PTAB 4 Years In: If you let me stay – district court and ITC trends

Ahead of the four-year anniversary of PTAB trials being available on September 16 this year, Managing IP is publishing two articles a week revealing 10 issues to watch at the Board. 

Visit www.managingip.com/ptab to see which other articles have been published in the series so far.

A hot issue ever since the Patent Trial and Appeal Board (PTAB) was created with the mandate of being a quick and efficient alternative to district court litigation is how the courts would treat motions to stay. District court deference to the Board has been far from certain.

The stay motion success rate has been fairly constant in four years of the PTAB. 

According to figures provided to us by LegalMetric, which tracks PTAB statistics, the overall success rate in the first half of 2016 for motions to stay pending inter partes review (IPR) and covered business method (CBM) review proceedings was 59.6%. 

This compares with a success rate of 61.0% from when proceedings became available in September 2012 to the end of 2015. While the stay motion success rate has stayed constant nationwide, this is not true for certain districts. Three districts – the Northern District of California, the District of Delaware, and the Eastern District of Texas – typically make up one-third to one-half of all such stay motions.

In the first half of 2016, the success rates in northern California and Delaware fell, while the success rates in eastern Texas and the rest of the country rose somewhat.

Seasoned patent observers will not be surprised to learn the Eastern District of Texas is the reverse of the overall trend, with a success rate for motions to stay in the district in the 30s overall. But in the first half of this year, the rate was 41.7% compared with 38.3% before 2016. 

Interestingly, the chance of success increases greatly once the Board has granted institution. 

According to LegalMetric figures, nationwide the success rate pre-institution is 54.1% and post-institution is 67.4%.

“So it significantly increases your success rate to hear the PTAB say, ‘Yes, we are going to proceed with a trial,’” says Steven Baughman, partner and chair of the post-grant Patent Office invalidity challenge practice at Ropes & Gray in Washington, DC. Some districts display disparities, however.

In the Eastern District of Texas, the chance of success jumps greatly post-institution, to 60.5% from just 17.6% pre-institution.

In the District of Delaware, the chance of success actually falls post-institution – to 50.0% from 58.9% pre-institution.

Despite this, Baughman recommends asking for stays early.

“I think parties are well served to seek a stay when they file their petition,” he says. “The likelihood of being granted at that stage may not be as high but it puts a marker in the sand about where you began seeking the court’s assistance.”

Typically, if a court says it wants to wait until institution they will deny that motion without prejudice so that it can be renewed after institution.

“There is guidance from the Federal Circuit indicating that that first moment of the motion is when you judge the circumstances, things like progress of the case,” says Baughman. “So rather than having that clock keep running until institution, there are benefits to filing at the time of a petition in many circumstances, doing that earlier and keeping the court informed in that way of what relief you think is appropriate and indicating you’ll renew it if you need to. It is one of the situations where the optics matter, because that judge is going to be balancing a range of factors.”

The average time to get a decision on a motion to stay has been slipping. Baughman says at the beginning it took about 1.2 months and that it is now more like 2.4 months.

Stay success rates by district
	Total	Before 2016	First half 2016
Total	60.9	61.0	59.6
Alabama Middle	100.0	100.0	0.0
Alabama Northern	100.0	100.0	0.0
Arkansas Eastern	100.0	100.0	0.0
California Central	65.4	61.1	75.0
California Eastern	100.0	100.0	0.0
California Northern	67.8	68.3	60.0
California Southern	65.7	66.7	60.0
Colorado	25.0	33.3	0.0
Connecticut	37.5	37.5	0.0
Delaware	61.4	63.3	25.0
Florida Middle	52.6	50.0	100.0
Florida Southern	66.7	60.0	100.0
Georgia Northern	86.4	83.3	100.0
Hawaii	25.0	25.0	0.0
Illinois Central	100.0	100.0	0.0
Illinois Northern	77.6	77.8	75.0
Indiana Northern	60.0	75.0	0.0
Indiana Southern	50.0	50.0	0.0
Kansas	100.0	100.0	0.0
Kentucky Western	50.0	50.0	0.0
Maine	50.0	50.0	0.0
Maryland	100.0	100.0	0.0
Massachusetts	52.5	46.9	75.0
Michigan Eastern	45.8	50.0	0.0
Michigan Western	50.0	0.0	100.0
Minnesota	47.1	43.8	100.0
Mississippi Southern	83.3	83.3	0.0
Missouri Eastern	100.0	100.0	100.0
Missouri Western	100.0	100.0	0.0
Nebraska	100.0	100.0	0.0
Nevada	60.0	33.3	100.0
New Jersey	37.5	37.5	0.0
New York Eastern	33.3	50.0	0.0
New York Northern	20.0	25.0	0.0
New York Southern	70.0	71.4	66.7
New York Western	75.0	75.0	0.0
North Carolina Eastern	75.0	75.0	0.0
North Carolina Western	40.0	50.0	0.0
Ohio Northern	66.7	62.5	100.0
Ohio Southern	72.7	72.7	0.0
Oklahoma Western	0.0	0.0	0.0
Oregon	100.0	100.0	0.0
Pennsylvania Eastern	66.7	100.0	0.0
Pennsylvania Western	50.0	50.0	0.0
Puerto Rico	100.0	100.0	0.0
South Carolina	100.0	100.0	0.0
Tennessee Eastern	21.4	21.4	0.0
Tennessee Middle	100.0	100.0	0.0
Tennessee Western	71.4	71.4	0.0
Texas Eastern	38.8	38.3	41.7
Texas Northern	43.8	46.7	0.0
Texas Southern	75.0	72.7	100.0
Texas Western	72.7	72.7	0.0
Utah	87.5	87.5	0.0
Vermont	100.0	100.0	0.0
Virginia Eastern	88.5	88.5	0.0
Virginia Western	100.0	100.0	0.0
Washington Western	50.0	50.0	0.0
Wisconsin Eastern	42.9	38.5	100.0
Wisconsin Western	33.3	33.3	0.0
Source: LegalMetric

PTAB observers are keen to see how the treatment of stays evolve through case law. Judges must weigh three factors when deciding whether to grant a stay pending an IPR – whether it will simplify the issues and streamline the trial; whether discovery is complete and a trial date set; and whether a stay would unduly prejudice the non-moving party or present a clear tactical advantage for the moving party. 

A fourth factor is added for CBM reviews: whether a stay would reduce the burden of litigation on the parties and court.

“We are getting some decisions from the Federal Circuit that not only touch upon that fourth special CBM factor but they are also talking in their decisions about the first three factors,” says Baughman.

“That is relevant to IPRs, so we are in situation where we actually have some pretty active litigation and some guidance from the Federal Circuit about how district courts should be looking at this procedural question.”

The Federal Circuit in its Virtual Agility v Salesforce decision in July 2014 reversed a denial of a motion for a stay pending a CBM review, saying the district court abused its discretion when it denied the stay. “The district court erred as a matter of law to the extent that it decided to ‘review’ the PTAB’s determination that the claims of the ’413 patent are more likely than not invalid in the posture of a ruling on a motion to stay,” said the Federal Circuit.

Baughman says it is important for a petitioner to put together a coherent explanation for what they have done, why it really is efficient and why it is in the interest of the parties to pause and allow the PTAB proceeding to go forward.

“Courts are particularly alert to perceptions of unfair dealing,” says Baughman. “That is why there is that unfair prejudice prong in the analysis. It is really important to be straightforward and clear and be able to explain the situation in a way that makes it understandable why a stay is in the interest of justice. Even thought that is not the formal test that is being applied, you are trying to convince a busy judge, but a judge that wants to do the right thing, that this procedural decision is fair and appropriate.”

Even in the Eastern District of Texas, those seeking a stay have had cause for hope.

Federal Circuit judge William Bryson sitting by designation in the Eastern District of Texas in March last year granted a stay late in proceedings in NFC Technology v HTC. This action had been instituted more than a year before. By the time the motion to stay was filed, the parties had engaged in significant discovery and claim construction briefing was complete.

“Clearly, the case is not ‘in its infancy’; it is far enough along that a stay would interfere with ongoing proceedings,” wrote Bryson. “On the other hand, it appears likely that the bulk of the expenses that the parties would incur in pretrial work and trial preparation are still in the future. Thus, denying a stay because of the progress of the case to this point would impose significant expenses on the parties that might be avoided if the stay results in the simplification (or obviation) of further court proceedings.”

Although the Eastern District of Texas’s figures have crept up so far this year, it is still a big outlier in granting stays. Baughman says if this remains the case the Federal Circuit may be asked to step in.

“One thing we may see moving forward is that if you still see that Texas numbers that are essentially the inverse of the rest of the nation this might be a subject where we see litigants considering mandamus motions,” he says. “We may see defendants seeking the Federal Circuit’s help through a mandamus motion to look at stay decisions that they view as being out of line with the rest of the nation.”

If you think getting stay in Texas is hard, try getting one out of the International Trade Commission (ITC). It has never granted stay pending an IPR or CBM.

The ITC reasoning is basically: we are quick and efficient too.

“A district is going to take two, three, four years to get a case to trial and that might count toward the district court to consider a stay. But at the ITC the likelihood that the Patent Office proceeding is going to finish before the ITC is certainly far, far lower because of the speed at which the ITC practices,” says Gregg LoCascio, partner at Kirkland & Ellis in Washington DC who is active at the ITC.

ITC investigations typically last less than two years, compared with the 18 months from the filing of a PTAB petition to final written decision. Fact discovery usually starts a little over a month from a complaint being filed, much quicker than in district court.

“There have not been successful efforts to stay an ITC case pending Patent Office review of an IPR, although it hasn’t kept people from suggesting or trying it,” says LoCascio. “I don’t think it is going to catch on nearly as much in some instances at the district court just because of the speed at which the ITC operates.”

He adds that some would suggest the PTAB’s ruling is not binding on the ITC until after Federal Circuit appeal, delaying matters further. A further difference between considerations for district courts and the ITC is the nature of the relief being sought.

“In a district court case the primary relief is typically damages,” says LoCascio. “So if you delay that district court case for a period of time to see what is happening in the IPR, while there is prejudice to the plaintiff, often a lot of that is just the delay in the recovery of money you would receive. That is something judges will say they can address through interest or other means. So it is not an irreparable delay to that party’s rights.

“But at the ITC, the only relief is the exclusionary order and you can’t recover any money. I think that is a reason the ITC is less likely to grant a stay.”

An example of the ITC denying a stay came in March this year when administrative judge David Shaw refused to stay an investigation even after an IPR proceeding had been instituted on two of the three Energetiq Technology patents in the Section 337 complaint. This was only the second request for a stay in an ITC case.

Judge Shaw cited the ITC's statutory mandate that it conclude Section 337 investigations "at the earliest practicable time”.

The facts were analysed under the ITC's five-factor test for determining whether to grant a stay: 1) the state of discovery and the hearing date; 2) whether a stay will simplify the issues and hearing of the case; 3) the undue prejudice or clear tactical disadvantage to any party; 4) the stage of the USPTO proceedings; and 5) the efficient use of Commission resources.

As a Morrison Foerster analysis reveals, when weighing factors 1 and 4 Judge Shaw reasoned that because the IPRs would conclude six months before the target date for the ITC investigation’s final determination, there would be a window for the ITC “to integrate the insights obtained from the IPRs into this investigation”. 

Shaw also noted that a stay would not simplify the case regarding the third patent not being challenged at the PTAB. He also noted the PTAB’s different claim construction. Analysing the efficient use of ITC resources, he found that the IPR proceedings and ITC investigation were “not truly parallel because the investigation involves numerous other issues separate from the IPRs". 

Complicating that case further was the existence of a parallel district court proceeding, Energetiq Technology v ASML in the District of Massachusetts, meaning the dispute was taking place on three fronts. Energetic sued in January 2015, ASML filed at the PTAB in May, and Energetiq filed the ITC complaint shortly after the PTAB instituted trial in November.

After the ITC declined to stay its investigation, ASML reversed its position.

“It could have requested a mandatory stay of the district court in view of the ITC proceeding but didn’t,” explained Foley Hoag’s Scott Kamholz on the PTAB Blog. “Then it opposed Energetiq’s motion to stay the district court case. ASML had been willing to stay the district court case when that would have meant leaving the dispute moving forward only at the PTAB (the forum arguably least favorable to patent owners), but not when it also would be under the gun of a high-speed ITC proceeding.”

The district court judge denied the motion to stay, arguing Energetiq orchestrated the timing of the district court and ITC actions.

“Result? The parties remain locked in an intense, fast-paced, three-front litigation despite both of them having preferred to proceed in one forum at a time,” said Kamholz. “It’s hard to say whose interests the situation serves other than the lawyers’.”

The ITC did, however, extend an investigation by two-and-a-half months to consider the impact of an IPR final written decision. In its final determination in Certain Three-Dimensional Cinema Systems and Components Thereof on July 21, the ITC affirmed the finding of infringement of three patents, and issued a limited exclusion order as well as cease-and-desist orders against the respondents.

Interestingly, the ITC suspended enforcement of those orders with respect to the claims found unpatentable by the PTAB, pending final appellate resolution of the PTAB’s final written decision. This rare suspension is only effective on the one patent challenged at the PTAB.

“[T]he decision seems likely to lead to suspension requests by litigants in other ITC cases presenting similar circumstances,” said Squire Patton Boggs’s Bryan Schwartz on the Global IP & Privacy Law Blog. “In light of the popularity and speed of post-grant review proceedings and their high rate of invalidity findings, the decision’s ultimate impact on Section 337 litigation is potentially significant."