No “Second Bite at the Apple” for Non-Petitioner Defendants Seeking Stay Based on Pending IPR - Evolutionary Intelligence, LLC v. Sprint Nextel Corporation et al.


Addressing whether a non-petitioner defendant seeking a stay pending inter partes review (IPR) should be bound by the statutory estoppel requirements for an IPR petitioner, a district court granted the defendant’s motion for a stay that was based on representations that the defendant was not involved in the IPR proceedings and agreement by the defendant to accept estoppel from raising (in the litigation) invalidity arguments that were made in the IPR.  Evolutionary Intelligence, LLC v. Sprint Nextel Corporation et al., Case No. 5-13-cv-04513 (N.D. Cal., Feb. 28, 2014) (Whyte, J.).

The plaintiff, Evolutionary Intelligence, filed suit against nine groups of defendants in the U.S. District Court for the Eastern District of Texas asserting two patents. After the cases transferred to the U.S. District Court for the Northern District of California, several companies collectively filed eight petitions for inter partes review before the U.S. Patent and Trademark Office (PTO), which, in combination, sought review of all claims for both patents.  The Sprint group of defendants did not file any of the IPRs, but nonetheless filed a motion to stay its case based on the IPRs.  In analyzing the three factors as to whether a stay pending reexamination should be granted—whether discovery is complete and whether a trial date has been set, whether a stay will simplify the issues and whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-movant—the court found all three in support of a stay.  However, prior to issuing the stay, the court considered whether Sprint, a non-petitioner, should be subject to the statutory estoppel provisions applied to IPR petitioners, that prevent petitioners from re-litigating invalidity arguments that were raised or could have been raised in the IPR.  While Sprint represented that it had no involvement in the IPRs and argued that no estoppel should be applied, the court required Sprint to submit to a weaker estoppel, foreclosing it from re-litigating arguments made in the IPR proceedings (but not arguments that could have been raised, but were not).  In doing so, the court balanced Sprint’s non-involvement in the IPR proceeding with the policy considerations of preventing groups of defendants from having “multiple bites at the invalidity apple” (i.e., first in the IPR and then again in district court) through the IPR process.

Practice Note:  Defendants seeking to stay their cases by leveraging IPRs filed by third parties should strategically consider their involvement in those IPRs, as well as the potential estoppel effects resulting from both a stay and any involvement. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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