Inter Partes Reexams Deflating in the E.D. Tex.

BarTex Research LLC v. Fedex Corp., 6:07-CV-385 (E.D. Tex., April 20, 2009)

BarTex sued FedEx in August 2007 alleging infringement of a Scott Harris patent directed to a "bar code data entry device." While the suit was pending, pleadings were filed in an Illinois litigation stating that the Fish & Richardson law firm (Harris’s former employer) had asserted ownership over some of Harris’s patents, including the patent-in-suit. BarTex filed for Partial Summary Judgment of ownership in the Texas case, and the court granted BarTex's motion on November 2008.

Just over a month later, FedEx filed an inter-partes reexamination action that subsequently resulted in an Office Action rejecting all claims. FedEx then filed for a motion to stay. If you didn't guess, the court denied the motion.

Again, the Institute for Progress's report on inter-partes reexamination was the deal breaker:

Although the PTO reports that the average pendency of an inter partes reexamination is 28.5 months, if the patent holder decides to defend its rights, the process is likely to require an average of 43.5 months. Id. (citing Institute for Progress, Reexamining Inter partes Reexam (2008)). If the decision is appealed, it is estimated that the entire process will require an average of 78.4 months, although this estimate may be subject to change since there has never been an inter partes reexamination that has gone through the entire reexamination process, including appeal, and made it to completion. Id. BarTex argues that granting the stay would prevent BarTex from licensing the ‘377 patent for 6.5 years and eviscerate BarTex’s right to exclusivity until at least 2016.

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The Court finds that BarTex would be unduly prejudiced if the Court were to grant a stay. A stay could potentially prevent BarTex from enforcing its rights for 6.5 years. This extreme delay, which has been exacerbated by FedEx’s delay in requesting reexamination, could allow for a loss of critical evidence as witnesses could become unavailable, their memories may fade, and evidence may be lost.

The kicker in this case was that BarTex, recognized as a non-practicing entity, successfully argued that the delay from the inter partes proceedings would unduly prejudice potential injunctive relief.

BarTex may still be entitled to a permanent injunction, even though it does not practice its patent. See Ebay Inc. v. MercExchange, LLC, 547 U.S. 388, 393 (2006) (declining to adopt a categorical rule that non-practicing patent-holders cannot receive injunctive relief); see, e.g., Commonwealth Sci. and Indus. Research Org. v. Buffalo Tech. Inc., 492 F. Supp. 2d 600, 607-08 (E.D. Tex. 2007) (granting permanent injunction to a non-practicing patent owner). While BarTex will be able to collect damages for infringement occurring during the stay, BarTex may still suffer from irreparable harm during that time. Should FedEx be found to infringe the asserted patent in this litigation, damages alone may not fully compensate BarTex for a lengthy delay resulting from reexamination. The right to exclude, even for a non-practicing entity, may be the only way to fully vindicate the patentee’s ownership in the patent.

Also interesting was the court's unsympathetic stance towards the timing of the reexamination request. FedEx argued that it did not file the request earlier because it make no sense to do so, given the uncertainty over the patent's ownership. When ownership was determined, the reexamination was filed a month later.

While FedEx’s concerns over ownership of the ‘377 patent may offer some explanation as to its delay in seeking reexamination, the Court is not persuaded by FedEx’s arguments. A compelling argument can be made that FedEx had ample opportunity to seek reexamination prior to the ownership issue even being raised in this Court. Moreover, when the ownership issue was raised in this Court, it was dealt with in some detail over a period of multiple months. FedEx did not request a stay of this litigation while the ownership issue was pending nor did FedEx take a position on the issue. Missing from FedEx’s assessment of the timing of the reexamination request is an acknowledgment of the fact that it was accused of infringement in August of 2007. Irrespective of the ownership issue arising thereafter, FedEx had every reason to, as promptly as possible, seek reexamination and a stay if that is the option it chose. In sum, the Court cannot conclude that FedEx has acted with requisite diligence in seeking reexamination and a stay.

Read/download the opinion here (link)

Source: Docket Navigator