District Court Stays Patent Case Pending Reexamination Despite Argument That Backlog at PTO after America Invents Act Would Slow Reexamination

November 7, 2012

Defendants BRP US Inc. and Bombardier Recreational Products, Inc. ("Bombardier" or "BRP") filed a motion to stay pending the inter partes reexamination of the patents-in-suit asserted by Polaris Industries, Inc. ("Polaris"). Polar manufactures recreational vehicles, including snowmobiles and Polaris obtained patents for rear suspension technology for snowmobiles. Polaris asserts the designs related to these patents improve rider comfort over rough terrain.

Bombardier is a Canadian recreational vehicle company that manufactures the "Ski-Doo" line of snowmobiles and it is also a competitor of Polaris. Bombardier introduced a rear suspension technology for snowmobiles called "rMotion." Polaris alleged Bombardier's suspension technology infringes the patents-in-suit. Prior to filing the patent infringement action, Polaris sent Bombardier a notice of infringement letter. As a result, Bombardier initiated an inter partes reexamination of the patents. The patent infringement action was filed one week after the reexamination. The PTO subsequently granted the request for reexamination and Bombardier moved to stay the case.

After reviewing the standards for a stay pending reexamination, the district court first analyzed the standard of undue prejudice or clear tactical disadvantage. The district court found that this factor weighed in favor of Bombadier. "Polaris argues that the inter partes reexamination process will take an unusually long period of time, but Polaris' estimate of the reexamination process is speculative. In addition, Polaris has not offered evidence beyond conclusory assertions that it will suffer a loss of market share not compensated by money damages. In BRP's favor, BRP filed timely requests for reexamination, and Polaris has not shown the use of dilatory tactics by BRP."

The district court also was not persuaded that the recent enactment of the America Invents Act would cause an undue delay by flooding the PTO with reexaminations. "Regarding the length of the reexamination process, Polaris argues that the recent influx of requests for reexamination at the PTO will cause extraordinary delay. The Leahy-Smith America Invents Act (the "Act") amended the inter partes reexamination process for all requests filed after September 15, 2012. Pl.'s Mem. Opp'n Mot. Stay [Docket No. 32] ("Pl.'s Opp'n") 6; Leahy-Smith America Invents Act, Pub. L. No. 112-29, sec. 35, 125 Stat. 284, 341 (2011). Because of this deadline, the PTO received an unusually large volume of reexamination requests in September 2012. Decl. Anthony R. Zeuli [Docket No. 33] ("Zeuli Decl.") Ex. F. At oral argument, Polaris argued that this high volume of requests will cause the PTO's reexaminations of the '285 and '923 patents to extend to 7 to 10 years."

The district court continued by finding that "the actual effect of the Act on the PTO's reexamination process remains to be seen. See Inogen, Inc. v. Inova Labs, Inc., No. SACV 11-1692-JST, 2012 WL 4748803, at *3 (C.D. Cal. Mar. 20, 2012) (noting reluctance to rely on current reexamination statistics given the Act's amendments). The court in Inogen posited that because the Act raised the threshold for granting requests for inter partes reexaminations (termed "inter partes reviews" under the Act), the PTO may actually grant fewer requests in the future. Id. Given the uncertainty of the PTO's future workload, Polaris has not provided persuasive evidence that the reexaminations of the '285 and '923 patents will be pending for nearly a decade. On the other hand, BRP promptly requested the reexaminations after the dispute between the parties emerged, and BRP has not engaged in improper litigation tactics that might otherwise warrant declining a request for a stay."

The district court also found that Polaris' argument that monetary damages would be insufficient was not supported by evidence that there would be undue harm in the marketplace. "Regarding Polaris' claim that money damages are insufficient, Polaris has not offered any evidence that a stay will unduly harm its position in the marketplace. Polaris offers only conclusory assertions that BRP's sales of allegedly-infringing products are "potentially" displacing Polaris sales. Pl.'s Opp'n at 11. Without more, such assertions do not demonstrate undue prejudice. Inogen, 2012 WL 4748803, at *3. For instance, in Hysitron v. Inc. v. MTS Sys. Corp., No. 07-CV-01533, at *5 (D. Minn. June 26, 2007), the plaintiff introduced evidence of underselling by the allegedly-infringing defendant, which resulted in untenable market pressure. Here, Polaris has offered no evidence of underselling or any other market pressure. And unlike in IMAX Corp. v. In-Three, Inc., 385 F. Supp. 2d 1030, 1032-33 (C.D. Cal. 2005),
the Court here does not face "myriad issues" that would inevitably remain after the reexaminations. On the contrary, the parties' claims relate exclusively to the patents at issue. If Polaris is entitled to damages for loss of market share from BRP, those damages will continue to accrue during the stay of this litigation."

In terms of the second factor, simplification of issues, the district court found that this also weighed in favor of the stay because of the preclusive impact on Bombadier's invalidity arguments. "The second factor for determining the appropriateness of a stay also favors BRP. BRP contends that unlike an ex parte reexamination, the already-granted requests for inter partes reexaminations will have a preclusive effect on BRP's invalidity arguments. Defs.' Reply Supp. Mot. Stay [Docket No. 35] ("Defs.' Reply") 3-4; 35 U.S.C. § 315(c) (2011).1 If the PTO upholds some or all of the reexamined claims, BRP will be estopped from asserting any invalidity argument it "raised or could have raised during the inter partes reexamination proceedings." §315(c). Alternatively, if the PTO invalidates some or all of Polaris' patent claims, the reexaminations could eliminate issues of validity and infringement altogether. Middleton, Inc. v. Minnesota Mining & Mfg. Co., No. 4:03-CV-40493, 2004 WL 1968669, at *10 (S.D. Iowa Aug. 24, 2004) (citations omitted). In either scenario, or in some combination of both, the PTO's reexaminations will simplify the issues at trial."

The last factor, the stage of the litigation, also favored a stay because the litigation was in its early stages. "The final factor also favors BRP. Courts hesitate to stay litigation where the case has proceeded through discovery or even reached the "trial ready" phase. See, e.g., Ecolab, 2007 WL 1582677, at *2-3. In this case, litigation between the parties has barely begun. The Court has not issued a scheduling order under Federal Rule of Civil Procedure Rule 26(f), and neither party claims to have served or responded to any discovery. The posture of this case is different than that in Ecolab, where litigation had proceeded for over two years and "nothing [was] left but to try the case." Id. at *2. A stay in this case promotes judicial efficiency."

Accordingly, the district court stayed the litigation pending the reexamination.

Polaris Industries, Inc. v. BRP US Inc., Case No. 12-01405 ADM/SER (D. Minn. Oct. 29, 2012)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.