Federal Circuit Addresses Jurisdiction to Review Stay Orders in Covered Business Method Reviews

Federal Circuit Addresses Jurisdiction to Review Stay Orders in Covered Business Method Reviews

In Intellectual Ventures II LLC v. JPMorgan Chase & Co., a 2–1 decision issued on April 1, 2015, the Federal Circuit held that it lacked jurisdiction to hear an appeal from a denial of a motion to stay a district court action pending the institution of covered business method reviews ("CBMRs") before the United States Patent and Trademark Office's Patent Trial and Appeal Board. Judge O'Malley, writing for the majority and joined by Judge Bryson, began by noting that the court "normally only has jurisdiction to review 'a final decision of the district court.'" The majority noted that "[e]xceptions to the final judgment rule, whether statutory or arising from common law, are to be narrowly construed."

Section 18(b) of the American Invents Act ("AIA") allows a party to seek a stay of a district court infringement action "relating to a [CBMR] proceeding for that patent," and allows a party to "take an immediate interlocutory appeal" from such a stay decision. Placing heavy emphasis on the term "proceeding" and invoking the principle that statutory grants of jurisdiction "must be construed narrowly," the majority reasoned that appellate review is appropriate following institution of a CBMR "proceeding," but not for a decision issued before an institution decision is made (and, thus, before a CBMR "proceeding" exists). The majority canvassed the statutory framework of the AIA and reasoned that "the language of the statutory scheme consistently defines 'proceeding' as beginning when the PTAB institutes review." Rejecting appellants' argument that a CBMR starts when a petition is filed, the majority explained that the AIA's statutory framework "differentiates between a petition for a CBMR proceeding (which a party files) and the act of instituting such a proceeding (which the Director is authorized to do)." To that end, the majority determined that "[b]ecause the Director decides whether to 'institute,' or begin, a CBMR proceeding, and necessarily bases that decision on the strength of the petition, the petition itself cannot substitute for the exercise of the Director's discretion."

Accordingly, the majority concluded that the Federal Circuit "only ha[s] jurisdiction over a decision on a motion to stay that is related to an actual CBMR proceeding, not a decision on a motion to stay that is related to anything that relates—however remotely—to a hoped-for CBMR proceeding."

Writing in dissent, Judge Hughes reasoned that the majority's opinion frustrated the purpose and goal of the AIA in general and the CBMR process specifically. Examining the legislative history, Judge Hughes noted that "Congress intended stays to be granted in all but the rarest of circumstances." Although admitting that the "majority provides a reasonable textual analysis for its conclusion," Judge Hughes placed little weight on the principle of "narrow construction," instead concluding that "the overall purpose and legislative history of the AIA" did not show "any intent to so limit our jurisdiction by its choice of that specific statutory language. Rather, I read the stay provision in § 18(b)(1) as more broadly authorizing district courts to stay a case based on a CBM review at any stage in the CBM process, and consequently our review extends to stay decisions issued at any stage in the CBM process."

The Federal Circuit's decision does not impact a district court's discretion to manage its docket as it sees fit, including staying litigation after a petition for CBMR but before the PTAB institutes a proceeding.

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Gregory A. Castanias

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