Factors in Deciding Motions to Stay Litigation Pending Reexamination

If a patent is in reexamination at the outset of a patent infringement action, there is a possibility of obtaining a stay from the district court.  But motions to stay are not always successful, and they are decided  after consideration of several factors.  One case that demonstrates some of the factors in deciding whether to grant a motion to stay litigation pending reexamination is Quest Software, Inc. v. Centrify Corp. (case no. 2:10-CV-859 TS), venued in the Central Division of Utah.

Quest sued Centrify for patent infringement of U.S. Pat. No. 7,617,501 on August 27, 2010 in the Central District of Utah.  Three days later, Centrify sued Quest for patent infringement of another patent (the ’005 patent) in the Northern District of California.  Quest was a third party requester in an inter partes reexamination of the ’005 patent.  That reexamination was ordered by the Patent Office and the claims are under rejection.  However, the Northern District of California denied a stay in that case.

The same day that Centrify sued Quest, Centrify also requested inter partes reexamination of the ’501 patent.  The Patent Office ordered reexamination of the ’501 patent and rejected all 40 claims of the ’501 patent.

Centrify moved to transfer venue to the Northern District of California, and in the alternative, to stay the action pending the outcome of the reexamination of the ’501 patent if venue remained in Utah.

After denying transfer of venue, the Utah Court weighed three factors and ultimately denied Centrify’s motion to stay the matter.

THE FACTORS

The three factors considered were:

(1) whether discovery is complete and whether a trial date has been set;

(2) whether a stay would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(3) whether a stay will simplify issues.

THE FACTS APPLIED TO THE FACTORS

(1) Even though the case was very new (which favors granting a stay) the Utah Court was concerned that granting a stay would “put this case at odds with the California Action, in which a stay was recently denied.”

(2) The Utah Court found that a stay would prejudice Quest and present a tactical advantage to Centrify because:

(a) Centrify would have years to continue alleged infringing activities, because an inter partes reexamination will likely take at least six years and up to eight years to complete, so Quest may suffer real harm;

(b) both companies may suffer harm due to fading memories and loss of evidence over such a long time;  and

(c) the Utah Court believes that the best resolution is to keep the case in line with the California Action in which a stay was denied.

The Utah Court did not find that a stay would clearly simplify issues, especially in light of the fact that there is a good chance that “at least some of the claims of the ’501 will survive the reexamination process, leaving the Court and the parties in the same position they are now, only months or years later.”