United States District Court, N.D. California
ORDER GRANTING MOTION TO STAY LITIGATION PENDING INTER PARTES REVIEW OF PATENT-IN-SUIT; GRANTING MOTION TO SEAL
ELIZABETH D. LaPORTE, Magistrate Judge.
On July 16, 2014, Roche Molecular Systems, Inc. ("Roche") filed this patent infringement suit against Cepheid, asserting direct and indirect infringement of U.S. Patent No. 5, 643, 723 (the "723 Patent"). On September 15, 2014, Cepheid filed an Answer and Counterclaims. On November 10, 2014, Cepheid submitted a petition to the Patent Trademark Appeals Board PTAB seeking inter partes review of the 723 Patent. This Court held a Case Management Conference on November 18, 2014, and thereafter issued a Case Management Order setting dates through trial. Now before the Court is Cepheid's Motion to Stay Litigation Pending Inter Partes Review of the Patent-In-Suit. For the following reasons, the motion is GRANTED.
Roche's patent infringement suit against Cepheid alleges that Cepheid's "Xpert® MTB/RIF Assay" product directly and indirectly infringes Roche's 723 Patent entitled "Detection of a Genetic Locus Encoding Resistence to Rifampin in Microbacterial Cultures and in Clinical Specimens" which relates to methods for detecting the bacterium that causes tuberculosis in humans. Compl. ¶¶ 18, 20-22. The 723 Patent is based on an invention made jointly by scientists working at Roche and Mayo. See Compl. Ex. 1 at 2 (cover page of 723 Patent, listing inventors). While the patent application was pending, Roche's inventor assigned her interest in this invention directly to Roche, whereas the Mayo inventors (including Dr. David Persing) assigned their interests to Mayo, which in turn conveyed rights to Roche. See Compl. ¶¶ 6, 9; Rabinowitz Decl. Ex. 4; Ex. 5. The assignment executed by Dr. Persing and the other Mayo inventors provides, in pertinent part:
we have sold, assigned, and transferred, and by these presents do sell, assign and transfer unto said Assignee [Mayo], its successors and assigns, the entire right, title and interest for all countries in and to all inventions and improvements disclosed in the aforesaid application, and in and to the said application... [and] all Letters Patent which may be granted therefrom.... AND, for the consideration aforesaid, we do hereby agree that we... will testify in all legal proceedings and generally do all things which may be necessary or desirable more effectively to secure to and vest in said Assignee, its successors or assigns the entire right, title and interest in and to the said improvements, inventions, applications, Letters Patent, rights, titles, benefits, privileges and advantages hereby sold, assigned and conveyed....
Rabinowitz Decl., Ex. 6 (Assignment dated September 21, 1994) at 1. The patent application on which the assignment was based issued on July 1, 1997 as the 723 Patent.
Dr. Persing left Mayo and thereafter joined Cepheid as a Director in May 2004 and became Executive Vice President and Chief Medical and Technology Officer in 2005. Complaint ¶ 10. While at Cepheid, he has been involved in Cepheid's Xpert® MTB/RIF Assay, though the extent of his involvement is disputed between the parties. Roche contends that Dr. Persing is an assignor-inventor who conveyed his ownership in the application that issued as the 723 Patent and the invention therein to Mayo, and that Cepheid has relied on his knowledge and assistance in developing and commercializing the accused product. As discussed below, Roche argues that Cepheid is barred by assignor estoppel from challenging the validity and enforceability of the 723 Patent.
In 2007, both Roche and co-owner Mayo suggested that Cepheid take a license under the 723 Patent, but Cepheid did not do so. Answer ¶ 107. Cepheid launched its product in the United States in July 2013. See Rabinowitz Decl., Ex. 1 (Cepheid Press Release dated July 25, 2013). The product has been commercialized in Europe since approximately 2009, where it allegedly competes with one of Roche's products. See Answer at ¶ 108; Rabinowitz Decl. Ex. 2 (article describing Roche's Cobas TaqMan MTB Assay and comparing the performance of Roche's and Cepheid's genetic tests).
The 723 Patent expired on July 1, 2014 and Roche seeks compensatory damages for past infringement only and does not seek an injunction. Cepheid has responded with an Answer and Counterclaims, denying infringement and asserting unpatentability, invalidity, unenforceability, laches and equitable estoppel defenses and also seeking a declaration that the 723 Patent is invalid, unenforceable and not infringed. On November 10, 2014, Cepheid submitted a petition to the Patent Trademark Appeals Board ("PTAB") seeking inter partes review ("IPR") of the '723 Patent. Barker Decl., ¶ 5 and Ex. 1. The IPR Petition challenges the validity of claims 1-13 and 17-20 of the 723 Patent, citing prior art that was not before the Patent Examiner. Id . ¶¶ 6-7. Also on November 10, 2014, Cepheid filed a motion to stay litigation pending IPR. Dkt. # 43.
II. LEGAL STANDARD
A. Inter Partes Review
IPR is a relatively new procedure that became available in September 2012 as part of the America Invents Act (the "AIA"), 35 U.S.C. § 311-319. Evolutionary Intelligence LLC v. Yelp Inc. ("Yelp"), No. C-13-03587 DMR, 2013 U.S. Dist. LEXIS 178547, at *5-6 (N.D. Cal. Dec. 18, 2013); PersonalWeb Techs., LLC v. Facebook, Inc., No. 5:13-CV-01356-EJD, 2014 U.S. Dist. LEXIS 4095, at *7-8 (N.D. Cal. Jan. 13, 2014). IPR is intended to "offer a timely, cost-effective alternative to litigation, ' designed to produce a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.'" Intellectual Ventures II LLC v. Commerce Bancshares, Inc., No. 2:13-CV-04160-NKL, 2014 U.S. Dist. LEXIS 75907, at *4 (W.D. Mo. June 4, 2014) (quoting Changes to Implement Inter Partes Review Proceedings, 77 Fed. Reg. 48680-01 (Aug. 14, 2012)); PersonalWeb Techs., 2014 U.S. Dist. LEXIS 4095, at *9. The IPR timeline is faster than prior reexamination procedures. Yelp, 2013 U.S. Dist. LEXIS 178547, at *6. The patentee may file an optional response within three months of notice of the filing of an IPR Petition, and then the PTAB has three months to decide whether to institute IPR. 35 U.S.C. §§ 313, 314; 37 C.F.R. § 42.107. The PTAB must complete the IPR within twelve months of its institution, unless there is good cause for an extension of no more than six months. 35 U.S.C. § 316(a)(11). Any appeal of the PTAB ruling is directly to the Federal Circuit without an intervening appeal. 35 U.S.C. § 142.
B. Standard for Granting a Stay
"Courts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO reexamination." Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (internal citations omitted); see also Fresenius Medical Care Holdings, Inc. v. Baxter Intern, Inc., 2007 WL 1655625 at *2 (N.D. Cal. June 7, 2007) (courts have discretion to stay judicial proceedings pending patent reexamination, but are not required to do so). Courts in this district often grant stays pending this new IPR process in light of the "liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO reexamination or reissuance proceedings." Yelp, 2013 U.S. Dist. LEXIS 178547, at *13 (citation omitted); see also Pi-Net Int'l, Inc. v. Focus Bus. Bank, No. C-12-4958-PSG, 2013 U.S. Dist. LEXIS 118723, at *5-7 (N.D. Cal. Aug. 16, 2013) (expressing skepticism concerning stays for the old reexamination procedure but granting a stay pending IPR); Brixham Solutions v. Juniper Networks, Inc., No. 13-cv-00616-JCS, 2014 U.S. Dist. LEXIS 58770 (N.D. Cal. Apr. 28, 2014, at *6 ("the potential delay associated with inter partes review is not significant in comparison to the post-grant review procedures that existed prior to the enactment of the America Invents Act"). One court has stated that ...