District Court Denies Stay for Ex Parte Reexamination

Pro-Troll, Inc. v. Shortbus Flashers, LLC (N.D. Cal. 2016)

By Donald Zuhn –-

In an order issued last week, Judge Vince Chhabria of the U.S. District Court for the Northern District of California denied a motion to stay filed by Defendant Shortbus Flashers, LLC.  Shortbus Flashers sought the stay because it had filed a request for an ex parte reexamination of the patent being asserted in the litigation by Plaintiff Pro-Troll, Inc.  While the District Court noted that the decision whether to stay the case during the ex parte reexamination was discretionary, the Court also noted that factors to be considered in deciding whether to stay a case for patent reexamination or review include:  whether discovery is complete and a trial date has been set, whether a stay will simplify the issues in the case, and whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party.

In the instant case, the District Court noted that Shortbus Flashers had the choice of requesting ex parte reexamination or petitioning for inter partes review and that the Defendant's choice of patent review was relevant to the Court's decision to deny the motion to stay.  In particular, the Court indicated that "[t]he choice of ex parte reexamination was strategically advantageous to Shortbus Flashers because the result of the reexamination will have no estoppel effect on Shortbus Flashers's arguments here," explaining that "even if the PTO decided not to invalidate the patent after reexamination, Shortbus Flashers could continue to press an invalidity argument here."  The District Court also noted that "the ex parte reexamination process is much less likely to advance the ball in this case," and would prevent Pro-Troll, which the Court pointed out was Shortbus Flashers' direct competitor, from asserting its patent rights in court "for as long as two years," "with Shortbus Flashers having effectively pressed the pause button on the litigation while hardly needing to lift a finger."

In a footnote, the District Court hinted that the result may have been different had Shortbus Flashers argued that it had chosen ex parte reexamination over inter partes review because of limited resources (especially given its participation in the ongoing district court litigation), and that those limited resources justified the stay of the litigation pending the results of the reexamination.  However, the Court stated that "Shortbus Flashers did not argue that here; indeed, it indicated at oral argument that it isn't an issue in this case."

Order Denying Motion to Stay by District Judge Vince Chhabria

Comments

[Paul F. Morgan]

An interesting example of a N.D.CA D.C. judge knowing one of the most important practical differences between reexamination and IPR, and asking the right questions early on.