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Verinata Health, Inc. v. Ariosa Diagnostics, Inc.

United States District Court, N.D. California

February 2, 2015

VERINATA HEALTH, INC., et al., Plaintiffs,
v.
ARIOSA DIAGNOSTICS, INC., Defendant.

ORDER GRANTING DEFENDANT'S THIRD MOTION TO STAY

SUSAN ILLSTON, District Judge.

Now before the Court are Ariosa's motions (1) to stay the proceeding, (2) for leave to amend its invalidity contentions, and (3) for leave to file a third amended answer and counterclaims. Docket Nos. 179, 189, 207. Pursuant to Civil Local Rule 7-1(b), the Court determines that this matter is appropriate for resolution without oral argument and VACATES the hearing. For the reasons set forth below, the Court GRANTS Ariosa's motion to stay. The Court DEFERS ruling on Ariosa's motion for leave to amend its invalidity contentions, and for leave to file a third amended answer and counterclaims during the pendency of the stay.

BACKGROUND

This is a patent infringement action. Plaintiffs Illumina Inc., Verinata Health, Inc. and the Board of Trustees of the Leland Stanford Junior University (collectively "Verinata") accuse Ariosa's Harmony¬ô Prenatal Test of infringing U.S. Patent No. 8, 296, 076 ("the '076 patent"), U.S. Patent No. 8, 318, 430 ("the '430 patent"), and U.S. Patent No. 7, 955, 794 (the '794 Patent). In May 2013, Ariosa filed petitions for inter partes review, requesting that the Patent Trial and Appeal Board ("PTAB") review claims 1-30 of the '430 patent and claims 1-13 of the '076 patent. Docket No. 103-1, Gindler Decl. Exs. 10-12. On May 10, 2013, Ariosa filed a motion to stay the action pending inter partes review. Docket No. 61.[1] Motions to stay were also filed in the related cases. On June 11, 2013, the Court denied Ariosa's motion to stay and the other motions to stay filed in the related cases. Docket No. 65. On October 16, 2013, the Court issued a claim construction order in this action and the related cases, construing the disputed terms of the '076 patent and the '430 patent. Docket No. 89. On December 13, 2013, Ariosa filed a second motion to stay, which the Court denied on January 13, 2014. Docket Nos. 103, 108. On December 17, 2014, the Court issued a claim construction order, construing disputed claims in the '794 Patent. Docket No. 199.

On October 25, 2013, the PTAB instituted inter partes review of claims 1-30 of the '430 Patent on obviousness grounds. Docket No. 103-1, Gindler Decl. Exs. 21-22. On November 20, 2013, PTAB instituted inter partes review of claims 1-13 of the '076 Patent on anticipation and obviousness grounds. Id. Ex. 23. On October 23, 2014, the PTAB issued two orders holding that Ariosa had failed to show that claims 1-30 of the '430 Patent are unpatentable. See Ariosa Diagnostics, Petitioner, IPR2013-00276, 2014 WL 5454541(Oct. 23, 2014); Ariosa Diagnostics, Petitioner, IPR2013-00277, 2014 WL 5454542 (Oct. 23, 2014). On November 19, 2014, the PTAB issued an order finding that the challenged claims of the '076 Patent are unpatentable. See Ariosa Diagnostics, Petitioner, IPR2013-00308, 2014 WL 6617697 (Nov. 19, 2014). These PTAB rulings have all been appealed to the Federal Circuit. On January 8, 2015, PTAB instituted inter partes review of claims 1-22 of the '794 Patent. See Ariosa Diagnostics, Inc., Petitioner, IPR2014-01093, 2015 WL 153677 (Jan. 8, 2015).

LEGAL STANDARD

"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) (citations omitted); see also Clinton v. Jones, 520 U.S. 681, 706 (1997) ("The District Court has broad discretion to stay proceedings as an incident to its power to control its own docket."). In determining whether to grant a stay pending PTO review, courts consider: (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); accord Pi-Net Int'l, Inc. v. Focus Bus. Bank, 2013 U.S. Dist. LEXIS 118723, at *11 (N.D. Cal. Aug. 16, 2013).

"There is no per se rule that patent cases should be stayed pending reexaminations, because such a rule would invite parties to unilaterally derail' litigation." ESCO Corp. v. Berkeley Forge & Tool, Inc., 2009 U.S. Dist. LEXIS 94017, at *5 (N.D. Cal. Sept. 28, 2009). "A court is under no obligation to delay its own proceedings by yielding to ongoing PTO patent reexaminations, regardless of their relevancy to infringement claims which the court must analyze." Id .; see also Viskase Corp. v. Am. Nat'l Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001) ("The court is not required to stay judicial resolution in view of the reexaminations."). However, "[t]here is a liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO reexamination or reissuance proceedings." Pragmatus AV, LLC v. Facebook, Inc., No. 11-CV-02168-EJD, 2011 WL 4802958, at *2 (N.D. Cal. Oct. 11, 2011). This policy stems from a recognition that granting a stay can "avoid inconsistent results, narrow the issues, obtain guidance from the PTO, or simply... avoid the needless waste of judicial resources, especially if the evidence suggests that the patents-in-suit will not survive reexamination." Id. (internal citations omitted).

I. Stage of Litigation

The first issue to be considered in determining whether to grant a stay pending inter partes review is whether discovery is complete and whether a trial date has been set. In the present case, a trial date has been set for July 27, 2015, the Court has construed the disputed terms of the patents-in-suit, and discovery is well underway with the parties having exchanged initial disclosures, infringement and invalidity contentions, substantial document production, and conducted multiple depositions. Fact discovery is set to close on February 20, 2015, and expert discovery is scheduled to conclude on April 24, 2015, with the deadline to file dispositive motions a week later. Docket No. 34, 14-cv-1921.

While Ariosa is correct to argue that "it simply cannot be said that the stage of this case, in and of itself, requires the denial" of its motion to stay, Docket No. 224, Def. Rep. at 3, it is also undeniably true that, as this court noted over a year ago, "this case is not in an early stage' of proceedings." Docket No. 108, citing Telemac Corp. v. Teledigital, Inc., 450 F.Supp.2d 1107, 1111 (N.D. Cal. 2006). The cost and expense of finishing fact and expert discovery, briefing dispositive motions, and conducting a trial is far from insignificant. See Versata Software, Inc. v. Callidus Software, Inc., 771 F.3d 1368, 1374 (Fed. Cir. 2014) (internal citations omitted) ("Courts considering this factor do not stop at discovery and trial settings, but rather, routinely inquire as to the occurrence [of] summary judgment arguments, rulings on summary judgment, and the status of the final pretrial order, among other elements."). Nonetheless, at this juncture, this case finds itself at a relatively late stage. Accordingly, this factor weighs against staying the action.

II. Simplification of the Proceedings

The second factor to be considered is whether the stay would simplify matters at issue before the Court. "[W]aiting for the outcome of the reexamination could eliminate the need for trial if the claims are cancelled or, if the claims survive, facilitate trial by providing the court with expert opinion of the PTO and clarifying the scope of the claims." Target Therapeutics, Inc. v. SciMed Life Sys., Inc., 1995 U.S. Dist. LEXIS 22517, at *4-5 (N.D. Cal. Jan. 13, 1995); accord Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983); see also Fresenius USA, Inc. v. Baxter Int'l, Inc., 721 F.3d 1330, 1340 (Fed. Cir. 2013) ("[W]hen a claim is cancelled, the patentee loses any cause of action based on that claim, and any pending litigation in which the claims are asserted becomes moot."). This is particularly true when a party has obtained PTO review of each of the asserted claims in the patents-in-suit. Versata 771 F.3d at 1372 (the "simplification factor weighs more strongly in favor of a stay when all of the litigated claims are undergoing [administrative review]. But there can still be a simplification of the issues when only some, but not all, of the claims asserted in litigation are challenged.").

There are currently four pending proceedings whose resolution may help simplify and streamline the issues in this case: (1) a pending appeal to the Federal Circuit of the PTAB's finding that the asserted claims of the '430 Patent are patentable, (2) a pending appeal to the Federal Circuit of the PTAB's finding that the asserted claims of the '076 Patent are unpatentable, (3) the PTAB's grant of inter partes review of the asserted claims of the '794 Patent, and (4) Verinata's appeal to the Federal Circuit of this Court's ruling that an arbitration clause in a contract between Illumina and Ariosa did not bar Ariosa from asserting certain ...


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