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Delphix Corp. v. Actifio, Inc.

United States District Court, N.D. California, San Jose Division

July 8, 2015

DELPHIX CORP., Plaintiff,
v.
ACTIFIO, INC., Defendant.

ORDER DENYING MOTION TO SEVER AND TRANSFER; STAYING ENTIRE ACTION DURING PENDENCY OF INTER PARTES REVIEW [Re: ECF 148, 149, 150]

BETH LABSON FREEMAN, District Judge.

Before the Court is defendant Actifio, Inc.'s Motion to Sever and Transfer Its Patent Claims. Def.'s Mot., ECF 150. Also before the Court are the parties' respective supplemental briefs regarding an extension of the stay this Court entered on November 13, 2014. ECF 148, 149. The Court finds Actifio's motion suitable for submission without oral argument and VACATES the July 30, 2015 hearing date. Having carefully considered the parties' respective written submissions, Actifio's motion is DENIED and this action is STAYED in its entirety.

I. BACKGROUND

This consolidated action began as a simple patent infringement lawsuit by plaintiff Delphix Corp. accusing defendant Actifio, Inc. of infringing five of Delphix's patents. Actifio, in turn, accused Delphix of infringing two of its own patents, causing Delphix to file a second lawsuit in this district seeking a declaration that it does not infringe the Actifio patents. Actifio moved to relate the cases in April 2014, ECF 50, which this Court granted, and the parties subsequently stipulated to consolidate the two cases, ECF 58. In September 2014, Delphix obtained leave to add a claim against Actifio for trade secret misappropriation. ECF 95.

While all of this was happening, Actifio filed another lawsuit asserting two more of its patents in the District of Massachusetts. Actifio Inc. v. Delphix Corp., No. 1:14-cv-13247 ("Massachusetts Action"). Delphix sought to transfer the claims in the Massachusetts Action to this district, contending that this action was first-filed. Pl.'s Mot. to Amend, ECF 79; Decl. of S. Giri Pathmanaban, ECF 150-1 Exh. D. The Massachusetts court denied that motion on March 17, 2015. Pathmanaban Decl. ¶ 6.

On October 9, 2014, after filing petitions for inter partes review ("IPR") of all five patents asserted by Delphix in this case, Actifio moved to stay this entire action. Mot. to Stay, ECF 103. Delphix opposed a stay as vigorously as Actifio advocated in favor of one. On November 13, 2014, the Court partially granted Actifio's request and stayed proceedings in connection with Delphix's patents-in-suit pending decision on Actifio's IPR petitions before the Patent Trial and Appeal Board ("PTAB") of the United States Patent and Trademark Office. Stay Order, ECF 118. Unaffected by the stay were Delphix's claim against Actifio for trade secret misappropriation and Actifio's claims against Delphix for infringement of two Actifio patents. The Court observed that in light of the uncertain outcome of the then-just filed IPR petitions, the parties should proceed on those claims unlikely to be affected by the IPR "at least until the potential effect of Defendant's IPR petitions can be better evaluated after the PTAB's decision on those petitions." Id. at 5. In May 2015, the PTAB instituted IPR on all of Delphix's patents-in-suit. See Updated Joint Case Management Statement at 20, ECF 138.

Delphix now requests that the Court stay this entire action during the pendency of IPR proceedings. In a surprising turn of events, Actifio now opposes such a stay and requests that the Court permit the parties to continue litigating Actifio's patent infringement claims and Delphix's trade secret misappropriation claim. In the alternative, Actifio requests that the Court sever its patent claims from this action and transfer those claims to the District of Massachusetts.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 21 provides that "the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party." A court's discretion under Rule 21 is broad, and "[t]he court may sever the claims against a party in the interest of fairness and judicial economy and to avoid prejudice, delay or expense." Apple Inc. v. Wi-LAN Inc., No. C 14-2838 CW, 2014 WL 4477362, at *3 (N.D. Cal. Sept. 11, 2014) (citing Coleman v. Quaker Oats Co., 232 F.3d 1271, 1296-97 (9th Cir. 2000)).

Similar factors inform a court's discretionary decision to stay litigation pending parallel proceedings in the PTAB, as a court must 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 nonmoving party." PersonalWeb Technologies, LLC v. Apple Inc., ___ F.Supp. 3d ___, No. 4:14-CV-1683 YGR, 2014 WL 4757816, at *2 (N.D. Cal. Sept. 24, 2014).

As to discretionary transfers, a district court may do so in the interest of justice for the convenience of the parties and of the witnesses. 28 U.S.C. § 1404(a). In a case not involving a forum-selection clause, a district court considering a § 1404(a) motion "must evaluate both the convenience of the parties and various public-interest considerations." Atl. Marine Constr. Co., Inc. v. United States Dist. Court for the Western Dist. of Texas, ___ U.S. ___, 134 S.Ct. 568, 581 (2013). The parties' convenience and other private interests entails consideration of a number of factors including the plaintiff's choice of forum, the parties' contacts with the forum, the contacts relating to the plaintiff's claims in the chosen forum, the "relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses;... and all other practical problems that make trial of a case easy, expeditious and inexpensive.'" Id. at 581 n.6 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)); Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000). No single factor is dispositive, though a plaintiff's choice of forum must be accorded some weight in the analysis. Atl. Marine, 134 S.Ct. at 581 n.6. "Public-interest factors may include the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; [and] the interest in having the trial of a diversity case in a forum that is at home with the law.'" Id. (quoting Piper Aircraft, 454 U.S. at 241 n.6) (alteration in original). A transfer may not be appropriate if it would "merely shift rather than eliminate the inconvenience." Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). Ultimately, the party seeking to transfer a case bears the burden of demonstrating that transfer is appropriate. Id.

III. DISCUSSION

Fairness, judicial economy and the interest in avoiding prejudice, delay or expense weigh in favor of staying this entire action and denying Actifio's request to sever its patents and transfer them to Massachusetts. As this Court previously found, the Delphix patents subject to IPR are a significant portion of this action. Stay Order at 4. Now that IPR has been granted on all of Delphix's patents-in-suit, it is clear that a substantial portion of the action will remain stayed. As explained below, there are significant overlaps in the evidence, technology, and legal issues that the Court and a jury would have to consider in deciding the parties' respective claims. As such, a more comprehensive stay of the entire action is in order pending IPR of the Delphix patents.

Actifio argues that its patents in this case should be severed because they are "substantially different" from those asserted by Delphix, attempting to invoke the reasoning of the court in Cellectricon AB v. Fluxion Biosciences, Inc., No. C-09-3150 RMW, 2011 WL 1557987 (N.D. Cal. Apr. 25, 2011). See Def.'s Mot. 4-5. The trouble with this argument, as Delphix notes, is that Actifio has previously represented to the Court the similarities between its and Delphix's claims. Pl.'s Opp. 4-6. Actifio's attempts to diminish its prior representations to the Court are unpersuasive. Def.'s Mot. 5 ("Actifio sought to relate the two cases not because Actifio's patent claims substantially overlap with Delphix's patent claims, but because both cases were filed within weeks of each other in the same district, involved the same parties and counsel, no schedule had been set in either case, and there was no indication that the Court might stay Actifio's patent claims."). The Court does not speculate about a party's intent when it files a motion to relate cases; it takes statements in the moving papers at face value. Actifio urged the Court to relate the action on Actifio's patents to Delphix's separate infringement action against Actifio in order to avoid "unduly burdensome duplication of labor and expense or conflicting results if the cases are conducted ...


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