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Avago Technologies U.S. Inc., et al v. Iptronics

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


February 15, 2013

AVAGO TECHNOLOGIES U.S. INC., ET AL., PLAINTIFFS,
v.
IPTRONICS, INC., ET AL.
DEFENDANTS.

ORDER GRANTING DEFENDANTS' MOTION TO STAY; DENYING DEFENDANTS' MOTION TO DISMISS AND PLAINTIFFS' MOTION TO STRIKE AS MOOT [Re: Docket No. 276, 313, 324]

United States District Court For the Northern District of California

Presently before the court are Defendants IPtronics, Inc. and IPtronics A/S's (collectively "Defendants") Motion to Stay and Motion to Dismiss Plaintiffs' Second Amended and 20 Supplemental Complaint, and Plaintiffs Avago Technologies U.S. Inc., Avago Technologies 21 General IP (Singapore) PTE. Ltd., Avago Technologies Trading Ltd., Avago Technologies 22 International Sales, PTE. Ltd., and Avago Technologies Fiber IP (Singapore) PTE. Ltd.'s 23 (collectively, "Plaintiffs") Motion to Strike Defendants' First Amended Answer and Counterclaims 24 to Second Amended and Supplemental Complaint. The court found these matters suitable for 25 decision without oral argument pursuant to Civil Local Rule 7-1(b) and previously vacated the 26 hearing. The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Having fully 27 reviewed the parties' briefing, and for the foregoing reasons, the court GRANTS Defendants' 28

Motion to Stay, and DENIES Defendants' Motion to Dismiss and Plaintiffs' Motion to Strike as 2 Moot. 3 5 lawsuit on June 29, 2010, alleging infringement of two of its U.S. patents: U.S. Patent Nos. 6 5,359,447 ("the '447 patent") and 6,947,456 ("the '456 patent"). Dkt. No. 1. Defendants 7 counterclaimed, seeking a declaratory judgment of invalidity and noninfringement of both patents. 8

I.BACKGROUND

Plaintiff Avago Technologies Fiber IP (Singapore) Pte. Ltd. ("Avago Fiber IP") filed this Dkt. No. 23. Later, on May 26, 2011, Avago Fiber IP executed a series of license agreements 9 through which some of its rights to the patents-in-suit were purportedly transferred to several 10 affiliated entities: Avago Technologies General IP (Singapore) Pte. Ltd., Avago Technologies (collectively, "the Avago Licensees.") 13

Complaint ("SASC"), joining the Avago Licensees and adding five business tort claims. Dkt. No. 16 172. While this motion was pending, the court held a claim construction hearing, and issued its 17 claim construction order. Dkt. No. 218, 258. With leave of the court, Avago Fiber IP filed its 18 SASC on September 18, 2012, joining the Avago Licensees as plaintiffs, and adding five business 19 tort claims for: (1) false advertising; (2) misappropriation of trade secrets; (3) violation of 20 California Business and Professions Code 17200; (4) intentional interference with contractual 21 relations; and (5) unjust enrichment. Dkt. Nos. 259, 268. 22 23 complaint at the International Trade Commission ("ITC") pursuant to 19 U.S.C. § 1337, alleging 24 infringement of the '456 patent by IPTronics Inc., IPtronics A/S, and several other entities. See In 25 re Matter of Certain Optoelectronic Devices for Fiber OIptic Commc'ns, Inv. No. 337-TA-860. 26 The complaint also alleged infringement of Avago's U.S. Patent No. 5,596,595 ("the '595 patent) 27 against several entities, but not against IPTronics. The ITC instituted an investigation, naming 28 Trading Ltd., Avago Technologies International Sales Pte. Ltd., and Avago Technologies U.S. Inc. 12 On June 17, 2011 Avago Fiber IP moved for leave to file a Second Amended Complaint ("SAC"), and on October 21, 2011, it moved to file a Second Amended and Supplemental 15 Less than one week later, Avago Fiber IP, Avago General IP, and Avago U.S. filed a IPtronics as a respondent. On December 6, 2012, Administrative Law Judge ("ALF") Theodore R. 2 Essex issued an order setting a target date of sixteen months, i.e., February 28, 2014. Decl. of Ary 3 Chang ("Chang Decl."), Ex. F. 4

II.LEGAL STANDARD

When parallel actions are proceeding before a district court and the International Trade

Commission, 28 U.S.C. § 1659 requires the district court to stay "any claim that involves the same 7 issues involved in the proceeding before the Commission" until the "determination of the 8 Commission becomes final" upon request by "a party to a civil action that is also a respondent in 9 the proceedings before the [ITC]." 10 District courts also have inherent authority to stay proceedings before them. "The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the 12 causes on its docket with economy of time and effort for itself, for counsel, and for litigants." 13

Landis v. No. Am. Co., 299 U.S. 248, 254 (1936). This discretionary power can extend both to 14 patent claims and non-patent claims that are related to patent claims asserted in a parallel action. 15 22, 2011) ("Congress explicitly intended that district courts should consider using their 17 discretionary power to stay patent infringement litigation that is related to, but not duplicative of, 18 an action before the ITC"); Epistar Corp. v. Philips Lumileds Lighting Co., LLC, No. 07-CV-5194, 19 2008 WL 913321 *3 (N.D Cal. Apr. 2, 2008) (staying a breach of contract claim because it 20 overlapped with plaintiff's infringement claim). In determining whether to grant a discretionary 21 stay, the district court must consider "the possible damage which may result from the granting of a 22 stay, the hardship or inequity which a party may suffer in being required to go forward, and the 23 orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and 24 questions of law which could be expected to result from a stay." CMAX, Inc. v. Hall, 300 F.2d 25 265, 268 (9th Cir. 1962). 26 27 28

See Zenith Elecs., LLC v. Sony Corp., No. 11-CV-02439, 2011 WL 2982377 *3-4 (N.D. Cal. July 16 is GRANTED as to those claims. The court is left to consider whether to grant a discretionary stay 4 as to the '447 patent and the business tort claims. 5 7 up to thirty-three months, because the patent-in-suit would expire during this delay, and because 8

III.DISCUSSION

Because the '456 patent claims are covered by the ITC Action, Defendants' Motion to Stay

a.Possible Harm in Granting a Stay

Plaintiffs argue that they will suffer harm should a stay issue because such a stay could last Defendants may not be able to pay a damage award should this case be delayed. Plaintiffs further 9 argue that they should not be required suffer such harm because the '447 patent and the business 10 tort claims are not related to the ITC proceedings. 12 and as such the stay will likely only last about twelve months. Furthermore the Defendants argue 13 that Plaintiffs' alleged harm of the expiration of the patent-in-suit is a red herring because the 14 patent-in-suit will expire even before the present case, as scheduled, reaches trial. As to the 15 relationship between the present claims and those in the ITC investigation, Defendants admit that 16 the '447 patent is not at issue in the ITC investigation, but points out that that investigation 17 concerns the exact same device as at issue here, that the '447 patent and the '595 patent (at issue in 18 the ITC investigation) share two inventors, that the patents at issue both in this case and in the ITC 19 investigation are commonly owned, which may raise standing and licensing issues, and that 20

Plaintiffs added the business tort claims to this case because information discovered in the present 21 case provided the foundation for those claims. Defendants further argue that the close timing of 22 the filing of Plaintiffs' SASC and Plaintiffs' filing of the ITC investigation suggests that Plaintiffs 23 added the business tort claims to this case as a hedge against the court's staying the action in its 24 entirety. As to the Defendants' ability to pay a damages award, Defendants suggest that Plaintiffs' 25 argument is based on stale information. 26

Though this litigation is already well underway, the harm imposed by a stay to Plaintiffs is 27 minimal and largely of their own making. Plaintiffs chose to file an ITC investigation fairly late in 28 Defendants respond that they only seek a stay until the ALJ issues his initial determination, this litigation knowing that in so doing, they would spread Defendants' financial resources even 2 thinner and afford Defendants an opportunity to request both a mandatory and a discretionary stay 3 from the court. That Defendants pursued this option does not constitute harm to Plaintiffs. 4

Defendants have demonstrated that the '447 claims and the business tort claims are at least 5 somewhat related to the claims at issue in the ITC investigation. Plaintiffs have failed to identify 6 any specific continuing severe harm it may suffer should a stay issue that could not ultimately be 7 rectified by a damages award. Even if such harm did exist, Defendants have attempted to minimize 8 it by requesting a discretionary stay only until the ITC issues its initial determination, rather than 9 demanding a stay until the final resolution of that investigation. Therefore, the court finds that this 10 factor weighs slightly in favor of a stay.

13 stay because of the potential for significantly duplicative discovery and because, as a small 14 company, Defendants will be overwhelmed should they be required to defend themselves both in 15 this court and in the ITC simultaneously. Defendants request a stay only until the ITC issues its 16 initial determination to allow them to focus their limited resources during "the period of the most 17 intense effort at the ITC." Dkt. No. 334 at 3:18-19. The court notes the aggressive pace and 18 demands of an ITC investigation, and finds that under the circumstances presented here, 19

Defendants would face a hardship without a stay. Therefore, this factor weighs in favor of a stay. 20

22 allowing this litigation to proceed on two tracks, or waiting twelve months to enable this litigation 23 to go forward on one. In the event the court does not issue a stay, the present case will proceed to 24 trial on the '447 patent and the business tort claims. Later, after the ITC investigation concludes, 25 litigation in this court may be renewed as to the '456 patent. A dual schedule such as the one 26 presented here may require duplicative discovery, two rounds of expert reports, two rounds of 27 dispositive motions, and ultimately, two trials. Because the ITC investigation relates to the present 28

b.Possible Hardship to Defendants without a Stay

Defendants argue that they would suffer considerable hardship should this court not issue a

c.Judicial Economy

Because the '456 patent claims are stayed as of right, the court faces the decision of

20130215

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