Are you a defendant (or representing one) seeking a stay in a patent infringement suit pending reexamination? Well, act quickly and provide a compelling showing of judicial efficiency, and you just might get such relief, at least according to the recent Judge Armstrong opinion in Finjan, Inc. v. FireEye, Inc.
Finjan brought a patent infringement suit against FireEye alleging infringement of seven patents. Approximately three months after the complaint was filed, FireEye successfully sought ex parte reexamination of three of the patents and moved the court to stay the litigation pending the outcome of the reexamination. Despite the fact four patents were not in reexamination, Judge Armstrong granted the motion as to all seven patents. She found that the relevant factors for granting a stay favored defendant, and if she were not to stay the entire case, the duplicative proceedings would likely create inefficiencies that would unduly burden on the court.
In reaching this decision, Judge Armstrong first examined the three factors considered when determining whether to grant a stay: "(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 advantage to the non-moving party." Turning to the first factor, Judge Armstrong held that there is a liberal policy in favor of granting such motions to stay pending reexamination, especially in cases that are in their initial stages of litigation – that is, before discovery or substantive proceedings. Since the defendant brought the motion soon after the complaint was filed, this factor weighed in its favor.
Turning to the second factor, Judge Armstrong explained that one of the purposes of reexamination is to eliminate trial issues by cancelling claims, or facilitating trial by providing the court with the expert opinion of the PTO as to the scope of, and the reasons for validity of, any surviving claims. Since the PTO was going to reexamine claims at issue, Judge Armstrong found that litigation would likely be simplified by the PTO's decision. In so holding, she relied on statistics proffered by FireEye showing the PTO cancels approximately 11% of claims thatit reexamines, and modifies another 67% of claims, meaning that a total of 78% of claims on average are either cancelled or modified. Since the court was still unfamiliar with the technology at this early stage of the litigation, Judge Armstrong held that the interest in simplifying the proceedings by allowing the PTO to reexamine the patents weighed in favor of granting a stay.
Turning to the third factor, Judge Armstrong found there was no undue prejudice or tactical advantage gained by ordering the stay. Finjan argued the reexamination could take up to five years, during which time evidence would be lost and memories would fade. Judge Armstrong found this argument unconvincing because this kind of prejudice applies to every case involving reexamination, and thus could not be the sole basis for finding undue prejudice. Moreover, she found FireEye was legally entitled to seek reexamination of patents it was accused of infringing, and there was no evidence of dilatory tactics. FireEye sought reexamination approximately three months after the complaint was filed. Finjan also argued that FireEye's decision to request ex parte reexamination instead of inter partes review was a dilatory tactic. Judge Armstrong held there was no evidence to suggest this decision was for a dilatory purpose, and Finjan failed to proffer evidence that an ex parte reexamination would take significantly longer than an inter partes review. Lastly, Judge Armstrong found since Finjan did not practice its own patents, any proven continued infringement by FireEye could not cause prejudice because the harm to a patent licensor like Finjan can be adequately redressed with money damages.
After deciding all three factors weighed in favor of a stay, Judge Armstrong decided it would be more efficient to stay the whole case instead of proceeding to litigate the unexamined patents. She found that all of the patents involved the same anti-malware technology, shared a common ancestry and a common inventor, and that Finjan accused the same products of infringing all seven patents. Therefore, conducting separate litigation would mean multiple discovery periods, claim construction proceedings, and trials where separate juries would have to be educated on the same technology. Given the overlapping issues, Finjan's failure to show undue prejudice, the fact that the PTO could streamline the litigation, and the judicial resources saved by having one trial for related patents and issues, Judge Armstrong found a stay of the entire case was appropriate.
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