Murata Mach. USA v. Daifuku Co. (Fed. Cir. Aug. 1, 2016) (Before Reyna, Stoll, and Chen, J.) (Opinion for the court, Stoll, J.)
Murata sued Daifuku for infringing its patents on the use of automated material handling systems used in manufacturing semiconductor devices. The original complaint alleged infringement of three patents. A year later, Murata moved to amend its complaint to add two new patents. Daifuku filed petitions for inter partes review (“IPR”)of the patents in the original complaint, and moved to stay the litigation pending the outcome of the IPR’s. Daifuku argued for a stay based on the traditional three-factor test: (1) stage of the proceedings, (2) potential for the stay to simplify the case, and (3) undue prejudice to the non-moving party or a clear tactical advantage for the moving party. Murata opposed, and asked the district court to consider whether the stay would reduce the burden of litigation on the parties and the court. The district court stayed the case. It also granted Murata leave to amend its complaint to add two more patents, but made clear that the stay would remain in place. The district court also specifically allowed Murata to move to lift the stay if there was a legitimate reason to do so.
After the Patent Trial and Appeal Board (“Board”) instituted an IPR on each of the original three patents, Murata moved to lift the stay only as to the two new patents, arguing the three-factor test, but not discussing whether a partial lift in the stay would reduce the litigation burden. Daifuku responded by filing IPR petitions on the two new patents. Before the district court could rule, Murata moved for a preliminary injunction against Daifuku for infringement of the two new patents. The district court did not lift the stay, by applying the three factor test, and considering the litigation burden. Further, because it denied the stay, it held that Murata untimely filed its motion for a preliminary injunction, and refused to consider it. Murata appealed.
The Court first held that it had jurisdiction to consider the district court’s refusal to lift the stay as to the two new patents because the decision was included in the same order that denied a preliminary injunction. The Federal Circuit generally does not have jurisdiction to consider whether a district court properly refused to lift a stay because it is not a final judgment. However, it has discretion to review such an order if it is inextricably linked to an order the Court does have jurisdiction over. Here, the Court has jurisdiction to review the denial of a preliminary injunction, and exercised its discretion to review the refusal to lift the stay.
Murata argued that the district court should have relied on the traditional three-factor test, which does not consider the burden of litigation on the court and the parties. By considering the burden of litigation, it alleged that the court committed a reversible error. Specifically, Murata argued that Congress specifically required district courts to consider the burden of litigation when considering stays for Covered Business Method reviews (“CBM”) under the America Invents Act (“AIA”), but there was no similar requirement for IPR’s. This would infer that Congress could have, but did not, allow courts to consider the burdens of litigation. The Court disagreed, ruling that courts have broad discretion to manage their own dockets, including the power to grant a stay of a case. This discretion does not come from statute, but is an inherent power of the courts. Thus, a district court may consider other factors beyond the three-factor stay test at its discretion. Further, the legislative history of the AIA reveals that Congress intended IPR’s to reduce the burden of litigation.
Murata also argued that the district court’s refusal to even consider its motion for a preliminary injunction was in error. The Court agreed. A district court must state factual findings and legal conclusions supporting its action under Federal Rule of Procedure 52(a)(2). A court need not issue a detailed opinion where the reasons for its decisions are clear from the record, but that was not the case here. The entire treatment of Murata’s motion for a preliminary injunction was one sentence: “Because the court has now declined to lift the stay, the Motion for Preliminary Injunction is denied without prejudice to renew at a later date, if appropriate.” This does not meet the requirements of Rule 52(a)(2). Because the Court cannot even review the decision for an abuse of discretion, the ruling of the district court was vacated. The Court noted that while the district court must provide an opinion on remand, it need not require briefing, or even conduct a hearing on the preliminary injunction. Where a stay is properly granted, a preliminary injunction is rarely appropriate. However, this does not relieve the district court of the responsibility of showing that the factors to be considered before granting a preliminary injunction do not favor the plaintiff.
In view of the Court’s opinion, patent defendants may find it easier to obtain a stay in a patent case, even where all claims or all patents are not involved in IPR proceedings at the patent office, where litigating only some patents would be unduly burdensome. Likewise, patent plaintiffs may find it more difficult to avoid a stay due to an IPR by adding new patents to the complaint.
Parker Hancock and Puja Dave also contributed to this summary.
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DavidAugust 5, 2016 11:24 am
(1) if the Dist. Ct. stays the case, and the PTAB invalidates the patent claim(s), then the Article III litigation is over, subject to appellate review;
(2) if the Dist. Ct. doesn’t stay the case, and upholds the validity of the patent claim(s), but the PTAB invalidates the patent claim(s), the patent claim(s) are nonetheless invalid, subject to Article III appellate review;
(3) both the Dist. Ct. and the PTAB may find that the patent claim(s) are valid, but for different reasons and applying different legal standards, leaving the defendant to guess which determination is the “correct” one.
This represents a significant separation of powers issue, and only works if patent validity is a “public right,” hence Cooper and MCM.
The constitutionally correct sequence: Article III Dist. Ct. litigation –> PTAB for advisory expert opinion (stay optional) –> return to Article III Dist. Ct. litigation for de novo review of advisory opinion and Dist. Ct. enforcement.
If initiated at the PTAB level, then the advisory opinion should not proceed to Article III Dist. Ct. litigation without standing, case or controversy, etc., and remains simply that: an administrative advisory opinion lacking legal effect without Dist. Ct. enforcement.