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July 31, 2007

Injunction & Reexamination

Hal Wegner reports: "More than fourteen months after the Supreme Court decision in eBay Inc. v. MercExchange, the eBay case continues in Norfolk. Just this past Friday, the court denied a permanent injunction while offering interesting observations on the interplay between patent reexamination and litigation."

MercExchange v. eBay and Half.com; Eastern District of Virginia, 2:01cv736 (decision)

The district court after trial had denied injunctive relief to MercExchange; a ruling overturned at the appeals court level; that CAFC ruling overturned by the Supreme Court in a landmark decision swinging injunctive relief on the concept of "principles of equity."

eBay put in for reexamination on the two patents asserted against it for its "Buy it now" feature. 5,845,265 is judicially a done deal, while 6,202,051 faces a long road to hoe in court, while its reexamination is already underway. The court describes its latitude of discretion, and facets of reasoning.

eBay’s motion to stay seeks to stay the proceedings with respect to both the ’265 patent and ’051 patent pending the ongoing PTO reexaminations. “It is well-settled law that a district court may exercise its discretion when ruling on a motion to stay proceedings pending reexamination of the patents-in-suit by the PTO.” NTP, Inc. v. Research In Motion, Ltd., 397 F. Supp. 2d 785, 787 (E.D. Va. 2005).

As discussed in detail below, after exercising its discretion and balancing the equities, the court grants defendants’ motion to stay the ’051 proceedings and denies defendants’ motion with respect to the ’265 proceedings. The court reaches differing conclusions regarding the two patents due to the vastly differing procedural postures of such discrete infringement disputes. Tellingly, unlike the alleged infringement of the ’051 patent, which never reached a jury, after a five-and-a-half week jury trial, the ’265 patent was deemed valid and infringed, and a $25 million damage award for such infringement was affirmed by the Federal Circuit and is now final.

A district court has broad discretion to grant or deny a stay pending PTO reexamination of the patents-in-suit and “is under no obligation to delay its own proceedings by yielding to ongoing PTO patent reexaminations, regardless of their relevancy to infringement claims which the court must analyze.” NTP, 397 F. Supp. 2d at 787; see Viskase Corp. v. American Nat. Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001) (“The court is not required to stay judicial resolution in view of the reexaminations.”). Although a court is not obligated to stay an infringement case based upon a parallel reexamination, it may opt to do so in order to avoid inconsistent results, narrow the issues, obtain guidance from the PTO, or simply to avoid the needless waste of judicial resources, especially if the evidence suggests that the patents-in-suit will not survive reexamination. See Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983) (“One purpose of the reexamination procedure is to eliminate trial of that issue (when the claim is canceled) or to facilitate trial of that issue by providing the district court with the expert view of the PTO (when a claim survives the reexamination proceeding).”); Patlex Corp. v. Mossinghoff, 758 F.2d 594, 602 (Fed. Cir. 1985) (explaining that PTO reexaminations can “settle validity disputes more quickly and less expensively than the often protracted litigation involved in such cases,” can aid the trial court in making informed validity decisions, and will ultimately reinforce investor confidence in the patent system by creating a broader opportunity for the PTO to review doubtful patents); Medichem, S.A. v. Rolabo, S.L., 353 F.3d 928, 936 (Fed. Cir. 2003) (recognizing the district court’s power to stay proceedings in a patent interference dispute pending the BPAI’s ruling as doing so “may permit the district court to avoid a needless duplication of efforts”). Additionally, in considering the propriety of a stay, district courts generally consider the stage of discovery, whether a trial date has been set, and whether a stay will unduly prejudice the non-moving party. Xerox Corp. v. 3Com Corp., 69 F. Supp. 2d 404, 406 (W.D.N.Y. 1999). A review of relevant caselaw indicates that district courts routinely grant pre-trial stays when PTO reexaminations are underway and evidence suggests that the patents-in-suit may not survive reexamination.

The court factors in PTO reexam pendancy:

[C]ourts frequently justify imposing a stay based upon the statute requiring that PTO reexaminations be 'conducted with special dispatch.; 35 U.S.C. § 305. This court, however, affords minimal weight to such statutory requirement as the undeniable reality is that even if the PTO promptly responds to all filings, the reexamination process, similar to patent litigation itself, can be long and drawn out; the gravity of the stakes in most disputes results in further extensions of the process as appeals to both the BPAI and Federal Circuit are probable in the event of a ruling unfavorable to the patent holder. See, e.g., In re American Academy of Science Tech Center, 367 F.3d 1359, 1362-63 (Fed. Cir. 2004) (affirming the BPAI's claim construction ten years after the request for PTO reexamination was filed).


The PTO Reexamination Bleak House: The one-size-fits-all approach to patent examination – including reexamination – means that all too many of the truly commercially important reexaminations languish for years. The PTO fails to prioritize its $ 1.6 billion annual budget to focus attention on the priority cases that the public deserves to have promptly resolved.

Post-Grant Review under Patent Reform Proposals: Unless a post-grant proceeding is put into an independent agency, there is no assurance that the PTO will handle new post-grant reviews any better than reexaminations today.

As to MercExchange getting an injunction after the Supreme Court ruling: heck, that dog was never going to hunt.

MercExchange has simply failed to establish irreparable harm or that damages at law will not adequately compensate it for eBay’s infringement. Additionally, after considering the balance of the harms, favoring neither party, and the public interest, favoring denial of plaintiff’s motion for an injunction, the court concludes that an injunction is not warranted.

Posted by Patent Hawk at July 31, 2007 2:10 AM | Injunction