Smartflash LLC v. Apple Inc. , 621 F. App'x 995 ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
SMARTFLASH LLC, SMARTFLASH
TECHNOLOGIES LIMITED,
Plaintiffs-Appellees
v.
APPLE INC.,
Defendant-Appellant
______________________
2015-1701
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 6:13-cv-00447-JRG,
Judge J. Rodney Gilstrap.
-------------------------------------------------------------------------
SMARTFLASH LLC, SMARTFLASH
TECHNOLOGIES LIMITED,
Plaintiffs-Appellees
v.
SAMSUNG ELECTRONICS CO., LTD., SAMSUNG
ELECTRONICS AMERICA, INC., SAMSUNG
TELECOMMUNICATIONS AMERICA, LLC, HTC
CORPORATION, HTC AMERICA, INC., EXEDEA,
INC.,
Defendants-Appellants
2 SMARTFLASH LLC v. APPLE INC.
______________________
2015-1707
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 6:13-cv-00448-JRG-KNM,
Judge J. Rodney Gilstrap.
______________________
Decided: July 30, 2015
______________________
BRADLEY WAYNE CALDWELL, Caldwell Cassady &
Curry, Dallas, TX, argued for plaintiffs-appellees. Also
represented by JASON DODD CASSADY, JOHN AUSTIN
CURRY, JOHN FRANKLIN SUMMERS.
MARK ANDREW PERRY, Gibson, Dunn & Crutcher LLP,
Washington, DC, argued for defendant-appellant Apple
Inc. Also represented by BLAINE H. EVANSON, Los Ange-
les, CA; DOUGLAS HALLWARD-DRIEMEIER, KEVIN JOHN
POST, Ropes & Gray LLP, Washington, DC; JAMES
RICHARD BATCHELDER, East Palo Alto, CA; CHING-LEE
FUKUDA, New York, NY.
CHARLES KRAMER VERHOEVEN, Quinn Emanuel Ur-
quhart & Sullivan LLP, San Francisco, CA, argued for
defendants-appellants Samsung Electronics Co., Ltd.,
Samsung Electronics America, Inc., Samsung Telecom-
munications America, LLC, HTC Corporation, HTC
America, Inc., Exedea, Inc. Also represented by MELISSA
J. BAILY, KEVIN ALEXANDER SMITH.
______________________
Before NEWMAN, LINN, and O’MALLEY, Circuit Judges.
Opinion for the court filed by Circuit Judge O’MALLEY.
SMARTFLASH LLC v. APPLE INC. 3
Opinion concurring in part and dissenting in part filed by
Circuit Judge NEWMAN.
O’MALLEY, Circuit Judge.
Appellants, Apple Inc. (“Apple”) and Samsung Elec-
tronics Co., Ltd., Samsung Electronics America, Inc.,
Samsung Telecommunications America, LLC, HTC Cor-
poration, HTC America, Inc., and Exedea, Inc. (collective-
ly, “Samsung”), appeal from the district court’s order
denying their motions to stay patent infringement litiga-
tion pending covered business method (“CBM”) review of
the asserted claims. For the reasons set forth below, we
affirm the district court’s order as to Apple, but reverse as
to Samsung.
BACKGROUND
Smartflash LLC and Smartflash Technologies Ltd.
(collectively, “Smartflash”), patent licensing companies,
filed separate suits against Apple and Samsung on May
29, 2013, alleging infringement of U.S. Patent Nos.
7,334,720 (the “’720 Patent”); 8,033,458 (the “’458 Pa-
tent”); 8,061,598 (the “’598 Patent”); 8,118,221 (the “’221
Patent”); 8,336,772 (the “’772 Patent”); and 7,942,317 (the
“’317 Patent”). Subsequently, Smartflash sued Google,
Inc. (“Google”) on May 7, 2014 and Amazon.com, Inc.
(“Amazon”) on December 23, 2014 for patent infringe-
ment, asserting the same six patents as those asserted
against Apple and Samsung, as well as an additional
patent that issued on August 5, 2014, U.S. Patent No.
8,794,516. All of the asserted patents relate to managing
access to data via payment information.
Throughout the course of these cases, both Apple and
Samsung filed multiple CBM petitions with the Patent
Trial and Appeal Board (“PTAB”). See America Invents
Act, Pub. L. No. 112-29, § 18, 125 Stat. 284, 329–31 (2011)
(“AIA”). Between March 28 and April 3, 2014, Apple filed
12 separate petitions for CBM review on 35 U.S.C. §§ 1024 SMARTFLASH LLC v. APPLE INC.
and 103 grounds. And, on April 3, 2014, Apple moved to
stay the district court action pending CBM review. See
Defendants’ Motion to Stay Litigation, SmartFlash LLC
v. Apple Inc., No. 6:13-cv-447 (E.D. Tex. Apr. 4, 2014),
ECF No. 120. On May 15, 2014, Samsung filed a motion
to stay based on Apple’s CBM petitions, explaining that, if
the court were to grant its motion, it “would stipulate to
be bound to the same extent as Apple is under
§ 18(a)(1)(D) of the America Invents Act.” Defendants’
Motion to Stay Litigation, SmartFlash LLC v. Samsung
Elecs., Co., No. 6:13-cv-448 at 3 n.4 (E.D. Tex. May 15,
2014), ECF No. 149. Because the PTAB had not yet
decided whether to grant these petitions, the district court
denied both motions without prejudice to refiling if any of
the petitions were granted. SmartFlash LLC v. Apple
Inc., No. 6:13-cv-447 (E.D. Tex. July 8, 2014), ECF No.
175; SmartFlash LLC v. Samsung Elecs., Co., No. 6:13-cv-
448 (E.D. Tex. Dec. 30, 2014), ECF No. 424. On Septem-
ber 30, 2014, the PTAB granted Apple’s petitions for CBM
review on several claims, but denied review for the major-
ity of the challenged claims, including those asserted at
trial. Neither Apple nor Samsung renewed their motions
to stay.
On September 26, 2014, Samsung filed ten petitions
for CBM review of all the patents-in-suit on §§ 101, 102,
and 103 grounds. Apple also filed six more petitions for
CBM review between October 30 and November 24, 2014,
this time only asserting that the patents covered patent
ineligible subject matter. Neither party filed a motion to
stay with the district court at this time.
While the parties awaited the PTAB’s decisions re-
garding the most recent petitions, both the Apple and
Samsung cases proceeded towards trial. Because the
cases raised similar issues, the district court held joint
hearings on claim construction, dispositive motions, and
the parties’ Daubert challenges during 2014, conducted a
joint pretrial conference in January 2015, and denied both
SMARTFLASH LLC v. APPLE INC. 5
defendants’ motions for summary judgment of invalidity
under § 101. It also set a February 2015 trial date for
Apple—postponing Samsung’s trial until after the conclu-
sion of Apple’s trial. Thereafter, the district court held
two additional pretrial conferences for the Apple case and
the case went to trial. After a six day trial in the Apple
case, the jury returned a verdict in favor of Smartflash on
February 24, 2015. See Smartflash LLC v. Apple Inc., No.
6:13-cv-447 (E.D. Tex. Feb. 24, 2015), ECF No. 503.
Briefing on post-trial motions then began, and the court
scheduled a hearing on those motions for July 1, 2015.
In late March and early April 2015, the PTAB insti-
tuted CBM review in seven proceedings filed by Apple and
Samsung on all asserted claims of the ’221, ’720, ’458,
’598, and ’317 Patents on § 101 grounds. On May 28,
2015, the PTAB also instituted CBM review on the as-
serted claims of the ’772 Patent on § 101 grounds. In
light of these decisions, on April 10, 2015, Samsung filed a
“renewed” motion to stay all proceedings pending CBM
review, and on April 23, 2015, Apple filed a motion to stay
post-trial activity in its case, or, in the alternative to stay
entry of final judgment, pending CBM review.
The district court denied both of these stay requests.
The court did, however, sua sponte stay the actions
against Google and Amazon. 1 Smartflash LLC v. Apple
Inc., Nos. 6:13-cv-447, 2015 U.S. Dist. LEXIS 70259 (E.D.
Tex. May 29, 2015) (“Stay Op.”). The district court wrote
1 After Apple and Samsung filed their motions to
stay pending CBM review in spring 2015, the district
court sua sponte ordered Google and Amazon to file
briefing on the issue of whether their cases should also be
stayed pending the CBM reviews instituted on the ’221,
’720, ’458, ’598, and the ’317 Patents. Neither party filed
a motion to stay pending CBM review prior to this order.
6 SMARTFLASH LLC v. APPLE INC.
a lengthy opinion analyzing the stay requests and ex-
plaining his ruling with respect to the four pending relat-
ed actions. With respect to Apple, the district court’s
analysis focused on the timing of Apple’s motion to stay,
which was two months after the jury trial, and the fact
that only the resolution of the parties’ post-trial motions
remained before the case could be appealed to this Court.
Because “seeing the case to its conclusion maximizes
judicial and party resources and discourages gamesman-
ship in filing CBM petitions,” the district court concluded
that a stay of the Apple litigation was unwarranted. Id.
at *89 (quotation omitted). Similarly, the district court
considered the significant resources already expended in
the Samsung case and Samsung’s decision to wait until
sixteen months into the litigation to file a CBM petition
asserting § 101. Because the case was on the eve of trial
and an appeal to the Federal Circuit of both Samsung and
Apple’s district court cases would be resolved before an
appeal from a final PTAB decision, the district court
concluded that the cases should proceed as scheduled.
Because the actions against Google and Amazon remained
in the early stages of litigation, the court found a stay of
those actions to be appropriate even though there neces-
sarily would be an overlap with respect to many of the
issues to be decided.
Appellants timely filed interlocutory appeals to this
Court. Apple further filed a motion to stay entry of final
judgment and/or expedite appeal and Samsung filed a
motion to stay district court proceedings pending appeal
and to expedite briefing. Two days before oral argument,
the district court vacated the jury’s damage award and
ordered a new trial on damages to begin on September 14,
2015. See Smartflash LLC v. Apple Inc., No. 6:13-cv-447
(E.D. Tex. July 7, 2015), ECF No. 581. After oral argu-
ment this Court, sua sponte, granted both parties motions
for temporary stays pending disposition of these appeals.
We have jurisdiction pursuant to § 18(b) of the AIA.
SMARTFLASH LLC v. APPLE INC. 7
DISCUSSION
On appeal, both Apple and Samsung challenge the
district court’s decision not to stay their cases. In light of
the PTAB’s decision to institute CBM review on all as-
serted claims under 35 U.S.C. § 101, both argue that the
district court should have stayed the litigation pending
the PTAB’s eligibility determinations because those
decisions could end both cases without any further pro-
ceedings, either at the district court or in this one. Apple
goes so far as to ask this Court to create a bright line rule
mandating stays whenever CBM review is granted on all
relevant patent claims, without regard to the state of the
litigation. Oral Arg. at 9:14–55, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
15-1701.mp3.
Under the AIA, parties may request a stay of district
court litigation pending CBM review, but a stay is not
obligatory. Rather, under § 18(b)(1), the district court is
required to weigh four factors to determine whether to
stay the case:
(A) whether a stay, or denial thereof, will simplify
the issues in question and streamline the trial; (B)
whether discovery is complete and whether a trial
date has been set; (C) whether a stay, or the deni-
al thereof, would unduly prejudice the moving
party or present a clear tactical advantage for the
moving party; and (D) whether a stay, or the de-
nial thereof, will reduce the burden of litigation on
the parties and on the court.
AIA § 18(b)(1). These factors include the three factors
courts traditionally have considered when deciding
whether a stay of litigation is appropriate pending admin-
istrative review in the PTO (prejudice to the non-moving
party, the state of the litigation, and simplification of the
issues) and a fourth—a consideration of the burdens of
litigation. Though these factors are statutory, considera-
8 SMARTFLASH LLC v. APPLE INC.
tion of them in a particular case remains committed to the
district court’s discretion. See Benefit Funding Sys. LLC
v. Advance Am. Cash Advance Ctrs. Inc., 767 F.3d 1383,
1385–86 (Fed. Cir. 2014); see also NFC Tech. LLC v. HTC
Am., Inc., No. 2:13-CV-1058, 2015 WL 1069111, at *1
(E.D. Tex. Mar. 11, 2015) (“A district court has the inher-
ent power to control its own docket, including the power
to stay proceedings before it.” (citing Clinton v. Jones, 520
U.S. 681, 706 (1997))). We, thus, review a district court’s
stay decision for abuse of discretion except to the extent
necessary “[t]o ensure consistent application of estab-
lished precedent.” Benefit Funding, 767 F.3d at 1385. As
discussed below, based on this record and the district
court’s thorough analysis, we see no reason “to conduct [a]
more searching review.” Id.
A. Apple’s Motion to Stay
Factor (A): Simplification of the issues in question and
potential to streamline the trial
The district court concluded that the first factor in
§ 18(b)(1) weighed against a stay because there was
“nothing left to simplify” as the district court and the jury
had already decided nearly every potential issue, includ-
ing the § 101 issue. Stay Op. at *71. Thus, the district
court determined that the simplest way for the § 101
dispute to be resolved now was to allow the district court
litigation to reach this Court. Id. at *72. We agree that
this factor does not favor a stay.
Apple does not dispute that “[g]enerally, the time of
the motion is the relevant time to measure the stage of
litigation. See VirtualAgility Inc. v. Salesforce.com, Inc.,
759 F.3d 1307, 1317 (Fed. Cir. 2014). Nor can Apple
dispute that it filed its motion post-trial, a point in time
when the possibility that the issues will be simplified is
greatly diminished. Id. at 1314. Apply argues, however,
that there is a good chance that it will prevail on one or
more post-trial motions or prevail on one or more issues
SMARTFLASH LLC v. APPLE INC. 9
on appeal that could result in a remand. Either way,
Apple argues that the litigation could remain ongoing.
And, Apple asserts that, because a CBM review that
results in invalidation of the patents at issue would
dispose of the entire litigation, the litigation issues neces-
sarily would be simplified. That is, Apple points out, “The
ultimate simplification of the issues.” Id.But the first factor relates to the simplification of the
issues before the trial court. In its entirety, the focus of
this factor is on streamlining or obviating the trial by
providing the district court with the benefit of the PTO’s
consideration of the validity of the patents before either
the court or the jury is tasked with undertaking that
same analysis. See NFC Tech., 2015 WL 1069111, at *4–
5. When the motion to stay is made post-trial, many of
the advantages flowing from the agency’s consideration of
the issues—such as resolving discovery problems, using
pre-trial rulings to limit defenses or evidence at trial,
limiting the complexity of the trial, etc.—cannot be real-
ized. The simplification contemplated by the first factor is
far less likely to occur once all the legal, procedural, and
evidentiary issues involved in a trial have already been
resolved.
Apple attempts to mitigate these realities by noting
that, since the beginning of this appeal, the district court
vacated the jury’s damage award and ordered a new trial
on damages to begin on September 14, 2015. In light of
this new development, Apple argues that this case is no
longer only a single post-trial order away from final
appellate review, and that significant work remains. As
this Court has recognized, a court may “take[] judicial
notice of post-appeal developments . . . when assessing the
propriety of a trial court’s ruling on a motion to stay
premised on the existence of a pending CBM[] proceed-
ing,” so long as it only considers the fact that such an
event occurred and not the propriety of such develop-
ments. Intellectual Ventures II LLC v. JPMorgan Chase
10 SMARTFLASH LLC v. APPLE INC.
& Co., 781 F.3d 1372, 1374 n.4 (Fed. Cir. 2015) (citing
VirtualAgility, Inc., 759 F.3d at 1312–13). But taking
judicial notice of this fact does not change our conclusion
that this factor does not favor a stay.
The district court and a jury have already addressed
infringement and invalidity issues, which are the only
questions common to the two proceedings which could be
“simplified” by agency review. The new trial is limited
solely to a consideration of the appropriate measure of
damages—an issue with which the PTO is not concerned.
Although we may take judicial notice of the fact of the
trial court’s post-trial order, we may not, in the first
instance, conduct an analysis of what the new trial may
entail, how long it may take, or the complexity of the
issues therein. Moreover, the trial court did not revisit
the request for a stay after ordering a new trial, indicat-
ing that it did not believe the new trial impacted its
reasoning.
Ultimately, the existence of a new damages trial does
not alter our finding that the district court did not err
when assessing this factor. 2
Factor (B): Whether Discovery is Complete and Whether a
Trial Date has been Set
Turning to the second factor, the district court deter-
mined that the status of the case weighed heavily against
granting a stay. Stay Op. at *75–79. Specifically, it noted
that, not only was discovery complete and a trial date set,
2 Under our jurisprudence, the damages proceed-
ings could be bifurcated from the liability determination
such that we could review an appeal from the district
court even though the damages determination is still
outstanding. Robert Bosch, LLC v. Pylon Mfg. Corp., 719
F.3d 1305, 1319–20 (Fed. Cir. 2013).
SMARTFLASH LLC v. APPLE INC. 11
but a jury had already rendered a verdict on February 24,
2015. The district court also considered Apple’s lack of
diligence in filing its petitions for CBM review on § 101
grounds. The district court concluded that this delay—
over seventeen months from start of the case—negated
the intent of the CBM review process, which was designed
to provide a cost-effective alternative to litigation and to
reduce the burden on the courts. Id. at *78 (citing 157
Cong. Rec. S1367 (Mar. 8, 2011) (statement of Sen. Kyl)).
The district court further explained that granting Apple’s
motion to stay “at the latest conceivable stage of district
court litigation” would “encourage parties to misuse CBM
review.” Id. at *77–78.
Apple disagrees that this factor weighs heavily
against a stay, contending that the stage of this litigation
does not preclude the issuance of a stay because even a
stay post-trial would avoid wasting judicial resources to
resolve post-trial motions and any resulting appeal.
Apple also argues that it was improper for the district
court to consider the timeliness of Apple’s CBM petitions
because there is no statutory deadline to file such a
petition.
We agree with the district court that this factor
weighs against a stay. At the time of Apple’s motion to
stay on April 23, 2015, discovery had been complete since
September 2014, and there had been a six day jury trial.
Apple downplays these facts, arguing that the work yet to
be done in the case is still significant, but Apple’s argu-
ment addresses whether a stay would reduce the burden
of litigation on the parties and on the court—a different
and separate factor in the analysis—and does not alter
the finding that discovery is complete and there has been
a jury trial. See VirtualAgility, Inc., 759 F.3d at 1313
(“We cannot, as VA requests, collapse the four-factor test
expressly adopted by Congress into a three-factor test.”).
While there may be circumstances where a stay is appro-
priate post-trial, on this record, where Apple filed its
12 SMARTFLASH LLC v. APPLE INC.
motion to stay well until after the jury had rendered its
verdict, the stage of litigation factor clearly favors a stay.
And the existence of a new damages trial does not modify
this conclusion, both for the reasons previously noted and
because a trial date has already been set for September
14, 2015.
We also find Apple’s argument regarding its diligence
in filing unpersuasive. The district court considered the
timing of these petitions in order to assess the state of the
proceeding when Apple actually filed its petitions and
when it could have filed its petitions. Stay Op. at *75-78.
Finding Apple could have reasonably raised § 101 issues
in petitions well before three months prior to trial, the
district court concluded that, but for Apple’s own decision
to delay filing its petitions, the stage of the litigation had
progressed to a point that no longer justified a stay. We
see no error in this analysis. It was not an abuse of
discretion for the district court to consider why the litiga-
tion was so advanced. And, although Apple argues its
delay in filing its CBM petitions on § 101 grounds was
justified in light of the Supreme Court’s decision in Alice
Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), which
issued in June 2014, Alice did not create a new § 101
defense, but rather clarified § 101 jurisprudence. A party
cannot wait to assert an available defense as litigation
marches on and then argue that the stage of litigation
facing the court is irrelevant to its right to a stay. In any
event, the Supreme Court issued Alice in June 2014 but
Apple did not file its petition until late October 2014, four
months later. Without any explanation for this additional
delay, we find no special circumstances that would justify
an extended grace period for filing a CBM petition.
SMARTFLASH LLC v. APPLE INC. 13
Accordingly, we find that the timing factor, although not
of significant weight, mitigates against a stay. 3
Factor (C): Undue Prejudice or Tactical Advantage
The district court concluded that the undue prejudice
factor also weighed against a stay. By waiting until the
eve of trial to pursue CBM proceedings on § 101 grounds,
the district court determined that Apple had multiple
opportunities to challenge the eligibility of the asserted
patents in two separate forums, which gave Apple a clear
tactical advantage over Smartflash. Stay Op. at *83.
Thus, even though there was no undue prejudice to
Smartflash because Smartflash does not compete with
Apple, the district court found that this factor disfavored
a stay. Id. at *82–83.
Apple disputes these findings, arguing that the dis-
trict court erred when it determined that Apple improper-
ly gained the opportunity to challenge the validity of
Smartflash’s asserted patents in multiple forums. Accord-
ing to Apple, the entire purpose of CBM review is to
create an alternative avenue to challenge the validity of a
claim, thus, the district court’s decision to weigh this fact
against it is illogical. Additionally, Apple argues against
any finding of tactical advantage, asserting that it is
actually at a disadvantage now because it must continue
to litigate its case, whereas the cases against its competi-
tors, Google and Amazon, have been stayed. We find
these arguments unpersuasive.
Congress enacted the AIA, in part, to address con-
cerns about business method patents. With this Court’s
3 Although delay in filing a CBM petition is not one
of the express factors listed in § 18(b)(1), it is not improp-
er for the trial court to have considered traditional equi-
table factors, such as unclean hands, in its analysis.
14 SMARTFLASH LLC v. APPLE INC.
decision in State Street Bank & Trust Co. v. Signature
Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), the
test for patent eligibility greatly expanded until the
Supreme Court’s decision in Bilski v. Kappos, 561 U.S.
593 (2010), which significantly curtailed the patentability
of business methods. As a result of “[t]his judicial expan-
sion and subsequent judicial retraction of U.S. patentabil-
ity standards . . . a large number of business-method
patents” issued that may not be valid. 157 Cong. Rec.
S1379 (daily ed. Mar. 8, 2011) (statement of Sen. Kyl).
Through the enactment of Section 18 of the AIA, Congress
sought to clarify this confusion by providing “a relatively
inexpensive administrative alternative to litigation for
addressing disputes concerning the validity of [CBM]
patents.” 157 Cong. Rec. S1379 (daily ed. Mar. 8, 2011)
(statement of Sen. Kyl); see also 157 Cong. Rec. S1364
(daily ed. Mar. 8, 2011) (statement of Sen. Schumer)
(noting that the fundamental purpose of the CBM review
process is “to provide a cost-efficient alternative to litiga-
tion”).
But in order to realize Congress’s intent to establish
an alternative to district court litigation for CBM issues,
parties must file CBM petitions in a manner that facili-
tates this goal. We recognize that there is no statutory
deadline to file a CBM petition, unlike other post-grant
proceedings, but we nevertheless conclude the timing of
the petitions in this case created a tactical advantage for
Apple. See VirtualAgility, Inc., 759 F.3d 1319–20 (consid-
ering the timing of a CBM petition to assess whether a
party sought to gain a tactical advantage or had a “dilato-
ry motive”). By waiting to submit its petitions until
almost the eve of trial and well after it filed its motion for
summary judgment on the § 101 issue, Apple was able to
first pursue its § 101 defense at the district court and
then at the PTAB. As the district court correctly found,
this strategy thus afforded Apple multiple opportunities
to pursue a single defense—a clear tactical advantage.
SMARTFLASH LLC v. APPLE INC. 15
See Segin Sys., Inc. v. Stewart Title Guar. Co., 30 F. Supp.
3d 476, 484 (E.D. Va. 2014) (“[T]wo separate opportunities
in two separate forums to challenge the validity of Plain-
tiffs’ patent does raise a concern of an unfair tactical
advantage, giving them two bites of the apple as to a
central defense.”).
This finding is not negated by the alleged prejudice
now suffered by Apple. The district court did not arbitrar-
ily decide to stay Google and Amazon, but not Apple.
Rather, the district court carefully considered the statuto-
ry factors for each party, taking into account the stage of
each litigation. Because the cases involving Google and
Amazon were still in their relative infancy, the factors
weighed in favor of a stay, while in Apple’s case, they did
not. Thus, Apple’s arguments related to its prejudice are
unpersuasive, especially considering that its suffering is
largely self-inflicted. Therefore, we find that this factor
does not weigh in favor of a stay.
Factor (D): Burden of litigation on the parties and on the
court
Finally, the district court found that the fourth factor
weighed against a stay. Stay Op. at *89. Recognizing the
potential benefits of a CBM review in reducing litigation
costs, the district court nevertheless found that those
benefits did not exist here. Specifically, because Apple
waited to file its petitions, the district court found that it
and the parties had already spent substantial time and
resources on the litigation, as evidenced by the six day
jury trial, the hundreds of pages of court-issued orders
and opinions, and the thousands of pages of briefing and
exhibits submitted by the parties. The district court also
explained that, under the current post-trial schedule, the
parties could appeal the entire litigation to this Court
prior to any appeal from a PTAB final determination.
Thus, the district court determined that it was more
efficient not to stay the case. The district court found this
16 SMARTFLASH LLC v. APPLE INC.
to be true even if it were to ultimately order a new trial on
damages. 4
Apple alleges that the district court erred in its deci-
sion, because it improperly focused on the resources
already expended in litigation (i.e., sunk costs) and failed
to properly consider the reduction in the burden of re-
maining litigation. This burden is significant, according
to Apple, especially considering that the district court did
actually order a new damages trial. If this Court were to
reweigh the evidence, Apple argues that this factor would
favor a stay.
As previously indicated, we may consider the new
damages trial in our review of the district court’s decision.
But this fact does not alter our ultimate conclusion that
the district court properly considered whether a stay, or
the denial thereof, would reduce the burden of litigation
on the parties and on the court. In reaching its decision,
the district court found that “the vast majority of civil
li[ti]gation costs have already been spent and the heavy
burden of litigation has already fallen upon the Court.”
Id. at *86. We see no error in this conclusion.
The primary cost of litigation is incurred pretrial and
in a trial on the merits. See Am. Intell. Prop. Law Ass’n,
Report of the Economic Survey 34 (2013). Where a case
has advanced past trial, it is not unreasonable for a
district court to conclude that it is more efficient to re-
solve all the post-trial motions so that the case can be
appealed. This is especially true here, where the district
court is intimately familiar with the case, the technology,
and the patents at issue after hearing six days of evidence
4 At the time of the district court’s order, Apple had
filed a motion for a new trial on damages, but the district
court had yet to rule on it.
SMARTFLASH LLC v. APPLE INC. 17
and testimony. See VirtualAgility, Inc., 759 F.3d at 1314
n.4 (“[T]he reduced burden of litigation factor may impli-
cate other considerations, such as the number of plaintiffs
and defendants, the parties’ and witnesses’ places of
residence, issues of convenience, the court’s docket, and in
particular its potential familiarity with the patents at
issue.”); see also Apple Inc. v. Samsung Elecs. Co., No. 11-
cv-01846, 2013 U.S. Dist. LEXIS 168683, at *50 (N.D. Cal.
Nov. 25, 2013) (“[T]he Court finds it would be most effi-
cient . . . to move forward with post-trial motions concern-
ing the damages retrial and finally enter a final judgment
in this case so that the Federal Circuit may review the
entire case on appeal including the validity of all of Ap-
ple’s patents as soon as possible.”). And although Apple
argues that the district court improperly weighed the
sunk costs in its analysis, such considerations can be
informative, so long as they are viewed in the context of
how much work remains, which the district court did in
this case. Even with a limited retrial on damages, the
ongoing burden of litigation on the parties and the district
court is minimal compared to the substantial effort al-
ready expended by all involved in this case. Accordingly,
we see no error in the district court’s conclusion that a
stay would not reduce the burden of litigation on the
parties and on the court.
Here, all four factors weigh against a stay in this case.
On this record, we conclude that the district court did not
abuse its discretion when it denied Apple’s motion to stay.
B. Samsung’s Motion to Stay
As an initial matter, Samsung disputes at what point
the court should measure the stage of litigation for the
purposes of the stay analysis. Samsung argues that,
because its April 10, 2015, motion was a “renewed” mo-
tion to stay, the district court erred when it failed to
consider May 2014—when Samsung filed its first motion
to stay—as the relevant time for application of the
18 SMARTFLASH LLC v. APPLE INC.
§ 18(b)(1) factors. We disagree. Samsung’s April 2015
motion was wholly unrelated to its May 2014 motion;
Samsung’s second motion to stay was based on entirely
different CBM petitions. Accordingly, the relevant time to
measure the stage of litigation in Samsung’s case is when
Samsung filed its second motion to stay, not its first. See
VirtualAgility, Inc., 759 F.3d at 1317.
Even if April 2015 is the appropriate benchmark,
Samsung submits that the district court’s analysis was
flawed because it failed to properly consider the signifi-
cant proceedings that remain in the case, including trial.
Despite the trial court’s careful consideration of the
factors involved and with due deference to the court’s
right to exercise its discretion in the face of a stay request,
we ultimately agree with Samsung.
Using essentially the same reasoning that it applied
to Apple, the district court concluded that all four stay
factors weighed against granting Samsung’s motion to
stay. We agree that much of our preceding analysis for
Apple applies to Samsung. But the critical distinction
between the Apple and Samsung cases is that Samsung
has yet to go to trial. This fact affects the analysis of two
of the four factors: simplification of the issues and reduc-
tion of the burden of litigation on the parties and on the
court. While the district court is extremely familiar with
the Apple case at this juncture, there are different claims
at issue and different accused technology in the Samsung
case. Oral Arg. at 30:18–31:24, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
15-1707.mp3. Additionally, the Samsung case involves
three co-defendants: Exedea, Inc.; the Samsung entities;
and the HTC entities. The trial will involve fact witness-
es from overseas and require the use of interpreters for
some foreign witnesses. The additional complexities and
cost of the Samsung trial counsel us to find that these two
factors weigh in favor of a stay.
SMARTFLASH LLC v. APPLE INC. 19
We recognize that, originally, the Samsung trial was
set for trial at the same time as the Apple case, but was
rescheduled in January 2015 to allow the parties to take
advantage of the district court’s rulings following the
Apple trial. Slip Op. at *92–93. Therefore, when Sam-
sung filed its latest CBM petitions in September and
October 2014, it was mere months away from its trial
date. As it was with Apple, this delay is not irrelevant to
the stay analysis. Ultimately, we do not believe either
that fact or the overlap in the legal and evidentiary issues
between the Apple and Samsung cases is enough to tip
the scales in favor of a stay.
Despite the substantial time and effort already spent
in this case, the most burdensome task is yet to come. A
determination from the PTAB that all the asserted claims
are patent ineligible will spare the parties and the district
court the expense of any further litigation, including a
trial. See VirtualAgility, Inc., 759 F.3d at 1314 (finding
that “where CBM review has been granted on all claims of
the only patent at issue, the simplification factor weighs
heavily in favor of [a] stay” and may “entirely eliminate”
the burden of litigation). It is true, moreover, that our
resolution of the Apple appeal may impact or streamline
the issues to be decided in the Samsung case. Because
the district court did not properly consider the signifi-
cance of this fact in its analysis, we find that the district
court abused its discretion when it denied Samsung’s
motion to stay. And, on balance, we conclude that the
totality of the factors weigh in favor of a stay.
CONCLUSION
For the foregoing reasons, we affirm the district
court’s order denying Apple’s motion to stay the district
court proceedings pending CBM review. But we reverse
its order denying Samsung’s motion to stay and remand
with instructions to grant the motion. In light of this
decision, we vacate the temporary stays pending disposi-
20 SMARTFLASH LLC v. APPLE INC.
tion of these appeals entered on July 10, 2015. We also
hereby expedite issuance of the mandate in this matter.
AFFIRMED AS TO APPEAL NO. 2015-1701
REVERSED AS TO APPEAL NO. 2015-1707
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
SMARTFLASH LLC, SMARTFLASH
TECHNOLOGIES LIMITED,
Plaintiffs-Appellees
v.
APPLE INC.,
Defendant-Appellant
______________________
2015-1701
______________________
Appeals from the United States District Court for the
Eastern District of Texas in No. 6:13-cv-00447-JRG,
Judge J. Rodney Gilstrap.
-------------------------------------------------------------------------
SMARTFLASH LLC, SMARTFLASH
TECHNOLOGIES LIMITED,
Plaintiffs-Appellees
v.
SAMSUNG ELECTRONICS CO., LTD., SAMSUNG
ELECTRONICS AMERICA, INC., SAMSUNG
TELECOMMUNICATIONS AMERICA, LLC, HTC
CORPORATION, HTC AMERICA, INC., EXEDEA,
INC.,
Defendants-Appellants
______________________
2 SMARTFLASH LLC v. APPLE INC.
2015-1707
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 6:13-cv-00448-JRG-KNM,
Judge J. Rodney Gilstrap.
______________________
NEWMAN, Circuit Judge, concurring in part, dissenting in
part.
I concur in the court’s decision to stay further proceed-
ings with respect to the Samsung litigation. However, the
stay should also be applied to defendant Apple. Although
the proceedings against Apple have gone to trial, a new
trial has been ordered with respect to damages, and the
reasons for separating the several defendants may not
exist if intervening events in the PTO materially change
the status of the patents-in-suit. The post-grant PTO
proceedings for the SmartFlash patents are progressing
on an expedited schedule, wherein the Patent Trial and
Appeal Board (PTAB) has already held that the Smart-
Flash patents are Covered Business Method (CBM)
patents and that it is “more likely than not” that claims
are invalid. 35 U.S.C. §324(a).
My colleagues require that the litigation against Ap-
ple nonetheless proceed, to a complex new damages trial,
certain to be followed by post-trial proceedings on all of
the issues of validity and infringement, then also certain
to be followed by appeals—while the PTO will have com-
pleted its post-grant review of these CBM patents that
have already been described by the PTAB as “more-likely-
than-not” invalid under section 101. The court cannot
remain oblivious to the reports that, as of June 20, 2015,
the PTO has invalidated every claim for which it has
instituted CBM review based on section 101. There have
SMARTFLASH LLC v. APPLE INC. 3
been no exceptions since the inception of the America
Invents Act. See Robert R. Sachs, The One Year Anniver-
sary: The Aftermath of #Alicestorm, BILSKIBLOG (June 20,
2015), available at
http://www.bilskiblog.com/blog/business-methods/ (report-
ing PTO statistics on review of business method patents).
It cannot be ignored that under the protocols of post-
grant PTO review, claims are more easily invalidated by
the PTO tribunal than in the district court. In In re
Cuozzo Speed Technologies, LLC, No. 14-1301 (Fed. Cir.
July 8, 2015), 1 the court held that the PTAB may apply
what’s called the “broadest reasonable interpretation” to
claims of issued patents, thus rendering the claims more
vulnerable to invalidity than if reviewed on the legally
correct claim interpretation. In addition, in PTAB pro-
ceedings unpatentability is determined by preponderance
of the evidence, whereas in the district court invalidity
requires clear and convincing evidence, which in this case
is accompanied by the deferential standard applied to jury
verdicts.
In enacting the America Invents Act, it was recog-
nized that the possibility of concurrent district court and
PTO proceedings, with the same patents and the same
issues, could lead to a variety of concerns. Thus, this
court is authorized to review “stay” rulings, with the goal
of establishing reasonably consistent national standards
to guide district courts and litigants. As applied to the
case here at bench, the only question is whether, in light
of the stay that is today granted to co-defendant Samsung
and that the district court previously granted to co-
1 The initial panel opinion and dissent in Cuozzo is-
sued on February 4, 2015. 778 F.3d 1271 (Newman, J.,
dissenting). A revised panel opinion and dissent issued
on July 8, 2015. On the same day, the court by 6 to 5 vote
denied rehearing en banc.
4 SMARTFLASH LLC v. APPLE INC.
defendants Google and Amazon, the proceedings against
Apple should continue at this stage.
The inequity, as well as the inefficiency, of continuing
against Apple overpowers my colleagues’ reasoning that
since the Apple trial process is fairly well advanced, it
should continue to the scheduled retrial of damages and
completion of the district court proceedings. (I cannot
guess whether any appeal of the district court decision
would also proceed expeditiously in the Federal Circuit if
the PTO proceedings remain pending.) The reasonable
possibility that the patent landscape will be altered, while
requiring Apple to proceed while staying the proceedings
against Samsung, Google, and Amazon, provides inequi-
ties that outweigh any convenience of wrapping up the
district court proceedings against Apple, especially in
view of the possibility of remand or other accommodation
of any change in the patent landscape.
Equity counsels in favor of uniform treatment of de-
fendants equally at risk, and pragmatism requires that
the courts take notice of the PTO’s decision to institute
CBM review based on the section 101 challenge to all of
the SmartFlash claims in suit. I outline my concerns with
the ruling of the panel majority:
1. CONCURRENT PTO AND DISTRICT COURT PROCEEDINGS—
After SmartFlash sued all of the defendants for pa-
tent infringement, and the district court implemented the
then-reasonable procedure of trying the case against
Apple first, Apple and Samsung initiated post-grant
review under the newly enacted America Invents Act,
selecting the procedure relating to covered business
method patents. The PTAB accepted the petitions to
institute review, implementing the requirement of 35
U.S.C. §324(a) (requiring threshold determination that it
is “more likely than not that at least 1 of the claims . . . is
unpatentable”).
SMARTFLASH LLC v. APPLE INC. 5
In view of the ongoing PTO proceedings, the possibil-
ity arises whereby the theory of patent validity presented
at the Apple trial might change as to the other defend-
ants. It is no longer clear that the Apple decision in the
district court could serve as the model for which it was
intended, depending on the outcome of the CBM proceed-
ing in the PTO.
Thus the fact of the concurrent proceedings, even
without my other reasons, weighs in favor of a stay
against Apple if there is to be a stay against Samsung,
whose trial was scheduled for September 14, 2015.
2. THE PTAB DECISION TO INSTITUTE CBM REVIEW—
Section 324(a) provides: “The determination by the
Director whether to institute a post-grant review under
this section shall be final and nonappealable.” On the
“broadest reasonable” claim construction, and in view of
the “more likely than not” determinations and the unre-
viewability at the threshold 2 of the decision to institute
post-grant review, the SmartFlash claims at this stage
are not cloaked in optimism.
The PTO has stated that a district court’s determina-
tion does not provide collateral estoppel and is not res
judicata against PTAB determinations. See, e.g., Inter-
thinx, Inc. v. Corelogic Sols., LLC, No. CBM2012-00007
(P.T.A.B. Jan. 30, 2014) (“[W]e conclude that res judicata
and collateral estoppel do not limit the Board’s ability to
decide the challenges at issue . . . .”). Much remains to be
2 Although this court held in Versata Development
Group, Inc. v. SAP America, Inc., No. 2014–1194, 2015
WL 4113722 (Fed. Cir. July 9, 2015), that any issues
relevant to the decision to “institute” are subject to review
on appeal of final judgment, the court sustained the
restriction on interlocutory appeal of the threshold deter-
mination of whether to institute post-grant review.
6 SMARTFLASH LLC v. APPLE INC.
resolved; the present state of uncertainty of law and
procedure, and the ongoing search for the optimum mech-
anism for determining patent validity, weigh heavily on
the side of staying the Apple proceedings, rather than
continuing to finality in the district court.
The issue is not simply that of deference between tri-
bunals of different assignments, nor of constitutional
dimension as to the relationship between the judiciary
and an executive agency. Included must be the overarch-
ing concern for serving the national interest in technologi-
cal advance, and how best to achieve it. Until these
issues are resolved, prudent adjustment is appropriate.
3. UNANSWERED QUESTIONS OF STANDARDS OF REVIEW AND
THE APPELLATE OBLIGATION—
On continuing with the Apple litigation in the district
court, as the panel majority today orders, it is far from
clear how the appellate process will proceed. What hap-
pens to possibly conflicting rulings? Are we creating
another race-to-the-courthouse, where the interests of
justice succumb to the fleet of foot, or the deepness of the
pocket? This court is already burdened with irregular
precedent, as in Fresenius, where a panel sustained the
district court’s final judgment of validity and infringe-
ment, and then held that since post-judgment damages
remained for determination, the Federal Circuit’s affir-
mance of the district court’s judgment gave way to the
Federal Circuit’s sustenance of the PTO’s later determi-
nation of invalidity. Fresenius USA, Inc. v. Baxter Int’l,
Inc. 721 F.3d 1330, 1344, 1347 (Fed. Cir. 2013) (Newman,
J., dissenting).
Stay of district court proceedings as to Apple would
acknowledge the CBM review in the PTO, and the PTAB’s
expert determination would, at a minimum, be available
for application to all defendants. And meanwhile, I urge
the communities of innovators, competitors, and legisla-
tors, to collaborate to design a system of innovation
SMARTFLASH LLC v. APPLE INC. 7
incentive, competitive fairness, and post-grant review
that best serves the nation.
4. THE FACTOR OF JUDICIAL ECONOMY—
My colleagues state that the district court’s invest-
ment in the Apple case should not be wasted, in the
interest of judicial economy. My colleagues state that “the
only questions common to the two proceedings which
could be ‘simplified’ by agency review” are “infringement
and validity.” Maj. Op. at 10. Indeed so! What else is
there?
Here, to press forward with active Apple litigation,
followed inevitably by post-trial disputes as to all of the
issues decided by the judge and the jury, and undoubtedly
the appeal, offers scant judicial efficiency. The PTO has
already determined that it is more likely than not, that at
least some of the claims in suit are invalid, and it is also
possible that the damages proceeding would be affected if
only some of the claims survive in the PTO. In such
likelihoods, any judicial investment in the trial proceed-
ings thus far conducted will not be satisfied.
CBM review of the SmartFlash patents is now pro-
ceeding, apparently with weight on section 101. The
litigation efficiencies extolled by the panel majority may
diminish, if new grounds of invalidity become available to
Samsung and the other stayed defendants. This factor
should not be overlooked.
5. LITIGATION DELAY—
Apple stresses that SmartFlash would not be preju-
diced by delaying the district court proceedings, for
SmartFlash is not a market competitor, and is compen-
sated by money damages based on infringement by the
defendants, rather than by profits from its own sales.
While the past litigation expense has been sunk, this is
not a sound reason to add additional litigation expense,
starting with the scheduled new trial of damages, when
8 SMARTFLASH LLC v. APPLE INC.
validity has been facially challenged under the new
America Invents Act procedures.
My colleagues deem it a fatal flaw that Apple did not
request CBM post-grant review of the SmartFlash pa-
tents earlier in this litigation. However, this timing
accords with the Supreme Court’s action on the Alice
Corporation case, first the petitions to the Court, then the
grant of certiorari in 2013, then the briefing and argu-
ment and widespread amicus participation, and then the
Court’s decision reported at Alice Corporation v. CLS
Bank International, 134 S. Ct. 2347 (2014). That Apple
waited while this section 101 issue was wending its way
to Court review and resolution was not imprudent, for the
section 101 arguments in the PTO take their guidance
from the Court’s rulings in Alice Corporation. That it took
Apple only four months thereafter to apply Alice Corpora-
tion to the complex new CBM procedures is not grounds
for punishing Apple for tardiness.
My colleagues also criticize Apple for “first pursu[ing]
its § 101 defense at the district court and then at the
PTAB.” Maj. Op at 14. Indeed, one wonders what else
Apple might have done, for surely it would have been
imprudent to discard either of these paths of defense—
such scold is unfair.
6. MY PREFERENCE—
The only difference between Apple and Samsung as
defendants is that the Samsung case was placed on a
later calendar, as the district court reasonably chose to
proceed with one case at a time, moving the cases against
Google and Amazon even further into the future. But the
landscape changed after the Court decided Alice Corpora-
tion, and even more so after experience was gained with
the CBM section of the America Invents Act. In view of
the PTO’s institution of post-grant review of all of the
claims in suit, it is fair and just that all of the defendants
be treated equally, and thus that the stay be granted to
SMARTFLASH LLC v. APPLE INC. 9
all. From my colleagues’ contrary decision as to Apple, I
respectfully dissent.