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Allen v. World - Interval Appeals the Stay
Tuesday, June 28 2011 @ 12:01 PM EDT

In a not surprising move, Interval Licensing has filed a motion [PDF, text below] with the court to reconsider the stay in the proceedings the court just granted two weeks ago. The court will need to consider this motion, and it is worth considering the arguments that Interval advances for reconsideration.

Interval cites four bases (although denominated as just two) for reconsideration:
(a) all of the work the parties have put into preparation for the Markman hearing that will now largely be lost;

(b) the harm to the experts retained by Interval, who have conducted a review of the defendants' source code and who will now be bound by the protective order governing the source code and subject to patent prosecution bar (they will not be allowed to prosecute any patents for any client within the scope of the software to which they have had access) for the duration of the reexaminations and subsequent trial;

(c) the USPTO, in granting the petitions for reexamination, did not rely on a substantial portion of the prior art submitted by the petitioner nor did it rely on petitioner's arguments in granting the petitions; and

(d) not all of the defendants are parties to the reexaminations and thus they can further delay any future trial by seeking further reexaminations (only the party(ies) petitioning for reexamination are bound by the resulting USPTO decision; other parties may still seek further reexamination).

In making its earlier determination to grant the stay the court cited three factors that are to be considered:
First, the reexamination of the four patents is likely to simplify some issues and claims for both trial and the Markman hearing. Defendants have presented a substantial body of prior art that they believe will reshape the four patents at issue in this litigation. The Court believes that there is a reasonable probability the PTO will simplify the issues for the Court and jury. Second, although the Markman hearing is fast approaching, discovery in this case is not particularly far along and the trial is roughly a year away. Though the Court recognizes the parties have expended substantial resources, the Court does not find the case to be so advanced as to cut against issuance of a stay. Moreover, the discovery work to date will not be wasted. Third, the Court is not able to find undue prejudice to Interval Licensing by granting the stay. Interval Licensing, a holding company, does not compete with Defendants and there is no danger it will lose customers, market share, or other intangible benefits. Rather, it can likely be compensated for damages suffered even if a stay is issued. The Court also does not believe that the stay will produce a clear tactical disadvantage to Interval Licensing.
Considering these factors, the weakest argument Interval presents is likely (c), the prior art submitted and relied upon. The USPTO is not obligated to use all prior art submitted, particularly if the examiner believes a single item of prior art is sufficient. Not infrequently in the give and take of reexamination the examiner will lead with what the examiner believes to be the strongest prior art, holding all remain prior art in reserve to counter arguments made by the patentee to overcome the examiner's rejections. That is largely what has occurred here. Contrary to Interval's argument, it sends no signal that the case for reexamination is weak.

Interval's arguments (a) and (b) are neither here nor there. The court considered (a) in deciding to grant the stay, and it is unlikely it will change its mind on this point. Similarly, while (b) may work a hardship on the experts retained by Interval, Interval has not cited anything to substantiate who these experts are and why it would work a harm on them. Are they, in fact, all patent attorneys? Don't know, but the argument is not overly persuasive.

That leaves Interval's (d) argument, and this one has some merit. If the stay is to remain in place the court should consider requiring all defendants to be bound by the results of the current reexaminations. To do otherwise does leave the door open to further significant delay and uncertainty. If it is not unfair to Interval to set aside (and potentially diminish the value of) all of the Markman work, then Interval should not have to face the specter of future delays as one defendant after another files its own petition for reexamination of the Interval patents.


Motion for Reconsideration


AOL, INC. et al,

Case No. 2:10-cv-01385-MJP


Interval respectfully requests that the Court reconsider its Order staying these eleven actions (Dkt. # 253; the “Stay Order”). Defendants filed their Motions to Stay on March 17, 2011—within one day of filing their requests for reexaminations with the Patent and Trademark Office (“PTO”). (Dkt. # 198) In the intervening three months since the parties briefed the Motions to Stay, the parties have undertaken an incredible amount of work, most of which will be of limited value should this action be stayed. In addition, the PTO rejected a number of defendants’ arguments and references in granting the requests for reexamination, which further supports Interval’s position that the reexaminations will not simplify the issues in these actions. To the contrary, the parties will be back before the Court one, two, or six years from now most likely litigating the exact same issues that are now before the Court.

These new facts warrant reconsideration, and demonstrate that staying these actions is counterproductive and inconsistent with Federal Rule of Civil Procedure 1, mandating that the Federal Rules “[b]e construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding.”

A. The Parties Have Completed Significant Additional Work Since Filing Their Briefs In March

The Court issued the Stay Order at 5:15 pm on the day that the parties’ Markman briefs were due. Pursuant to the scheduling order, Interval and Defendants were each to submit briefs not to exceed 40 pages for each of the two tracks, for a total of 160 pages of briefing. When the Court issued its order, the parties had already completed these briefs and were in the process of filing them. Indeed, Interval had already filed its Markman brief on the ‘652/’314 track when the Court issued the Stay Order. Interval’s counsel, alone, spent hundreds of hours preparing and finalizing Interval’s Markman briefs. Counsel for the eleven defendants likely spent at least that much time preparing defendants’ briefs, especially considering that 50 lawyers have entered appearances on behalf of defendants.

In addition to the Markman, the parties spent hundreds of hours completing the tasks leading up to the Markman briefs, including submitting a prehearing statement and joint claim charts that exceeded 150 pages. During that process, the parties met and conferred for hours in an attempt to reach compromise and narrow the issues to present to the Court for resolution. If the actions are stayed, then at least one of the twelve parties will no doubt use the delay as a justification to reject compromises already reached during this process.

The parties have also completed an extraordinary amount of discovery since March, especially with respect to the production and review of defendants’ source code. When the parties submitted their briefs on the Motions to Stay in March, not a single defendant had produced source code. Since that time, every defendant has produced code that, together, amounts to hundreds of thousands of lines of code.

By its nature, the review of source code is incredibly expensive and time consuming. First, Interval retained seven experts to review defendants’ source code. Second, the reviews have been conducted at the offices of defendants’ outside counsel throughout the United States, including Chicago, Virginia, Palo Alto, San Francisco, and Portland. Third, the code reviews are conducted in accordance with seven pages of stringent source code review protocols set forth in ¶ 11 of the protective order (Dkt. # 222). These protocols limit the number of pages that Interval’s experts can print and limit the nature of the notes that Interval’s experts can take. These two limitations together make it likely that much of the source code review will have to be repeated after the stay is lifted because of the difficulty for Interval’s experts to pickup where they left off years earlier because of the lack of comprehensive notes and printed source code.

In addition, because defendants designated their source code highly confidential under the protective order, each of Interval’s seven experts had to sign Exhibit A to the protective order before gaining access to the code. By signing Exhibit A and reviewing the code, the experts are now subject to the patent prosecution bar in ¶ 6(b) of the protective order (Dkt. # 222). Pursuant to the prosecution bar, the experts

shall not prosecute, supervise, or assist in the prosecution of any patent application involving technology related to software for recommending information to a user or other information filtering techniques aimed at notifying users of items that are likely to be of interest to that user or software directed to the engagement of the peripheral attention of a person in the vicinity of a display device, before any foreign or domestic agency, including the United States Patent and Trademark Office.
This bar remains in place until one year after the final resolution of this action. Accordingly, the Stay Order has the effect of extending the prosecution bar for these seven experts, likely for years. This places an undue burden on the experts’ ability to pursue future engagements.

These new facts warrant the reconsideration of the Court’s Stay Order.

B. In Granting The Requests For Reexaminations, The PTO Rejected A Number Of Defendants’ Arguments And References

The Stay Order noted that “Defendants have presented a substantial body of prior art that they believe will reshape the four patents at issue in this litigation.” Order at 2. That is not entirely accurate because the PTO already rejected a number of those references in granting the reexaminations and instead focused on a single reference in granting most of the reexaminations.

First, in granting reexamination of the ‘314 patent, the examiner declined to reject any claims based on the Rakavy reference. Instead, the grant of reexamination was premised on a single primary reference—Kjorsvik. In addition, the examiner refused to adopt any of the rejections defendants proposed in their request. (Dkt. # 247-5)

Second, in granting the reexamination of the ‘652 patent, the examiner mentioned only one of the references that defendants identified (Petrecca). Although the examiner is not precluded from relying on the other references, the failure even to mention those references in granting the reexamination suggests that the examiner discounted defendants’ arguments. (Dkt. # 247-4)

Third, the PTO issued an office action concerning the ‘682 patent. In that office action, the examiner refused to adopt any of the rejections defendants proposed in their request. Indeed, the office action rejected the claims over a single reference—Bezos. (Dkt. # 247-2)

Fourth, in granting reexamination of the ‘507 patent, the examiner did not mention four of the references that defendants identified (Joachims, Chesnais, Iwayama, and Yuasa). Again, the examiner is not precluded from later relying on those references, but the failure to mention them suggests that the examiner discounts defendants’ arguments. (Dkt. # 247-1)

In addition, the reexaminations will not simplify the issues for Markman or trial because none of the requests for reexamination were joined by all of the defendants who are accused of infringing that patent. Defendants undoubtedly will argue when these patents emerge from reexamination that at least one of the defendants can still raise all of the arguments now before the PTO no matter the result of the reexamination.1 [FN.1 - Interval will vigorously oppose any attempt by a defendant to argue that it is not bound by a particular reexamination because it did not joint in the request.] Such tactics reek of gamesmanship and leave little doubt that the parties will be in the exact same position as they are now after the reexaminations are completed years down the road.

For good reason, courts throughout the country, including other judges in this District and in the Federal Circuit, have expressed increasing reluctance to stay cases during the reexamination process. It is routine for patents to be involved both in litigation and re-examination proceedings at the same time. Interval can only enforce its patents through litigation, and delaying that process by as much as a few years is substantially prejudicial to Interval. Defendants, on the other hand, will not be prejudiced at all by moving forward in a timely fashion in an Article III court.


Interval respectfully requests that this Court reconsider its Order staying these actions. The parties already have spent incredible amounts of time of money getting these eleven actions to the brink of the Markman hearing and within six months of the end of fact discovery. Much of the benefit of this work will be lost after a stay. This Court should deny the stay and keep these actions on schedule to be heard by a jury next summer. Because the opening Markman briefs are complete, Interval has no objection to moving the Markman hearing to a date later in the summer, with a corresponding change in the discovery dates.

Dated: June 24, 2011

Respectfully submitted,

/s/ Justin A. Nelson
Justin A. Nelson
WA Bar No. 31864
Edgar G. Sargent
WA Bar No. 28283
Matthew R. Berry
WA Bar No. 37364
1201 Third Ave, Suite 3800
Seattle, WA 98101
Telephone: (206) 516-3880
Facsimile: (206) 516-3883

[Other attorneys for Interval not listed.]


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