Stay pending ex parte reexamination denied where parties are direct competitors

eComSystems sued Shared Marketing Services and Ace Hardware for infringement of 5 patents. Shared Marketing and Ace filed a request for ex parte reexamination with the Patent Office arguing that certain prior art rendered each of the patents invalid. 92% of ex parte reexamination requests are granted, and this case was no exception.

Shared Marketing and Ace asked the Court to stay the litigation pending resolution of the reexamination. The Court refused.

Courts typically analyze 3 factors when considering a motion to stay pending reexam: (1) will the stay unduly prejudice the non-moving party; (2) will the stay simplify the issues; and (3) will the stay streamline the litigation.

Here, the Court noted that the case was in its infancy, and thus on initial look the factors seemed to favor a stay. But 2 key points tilted the scale in the opposite direction. First, defendants requested ex parte reexamination and would not be bound by the result (and could thus relitigate the same invalidity issues if the patents survived reexamination). Second, eCom and Shared Marketing are direct competitors. Staying the litigation 2 years for reexam (and then another 2 for appeals) would prejudice eCom because it could not enjoin its competitor during this indefinite time frame:

However, because the pending Patent and Trademark Office proceedings are ex parte reexaminations, rather than inter partes reexaminations, the Court is not persuaded that the second and third factors weigh in favor of a stay. Rather, the Court anticipates that the benefits of a stay would likely to be marginal, at best.

Inter partes reexaminations provide a third party the right to participate in the reexamination process and, thus, have a res judicata effect on the third party requester in any subsequent or concurrent civil action. See 35 U.S.C. §§ 314- 315; Tomco2 Equip. Co. v. S.E. Agri-Systems, Inc., 542 F. Supp. 2d 1303, 1306 (N.D. Ga. 2008). Ex parte reexaminations, on the other hand, do not bar the requestor from relitigating the exact same issues in district court. Id.

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Courts have recognized that where the parties are direct competitors, a stay would likely prejudice the non-movant. Tesco Corp. v. Weatherford Int'l, Inc., 599 F. Supp. 2d 848, 851 (S.D. Tex. 2009). In such situations, stays are denied where there is concern that the patent owner will be irreparably harmed because the accused product will continue to gain market share during the pendency of the stay. Heraeus Electro-Nite Co., LLC v. Vesuvius USA Corp., Case No. 09-2417, 2010 U.S. Dist. LEXIS 1887, at *3 (E.D. Pa. Jan. 11, 2010).

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Furthermore, the potential prejudice to eCom is exacerbated by the lengthy and indefinite amount of time required to complete the reexamination proceedings for all five of the patents-in-suit. The requested stay would expire only after completion of the reexamination and the appellate process. Fusilamp, LLC v. Littelfuse, Inc., No. 10-20528-CIV, 2010 U.S. Dist. LEXIS 56553, at *12 (S.D. Fla. June 7, 2010). The reexamination process averages 25.4 months to complete, and the appellate process averages 24 months to complete. Id.

Motion to stay denied.

eComSystems, Inc. v. Shared Marketing Services, Inc., Case No. 8:10-CV-1531, slip op. (M.D. Fla. Jan. 26, 2011)(J. Covington)

Want to help improve the MPEP or TMEP? The PTO wants to hear from you.

David Kappos (the Director of the Patent and Trademark Office) writes in his blog about the ongoing effort to reengineer the MPEP. They want the IP Community to get involved:

I’m thrilled to announce to our readers that we have now put out what we believe is a radically new way for us to work in collaboration with colleagues and stakeholders in getting this important job done. The vehicle we chose to bring that philosophy to action is the Internet, more specifically an online discussion tool. Now for the first time in history, the IP world can work with the PTO, together and collaboratively make the MPEP and TMEP into state-of-the-art practice documents.

So, go join the discussion on the MPEP or the TMEP and let your voice be heard.

A win alone in a patent case doesn't get you fees. And don't try to rely on your settlement negotiations as evidence of litigation misconduct.

I've written previously about the Stone Strong case. Stone Strong was awarded an injunction precluding Del Zotto from infringing Stone's patent. Post trial, Stone moved for fees, arguing the case was "exceptional" because: (1) Del Zotto's infringement was willful; (2) Del Zotto's litigation tactics were vexatious and unnecessary; and (3) the question of infringement was not a close one. Del Zotto opposed.

The Court wasn't convinced by Stone. There was no willfulness finding and Del Zotto's defense was not unreasonable:

To find "exceptional" circumstances in this case would be tantamount to a finding that every patent infringement action, without more, is exceptional merely because it proceeds to trial.

The Court also granted Del Zotto's motion in limine to exclude any consideration of the parties' settlement negotiations in considering Stone's attorney fee request. Stone sought to offer theses negotiations as evidence of Del Zotto's inappropriate litigation conduct. The Court wouldn't have it:

Federal Rule of Evidence 408 prohibits the admission of [settlement negotiations] when it is "offered to prove liability for ... a claim that was disputed as to validity or amount ..." There appears to be no decision of the Federal Circuit dealing with the application of Rule 408 in disposing of post trial claims for attorney's fees under 35 U.S.C. § 285, but such a claim is well within the plain and clear language of the rule....The court will not consider the settlement correspondence attached to the Plaintiff's motion.

Motion for fees denied.

Stone Strong, LLC v. Del Zotto Products of Florida, Inc., Case No. 5:08-CV-503, slip op. (M.D. Fla. Jan. 5, 2011)(J. Hodges)

Did Novell, SCO and X/Open conspire to hide the true owner of the UNIX trademark??? No.

I've written previously about who owns the UNIX copyrights. Another dispute has been waged concerning the UNIX trademark.

A brief history. AT&T developed an operating system in 1969 and called it UNIX. In 1986, it sought a couple of federal trademark registrations. It then transferred ownership of the mark and registrations to its subsidiary, UNIX Systems Laboratories (USL).

USL then merged into Novell. As part of that merger, Novell acquired the UNIX trademark. Much of the computer industry (Novell included) then agreed that it was in the industry's best interest to transfer Novell's UNIX-trademark licensing business into a non-profit organization. That's X/Open's role in this story. A little later, Novell sold off some assets, including its UNIX business, to SCO.

Confused? I made a chart.

iNUX

Wayne Gray started a business in the late 90s which he ended up calling iNUX. He applied for a trademark registration for "iNUX," but X/Open opposed that registration claiming it was confusingly similar to its UNIX mark. Gray did not passively respond -- he launched his own investigation into X/Open and ownership of the UNIX trademarks. In a nutshell, Gray argued that X/Open fraudulently opposed the iNUX mark because X/Open did not really own the UNIX trademark, and had claimed it did in the opposition proceeding.

Neither the district court nor the Eleventh Circuit agreed with Gray. Gray argued that SCO was the real owner of the UNIX trademark because it had received all UNIX trademarks by way of an Asset Purchase Agreement between Novell and SCO. The operative language of the Asset Purchase Agreement assigned

[t]trademarks UNIX and UNIXWARE as and to the extent held by [Novell]

(emphasis added). The courts refused to read out the limiting language at the end and by way of contract analysis held that Novell assigned what it had -- not what it had already assigned to X/Open. Thus, X/Open was the proper owner of the UNIX trademark and Gray could not maintain any of his causes of action against the three defendants because each claim was premised on X/Open's purported fraud in claiming ownership of the mark.

Summary judgment affirmed.

Gray v. Novell, Inc., No. 09-11374 (11th Cir. Jan. 7, 2011)

Gray v. Novell - 11th Cir.

A consent judgment to "obey the law" doesn't cut it

Plastic Tubing Industries, Inc. accused Blue Diamond Industries, LLC and Mark Stuhlreyer of infringing U.S. Patent Nos. 5,516,229; 5,520,481; and 7,661,903 each generally directed to drainage pipes. The parties resolved their dispute, and asked the Court to enter a consent judgment. The proposed consent judgment included the following proposed order:

1. The Defendants, and Defendants' officers, directors, owners, agents, servants, employees, successors, heirs and assigns, and any other persons in active concert or privity or in participation with any of then, are hereby enjoined from infringing PTI's Patents.

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8. The Defendants ... are hereby enjoined from aiding, abetting, contributing, causing or assisting anyone or any entity in engaging in the activities prohibited by this Injunction or infringing the intellectual property described above.

Judge Presnell succinctly refused to enter this consent judgment:

The proposed consent judgment is essentially an extremely broad "obey the law" injunction requiring the Court to retain jurisdiction over this action indefinitely. The Court declines to do so.

The parties revised their proposed consent judgment (to be more direct and prohibit defendants from making, using, selling, or offering for sale mulit-pipe systems that constitute a material part of the invention covered by PTI's patents), which the Court entered.

Plastic Tubing Industries, Inc. v. Blue Diamond Industries, LLC, Case No. 6:10-cv-1227, slip op. (Dec. 28, 2010) (J. Presnell)