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Affinity Labs of Texas, LLC., A Texas Limited Liability Company v. Nike

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA


May 13, 2011

AFFINITY LABS OF TEXAS, LLC., A TEXAS LIMITED LIABILITY COMPANY,
PLAINTIFF
v.
NIKE, INC., AN OREGON CORPORATION, AND APPLE INC., A CALIFORNIA CORPORATION,
DEFENDANTS AND COUNTERCLAIM-PLAINTIFFS.

The opinion of the court was delivered by: Claudia Wilken United States District Judge United States District Court

ORDER DENYING and DEFENDANTS' MOTION

Counterclaim-Defendant, TO STAY ACTION

United States District Court For the Northern District of California

(Docket No. 91)

present action pending inter partes reexamination of United States Defendants Apple, Inc. and Nike, Inc. move to stay the Patents No. 7,251,454 ('454 Patent) and No. 7,519,327 ('327 21 Patent).*fn1 Docket No. 91. Plaintiff Affinity Labs of Texas, LLC. 22 opposes the motion. The motion was taken on the papers. Having 23 considered all of the parties' submissions, the Court DENIES 24 Defendants' motion.

BACKGROUND

Affinity filed this lawsuit on February 16, 2010 in the Eastern District of Texas. On November 4, 2010, Defendants' 4 motion to transfer this action to the Northern District of 5 California was granted. Docket No. 68. On November 15, 2010, 6 Apple filed three requests for reexamination of the Patents-in-7 3 Suit. On March 22, 2011, Defendants jointly moved stay the 8 proceedings in this case. Docket No. 91.

LEGAL STANDARD

As the Federal Circuit has noted, "Courts have inherent power to manage their dockets and stay proceedings, including the 13 authority to order a stay pending conclusion of a PTO 14 reexamination." Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 15 (Fed. Cir. 1988) (citation omitted). In determining whether to 16 stay a case pending reexamination, a court may consider the 17 following factors: (1) whether discovery is complete and whether a 18 19 trial date has been set; (2) whether a stay would simplify the issues in question and trial of the case; and (3) whether a stay 21 would unduly prejudice or present a clear tactical disadvantage to 22 the non-moving party. In re Cygnus Telecomm. Tech., LLC Patent 23 Litig., 385 F. Supp. 2d 1022, 1023 (N.D. Cal. 2005). 24

DISCUSSION

The present case does not merit a stay of the proceedings.

The first factor for consideration--the stage of the litigation-- weighs in favor of a stay. The parties agree that, thus far, they have exchanged very little discovery. No trial date has been set, 1 2 and the parties have not yet appeared for a case management conference. 4

The second factor--whether a stay would simplify the issues presented in this action--is neutral. On one hand, staying the 6 case may narrow the issues in question and simplify the trial. As 7 noted in this Court's order denying Apple's motion for a stay in 8 the related action, Affinity Labs of Texas, LLC v. Apple, Inc., C 09-04436, April 29, 2010 Order Denying Stay, patents rarely emerge from inter partes reexaminations unchanged. Affinity argues that simplification of the issues is unlikely to result 13 from the reexamination proceeding because Nike did not join the 14 reexamination requests. However, Defendants' reply brief makes 15 clear that Nike is willing to be bound by the results of the 16 reexamination proceedings to the same extent as a party to those proceedings if the Court grants a stay of the proceedings. An 18 19 inter partes reexamination permits third-parties to participate in the reexamination process, and a participating defendant will be 21 estopped from asserting the invalidity of any claim of the 22 patents-in-suit on any ground which it raised or could have raised 23 during the inter partes proceeding. Nevertheless, even if Nike 24 were bound by the results of the reexamination, it is unlikely 25 that the reexamination proceeding will resolve all of the issues 26 27 regarding the two patents in question in this lawsuit. Thus, the Court would be left to adjudicate the remaining issues. Given the uncertainty about whether the reexamination will actually simplify 1 2 the issues in this case, this factor is neutral.

Lastly, the Court considers whether a stay in this action will unduly prejudice or create a clear tactical disadvantage to 5 the non-moving party, Affinity. This Court and others have 6 recognized that the average inter partes reexamination takes over 7 three years to complete. Affinity Labs of Texas, LLC v. Apple, 8 Inc., April 29, 2010 Order Denying Stay at 4; ESCO Corp. v 9 10 Berkeley Forge & Tool, Inc., 2009 U.S. Dist. LEXIS 94017, *9 n.3 (N.D. Cal.). Although the delay that inherently results from the reexamination process "does not constitute, by itself, undue 13 prejudice," Network Appliance Inc. v. Sun Microsystems, Inc., 2008 WL 2168917, *5 (N.D. Cal.), Apple waited nine months after Affinity filed the present suit before requesting the reexaminations. Defendants delayed their motion for a stay until March 22, 2011. These delays are similar to those in Affinity Labs of Texas, LLC v. Apple, Inc.. There Apple waited eight months after Affinity filed its suit before seeking reexamination 21 of the patents-in-suit, and then delayed seven weeks after the 22 requests were granted before moving to stay the proceeding. A 23 stay may prejudice Affinity's ability to enforce and license its 24 patents, and could lead to a loss of evidence. Thus, a stay in 25 this action is unwarranted.

CONCLUSION

Defendants' motion for a stay of the proceedings is denied.

Docket No. 91. The parties shall appear for a case management 4 conference on June 9, 2011 at 2 pm. 5

IT IS SO ORDERED.


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