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Lifescan, Inc. and Lifescan Scotland, Ltd v. Shasta Technologies

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


March 19, 2013

LIFESCAN, INC. AND LIFESCAN SCOTLAND, LTD., PLAINTIFFS,
v.
SHASTA TECHNOLOGIES, LLC, INSTACARE CORP., PHARMATECH SOLUTIONS, INC., AND CONDUCTIVE TECHNOLOGIES, INC., DEFENDANTS.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO STAY [Re: Docket No. 175]

Presently before the court is Defendants Shasta Technologies, LLC ("Shasta"), Instacare Corp. ("Instacare"), Pharmatech Solutions, Inc. ("Pharmatech"), and Conductive Technologies, 18 Inc.'s ("Conductive") (collectively, "Defendants") Motion to Stay Pending Reexamination of U.S 19 Patent Nos. 6,241,862 ("the '862 patent") and 5,708,247 ("the '247 patent"). The court found this 20 matter suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and 21 previously vacated the hearing. Having fully reviewed the parties' briefing, and for the reasons set 22 forth below, the court GRANTS in part and DENIES in part Defendants' Motion to Stay. 23

I.BACKGROUND

The facts of this case are well known to the parties, and sufficiently recited in the court's 25 prior orders. Therefore, the court repeats the facts only to the extent they are applicable to the 26 instant motion. Plaintiff LifeScan Scotland, Ltd. filed this suit on September 9, 2011, alleging 27 infringement of its U.S. Patent Nos. 6,241,862 ("the '862 patent") and 5,708,247 ("the '247 28 patent").

Dkt. No. 1. Nearly a year later, LifeScan Scotland amended the complaint to add 2 LifeScan, Inc. as an additional Plaintiff. Dkt. No. 134. On September 12, 2012, Pharmatech filed 3 a request for ex parte reexamination of the '247 and the '862 patents, and the next day filed a 4 request for ex parte reexamination of Plaintiffs' U.S. Patent No. 5,951,836, which is related to the 5 November 19, 2012, finding substantial new questions of patentability with respect to multiple 7 claims in these patents, including all but one of these patents' claims at issue in this litigation. See 8 (Dkt. No. 169), and on December 10, 2012, Plaintiffs filed their amended complaint, adding a 10 claim for indirect infringement of their U.S. Patent No. 7,250,105 ("the '105 patent") (Dkt. No. 170). Defendants now seek a stay pending resolution of the reexamination proceedings.

'247 and '862 patents. The Patent and Trademark Office ("PTO") granted these requests on 6 Dkt. No. 175. On December 5, 2012, the court granted Plaintiffs leave to amend their complaint 9 14 a patent on the basis of any prior art" consisting of patents or printed publications. 35 U.S.C. § 302 15 (amended 2011). "The stay of pending litigation to enable PTO review of contested patents was 16 one of the specified purposes of the reexamination legislation." Patlex Corp. v. Mossinghoff, 758 17 F.2d 594, 606, aff'd on reh 'g, 771 F.2d 480 (Fed. Cir. 1985).

"Patent validity is a commonly 18 asserted defense in litigation and courts are cognizant of Congress's intention of utilizing the 19 GmBH and Erbe U.S.A., 271 F.Supp.2d 64, 78 (D.D.C. 2002) (citation omitted). 21

II.LEGAL STANDARD

"Any person at any time may file a request for reexamination by the [PTO] of any claim of PTO's specialized expertise to reduce costly and timely litigation." Canady v. Erbe Elektromedizin 20 A stay is within the discretion of the court. See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) ("Courts have inherent power to manage their dockets and stay 23 proceedings, including the authority to order a stay pending conclusion of a PTO reexamination."). 24

A court may grant a motion to stay "in order to avoid inconsistent results, narrow the issues, obtain 25 guidance from the PTO, or simply to avoid the needless waste of judicial resources, especially if 26 the evidence suggests that the patents-in-suit will not survive reexamination." MercExchange, 27 L.L.C. v. eBay, Inc., 500 F.Supp.2d 556, 563 (E.D. Va. 2007). In this district, "there is a liberal 28 policy in favor of granting motions to stay proceedings pending the outcome of USPTO 2 reexamination or reissuance proceedings," (ASCII Corp. v. STD Entm't USA, 844 F. Supp. 1378, 3 1381 (N.D. Cal. 1994)), though some courts have begun to rethink that policy in recent years (see, 4 e.g., Network Appliance Inc. v. Sun Microsystems Inc., No. 07-CV-06053, 2008 WL 2168917, at 5 Courts consider three main factors in determining whether to stay a case pending 7 reexamination: "(1) whether discovery is complete and whether a trial date has been set; (2) 8 whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay 9 would unduly prejudice or present a clear tactical disadvantage to the non-moving party." Telemac 10 Therapeutics, Inc. v. SciMed Life Sys. Inc., 33 U.S.P.Q.2d 2022, 2023 (N.D. Cal. 1995). This 15 element of the stay analysis focuses on the stage of litigation proceedings, not the length of time 16 that has passed since the filing of the case. SeeConvergence Tech. (USA), LLC v. Microloops 17 Corp., No. 5:10-CV-02051, 2012 WL 1232187, at *4 (N.D. Cal. April 12, 2012) (finding that a 18 case that was over two years old had not reached the "point of no return" because, though 19 discovery was ongoing, the court had not yet heard claim construction and no trial date had been 20 set). The distinction is an important one here, where the case was filed more than a year ago, but 21 the parties have not progressed to the later stages of litigation. In this case, discovery is underway 22 but only moderate progress has been made-no depositions have been taken and document 23 production is ongoing. The court has only recently heard the parties' arguments as to Plaintiffs' 24 Motion for Preliminary Injunction. See Dkt. No. 176. The parties have filed an opening claim 25 construction brief, but the court has not held a tutorial or a claim construction hearing. Close of 26 discovery is three months away, close of expert discovery is seven months away, and the *3 (N.D.Cal. May 23, 2008)). 6

Corp. v. Teledigital, Inc., 450 F.Supp.2d 1107, 1111 (N.D. Cal. 2006) (citation omitted).

III.DISCUSSION

a.Stage of Proceedings

The early stage of a litigation weighs in favor of a stay pending reexamination. See Target dispositive motion filing deadline is ten months away. No trial date has been set. Given the status 2 of the litigation, the court finds that this first factor weighs moderately in favor of a stay. 3

claims are cancelled or, if the claims survive, facilitate trial by providing the court with expert 6 opinion of the PTO and clarifying the scope of the claims." Target Therapeutics, 33 U.S.P.Q.2d at 7

b.Simplification of Issues

"[W]aiting for the outcome of the reexamination could eliminate the need for trial if the

2023. The pending reexaminations deal directly with two of the patents-in-suit and nearly all of 8 the claims at issue. However, the reexamination does not cover the '105 patent, which is major 9 component of this litigation and the subject of Plaintiffs' Motion for Preliminary Injunction. While 10 the court certainly stands to benefit from the PTO's guidance as to the scope and validity of the "purpose of the reexamination procedure is to eliminate trial of that issue (when the claim is 14 cancelled) or to facilitate trial of that issue by providing the district court with the expert view of 15 the PTO (when a claim survives the reexamination proceeding), and so finds that this factor weighs 16 heavily in favor of a stay as to the '247 and '862 patents, but weighs against a stay as to the '105 17 patent. AT&T Intellectual Prop. v. Tivo, Inc., 774 F. Supp. 2d 1049, 1051 (N.D. Cal. 2011) (citing 18 Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983). 19

21 parte reexamination process can take more than two years to complete, and because they stand to 22 lose significant market share and suffer injury to their goodwill in the interim. The delay inherent 23 to the reexamination process does not generally, by itself, constitute undue prejudice. Telemac 24 Corp. v. Teledigital, Inc., 450 F.Supp.2d 1107, 1111 (N.D. Cal. 2006). However, Plaintiffs here do 25 not rely on delay alone. Rather, they argue that because Defendants' entire business is based on 26 selling a nearly identical copy of Plaintiffs' test strips for use only in Plaintiffs' meters, the 27 competitive injury during the litigation, let alone the pendency of the reexamination, would be 28 '247 and the '862 patents, it is not convinced that reexamination would provide any substantial benefit to the evaluation of the issues related to the '105 patent. The court recognizes that a 13

c.Undue Prejudice

Plaintiffs argue that they will be unduly prejudiced by a stay in this case because the ex

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