District Court Denies Motion to Stay Pending Ex Parte Reexamination Where Defendant Did Not Pursue Inter Partes Review

January 3, 2017

After filing an ex parte reexamination with the Patent Office, the defendant filed a motion to stay the action pending the ex parte reexamination.

In analyzing the request to stay the action, the district court noted that "[t]he decision of whether to stay this case during the potential ex parte reexamination is discretionary." The district court also explained that courts have inherent power to manage their dockets, including by ordering a stay during a patent reexamination. See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988). Other cases in this district have considered, in deciding whether to stay a case pending patent reexamination or review, "(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party." Telemac Corp. v. Teledigital, Inc., 450 F. Supp. 2d 1107, 1111 (N.D. Cal. 2006); see In re Cygnus Telecomms. Tech., LLC, Patent Litig., 385 F. Supp. 2d 1022, 1023 (N.D. Cal. 2005).

The district court then noted that there is a significant advantage in making a choice to pursue an ex parte reexamination instead of an inter partes review--the lack of estoppel from the outcome of the ex parte reexamination: Shortbus Flashers had a choice of applying for ex parte reexamination or inter partes review. The choice of ex parte reexamination was strategically advantageous to Shortbus Flashers because the result of the reexamination will have no estoppel effect on Shortbus Flashers's arguments here. See Interwoven, Inc. v. Vertical Comput. Sys., Inc., No. 10-cv-04645-RS, 2012 WL 761692, at *3 (N.D. Cal. Mar. 8, 2012). In other words, even if the PTO decided not to invalidate the patent after reexamination, Shortbus Flashers could continue to press an invalidity argument here. This is in contrast to inter partes review, which is "guaranteed to finally resolve at least some issues of validity." Avago Techs. Fiber IP (Singapore) Pte. Ltd. v. IPtronics Inc., No. 10-cv-02863-EJD, 2011 WL 3267768, at *5 (N.D. Cal. July 28, 2011); see 35 U.S.C. ยง 315(e)(2).

From this analysis, the district court concluded that the inter partes review was much less likely to impact the litigation. The district court also noted that the delay would be prejudicial to the plaintiff. "Meanwhile, Pro-Troll, which is a direct competitor of Shortbus Flashers, would be prevented from asserting its patent rights in court for as long as two years, with Shortbus Flashers having effectively pressed the pause button on the litigation while hardly needing to lift a finger. This argues against a stay. See Interwoven, 2012 WL 761692, at *3. This is so even acknowledging that Shortbus Flashers was diligent in seeking ex parte reexamination shortly after this lawsuit was filed."

Accordingly, the district court denied the motion for stay.

Pro-Troll, Inc. v. Shortbus Flashers, LLC
, Case No. 16-cv-04062-VC (N.D. Cal. Dec. 23, 2016)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.