District Court Stays After SAS – Simplified Or Not?

After SAS, does institution of an IPR make a district court more or less likely to stay a parallel litigation? Maybe, maybe not.

In its April 2018 decision in SAS Institute v. Iancu, the U.S. Supreme Court ruled that the PTAB cannot take a selective, claim-by-claim and ground-by-ground approach when instituting an IPR. SAS mandates that the PTAB, if it elects to institute an IPR, must issue a final written decision addressing all the challenged patent claims and all the prior art grounds presented in the IPR petition.

The conventional wisdom was that the Supreme Court’s SAS decision would make it more likely for district court judges to stay a parallel litigation pending an ongoing IPR at the PTAB. Before SAS, judges had sometimes declined to stay a case if the PTAB had only agreed to review some of the patent claims asserted in the litigation—when the PTAB only partially instituted an IPR as to certain patent claims, other claims would still be in play in the litigation, weakening the argument that a stay would result in overall simplification (which is one of the factors routinely considered in assessing a stay motion). After SAS, with partial institutions a thing of the past, it was believed that district judges would be more likely to stay an ongoing litigation, since the district court will necessarily get the benefit of a PTAB final decision addressing all challenged claims and all grounds.

The conventional wisdom has held true in a handful of cases over the last two years or so, including:

• Lund Motion Products, Inc. v. T-Max Hangzhou Technology Co., Ltd., 2019 WL 116784 (C.D. Cal. Jan. 2, 2019) (“A stay pending the PTO’s decision to institute IPR also has the potential to simplify the issues in question in this case. This year, the Supreme Court held that once the PTO grants review of a petition for IPR, it is “statutorily required to address every claim.” SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348, 1354 (2018). In other words, the PTO cannot institute partial review of a patent. Given that Defendants’ IPR petitions cover every claim of three of the four patents at issue in this litigation, if the PTO grants Defendants’ petitions, the PTO will have to address all of the claims in those three patents.”).
• Wi-LAN, Inc. v. LG Electronics, Inc., 2018 WL 2392161 (S.D. Cal. May 22, 2018) (“Certainly, the PTO’s review of the patents-in-suit will clarify and streamline the issues before this Court. LG has filed IPR petitions for reexamination of every asserted claim of the four patents-in-suit. Recently, the Supreme Court issued an opinion concluding that, once the PTAB grants review of an IPR petition, it is statutorily required to address every contested claim. SAS Inst, Inc. v. Iancu, 138 S. Ct. 1348, 1354 (2018). As a result, if IPR is instituted, the PTO will either (1) invalidate the asserted claims and reduce the number of issues before this Court, or (2) find the claims valid, in which case LG will be estopped from asserting those invalidity contentions here. *** While review is not guaranteed and, therefore, the benefits of review are only speculative at this juncture, in light of the Supreme Court’s mandate to review all contested claims upon grant of IPR and the complexity of this case, the Court finds this factor weighs in favor of a limited stay of proceedings until the PTO issues its decisions on whether to institute IPR.”).
• Nichia Corporation v. Vizio, Inc., 2018 WL 2448098 (C.D. Cal. May 21, 2018) (“If the PTAB denies VIZIO’s three currently-pending petitions—particularly the petitions on the ‘411 and ‘071 Patents—the Court and the parties will reevaluate whether the calculus should remain the same. Indeed, with the PTAB taking the new all-or-nothing approach to institution decisions, there’s no concern about the PTAB picking and choosing certain claims or certain invalidity grounds from each petition. See SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1359 (2018). At least for now, this factor favors a stay.”).
• PopSockets LLC v. Quest USA Corp., 2018 WL 5020172 (E.D.N.Y. Sep. 12, 2018) (“As defendants note, the Supreme Court has held that once the PTAB institutes review for any claim, it “must address every claim the petitioner has challenged” and thus decide the patentability of all of the claims the petitioner has challenged. SAS Institute Inc. v. Iancu,138 S.Ct. 1348, 1354 (2018). In doing so, the PTAB will provide a more robust record that considers the scope and meaning of the claims, clarifies claim construction issues, and is preclusive on issues of patent validity.”).

But a recent decision in the Eastern District of Texas denying a stay reached a conclusion contrary to the conventional wisdom. Peloton Interactive, Inc. v. Flywheel Sports, Inc., 2019 WL 3826051 (E.D. Tex. Aug. 14, 2019). In Peloton, the court held that the Supreme Court’s SAS decision

precluded the PTAB from instituting IPRs for only a portion of the patent claims, so any institution decision occurring after SAS provides a weaker inference that the PTAB will determine that all challenged claims are unpatentable. Thus, institution decisions for the [asserted patents] are less helpful in indicating that IPRs will result in a simplification of issues than they would have been before SAS.

The court “conclude[d] that the Supreme Court’s decision in SAS alters the Motion to Stay analysis and makes institution decisions less indicative that all claims will be found unpatentable.” The court further explained its reasoning:

Since the PTAB can no longer partially institute IPR proceedings, institution decisions are not as useful as they were in the past for providing an indication of whether all claims would be found unpatentable. Because the PTAB could partially institute review before SAS, their institution decisions provided a much stronger indication that all claims for which review was instituted would be found unpatentable. This is because the PTAB could decline institution for certain challenged claims if the PTAB concluded that the petitioner had not shown a reasonable likelihood of prevailing for those claims.

When the PTAB decides to institute review after SAS, it must institute review for all challenged claims even if the PTAB concludes at the petition stage that the petitioner did not show a reasonable likelihood that it would prevail for some challenged claims. [Defendant] argues that the PTAB may still decline institution of IPR proceedings even if it concludes that the petition has shown a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition. However, the Court still concludes that an institution decision is less effective as a barometer for the issue of whether the PTAB will eventually determine that the challenged claims are unpatentable after SAS.

The Peloton reasoning that IPR institutions after SAS are less helpful in showing that the litigation will be simplified may provide fodder for patent owners opposing a stay motion, although whether this reasoning gains any traction outside East Texas remains to be seen.