Thursday, July 30, 2015

CAFC analyzes stay requests in view of CBM review by PTAB

The background of this CAFC case relates to stays requested by
Apple, and by Samsung:

Smartflash LLC and Smartflash Technologies Ltd.
(collectively, “Smartflash”), patent licensing companies,
filed separate suits against Apple and Samsung on May
29, 2013, alleging infringement of U.S. Patent Nos.
7,334,720 (the “’720 Patent”); 8,033,458 (the “’458 Patent”);
8,061,598 (the “’598 Patent”); 8,118,221 (the “’221
Patent”); 8,336,772 (the “’772 Patent”); and 7,942,317 (the
“’317 Patent”). Subsequently, Smartflash sued Google,
Inc. (“Google”) on May 7, 2014 and, Inc.
(“Amazon”) on December 23, 2014 for patent infringement,
asserting the same six patents as those asserted
against Apple and Samsung, as well as an additional
patent that issued on August 5, 2014, U.S. Patent No.
8,794,516. All of the asserted patents relate to managing
access to data via payment information.
Throughout the course of these cases, both Apple and
Samsung filed multiple CBM petitions with the Patent
Trial and Appeal Board (“PTAB”). See America Invents
Act, Pub. L. No. 112-29, § 18, 125 Stat. 284, 329–31 (2011)
(“AIA”). Between March 28 and April 3, 2014, Apple filed
12 separate petitions for CBM review on 35 U.S.C. §§ 102
and 103 grounds. And, on April 3, 2014, Apple moved to
stay the district court action pending CBM review. See
Defendants’ Motion to Stay Litigation, SmartFlash LLC
v. Apple Inc., No. 6:13-cv-447 (E.D. Tex. Apr. 4, 2014),
ECF No. 120. On May 15, 2014, Samsung filed a motion
to stay based on Apple’s CBM petitions, explaining that, if
the court were to grant its motion, it “would stipulate to
be bound to the same extent as Apple is under
§ 18(a)(1)(D) of the America Invents Act.” Defendants’
Motion to Stay Litigation, SmartFlash LLC v. Samsung
Elecs., Co., No. 6:13-cv-448 at 3 n.4 (E.D. Tex. May 15,
2014), ECF No. 149. Because the PTAB had not yet
decided whether to grant these petitions, the district court
denied both motions without prejudice to refiling if any of
the petitions were granted. S

Of history of the AIA:

Congress enacted the AIA, in part, to address concerns
about business method patents. With this Court’s
decision in State Street Bank & Trust Co. v. Signature
Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), the
test for patent eligibility greatly expanded until the
Supreme Court’s decision in Bilski v. Kappos, 561 U.S.
593 (2010), which significantly curtailed the patentability
of business methods. As a result of “[t]his judicial expansion
and subsequent judicial retraction of U.S. patentability
standards . . . a large number of business-method
patents” issued that may not be valid. 157 Cong. Rec.
S1379 (daily ed. Mar. 8, 2011) (statement of Sen. Kyl).
Through the enactment of Section 18 of the AIA, Congress
sought to clarify this confusion by providing “a relatively
inexpensive administrative alternative to litigation for
addressing disputes concerning the validity of [CBM]
patents.” 157 Cong. Rec. S1379 (daily ed. Mar. 8, 2011)
(statement of Sen. Kyl); see also 157 Cong. Rec. S1364
(daily ed. Mar. 8, 2011) (statement of Sen. Schumer)
(noting that the fundamental purpose of the CBM review
process is “to provide a cost-efficient alternative to litigation”).

But in order to realize Congress’s intent to establish
an alternative to district court litigation for CBM issues,
parties must file CBM petitions in a manner that facilitates
this goal. We recognize that there is no statutory
deadline to file a CBM petition, unlike other post-grant
proceedings, but we nevertheless conclude the timing of
the petitions in this case created a tactical advantage for
Apple. See VirtualAgility, Inc., 759 F.3d 1319–20 (considering
the timing of a CBM petition to assess whether a
party sought to gain a tactical advantage or had a “dilatory
motive”). By waiting to submit its petitions until
almost the eve of trial and well after it filed its motion for
summary judgment on the § 101 issue, Apple was able to
first pursue its § 101 defense at the district court and
then at the PTAB.

Footnote 3 of the CAFC decision observes:

Although delay in filing a CBM petition is not one
of the express factors listed in § 18(b)(1), it is not improper
for the trial court to have considered traditional equitable
factors, such as unclean hands, in its analysis.

And the CAFC noted:

Specifically, because Apple
waited to file its petitions, the district court found that it
and the parties had already spent substantial time and
resources on the litigation, as evidenced by the six day
jury trial, the hundreds of pages of court-issued orders
and opinions, and the thousands of pages of briefing and
exhibits submitted by the parties. The district court also
explained that, under the current post-trial schedule, the
parties could appeal the entire litigation to this Court
prior to any appeal from a PTAB final determination.
Thus, the district court determined that it was more
efficient not to stay the case.

The conclusion of the CAFC: no stay for Apple:

Here, all four factors weigh against a stay in this case.
On this record, we conclude that the district court did not
abuse its discretion when it denied Apple’s motion to stay.

There was a different result for Samsung:

But the critical distinction
between the Apple and Samsung cases is that Samsung
has yet to go to trial. This fact affects the analysis of two
of the four factors: simplification of the issues and reduction
of the burden of litigation on the parties and on the
court. While the district court is extremely familiar with
the Apple case at this juncture, there are different claims
at issue and different accused technology in the Samsung
case. Oral Arg. at 30:18–31:24, available at
15-1707.mp3. Additionally, the Samsung case involves
three co-defendants: Exedea, Inc.; the Samsung entities;
and the HTC entities. The trial will involve fact witnesses
from overseas and require the use of interpreters for
some foreign witnesses. The additional complexities and
cost of the Samsung trial counsel us to find that these two
factors weigh in favor of a stay


the district court did not properly consider the significance
of this fact in its analysis, we find that the district
court abused its discretion when it denied Samsung’s
motion to stay. And, on balance, we conclude that the
totality of the factors weigh in favor of a stay.



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