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GT Nexus, Inc. v. Inttra, Inc.

United States District Court, N.D. California, Oakland Division

July 9, 2014

GT NEXUS, INC., a Delaware corporation, Plaintiff,
v.
INTTRA, INC., a Delaware corporation, Defendants. AND RELATED COUNTERCLAIMS

ORDER DENYING MOTION TO LIFT THE STAY AND REOPEN THE ACTION Docket 63, 65, 69.

SAUNDRA BROWN ARMSTRONG, District Judge

Plaintiff GT Nexus, Inc. ("GT Nexus") brings the instant action against Inttra, Inc. ("Inttra") seeking a declaratory judgment that four of Inttra's patents ("patents-in-suit")[1] are invalid and have not been infringed. Inttra has filed counterclaims against GT Nexus for infringement of the patents-in-suit. On February 22, 2012, the instant action was stayed and administratively closed pending the outcome of GT Nexus's requests for ex parte reexamination of the patents-in-suit by the United States Patent and Trademark Office ("PTO"). Dkt. 61. Thereafter, the PTO granted GT Nexus's requests for ex parte reexamination. The parties are presently before the Court on Inttra's motion to lift the stay and reopen the action. Dkt. 65. GT Nexus opposes the motion. Dkt. 66. Having read and considered the papers filed in connection with this matter and being fully informed, the Court hereby DENIES Inttra's motion, for the reasons stated below. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed.R.Civ.P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).

I. DISCUSSION

A. Administrative Motion for Leave to File Sur-Reply

GT Nexus requests leave to file a sur-reply "to address certain evidence and arguments raised for the first time in [Inttra's] reply brief in support of its motion to lift stay and reopen action." Dkt. 69. If a party raises a new argument or presents new evidence in a reply brief, a court may consider these matters only if the adverse party is given an opportunity to respond. See El Pollo Loco v. Hashim , 316 F.3d 1032, 1040-1041 (9th Cir. 2003); Provenz v. Miller , 102 F.3d 1478, 1483 (9th Cir. 1996). Here, because it is undisputed that Inttra's reply brief contains new legal argument and new evidence, GT Nexus's administrative motion to file a sur-reply is GRANTED.

B. Motion to Lift the Stay and Reopen the Action

In the instant motion, Inttra moves to lift the stay and reopen this action on the ground that the ex parte reexamination proceedings before the PTO have been completed. In response, GT Nexus contends that the stay should not be lifted because it has filed petitions with the Patent Trial and Appeal Board ("PTAB") seeking review of the validity of Inttra's covered business method ("CBM") patents[2] ("CBM review"). Specifically, GT Nexus's petitions challenge the validity of every claim of the patents-in-suit. According to GT Nexus, the patents-in-suit are invalid because they claim unpatentable subject matter. GT Nexus argues that the stay should not be lifted while proceedings before the PTO are ongoing.[3]

1. The Leahy-Smith America Invents Act

Section 18 of the Leahy-Smith America Invents Act ("AIA") created a new transitional program authorizing persons or entities who have been sued for infringing a CBM patent to petition the PTAB for post-grant review of the validity of the patent. AIA § 18(a)(1), P.L. 112-29, 125 Stat. 284, 329-330.[4] Under the AIA, a party may seek to stay a patent infringement action in federal district court where a "transitional proceeding for that patent" has been instituted. AIA § 18(b)(1), P.L. 112-29, 125 Stat. 284, 331. The AIA provides that courts should apply a four-factor test ("AIA Factors") when deciding whether to stay a case pending CBM review. Id . These four factors are: (1) "whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial"; (2) "whether discovery is complete and whether a trial date has been set"; (3) "whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party"; and (4) "whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court." Id.

This test resembles the one that courts have applied in assessing a motion to stay pending inter partes or ex parte reexamination by the PTO. See In re Ameranth Patent Litigation Cases, 2013 WL 7144380, at *1 (S.D. Cal. 2013). The primary difference between this test and the one employed by courts in the ordinary patent reexamination context is the inclusion of the fourth factor, which requires a court to consider whether a stay will reduce the burden of litigation. Id . The fourth factor was added in order to ease the movant's task in demonstrating the need for a stay. See Market-Alerts Pty. Ltd. v. Bloomberg Finance L.P. , 922 F.Supp.2d 486, 489-490, 496 n. 14 (D. Del. 2013) (noting that § 18 of the AIA was added through an amendment proposed by Senator Charles Schumer, who, during Congressional debate on the AIA, stated that "the four factor test... places a very heavy thumb on the scale in favor of a stay being granted, " and that "[s]ince the entire purpose of the transitional program at the PTO is to reduce the burden of litigation, it is nearly impossible to imagine a scenario in which a district court would not issue a stay"); Zillow, Inc. v. Trulia, Inc. , 2013 WL 5530573, at *3 (W.D. Wash. 2011) ("the four-factor test was designed to increase the likelihood that the court will grant a stay when a party initiates a transitional CBM review, as opposed to an ordinary PTO reexamination").

2. The AIA Factors

As an initial matter, Inttra argues that the four-factor test does not apply because the patents-in-suit do not qualify for CBM review. The Court rejects this argument. The statutory stay analysis under the AIA is triggered upon the filing of a petition for CBM review, not upon the granting of a petition for CBM review by the PTAB. See Zillow , 2013 WL 5530573 at *4 n. 3 ("The statutorily required stay analysis set forth in § 18(b) of the AIA is triggered by a party's petition for post-grant review and not upon the PTAB's institution of such review."); Market-Alerts Pty. , 922 F.Supp.2d at 490, n. 5 ("Since the PTO has recognized that the [CBM review] proceedings begin with the filing of a petition, ' the court finds that the relevant stay provisions apply when the petition is first filed.") (italics in original); Sightsounds Techs., LLC v. Apple, Inc., 2013 WL 2457284, at *3 (W.D. Pa. 2013) ("[T]he relevant stay provisions of the AIA apply when the petition for review is filed, and not when the PTAB institutes such review."). Moreover, the question of whether a patent qualifies for CBM review is an issue for the PTAB to decide.[5] See Zillow , 2013 WL 5530573 at *4 n. 3 ("Whether CBM review should be granted... is an issue for the PTAB to evaluate and not for this court."); Landmark Technology, LLC v. iRobot Corporation, 2014 WL 486836, at *3 (E.D. Tex. 2014) ("The threshold issue of whether CBM review... is appropriate is typically an issue for the PTAB to decide, not th[e] Court."). Accordingly, the Court will apply the four-factor test set forth in § 18(b) of the AIA.

a. Simplification of the Issues and Trial

The first factor examines "whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial." As explained by the Federal Circuit in the reexamination context: "[o]ne purpose of the reexamination procedure is to eliminate trial of [an] issue (when [a] claim is canceled) or to facilitate trial... by providing the district court with the expert view of the... PTO... when a claim ...


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