreviewable decision if the PTAB has yet to grant the petition at the time of appeal.
Parties should consider this timing from the beginning, since it may take upwards of six or seven months for the PTAB to institute trial. There are benefits, of course, to parties filing their CBM petitions early in an infringement action, especially if a stay of parallel infringement proceedings is desired; some of the stay factors in §18(b)(1) cut heavily against a delayed request.
On the other hand, parties must also recognize that the grounds for the stay remain somewhat speculative before institution such that the trial court may justifiably want to wait to see the scope of PTO review, if granted at all.18
Thus, while litigants may elect to seek a stay of the infringement action early on, they may have to live with an unfavorable result if the district court disagrees and the PTAB has not yet acted. Perhaps recognizing some of these difficulties on all sides, a trend has been for district courts to deny pre-institution stay requests as premature while granting leave to refile if and when the PTAB institutes review. This obviates some of the concerns in the strict application of Intellectual Ventures, but the case serves as a reminder that the Federal Circuit's jurisdiction is always an important consideration when seeking interlocutory appeal. The Federal Circuit, like its sister courts, typically construes exceptions to the final judgment rule very narrowly.
Endnotes
1 Leahy-Smith America Invents Act (AIA), Pub. L. No. 11229, §18, 125 Stat. 284, 32931 (2011).
2 VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 111 U.S.P.Q.2d 1763 (Fed. Cir. 2014) (88 PTCJ 750, 7/18/14).
3 Benefit Funding Sys. LLC v. Advance Am. Cash Advance Ctrs. Inc., 767 F.3d 1383, 112 U.S.P.Q.2d 1336 (Fed. Cir. 2014) (88 PTCJ 1396, 10/3/14).
4 Intellectual Ventures II LLC v. JPMorgan Chase & Co., No. 20141724, 2015 BL 91941 (Fed. Cir. Apr. 1, 2015) (89 PTCJ 1516, 4/3/15).
5 Id., slip op. at 2.
6 Id. at 4.
7 AIA §18(b), 125 Stat. at 331.
8 Intellectual Ventures, No. 20141724, slip op. at 4.
9 Id. at 6 ("The parties agree that decisions on motions to stay ordinarily are not immediately appealable under the final judgment rule." (citing Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 27778 (1988) ("explaining that a denial of a motion to stay is not appealable because it is always subject to reconsideration and, thus, never truly final"))).
10 Id. at 78 (second alteration in original) (quoting AIA §18(b)(1), 125 Stat. at 331).
11 Id. at 8.
12 Id. at 812.
13 Id. at 1314 ("[O]ur conclusion that we do not have jurisdiction over an interlocutory appeal before the PTAB grants a petition and institutes a CBMR proceeding does not affect the district court's ability to exercise its discretion in deciding a motion to stay at any time . . .").
14 Id. at 1415.
15 Intellectual Ventures, No. 20141724, dissenting op. at 2 (Hughes, J., dissenting); see also id. at 3 ("The majority provides a reasonable textual analysis for its conclusion. But given the overall purpose and legislative history of the AIA and §18, I do not believe that Congress had any intent to so limit our jurisdiction by its choice of that specific statutory language.").
16 Id. at 34.
17 Id. at 67.
18 VirtualAgility, 759 F.3d at 1315 ("[I]t was not error for the district court to wait until the PTAB made its decision to institute CBM review before it ruled on the motion."); cf. Benefit Funding Sys., 767 F.3d at 1384 (observing that the trial court initially denied the stay request, but then reconsidered and granted it once the PTAB instituted CBM review on all claims).
America Invents Act (AIA), United States Court of Appeals for the Federal Circuit (CAFC), United States Patent and Trademark Office (USPTO), Aqua Products v. Matal
Reproduced with permission from BNA's Patent, Trademark & Copyright Journal, Vol. 89, No. 1796, 04/24/2015. Copyright © 2015 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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