East Texas Court Orders Stay Pending Inter Partes Review

Sometimes, the straightforward application of the law has the power to surprise.

The United States Patent and Trademark Office has a process in place, called inter partes review, through which accused infringers can challenge the validity of patents asserted against them in litigation. Inter partes review is an adversary proceeding with a binding effect on the parties. When an inter partes review is filed, it is common for the accused infringer to seek a stay of the district court litigation pending the outcome of the Patent Office proceeding—allowing the specialized Patent Trial and Appeal Board a first crack at the validity question in a way that can simplify (if not eliminate) the issues in the underlying lawsuit. Whether to grant a stay is within the discretion of the federal court in which the litigation was filed. In the nation’s most popular jurisdiction for patent lawsuits, the Eastern District of Texas, that discretion has rarely been exercised in favor of a stay. Yet even discretion has its limits, and can be abused, as the Federal Circuit found in a couple of recent cases brought to it from the Eastern District of Texas after denial of motions to stay pending inter partes review.

Thus, it is newsworthy that U.S. District Judge Rodney Gilstrap recently granted a motion to stay cases filed by Intellectual Ventures II, LLC against two insurance companies. In ordering a stay, the judge concluded that (1) Intellectual Ventures, a licensing entity (a/k/a patent troll), would not be unduly prejudiced by the stay because all it was seeking from the litigation was money; (2) the defendants filed their motion to stay in good time because it was reasonable for them to wait to learn whether the PTAB would agree to review the validity of the asserted patents before seeking a stay; and (3) the inter partes review process had the potential to simplify the issues in the litigation because the PTAB had agreed to review virtually all of the claims asserted in the district court action. Stay granted.