A PTAB proceeding, such as an Inter Partes Review (“IPR”), Covered Business Method Review (“CBM”) or Post-Grant Review (“PGR”) is a powerful defensive strategy because of speed and cost. The business calculus, however, changes significantly if the petitioner has already been sued in district court and the district court judge denies a stay. Then, instead of a cheaper, faster process, the petitioner/defendant is faced with parallel proceedings with differing standards, different deadlines, overlapping but different rules and additional fees and costs. And that does not take into account the potential estoppel from the PTAB proceeding and the added strategy analysis that is required. Docket Navigator is a great resource for performing your pre-PTAB filing due diligence. The below chart shows stay grant rates in each of the biggest patent districts. You can also get judge-by-judge statistics and stay decisions that will be even more valuable in a specific case where you can identify the deciding judge.
While the rest of the country saw a year-over-year drop in patent cases during 2016, the Northern District saw an increase. According to the excellent data from Docket Navigator, the Northern District’s share of patent cases nearly doubled from 2.8% in 2015 to 5.3% in 2016. In a number of cases, the Northern District moved from 162 filed cases to 244. That is a significant jump back to 2012-13 patent case levels, after two years of depressed filings.
Other districts that saw a significant increase in filings included the Central District of California and the Southern District of Florida. Otherwise, most of the largest patent districts saw a decrease or stayed relatively even, including the Eastern District of Texas (down 7.5%), the District of Delaware (up 0.6%), the Northern District of California (up 0.4%), and the Southern District of New York (down 0.1%).
While there are no clear answers for why Chicago is bucking the national trend, there are several possible reasons:
- Anticipating the TC Heartland Supreme Court decision, parties are filing where the defendants actually are.
- While NPE cases have been dropping, competitors are still filing where patent issues with competitors make business sense. We have seen competitor cases remaining strong in Chicago and across the country.
- The Chicago market has seen an increase in quality plaintiff-side shops, including as the Niro firm splintered late last year and early this year.
T-Rex Prop. AB v. Adaptive Micro Sys., LLC, No. 16 C 5667, Slip Op. (N.D. Ill. Jan. 26, 2017) (Kendall, J.).
Judge Kendall granted defendant Adaptive Micro Systems’ (“Adaptive”) motion to stay plaintiff T-Rex’s patent suit pending potential institution of inter partes review (“IPRs”) and a covered business method review (“CBM”).
The fact that Adaptive filed a petition for IPR or CBM of each asserted claim of each asserted patent weighed in favor of a stay. Even though the Patent Trial and Appeal Board (“PTAB”) had not yet ruled upon institution, it would do so only about three months after the Court’s order. That was a relatively short wait, even if one or more were not instituted. And staying pre-institution prevents the potential of months of unnecessary, duplicative discovery and motion practice. Additionally, discovery had just begun in this case and no claim construction hearing date had been set. The early stage of the case weighed in favor of the stay.
There was no undue prejudice or tactical advantage from the stay. The parties were not competitors, the motion was filed quickly and early, and the institution decisions were due in about three months. T-Rex’s argument that it would lose prospective damages against future defendants in other cases was not credible. If the Court accepted that argument, stays could not be granted in almost any case.
The burden of litigation factor weighed in favor of granting a stay, although neither party supported its arguments beyond conclusory statements.
Deckers Outdoor Corp. v. Australian Leather Pty. Ltd., No. 16 C 3676, Slip Op. (N.D. Ill. Jan. 25, 2017) (Shah, J.).
Judge Shah denied individual defendant’s Fed. R. Civ. P. 12(b)(2) motion to dismiss for lack of personal jurisdiction in this Lanham Act dispute over plaintiff Deckers’ UGG and CARDY marks.
The corporate defendant Australian Leather did not challenge personal jurisdiction. The individual defendant is Australian Leather’s owner and general manager. Because Deckers only claimed specific jurisdiction, the Court only analyzed whether it had specific jurisdiction over the individual defendant. While the individual defendant claimed not to have contact with Illinois, he designed Australian Leather’s products and facilitated their sale into Illinois. He also personally directed Australian Leather to make contact with Illinois. So, he did have contact with Illinois. The issue is whether that contact was attributable to him or just to Australian Leather.
The fiduciary shield doctrine did not apply to the individual defendant because he was not merely acting at the direction of Australian Leather. As Australian Leather’s owner and managing director, his actions were also for the individual defendant’s own pecuniary interests. Additionally, the individual defendant was acting at his own behest, not that of his supervisor which is a more typical case where the fiduciary shield doctrine would apply. This analysis could have been different if, for example, the individual defendant were not also the sole owner of Australian Leather.
Furthermore, traditional notions of fair play and substantial justice were not offended by finding personal jurisdiction. The individual defendant would not be significantly burdened by defending the claims in Illinois. His company conceded jurisdiction. As owner and managing director of Australian Leather, he will play a significant role in defending Australian Leather’s suit. And both defendants share counsel.
Additionally, the Court noted that it need not undergo a piercing of the corporate veil analysis because individual personal jurisdiction did not require piercing the corporate veil.
The Northern District has the highest grant rate for stays pending Inter Partes Review (“IPR”), Covered Business Method Review (“CBM”) and Post-Grant Review (“PGR”) of any of the biggest patent districts nationwide – 72.7%. According to Docket Navigator’s excellent data, through 2016 the Northern District fully granted 59.1% of stay motions and partially granted another 13.8%. The Northern District fully or partially granted 32 of 44 stay motions.
The Northern District of California comes in second, fully or partially granting 72.2% of stays, fully granting slightly less than the Northern District – 56.7%.
The lowest grant rates are Eastern District of Texas – 36.9% – and the District of Delaware – 49%. No surprise, the lowest grant rates are also the two busiest patent districts, suggesting that plaintiffs do their research.
Republic Techs. (NA), LLC v. BBK Tobacco & Foods, LLC d/b/a HBI Int’l., No. 16 C 3401, Slip Op. (N.D. Ill. Jul. 7, 2016) (Bucklo, J.).
Judge Bucklo granted declaratory judgment defendant HBI’s Fed. R. Civ. P. 12(b)(1) motion to dismiss plaintiffs’ (collectively “Republic Tobacco”) complaint without prejudice to replead, if possible, in this trademark dispute related to cigarette rolling papers.
As an initial matter, the Court determined that HBI’s standing challenge was a facial one arguing that actual controversy was not properly pled, as opposed to contesting the facts pled. The analysis was complicated by the fact that both parties’ briefing went beyond the complaint arguing additional facts. Because it was a facial challenge, the Court accepted Republic Tobacco’s factual allegations. For that reason, the Court did not consider the affidavit and exhibits that Republic Tobacco attached to its papers.
Republic Tobacco’s allegations did not establish an actual controversy. Republic Tobacco makes three relevant allegations:
- HBI sent Republic Tobacco a letter seeking to agree to changes to Republic Tobacco’s packaging;
- HBI previously threatened Republic Tobacco with a trademark lawsuit over hemp rolling papers; and
- HBI sent a copy of its letter to a Republic Tobacco customer.
Republic Tobacco’s factual allegations have been held to be relevant to an actual controversy analysis. But where the factors created an actual controversy, they either were combined with significant other factors or went well beyond sending a customer a copy of a cease and desist letter.
Similarly, a history of litigation can create actual controversy. But it requires much more extensive litigation, as opposed to just a threat of future litigation, as HBI did here.
Next week, on March 15, 2017, the Federal Circuit Bar Association and the Intellectual Property Law Association of Chicago are hosting an Intellectual Property Law Symposium at the University Club of Chicago from 8:45am until 5:00pm. Register here. Speakers include Northern District of Illinois Judges Castillo, Feinerman, Holderman (Ret.), Kendall, and Pallmeyer; as well as Federal Circuit Chief Judge Prost. It promises to be an excellent conference, hitting key topics from Alice to the PTAB, willfulness post-Halo, and case management from the judges’ perspective.
I hope to see you there.
The Northern District and the Chicago Chapter of the Federal Bar Association are seeking nominations (by April 10, 2017) for attorneys who have provided outstanding pro bono and public interest representation in civil and criminal matters before the Northern District that are complete and no longer pending. In the words of the Northern District:
The nominee should be someone who has demonstrated excellence in commitment to pro bono or public interest work by handling a matter in this District as a court-appointed attorney, pro bono attorney, or staff attorney for a not‑for‑profit agency, representing an indigent party in a civil or criminal matter.
- dedication to pro bono or public interest work;
- outstanding achievement resulting from the representation of a large group of indigents, successful representation in a difficult case;
- outstanding negotiation and settlement skills in achieving a result without trial;
- extraordinary number of hours committed to pro bono work; and
- other distinguished performance.
O2 Media, LLC v. Narrative Science Inc., No. 15 C 5129, Slip Op. (N.D. Ill. Jan. 3, 2017) (Tharp, J.).
Judge Tharp denied defendant Narrative Sciences’ 35 U. S.C. § 285 motion to make the case exceptional after using a motion to dismiss in this patent case.
The Court previously held that O2 Media’s patent claims were unpatentable software pursuant to 35 U.S.C. § 101 and Alice. While some courts have found pursuing software patent claims objectively unreasonable, that was not the case for O2 Media’s claims. O2 Media advanced five arguments, albeit, all unsuccessful. But O2 Media’s arguments were plausible, if wrong. The Court also refused to make the case exceptional because of noninfringement arguments that the Court never ruled upon.
O2 Media’s $1M+ settlement demand was also not evidence of an exceptional case. It just showed that O2 Media placed a high value on its patent.
Kosten v. Kosten, No. 16 C 6666, Slip Op. (N.D. Ill. Dec. 14, 2016) (Kennelly, J.).
Judge Kennelly denied in part defendant’s Fed. R. Civ. P. 12(b) motion to dismiss plaintiff’s state law claims in this case involving copyright claims and generally relating to the sale of the parties’ Garden Row sauce business.
While only one of three plaintiff’s brought a copyright claim – related to art created for use with Garden Row’s sauces – the Court had supplemented jurisdiction over the other parties’ state law claims because they all arose from a common nucleus of fact – the allegedly improper sale of the Garden Row business.
The Court did dismiss plaintiff’s breach of contract claim for failure to identify the allegedly breached terms. The Court also counseled plaintiff to attach the relevant agreements if it chose to refile.