IPRs Offer Sports Companies a Defensive Play in Patent Lawsuits
Sports tech companies faced with patent lawsuits may find help via an Inter Parties Review, which challenges a patent’s validity. (Modified Royalty Free Stock Photo, https://pixabay.com)
As sports companies become increasingly associated with technology, they find themselves more susceptible to expensive and time-consuming patent infringement lawsuits. Those companies are turning to a petition called an Inter Partes Review to challenge the validity of patents.
When KneeBinding, an American company that specializes in safer-release ski bindings, sued Völkl, a German manufacturer of high-performance ski products, the German company filed an IPR in response. KneeBinding claimed that Völkl’s products infringed its patent covering heel bindings for alpine skiing. Völkl’s IPR petition with the U.S. Patent and Trademark Office sought cancellation of all claims recited in KneeBinding’s patent. After the IPR was instituted by the Patent Trial and Appeal Board, the district court granted a motion to stay the litigation between the parties pending the outcome of the IPR. Ultimately, Völkl was successful in defeating the patent through the IPR proceeding, and the district court case was dismissed.
In 2012, as part of the American Invents Act, Congress created the IPR process to limit the unnecessary and counterproductive costs associated with litigation. An IPR proceeding is a focused and abbreviated trial conducted at the USPTO before the PTAB that involves a review of the claims of a patent by three administrative patent judges. It acts as a check to ensure that the initial grant of the patent-at-issue was correct and appropriate.
IPRs now account for 92 percent of the post-grant proceeding petitions filed. Since Congress established IPRs, patent challengers have been widely successful, with over 73 percent of claims that the PTAB reviews being cancelled.
USPTO Publication of Trial Statistics at the PTAB from June 2018 (USPTO)
By statute, an IPR must be completed within one year of institution—although the time may be extended in certain situations—and an institution decision must be issued within six months of the filing of the IPR petition. Thus, the entire IPR proceeding typically lasts 18 months or less. District court cases, on the other hand, frequently take several years to even reach trial and may drag on much longer.
Unlike in district court, where parties may file motions for summary judgment to decide certain issues early in a case, the PTAB only issues one final decision in an IPR determining the validity of the challenged patent. And the scope of an IPR proceeding is highly limited. In an IPR, a patent may only be challenged by offering other patents or printed publications issued before the date of the patent to show that the invention was known previously, and should never have been awarded a patent. In contrast, district court litigations can be quite complex and may involve a number of issues in addition to validity, including infringement, defenses to infringement, and damages. District court trials, however, do allow a party to assert some invalidity defenses that are not permitted in an IPR proceeding. Additionally, in an IPR proceeding, the extent of documents that an opposing party can request through discovery is limited.
The accelerated schedule in IPR proceedings can allow for quick disposition of cases and cost savings for the accused infringer. Discovery in a district court litigation is almost always an expensive endeavor for companies, potentially requiring production of tens of thousands of documents.
But merely filing an IPR can be advantageous to a defendant in a pending lawsuit. As illustrated by the Völkl case, district courts may pause or “stay” litigation awaiting a determination in the IPR, providing the defendant some breathing room while the focus is diverted to the validity of the patent. This stay, however, is not granted automatically.
Courts generally consider three factors in deciding whether to stay litigation in view of a pending IPR. First, they consider whether a stay would simplify the issues in the case. In a case with multiple patents, for example, if the IPRs challenge only a few of the patents being asserted, the court will be less likely to grant a stay. Additionally, if the PTAB has not indicated whether it will institute a filed IPR at the time a motion to stay is filed, courts will often deny the stay as premature.
Second, courts will consider whether the stay would unduly prejudice or present a clear tactical disadvantage to the patent owner. This may arise for a number of reasons. For example, allowing the alleged infringer’s activities to continue may lessen the licensing value of a patent. Or when a patent’s term would likely expire before the end of the IPR proceeding.
Finally, courts will look to the timing of the motion, specifically, whether discovery is complete in the district court litigation and whether a trial date has been set. Generally, the further along the case is, the less likely the court will grant a stay.
In 2015, Easton sued Wilson Sporting Goods for the sale of its Vexxum model baseball bat, claiming the bat infringes Easton’s patented use of stiffening and dampening elements to improve performance. In response to the suit, Wilson filed an IPR challenging the patent and subsequently filed a motion to stay litigation pending a final decision in the IPR.
Because the Patent Office had not indicated whether it would institute the IPR, the first factor favored not granting a stay. The court also found that a stay would unduly prejudice Easton by prolonging the time its primary competitor could infringe upon its patent. And finally, the timing of the motion did not warrant granting a stay, because the parties were nearly through discovery and already prepping for trial. The court denied Wilson’s request and maintained the litigation schedule.
For companies hoping to stay litigation through filing an IPR, several strategies can increase the likelihood of obtaining a stay. First, timing is key. Many accused infringers may be eager to file a motion to stay soon after filing their IPR, but courts often refuse to give a recently-filed IPR much weight until it is instituted. But parties should also file the IPR early in the litigation. As shown in the Easton case, courts will be reluctant to grant a stay further into a case.
When filing the IPR, parties should also seek to challenge all patents asserted in the district court litigation. Courts are more likely to find that the issues for the district court litigations would be sufficiently simplified if an IPR is instituted for each asserted patent, and, if a party is successful in defeating all asserted patents, the entire district court litigation can become moot.
And, finally, the accused infringer should try to demonstrate that the patent holder is not a direct competitor. If the patent holder is a direct competitor of the alleged infringer, granting a stay may allow infringing activity to continue for longer, greatly and directly harming the patent holder’s share in the market.
