In Oy Ajat, Ltd. v. Vatech America, Inc. [unpublished] (March 29, 2012), Judge Arpert (District of New Jersey) granted Defendant's motions to stay the case pending reexamination and also to supplement its invalidity contentions based on prior art in the reexamination request. Relying on Patent Local Rule 3-7, Defendant requested a supplement to its prior art disclosures, arguing:
the two new prior art references cited in [its] proposed supplemental contentions became truly material...to the issue of invalidity of the patents-in-suit...[for the first time] on August 23, 2011 when [Plaintiff]...made arguments in [the] reexamination proceedings to avoid invalidity findings by the assigned examiner. [Order at 18]
In a lengthy evaluation of the parties' arguments, the Court considered the prevailing "good cause" factors in evaluating the proposed supplements:
- the reason for the delay and whether a party has been diligent;
- the importance of what is to be excluded;
- the danger of unfair prejudice; and
- the availability of a continuance and the potential impact of a delay on judicial proceedings.
(Order at 36).
The Court ultimately granted the stay, noting that the reexamination had reached ACP (Action Closing Prosecution). With respect to Defendant's supplemental invalidity contentions, the Court explained:
the application itself comes approximately five (5) months after Plaintiff’s submissions to the USPTO, the Court finds that permitting Defendant to serve supplemental Invalidity Contentions at this time will not unduly prejudice Plaintiff given that Defendant presented the USPTO examiner and Plaintiff with the same additional prior art references in September 2011 ..., given that VAK’s recently filed Answer “asserted invalidity of the [patents-in-suit] on all art in the reexamination proceeding including the proposed supplemental prior art” ..., and given the imposition of a stay as set forth above. While noting that the parties may incur additional legal expenses, .... Fact discovery has yet to be completed and, although Markman briefs have been submitted, no hearing has been scheduled such that any additional discovery and/or revisions to Markman briefs may proceed when the stay is lifted. [Order at 40-41]
We earlier commented on a different result where the Court (NDCA) determined that a two month delay in seeking leave to supplement invalidity contentions precluded the request to supplement. In contrast, this New Jersey District Court decision was a bit surprising because there does not seem to be a sufficient justification by the Defendant in requesting a supplement when the relied on prior art was identified in a reexamination request filed months earlier. The Court did not really explain the first "good cause" factor - reason for the delay and diligence, but rather relied on lack of prejudice to the Plaintiff. See Order at 37-41. Defendant's main argument to explain away the delay was that Plaintiff
made arguments in [the] reexamination proceedings to avoid invalidity findings by the assigned examiner. [Order at 18]
This justification seems a bit weak. The art was known at least as of the time of the reexamination filing. Plaintiff's arguments in reexamination don't really explain why the request to supplement was delayed for four to five months. The prior art was either relevant, or it wasn't relevant, despite Plaintiff's reexamination arguments.
Takeaways - this is a bit perplexing. Defendant could have neutralized the delay issue if it would have filed a request to supplement its contentions when it was was drafting the reexamination request, or when it ultimately filed the reexamination request. This seemed to be a close call and the Court's decision is understandable - let the PTO decide the validity issues by imposing a stay. But if the PTO and BPAI are to decide the validity issues, why was it important to allow the supplement when defendant's delay/diligence justification was so thin?