Virtualagility Inc. v. Salesforce.Com, Inc.

• Decision Date: 10 July 2014
• Docket Number: No. 2014–1232.,2014–1232.
• Citation: 759 F.3d 1307
• Parties: VIRTUALAGILITY INC, Plaintiff–Appellee, v. SALESFORCE.COM, INC., Dell, Inc., Dr. Pepper Snapple Group, Inc., Kimberly–Clark Corporation, NBCUniversal, Inc., Livingsocial, Inc., Fedex Corporation, BMC Software, Inc., Bank of America Corporation, Bank of America National Association, Merrill Lynch & Co., Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Fedex Corporate Services, Inc., Defendants–Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

759 F.3d 1307

VIRTUALAGILITY INC, Plaintiff–Appellee,

v.SALESFORCE.COM, INC., Dell, Inc., Dr. Pepper Snapple Group, Inc., Kimberly–Clark Corporation, NBCUniversal, Inc., Livingsocial, Inc., Fedex Corporation, BMC Software, Inc., Bank of America Corporation, Bank of America National Association, Merrill Lynch & Co., Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Fedex Corporate Services, Inc., Defendants–Appellants.

No. 2014–1232.

United States Court of Appeals,Federal Circuit.

July 10, 2014.

Christian John Hurt, Nix Patterson & Roach LLP, of Irving, TX, argued for plaintiff-appellee. With him on the brief were Edward K. Chin and Andrew Joseph Wright; and Derek T. Gilliland, of Daingerfield, TX. Of counsel was D. Neil Smith, of Irving, TX.

Jose C. Villarreal, Wilson, Sonsini, Goodrich & Rosati, PC, of Austin, TX, argued for defendants-appellants. With him on the brief was Darryl J. Adams, Baker Botts, LLP, of Austin, TX, for Kimberly–Clark Corporation. Of counsel were Joel Christian Boehm and Brian David Range, Wilson, Sonsini, Goodrich & Rosati, PC, of Austin, TX; and Kevin J. Meek, Baker Botts, LLP, of Austin, TX.

Before NEWMAN, MOORE, and CHEN, Circuit Judges.

Dissenting opinion filed by Circuit Judge NEWMAN.

MOORE, Circuit Judge.

Salesforce.com, Inc. and other defendants (collectively, Defendants) ¹ appeal from the district court's order denying their joint motion to stay VirtualAgility Inc.'s (VA) patent infringement lawsuit against Defendants pending post-grant review of the validity of VA's asserted claims under the Transitional Program for Covered Business Method Patents (CBM program). We reverse.

Background

In January 2013, VA sued Defendants alleging infringement of U.S. Patent No. 8,095,413 ('413 patent). On May 24, 2013, Salesforce filed a petition with the Patent Trial and Appeal Board (PTAB) for post-grant review of all claims of the '413 patent under the CBM program. In the petition, Salesforce argued that all claims of the '413 patent were eligible for this form of post-grant review because they are directedto a “covered business method patent” within the meaning of § 18(a)(1) of the America Invents Act (AIA), Pub L. No. 112–29, 125 Stat. 284, 329–31 (2011), and that Salesforce had standing to bring the petition because it was sued for patent infringement, AIA § 18(a)(1)(B). Salesforce further argued the PTAB should institute CBM review because all the claims of the '413 patent were more likely than not patent-ineligible under 35 U.S.C. § 101 and invalid under 35 U.S.C. §§ 102, 103 in view of several prior art references.

On May 29, 2013, Defendants filed a motion to stay district court proceedings pursuant to AIA § 18(b)(1). See Defendants' Joint Motion To Stay Proceedings, Virtual–Agility Inc. v. Salesforce.com, Inc., 13–cv–00111 (E.D.Tex. May 29, 2013), ECF No. 67. In August 2013, while this motion was pending, the district court issued a discovery order and held a scheduling conference, setting an April 2014 date for a claim construction hearing and a November 2014 date for jury selection. Also in August 2013, VA filed a Preliminary Response in opposition to Salesforce's petition at the PTAB pursuant to 37 C.F.R. § 42.207(a). In November 2013, the PTAB granted-in-part Salesforce's petition based on its conclusion that all claims of the '413 patent are directed to a covered business method, and are more likely than not patent-ineligible under 35 U.S.C. § 101 and invalid under § 102 as anticipated by U.S. Patent No. 5,761,674 (Ito). The PTAB also issued its own scheduling order, setting a July 2014 date for a trial on the validity of the '413 patent claims.

In early January 2014, the district court denied Defendants' motion to stay the case pending CBM review. VirtualAgility Inc. v. Salesforce.com, Inc., 13–cv–00111, 2014 WL 94371 (E.D.Tex. Jan. 9, 2014). Defendants timely filed an interlocutory appeal to this court, and also filed motions to stay district court proceedings pending the disposition of this appeal with the district court and this court. While these motions were pending, VA filed a Motion to Amend the '413 patent claims with the PTAB contingent on the claims' invalidation. PTAB No. CBM2013–00024, Paper 26 (Jan. 28, 2014). In February, we issued an order staying proceedings in the district court pending our disposition of Defendants' motion to stay pending appeal. VirtualAgility Inc. v. Salesforce.com, Inc.,14–1232 (Fed.Cir. Feb. 12, 2014), ECF No. 34. Pursuant to our order, the district court entered the stay pending appeal.

Discussion

We have jurisdiction over this appeal under AIA § 18(b)(2), which provides that “[a] party may take an immediate interlocutory appeal from a district court's decision” granting or denying a motion to stay litigation pending CBM review. The statute instructs the district court to consider the following four factors when deciding whether to grant a stay:

(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.

AIA § 18(b)(1). The statute further provides that we “shall review the district court's decision to ensure consistent application of established precedent, and such review may be de novo.” Id. § 18(b)(2) (emphasis added).

I. Standard of Review

The parties dispute the standard of review that we should apply to this case. Defendants contend that the statute “encourages full de novo review where factual evidence and conclusions of law are reviewed fully and independently.” Appellant's Br. 15. VA responds that we should review the order denying a stay with deference because such decisions implicate district courts' management of their own dockets, which is a matter traditionally left to their discretion. We note that prior to the AIA, district court decisions on motions to stay pending U.S. Patent and Trademark Office (PTO) proceedings were generally not appealable and, when they were, we reviewed them under the abuse of discretion standard. Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 845, 848–49 (Fed.Cir.2008); see also Landis v. N. Am. Co., 299 U.S. 248, 254–55, 57 S.Ct. 163, 81 L.Ed. 153 (1936); Gould v. Control Laser Corp., 705 F.2d 1340, 1341 (Fed.Cir.1983). We also note that the AIA expressly created an immediate right of appeal of stay decisions pending CBM review, gave us jurisdiction over the interlocutory appeals, and that the only standard mentioned in the statute is de novo review. Nevertheless, we need not resolve this dispute because we hold that, even under the abuse of discretion standard argued for by VA, the district court's decision to deny a stay pending the PTAB's review of the '413 patent claims under the CBM program must be reversed. Nothing in this opinion should be read as deciding the standard of review applicable to the ultimate stay decision or the individual factors. We leave it to a future case to resolve what Congress meant when it indicated that our “review may be de novo.”

II. Factors (A) and (D): Simplification of Issues and Reduced Burden of Litigation

The district court concluded that the first factor—simplification of the issues—was “essentially neutral, if not slightly against” granting a stay because it was “not convinced” by the PTAB's assessment that cancellation of some or all of the claims during CBM review was “probable.” VirtualAgility,2014 WL 94371, at *2, *5. The district court reviewed the lengthy prosecution history that the '413 patent underwent before issuance. The court was persuaded that “there can be little dispute here about the thoroughness of the PTO's prior examination of the '413 patent, given the various grounds of invalidity and the breadth of prior art references considered by the PTO before issuing this patent.” Id. at 3. The court then performed its own evaluation of the bases upon which the PTAB granted the CBM petition. The court stated that, even though the Ito patent had never been before the PTO, it was not persuaded that Ito anticipates all of the claims given the PTO's extensive review of other prior art during “a lengthy prosecution process.” Id. The court also concluded that the value of the PTAB's consideration of Ito was “marginal” because Defendants introduced two other pieces of prior art in the district court proceedings—which, they represented, were “of particular importance”—that Salesforce did not include in its CBM petition. Id. With regard to the PTAB's decision to review whether the '413 patent claims are patent-ineligible, the court observed that the claims were amended during prosecution to overcome an earlier § 101 rejection. Based on its assessment of the claims and the law of § 101, the court “was not persuaded that the PTAB will likely cancel all claims of the ' 413 patent” as patent-ineligible. Id. at 4. In spite of the PTAB's grant of the CBM petition, finding that all the claims of the '413 patent were more likely than not invalid on two different grounds, the district court concluded that it was not convinced that the PTAB would cancel some or all of the '413 patent claims. The court further concluded that it was not convinced that the CBM review would simplifythe issues in this case and that, therefore, this factor was “neutral, if not slightly against, granting a stay.” Id. at 5.

The court determined that the parties' arguments regarding the fourth factor—burden of litigation—“substantially overlap” with those presented under the first factor. It found that “the specific circumstances in the instant case present only a limited possibility” of a reduced burden on the court and the parties. Id. at 8. The court therefore...