Patent infringement suits today are quite the rich man’s game. From the moment it is initiated, a patent infringement suit takes an enormous toll on a defendant, of which arguably the greatest portion includes attorneys’ fees and litigation costs in federal court. As such, proceedings before the newly renamed Patent Trial and Appeal Board (PTAB), formerly Board of Patent Appeals and Interferences, can be very attractive for litigants.
Typically, proceedings before the PTAB are more efficient and less expensive than those filed in federal court. Partly in light of the ever-growing costs of litigating patents, the relatively new American Invents Act (AIA) has established the inter partes review (IPR) and post-grant review (PGR) processes in order to, at least in part, discourage litigation. In particular, under the AIA, an IPR proceeding must be resolved within three months, and though the costs to petition for an IPR before the PTAB is steep at $20,000, the amount is very often low compared to the staggering millions that may be spent on litigation. Furthermore, the AIA prescribes the stay of federal action once an IPR is instituted.
In a recent decision by the United States District Court for the Eastern District of Pennsylvania, the court granted a defendant’s motion to stay proceedings pending a decision by the PTAB. In Destination Maternity v. Target, Target was accused of copying Destination Maternity’s patented designs for maternity pants that have flexible material over the stomach area in order to adjust for different stages of the pregnancy. In opposition, Target petitioned for IPR before the PTAB for twenty-seven of the twenty-nine claims asserted against it by Destination Maternity, and plans to petition for review of the remaining claims as well.
In deciding to grant the stay, the court weighed several factors, promulgated by common law and formalized in the AIA, including (1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set. The AIA also includes a fourth factor, namely, whether a stay will reduce the burden of litigation on the parties and on the court (AIA § 18(b)). Regardless, the court was swayed by the first three factors enough to grant a stay.
Destination Maternity argued that Target had waited too long to petition for IPR and that it would be prejudiced by losing valuable market share to Target due to the delay. The court, however, decided that Target was just one of several of Destination Maternity’s main market competitors and any market share loss in the interim would not be substantial enough to constitute prejudice. The court noted that Destination Maternity had many competitors in the market, including H&M, Babies R’ Us, Walmart, Old Navy, J.C. Penney, and Gap, the latter two of which Destination Maternity had threatened, but failed, to sue over the same infringement claims as it did Target. Furthermore, the court also decided with respect to the second factor that the PTAB decision would simplify the issues and streamline the case, and with respect to the third factor, that discovery was not yet complete and the case was not at an advanced stage.
In addition to the new review processes and associated preclusion effects that may hinder patent litigation generally, it remains to be seen whether the nascent AIA can help to stem the tide of rising costs of litigating patent infringement claims, or at least avoid them altogether. For now at least, it seems as though courts are at least willing to give it a chance.