IP Law Daily, PATENT—D. Del.: Litigation stayed pending reexamination of knee-implant patents, (Apr 8, 2014)

By Mark Engstrom, J.D.

A motion to stay patent infringement litigation, pending the reexamination of four patents that described various instruments and methods for performing minimally invasive knee-implant surgery, was granted by the federal district court in Wilmington, Delaware (Bonutti Skeletal Innovations, LLC v. Zimmer Holdings, Inc., April 7, 2014, Sleet, G.). The court concluded that a stay would advance judicial efficiency.

Background

Bonutti Skeletal Innovations brought patent infringement claims against six entities: Zimmer Holdings, Inc.; Zimmer, Inc.; ConforMIS, Inc.; Wright Medical Group, Inc.; Wright Medical Technology, Inc.; and Smith & Nephew, Inc. According to Bonutti, the defendants were infringing six patents that described specialized procedures, implants, systems, and instruments that were used to perform minimally invasive knee surgeries. Bonutti asserted all six patents against the Zimmer companies, one patent against ConforMIS, and three patents against the Wright companies. The claims against Smith & Nephew were previously dismissed.

The court noted that four of the six patents were the subjects of inter partes review (IPR) petitions before the U.S. Patent and Trademark Office. Two of those petitions were granted and two were still pending. In considering the defendants’ request for a stay, the court balanced three factors: (1) whether a stay would unduly prejudice or present a clear tactical disadvantage to Bonutti; (2) whether a stay would simplify the issues and the trial of the case; and (3) whether discovery was complete and a trial date had been set.

Undue Prejudice

To best gauge whether a stay would cause undue prejudice to Bonutti, or would place it at a tactical disadvantage, the court weighed several subfactors. Those subfactors included the timing of the defendants’ request for reexamination, the timing of the defendants’ stay motion, the status of the reexamination proceedings, and the relationship of the parties.

Timing of defendants’ requests. The court noted that, in patent infringement actions, defendants had to file their IPR petitions for underlying patents “no later than one year after the date on which the complaint is served.”

In this case, Bonutti argued that the defendants had engaged in dilatory tactics because they failed to file their IPR petitions until “almost a year after service of the complaints, months after the Court’s Rule 16 scheduling conference, and immediately prior to the statutory deadline for filing an IPR petition.” Bonutti also argued that the IPR petitions of the Zimmer and Wright companies were “nominal” because the petitions covered an “extremely small percentage of the claims in the patents asserted against each party.”

The defendants denied any dilatory motives and noted that: (1) a schedule had not been set in any of the consolidated cases and (2) discovery had not commenced. The defendants also argued that Bonutti’s refusal to specify which of the claims in the “multiple patents with large numbers of claims” had contributed to the length of time that had elapsed before they filed their IPR petitions.

According to the court, the record showed that all of the petitions were filed before the court had set a schedule and before discovery had commenced. In addition, the court’s teleconferences had mostly focused on whether the court should stay the proceedings. Because the defendants had filed their IPR petitions “before any significant occurrences and proceedings,” the court ruled that the petitions were filed in a timely fashion.

Status of reexamination proceedings. Bonutti argued that it would suffer “extreme evidentiary prejudice” if the parties were prevented from collecting documents and taking depositions for “three years.” The court decided, however, that Bonutti’s fear of stale evidence would be mitigated by the parties’ obligation to preserve evidence. The court thus concluded that the early stage of the IPR proceedings did not render a stay unduly prejudicial.

Moreover, the PTO had already granted two of the IPR petitions. According to the court, the timeliness of the PTO’s response to those petitions indicated that the PTO was proceeding “with all due haste”—in compliance with its statutory obligation. The PTO’s expeditious actions thus favored a stay.

Relationship of parties. The defendants argued that the relationship between the parties favored a stay because Bonutti was a non-practicing entity that could be adequately compensated by damages. Bonutti argued that a stay would be prejudicial because the defendants would use it to “run roughshod over its patent rights and alter the economics of the market for licenses to the technologies covered by its patents.” Despite those arguments, Bonutti’s status as a non-practicing entity, rather than a market participant, indicated that Bonutti would face little risk of lost sales or lost goodwill. The court concluded that the relationship of the parties favored a stay.

Issue Simplification

The defendants argued that: (1) any amendment or cancellation of the challenged claims would streamline claim construction and discovery and (2) statistically, a high probability existed that the PTO would indeed cancel or amend the claims. The defendants also argued that estoppel would further simplify the issues if the PTO canceled or amended the challenged claims. Finally, the defendants argued that, even if the PTO upheld every challenged claim, the court would still benefit from the PTO’s expert analysis.

Bonutti argued that any issue simplification from an IPR proceeding would be minimal because the IPR petitions did not involve all of the issues, claims, and patents that would be addressed in the litigation. In addition, Bonutti alleged that the defendants were engaging in a “scheme” to avoid the full statutory scope of estoppel, “to which they absolutely must be subject.”

Contrary to Bonutti’s suggestion, the issues in the IPR did not have to be identical to those in the litigation, the court explained. Further, to the extent that there were claims that were “absent from the IPR petitions that Bonutti assert[ed] should be included,” that absence was attributable “in no small part” to Bonutti’s refusal to precisely identify the claims that it intended to assert against the defendants. The court noted that it could not use Bonutti’s lack of disclosure to favor Bonutti.

Finally, the court was unconvinced by Bonutti’s argument that issue simplification required all of the defendants to agree to “full statutory estoppel.” Ultimately, the court concluded that a stay was favored by the issue simplification that would occur as the result of the PTO’s review of the claims that were subject to IPR petitions.

Stage of Litigation

According to the court, the proceedings were still in the early stages, no case scheduling order had been issued, discovery had not begun, and no trial date had been set. For those reasons, the “stage of litigation” factor strongly favored a stay.

The case is C.A. Nos. 12-cv-1107 (GMS), 12-cv-1109 (GMS), and 12-cv-1110 (GMS).

Attorneys: Philip A. Rovner (Potter, Anderson & Corroon, LLP) for Bonutti Skeletal Innovations LLC. Jack B. Blumenfeld (Morris, Nichols, Arsht & Tunnell, LLP) for Zimmer Holdings Inc.

Companies: Bonutti Skeletal Innovations, LLC; Zimmer Holdings, Inc.; Zimmer, Inc.; ConforMIS, Inc.; Wright Medical Group, Inc.; Wright Medical Technology, Inc.

Cases: Patent DelawareNews