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April 19, 2014

Chief Judge of Northern District of Georgia Grants Motion to Stay Pending Reexamination

On March 12, 2013, Chief U.S. District Judge Julie E. Carnes, of the U.S. District Court for the Northern District of Georgia, entered an order granting a motion to stay patent litigation brought against Defendant Diversitech Corporation (“Diversitech”) pending the conclusion of reexamination proceedings in the USPTO.

Plaintiffs Evolve Composites, Inc. and Australia-based Polyslab International Pty. (collectively “Plaintiffs”) sued Diversitech on June 12, 2012, alleging infringement of U.S. Patent No. 8,152,129 (“the ’129 Patent”).

Less than two months later, Diversitech filed a Request for Reexamination of that patent in the USPTO.  In late September, the USPTO granted that request as to several claims in that patent, including claim 12, which Plaintiffs specifically identified in their complaint as an infringed claim.  Diversitech then filed a motion asking the court to stay the litigation pending the conclusion of the USPTO reexamination proceeding.

Chief Judge Carnes began her analysis by citing basic reexamination principles and commenting: “These rules dovetail with the goal of reexamination, which is to ‘permit [the] efficient resolution of questions about the validity of issued patents without recourse to expensive and lengthy infringement litigation.’”[1]  Following that comment is a list of seven benefits of reexamination perceived by two other district courts.[2]

Next, the court listed the three factors commonly used by the Northern District of Georgia to assess motions to stay pending a USPTO reexamination: “(1) whether a stay would unduly prejudice or present a tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues of the case; and (3) the stage of the litigation.”[3]

Regarding factor (1), the court credited Plaintiffs’ argument that the “the potential for prejudice to a patent holder increases when the alleged infringer is a direct competitor,” but added: “However, the litigants’ status as a direct competitor does not mandate denial of a stay.”[4]  The court found that Plaintiffs did not “allege any specific facts about how they will be adversely affected by the delay or how the direct competition harms them.”[5]  Distinguishing Plaintiffs’ cited cases on their facts, and finding that it was unlikely that Diversitech filed its reexamination request in such a way as to gain a tactical advantage, Chief Judge Carnes concluded that factor (1) was “either neutral or weigh[ed] only slightly in favor of denying [Diversitech’s] motion for a stay.”[6]

Turning to factor (2), Chief Judge Carnes reviewed statistical information provided by both litigants concerning USPTO reexamination proceedings, and observed: “By both accounts, a high probability exists that the claims will be either amended or [canceled],” but that even if claim 12 of the ’129 Patent were not canceled, “an affirmation or amendment will greatly assist the Court in its infringement determination.”  Chief Judge Carnes explained that the court “will not have to consider any of the prior art considered by the PTO during reexamination and will have guidance from the experts at the PTO regarding the scope of the claims . . . .”[7]  Although acknowledging that Diversitech’s defenses include five grounds for invalidity that cannot be addressed in a reexamination proceeding, the court found that the reexamination still would simplify issues for trial.  Chief Judge Carnes found one of Plaintiffs’ cited cases distinguishable because in that cited case, “the parties had already completed their Markman briefings and the court had heard oral arguments on claim construction,” so the USPTO’s assessment of claim scope “would have been less useful to the court.”[8]  Thus, concluded Chief Judge Carnes, factor (2) “weigh[ed] heavily in support of granting the stay.”[9]

Factor (3), the court ruled, “somewhat favors a stay,” since the case is in its early stages, and “[w]here a case is in the early stage of litigation, this factor weighs in favor of a stay.”[10]  The court acknowledged that the parties are engaged in related litigation, where Diversitech is suing Evolve for infringement of a Diversitech patent, but did not find that any need to coordinate the two cases required denying the motion to stay, noting that either party could file a motion in that case to stay the litigation pending conclusion of the ’129 Patent reexamination proceeding.[11]  Notably, that related litigation is not in its early stages: there, in July 2012, a Special Master issued a report and recommendation regarding claim construction following a Markman hearing, and the parties concluded briefing of objections to that report and recommendation.[12]

Consequently, Chief Judge Carnes granted Diversitech’s motion, ordered the Clerk of Court to administratively close the case, and indicated that either party could move to re-open the case within 60 days from the USPTO’s determination in the reexamination proceeding “or earlier, for good cause shown.”[13]

The order is Evolve Composites, Inc. v. Diversitech Corp., No. 1:12-cv-2028-JEC, 2013 U.S. Dist. LEXIS 33505 (N.D. Ga. Mar. 12, 2013), written by Chief U.S. District Judge Julie E. Carnes.


[1] Evolve Composites, Inc. v. Diversitech Corp., No. 1:12-cv-2028-JEC, 2013 U.S. Dist. LEXIS 33505, at *4 (N.D. Ga. Mar. 12, 2013) (quoting Graywire, LLC v. Ciena Corp., No. 1:08-CV-2993-BBM, 2009 U.S. Dist. LEXIS 131906, 2009 WL 8590870, at *2 (N.D. Ga. July 17, 2009) (Martin, J.) (citing H.R. Rep. No. 96-1307(I), at 3-4 (1980)).

[2] Evolve Composites, U.S. Dist. LEXIS 33505, at *5 (quoting Datatreasury Corp. v. Wells Fargo & Co., 490 F. Supp. 2d 749, 754 (E.D. Tex. 2006), which in turn quoted Fisher Controls Co., Inc. v. Control Components, Inc., 443 F. Supp. 581, 582 (S.D. Iowa 1977)).

[3] Evolve Composites, U.S. Dist. LEXIS 33505, at *6.

[4] Id. at *7.

[5] Id. at *8.

[6] Id. at *11.

[7] Id. at *12.

[8] Id. at *13.

[9] Id. at *14.

[10] Id.

[11] Id. at *15.

[12] Id. at *3.

[13] Id. at *16.

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