By Kyle Pietari – Edited by Insue Kim
VirtualAgility, Inc., v. Salesforce.com, Inc., et al., No. 2014-1232 (Fed. Cir. July 10, 2014)
The Federal Circuit reversed a decision of the U.S. District Court for the Eastern District of Texas, which denied a joint motion raised by Salesforce.com and other defendants (“Defendants”) to stay VirtualAgility’s (“VA”) patent infringement suit until the Patent Trial and Appeal Board (“PTAB”) could complete a post-grant review of the validity of VA’s patent under the Transitional Program for Covered Business Method Patents (“CBM”). This was the Federal Circuit’s first encounter with an interlocutory appeal from a district court’s ruling on a motion to stay infringement proceedings concurrent with the CBM review process, made possible by the America Invents Act (“AIA”), 125 Stat. 284 § 18(b)(2).
Reviewing the district court’s application of four factors that the AIA expressly requires courts to consider, the Federal Circuit held that the stay pending CBM review was improperly denied. VirtualAgility, slip op. at 5. Though § 18(b)(2) states that the Federal Circuit’s standard of review “may be de novo,” the court declined to address the question of when to apply a de novo standard, holding that the district court’s decision would be reversed even under the abuse of discretion standard that VA had argued for. Id. at 5. In so holding, the Federal Circuit sent a message that although a court denying a stay of infringement proceedings could be given deference on appeal, it should not expect to.
National Law Review provides a thorough analysis of the case. PatentlyO discusses the interplay between courts and the U.S. Patent and Trademark Office.
In reaching its conclusion that the district court abused its discretion, the Federal Circuit thoroughly analyzed each of the four factors considered under AIA § 18(b)(1), which are:
(1) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(2) whether discovery is complete and whether a trial date has been set;
(3) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
(4) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
Though a district court’s analysis of the factors must be fact-specific, the Federal Circuit clarified that courts may choose to grant the stay before or after the PTAB decides whether to review a patent’s claims. VirtualAgility, slip op. at 16. It also noted that “the case for a stay is stronger after post-grant review has been instituted.” Id.
National Law Review explains that, according to the legislative history of AIA § 18, Congress expected that stays would rarely be denied and wrote the statute intending to produce consistent outcomes in court decisions. While the majority does not explicitly refer to Congress's intent as a driving factor behind its decision, it appears to have brought the application of AIA in line with congressional intent.
Judge Newman dissented, arguing that the majority’s decision stripped the district court of its statutorily granted discretion to deny a stay of litigation. Id. at 2–3 (Newman, J., dissenting). That the majority overturned the district court’s decision without applying a de novo standard of review suggests that Judge Newman’s reading of the statute may be contrary to how the law is moving forward. But the question of how much discretion district courts will be allowed to exercise remains yet to be determined.
Kyle Pietari is a J.D. student at Harvard Law School, Class of 2016. Kyle is from Denver, Colorado.