United States District Court, N.D. California
ORDER GRANTING DEFENDANTS' MOTION TO STAY
Re: Dkt. Nos. 67, 78, 90, 97
SUSAN ILLSTON, District Judge.
Currently before the Court are defendants' motion to stay the proceeding pending inter partes review, plaintiffs' motion to strike defendants' infringement contentions, plaintiffs' motion to amend their own infringement contentions, and for leave to file an objection and sur-reply in opposition to the motion to stay. Docket Nos. 67, 78, 90, 97. Pursuant to Civil Local Rule 7-1(b), the Court determines that these matters are appropriate for resolution without oral argument and hereby VACATES the February 13, 2015, hearing on these motions. For the reasons set forth below, the Court GRANTS Defendant's motion to stay.
In the present action, Plaintiffs Advanced Micro Devices, Inc. and ATI Technologies ULC (collectively, "AMD") filed a complaint on March 5, 2014, accusing Defendants LG Electronics, Inc., LG Electronics U.S.A., Inc., and LG Electronics Mobilecomm U.S.A., Inc. (collectively, "LG") of infringing nine U.S. patents. The AMD patents-in-suit generally relate to consumer electronic device technologies, including semiconductor design, graphic and video processing, communications networks, and user interface. LG answered the complaint on June 16, 2014, asserting counterclaims for declaratory judgment of noninfringement and invalidity, and alleging that AMD infringes on four LG patents. The initial case management conference took place on July 18, 2014, where the Court set a technology tutorial for March 25-26, 2015, a claim construction hearing for April 1-2, 2015, and a further case management conference for April 24, 2015. To date, the parties have exchanged initial disclosures, infringement and invalidity contentions, and initial written discovery requests. Fahrenkrog Decl. ¶¶ 12-19, 22-30. In addition, the parties have served proposed claim terms for construction, exchanged preliminary constructions and supporting evidence, and filed a joint claim construction statement. Fahrenkrog Decl. ¶¶ 35-37; Dkt. No. 81.
On December 10, 2014, LG filed ten petitions for inter partes review ("IPR") at the U.S. Patent and Trademark Office ("PTO"), challenging the patentability of at least all asserted claims of the nine AMD patents-in-suit. Barnes Decl. ¶¶ 2-11. The PTO must issue a decision on whether to institute the IPRs no later than June 10, 2015. See 37 C.F.R. § 42.107(b) ("The [patent owner's] preliminary response must be filed no later than three months after the date of a notice indicating that the request to institute an inter partes review has been granted a filing date."); 35 U.S.C. § 314(b) (requiring the PTO to determine whether to institute an IPR within three months after receiving a preliminary response, or if no preliminary response is filed, within three months after the last date on which such response may be filed). If the IPR is instituted, the PTO is required to issue its final written decision in the IPR within one year of the institution date, with a six-month extension available only upon a showing of good cause. 37 C.F.R. § 42.100(c).
"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) ("[T]he 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 three main factors: (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, No. C-12-4958-PSG, 2013 WL 4475940, at *3 (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., No. C 09-1635 SBA, 2009 WL 3078463, at *2 (N.D. Cal. Sept. 28, 2009) (quoting Soverain Software LLC v. Amazon.Com, Inc., 356 F.Supp.2d 660, 662 (E.D.Tex.2005)); 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 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 IPR is whether discovery is complete and whether a trial date has been set. To date, the parties have exchanged initial disclosures and discovery requests, served infringement and invalidity contentions, and produced thousands of documents. Although discovery is underway, it is far from complete and no deadlines have been set. Moreover, a trial date has not been set, no expert reports have been served, no depositions have been taken, and no claim construction briefs or summary judgment motions have been filed.
AMD argues that "[t]his case is not in the early stages of litigation. Rather, significant substantive fact discovery and claim construction work has occurred and is ongoing...." Dkt. No. 83, Pl. Opp. at 4. The Court disagrees, finding that while discovery and claim construction work has occurred, there has been no material progress in the litigation. Between the complaint and the counter-claims, this case involves thirteen patents, sixty-five asserted claims, and 530 accused products; even the initial discovery and claim construction work is expected to be significant in this complex patent infringement lawsuit. "When, as here, there has been no material progress in the litigation, courts in this district strongly favor granting stays pending inter partes [review]." Pragmatus AV, LLC v. Facebook, Inc., No. 11-CV-02168-EJD, 2011 WL 4802958, at *3 (N.D. Cal. Oct. 11, 2011) (granting stay pending reexam where plaintiff had served infringement contentions and written discovery); see also Tse v. Apple Inc., No. C 06-06573 SBA, 2007 WL 2904279, at *2 (N.D. Cal. Oct. 4, 2007) ("A stay is particularly appropriate for cases in the initial stages of litigation or in which there has been little discovery."). Considering that the parties have yet to engage in the substantial and costly work of conducting expert discovery and filing summary judgment motions or claim construction briefs, the Court finds that this case is not so far advanced that a stay would be improper. Accordingly, the Court concludes that this factor weighs in favor of a stay.
II. Simplification of Issues
Next, the Court must consider whether the stay would simplify matters at issue in the litigation. "[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., No. C-94-20775 RPA (EAI), 1995 WL 20470, at *2 (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 requested PTO review for each asserted claim in the patent(s)-in-suit. Versata Software, Inc. v. Callidus Software, Inc., 771 F.3d 1368, 1372 (Fed. Cir. 2014) (the ...