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Tas Energy, Inc. v. San Diego Gas & Electric Co.

United States District Court, S.D. California

February 26, 2014

TAS ENERGY, INC., a Delaware corporation, Plaintiff,
v.
SAN DIEGO GAS & ELECTRIC CO., a California corporation; SEMPRA ENERGY, a California. corporation; and PALOMAR ENERGY, LLC, a Delaware limited liability company, Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO STAY PENDING INTER PARTES REVIEW [Dkt. 57.].

GONZALO P. CURIEL, District Judge.

Pending before the Court is Defendant San Diego Gas & Electric Co.'s ("SDG&E") motion to stay the case pending inter partes review. (Dkt. No. 57.) Plaintiff TAS Energy, Inc. ("TAS") filed a partial opposition on January 31, 2014. (Dkt. No. 60.) On February 14, 2014, Defendant filed a reply. (Dkt. No. 61.) The motion is submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1). Based on the reasoning below, the Court GRANTS Defendant's motion to stay pending inter partes review.

Background

On November 16, 2012, the original patent infringement complaint was filed. (Dkt. No. 1.) After the Court granted Plaintiff's motion for leave to file an amended complaint, on August 26, 2013, Plaintiff filed an amended complaint alleging violations of four related patents (Dkt. No. 48, FAC.) Plaintiff is a "global leader in industrial temperature regulation, such as systems for cooling gas turbine-driven power plants." (Id. ¶ 7.) Specifically, Plaintiff has developed technology that cools the inlet air of gas turbines used to generate electricity and by cooling turbine inlet air, the efficiency of the gas turbines can be increased. (Id.) Plaintiff's research and development has led to multiple patents. (Id.) At issue in this case are U.S. Patent Nos. 6, 318, 065 (the 065 patent); 6, 470, 686 (the 686 patent); 6, 769, 258 (the 258 patent); and RE44, 079 (the 079 patent). (Id.)

Defendant owns and operates the Palomar Energy Center ("PEC") near Escondido, California. (Id. ¶ 9.) In 2006, the PEC became operational and requested bids from contractors to provide a better cooling system. (Id.) Multiple parties, including TAS Energy and General Electric Co. ("GE"), provided confidential bids. (Id. ¶ 10.) TAS's bid included notification that the cooling system was "MANUFACTURED UNDER ONE OR MORE OF THE FOLLOWING U.S. PATENTS: 6318065, 6470686, 6769258." (Id. ¶ 11.) Defendant selected General Electric Co. to build and install a new cooling system at the PEC. (Id. ¶ 12.) Plaintiff alleges that this new cooling system uses technology protected by TAS's patents. (Id.)

On November 18, 2013, GE filed petitions for Inter Partes Review ("IPR") of the three patents asserted in the original complaint with the U.S. Patent and Trademark ("PTO") to invalidate the claims asserted in this case. (Dkt. No. 57-2, Cleveland Decl., Exs. A-C.) On January 10, 2014, GE filed a petition for Inter Partes Review of the 079 reissue patent which was added to the case in August 2013. ( Id., Ex. D.) According to the statutory IPR schedule, Plaintiff's reply date is due on March 4, 2014. 37 C.F.R. § 42.107(b). Any decision to institute trial on the petitions or deny review will likely issue by June 4, 2014. See 35 U.S.C. § 314(b) ("Director shall determine whether to institute an inter partes review... within 3 months after - receiving a preliminary response to the petition under section 313....") A final determination must issue within one year unless there is good cause to extend the period by no more than six months. 35 U.S.C. § 316(a)(11). Therefore, a final determination will likely be made in June 2015.

Discussion

Defendant seeks a stay of all the proceedings pending review by the PTO of the IPR petitions. Plaintiff agrees that a stay would be appropriate but seeks a partial stay asking the Court keep the claim construction hearing date set for March 28, 2014 and then stay the remainder of the case, including discovery and trial. TAS argues that briefing on claim construction is well underway and that the familiarity on the issues in claim construction would be lost if the case were stayed. Moreover, allowing claim construction to go forward now would make restarting the case much quicker and easier once the case is restarted because claim construction would be completed.

A. Inter Partes Review Background and Procedure

Effective September 16, 2012, the Leahy-Smith America Invests Act ("AIA") amended the inter partes reexamination process and renamed it the inter partes review process. Semiconductor Energy Lab. Co., Ltd. v Chimei Innolux Corp., No. SACV 12-21-JST(JPRx) , 2012 WL 7170593, at *1 n. 1 (C.D. Cal. Dec. 19, 2012). The AIA converted the process from an examination to an adjudicative one. PersonalWeb Techs, LLC v. Facebook, Inc., Case Nos.:5:13-CV-01356-EJD; 5:13-CV-01358-EJD; 5:13-CV-01359-EJD, 2014 WL 116340, at *2 (N.D. Cal. Jan. 13, 2014). Inter parties review allows any person other than the patent owner to file a petition to institute IPR in order to establish that the identified claims are invalid under 35 U.S.C. §§ 102 or 103. 35 U.S.C. §§ 311(a)-(b). A petitioner may request to cancel as unpatentable one or more claims of a patent. Id . The petitioner must rely "only on... prior art consisting of patents or printed publications." 35 U.S.C. § 311(b). The patent owner may file a preliminary response "setting forth the reasons why no inter partes review should be instituted" within three months of the petition, or may expedite the proceeding by waiving the preliminary response. 37 C.F.R. § 42.107(a)-(b). The PTO must decide whether to institute IPR within three months of the patent owner's preliminary response, or in the event no response is filed, by the last date on which the response could have been filed. 35 U.S.C. § 314(b). The Director may institute IPR only when the Director determines that "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." 35 U.S.C. § 314(a).

If the Director institutes IPR, the proceeding is conducted before the United Sates Patent and Trademark Office Patent Trial and Appeal Board ("PTAB"). See 35 U.S.C. §§ 6(a)-(c). The PTAB must, under most circumstances, issue its final determination within one year of the institution date. 37 C.F.R. § 42.100(c). After receiving a final determination from the PTAB, the parties may appeal to the Federal Circuit. 35 U.S.C. §§ 141(c), 319.

In enacting the AIA, Congress sought "to establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs" and "to create a timely, cost-effective alternative to litigation." Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 Fed. Reg. 48680-01 (Aug. 12, 2012) (codified at 37 C.F.R. §§ 42.100 et seq. ). To that end, IPR affords at least three advantages to the parties and the district court in any corollary civil action. First, IPR provides a path to receive expert guidance from the PTO under a more accelerated timeline than the previous inter partes reexamination procedure: petitioners must file for IPR within one year of being served with a patent infringement complaint (35 U.S.C. § 315(b)) and IPR, if instituted, will typically conclude within 18 months of the filing date. In contrast, the average time from filing to conclusion of the previous inter partes reexamination procedure ranged from 28.9 to 41.7 months. 77 Fed. Reg. 48680-01 at 48721. Second, the decision to institute IPR signals that at least one of the subject claims may be modified or cancelled. See 35 U.S.C. § 314(a) (requiring "a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition" in order for IPR to be instituted). This new threshold requirement presents a more stringent standard than the previous "substantial new question of patentability" and thus provides some assurance that the delay suffered as a result of IPR will be worthwhile. Third, IPR imposes an estoppel requirement that precludes the petitioner from asserting invalidity, during a later civil action, "on any ground that the petitioner raised or reasonably could have raised during that inter partes review." 35 U.S.C. § 315(e)(2). This critical limitation results in a more streamlined litigation and reduces the likelihood of inconsistent judgments.

PersonalWeb Techs., LLC, 2014 WL ...


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