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 Thomas S. Biemer, Esquire dated July 8, 2015 re: Response to pre-motion letter from Defendants Apple and Samsung requesting a stay. Document filed by IXI IP,LLC, IXI Mobile (R&D) Ltd.

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DIRECT DIAL NUMBER: Thomas S. Biemer (215) 575-7025 tbiemer@dilworthlaw.com July 8, 2015 Honorable Richard J. Sullivan Thurgood Marshall United States Courthouse 40 Foley Square New York, NY 10007 Re: IXI Mobile (R&D) Ltd. et al. v. Samsung Elec. Co. Ltd. et al., No. 14-cv-4355-RJS IXI Mobile (R&D) Ltd. et al. v. Apple Inc., No. 14-cv-7954-RJS Dear Judge Sullivan: We write on behalf of IXI Mobile (R&D) Ltd. and IXI IP, LLC ("IXI") in response to the pre-motion letter from Apple and Samsung ("Defendants") requesting a stay. IXI served Samsung with a complaint on June 20, 2014. Defendants waited until two days before Samsung's statutory deadline to file their petitions for inter partes review ("IPR"). Under these circumstances, no stay is warranted. Over the past year, the parties have engaged in extensive, costly discovery, including: (a) written discovery followed by meet-and-confer negotiations; (b) review of Defendants' source code, including hiring outside consultants; (c) preparation of infringement contentions, including amendments; (d) preparation of invalidity contentions, including amendments; (e) negotiation and filing of a Joint Claim Chart; (f) IXI's preparation of its opening claim construction brief and accompanying expert declaration, filed today; (g) IXI's service of third party subpoenas on mobile phone carriers and ongoing negotiation about their responses; (h) Apple's service of four subpoenas, including on third-party inventors; and (i) Defendants' deposition of a third-party inventor. Importantly, the PTO has not yet decided whether to institute IPRs. Defendants filed five petitions against three patents. IXI has 90 days to respond to the IPR petitions, and the PTO then has 90 days to decide if it will initiate one or more IPRs, and, if it does, what arguments to consider. See 35 U.S.C. § 314(b); 37 C.F.R. § 42.107(a)-(b). Thus, the Court will not know until December whether there will be an IPR or what its scope might be. The Court should not issue a stay based on the pending IPR petitions. "There is "no per se rule that patent cases should be stayed pending [IPR], because such a rule would invite parties to unilaterally derail litigation." CDX Diagnostics, Inc. v. U.S. Endoscopy Group, Inc., 2014 WL 2854656, at *3 (S.D.N.Y. June 20, 2014) ("CDX"). "Courts generally consider three factors in deciding a motion to stay pending review by the PTO: (1) whether a stay will simplify the issues in question and trial of the case; (2) the stage of the proceedings; and (3) whether a stay will prejudice the nonmoving party." Id. at * 2. "These factors are not exclusive, however, and in the end, an overarching consideration of the circumstances in their totality governs." Id.; 1500 Market Street · Suite 3500E · Philadelphia, PA 19102-2101 · 215-575-7000 · fax 215-575-7200 Cherry Hill NJ · Harrisburg, PA · Red Bank. NJ · Washington, DC · Wilmington, DE · New York, NY Honorable Richard J. Sullivan July 8, 2015 Page 2 see also Rensselar Polytechnic Inst. v. Apple, Inc., 2014 WL 201965, at * 3 (N.D.N.Y. Jan. 15, 2014) ("RPI"). Here, these factors strongly weigh against the entry of a stay. First, until the PTO rules on the IPR petitions, the Court cannot conclude that a stay would simplify these cases. As Federal Circuit Judge Bryson, sitting by designation, noted earlier this year, the "majority of courts that have addressed the issue have postponed ruling on stay requests or have denied stay requests when the PTAB has not yet acted on the petition for review." Trover Group, Inc. v. Dedicated Micros USA, 2015 WL 1069179, at * 5 (E.D.Tex. Mar. 11, 2015) (collecting cases); see also RPI, 2014 WL 201965, at * 3 (no obligation to stay proceedings "especially … when the Patent Office has yet to decide whether to institute IPR proceedings"). In CDX, this Court reached the same conclusion. See CDX, 2014 WL 2854565, at * 3, * 4; see also Intellectual Ventures II LLC v. HP Morgan Case & Co., Doc. No. 154, Case No. 1:13-cv-03777, slip op. at 5 (S.D.N.Y. Aug. 11, 2014) (Hellerstein, J). Defendants suggest it is "not uncommon" for courts to grant stays in these circumstances. (Ltr. at 2.) Yet that is a minority position that this Court and a sitting Judge of the Federal Circuit have rejected. Defendants also imply that the PTAB will initiate IPR proceedings because the "vast majority of [IPR] requests have been accepted …." (Id. at 2.) However, Judge Bryson rejected the same argument: "overall statistics for the number of petitions that are reviewed and the number of claims that are invalidated are not especially enlightening as to the likely disposition of any particular patents or claims …." Trover Group, 2015 WL 1069179, at * 4. Thus, it "would be speculative for the Court to extrapolate from the statistics and conclude that it is likely that the PTAB will institute inter partes review in this case." Id. An IPR also would not simplify this action because BlackBerry has not joined the petitions. If IPR petitioners lose, they cannot raise in court invalidity arguments that the PTO rejected. See 35 U.S.C. § 315(e)(2). However, as a non-party to the petitions, BlackBerry would not be estopped, even though it is a defendant in a related action. Courts have "conditioned the grant of stays pending IPR … on the non-party co-defendants agreeing to be bound … as if they themselves had filed the relevant IPR petitions." Capella Photonics, Inc. v. Cisco Systems, Inc., 2015 WL 1006582, at * 2 & n. 3 (N.D.Cal. March 6, 2015). Second, this case is sufficiently advanced that a stay is not appropriate. As noted, the parties have engaged in substantial pre-trial activity. IXI filed its opening claim construction brief today, and claim construction briefing will likely be complete before briefing on any stay motion. In similar circumstances, courts routinely reject stay motions. For example, in RPI, the court rejected Apple's stay motion and noted that there was no reason to halt claim construction while the PTO considered whether to initiate an IPR. See RPI, 2014 WL 201965, at * 9. Similarly, in Trover Group, Judge Bryson rejected the stay motion in part because the defendants "waited for nearly a year after the complaints were filed against them before filing their petition for inter partes review." Trover Group, 2015 WL 1069179, at * 3. There, as here, the defendants waited until the statutory deadline to file their IPR petition. They filed for an IPR and a stay after engaging in substantial discovery and after the start of the claim construction process. Judge Bryson chastised the defendants for their delay in terms that apply equally here: "The defendants could have filed their motion for a stay at a time when the case could truly be said to have been in its infancy. …Because this factor was within the defendants' control, the Court is 1500 Market Street · Suite 3500E · Philadelphia, PA 19102-2101 · 215-575-7000 · fax 215-575-7200 Cherry Hill NJ · Harrisburg, PA · Red Bank. NJ · Washington, DC · Wilmington, DE · New York, NY Honorable Richard J. Sullivan July 8, 2015 Page 3 not sympathetic with the defendants' contention that they will be exposed to potentially unnecessary expenses in the absence of a stay." Id. at * 4. Third, IXI would suffer undue prejudice from a stay, both because the timing suggests a dilatory motive and because staying this case now could interfere with IXI's case preparation. In general, the "question of undue prejudice or clear tactical advantage is informed by four subfactors, including (1) the timing of the review request; (2) the timing of the request for stay; (3) the status of the review proceedings; and (4) the relationship of the parties." RPI, 2014 WL 201965, at * 4. The first three factors all demonstrate prejudice. The fact that Defendants "wait[ed] until one year after being served with a complaint in an infringement action to submit [the] IPR petition at least raises the possibility that it was a dilatory tactic." RPI, 2014 WL 201965, at * 4. The timing here is even more suspicious, as they waited until after IXI's claim construction brief is due. Thus, they get a free look at positions that IXI might assert in response to the IPRs. In addition, they waited until the day after they deposed a third-party inventor to seek a stay. Courts have held that such timing "raise some alarm bells that [the IPR petitions] are a litigation gambit." Tyco Fire Prods. LP v. Victaulic Co., 2011 WL 4632689, at *4 (E.D.Pa. Oct. 4, 2011). Indeed, Defendants' decision to seek a stay after deposing a non-party inventor and on a schedule that ensures them access to IXI's claim construction briefs "shows a clear tactical motivation." Id. Despite many opportunities, they also did not inform IXI or the Court of their plan to file for an IPR or a stay, even though they must have been planning for months to do so. See RPI, 2014 WL 201965, at *5 (Apple "neglected to inform the court and plaintiffs" about its IPR request). A stay would also risk undermining IXI's preparation of its case. IXI has served subpoenas on third parties and is engaged in negotiations with each of them about the documents that it will produce. Where a plaintiff requires proof from third parties, preservation concerns highlight the potential prejudice of a stay. See Trover Group, 2015 WL 1069179. The Court should not issue a stay based on the pending motion to transfer. Apple sought leave to file a motion to transfer on December 15, 2014, and it filed briefs on February 3, 2015, February 20, 2015, and March 5, 2015. It never sought a stay. Now, nearly seven months after raising the issue, Apple belatedly seeks one. Where a stay would "complicate the orderly proceeding of the completion of the discovery period, which is otherwise currently in full swing," a stay pending transfer is not appropriate. Pragmatus AV, LLC v. Yahoo!, Inc., 2013 WL 2372206, at * 3 (D. Del. May 30, 2013). Apple's rationale for seeking a stay is that it might have to engage in unnecessary claim construction briefing, even though Apple participated for months in the process of negotiating a Joint Claim Terms Chart and otherwise discussing claim construction. By delaying its request, Apple ensured that IXI incurs the costs of its claim construction brief. Apple also obtained a free look at IXI's arguments and supporting evidence. For all these reasons, the Court should deny Apple and Samsung leave to file a motion. Respectfully, /s/ Thomas S. Biemer cc: Counsel of Record via ECF 1500 Market Street · Suite 3500E · Philadelphia, PA 19102-2101 · 215-575-7000 · fax 215-575-7200 Cherry Hill NJ · Harrisburg, PA · Red Bank. NJ · Washington, DC · Wilmington, DE · New York, NY