Aliphcom et al v. Fitbit, Inc.

Northern District of California, cand-4:2015-cv-02579

ORDER by Judge Haywood S. Gilliam, Jr. GRANTING {{47}} MOTION TO STAY.

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ALIPHCOM, et al., Case No. 15-cv-02579-HSG Plaintiffs, 8 ORDER GRANTING MOTION TO v. STAY 9 10 FITBIT, INC., Re: Dkt. No. 47 Defendant. 11 12 Before the Court is a motion, filed by Plaintiffs Aliphcom D/B/A Jawbone and Northern District of California United States District Court 13 Bodymedia, Inc. ("Jawbone"), to stay this action pending resolution of proceedings before the 14 International Trade Commission ("ITC"). Having carefully reviewed the parties' papers and 15 considered their arguments and the relevant legal authority, the Court hereby GRANTS 16 Jawbone's motion. 17 I. BACKGROUND 18 Jawbone instituted this action on June 10, 2015 against Defendant Fitbit, Inc. ("Fitbit"). 19 Jawbone filed the operative complaint on July 3, 2015, asserting infringement of six patents. On 20 July 7, 2015, Jawbone filed a complaint in the ITC, alleging infringement of the same six patents 21 under 19 U.S.C. § 1337. 22 The ITC instituted the investigation of Jawbone's claims on August 17, 2015. 80 Fed. 23 Reg. 162 (Aug. 21, 2015). The ITC has set a target date of December 21, 2016, for completion of 24 the ITC investigation, and has set several key interim dates, including a Markman hearing on 25 December 18, 2015, fact and expert discovery deadlines in January and March 2016, respectively, 26 summary determination motions in March 2016, and initial determinations in August 2016. 27 On October 2, 2015, Jawbone filed a motion to stay the district court proceedings pending 28 the ITC's decision. Dkt. No. 47. On October 9, 2015, Fitbit filed a Federal Rule of Civil 1 Procedure 12(c) motion for judgment on the pleadings on the ground that three of the six patents 2 claim unpatentable subject matter under 35 U.S.C. § 101. Dkt. No. 48. 3 II. ANALYSIS 4 This motion requires the Court to address a thorny, and apparently somewhat rare, policy 5 dilemma: should a plaintiff be permitted to invoke this Court's jurisdiction, then seek a stay of its 6 own case in favor of a later-filed proceeding in the ITC? On one hand, endorsing such a tactic 7 runs the risk of encouraging gamesmanship and forum shopping by plaintiffs. On the other hand, 8 Congress has expressly recognized the substantial inefficiency inherent in conducting district court 9 and ITC litigation concurrently regarding the same patents, and provided for a mandatory stay of 10 district court proceedings -- but only if the respondent seeks the stay. Jawbone represents, and 11 Fitbit does not contest, that patent defendants routinely invoke the mandatory stay provision 12 without dispute, recognizing the undesirability of simultaneous district court and ITC proceedings. Northern District of California United States District Court 13 See Rambus, Inc. v. Nvidia Corp., No. C 08-3343 SI, 2008 WL 5427599, at *1 (N.D. Cal. Dec. 30, 14 2008); Zenith Elecs. LLC v. Sony Corp., No. C 11-02439 WHA, 2011 WL 2982377, at *2 (N.D. 15 Cal. July 22, 2011); Tessera, Inc. v. Advanced Micro Devices, Inc., No. C 05-4063 CW, 2007 WL 16 3232441, at *2 (N.D. Cal. Nov. 1, 2007); BenQ Am. Corp. v. Forward Elecs. Co., No. C 05-2409 17 PJH, 2005 WL 3445629, at *1 (N.D. Cal. Dec. 15, 2005); FMC Corp. v. Summit Agro USA, LLC, 18 No. CV 14-51-LPS, 2014 WL 6627727, at *4 (D. Del. Nov. 14, 2014); Solomon Techs., Inc. v. 19 Toyota Motor Corp., No. 8:05-CV-1702-T-MAP, 2010 WL 715243, at *1 (M.D. Fla. Jan. 26, 20 2010). But here, Fitbit has decided for its own tactical reasons to forgo the stay to which it is 21 entitled, because it hopes this Court will find some of the patents-in-suit void under § 101 before 22 the ITC proceedings run their course. 23 Recognizing that either course of action has benefits and drawbacks, the Court finds, for 24 the reasons set forth below, that staying this action best promotes the critical values of conserving 25 judicial and party resources and avoiding the highly-problematic prospect of inconsistent rulings 26 regarding identical patents. 27 28 2 A. Without Dispute, Fitbit Would Be Entitled to a Mandatory Stay Under These 1 Circumstances, if it Chose to Invoke its Right to One 2 28 U.S.C. § 1659(a) provides that: 3 In a civil action involving parties that are also parties to a proceeding before the United States International Trade Commission 4 under section 337 of the Tariff Act of 1930, at the request of a party to the civil action that is also a respondent in the proceeding before 5 the Commission, the district court shall stay, until the determination of the Commission becomes final, proceedings in the civil action 6 with respect to any claim that involves the same issues involved in the proceeding before the Commission, but only if such request is 7 made within— 8 (1) 30 days after the party is named as a respondent in the proceeding before the Commission, or 9 (2) 30 days after the district court action is filed, whichever is later. 10 (emphasis added). 11 It is undisputed that this case and the ITC action involve the exact same patents and the 12 Northern District of California exact same issues. Dkt. No. 47 at 3; Dkt. No. 51 at 2. As the respondent in the ITC investigation, United States District Court 13 Fitbit thus would be entitled to the stay Jawbone requests here as a matter of right. But because 14 Fitbit has opted not to invoke § 1659(a), that provision's mandatory stay does not apply here. 15 B. Under These Circumstances, a Discretionary Stay is Warranted 16 Even though the mandatory stay provision does not apply, the Court also has discretionary 17 power to stay proceedings before it. "[T]he power to stay proceedings is incidental to the power 18 inherent in every court to control the disposition of the causes on its docket with economy of time 19 and effort for itself, for counsel, and for litigants." Landis v. N. Am. Co., 299 U.S. 248, 254 20 (1936). 21 In the Court's view, the most important rationales underlying the mandatory stay provision 22 in § 1659(a) apply with equal force even when a defendant decides for strategic reasons not to 23 invoke the stay, and the Court must keep those rationales in mind in deciding what course of 24 action makes the most sense. See In re Princo Corp., 486 F.3d 1365, 1368 (Fed. Cir. 2007) ("The 25 purpose of § 1659(a) was to prevent infringement proceedings from occurring 'in two forums at 26 the same time.'") (citing H.R. Rep. No. 103–826(I), at 141-42 as reprinted in 1994 U.S.C.C.A.N. 27 3773, at 3914). And even where, unlike here, the district court and ITC actions do not involve 28 3 1 precisely the same patents and same issues, "Congress explicitly intended that district courts 2 should consider using their discretionary power to stay patent infringement litigation that is related 3 to, but not duplicative of, an action before the ITC." Zenith, 2011 WL 2982377, at *2 (citing H.R. 4 Rep. No. 103–826(I), at 141 (after granting mandatory stay under § 1659(a), "[t]he district court 5 may use its discretionary authority to stay any other claims in the action before it")). 6 Courts consider three factors when determining whether to grant a stay pending parallel 7 proceedings: (1) "the possible damage which may result from the granting of a stay"; (2) "the 8 hardship or inequity which a party may suffer in being required to go forward"; and (3) "the 9 orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and 10 questions of law which could be expected to result from a stay." Lockyer v. Mirant Corp., 398 11 F.3d 1098, 1110 (9th Cir. 2005). The party seeking the stay bears the burden of proving that it is 12 warranted. Zenith, 2011 WL 2982377, at *2. Jawbone has met its burden here. Northern District of California United States District Court 13 1. Possible damage to Fitbit in granting stay 14 Fitbit fails to articulate what possible damage would result if a stay is granted. Fitbit 15 asserts generally that not resolving its Rule 12(c) motion before considering the stay motion would 16 harm it by delaying resolution of the § 101 validity challenge until the completion of ITC 17 proceedings two to three years from now. It further contends that granting the stay would allow 18 Jawbone to sue it in multiple forums and then control where Fitbit asserts its defenses. 19 Fitbit's arguments are unpersuasive. The ITC provides a venue for Fitbit to present its 20 § 101 challenges. See 19 C.F.R. § 210.18(b) (authorizing summary determination by the ITC 21 where "there is no genuine issue as to any material fact and that the moving party is entitled to a 22 summary determination as a matter of law"). The standards for judgment on the pleadings before 23 this Court and summary determinations before the ITC are effectively the same and, while it might 24 be somewhat uncommon, it is not unprecedented for the ITC to review § 101 challenges. See 25 Texas Instruments Inc. v. U.S. Int'l Trade Comm'n, 854 F.2d 1327, at *1-2 (Fed. Cir. 1988) 26 (reversing ALJ's determination that claims were invalid under § 101); Levi Strauss & Co. v. 27 Golden Trade, S.r.L., No. 90 CIV. 6291 (RPP), 1995 WL 710822, at *5 (S.D.N.Y. Dec. 1, 1995) 28 (ALJ denied summary determination motion regarding the validity of a claim under § 101); In the 4 1 Matter of Certain Commc'ns or Computing Devices & Components Thereof, USITC Inv. No. 337- 2 TA-925 (May 19, 2015) (denying motion for summary determination on claim's invalidity). And 3 by granting a stay, the Court does not deny Fitbit's right to raise a validity challenge in this Court. 4 Instead, the Court will hold Fitbit's motion in abeyance along with the rest of the case. Following 5 the resolution of the ITC proceeding, Fitbit will have an opportunity to be heard before this Court 6 should it so desire. 7 In addition, although Fitbit generally contends that a delay would be harmful, it fails to 8 adequately articulate that harm. At the hearing, Fitbit stated it was motivated by the "harm that 9 comes from having the cloud of a federal court lawsuit" and the desire "to dispel that cloud at the 10 earliest possible opportunity." Dkt. No. 66 at 10. Courts, however, are generally unwilling to 11 presume delay is harmful without specific supporting evidence. For example, courts have relied 12 on delay as a reason to deny a stay where the plaintiff is seeking injunctive relief and a delay of Northern District of California United States District Court 13 months or years would allow the defendant to continue infringing a patent, see LG Elecs., Inc. v. 14 Eastman Kodak Co., No. 09-CV-0344H (BLM), 2009 WL 1468703, at *2 (S.D. Cal. May 26, 15 2009). Similarly, courts have found persuasive the opposing party's argument that a delay will 16 result in the loss of documentary or testimonial evidence, id. Here, any generalized risk of 17 delayed litigation is minimized by the fact that the ITC proceeding is moving forward on a 18 comparatively expedited schedule, with trial in May 2016, an opinion to be issued by August 19 2016, and completion of the investigation by December 2016. Dkt. No. 66 at 14. See Zenith, 20 2011 WL 2982377, at *2 ("A stay should not be granted unless it appears likely that the other 21 proceedings will be concluded within a reasonable time in relation to the urgency of the claims 22 presented to the court."). 23 2. Possible hardship or inequities Jawbone will suffer if stay is denied 24 Under the second factor, "if there is even a fair possibility that the stay. . . will work 25 damage to someone else, the party seeking the stay must make out a clear case of hardship or 26 inequity." Lockyer, 398 F.3d at 1112 (internal quotation marks omitted). 27 Jawbone contends that "neither party claims a hardship in moving forward with the 28 litigation, making this factor neutral." Dkt. No. 47 at 7. Fitbit argues that because Jawbone has 5 1 failed to establish that it would suffer hardship if the litigation were to proceed, the stay should be 2 denied. Dkt. No. 51 at 6. In response, Jawbone contends that where "not staying the case merely 3 requires parties to continue litigating, courts find the second factor neutral." Dkt. No. 47 at 7. 4 Here, Fitbit has failed to establish a fair possibility of damage if the stay were to be 5 granted. Fitbit can present its § 101 challenges before the ITC and does not lose the opportunity to 6 argue the § 101 motion before this Court, and it has not articulated any other specific harm 7 resulting from delayed litigation in this Court. Moreover, Jawbone does not contend that it would 8 suffer any hardship, separate from having to proceed with the lawsuit, if the stay were denied. See 9 FormFactor, Inc. v. Micronics Japan Co., No. CV-06-07159 JSW, 2008 WL 361128, at *2 (N.D. 10 Cal. Feb. 11, 2008) ("The hardship related to defending a lawsuit is irrelevant when considering 11 whether to grant a stay."). Accordingly, this factor is neutral in the Court's assessment. 12 3. Simplification of the issues, proof, and questions of law Northern District of California United States District Court 13 Finally, Jawbone contends judicial economy weighs in favor of a stay. The ITC 14 proceeding will involve the same issues that this Court will confront (claim construction, 15 invalidity, and enforceability of the patents-in-suit), and Jawbone argues that a stay will minimize 16 the risk of inconsistent results and conserve resources. 17 The Court strongly agrees. The six patents before this Court are all the subject of the ITC 18 investigation. In the ITC investigation, discovery is underway and set to be completed in early 19 March 2016. Based on the schedule provided to the Court by the parties, a Markman hearing 20 already should have taken place in mid-December. By comparison, the action before this Court is 21 in its very early stages. The operative complaint was filed five months ago. The parties have not 22 engaged in discovery, and the Court has not set a scheduling order identifying dates for claim 23 construction, let alone a trial. And although this Court is not bound by the ITC's determination, 24 this Court would benefit from its final decision, because "issues resolved in the ITC hearing will 25 'bear upon the highly technical. . . questions which are likely to arise in the district court case,'" 26 FormFactor, 2008 WL 361128, at *2-3 (citing CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 27 1962)). The ITC's consideration of issues relevant to this case thus will inform, and likely narrow, 28 the scope of the issues to be decided here. See id. at *2. See also H.R. Rep. No. 103–826(I), at 6 1 141-42 (explaining that the record developed in the proceeding before the ITC may be used to 2 "expedite proceedings and provide useful information to the court"). As a practical matter, the 3 Court agrees with Jawbone that the ITC proceeding is likely to substantially advance the 4 resolution of the parties' entire dispute. 5 Fitbit contends that judicial economy requires the Court to first resolve the Rule 12(c) 6 motion regarding validity under § 101. Fitbit argues that the motion pertains to a threshold issue 7 that does not require discovery nor claim construction, and that if the Court finds one or more of 8 the claims patent-ineligible, there will be no issues to litigate as to those claims. It further 9 contends that the district court's decision would have preclusive effect in the ITC's investigation, 10 building efficiencies for the ITC. See In the Matter of Certain Pers. Computers with Memory 11 Mgmt. Info. Stored in External Memory & Related Materials, USITC Inv. No. 337-TA-352 (June 12 6, 1994) ("[R]es judicata principles are generally applicable to section 337 investigations."). But Northern District of California United States District Court 13 as discussed, Fitbit can raise its § 101 challenge before the ITC at any time; indeed, Fitbit does not 14 contest this. See Dkt. No. 66 at 11. The Court also finds unpersuasive Fitbit's suggestion that the 15 ITC's Administrative Law Judge, while able to review "issues of validity, infringement, 16 enforceability and the like," lacks the experience to review § 101 challenges. See id. 17 The inevitable risk of inconsistent rulings further, and fatally, undermines Fitbit's judicial 18 economy claims. Should this case proceed alongside the ITC investigation, there is a strong 19 possibility that the same patents will be interpreted differently, potentially creating inconsistent 20 claim construction rulings, conflicting validity and enforceability determinations, and piecemeal 21 litigation. When asked at the hearing what could be done to minimize these risks, the most Fitbit's 22 counsel could offer was "close communication with both this Court and the commission and 23 collaboration among professional counsel to make sure we get ahead of those issues," and he 24 candidly acknowledged the obvious fact that there likely is no "magic bullet" that completely 25 eliminates these risks. Dkt. No. 66 at 13. The Court will go further: it is beyond reasonable 26 dispute that proceeding with this action at the same time as the ITC action will likely produce a 27 number of factually and legally inconsistent rulings regarding the identical patents at issue in both 28 forums. This factor accordingly supports a stay. 7 III. CONCLUSION 1 For all of these reasons, the Court exercises its discretion to stay this action pending 2 resolution of the ITC proceeding. See FormFactor, 2008 WL 361128, at *3; Avago Techs. U.S. 3 Inc. v. IPtronics, Inc., No. 5:10-CV-02863-EJD, 2013 WL 623042, at *2-3 (N.D. Cal. Feb. 15, 4 2013). Jawbone's motion is accordingly GRANTED. Fitbit's motion for judgment on the 5 pleadings, Dkt. No. 48, will be held in abeyance during this time. The parties shall file a joint 6 status report within five days of the issuance of the ITC's decision, informing the Court of the 7 decision. At that time, the Court will issue an order addressing further proceedings in the case. 8 Because the ITC proceeding and this case involve identical patents, and because the parties have 9 already agreed to coordinate discovery and consider measures such as cross-designation of 10 testimony, see Dkt. 66 at 4, the Court would expect this case to proceed on an expedited basis after 11 the ITC matter ends. 12 Northern District of California IT IS SO ORDERED. United States District Court 13 Dated: 12/30/2015 14 15 16 HAYWOOD S. GILLIAM, JR. United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 8