United States: District Court Erred In Denying Stay By Reviewing Board’s Decision To Institute A Covered Business Method Proceeding

n VirtualAgility Inc. v. Salesforce.com, Inc., No. 14-1232 (Fed. Cir. July 10, 2014), the Federal Circuit held that the district court clearly erred in denying a stay pending a covered business method ("CBM") review when it undertook its own review of the Board's decision to institute the CBM review.

VirtualAgility Inc. ("VA") sued Salesforce.com, Inc. ("Salesforce") and other defendants (collectively "Defendants"), alleging infringement of U.S. Patent No. 8,095,413 ("the '413 patent").  In May 2013, Salesforce filed a petition with the Board for CBM review, alleging that all claims of the '413 patent were not patent eligible under 35 U.S.C. § 101 and were invalid under 35 U.S.C. §§ 102 and 103 based on prior art.  Also in May 2013, Defendants filed a motion to stay all district court proceedings pending the CBM review.  In August 2013, while the motion to stay was pending, the district court issued a discovery order and held a scheduling conference, setting the claim construction hearing and trial dates for April 2014 and November 2014, respectively.  In November 2013, the Board instituted CBM review of all claims of the '413 patent under §§ 101 and 102, setting a trial date at the Board for July 2014.  The district court then denied Defendants' motion to stay in January 2014.  Defendants appealed.

On appeal, the Federal Circuit first considered the proper standard of review.  The parties disputed whether the appellate review standard should be de novo or abuse of discretion.  The Court observed that prior to the America Invents Act ("AIA"), a district court's denial of a motion to stay pending PTO proceedings was generally not appealable, but when it was, the Court reviewed the denial under the "abuse of discretion" standard.  The Court noted that the AIA created an express right to appeal stay decisions pending CBM review.  The Court declined, however, to resolve the parties' dispute over the standard of review, holding that the district court's denial would be reversed even under the "abuse of discretion" standard.

"Under the statutory scheme, district courts have no role in reviewing the [Board's] determinations regarding the patentability of claims that are subject to CBM proceedings."  Slip op. at 11.

The Court then considered each of the factors set forth in the AIA for deciding whether to grant a stay pending CBM review.  First, in considering whether a stay would simplify the issues in question and streamline the trial, the Court rejected the district court's finding that "it was 'not convinced' by the [Board's] assessment that cancellation of some or all of the claims during the CBM review was 'probable.'"  Slip op. at 6 (quoting VirtualAgility Inc. v. Salesforce.com, Inc., No. 13-cv-00111, 2014 WL 94371, at *2, *5 (E.D. Tex. Jan. 9, 2014)).  The Court agreed with Defendants that the issues would be simplified and determined that this factor heavily favored a stay.  Although agreeing that this factor and another stay factor overlap in their analyses, the Court stated that "they continue to be separate, individual factors which must be weighed in the stay determination" and could not be collapsed into a single factor.  Id.  at 11.  The Court held that the district court erred in collapsing two of the factors and to the extent that the district court "decided to 'review'" the Board's determination because "district courts have no role in reviewing the [Board's] determinations regarding the patentability of claims that are subject to CBM proceedings."  Id.  The Court then determined that once the district court's improper review of the Board's analysis was removed, the remaining evidence of this factor weighed in favor of a stay.  For example, the Court observed that because CBM review was granted on all claims of the only patent-at-issue, if Salesforce is successful at the Board, then any burden on the district court would be eliminated.  The Court also took judicial notice of the fact that VA filed a motion to amend its claims at the PTO.  Although the Court did not consider the motion to amend, it stated that the motion to amend would "only weigh further in favor of granting the stay."  Id. at 14. 

The Court next examined the factor of whether discovery was complete and whether a trial date had been set.  The Court determined that this timing factor heavily favored a stay.  The Court noted that "it was not error for the district court to wait until the [Board] made its decision to institute CBM review before it ruled on the motion"; however, the Court also stated that "a motion to stay could be granted even before the [Board] rules on a post-grant review petition."  Id. at 16.  The Court observed that Defendants filed the stay motion in May 2013 and the Board instituted CBM review in November 2013, but the district court denied the stay motion in January 2014.  Although the Court reiterated that it was not error to decide the motion to stay until after institution by the Board, it stated that a court "should make every effort to expeditiously resolve the stay motion after the [Board] has made its CBM review determination."  Id.  at 17.  The Court also explained that the time at which the motion was filed is generally the relevant time to measure the stage of litigation.  The Court then held that, in this case, this factor weighed in favor of a stay because the motion was filed before discovery had begun and before a trial date had been set.  The Court also noted that when the PTO instituted CBM review, eight months remained in fact discovery, claim construction statements had not yet been filed, and jury selection was more than a year away.  Thus, the Court concluded that, even at the time of institution, this factor favored granting a stay.

The Court then turned to whether a stay would unduly prejudice the plaintiff or give the Defendants a tactical advantage.  The Court determined that the district court clearly erred in finding that undue prejudice weighed heavily against a stay, stating that although "competition between parties can weigh in favor of finding undue prejudice," there was "no evidence in [the] record that the two companies ever competed for the same customer or contract."  Id. at 21.  Further, the Court noted that VA's delay in seeking relief and its decision not to seek a preliminary injunction contradicted VA's assertions that it needed injunctive relief as soon as possible.  The Court also rejected VA's argument that there was a risk of witness loss, explaining that there was "no evidence that any of these individuals are in ill health, and at least one of the older witnesses has already been deposed."  Id. at 23.  Although noting that no single factor in its analysis was dispositive, the Court concluded that "the evidence of competition is weak and the patentee's delays in pursuing suit and seeking preliminary injunctive relief belie its claims that it will be unduly prejudiced by a stay."  Id. at 25.

The Court concluded that, because three of the four factors weighed heavily in favor of a stay and the fourth factor, "at best, weighs slightly in favor of denying a stay," the district court had abused its discretion in denying the stay.  Id. at 25-26.

Judge Newman dissented.  Judge Newman would have found that the district court's denial was within its discretion, concluding that "[a]lthough the Covered Business Method (CBM) statute provides that appellate review of a district court's decision to grant or deny a stay 'may be de novo,' when the district court's decision is within its range of discretion, it warrants appellate respect."  Newman Dissent at 3.

Judges:  Newman (dissenting), Moore (author), Chen

[Appealed from E.D. Tex., Judge Gilstrap]

This article previously appeared in Last Month at the Federal Circuit, August, 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
14 Oct 2018, Conference, Boston, United States

Finnegan is a Gold sponsor of the Licensing Executives Society Annual Meeting. The program will take place at the Marriott Copley Place in Boston, Massachusetts.

15 Oct 2018, Conference, California, United States

Finnegan is a sponsor of the 30th annual All Hands Meeting, hosted by Ivy Events. Finnegan partners Justin Hendrix and Jacob Schroeder will present "Extraterritoriality: A Big Word That Just Got Smaller."

17 Oct 2018, Other, Washington, DC, United States

Finnegan is a Platinum sponsor of the ChIPs Women in Tech, Law, & Policy Global Summit. The program will take place at the Mandarin Oriental Hotel in Washington, DC.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions