Versata Software, Inc. v. Callidus Software, Inc., No. 2014-1468, 2014 U.S. App. LEXIS 21962 (Fed. Cir. Nov. 20, 2014) (Chen, J.). Click Here for a copy of the opinion.
Versata sued Callidus Software in the District of Delaware for infringement of three patents. Callidus counterclaimed for infringement of its own patents and alerted the court of its intent to request Covered Business Method (CBM) review of Versata's patent. Callidus filed CBM petitions challenging all of the claims in one patent and some claims in the other two patents, and concurrently filed a motion to stay the district court litigation. The district court stayed the litigation for one patent, but not for the two patents where only some claims were under CBM review. Citing Section 18(b) of the America Invents Act, the district court considered the following factors:
- whether a stay, or the denial thereof, would simplify the issues and streamline the trial;
- whether discovery was complete and a trial date had been set;
- whether a stay, or the denial thereof, would unduly prejudice the non-moving party or present a clear tactical advantage for the moving party; and
- whether the burden of litigation, on the parties and on the court, would be reduced by a stay.
The district court found that the failure to challenge all claims in two patents weighed against a stay. The status of the litigation was deemed neutral, because a decision by the district court would likely be reached within a few months of a CBM final written decision. The district court also found that Callidus' decision to request a stay of Versata's infringement claims but not its own counterclaims created an unfair tactical advantage. Finally, the district court found that early motion practice by Callidus had burdened the court and weighed against a stay.
Callidus made an interlocutory appeal to the Federal Circuit. The Federal Circuit found that the district court had erred in its analysis of each and every factor of Section 18(b).
First, the Federal Circuit found that denial of a stay based on failure to challenge every claim was inappropriate, and while challenging every claim would indeed further simplify the issues, the court should have analyzed "what would be resolved by CBM review versus what would remain." The Court rejected a "categorical rule" to deny a stay where some asserted claims are not challenged in the CBM. Second, it was incorrect to overlook the early stage of the proceeding and that a significant amount of discovery remained. These factors favor a stay. Third, The district court's assertion that Callidus intended to move forward on its own interests while staying Versata's case was not correct. There was no tactical advantage and no finding of prejudice to weigh against a stay. Fourth, the Federal Circuit found that the district court's analysis was "backward" and should have considered the future impact of the stay on the litigation rather than the parties' past actions in filing early motions.
Given its conclusion that all four factors weighed strongly in favor of granting a stay, the Federal Circuit reversed and remanded with instructions to grant Callidus' motion to stay as to all three asserted patents.
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