On July 24, 2009, ALJ Theodore R. Essex issued Order No. 5 in Certain Course Management System Software Products (Inv. No. 337-TA-677), staying the investigation pending a decision from the Federal Circuit in an appeal between the same parties on the identical patent that is the subject of the 677 investigation.

As we explained in our April 22 and June 5 posts, Complainant Blackboard, Inc. (“Blackboard”) accused respondent Desire2Learn Incorporated (“D2L”) of violating Section 337 based on infringement of U.S. Patent No. 6,988,138 (“the ‘138 patent”).  The ‘138 patent is currently involved in a reexamination proceeding at the U.S. Patent and Trademark Office and an appellate proceeding before the Court of Appeals for the Federal Circuit.

On June 12, 2009, D2L filed a motion to stay the investigation pending (1) completion of the reexamination process; (2) until Blackboard can make a showing that some asserted claim has a legitimate chance of emerging from reexamination; and/or (3) resolution of the pending Federal Circuit appeal.

According to the order, D2L argued that at the present stage of the reexamination process, the PTO rejected the ‘138 patent in its entirety, and that given the advanced stage of reexamination and the early stage of the ITC investigation, administrative efficiency is best served by staying the investigation.  D2L further argued that the investigation should be stayed pending resolution of a Federal Circuit appeal, which is directed to the validity of three of the nine asserted method claims in the ‘138 patent.  D2L also argued that a stay would simplify the issues in the investigation as to all 44 claims of the ‘138 patent.

Blackboard responded that the issuance of any stay prior to the completion of reexamination would, in effect, “override” the presumption of validity of its patent.  Blackboard further noted that the U.S. District Court for the Eastern District of Texas, where Blackboard and D2L were engaged in litigation over the same patent, and the Federal Circuit both refused to stay their respective proceedings pending the completion of reexamination.  Blackboard added that the investigation should not be stayed pending reexamination because the proceedings would likely continue for at least four more years.  Consequently, any stay would prejudice Blackboard, since D2L would be permitted to infringe during the period of the stay.  Blackboard further argued that the Commission “could not” stay the investigation pending resolution of the reexamination proceedings because Section 337 investigations must be completed expeditiously.  Blackboard further urged the ALJ to reject D2L’s other requested relief because (1) requiring Blackboard to make a showing that the asserted claims have a legitimate chance of emerging from reexamination is tantamount to shifting the burden of proving validity of the ‘138 patent to Blackboard and (2) the Federal Circuit’s decision will have no affect on claims 39-44 as they are not at issue in the appeal and “the investigation would move forward with regard to claims 39-44.”

The Staff supported staying the investigation pending completion only of the appellate proceedings, since the stay would not be very lengthy as the Federal Circuit will likely issue an opinion within a few months. The Staff, however, opposed staying the investigation pending completion of the reexamination, since it is still in its early stages with several years remaining before final resolution of the reexamination, and since Blackboard has not yet amended any claims, which would require an amendment to the infringement allegations in the complaint.

ALJ Essex held that he has authority pursuant to Commission Rule 210.15(a)( 1) to stay an investigation pending resolution of a related litigation or administrative proceeding.  Citing Certain Semiconductor Chips With Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-605, Comm’n Op. at 3, 2008 ITC LEXIS 888 at *4 (May 27, 2008), he identified and applied the following five considerations, which he determined favored granting the requested stay pending the Federal Circuit proceedings, but weighed against a stay pending the reexamination proceedings:

1.)   The state of discovery and the hearing date

ALJ Essex found that this factor favored a stay pending resolutions of both the Federal Circuit and the reexamination proceedings, particularly since the ALJ’s target date was noted as merely “tentative” since the decision in this order could affect that date.  This investigation is in its early stages with the hearing nearly seven months away and a procedural schedule had not yet been set.

2.)   Whether a stay will simplify the issues and hearing of the case

ALJ Essex determined that this factor strongly favored a stay pending the Federal Circuit’s decision.  In the proceedings before the Federal Circuit, D2L appealed the district court’s decision on claim construction and validity for claims 36-38, and Blackboard appealed the decision on invalidity of claims 1-35.  While claims 39-44 are not at issue in the appellate proceedings, they depend from claim 36 and the Federal Circuit’s decision on the validity of claims 36-38 would undoubtedly impact this investigation.  ALJ Essex found this factor only slightly favored a stay pending the reexamination, since the issues in this investigation would focus on any and all valid claims, including those amended during reexamination.

3.)   The undue prejudice or clear tactical disadvantage to any party

ALJ Essex determined that this factor favored a stay pending the Federal Circuit decision, since Blackboard was already aware of the Federal Circuit proceedings before it filed the complaint in the investigation, and it failed to show any undue prejudice or tactical disadvantage in waiting for the Federal Circuit decision.  With regard to the reexamination proceedings, ALJ Essex found Blackboard would be unduly prejudiced, as those proceedings are several years away from completion, and the Commission has no authority to award damages for past violations of infringement and importation.  He agreed with Blackboard that such that such a stay would be tantamount to a royalty free license for the duration of those years.

4.)   The stage of the parallel proceedings

The issues before the Federal Circuit have been fully briefed, oral arguments have been heard, and the parties are simply awaiting a decision from the Federal Circuit, which is expected to issue in a matter of weeks.  ALJ Essex therefore determined that this factor heavily favored staying the investigation.  By the same token, this factor strongly disfavored staying the investigation pending the reexamination, which was not expected to be completed for several years.  Further, ALJ Essex found that the impact of the reexamination was speculative, since it was unclear if or when Blackboard may amend its claims.

5.)   The efficient use of Commission resources

ALJ Essex again determined that this factor favored staying the investigation pending the Federal Circuit’s decision since any such decision on the validity of claims 36-38 and on their claim construction will significantly impact this investigation.  As for the reexamination proceedings, the Commission’s resources would be saved from litigating claims that may ultimately be amended during the reexamination proceedings, but since it was not clear that those claims will ultimately be amended, this factor had no impact as to the reexamination.

Finally, ALJ Essex declined to grant D2L’s request to stay the investigation until Blackboard could make a showing that some asserted claim has a legitimate chance of emerging from reexamination.  The ALJ held that D2L’s request was tantamount to a guessing game of how the PTO will ultimately conduct the reexamination proceedings, including what issues may arise and how Blackboard will respond to those issues.  The ALJ declined to stay this investigation based on such hypothetical scenarios.

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On July 27, the Federal Circuit issued its opinion in the appeal from the district court case.  It held that claims 1-35 of the '138 patent were invalid for indefiniteness, upholding the district court's grant of summary judgment on that issue.  The Federal Circuit also found that claims 36-38 of the '138 patent were anticipated as a matter of law, reversing the district court's failure to grant D2L's JMOL motion on that issue.