Court Takes Issue with DJ Filing Prior to IPR
Patent infringement defendants seek IPR of patents asserted against them at the PTAB as an alternative to higher cost litigation. That is, a primary benefit of seeking IPR is the ability to seek a stay of the costlier district court action on the basis that the outcome of the IPR may moot the dispute through cancellation of the asserted claims, or at least greatly simplify the issues for trial.
Yet, not all patent litigation is initiated by patent owners. Often times a potential defendant will seek a Declaratory Judgment (DJ) to secure a favored district court forum in anticipation of an imminent litigation in a less favorable district (typically Texas)
Recently, the District of Delaware considered the impact of such proactive conduct on the typical IPR stay analysis.
In Cisco Systems et al., v. Ramot At Tel Aviv University Ltd. ((D.Del )- order here), the DJ plaintiffs filed a complaint on September 28, 2021. They then filed on February 16, 2022 IPR petitions challenging all claims of the single asserted patent. Both IPRs were instituted on October 5, 2022. The DJ plaintiffs then filed a motion to stay on November 17, 2022.
While the Court found that granting a stay would simplify issues for trial and that the status of the litigation favors a stay, the Court also found that the defendant would suffer undue prejudice. Here, the Court’s undue prejudice analysis considered the DJ plaintiff’s action in pursuing the DJ. That is, the Court looked to: (1) the DJ plaintiffs’ actions and (2) the DJ plaintiffs’ first-to-file arguments made in response to a Motion to Dismiss that the case should proceed over a related EDTX case filed by the defendant.
On balance, the Court granted the motion in part with respect to the majority of deadlines on the case’s scheduling order, but denied the motion in part with respect to fact discovery cutoff and document production. Thus, fact discovery is set to continue as scheduled through September 29, 2023 (just before the FWDs are due).
The Order expresses a bit of annoyance that the plaintiff insisted on the DJ action going forward over a competing case in Texas only to turn around and ask the Court to stay the dispute months later. Notably, the Court repeatedly cited the 12:01 AM filing of the plaintiff (the day the patent issued) as an “abuse of the Declaratory Judgment Act.” Still, given the low likelihood that the competing Texas Court would stay any aspect of the case pending PTAB review, such filings are becoming increasingly commonplace.