Tuesday, November 25, 2008

Are Inter-Partes Reexams Losing Their "Staying Power"?

ESN v. Cisco Systems, Inc., E.D. Tex., 5:08-CV-20, November 20, 2008

ESN sued Cisco for patent infringment. A few months later, Cisco successfully petitioned for an inter-partes reexamination (IPR). Shortly thereafter, the PTO issues a First Office Action rejecting every claim in the patent. Cisco then filed a motion to stay.

In support of its motion, Cisco argued that (1) the PTO has a mandate to resolve inter-partes reexaminations expeditiously, (2) ESN does not practice the patent, so money damages will be sufficient, (3) ESN has no claims in the lawsuit other than those based on the reexamined patent, and (4) estoppel will prevent the duplication of prior art issues.

ESN countered that (1) the excessive length of time for resolving IPR issues will result in a "clear case of substantial prejudice"; ESN also cited the study from the Institute for Progress (see 271 Blog coverage here) that alleged that PTO's reports on IPR's are "highly misleading" and that average IPR pendency is between 34 and 53 months, (2) given the PTO delay in IPR's, granting a stay would "write off half of the life of ESN's patent", and (3) citing the Supreme Court and Cisco's V.P. and General counsel, caution should be taken "against viewing non-practicing entities as incapable of showing irreparable harm."

Weighing the factors, the court sided with ESN:

The Court finds ESN would be significantly prejudiced and suffer tactical disadvantages by a stay in this case. Mark Chandler, Cisco’s V.P. and General Counsel perhaps said it best when he noted in testimony before the Senate Subcommittee on Intellectual Property in a hearing on patent post-grant review, “The principle that justice delayed is justice denied applies with full force to the patent process.” Staying this case for six-plus years when this Court can resolve the matter more expeditiously is unfairly prejudicial to ESN. Accordingly, this factor weighs heavily against granting the stay.

* * *

When the factors are considered collectively, the Court finds the unfair prejudice to ESN in granting this stay overshadows any potential simplification of issues. Further, although the stage of this litigation is fairly early, statistics indicate that the IPR process, assuming appeals are taken, will take much longer than the schedule currently set in this case. For all of the foregoing reasons, Cisco’s Motion to Stay Litigation Pending Reexamination of U.S. Patent No. 7,283,519. (Dkt. No. 35) is hereby DENIED.

Download/read a copy of the opinion here.

NOTE: For what it is worth, this happens to be the exact case that started the Patent Troll Tracker defamation brouhaha (link)

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