Think Twice Before Filing a Motion to Stay Pending Reexamination

by Nicole Keenan

While many districts have granted and continue to grant stays in patent litigation pending reexamination, several recent rulings from the Eastern District of Texas have held the opposite, with potentially significant implications for the litigation itself.  Among these is the decision from Judge Folsom in Parallel Networks, LLC v. Microsoft Corp on May 10th, in which he denied Microsoft’s Motion to Stay the Action Pending Resolution of an Ex-Parte Reexamination of the Patents-in-Suit.

The latest statistics from the United States Patent and Trademark Office on ex parte re-examination show that 92% of requests for reexaminations are granted.  The average pendency is just over two years.  In cases where the patent owner requested the reexamination, the claims were changed 70% of the time and all of the claims were cancelled 8% of the time.  In situations where the reexamination was requested by a third party, the claims were changed in 61% of the cases and all the claims were cancelled 13% of the time.  These statistics show that in only 22% or 26% of the time (depending on the requester) the claims are actually confirmed as a whole without changes.

In situations where a reexamination is filed during a pending litigation, as in the Microsoft case, the outcome of the reexamination could have an impact (and some may even go as far as to say a significant impact) on the litigation itself.  Let’s say, for example, a court decides to move forward with the litigation and issues a claim construction order.  Those claims could be significantly changed or even cancelled in the concurrent reexamination proceeding.  This could potentially render the claim construction order in the litigation obsolete, which can be a very costly outcome for the parties involved.

In the Microsoft decision, the court noted that in deciding whether to stay a litigation pending reexamination, three factors should be considered: (1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues; and (3) whether discovery is complete and a trial date has been set.  In balancing these factors the court held against a stay and specifically noted that the requesting party must do more than merely proffer cited reexamination statistics and generic judicial efficiency arguments.

When it comes to this issue, the Eastern District of Texas lives up to its reputation of being a “plaintiff-friendly forum” for patent holders.  And both sides will need to consider the potential ramifications before filing a motion to stay pending a reexamination.