For defendants in patent infringement cases, moving to stay the case pending the outcome of a concurrent U.S. Patent Office reexamination proceeding is a fairly common building block that has the potential to streamline or even eliminate a costly and lengthy litigation. And, as one litigant that makes construction-grade joint systems recently found out, under the right conditions, courts are willing to grant such motions to stay.
Plaintiff Emseal sued several defendants, including Schul International Co. and Willseal, LLC, in the District of New Hampshire, alleging they had infringed Emseal's patent for a fire and water resistant expansion joint system. Schul then filed a request for reexamination of Emseal's patent at the Patent Office, which determined that the request raised ten substantial new questions of patentability with respect to all 37 patent claims. The joint defendants subsequently moved to stay the litigation pending the outcome of the reexam proceeding.
Emseal opposed the motion on four bases. Emseal argued that a stay of the litigation would (1) delay its ability to exclude defendants from producing and marketing (allegedly) infringing products; (2) delay discovery, leading to the potential loss of essential materials and testimony; (3) "avoid" a hearing on its motion to dismiss Defendants' counterclaims and "deprive" Emseal an opportunity to defend itself against Defendants' counterclaims; and (4) allow defendants the benefit of a lower standard of proof (i.e., preponderance of the evidence) in the reexam than the clear and convincing standard used by federal courts to invalidate patents.
The court did not find any of Emseal's arguments persuasive. With respect to the first argument, Judge McAuliffe noted that Emseal had not sought a temporary restraining order or moved for a preliminary injunction to prevent Defendants from marketing and selling allegedly infringing products—thereby raising an implication that Emseal was "content to let this litigation proceed to its conclusion and, should it prevail, that monetary damages would be sufficient to make it whole."
Regarding Emseal's second and third arguments, the court found Emseal failed to show that it would be prejudiced by a delay in discovery and that, if the patent-in-suit survived reexam, the court would have "ample opportunity" to decide Emseal's counterclaim motions. Finally, Judge McAuliffe was not swayed by Emseal's burden of proof argument, stating that "[w]hether this court grants a stay or not, should the [Patent Office] invalidate that patent, all of the claims advanced in Emseal's consolidated complaint will be foreclosed, as each relies upon defendants having unlawfully infringed Emseal's intellectual property rights, as embodied in the '495 patent."
In light of the above factors, the court found that a limited stay of six months would be appropriate as the outcome of the reexam would potentially simplify the issues in question and streamline a potential trial. The court also noted that a limited stay was also supported by the fact that the case was at a very early stage and no substantial discovery was underway.
Judge McAuliffe's opinion provides a helpful framework for patent litigants that may want to file (or oppose) a motion to stay pending reexamination. Defendants might consider such a strategy early on in a case to enhance the likelihood that a stay will be granted.
The case is Emseal Joint Systems, Ltd. v. Schul International Co., LLC et al., Case No. 14-cv-358-SM (D.N.H.), and pending in the District of New Hampshire. A copy of the order can be found here.
Joint Defendants Succeed on Motion to Stay Pending Reexam
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