Patents Post-Grant: Paul Allen's Infringement Campaign Halted by Patent Reexamination

Patents Post-Grant: Paul Allen's Infringement Campaign Halted by Patent Reexamination

Interval Licensing Litigation Stayed Pending Patent Reexamination

Former Microsoft founder Paul Allen has made headlines recently by asserting the patents of his company, Interval Licensing against the 11 industry stalwarts (Apple, Google, Facebook, NetFlix, AOL and others). The case was initially stalled when the court found the opening complaint lacking in detail, but this formality was quickly corrected. Last week, however, a much more significant roadblock was placed in the path of Mr. Allen's litigation endeavor--patent reexamination. A judge in the Western District of Washington has halted the proceedings against all 11 defendants pending patent reexamination.

As most readers of this blog realize, obtaining a stay of an ongoing district court infringement action is one of the many benefits of patent reexamination parallel with litigation. Defendants that are able to obtain a stay pending patent reexamination can avoid cost prohibitive litigation discovery during the course of the USPTO proceeding, which can be rather lengthy.

In addition to cost savings, there are also tactical advantages to the USPTO proceeding. Unlike the courts, in patent reexamination, the USPTO does not recognize the presumption of validity. Moreover, the USPTO does not require the "clear and convincing" standard to demonstrate invalidity in patent reexamination, but employs the more liberal "preponderance of the evidence" standard. As such, defendants can enhance the strength of their invalidity defense via patent reexamination. So, in essence, Interval Licensing is now facing a new challenge that must be overcome before the litigation resumes, and at much longer odds.

In considering if Interval Licensing's interests would be prejudiced by a delay in the litigation of a length necessary to reexamine the patents at issue, the court emphasized the fact that Interval licensing is a holding company (known as a patent troll to some). 

The full decision may be found (here). In deciding whether Interval Licensing would be prejudiced by a stay, the court explained:

[T]he Court is not able to find undue prejudice to Interval Licensing by granting the stay. Interval Licensing, a holding company, does not compete with Defendants and there is no danger it will lose customers, market share, or other intangible benefits. Rather, it can likely be compensated for damages suffered even if a stay is issued. The Court also does not believe that the stay will produce a clear tactical disadvantage to Interval Licensing.

As pointed out in past posts, stays are disfavored between direct competitors, but courts are increasingly willing to halt patent infringement suits that are initiated by those (trolls) that are not actively competing in the marketplace. Silicon Valley may now enjoy a lengthy reprieve as the battle shifts to the USPTO.

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