United States: Stay Pending IPRs Granted Subject To Defendants Agreement To Be Bound By Estoppel, Even Though IPR Proceedings Don’t Cover All Asserted Claims

Motion to Stay Pending Inter Partes Review Granted, Personal Web Techs. LLC et al. v. Google Inc. et al., 5:13-cv-01317 (Judge Edward Davila)

When third parties file petitions for inter partes review that cover some, but not all, of the Plaintiff's asserted claims, should the court still stay the district court litigation? In at least one recent case brought by PersonalWeb Technologies against Google and YouTube, the answer was "yes," so long as the Defendants agreed to be bound by the same estoppel conditions as would bind the
third parties.

The case was one of 12 lawsuits originally brought by PersonalWeb in the Eastern District of Texas, and involved a total of 47 claims from six patents. However, only 37 of the claims were subject to ongoing or concluded IPR proceedings brought by other defendants sued by PersonalWeb. Nonetheless, 6 of the 31 claims asserted against Google and YouTube already had been found to be invalid. Further, the PTAB had instituted inter partes review proceedings for the other 31 claims, meaning that the PTAB had determined there was a "reasonable likelihood" of invalidity of at least one claim in each challenged patent. Judge Davila found a stay to be appropriate because the IPR proceedings could simplify the case, even if they would not dispose of it completely.

In particular, Judge Davila analyzed the following three factors in reaching his conclusion that a stay was warranted: (1) the stage of the litigation, including whether discovery was complete and whether a trial date had been set; (2) whether a stay would simplify the issues in question and with respect to the trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to PersonalWeb, the non-moving party.

In this case, the Eastern District of Texas had issued a claim construction order prior to transferring the matter to the Northern District of California. As a result, fact discovery had completed, expert discovery was well underway, and motions for summary judgment were imminent. Judge Davila acknowledged that the case was "not in its infancy," but concluded there was still much to be done and that the case could be said "to have reached the point of no return." The parties had not made pretrial exchanges, and the court had not yet held a pretrial conference. Accordingly, Judge Davila concluded that the "stage of the litigation" factor was neutral.

As to the second factor, there was an arbitration pending that would address the plaintiffs' standing to bring suit, which could ultimately result in a dismissal of the district court case altogether. Additionally, while the pending IPRs did not address all of the asserted claims, they addressed most of them. IPR decisions invalidating even some of the claims would simplify the district court litigation. And even if the IPR decisions ultimately did not invalidate many of the claims, the court would still benefit from the Patent Office's specialized expertise regarding the validity of
the claims.

One wrinkle in the case was that the Defendants themselves were not real parties in interest for the IPRs; rather, third parties had filed the petitions. Judge Davila felt that the benefit of any stay was partially contingent upon the application of the IPR's prior estoppel effect, since estoppel would narrow the prior art issues in the district court litigation. However, estoppel only applies to the real parties in interest for an IPR, therefore, Judge Davila conditioned the stay on Defendants' agreement to be bound by the IPR estoppel.

Regarding the third factor of whether PersonalWeb would suffer undue prejudice if a stay was granted, the plaintiff argued that Defendants improperly waited until the IPR proceedings had begun and the Patent Office had already invalidated several claims. But Judge Davila , while acknowledging that PersonalWeb had highlighted "a potentially strategic maneuver on the part of Defendants," nonetheless did not believe Defendants waited too long. Additionally, he found that any prejudice to Plaintiffs would be minimal because the parties were not competitors, and the key evidence, Defendants' source code, would be just as available and usable after the IPRs
had completed.

In the end, Judge Davila concluded that so long as Defendants agreed to be bound by the estoppel effects of the IPR proceedings, the benefits of a stay outweighed any inconvenience created by the fact that there would necessarily be some claims left to be ruled upon in the litigation going forward.

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.