Delaware Leads the Way on CBM-Related Stay

In one of the apparently few judicial decisions of its kind to date, the District of Delaware recently granted a motion to stay six patent infringement actions, pursuant to Section 18 of the America Invents Act (AIA), pending resolution of post-grant review proceedings in the U.S. Patent & Trademark Office (USPTO) to reexamine the validity of the so-called covered business method (CBM) patents at issue. As defined by AIA § 18(d)(1) and 37 C.F.R. § 42.301, a CBM is “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”

In Market-Alerts Pty. Ltd. v. Bloomberg Fin., et al., C.A. No. 12-780, D.I. 25 (D. Del. Feb. 5, 2013), the Court considered a new “fourth factor” that has been added by Section 18 of the AIA to the traditional three-factor stay analysis that federal courts apply when considering reexaminations. The fourth factor adds as a consideration “whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.” In considering this additional factor, the Court acknowledged that its apparent intent was “to ensure that district courts would grant stays pending CBM review proceedings at a higher rate than they have allowed stays pending ex parte reexaminations.” In fact, the Court noted, citing the relevant legislative history, the fourth stay factor was intended to “place[] a very heavy thumb on the scale in favor of a stay being granted.”

Ultimately, the Court ordered the stay, after considering this fourth factor, as well as the three traditional factors considered for staying civil patent litigations brought under 35 U.S.C. § 281: 1) simplification of the issues; 2) the status of the litigation, particularly discovery; and 3) any claimed undue prejudice to the nonmoving party. Notably, as to the issue of prejudice (or lack thereof), the Court noted that plaintiff, Market-Alerts Pty. Ltd., was not a direct competitor of the defendants, but rather, was primarily in the business of patent infringement litigation. As such, the Court found there would be no undue prejudice to plaintiff in staying the actions, as there was no resultant risk to plaintiff as a non-practicing entity of a “loss of market share” or an “erosion of goodwill.”

The Market-Alerts decision highlights a significant new consideration for parties litigating CBM patents, particularly where the plaintiff is a non-practicing entity. Defendants should strongly consider post-grant review proceedings for CBM as a component of their defense strategies. Stay tuned for additional developments.

Thomas J. Bean is a Director in the Gibbons Intellectual Property Department. Christopher Viceconte, a Director in the Gibbons Business & Commercial Litigation Department, and Ralph A. Dengler, a former Director in the Gibbons Intellectual Property Department, co-authored this post.