The Court of Appeals for the Federal Circuit today upheld the district court’s ruling rejecting a stay of Smartflash LLC’s retrial on damages against Apple Inc. (APPL) pending a covered business method review by the Patent Trial and Appeals Board, and reversed the ruling denying the stay of trials against Samsung Electronics America Inc. and others.
The ruling was handed down by a panel including Circuit Judges Kathleen O’Malley and Richard Linn. Circuit Judge Pauline Newman dissented in part finding that the panel erred in not staying trial against Apple, but correctly stayed the action against Samsung and others.
The ruling upheld in part and reversed in part a decision by Judge Rodney Gilstrap of the U.S. District Court in Austin, Texas. Judge Gilstrap in April tossed a $533 million award Smartflash won against Apple, but declined to stay the case pending a CBM review filed by Apple with the PTAB. Judge Gilstrap agreed to stay the cases against Samsung and the others because those trials had yet to begin
With respect to Apple, the Federal Circuit agreed with the district court’s analysis focused on the timing of Apple’s motion to stay, which was two months after the jury trial, and the fact that only the resolution of the parties’ post-trial motions remained before the case could be appealed to the appellate court.
“Because the case was on the eve of trial and an appeal to the Federal Circuit of both Samsung and Apple’s district court cases would be resolved before an appeal from a final PTAB decision, the district court concluded that the cases should proceed as scheduled. Because the actions against Google and Amazon remained in the early stages of litigation, the court found a stay of those actions to be appropriate even though there necessarily would be an overlap with respect to many of the issues to be decided.
The Federal Circuit held that “the district court concluded that the first factor in §18(b)(1) weighed against a stay because there was ‘nothing left to simplify’ as the district court and the jury had already decided nearly every potential issue, including the § 101 issue. Thus, the district court determined that the simplest way for the § 101 dispute to be resolved now was to allow the district court litigation to reach this Court. Id. at *72. We agree that this factor does not favor a stay.”
The Federal Circuit also said it agreed with the district court that a stay was inappropriate given Apple’s lack of diligence in filing its petitions for CBM review on section 101 grounds.
“The district court concluded that this delay— over seventeen months from start of the case—negated the intent of the CBM review process, which was designed to provide a cost-effective alternative to litigation and to reduce the burden on the courts.”
The Federal Circuit also agreed with the district court that by waiting until the eve of trial to pursue CBM proceedings on § 101 grounds, Apple had multiple opportunities to challenge the eligibility of the asserted patents in two separate forums, which gave Apple a clear tactical advantage over Smartflash.
“By waiting to submit its petitions until almost the eve of trial and well after it filed its motion for summary judgment on the § 101 issue, Apple was able to first pursue its § 101 defense at the district court and then at the PTAB. As the district court correctly found, this strategy thus afforded Apple multiple opportunities to pursue a single defense—a clear tactical advantage.”
The appellate panel also ruled that “although Apple argues that the district court improperly weighed the sunk costs in its analysis, such considerations can be informative, so long as they are viewed in the context of how much work remains, which the district court did in this case.
“Even with a limited retrial on damages, the ongoing burden of litigation on the parties and the district court is minimal compared to the substantial effort already expended by all involved in this case. Accordingly, we see no error in the district court’s conclusion that a stay would not reduce the burden of litigation on the parties and on the court.
In upholding Judge Gilstrap’s stay of the pending trials against Samsung and the others, the appellate panel said:
“Despite the substantial time and effort already spent in this case, the most burdensome task is yet to come. A determination from the PTAB that all the asserted claims are patent ineligible will spare the parties and the district court the expense of any further litigation, including a trial.
“It is true, moreover, that our resolution of the Apple appeal may impact or streamline the issues to be decided in the Samsung case. Because the district court did not properly consider the significance of this fact in its analysis, we find that the district court abused its discretion when it denied Samsung’s motion to stay. And, on balance, we conclude that the totality of the factors weigh in favor of a stay.
Jason Cassady, a partner Caldwell Cassady & Curry in Dallas, who helped represent Smartflash, couldn’t be reached for comment.
Mark Perry, a partner with Gibson Dunn & Crutcher in Washington, D.C., who represented Apple, also couldn’t be reached.
Charles Verhoeven, a partner with Quinn Emanuel Urquhart & Sullivan, who represented Samsung, also couldn’t be reached.
—To reach the reporter responsible for this story please contact Dan Lonkevich at 707 318-7899 or at email@example.com