District Court Stays Litigation for Second Time Pending Patent Review

by Eric Caligiuri
The IP Law Blog

In WAG Acquisition LLC v. Flying Crocodile Inc et al, 2-19-cv-01278 (WDWA Dec. 28, 2021), the Court granted defendants’ motion to stay pending ex parte reexamination even though the case had already previously been stayed pending inter partes review.

As background, on March 19, 2020, the court granted a motion to stay the instant case during the pendency of an inter partes review of one of the patents at issue.  After the inter partes review was resolved, but before the court scheduled a Markman hearing, defendants filed the pending motion to stay further proceedings on claim construction and the Markman hearing based on requests for subsequent ex parte reexamination of the patents in-suit that were filed by the defendants in another case.  Thus, the court had to decide whether to stay the case for a second time pending review of one of the patents at issue.

In determining whether to grant a motion to stay proceedings pending reexamination, the court considers: “(1) whether a stay will simplify the issues in question and the trial of the case, (2) whether discovery is complete and whether a trial date has already been set, and (3) whether a stay will unduly prejudice or present a clear tactical disadvantage to the non-moving party.”

As to the first factor, the defendants argued that a stay of claim construction proceedings and the Markman hearing will simplify the issues in this case because the pending ex parte reexamination: (1) has the potential to reduce the number of claims at issue; (2) will allow the Court to evaluate the fully developed intrinsic record; and (3) will provide the Court with “the benefit of USPTO’s expertise, analysis of the asserted claims, and evaluation of the prior art.”  In contrast, the plaintiff argued that a stay is unlikely to simplify the issues in this case, arguing that the patents in-suit have already been subject to prior inter partes reviews.  The plaintiff also pointed to USPTO statistics indicating that only 14 percent of reexamination requests filed by third-party requestors result in all claims in a patent being canceled.

However, the court ultimately found defendants’ arguments more persuasive.  The court reasoned that the pending reexamination of at least three of the patents-in-suit has the potential to reduce the number of claims at issue and to simplify this case. Although the patents at issue have been subject to prior IPR proceedings, the USPTO grants an ex parte reexamination request only when it finds substantial new questions of patentability.  Further, the standard is the simplification of the district court case, not complete elimination of it.  Thus, the Court found that this factor weighs in favor of defendants’ request for a stay.

Next, as to the second factor, the court considers “whether discovery is complete and whether a trial date has already been set.”  The court reasoned that although fact discovery related to liability has been completed, fact discovery related to damages is not yet complete, nor have the parties yet conducted expert discovery. In addition, the court has not yet set a trial date, but instead previously indicated that it would schedule the remaining deadlines in this case after ruling on claim construction.  Thus, the court found that this factor again weighs in favor of a stay.

As to the third factor, the court considers “whether a stay will unduly prejudice or present a clear tactical disadvantage to the non-moving party.”  However, the court noted that “mere delay does not demonstrate undue prejudice,” particularly where, as here, the parties are not competitors.  Thus, the court found that plaintiff would not suffer undue prejudice or a clear tactical disadvantage if the court grants defendants’ motion to stay claim construction and a Markman hearing pending the outcome of the pending requests for reexamination of the patents at issue.