Court Takes Offense to Tactics Geared to PTAB Alone

Litigants beware; Judge Rodney Gilstrap (E.D. Texas) warned litigants considered to be using the district court proceedings to posture positions in co-pending CBM proceedings that ‘[t]he Court does not countenance—in fact this Court is offended by—the strategic use of an Article III Court to gain a tactical advantage in any parallel proceeding.”

But, this dispute may be a preview of things to come as the Patent Trial & Appeal Board (PTAB) aligns itself with the Phillips construction of the courts.

In United Services Automobile Association v. Wells Fargo Bank, N.A., 2:18-CV-00245-JRG (E.D. Tex.), USAA brought a suit for patent infringement against Wells Fargo concerning four patents directed to remote check deposit technology. On September 18th of this year, Defendants filed a rule 12(c) motion for judgment on the pleadings on Section 101 grounds; Plaintiffs filed a response to the motion on October 26th. After Plaintiffs’ filed their response, on Nov. 8th, Defendants filed four CBM proceedings on each of the asserted patents on 101 issues (which were seemingly tailored to address the district court arguments that plaintiff presented). Plaintiffs then filed an amended complaint on Nov. 26th along with a motion to compel deposition of Defendant’s expert witness in the CBM proceedings; on Dec. 12th Judge Gilstrap denied the 12(c) Motion as moot and gave Defendants leave to file a similar 101 motion within 15 days. The Defendants declined to file another 101 motion and represented that it would not file it again until after claim construction. Plaintiffs continued to insist on deposing Defendants CBM expert on the basis that the expert’s positions were inconsistent with the arguments presented in the, now moot, 101 motion. The Judge heard oral argument as to the motion to compel expert testimony on January 10th, and subsequently denied the motion to compel.

In his Order, (here) Judge Gilstrap chastised both parties for what he appeared to consider gamesmanship. He seemed unhappy that Defendants filed a 101 motion for the apparent purpose of obtaining Plaintiffs litigation positions before filing its CBMs, especially since the Defendants declined to file a renewed 101 motion after the plaintiffs filed an amended complaint. The Judge was also apparently unhappy that the Plaintiffs sought to depose the Defendant’s expert witness from the CBMs with respect to a moot motion. That deposition wouldn’t really have any value in the district court (in light of there being no 101 motion), and instead was likely being sought for use in the concurrent CBMs.

The Court explained,

" [T]he Court is persuaded that both parties have used (and continue to attempt to use) this Court as a mere tool to better posture their positions as regards the co-pending CBM proceedings before the Patent Trial and Appeal Board (the “PTAB”). The Court does not countenance—in fact this Court is offended by—the strategic use of an Article III Court to gain a tactical advantage in any parallel proceeding. Such overtly demonstrates the parties’ lack of recognition and reliance on the district court as a deliberative body. Moreover, such gamesmanship reflects a clear lack of respect for the Third Branch of our national government. This Court will not ignore such conduct.

Given the PTAB’s new 101 guidelines, and indeed, the risk defendants may be taking in pursuing a 101 challenge in parallel with a summary determination, it may be that this case is more of a preview of potential posturing downsides now that the PTAB has switched to a Phillips construction.

Scott A. McKeown is an author of the Patents Post Grant