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Federal Circuit Reverses Denial of Stay Request Based On Covered Business Method Review


Most of the inter partes review proceedings filed before the United States Patent Trial and Appeal Board (PTAB) have also been involved in concurrent district court litigation. The nexus between on-going litigation and Covered Business Method (CBM) reviews has been even stronger because a CBM can only be filed if the person filing a petition for such a review, or its real person-in-interest, "has been sued for infringement of the patent or has been charged with infringement under that patent." AIA § 18(a)(1)(b). The much anticipated Federal Circuit decision in VirtualAgility Inc. v., Inc., Case No. 2014-1232 (July 10, 2014) now suggests the likelihood is very high that a district court must stay a litigation pending a final determination by the PTAB in a CBM proceeding. While district courts had previously granted stays based on such proceedings at a high frequency, prior to this decision, there had been an increasing number of denials of stay requests that had been based on pending CBM petitions.

This is likely a very significant decision regarding when a district court should stay litigation once PTAB has granted a CBM petition. The Federal Circuit particularly faulted the district court for engaging in an analysis of the PTAB's decision to institute its review. Id. at 11. The Court stated that, once the district court's review of the PTAB decision is removed from the calculus, the remaining evidence of record "weighs heavily in favor of a stay." Id. at 13. The Court found it particularly "significant that the PTAB granted CBM review on all asserted claims of the sole asserted patent." Id. Judge Newman, in dissent, noted that the decision "effectively creates a rule that stays of district court litigation pending CBM review must always be granted." 

This opinion, and the increased chances of a potential stay, will likely be a helpful tool for entities against whom financial type patents are asserted and for whom CBMs are an available option.

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