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Pragmatus Telecom, LLC v. Netgear


May 13, 2013


The opinion of the court was delivered by: Saundra Brown Armstrong United States District Judge

PENDING THE RESOLUTION OF THE VALIDITY OF THE ORDER GRANTING DEFENDANT'S MOTION TO STAY PATENTS-IN-SUIT 10 against NETGEAR, Inc. ("NETGEAR") alleging infringement of U.S. Patent Nos. 6,311,231 ("'231 Patent"), 6,668,286 ("'286 Patent") and 7,159,043 ("'143 Patent"). The 16 parties are presently before the Court on NETGEAR's Motion to Stay Pending Resolution 17 of the Validity of the Patents-in-Suit. Dkt. 19. Having read and considered the papers filed 18 in connection with this matter and being fully informed, the Court hereby GRANTS the 19 motion and stays the action. The Court, in its discretion, finds this matter suitable for 20 resolution without oral argument. See Fed. R. Civ. P. 78(b); N.D. Cal. Civ. L.R. 7-1(b). 21


23 pending reexamination proceedings before the United States Patent and Trademark Office 24 ("PTO") and/or other federal district court lawsuits. More specifically, on December 12, 25 2012, the PTO issued an Order on a third party request for inter partes reexamination of the 26 '286 Patent which rejected Claims 9-10, 16-17, 21-25 and 28. See Wang Decl. ¶¶ 5-8, Exs. 27 C & D, Dkt. 20-3, 20-4. As for the '231 Patent, which is the subject of an ex parte 28 reexamination, the PTO found that there is a "substantial new question of patentability" for Defendant. Docket 19

Pragmatus Telecom, LLC ("Pragmatus") brings this patent infringement action Pragmatus is the owner of the three patents-in-suit, all of which are being litigated in Claims 9-12. See id. Ex. E, Dkt. 20-5.1 The request for inter partes reexamination of '043 2 patent was denied on November 26, 2012. See Pl.'s Opp'n at 2, Dkt. 24. In addition to the 3

PTO actions, all three of the patents-in-suit are at issue in pending lawsuits involving 4 Pragmatus in the District of Delaware and the Eastern District of Texas. See LivePerson 5 Inc. v. Pragmatus Telecom LLC, No. 1:2012-cv-147 (D. Del.); Pragmatus Telecom LLC v. 6 Neiman Marcus Group, Inc., No. 6:2011-cv-620 (E.D. Tex.). The validity of the patents-7 in-suit is at issue in those cases. See Wang Decl. ¶¶ 35-40. 8 On December 6, 2012, Pragmatus filed the instant patent infringement action in this Court. Pragmatus does not allege that any of NETGEAR's products infringe the patents-in-10 suit. Rather, Pragmatus claims that the software used on NETGEAR's website to facilitate 11 a "click-to-chat" feature is infringing. See id. Ex. B at 1, Dkt. 20-2. NETGEAR does not 12 own and did not develop the click-to-chat software; rather it licenses the software from a 13 third party for approximately $7,000 per year. See Sze Decl. ¶ 6, Dkt. 21. Nonetheless, 14 Pragmatus has demanded a $400,000 licensing fee from Pragmatus. See Wang Decl. Ex. B 15 at 2. 16 17 resolution of the reexamination proceedings. Pragmatus opposes the motion. The matter 18 has been fully briefed and is ripe for adjudication. 19


of a patent. Amado v. Microsoft Corp., 517 F.3d 1353, 1358 (Fed. Cir. 2008). In 22 determining whether to grant a stay pending reexamination, courts consider: (1) whether 23 discovery is complete and whether a trial date has been set; (2) whether a stay will simplify 24 the issues in question and trial of the case; and (3) whether a stay would unduly prejudice 25 or present a clear tactical disadvantage to the non-moving party. Spectros Corp. v. Thermo 26 A third party requestor may participate in an inter partes reexamination, but not in an ex parte reexamination. 35 U.S.C. §§ 305, 314(b)(2). NETGEAR did not initiate the 28 reexamination proceedings involving the patents-in-suit.

NETGEAR now moves the Court for an Order staying the instant action pending

A district court has the discretion to stay judicial proceedings pending reexamination Fisher Scientific, Inc., No. C 09-1996 SBA, 2010 WL 338093, at *2 (N.D. Cal. Jan. 20,


outcome of the PTO reexamination or reissuance proceedings, especially in cases that are 7 still in the initial stages of litigation and where there has been little or no discovery. 8 Yodlee, Inc. v. Ablaise Ltd., No. C 06-7222 SBA, 2009 WL 112857, at *2 (N.D. Cal. Jan. 9 2010).


There is a liberal policy in favor of granting motions to stay proceedings pending the 16, 2009). Here, the action was filed only a few months ago on December 6, 2012, and no 10 trial date or other pretrial deadlines have been established. 11

contends that the reexamination proceedings are in their "infancy," and therefore, the Court 13 must, in turn, "balance the stage of the reexamination proceedings against the stage of the 14 patent litigation." Opp'n at 6, Dkt. 24. In this Court's view, however, it is the stage of the 15 instant action, not the reexamination, that is germane to whether a stay is appropriate. See 16 AT & T Intellectual Property I v. Tivo, Inc., 774 F. Supp. 2d 1049, 1052 (N.D. Cal. 2011); 17 accord Sonics, Inc. v. Arteris, Inc., No. C 11-5311 SBA, 2013 WL 503091, at *1 (N.D. Cal. 18 Feb. 8, 2013); Ho Keung Tse v. Apple, Inc., No. C 06-6573 SBA, at *2 (N.D. Cal. May 5, 19 2010); Esco Corp. v. Berkeley Forge & Tool, Inc., No. C 09-1635 SBA, 2009 WL 20 3078463, at *2 (N.D. Cal. Sept. 28, 2009); Yodlee, 2009 WL 112857, at *3. The Court 21 thus finds that the fact that the stay is being sought early in the litigation militates in favor 22 of a stay. 23 25 issues in question and trial of the case." AT & T Intellectual Property I, 774 F. Supp. 2d at 26 1052; see also Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983) ("[o]ne 27 purpose of the reexamination procedure is to eliminate trial of that issue (when the claim is 28 Pragmatus does not dispute that this case is in its embryonic stage, but nonetheless B.SIMPLIFICATION OF THE ISSUES AND TRIAL

"The second factor examines whether a stay pending reexamination will simplify the canceled) or to facilitate trial of that issue by providing the district court with the expert 2 view of the PTO (when a claim survives the reexamination proceeding)"). 3

4 reexamined, and that the reexamination of the '231 and '286 patents will not address all of 5 the defenses NETGEAR intends to assert in this action. However, a stay request is not 6 contingent upon the reexamination proceeding being coterminous and resolving every 7 claim and issue in this action. Rather, the salient question is whether the reexamination 8 will aid the Court or otherwise streamline the litigation. See Sonics, 2013 WL 503091, at 9

Pragmatus argues that a stay is not warranted because the '043 patent is not being *2 ("should the PTO cancel any of the asserted claims of the patents-in-reexamination or 10 narrow any of the asserted claims in the patents-in-reexamination, the scope of this 11 litigation may be significantly simplified."); AT & T Intellectual Property I, 774 F. Supp. 12

2d at 1053 (rejecting argument that a stay was inappropriate because the reexaminations are 13 unlikely to cancel or modify all of the patent claims at issue). 14

15 that NETGEAR "has not agreed to be bound by the outcome of the reexamination of either 16 the '231 patent or the '286 patent." Opp'n at 7. The import of Pragmatus's contention is 17 unclear. A defendant is not estopped from challenging patent validity in a future civil 18 action following an ex parte reexamination. See Xilnx, Inc. v. Invention Inv. Fund I LP, 19 No. 5:11-cv-00671 EJD, 2012 WL 6003311, at *3 n.3 (N.D. Cal. Nov. 30, 2012) (citing 20 cases). Nor is there any estoppel in an inter partes reexamination as to a party, such as 21 NETGEAR, which did not request the reexamination. See 35 U.S.C. § 315(e)(2). 22

Accordingly, whether or not NETGEAR seeks to reassert arguments rejected by the PTO 23 during the reexamination proceedings is inapposite. 24 26 tactical disadvantage to the non-moving party. See Sonics, 2013 WL 503091, at *1. 27

Pragmatus complains that a stay would force it "to litigate this case at least twice: once 28 against defendants who have not sought a stay and yet again against those defendants who Alternatively, Pragmatus contends that there is no benefit to staying the action given


The third factor examines whether a stay would unduly prejudice or present a clear have sought a stay once the reexamination process is resolved." Pl.'s Opp'n at 8. That 2 argument strains credulity given that Pragmatus has commenced close to fifty lawsuits in 3 district courts throughout the country. Wang Decl. Ex. I, Dkt. 20-9. Moreover, any burden 4 resulting from having to litigate the patents-in-suit is attributable to Pragmatus, which has 5 chosen to litigate the same patents in multiple judicial districts. 6

7 on the '043 Patent, which is not being reexamined by the PTO. See Pl.'s Opp'n at 8. 8

Pragmatus also asserts that a stay would unfairly delay resolution of its claims based

However, the '043 Patent involves technology and claim terms that are similar the other 9 two patents-in-suit. See Wang Decl. ¶ 18. In addition, Pragmatus cannot legitimately 10 claim any prejudice resulting from a stay. Pragmatus only seeks damages, not injunctive 11 relief. As such, any delay resulting from a stay will not result in undue prejudice. See 12

Pragmatus AV, LLC v. Facebook, Inc., No. C 11-0494 EJD, 2011 WL 4635512, at *3 13 (N.D. Cal. Oct. 5, 2011) (finding that a stay pending reexamination would not prejudice 14 plaintiff, which, as a non-practicing entity, could not seek injunctive relief). 15


favor of a stay. Accordingly,

The Court finds that all of the factors germane to the Court's decision militate in


1. Defendant's Motion to Stay Pending Resolution of the Validity of the Patents-in-Suit is GRANTED. This action is STAYED pending final exhaustion of all 21 pending reexamination proceedings. 22

23 of the reexamination proceedings six months from the date this Order is filed, and every six 24 months thereafter. The failure to do may result in the imposition of sanctions, up to and 25 including the dismissal of the action. 26

27 proceedings, including appeals, the parties shall provide notice of the same. Said notice 28

2. The parties shall submit a joint status report apprising the court of the status

3. Within one (1) week following final exhaustion of all pending reexamination shall request the Court to reopen the action and to schedule a Case Management


4. The Clerk shall ADMINSTRATIVELY CLOSE the action.

5. All pending docket items shall be terminated.



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