Ixi Mobile (R&D) Ltd. et al v. Apple, Inc.

Northern District of California, cand-4:2015-cv-03755

LETTER addressed to Judge Richard J. Sullivan from Harrison J. Frahn IV dated 7/2/2015 re: pre-motion conference for motion to stay. Document filed by Apple, Inc.

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SIMPSON THACHER & BARTLETT LLP 2475 HANOVER STREET PALO ALTO, CA 94304 (650) 251-5000 FACSIMILE (650) 251-5002 DIRECT DIAL NUMBER E-MAIL ADDRESS (650) 251-5065 hfrahn@stblaw.com VIA ECF AND EMAIL (SULLIVANNYSDCHAMBERS@NYSD.USCOURTS.GOV) July 2, 2015 Re: IXI Mobile (R&D) Ltd. and IXI IP, LLC v. Apple Inc., 14-cv-7954 (RJS); IXI Mobile (R&D) Ltd. et al. v. Samsung Electronics Co. Ltd., et al., 14-cv-4355 (RJS) Honorable Richard J. Sullivan United States District Judge Thurgood Marshall United States Courthouse 40 Foley Square New York, NY 10007 Dear Judge Sullivan: I write on behalf of Defendants Apple and Samsung to request a conference for a motion to stay this action pending Apple's and Samsung's recent inter partes review petitions ("IPRs") filed with the Patent Trial and Appeal Board ("PTAB"). On June 18 and 19, 2015, Apple and Samsung filed five IPR petitions, challenging the validity of each and every asserted claim of all three patents-in-suit. See PTAB Proceeding Nos. IPR2015-01442–46. This Court has broad discretion to manage its docket and stay proceedings, including "the inherent power to stay a case pending the [PTAB's] review of a patent" to conserve judicial resources. Software Rights Archive, LLC v. Facebook, Inc., 2013 WL 5225522, at *2 (N.D. Cal. Sept. 17, 2013) (internal citations omitted). There are three factors: (1) whether the stay would unduly prejudice the non- moving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) the stage of the case, including "whether discovery is complete and whether a trial date has been set." Id. Each of these factors supports a stay here. First, there is no prejudice to the Plaintiffs, much less undue prejudice. Apple and Samsung submitted all the IPRs before the statutory deadline, and are seeking this stay less than two weeks later.1 Further, because IXI IP, the patent owner, does not 1 Because Plaintiffs' complaint against Apple was not served until October 2, 2014, Apple's petitions were filed nearly three months before the deadline. BEIJING HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK S ÃO P A U L O SEOUL TOKYO WASHINGTON, D.C. SIMPSON THACHER & BARTLETT LLP Honorable Richard J. Sullivan -2- July 2, 2015 make any products or compete with the accused products, there is no risk of "irreparable harm" even if the patents were valid and infringed, neither of which is true. Id. at *6 (no prejudice where parties were not competitors and IPRs were filed within one-year deadline).2 Further, because IXI IP's claim can be "easily remedied through monetary damages," it will not be harmed by a stay. Cf. CDX Diagnostics, Inc. et al. v. U.S. Endoscopy Group, Inc. et al., No. 7:13-cv-05669-NSR, slip op. at 8 (S.D.N.Y. June 20, 2014) (finding competitive relationship rendered money damages inadequate). Nor can IXI rely on the passage of time to show prejudice; delays "based on the length of the [PTAB's] review standing alone do not amount to undue prejudice." PI-Net Int'l, Inc. v. Focus Bus. Bank, 2013 WL 4475940, at *4 (N.D. Cal. Aug. 16, 2013) (emphasis in original). Second, the PTAB's decision will simplify the case or eliminate it entirely. Since the new IPR rules were enacted, the "vast majority of requests" have been accepted, and challenged claims have been cancelled "in virtually all of the cases in which final written decisions have been issued." Brixham Solutions Ltd. v. Juniper Networks, Inc., 2014 WL 1677991, at *1 (N.D. Cal. Apr. 28, 2014); see also AIA Progress Report (as of February 26, 2015), available at http://www.uspto.gov/sites/default/files/documents/022615_aia_stat_ graph.pdf (showing 75% of all IPRs filed in 2015 were instituted). Because the IPR petitions cover 19 grounds of invalidity, relying on prior art that clearly invalidates each of the patents-in-suit, Apple and Samsung expect a similar outcome here. If the PTAB finds the asserted patents invalid, this action will be rendered entirely moot. And even if only certain claims or patents are "canceled in the reexamination, [it] would eliminate the need to try the infringement issue," relieving the parties from litigating those claims. Software Rights, 2013 WL 5225522, at *2 (internal citation omitted). There can be no question that waiting for the PTAB's decision will streamline the proceedings here: the IPR petitions rely upon many of the same references as the invalidity contentions already served in this case. Finally, because IPR petitioners are estopped from asserting invalidity "on any ground that the petitioner raised or reasonably could have raised during that inter partes review" for the claims on which the PTO reaches a final decision, even a finding of validity by the PTAB would simplify the issues in this case. 35 U.S.C. § 315(e)(2); cf. Intellectual Ventures II LLC v. JP Morgan Chase & Co., Dkt. No. 154, Case No. 1:13-cv-03777 (S.D.N.Y. Aug. 11, 2014) (denying stay where IPR petition was brought by non-party and where movant was thus not estopped by § 315(e)). It "is not uncommon for [courts] to grant stays pending reexam prior to the [PTAB] deciding to reexamine the patent." Evolutionary Intelligence LLC v. Yelp Inc., 2013 WL 6672451, at *7 (N.D. Cal. Dec. 18, 2013); see Brixham Solutions, 2014 WL 1677991, at *1 (same). A stay now will "maximize the likelihood that neither the Court nor the parties expend their assets addressing invalid claims," eliminating the need to construe and litigate 2 As set forth in Apple's prior letter, Dkt. No. 52, IXI Mobile (R&D), Ltd. ("IXI Mobile") lacks standing so its interests are irrelevant, but in any event, IXI Mobile does not make or sell any products either. SIMPSON THACHER & BARTLETT LLP Honorable Richard J. Sullivan -3- July 2, 2015 claim terms that may be rendered moot by the PTAB's decision. See Princeton Digital Image Corp. v. Konami Digital Entm't. Inc., 2014 WL 3819458, *3 (D. Del. 2014) (issuing pre-institution stay even after early Markman hearing). Delaying a stay here will undermine the very policies that support staying parallel litigation during IPR. Because it could be up to six months before institution, the parties will have already spent significant resources on claim construction, fact and expert discovery, and summary judgment motions by that time. Regarding the third factor, this case is in its early stages. No trial date has been set. Fact discovery will not close for months, expert reports have not yet been served, and summary judgment motions are not likely to be submitted until early 2016. Dkt. No. 22 (Scheduling Order). In these circumstances, where the "parties have yet to engage in the significant and costly work of conducting expert discovery and preparing summary judgment motions," courts routinely stay cases. PersonalWeb Techs., LLC v. Facebook, Inc., Case No. 13-cv-01356, 2014 WL 116340, at *4 (N.D. Cal. Jan. 13, 2014); see Softview LLC v. Apple Inc., 2013 WL 4757831, at *2 (D. Del. Sept. 4, 2013) (ordering stay even after fact discovery was completed and the court had issued a Markman opinion). In the alternative, Apple seeks a stay pending a ruling on its transfer motion, Dkt. Nos. 27-28. It is well established that courts must "first address whether it is a proper and convenient venue before addressing any substantive portions of the case." In re Nintendo Co., Ltd., 544 F. App'x 934, 941 (Fed. Cir. 2013). While a hearing date has not yet been set, Markman briefing is due over the next two months, and the parties will face an increased risk that their work product will need to be duplicated due to differences in local practices, procedures, and patent rules in the event of a transfer. Indeed, continuing to litigate while a transfer motion is pending would thwart "Congress' intent to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense." In re EMC Corp., 501 Fed. App'x 973, 975-76 (Fed. Cir. 2013); see also In re Horseshoe Entm't., 337 F.3d 429, 433 (5th Cir. 2003) (deeming transfer motions "a top priority" for this very reason). For the reasons set forth above, Apple and Samsung respectfully request a pre- motion conference, in the alternative, authorization to file the motion to stay without a conference. Should the Court deem the motion to be premature, Apple and Samsung respectfully request that any denial be without prejudice. Respectfully submitted, /s/ Harrison J. Frahn IV Harrison J. Frahn IV Counsel for Apple SIMPSON THACHER & BARTLETT LLP Honorable Richard J. Sullivan -4- July 2, 2015 /s/ Todd M. Friedman, P.C. Todd M. Friedman, P.C. Counsel for Samsung cc: Thomas Steven Biemer, Esq. Gregory A. Blue, Esq. Joshua D. Wolson, Esq. John J. Higson, Esq. Gary D. Colby, Esq. Marshall Beil, Esq. Jason W. Cook, Esq. Brian C. Riopelle, Esq. Derek H. Swanson, Esq. Gregory S. Arovas, Esq. Todd M. Friedman, Esq. James E. Marina, Esq. David Rokach, Esq. James Henry McConnell, Esq. Mark W. Halderman, Esq.