Stay Granted Pending Inter Partes Reexaminations Finding No Exploitation of Patents and Absence of Counter-Claims in Suit Involving Delivery Systems for Digital Mail (CACD)

May 25th, 2010

On May 20, 2010, Judge Margaret M. Morrow, United States District Judge for the United States District Court for the Central District of California, ordered a stay of a patent infringement suit brought by Pitney Bowes Inc. against Zumbox, Inc.

On October 13, 2009, Pitney Bowes sued Zumbox, Inc. alleging infringement of Pitney Bowes’s U.S. Patent Nos. 6,690,773 (“the ’773 patent”), 7,058,586 (“the’586 patent”), and 7,478,140  (”the ‘140 patent”), each directed to delivery systems for digital mail.  On January 22, 2010, Zumbox submitted requests at the USPTO for inter partes reexamination of all claims in each of the three patents-in-suit.  One month later, Zumbox moved the district court to stay the litigation pending the reexaminations.  On March 15, 2010, the USPTO granted the inter partes reexamination of the ’140 patent and issued a first non-final Office action that rejected all 20 claims in the ’140 patent.  On April 16, 2010, the USPTO granted inter partes reexaminations of the ’586 and ’773 patents but issued Office Actions that same day preliminarily confirming the claims in those patents.

In granting Zumbox’s motion to stay, the court found three factors weighed in its favor.  First, the case was “in its earliest stages—the Case Management Conference was held in February 2010. Second, the court found that the reexaminations would likely result in a simplification of the issues.  The court observed that all of the claims in the ’140 patent were preliminarily rejected by the USPTO meaning the parties would not need to litigate any issue relating to the ’140 patent infringement.  The Court also stated that the USPTO’s confirmation of the patentability of the claims in the remaining two patents (if made final) also would benefit the litigation by allowing the court to rely on the “office’s expertise, analysis of the claims, and evaluation of the relevant prior art.”  The court also noted that the absence of counter-claims brought by defendant weighed in favor of staying the litigation and that the high likelihood that some claims would be canceled or amended in the reexaminations likely would narrow or clarify the issues for claim construction and trial.

Third, the court found a stay would not unduly prejudice the plaintiff.  Pitney Bowes waited over six months from the filing of its lawsuit to seek any injunctive relief and in its Complaint asked for only permanent injunctive relief, not preliminary injunctive relief.  Pitney Bowes fought the stay motion by citing to the Central District’s decision in Allergan v.Cayman Chemical Co. denying a motion to stay pending reexamination. Allergan Inc. v. Cayman Chemical Co., No. SACV 07-01316-JVS (C.D. Cal. Apr. 9, 2009). The court distinguished this case from the decision in Allergan because Pitney Bowes unlike the Allergan plaintiff was not exploiting the patents-in-suit:  “non-patent exploiters” or NPEs “have a more difficult time obtaining injunctions” because they cannot adequately demonstrate irreparable harm under the Supreme Court’s recent decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).” That is, any delay could be addressed by monetary damages.  This decision and the Allergan case are among a small number of stay decisions where a court considered whether a patent-owner plaintiff was currently exploiting its patents, even where the patent-owner plaintiff does not fit the traditional definition of NPE as a “non-practicing entity.”  Neither decision clarifies whether exploitation of a patent includes practicing the patent, licensing the patent, or both.