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February 26, 2009

Delay

Companies are merely individuals acting in concert, with no more scruples than they have individually. As often as not, group think leads to sinking to a lower common denominator: scruple lite. Belonging to a larger group empowers little shitbirds to spread their wings and leave their droppings en masse. A reflection of the human condition, patent cases too often read as a morality tale.

Almost 40 years ago, Dr. Elisabeth Kübler-Ross drew the roadmap of patent infringer psychology. The Kübler-Ross grief process identified seven stages of dealing with seriously bad news. (These are sometimes abbreviated to five stages.)

Shock: Initial paralysis at receiving the bad news.
Denial: Struggling to avoid the inevitable.
Anger: Outburst of frustration.
Bargaining: Seeking in vain for a way out.
Depression: Realization of the inevitable.
Testing: Seeking realistic solutions.
Acceptance: Finally finding the way forward.

A hoary patent litigation stratagem has been for a defendant to go to and through trial as a cathartic exercise of grief stages. Upon losing, the final testing has been a mulligan of filing for reexamination. This lets the trial litigators tee up and swing away before putting their irons back in the bag and handing off their already sliced ball.

But judges don't have to navigate water already under the bridge, and are not bound to reverse a finding based upon subsequent USPTO reexamination. And, in recent years, the patent office has become a much more ugly place for inventions to wind up at.

So the new dance, mid-grief, is to seek reexamination early. File for a stay, delay trial with hope that the delay changes what otherwise seems inevitable to evitable.

Affinity Labs sued numerous parties in different suits in the Eastern District of Texas for infringing 7,324,833, claiming ways to connect an audio player to an automobile sound system. Defendants tried to dance the new-fangled way.

District Court Judge Ron Clark (ruling):

Defendants filed a joint motion to stay the litigation pending outcome of the ex parte reexamination of the '833 patent currently ongoing before the United States Patent and Trademark Office (PTO), arguing that concerns of judicial economy favor granting a stay.

In deciding whether to stay litigation pending reexamination, courts typically consider: (1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set. Sovereign Sofnvare LLC v. Amazon.com, 356 F. Supp. 2d 660, 662 (E.D. Tex. 2005); see also Alza Corp. v. Wyeth Pharmas., Inc., 2006 WL 350015 at *1 (E.D. Tex. Nov. 21, 2006); EchoStar Techs. Corp. v. Tivo, Inc., 2006 WL 2501494 (E.D. Tex. Jul. 14, 2006).

Defendants argue that Affinity Labs will not be prejudiced by the stay because the litigation is in its early stages. It is true that the Case Management Conference has not yet been held and no Scheduling Order has issued. However, Defendants requested and received a total of four extensions for their respective Answer dates. The parties exchanged Initial Mandatory Disclosures on January 21, 2009. Affinity Labs disclosed its asserted claims, Infringement Contentions, and associated documents on February 2, 2009, and Defendants are required to disclose their Invalidity Contentions and associated documents by March 20, 2009. [M]uch of the discovery essential to the case has already occurred.

The filing of a request for ex parte reexamination by only one of the twenty-four Defendants in these three cases raises a strong inference of gamesmanship. Congress's intent when it established the inter partes reexamination procedure as part of the American Inventors Protection Act of 1999 was to "'make reexamination a viable, less-costly alternative to patent litigation by giving third-party requesters the option of inter-partes reexamination procedures' in which they are 'afforded an expanded, although still limited, role in the reexamination process.'" Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1332 (Fed. Cir. 2008) (quoting Senator Orrin Hatch, 145 Cong. Rec. S13259 (Oct. 27, 1999)). No Defendant in this case has taken advantage of Congress's hard work in offering this option. Rather, one Defendant has reached back in history to the non-binding "no risk for me" ex parte reexamination process, allowing all Defendant to lay behind the log, hoping for favorable developments with the passage of time. Instead of streamlining the process, Defendants' choice guarantees the imposition of additional costs on Affinity Labs, and indicates a lack of desire to resolve the issues in the case in a timely manner.

Defendants' position is also undercut by the fact that they have chosen to rely upon an ex parte, rather than an inter partes, reexamination. A third party requesting an inter partes reexamination is thereafter estopped from asserting the invalidity of any claim finally determined to be valid or patentable on any ground which the requester raised or could have rased during the reexamination. 35 U.S.C. § 315(c). On the other hand, a third party requester in an ex parte reexamination is not precluded from raising the same issues in a subsequent litigation between itself and the patent owner. Because the reexamination at issue here is ex parte, the third party requester will not be bound by the results as it would have been had the reexamination been inter partes.

It would be naive to believe that counsel for at least some of the Defendants are not coordinating mutually beneficial defense strategies. No Defendant has been confident enough to ask the PTO for a binding inter partes reexamination. All are waiting to let John King, on behalf of Defendant Dice Electronics, LLC, take a shot at defeating Affinity Labs. Of course, if things do not go well at the PTO, each Defendant in turn can file a request for ex parte reexamination. Defendants could then still assert the same and similar claims in this court. This is underscored by the fact that, when asked whether they were willing to be bound by the result if Affinity Labs succeeds in the ex parte reexamination, Defendants made it clear that they were not.

Defendants did not act with dispatch in seeking review; the parties are well into the discovery process already; and staying the case pending outcome of an ex parte reexamination is not likely to simplify the issues. Defendants' failure to choose the congressionally provided option of a binding inter partes reexamination smacks of a litigation tactic designed to bog down, rather than expedite, resolution of this case. Defendants' motion to stay is denied.

Posted by Patent Hawk at February 26, 2009 11:46 PM | Litigation

Comments

The judge should have sanctioned the D. just for filing the motion to stay.


Posted by: Babel Boy at February 27, 2009 9:24 AM

Nice; and as it should be.

Thanks for the reference, which I'll be keeping for potential future use.

Posted by: Steve M at February 28, 2009 6:31 PM

I've added a link to the ruling.

Posted by: Patent Hawk at February 28, 2009 7:47 PM