IP Law Daily, PATENT—E.D. Va.: Partial limited stay granted for CBM review of buySAFE’s patent in dispute with Google, (Jun 18, 2014)

By Peter Reap, J.D., LL.M.

After consideration of the relevant factors under the America Invents Act (“AIA”) in a suit brought by buySAFE, Inc. against Google, Inc., for infringement of buySAFE’s U.S. Patent No. 8,515,791 ("the ’791 Patent"), a partial limited stay was warranted pending completion of a Covered Business Method ("CBM") Review of the ’791 Patent, the federal district court in Richmond, Virginia, has decided (buySAFE, Inc. v. Google, Inc., June 16, 2014, Hudson, H.). The stay was limited with respect to discovery, which would move forward as set forth in the existing Scheduling Order.

Background. Products made by both parties provided a type of guarantee or verification to online shoppers, and consumer behavior information, the court noted. buySafe "sells to Internet retailers a patented service that provides third-party certification and transactional guarantees for online merchants." buySafe "has also invented methods for performing systematic analysis of consumer behavior data to predict consumer demand in relation to the offering of a third-party transactional guarantee." These methods were covered by the ’791 Patent, which issued on August 20, 2013.

In 2011, Google launched Google Trusted Stores ("GTS"), which provides "merchants with a trust seal[,] guarantee[s] the purchases of online shoppers," and "collect[s] consumer purchase information." buySafe filed suit against Google on November 25, 2013, alleging that Google is infringing the ’791 Patent with GTS.

The AIA provides for USPTO Patent Trial and Appeal Board ("PTAB") review of CBM patents upon petition, the court observed. On May 9, 2014, Google filed a Petition for Transitional Post-Grant Review of a patent (CBM Review) with PTAB ("the Petition"), seeking to invalidate all claims of the ’791 Patent pursuant to 35 U.S.C. § 321. The PTAB will must decide whether to conduct a CBM Review no later than six months after May 9, 2014 (or by November 9, 2014), according to the court.

Analysis. The AIA provides that "[i]f a party seeks a stay of a civil action alleging infringement of a patent under section 281 of title 35, United States Code, relating to a transitional proceeding for that patent, the court shall decide whether to enter a stay based on" the following four factors:

1. whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

2. whether discovery is complete and whether a trial date has been set;

3. whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

4. whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

AIA, 112 Pub. L. No. 29 § 18(b)(1) (2011).

Given how recently the AIA was enacted, there was little or no guidance from the Federal Circuit on how to apply the AIA §18(b)(1) factors. District court opinions on the subject were not controlling and were inconsistent, largely due to the discretionary nature of the issue. Accordingly, the court based its decision to grant a partial limited stay, on its analysis of the AIA § 18(b)(1) factors.

Simplification of issues and streamline the trial. A stay would “simplify the issues in question and streamline the trial,” the court ruled. Here, all of the claims in this litigation would be affected by a CBM Review.

It was evident that a partial limited stay would simplify the issues since every claim asserted in the case was raised in the Petition, and if the PTAB grants the Petition, it would address the validity of these claims. The Petition in this case highlighted two combinations of references which Google contended the Patent Office had never considered.

In the first combination of references, Google alleged there was relevant prior art (the ’019 Patent), which was not before the USPTO in the prosecution of the ’791 Patent. According to Google, the USPTO never considered whether combining the known prior art, the guaranty concept, with the known prior art consumer research concept is valid. Irrespective of whether this prior art was intentionally or unintentionally withheld, it revealed that there may have been a similar patent that provides both consumer research and retailer guaranty, potentially rendering the ’791 Patent unpatentable, according to the court. This was an issue that the USPTO or PTAB has not had the opportunity to address.

It was clear that PTAB's consideration of the purportedly withheld prior art bore on this critical issue, and a stay would simplify important issues. This was particularly apparent because in Delaware litigation between buySAFE and Google over the ’019 Patent, the District Court of Delaware found that the ’019 Patent was invalid as claiming unpatentable subject matter pursuant to 35 U.S.C. § 101 (buySAFE, Inc. v. Google Inc., 964 F. Supp. 2d 331, 337 (D. Del. 2013). The court also construed the terms "guaranty" and "transaction performance guaranty" (terms that are also in the ’791 Patent).

Given that the ’019 Patent was held unpatentable, there was a reasonable likelihood that the ’791 Patent was similarly unpatentable since both patents, though not directly related, had key concepts and terms in common, the court explained. Furthermore, both patents disclosed methods of providing a guaranty for some or all of a party's obligations in an online transaction. Materiality could be shown by establishing that "but for" the withholding of the prior art reference, the Patent Office would not have allowed the claims of the patent. Thus, a CBM Review would likely simplify the principal defense in this case.

Whether discovery was complete and trial date set. Here, while a trial date has been set, it was scheduled early in the proceedings as was customary in the District. Claim construction briefs had been filed, but a number of deadlines remained. For example, discovery was ongoing, but summary judgment motions had not been filed. Thus, the case was approaching its most critical stages. Many of the issues left to be addressed—claim construction, infringement, and damages—could be mooted by the CBM Review.

Significantly, if PTAB were to find any of the claims invalid, that determination would govern, regardless of this court's ultimate determination on validity. The binding nature of PTAB's decision weighed in favor of granting a stay, the court held. These circumstances supported granting a limited stay; discovery and settlement discussions would move forward, in the interest of keeping the case moving to a reasonable extent while PTAB considers the Petition.

Undue prejudice or clear tactical advantage. A partial limited stay would not "unduly prejudice [buySAFE] or present a clear tactical advantage [to Google]" under AIA § 18(b)(1)(C), the court determined.

The timing of Google's Petition and Motion to Stay weigh in favor of a partial limited stay. While Google could have filed its CBM Petition earlier in this litigation, it was timely filed on May 9, 2014 and done so within a reasonable amount of time. Three days later, Google promptly filed its Motion to Stay on May 12, 2014.

The parties are not direct competitors, which weighed in favor of granting the stay. The parties may or may not be competitors with respect to consumer protection. However, they were not competitors on methods of monitoring and analyzing consumer behavior in online sales transactions because up until the filing of its Opposition Brief to the Motion to Stay, buySAFE admitted it never marketed or sold a product or service covered by the ’791 Patent. Thus, there was insufficient evidence at this point that the parties were direct competitors with respect to the ’791 Patent, according to the court.

Moreover, buySAFE’s testimony of past financial loss was not dispositive on this factor because the testimony covered a time period before the ’791 Patent was issued. Thus, the deposition testimony did not necessarily show prejudice as a result of a stay of the ’791 Patent litigation.

The burden of litigation on the parties and the court. The court relied on its analysis under AIA §18(b)(1)(A) to support its conclusion under AIA § 18(b)(1)(D), and found that a partial limited stay "will reduce the burden of litigation on the parties and on the court."

Recognizing that the AIA § 18(b)(1)(D) factor "was included, in part, to ease the movant's task of demonstrating the need for a stay," the court concluded that AIA §18(b)(1)(D) weighed strongly in Google's favor here.

Conclusion. Based on the foregoing analysis, a partial limited stay would be granted under AIA §18(b)(1), pending disposition of the CBM Petition.

The partial limited stay would remain in effect pending PTAB's consideration of the Petition for CBM Review. Immediately after PTAB decides whether to grant the Petition, the parties were ordered to notify the court of PTAB's decision. If PTAB denies the Petition, a status hearing would be held within ten days after PTAB's decision to reset the dates for trial and other proceedings. However, if PTAB elects to conduct a CBM Review, the partial limited stay shall be extended, pending the conclusion of the CBM Review. In that case, a status hearing would be held within ten days after the conclusion of the CBM Review.

The case is No. 3:13cv781-HEH.

Attorneys: Dana Duane McDaniel (Spotts Fain PC) for buySAFE, Inc. Robert Armistead Angle (Troutman Sanders LLP) for Google, Inc.

Companies: buySAFE, Inc.; Google, Inc.

Cases: Patent VirginiaNews