Despite the defendant’s diligence in seeking an ex parte re-examination of the patent-in-suit by the USPTO shortly after being sued, a district court has denied the defendant’s motion for a stay. Pro-Troll, Inc., v. Shortbus Flashers, Inc., No. 16-cv-04062-VC (N.D. Cal. Dec. 23, 2016). The court’s reasoning included in an interesting comparison of ex parte re-examination and Inter Partes Review (IPR) proceedings:
[Defendant] Shortbus Flashers had a choice of applying for ex parte reexamination or inter partes review. The 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. See Interwoven, Inc. v. Vertical Comput. Sys., Inc., No. 10-cv-04645- RS, 2012 WL 761692, at *3 (N.D. Cal. Mar. 8, 2012). In other words, even if the PTO decided not to invalidate the patent after reexamination, Shortbus Flashers could continue to press an invalidity argument here. This is in contrast to inter partes review, which is "guaranteed to finally resolve at least some issues of validity." Avago Techs. Fiber IP (Singapore) Pte. Ltd. v. IPtronics Inc., No. 10-cv-02863-EJD, 2011 WL 3267768, at *5 (N.D. Cal. July 28, 2011); see 35 U.S.C. § 315(e)(2). Thus, the ex parte reexamination process is much less likely to advance the ball in this case. Meanwhile, Pro-Troll, which is a direct competitor of Shortbus Flashers, would be prevented 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. This argues against a stay. See Interwoven, 2012 WL 761692, at *3. This is so even acknowledging that Shortbus Flashers was diligent in seeking ex parte reexamination shortly after this lawsuit was filed.
Moreover, the defendant appeared to have selected ex parte re-examination to avoid the estoppel provisions of inter partes review, and not for another reason why accused infringer might prefer ex parte re-examination: it is a lot less expensive than an IPR. The court addressed this in a footnote:
One could imagine a party sued for patent infringement arguing that its limited resources require it to seek ex parte reexamination rather than inter partes review (since the accused party does not participate in the ex parte reexamination process), and that these limited resources similarly justify a stay of the litigation pending the results of the reexamination. Shortbus Flashers did not argue that here; indeed, it indicated at oral argument that it isn't an issue in this case.
In other words, the court is all but explicitly saying, do not try to use ex parte re-examination to avoid the IPR estoppel provisions, and then turn around and seek a stay of litigation in a District Court. In this case, the court found dispositive that, in contrast to an IPR, it is not prevented from considering the same issues that are before the USPTO in the ex parte re-examination.
Lessons for Practice
Ex parte re-examinations are now requested at less than half the rate prevalent in 2012, the last year before the America Invents Act’s Inter-Partes Review proceedings became available. Surely this has to do mostly with the patent bar’s perception that, notwithstanding the estoppel requirements of IPR’s (which may in any event be limited), IPR’s are far more effective patent killers than ex parte re-examinations. This case shows that federal judges share this view. If a goal of having the USPTO review an issued patent is to obtain a stay of litigation, this case provides yet a further reason why accused infringers might favor IPR’s over ex parte re-examinations.