In March 2024, BMW Group put a stop to Patent Assertion Entity NorthStar Systems LLC by securing a covenant not to sue, without paying a penny.

NorthStar has pursued BMW Group products in litigation in the Eastern District of Texas from late 2022, and BMW Group responded with a Declaratory Judgement (DJ) Action on non-infringement in the Western District of Texas and 6 IPR proceedings for the 5 patents asserted by NorthStar. Although NorthStar initially refused to stay the litigations due to pending IPR institution decisions, after BMW Group received 6 favorable IPR institution decisions covering every single claim of the 5 asserted patents, NorthStar agreed to stay both Texas litigations and days later agreed to give BMW Group a walk away.

BMW Group's litigation strategy provides insights into how companies may effectively counter allegations of infringement when facing patent-assertion entities.

1. File a DJ Action in Defendant's Place Of Residence When Plaintiff Files in the Wrong Jurisdiction.

In patent litigation, like any complex litigation, building an infringement case requires orchestrating many moving pieces. Attacking an infringement case requires nothing less, and venue selection can be pivotal

NorthStar's decision to litigate against BMW Group in Judge Gilstrap's Eastern District of Texas (EDTX) raised questions when NorthStar has a registered office in the Western District of Texas (WDTX), in the jurisdiction of Judge Albright. Unfortunately for NorthStar, this decision backfired.

By filing a DJ action in NorthStar's place of residence in WDTX with Judge Albright, BMW Group was able to take proactive steps to assert a lack of infringement and quickly build its defensive strategy against NorthStar. This tactical move not only highlighted the anomaly of NorthStar's venue selection but also allowed the BMW Group to build its defensive strategy against NorthStar in a jurisdiction where NorthStar already has a registered office and a stronger foothold.

2. File IPRs early

Early filing of IPRs allow defendants to proactively challenge the validity of asserted patents. Courts, including the court in EDTX, consider the amount of time that a party waits to file the IPR petition and request a stay, because some patentees contend that the delay may cause harm to the patentee's business, provide a tactical advantage to the defendant hoping to learn about a patentee's litigation positions before entering the IPR, or be unfairly prejudicial if the parties have expended significant resources and are close to trial. By filing the IPRs within the first six months of NorthStar filing the complaint, BMW Group was able to challenge the validity of NorthStar's patents, laying the groundwork for a robust defense strategy.

3. Don't be afraid to fight - if everyone else settles, you don't have to settle.

The temptation to settle can be strong, especially when many similarly situated parties opt for this route. However, a valuable lesson emerges: standing firm can lead to a complete victory. By refusing to follow the other automobile manufacturers in the case into settlement, BMW Group was able to maintain control over its legal strategy and case narrative. As BMW Group is increasingly seeing, the decision to consistently fight meritless cases rather than settle can define the trajectory of future cases and may even result in securing a covenant not to sue, without paying a penny.

4. IPRs may be effective as a defense strategy, even if there are 5 asserted patents

Even when faced with numerous asserted patents, filing IPRs for each asserted patent can prove to be a highly effective defense strategy. While the plaintiff may assert multiple patents, filing IPRs enables the defendant to challenge the validity of these patents, potentially weakening the plaintiff's overall position and casting a tall shadow on the plaintiff's asserted patents.

5. Hope for a clean sweep – all IPRs may be instituted

While navigating and filing as many as 6 IPRs spanning all claims of 5 patents in a limited amount of time may require a lot of work in a compressed timeframe, it is important to present your best arguments effectively. Sometimes you find great prior art early, and a clean sweep may happen. With favorable institution decisions for all 6 IPR proceedings that covered all claims of the asserted patents, Finnegan was not only able to significantly bolster BMW Group's defense but also placed considerable pressure on NorthStar, leading to NorthStar asking to walk away from its own case.

6. Be sure to have the motion to stay strategy locked in

In patent litigation proceedings, defendants should check the local rules and customs of their jurisdiction regarding motion practice, including motions to stay. In EDTX, Defendants should promptly file their motion to stay pending IPR shortly after the IPRs are filed. If the initial motion is denied with leave to refile (as is common), Defendants should again move to stay after IPRs are instituted.

In EDTX, Judge Gilstrap effectively has a two-step process for a motion to stay pending the IPRs. First, the defendant should file the motion to stay as soon as it has filed IPRs for the asserted patents. Judge Gilstrap will likely deny the motion to stay while preserving the defendant's right to refile after IPR institution decisions issue. After the defendant receives the institution decisions, it may refile the motion to stay noting that the IPRs have been instituted. It should be noted that while this two-step process has been endorsed by Judge Gilstrap, non-practicing entities may threaten sanctions on defendants for filing multiple motions to stay. Resonant Sys., Inc. v. Samsung Elecs. Co., Ltd., No. 2:22-CV-00423-JRG, 2024 WL 1021023, at *4 (E.D. Tex. Mar. 8, 2024) (After Judge Gilstrap denied Defendants' first motion to stay without prejudice because the PTAB had not yet issued IPR institution decisions, Defendants filed a second motion to stay and Judge Gilstrap "notes that [Defendant] filed its renewed Motion to Stay two days after the PTAB issued its decisions instituting inter partes review," and granted the stay); Barkan Wireless IP Holdings, L.P. v. Samsung Elecs. Co., Ltd., No. 2:18-CV-00028-JRG, 2019 WL 8647996, at *2 (E.D. Tex. Mar. 15, 2019) (Judge Gilstrap denied Defendants' first motion to stay "without prejudice to refiling of the same to be permitted within 14 days following the PTAB's institution decisions."); St. Lawrence Commun. LLC v. ZTE Corp., No. 2:15-CV-349-JRG, 2017 WL 3396399, at *1 (E.D. Tex. Jan. 17, 2017) ( Judge Gilstrap "denied [Defendant's] first motion to stay without prejudice to refiling in light of the fact that the PTAB had not yet issued its decision on institution.").

In BMW Group's WDTX declaratory judgment case against NorthStar, with favorable institution decisions for all 6 IPR proceedings covering all claims of all 5 asserted patents, NorthStar relented and joined BMW Group in the stay motions, resulting in stays of the EDTX and WDTX litigations within one week.

7. A team able to seamlessly handle both litigations and IPR proceedings is key to success

Navigating a host of positions across a range of patent venues requires a strong team with impeccable communication. Trust and coordination between in-house and outside counsel is foundational for victory in a complex patent case. And an intelligent, diligent, and dedicated litigation team will set a party far ahead of the opposition. Here, BMW Group's strategy was successful, as a consistent team was able to handle both of the EDTX and WDTX litigations as well as the IPR proceedings against all five asserted patents by NorthStar.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.