United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION TO STAY PENDING INTER PARTES REVIEW [RE: DOCKET
EDWARD J. DAVILA, District Judge.
Defendant Millenial Media, Inc. ("Millenial") brings this motion to stay pending inter partes review ("IPR") of U.S. Patent Nos. 7, 010, 536 ("the 536 Patent") and 7, 702, 682 ("the 682 patent") (collectively, the "asserted patents"). Dkt. No. 113. Plaintiff Evolutionary Intelligence, LLC ("Evolutionary") opposes the motion. Dkt. No. 115. Pursuant to Local Rule 7-1(b), the court found this matter suitable for resolution without oral argument and previously vacated the hearing. Having considered the parties' briefing and for the reasons set forth below, the court GRANTS the motion to stay.
a. Procedural Background
In October 2012, Evolutionary filed complaints in the Eastern District of Texas alleging infringement of the asserted patents against nine unrelated defendants: Millenial Media, Inc., Apple, Inc., Twitter, Inc., Facebook, Inc., Groupon, Inc., LivingSocial, Inc., FourSquare Labs, Inc., Yelp, Inc., and Sprint Nextel Corp. In its complaint against Millenial, Evolutionary specifically alleges infringement of claims 1-16 of the 536 patent and claims 1, 3-7, 10, 11, and 14-22 of the 682 patent. Dkt. No. 1. Millenial filed its answer on December 17, 2012 and a few days later moved to transfer venue to this District under 35 U.S.C. § 1404(a). Dkt. Nos. 9, 13. The parties engaged in limited discovery relating to venue. The Texas court ordered the case be transferred to this court on August 27, 2013. Dkt. No. 88. Between July and September 2013, the other eight actions were also transferred to this district. On October 8, 2013, Evolutionary's motion to relate the nine actions was denied. Dkt. No. 100.
On October 22 and 23, 2013, four defendants from the co-pending cases-Apple, Inc., Twitter, Inc., Yelp, Inc., and Facebook, Inc. (the "petitioners")-filed petitions for IPR at the United States Patent and Trademark Office ("PTO") seeking review of the asserted patents. Together, the IPR petitions seek review of all claims that Evolutionary asserts against Millenial. Millenial did not request an IPR for any claims of either asserted patent nor does it intend to. Decl. of Nathan K. Cummings ¶ 2, Dkt. No. 117-1. All defendants in the Evolutionary cases have requested a stay on the basis of these petitions for IPR and the other eight actions have been stayed pending resolution of the IPR proceedings. On April 25, 2014, after Millenial filed the instant motion, the PTO granted Apple's Petition 2014-00086 in part, taking claims 2-12, 14, and 16 of the 536 patent under review. The PTO denied the remaining petitions, including all petitions directed to the 682 patent.
b. IPR Background
Pursuant to the Leahy-Smith America Invents Act ("AIA"), the IPR proceeding replaces the PTO's previous inter partes reexamination. 35 U.S.C. §§ 311-319. Congress, in enacting the IPR procedure, 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 (August 12, 2012) (codified at 37 C.F.R. §§ 42.100 et seq.). Under the new procedure, any party other than the patent owner may request to cancel one or more claims of a patent; in doing so, the petitioner is limited to grounds that could be raised under 35 U.S.C. §§ 102 and/or 103 and only based on prior art consisting of patents and printed publications. 35 U.S.C. § 311(a)-(b). If a party has been served with a patent infringement complaint, the party must file for IPR within one year of being served with the complaint. 35 U.S.C. § 315(b).
For the PTO to institute an IPR proceeding, the petitioner must show "that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition, " a higher burden than in the predecessor reexamination proceedings where the requester was only required to show a "substantial new question of patentability." 35 U.S.C. §§ 304, 314(a). Within three months of the filing of the petition, the patent owner may file a preliminary response setting forth arguments as to why the PTO should not institute IPR; alternatively the patent owner may waive the preliminary response to expedite the proceeding. 37 C.F.R. § 42.107(a)-(b). The PTO must decide whether to institute the IPR within three months after the patent owner's preliminary response or by the last date on which the response could have been filed if the patent owner did not file a response. 35 U.S.C. § 314(b).
If the PTO institutes the IPR, the proceeding is conducted before three technically-trained Administrative Patent Judges of the Patent Trial and Appeal Board ("PTAB"). See 35 U.S.C. §§ 6(a)-(c), 311. This proceeding "converts inter partes reexamination from an examinational to an adjudicative proceeding." H.R. Rep. No. 112-98, 46 (2011), reprinted in 2011 U.S.C.C.A.N. 67, 77. Where parties previously conducted amendment-and-response before a PTO examiner, the parties are now permitted to take limited discovery, respond to each other's arguments, and are entitled to an oral hearing before the PTAB. 35 U.S.C. § 316(a)(5), (8), (10), (13).
The PTO must issue its final IPR determination within one year, extendable for good cause for not more than six months. 35 U.S.C. § 316(a)(11). Final determinations are appealable to the Federal Circuit. 35 U.S.C. §§ 141(c), 319. To streamline later litigation and reduce the likelihood of inconsistent judgment, the petitioner is estopped from later asserting that a "claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review." 35 U.S.C. § 315(e)(2).
II. Legal Standard
Courts have inherent power to manage their dockets, including the discretion to decide whether to grant a stay pending a concurrent proceeding before the PTO. Ethicon, Inc. v. Quigg , 849 F.2d 1422, 1426-27 (Fed. Cir. 1988). A stay is particularly justified where the outcome of a PTO proceeding is likely to assist the court in determining patent validity or eliminate the need to try infringement issues. In re Cygnus Telecomm. Tech., LLC, Patent Litig. , 385 F.Supp.2d 1022, 1023 (N.D. Cal. 2005) (citing Gould v. Control Laser Corp. , 705 F.2d 1340, 1342 (Fed. Cir. 1983)). "While the case law states several general considerations that are helpful in determining whether to order a stay, ultimately the court must decide stay requests on a case-by-case basis." TPK Touch Solutions, Inc. v. Wintek Electro-Optics Corp., No. 13-CV-02218, 2013 WL 6021324, at *1 (N.D. Cal. Nov. 13, 2013).
Courts typically consider three factors to determine the appropriateness of a stay: "(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party." Telemac Corp. v. Teledigital, Inc. , 450 F.Supp.2d 1107, 1111 (N.D. Cal. 2006) (citation omitted). The party seeking the ...