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Virtualagility, Inc. v. Salesforce. Com, Inc.

United States District Court, Fifth Circuit

January 8, 2014

VIRTUALAGILITY, INC., Plaintiff,
v.
SALESFORCE.COM, INC., ET AL, Defendants.

MEMORANDUM OPINION AND ORDER

RODNEY GILSTRAP, District Judge.

Before the Court is Defendants' Joint Motion to Stay Proceedings Pursuant to Section 18(b) of the Leahy-Smith America Invents Act ("AIA"). (Dkt. No. 67.) Having considered the parties' written submissions, the Court DENIES Defendants' motion.

I. Background

The patent at issue relates to processes and tools which provide a common framework for communicating effectively across diverse groups within an organization and for assessing key elements of the organization's business. The patentee, VirtualAgility, Inc. ("VirtualAgility" or "Plaintiff") sells cloud-based enterprise-level information technology solutions that encompass the patented invention. Defendant Salesforce.com, Inc. ("Salesforce") likewise is a provider of enterprise cloud computing solutions, whose products are used by the other Defendants in this case.

VirtualAgility filed suit on January 4, 2013 against Salesforce and the other Defendants for allegedly infringing U.S. Patent No. 8, 095, 413 (the "'413 Patent"). On May 24, 2013, Salesforce filed a petition for Covered Business Method ("CBM") review of the 413 Patent under the AIA. On May 29, 2013, all Defendants jointly filed the instant motion seeking a stay of proceedings pending the PTO's final resolution of the CBM review. On November 19, 2013, the Patent Trial and Appeal Board ("PTAB") granted Defendants' petition and instituted a CBM review of all claims of the 413 Patent.

II. Applicable Law

Section 18 of the Leahy-Smith America Invents Act ("AIA") establishes the Transitional Program for Covered Business Method Patents ("CBM"). 157 Cong. Rec. S1360-02 (2011); AIA § 18. The program is regarded as a post-grant review, where a person sued for infringement of a "covered business method" patent may petition the PTAB to review the validity of that patent. AIA § 18(a). For purposes of the statute, a "covered business method" patent is defined as "a patent that claims a method or corresponding apparatus for performing data processing operations utilized in the practice, administration, or management of a financial product or service." AIA § 18(d).

The transitional program provides a statutory stay provision under which a party may seek stay of a civil action alleging infringement of the CBM patent. AIA § 18(b)(1). The courts are directed to base their decision as to whether or not to grant such a stay on four factors: "(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; (B) whether discovery is complete and whether a trial date has been set; (C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and (D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court." Id.

III. Analysis

The Court will discuss each of the statutory stay factors outlined in § 18(b) below, addressing the parties' specific arguments where applicable.

a. Statutory Background

The CBM transitional program is designed to "provide a cheaper, faster alternative to district court litigation over the validity of business-method patents." 157 Cong. Rec. S1360-02. The proceeding is limited to certain business method patents, which "are generally of dubious quality because unlike other types of patents, they have not been thoroughly reviewed at the PTO due to a lack of the best prior art." Id.

The four-factor test, adopted directly from a 2006 district court opinion in Broad. Innovation, L.L.C. v. Charter Commc'n, Inc., No. 03-cv-2223-ABJ-BNB, 2006 WL 1897165 at *3 (D. Colo. July 11, 2006), "closely resembles the stay analysis courts have applied in assessing a motion to stay pending inter partes or ex parte reexamination by the [patent office]. 157 Cong. Rec. S1360-02; Market-Alerts Pty. Ltd. v. Bloomberg Fin. L.P., 922 F.Supp.2d 486, 489 (D. Del. Feb. 5, 2013); see, e.g., Soverain Software LLC v. Amazon, Inc., 356 F.Supp.2d 660, 662 (E.D. Tex. 2005) (citing Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)) (applying a three-factor test that asks "(1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party, (2) whether a stay will simplify the issues in question and trial of the case, and (3) whether discovery is complete and whether a trial date has been set."). Indeed, the only difference between the CBM test and the court's traditional test is the addition of the fourth factor, which requires courts to consider "whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court." AIA § 18(b)(1). Some courts interpret this additional consideration as "[having] ease[d] the movant's task of demonstrating the need for a stay." Market-Alerts, 922 F.Supp.2d at 489-490; see also Versata Software, Inc. v. Volusion, Inc., No. A-12-CA-893-SS (W.D. Tex. June 20, 2013) (slip opinion); Progressive Casualty Ins. Co. v. Safeco Ins. Co, et al., Nos. 1:10-cv-01370, 1:11-cv-00082, 1:12-cv-01068, 1:12-cv-01070, 2013 WL 1662952 (N.D. Ohio April 17, 2013); Zillow v. Trulia, No. C-12-1549-JLR, 2013 WL 5530573 (W.D. Wash. Oct. 7, 2013).

This Court is mindful that Congress did not provide an automatic stay provision for the transitional program. Rather, the statute instructs the court to consider all four factors in deciding whether or not to grant a stay. Further, there has been little dispute among district courts that Congress did not intend to alter the way in which district courts assess the first three factors. See, e.g., Market-Alerts, 922 F.Supp. at 490 n.6; Zillow, 2013 WL 5530573 at *3. Thus, under the statutory stay provision of the transitional program, staying patent cases pending CBM review remains squarely within the court's discretion, and "such determinations must rest on the facts of each particular case." See Sightsound Techs., LLC v. Apple, No. 11-1292, 2013 WL 2457284 at *1 (W.D. Penn. June 6, 2013). Whether to ultimately grant or deny such a stay flows from the court's inherent authority to manage its own trial docket. See Landis v. N. Am. Co., 299 ...


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