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DJO, LLC v. VitalWear

October 14, 2010

DJO, LLC, A DELAWARE CORPORATION, PLAINTIFF,
v.
VITALWEAR, INC., A CALIFORNIA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge

ORDER GRANTING MOTION TO STAY

I. FACTUAL BACKGROUND

DJO and VitalWear are competitors in the thermal therapy business. On December 22, 2009, DJO filed an infringement action against VitalWear, alleging that VitalWear's products infringe DJO's United States Patent No. 5,865,841 (the "'841 patent") and United States Patent No. 5, 980, 561 (the "'561 patent"). On July 6, 2010, VitalWear moved to stay discovery in this action pending the results of a reexamination of the validity of the '841 and '561 patents by the United States Patent Office ("PTO"). That reexamination is currently underway.

II. LEGAL STANDARD

A court has the inherent power to stay a patent infringement action pending conclusion of PTO reexamination proceedings. Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988). "The decision whether to grant or deny a motion to stay proceedings pending PTO reexamination rests within the sound discretion of the court." SKF Condition Monitoring, Inc. v. SAT Corp., No. 07CV1116, 2008 WL 706851 at *6 (S.D.Cal February 27, 2008). There is a "liberal policy" in favor of granting motions to stay. ASCII Corp. v. STD Entertainment USA, Inc., 844 F.Supp. 1378, 1381 (N.D.Cal. 1994).

III. DISCUSSION

Courts consider three factors when evaluating the propriety of a stay: "(1) the stage of litigation, i.e., whether discovery is almost complete and whether a trial date has been set; (2) whether a stay would cause undue prejudice or present a clear disadvantage to the non-moving party; and (3) whether a stay will simplify the issues in question and trial of the case." SKF Condition Monitoring, 2008 WL 706851 at *6 (citing Xerox Corp. v. 3Com Corp., 69 F.Supp.2d 404, 406 (W.D.N.Y. 1999)).

A. The Stage of Litigation

This case is young. No scheduling order has been entered, no discovery has been taken, and no substantive work has been performed by the parties or the Court. DJO agrees the case is in an early stage of litigation, but claims "every day of delay in resolving this suit results in further damage to DJO's cold therapy business and market share." (Doc. No. 31, pp. 17--18.) The Court discounts this claim, however, because DJO has been aware of VitalWear's allegedly infringing products since 2004, but did not file an infringement suit until December 2009. The stage of litigation in this case weighs in favor of granting the stay.

B. Undue Prejudice to DJO

DJO alleges it would be prejudiced by a stay because it would be unable to enforce its patents against VitalWear or other potential infringers during the stay, and it would suffer a permanent loss of market share.

The Court disagrees. As VitalWear points out, DJO did a billion dollars in sales in 2009, and only 13 million came from the product incorporating the '841 and '561 patents. From that 13 million, DJO has not alleged a significant loss.

Additionally, if DJO is eventually successful in its infringement suit, VitalWear will owe monetary damages that reflect DJO's losses, thus eliminating any prejudice. See Emhart Indus., Inc. v. Sankyo Seiki Mfg., No. 85C7565, 1987 WL 6314 at *2 (N.D. Ill. Feb. 2, 1987) (granting stay where money damages would be sufficient to compensate patentee for any alleged infringement during stay).

Finally, even if waiting for the reexamination to conclude will delay the prosecution of DJO's infringement claims, "the delay inherent in the reexamination process 'does not constitute, by itself, undue prejudice.'" SKF Condition Monitoring 2008 WL 706851 at *6 (citing Photoflex Products, Inc. v. ...


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