In a February 26, 2014 order, District Judge Schiltz of Minnesota1 penned a brief primer on the America Invents Act (AIA) Covered Business Method review process, litigation stays, and unpatentable subject matter.
In April 2010, Transunion sued Search America for infringing its patents which “are directed to a computer-implemented method used to assess a patient’s eligibility to receive financial assistance for healthcare services.” In July 2013, Search America submitted a Petition for Covered Business Method Patent Review to the USPTO. The Leahy-Smith America Invents Act created the Covered Business Method (CBM) review process by which a party sued for infringing a CBM patent may petition the USPTO to review the validity of the patent. Often, the alleged infringer will seek a stay of the underlying litigation if the USPTO grants its petition for review.
In determining whether to grant or deny a stay of the litigation, the court is directed to consider factors set out in § 18(b)(1) of the AIA:
(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
The court found that a stay was warranted—finding that all four factors favored a stay. The court first reasoned that a stay would simplify and streamline the issues for trial, because it was likely that at least some of the claims of the patents-in-suit would be found invalid.
Regarding simplification of issues in question, the court expressed “grave doubts about the validity of Transunion’s patents” which use a computer to assist hospitals to investigate whether a person seeking medical services is eligible for public or private assistance through many available programs.
If the USPTO finds all of the claims invalid, no trial will be necessary. If some of the claims survive review, then Transunion would be estopped (prevented) from raising in the underlying litigation invalidity arguments it raised or could have reasonably raised in the review process which would reduce issues in the district court case.
Regarding the second factor (b), even though discovery was complete, the court had not prepared for the Markman hearing yet nor had the parties briefed and argued summary judgment motions, which the court said would be inevitable following the Markman ruling. Transunion opposed a stay of its suit, arguing that the trial could be complete by August 2014, however the court replied that the “trial-ready” date of the scheduling order, August 2014, was hardly the actual date of the trial—the court stated that the CBM review decision would be issued by early 2015 and “there is no chance that the Court will try this case before then.”
Regarding the third factor (c), undue prejudice to the nonmoving party (Transunion) or tactical advantage for the moving party (Search America), the court found none. Transunion argued that Search America had “hedged its bets” by continuing with discovery before filing for CBM review. However, the court said that as far as it was concerned, Search America did everything right. Search America did not request a stay of the litigation until its petition was granted—sometimes courts will grant a stay when a party merely files a petition for review and the petition has not been granted. Search America moved for a stay immediately after its petition was granted instead of waiting a few more days to see how it fared at the Markman hearing.
The court noted that the case had been pending a while due to delay, but the court was particularly terse with Transunion on this point:
Finally, the court found that the fourth factor (d)—regarding reducing the burden of litigation on the parties and the court—weighed in favor of a stay: “the Court has always believed that the patents at issue are probably invalid,” and if the USPTO invalidates the patents, the litigation will end, saving “thousands of hours of attorney time and hundreds of thousands of dollars in fees and expenses, and the Court will save hundreds of hours of scarce judicial time.”
Unpatentable subject matter is an always-trending topic, particularly with two relevant cases before the Supreme Court: Limelight Networks Inc. v. Akamai Techs., Inc., 134 S. Ct. 895 (2014), and Alice Corp. Pty. v. CLS Bank Intn’l, 134 S. Ct. 734 (2013).
Case: Transunion Intelligence LLC, v. Search America Inc., No. 0-11-cv-01075 (MND). Opinion attached at link below.
2014-02-26 Transunion v. Search America
1 The case was transferred from the Eastern District of Texas (EDTX) in April 2011.