United States: Federal Circuit Says District Courts Should Freely Grant Stays When CBM Proceeding Instituted

On November 20, 2014, the Federal Circuit issued its decision in Versata Software, Inc. v. Callidus Software, Inc. reversing the district court's denial of a motion to stay pending a Covered Business Method ("CBM") review of the patents asserted by Versata in the action. The Court's decision signaled that district courts should freely grant stays in pending CBM reviews instituted by the Patent Trial and Appeal Board ("PTAB"). More importantly, the Court ruled that stays can be warranted even when a CBM proceeding does not address all asserted patents, claims or invalidity defenses in a district court action. The Federal Circuit's decision may be influential to district courts' rulings on motions to stay in other post-issuance proceedings, such as Inter Partes Review ("IPR").

By way of background, the appeal was taken from a July 19, 2012 action in which Versata sued Callidus in the District of Delaware alleging infringement of three patents related to the "management and tracking of sales information by a financial services company." Callidus filed a motion to dismiss based on the pleadings as well as a motion to transfer to the Northern District of California. Both motions were denied by the district court. Callidus subsequently answered Versata's complaint and filed counterclaims asserting its own patent. Callidus also filed a set of CBM petitions which challenged all of the claims of one of Versata's asserted patents, but only selected claims from the other two patents Versata asserted. When the PTAB instituted CBM review as to Callidus's first set of petitions, the district court stayed the proceedings with respect to the one patent in which Callidus challenged all claims of the patent, but denied the stay with respect to the other two patents. As the Federal Circuit noted, the district court improperly seemed to "create[] a categorical rule that if any asserted claims are not also challenged in the CBM proceeding," a stay is disfavored. Callidus filed an interlocutory appeal pursuant to Section 18(b)(2) of the America Invents Act ("AIA") seeking to overturn the district court's denial of a stay as to the other two patents. Also, while the appeal was pending, a second set of CBM petitions were filed by Callidus as to the remaining claims on the patents not stayed by the district court, which were instituted by the PTAB.

In making its decision, the Court analyzed Section 18(b) of the AIA, which outlines four factors a district court must consider in staying a civil action pending CBM review. Specifically, a court must look at:

  1. whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
  2. whether discovery is complete and whether a trial date has been set;
  3. whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage of the moving party; and
  4. whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

In assessing these factors, the district court had acknowledged "the presence of Congress' thumb on the scale of justice," but still concluded that a complete stay would "not simplify or reduce the burdens of litigation." The Federal Circuit disagreed with the district court's analysis and noted that a categorical rule requiring all claims be subject to CBM before granting a stay is inappropriate, citing its recent VirtualAgility, Inc. v. SalesForce.com, Inc. opinion in which it stayed the case even though two prior art references were not asserted in the CBM review. The Court specifically noted that "[s]tays can be warranted even when a CBM proceeding does not address all asserted patents, claims, or invalidity defenses," and that "there can still be simplification of issues when only some, but not all, of the claims asserted in litigation are challenged in a CBM review."

In looking to the second factor, the Court stated that the district court erred by "fail[ing] to analyze how much more remains to be done in the litigation before reaching the trial date." It held that "generally the time of filing the motion [to stay] will be the relevant stage at which to measure this factor." However, the Court noted that lower courts "are not obligated to ignore advances in the litigation that occur as of the date that the PTAB grant[s] CBM review." After the filing of Callidus' motion to stay, the parties began to engage in discovery. However, the Federal Circuit still believed that the second factor weighed strongly in favor of granting a stay as the case was still in the stage of fact discovery.

With respect to the third factor, the Federal Circuit disagreed with the district court that Callidus was using the "stay card" as a sword and a shield. The district court had ruled that since Callidus was asserting its own patent that Versata would be at risk and Callidus would have an unfair advantage in the litigation if the case were stayed as to Versata's asserted patents. However, the Federal Circuit responded by pointing out that Callidus intended to stay the entire case, which weighed in favor of granting its motion to stay.

Finally, as to the fourth factor, the district court ruled that Callidus had increased the burden of the litigation by filing preliminary motions. The Federal Circuit concluded, however, that "the district court clearly erred in evaluating the burden-of-litigation exclusively through this backward-looking lens. The correct test is one that focuses prospectively on the impact of the stay on the litigation, not on the past actions of the parties." It noted that when framed appropriately, a stay will indeed reduce the future burdens of litigation.

Ultimately the Court found that, weighed together, all the factors outlined in Section 18(b) of the AIA favored a stay. As a result, this case may have implications for district court stays in other post-issuance proceedings, such as IPRs. On one hand, the IPR section of the AIA does not articulate factors for the district court to consider in granting a motion to stay during an IPR. It also contains a less deferential standard of review for the appellate court in reviewing a district court's decision whether to grant or deny a party's motion to stay. On the other hand, the factors considered for a stay in a CBM are common to those considered by a district court for an IPR, and lower courts will likely look to this case and the Federal Circuit's VirtualAgility case for guidance. Thus, even if it will be more difficult for the Federal Circuit to reverse and remand a denial of a stay in the IPR context, the application of the factors outlined in this case and VirtualAgility may be influential on district courts considering whether to grant or deny a party's motion to stay where an IPR is pending.

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.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.