United States District Court, E.D. California
SMART MODULAR TECHNOLOGIES, INC., Plaintiff and Counterdefendant,
NETLIST, INC., Defendant and Counterclaimant.
ORDER DENYING DEFENDANT'S MOTION TO REINSTITUTE
L. NUNLEY UNITED STATES DISTRICT JUDGE
matter is before the Court pursuant to Defendant and
Counterclaimant Netlist, Inc.'s (“Defendant”)
Motion to Reinstitute Stay. (ECF No. 176.) Plaintiff and
Counterdefendant Smart Modular Technologies, Inc.
(“Plaintiff”) filed an opposition (ECF No. 177),
and Defendant has replied (ECF No. 179). For the reasons set
forth below, the Court hereby DENIES Defendant's Motion
to Reinstitute Stay. (ECF No. 176.)
Factual and Procedural Background
is the assignee and owner of all rights, title, and interest
in U.S. Patent Number 8, 250, 295 (“the '295
Patent”) entitled “Multi-Rank Memory Module That
Emulates A Memory Module Having A Different Number of
Ranks.” (ECF No. 1 at 7.) The '295 Patent was
issued on August 21, 2012, by the United States Patent and
Trademark Office (“PTO”). The Patent involves a
memory module with rank multiplication capability. It enables
a memory module to provide a given memory capacity using
greater numbers of lower-capacity, lower-cost Dynamic Random
Access Memory (“DRAM”) devices, as opposed to
using lower numbers of higher-capacity, higher-cost-DRAM
devices that would otherwise be imposed by memory controller
limitations. (See Compl., ECF No. 1.) The '295
Patent is composed of eight claims. (ECF No. 1 at 7.)
Plaintiff alleges that Defendant's Hypercloud memory
module products infringe at least one of the '295
Patent's seven claims. (ECF No. 22 at 6.) Infringement of
at least one of the claims means that the entire patent is
being infringed. Thus, Plaintiff alleges that Defendant is
infringing upon Plaintiff's exclusive right to exclude
others from making, using, offering to sell, and selling
articles covered by the '295 Patent. Defendant brought
counterclaims alleging that the '295 Patent is invalid.
(See Answer and Countercl., ECF No. 49.)
September 15, 2012, Defendant filed an inter partes
reexamination (“IPR”) request with the Patent and
Trade Office (hereinafter “PTO”) proposing claims
1 through 7 of the '295 Patent be rejected on six
different combinations of prior art. (ECF No. 107.) On
December 7, 2012, the PTO granted Defendant's request and
ordered reexamination. (Transmittal of Communication to Third
Party Requester IPR, ECF No. 107-3.)
December 13, 2012, Defendant filed a Motion to Stay Pending
Patent Reexamination. (ECF No. 107.) On May 30, 2013, this
Court ordered the case stayed. (ECF No. 154.) In its order to
stay, the Court noted: (1) the litigation was in its early
stages; (2) the PTO proceedings would simplify issues for
trial; and (3) Plaintiff would not be unduly prejudiced by
the stay. (ECF No. 154.) Thereafter, on April 29, 2014, the
PTO examiner issued an Action Closing Prosecution
(“ACP”) upholding the patentability of all seven
challenged claims. (ECF No. 165.) On August 4, 2015, the PTO
examiner issued a Right of Appeal Notice (“RAN”)
concluding the reexamination and allowing Defendant to appeal
to the Patent Trial and Appeal Board (“PTAB”).
(ECF No. 165.)
November 4, 2015, Defendant filed its opening appellate
brief. (ECF No. 165.) Shortly thereafter, on February 25,
2016, the PTO examiner issued an answer to Defendant's
brief in which the examiner incorporated the RAN and
determined that there were no new grounds to reject the
claims of the '295 Patent. (ECF No. 165.) On May 5, 2016,
Plaintiff filed a Motion to Lift Stay. (ECF No. 165.) On
September 20, 2016, the Court ordered the stay lifted. (ECF
No. 173.) In its decision to lift the stay, the Court
considered three factors and found the PTAB's
confirmation of Plaintiff's patent shifted the analysis
to weigh in favor of lifting the stay.
March 23, 2017, Defendant filed a Motion to Reinstitute Stay
because the PTAB “reversed the patent examiner's
inter partes reexamination decision and
rejected” claims 1 through 7 of the '295 Patent.
(ECF No. 176 at 1.) Defendant argues because the PTAB
“rejected all of the asserted claims as unpatentable
over the prior art, ” the '295 Patent should not be
subjected to litigation at this time to conserve the
Court's and parties' resources. (ECF No. 176 at 2-5.)
Standard of Law
patentability is at issue, 35 U.S.C. § 318 allows a
party to request a stay of litigation upon an order of inter
partes reexamination of the patent. See Proctor &
Gamble, 549 F.3d 842, 848 (Fed. Cir. 2008).
“Congress instituted the reexamination process to shift
the burden of reexamination of patent validity from the
courts to the PTO.” H.R. Rep. No. 1307, 96th Cong., 2d
Sess., pt. 7 at 4 (1980), reprinted in 1980 U.S.C.C.A.N.
6460. Patent validity is a commonly asserted defense in
litigation and courts are cognizant of Congress's
intention of utilizing the PTO's specialized expertise to
reduce costly and timely litigation.” Canady v.
Erbe Elektromedizin GmbH, 271 F.Supp.2d 64, 78
(D.D.C. 2002). Thus, courts have 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);
see also Landis v. N. Am. Co., 299 U.S. 248, 254-55
(1936) (holding the court's power to stay proceedings
secondary to the inherent power the court has to control its
docket). “While courts are not required to stay
judicial proceedings pending reexamination of a patent, a
stay for purposes of reexamination is within the district
court's discretion.” Telemac Corp. v.
Teledigital, Inc., 450 F.Supp.2d 1107, 1110 (N.D. Cal.
2007); see also Medichem, S.A. v Rolabo, S.L., 353
F.3d 928, 936 (Fed. Cir. 2003) (holding a stay of proceedings
in the district court pending the outcome of the parallel
proceedings in the PTO remains an option within the district
courts have noted that there is a “liberal policy in
favor of granting motions to stay proceedings pending the
outcome of USPTO reexamination.” ASCII Corp. v. STD
Entm't USA, Inc., 844 F.Supp. 1378, 1381 (N.D. Cal.
1994). Other courts have recognized that a stay pending
reexamination must be approached with caution because it can
prolong the proceeding without achieving sufficient benefits.
See Eakin Enters. v. Specialty Sales LLC, Civ. No.
11-02008 LJO SKO, 2012 WL 2445154, at *10 (E.D. Cal. June 26,
2012). “In determining whether to stay [a] case pending
reexamination, the [c]ourt considers the following 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 nonmoving party.” Telemac, 450 F.Supp.2d
at 1110 (citations omitted).
argues the stay should be reinstituted because the reasons
for lifting the stay are no longer applicable since the PTAB
“reversed the patent examiner's . . . decision and
rejected all asserted claims” of the '295 Patent.
(ECF No. 176 at 1.) Defendant argues the stay is necessary to
conserve the Court's and parties' resources until the
PTAB makes a final ruling on the '295 Patent. (ECF No.
176 at 3.) Plaintiff argues the stay should not be
reinstituted because the PTAB has not released a final
decision, thus Plaintiff “should not be precluded from
enforcing its valid patent against an infringing
competitor.” (ECF No. 177 at 1.) Plaintiff argues the
longer litigation is postponed the more difficult it will be
to recover redress from Defendant's infringement, thus
the stay should not be reinstituted to avoid prejudice to
Plaintiff. (ECF No. 177 at 5.) The Court considers the
aforementioned three Telemac factors when
determining whether to reinstitute the stay pending
reexamination. Telemac, 450 F.Supp.2d at 1111.
Whether Discovery is Complete and Whether a Trial ...