On October 8, 2009, Judge Stephen G. Larson granted a motion to stay pending reexamination of the patents-in-suit in the United States District Court for the Central District of California in the matter of Allflex USA, Inc. v. Avid Identification Sys., Inc. Judge Larson also ordered Avid, Fish & Rirchardson (Avid’s past counsel in the matter) and Kirkland & Ellis (Avid’s current counsel in the matter) to show cause for why they should not bear Allflex’s reasonable costs and fees for violating Federal Rule of Civil Procedure 26(e).  Rule 26(e) requires a party to supplement its discovery responses on a continual basis.  (Read the Court’s Order Staying Case here:  Order of Stay)

In Allflex, the Court was about to render its Markman order when Avid’s counsel disclosed to the Court that the patents-in-suit had been undergoing reexamination for the past two years.  While Fish & Richardson received notification of the reexamination in 2007 when representing Avid, Kirkland & Ellis contends that it learned of the reexamination proceedings in March 2009 during one of its “periodic sweeps” of Avid’s files to locate responsive documents.  Indeed, Avid told Fish & Richardson about the reexamination proceedings, and Avid assumed Fish & Richardson would tell Kirkland & Ellis.  During the litigation, Allflex served discovery requests on Avid, including a request for “all documents relating to the prosecution histories” for the patents-in-suit.  Avid did not produce documents relating to the reexamination proceedings.  There was no dispute that documents relating to the reexamination proceeding fall within the scope of Allflex’s document requests.

After learning of the reexamination proceedings, the Court issued a stay of the litigation, stating “if the re-examination of the remaining patents-in-suit had been disclosed as it should have been in 2007, this Court would have stayed this entire litigation until the conclusion of the re-examination proceedings before the PTO (as is its practice and that of nearly every district court of which this Court is aware).  Because that was not disclosed, this Court and Allflex have, for the past two years, proceeded to hear and litigate whether the patents in question have been infringed, patents that unbeknownst to the Court and Allflex may have been found unpatentable because of agency proceedings then underway before the PTO.”

Allflex protested the stay, seeking a stay of litigation relating to the question of infringement, but wanting to continue to prosecute its inequitable conduct and unclean hands arguments, based on Avid’s alleged failure to disclose prior art in its initial patent application and during the reexamination before the USPTO.  The Court responded, “allowing that sliver of the litigation to proceed, as sought by Allflex, potentially adds further wasted expense and resources into what has already turned out to be a less than productive exercise in litigation.”

The Court then recognized that it could impose monetary sanctions on Avid, Fish & Richardson, and Kirkland & Ellis for discovery violations.  Avid argued that it had no duty to disclose the reexamination proceedings to either the Court or Allflex under the local rules or Federal Rule of Civil Procedure 34.  The Court found, however, that Avid had a duty to supplement its earlier discovery responses and to produce documents from the reexamination proceedings.  For that reason, the Court ordered Avid, Fish & Rirchardson and Kirkland & Ellis to show cause as to why they should not be required to pay costs and fees incurred by Allflex in preparing and submitting its various Markman briefs, and in attending the Markman hearing.  To that end, all three must file their written response to show cause no later than October 20, 2009.

More information on Stays Pending Reexamination can be found at:  http://reexamcenter.com/2009/09/stays/.