Parties Terminate CBM Before They Settle Dispute to Avoid PTAB Decision

In January of 2013, EZ Shield , Inc sued Harland Clarke Corp. for infringement of U.S. Pat. 8,346,637.  The ‘637 patent relates to a system for reimbursement of consumers  for losses incurred for specific forms of check fraud.  In April of that year Harland Clarke filed a petition for covered business method patent review (CBM2013-00016).  In July, EZ Shield (the Patent Owner) filed its Preliminary Response.  The Preliminary Response details how Harland Clarke (Petitioner) was allegedly a former licensee of the patent and a customer of EZ Shield for more than two years.  The Preliminary Response alleges that Harland Clarke breached its agreement and offered a competing product for sale.  EZ Shield even included a table detailing the alleged patent infringement by Harland Clarke’s competing product.

Apparently, the parties were discussing settlement and by late September they decided to contact the Board to discuss the possibility of having it delay its decision on institution of the CBM petition.  On September 27, 2013, the parties conducted a telephone conference call with the Board to discuss the possibility of delaying or suspending the issuance of the Board’s decision on whether to institute review.  On September 30, 2013, the Board denied the joint request to delay or suspend, citing its need to provide a just, speedy and inexpensive resolution of every proceeding (37 C.F.R. § 42.1(b).)  The Board did authorize the parties to file a joint motion to terminate the proceeding with a true copy of the parties’ settlement agreement in connection with the termination of the proceeding as required by 35 U.S.C. § 327(b) and 37 C.F.R. § 42.74(b).

On October 4, 2013, the parties filed a joint motion to terminate with a copy of their Settlement Agreement (Exhibit 2016) under which the parties agreed to terminate the CBM without prejudice to Harland Clarke “in the event that the Parties are unable thereafter to negotiate a mutually agreeable settlement of [the litigation].”  The Board granted the motion on October 7, 2013, and terminated the CBM.

Of course, now that the CBM is terminated we will never know if the Board would have instituted trial or not based on the documents of record.  The Settlement Agreement states that the parties have not yet settled their dispute and that the District Court agreed to stay the litigation until November 22, 2013, so it will be interesting to see whether the parties settle by then.  Obviously, settlement must be imminent or Harland Clarke would not have agreed to termination of the CBM, since it will cost at least another 6 months and an additional PTO filing fee to re-file the CBM should things not work out.  Regardless, this matter demonstrates one advantage of AIA patent trials which allow for early termination by joint motion of the parties, as opposed to reexamination which does not offer that feature.

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