United States: Going Along For The Ride: Stay Pending IPR Conditioned On Defendant’s Agreement To Be Bound By Estoppel

Last Updated: June 27 2014
Article by Monte Cooper and Lillian J. Mao

Stay Conditionally Granted, Evolutionary Intelligence, LLC v. Millenial Media, Inc., Case No. C 13-04206 (Judge Edward Davila)

When it rains, it pours – certainly for Evolutionary Intelligence, it must seem that way, although there are some signs that the "gloomy weather" surrounding its numerous patent infringement lawsuits against Silicon Valley companies may be clearing a bit.  This decision involved a motion by defendant Millenial Media for a stay pending inter partes review proceedings that had been initiated by other defendants in different cases involving the same asserted patents.  The other cases had been originally filed in the Eastern District of Texas but subsequently transferred to the Northern District and stayed pending inter partes review of the asserted patents.  Millenial Media did not file its own IPRs, but rather relied on the IPR petitions filed by defendants in the stayed actions.  Judge Davila followed the lead of the other Judges in the District that had granted a stay in their Evolutionary Intelligence cases by granting a stay in the action against Millenial.  Judge Davila's decision was subject to the condition that Millenial agree to be bound by a prior art estoppel of the same scope that would apply to the IPR petitioners under the AIA.  See 35 U.S.C. § 315(e).

Judge Davila considered three stay factors – (1) stage and history of litigation, (2) simplification of issues and trial, and (3) prejudicial and tactical concerns – and found that they all weighed in favor of a stay.  On the first factor, Judge Davila found no reason to disagree with the decision of judges in co-pending cases, which had all found the early stage of the cases favored a stay.  In reaching this conclusion, Judge Davila was not persuaded by Evolutionary Intelligence that it mattered that the company already had invested significant time by virtue of the fact that it had prepared lengthy infringement contentions and produced more than 4000 pages of documents in discovery.  Instead, Judge Davila acknowledged that while Evolutionary Intelligence may already have spent some time and resources, nonetheless the bulk of the time and expenses lay ahead in the patent litigation.  Further, Evolutionary Intelligence did not present any additional evidence to indicate why its case against Millenial was more advanced than the other Evolutionary Intelligence cases, all of which recognized that discovery was far from complete.

On the second factor, Judge Davila's primary reservation was the lack of estoppel, since Millenial was not a party to the relevant IPRs.  This was resolved by the conditioning the stay on Millenial's agreement to be bound as if it had itself filed the IPRs.  In so ruling, Judge Davila rejected Evolutionary Intelligence's argument that that because patents often survive PTO proceedings with at least some patent claims in their original form, there was no evidence that the IPR proceeding will eliminate the need for litigation or simplify the issues in this case. Instead Judge Davila found that a stay is not contingent upon the IPR resolving every issue in the action. Instead, the District Court considers whether the IPR proceedings will streamline the litigation which, as noted, he concluded would be the case here.   Even if the IPR proceeding did not result in any cancelled or modified claims, the Court would receive the benefit of the PTO's expertise and guidance on these claims.

Finally, on the third factor, Judge Davila was not persuaded that Millenial had delayed so as to disadvantage Evolutionary, in light of his finding that the case was in its early stages.  Evolutionary Intelligence complained that Millenial brought its motion three months after the earlier petitions waited almost a full year into the litigation to file their petitions for IPRs.  In that regard, Judge Davila recognized that the petitioners' delay in filing for IPRs could potentially suggest that they were acting in a strategically dilatory fashion.  However, he also acknowledged that IPR petitioners are permitted one year after receiving a patent infringement complaint to file an IPR petition with the PTO.  Moreover, Millenial filed its motion to stay within five months after Evolutionary Intelligence first served its infringement contentions, a reasonable time period recognized by many courts.  Following the analysis in co-pending cases, Judge Davila also dismissed as speculation Evolutionary Intelligence's separate concerns about loss of evidence while the litigation remained stayed.

Judge Davila's decision, unlike the earlier decisions, came after the PTO had ruled on the IPR petitions.  In the end, the PTO only granted one of the petitions in part, and denied the rest, including all of the petitions directed to the second of Evolutionary's two patents.  Interestingly, although Judge Davila mentions this fact as background, it doesn't come up in his analysis.

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