Eastern District of Texas Issues First-Ever CBM-Related Denial of Stay Without Leave to Refile

February 03, 2014

During Congressional debate on the AIA, Senator Charles Schumer opined that "it is nearly impossible to imagine a scenario in which a district court would not issue a stay” in favor of a concurrent CBM proceeding. 157 Cong. Rec. S1053 (daily ed. Mar. 1, 2011). Until recently, Senator Schumer’s words rang true—every motion to stay brought under § 18 was granted, with a few denials issued where the Patent Trial and Appeal Board (“PTAB”) had not yet decided whether to institute. These denials were issued without prejudice with leave to refile if the PTAB instituted the review.

However, in VirtualAgility, Inc. v. SalesForce.com, Inc., No. 2:13-cv-00011-JRG (E.D. Tex. Jan. 8, 2014), Judge Gilstrap of the Eastern District of Texas issued the first denial of a CBM-related stay motion without leave to refile. Notably, while the motion itself was filed before the PTAB instituted review, the court denied it almost two months after the PTAB instituted CBM review of all claims of the only patent-in-suit.

The court’s opinion weighed the four factors courts “shall” consider under § 18 when deciding CBM-related stay motions. See AIA § 18(b)(1). The court’s analysis of these factors is summarized below.

Defendants have already filed for an immediate interlocutory appeal to the Federal Circuit, as provided for by § 18.

Denial of CBM-Related Stay: Four Factor Scorecard in VirtualAgility v. Salesforce.com
Factor	Analysis	Weight in Favor of Stay	Weight Against Stay
1. Whether stay will simplify issues and streamline trial;	Prior examination was “thorough[]” and considered numerous prior art references and importantly, section 101 issues. PTAB instituted review based on only one reference. Other non-prior art references “of particular importance” are involved in litigation but not before PTAB. Claims likely not invalid under section 101.		“essentially neutral, if not slightly against”
2. Whether discovery is complete and trial date is set;	“[R]elatively early stage of the proceedings.” Some discovery provided or obtained. 6 months of fact discovery remain. Claim construction activities yet to occur.	“in favor”
3. Whether stay will unduly prejudice the non-moving party;	“Credible evidence” that parties are direct competitors. Patentee risked potential loss of market share and consumer goodwill. Patentee is a “small company with private investors and limited resources.” Potential risk of loss of witnesses. Patentee’s failure to seek preliminary injunction not dispositive.		“heavily against”
4. Whether stay will reduce the burden of litigation.	Unlikely PTAB will cancel even a “substantial number” of asserted claims. Prior art references are before court that are not before PTAB, needing separate resolution. “[G]eneral relief from dual track litigation . . . is inherent to all CBM reviews . . . .”	“slightly in favor”

* All quotations are to the Court’s opinion.

Contacts

Michele C. Bosch: Partner; Washington, DC; +1 202 408 4193; Email

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