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

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

ORDER by Judge Haywood S. Gilliam, Jr. GRANTING(121 in case 3:15-cv-03754-HSG; 106 in case 3:15-cv-03755-HSG; and 119 in case 3:15-cv-03752-HSG MOTION TO STAY.

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 IXI MOBILE (R&D) LTD., et al., 7 Case No. 15-cv-03752-HSG Plaintiffs, 8 ORDER GRANTING MOTION TO v. STAY 9 SAMSUNG ELECTRONICS CO LTD, et Re: Dkt. No. 119 10 al., 11 Defendants. 12 IXI MOBILE (R&D) LTD., et al., Case No. 15-cv-03754-HSG Northern District of California United States District Court 13 Plaintiffs, 14 v. Re: Dkt. No. 121 15 BLACKBERRY LIMITED, et al., 16 Defendants. 17 IXI MOBILE (R&D) LTD., et al., Case No. 15-cv-03755-HSG 18 Plaintiffs, 19 v. 20 APPLE INC, Re: Dkt. No. 106 21 Defendant. 22 Pending before the Court is Defendants' joint motion to stay the case pending completion 23 of inter partes review ("IPR") proceedings. Dkt. No. 119 ("Mot.").1 For the reasons articulated 24 below, the motion is GRANTED. 25 26 27 1 28 All docket citations refer to the docket in IXI Mobile (R&D) Ltd. et al. v. Samsung Electronics Co. Ltd. et al., Case No. 15-cv-03752-HSG, unless otherwise indicated. 1 I. BACKGROUND 2 A. America Invents Act 3 By enacting the Leahy-Smith America Invents Act ("AIA"), Congress sought to "establish 4 a more efficient and streamlined patent system that will improve patent quality and limit 5 unnecessary and counterproductive litigation costs" and "to create a timely, cost-effective 6 alternative to litigation." 77 Fed. Reg. 48,680-01 (Aug. 14, 2014) (to be codified at 37 C.F.R. 7 § 42.100 et seq). To that end, AIA created the IPR procedure, by which the Patent and Trademark 8 Office's ("PTO") Patent Trial and Appeal Board ("PTAB") may review the patentability of one or 9 more claims in a patent. See 35 U.S.C. §§ 311-319. IPR replaces the previous inter partes 10 reexamination procedure and converts the process from an examinational to an adjudicative one. 11 See Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1326 (Fed. Cir. 2013). 12 IPR allows any party other than the patent owner to challenge a patent's validity under 35 Northern District of California United States District Court 13 U.S.C. § 102 or § 103 "on the basis of prior art consisting of patents or printed publications." 35 14 U.S.C. § 311(a)-(b). The petitioning party must establish "a reasonable likelihood that the 15 petitioner would prevail with respect to at least [one] of the claims challenged in the petition" in 16 order for the PTO to institute IPR. 35 U.S.C. § 314(a). If the PTO decides to institute IPR, the 17 proceeding is conducted before a panel of three technically-trained Administrative Patent Judges 18 of the PTAB. See 35 U.S.C. §§ 6(a)-(c), 316. Following a final determination, the petitioning 19 party is estopped from asserting invalidity during a later civil action "on any ground that the 20 petitioner raised or reasonably could have raised during" the IPR. 35 U.S.C. § 315(e)(2). 21 B. This Litigation 22 Plaintiffs IXI Mobile (R&D) Ltd. and IXI IP, LLC sued Defendants Samsung Electronics 23 Co., Blackberry Limited, and Apple Inc. in the Southern District of New York on June 17, June 24 18, and October 2, 2014, respectively. See Dkt. No. 1 (Samsung); Case No. 3:15-cv-03754-HSG, 25 Dkt. No. 1 (BlackBerry); Case No. 3:15-cv-03755-HSG, Dkt. No. 1 (Apple). 26 On February 3, 2015, Defendants moved to transfer the cases to the Northern District of 27 California. Dkt. No. 44. On August 6, 2015, Judge Sullivan granted the motion. Dkt. No. 79. 28 The cases were related and reassigned to this Court on September 9, 2015. Dkt. Nos. 90, 94. An 2 1 initial case management conference occurred on November 5, 2015. Dkt. No. 130. 2 Discovery is underway. Infringement and invalidity contentions have been served. Dkt. 3 No. 124-1 ¶¶ 11-12. The parties have served and responded to written discovery and document 4 requests. Id. ¶ 7. Plaintiffs have begun review of Defendants' source code. Id. ¶ 14. The parties 5 have served a series of third-party subpoenas. Id. ¶ 17. Defendants have deposed a third-party 6 inventor and Plaintiffs' claim construction expert. Id. ¶¶ 16, 22. 7 Claim construction has just begun. The parties filed a joint claim construction statement 8 on June 8, 2015, and Plaintiffs filed an opening claim construction brief on July 8, 2015. Dkt. 9 Nos. 68, 73. 10 On June 18 and 19, 2015, Defendants Apple and Samsung filed petitions for IPR 11 challenging the validity of each asserted claim in all three patents at issue. Dkt. No. 119-1 ¶ 5. 12 Defendant BlackBerry is not a party to the IPR petitions. An institution decision is expected from Northern District of California United States District Court 13 PTAB on or before January 2, 2016. Mot. at 3 (citing 35 U.S.C. § 316(a)(11)). 14 II. DISCUSSION 15 A. Legal Standard 16 "Courts have inherent power to manage their dockets and stay proceedings, including the 17 authority to order a stay pending conclusion of a PTO reexamination." Ethicon, Inc. v. Quigg, 849 18 F.2d 1422, 1426-27 (Fed. Cir. 1988) (citations omitted). While courts are "under no obligation to 19 stay proceedings pending parallel litigation in the PTAB, . . . judicial efficiency and the desire to 20 avoid inconsistent results may, after a careful consideration of the relevant factors, counsel in 21 favor of a limited stay, even before the PTAB has acted on a petition for IPR." Delphix Corp. v. 22 Actifio, Inc., No. 13-cv-04613-BLF, 2014 WL 6068407, at *2 (N.D. Cal. Nov. 13, 2014). Indeed, 23 some courts in this district have recognized "a liberal policy in favor of granting motions to stay 24 proceedings pending the outcome of USPTO reexamination or reissuance proceedings." 25 Pragmatus AV, LLC v. Facebook, Inc., No. 11-cv-02168-EJD, 2011 WL 4802958, at *2 (N.D. 26 Cal. Oct. 11, 2011). 27 Courts consider three factors when determining whether to grant a stay pending IPR: "(1) 28 whether discovery is complete and whether a trial date has been set; (2) whether a stay will 3 1 simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice 2 or present a clear tactical disadvantage to the non-moving party." Evolutionary Intelligence, LLC 3 v. Facebook, Inc., No. 13-cv-04202-SI, 2014 WL 261837, at *1 (N.D. Cal. Jan. 23, 2014). The 4 moving party bears the burden of demonstrating that a stay is appropriate. Netlist, Inc. v. Smart 5 Storage Sys., Inc., No. 13-cv-05889-YGR, 2014 WL 4145412, at *1 (N.D. Cal. Aug. 21, 2014). 6 B. Stage Of The Litigation 7 The first factor the Court considers is whether the litigation is at an early stage. See AT&T 8 Intellectual Property I v. Tivo, Inc., 774 F. Supp. 2d 1049, 1052 (N.D. Cal. 2011). Specifically, 9 courts consider "whether discovery is complete and whether a trial date has been set." 10 Evolutionary Intelligence, 2014 WL 261837, at *1. 11 Plaintiffs argue that "[t]hese cases are sufficiently advanced that a stay is not appropriate." 12 Dkt. No. 124 ("Opp.") at 8. The Court does not doubt that the parties have already expended Northern District of California United States District Court 13 substantial resources on this litigation, but significant work remains to be done. No discovery, 14 dispositive motions, pretrial, or trial deadlines have been set. Claim construction briefing, though 15 underway, is not complete, and there is no claim construction or tutorial hearing set. Moreover, 16 the cases were only recently transferred to this Court. In similar circumstances, courts have found 17 that this factor weighs in favor of a stay. See Cypress Semiconductor Corp. v. LG Elecs., Inc., No. 18 13-cv-04034-SBA, 2014 WL 5477795, at *2 (N.D. Cal. Oct. 29, 2014) (finding that this factor 19 weighs in favor of a stay where claim construction briefing was complete but "[t]here has been no 20 dispositive motion practice, the claims have not been construed, and no deadlines for completing 21 discovery, motion practice or trial have been set"); DSS Tech. Mgmt., Inc. v. Apple Inc., No. 14- 22 cv-05330-HSG, 2015 WL 1967878, at *2-3 (N.D. Cal. May 1, 2015) (finding that this factor 23 weighs in favor of a stay where claim construction briefing was complete, substantial discovery 24 had been produced, and depositions had begun but fact discovery was not scheduled to close for 25 another six months, expert discovery had not begun, and no trial date had been set). 26 The Court finds that this factor weighs in favor of a stay. 27 C. Simplification of the Case 28 The second factor that the Court considers is whether granting a stay could simplify the 4 1 litigation. "The standard is simplification of the district court case, not complete elimination of it 2 by the PTAB." LELO, Inc. v. Standard Innovation (US) Corp., No. 13-cv-01393-JD, 2014 WL 3 2879851, at *3 (N.D. Cal. June 24, 2014). Granting a stay pending IPR is "particularly" likely to 4 simplify the case "when a party has obtained PTO review of each of the asserted claims in the 5 patents-in-suit." Evolutionary Intelligence, 2014 WL 261837, at *2. 6 Staying the case pending the outcome of IPR could simplify the case by rendering some or 7 all of Plaintiffs' infringement claims moot, estopping Defendants from asserting any arguments 8 they raised or reasonably could have raised in the IPR, and providing the Court with PTAB's 9 expert opinion on the claims at issue. See Evolutionary Intelligence, 2014 WL 261837, at *2. 10 Indeed, even if the PTAB decides to institute review and affirms the validity of every asserted 11 claim, the case would still be simplified because "such a strong showing would assist in 12 streamlining the presentation of evidence and benefit the trier of fact by providing the expert Northern District of California United States District Court 13 opinion of the PTO." PersonalWeb Techs., LLC v. Facebook, Inc., No. 13-cv-01356-EJD, 2014 14 WL 116340, at *4 (N.D. Cal. Jan. 13, 2014). 15 Because Defendant BlackBerry is not a party to the IPR petitions, it is not bound by the 16 estoppel rules set out in the statute. However, "[t]he court may alleviate any estoppel concern as 17 to [BlackBerry] by using its inherent power to condition a stay on [BlackBerry's] agreement to be 18 bound as if [it] had filed the relevant IPR petition." Id. at *6. At the November 5, 2015 hearing, 19 BlackBerry agreed on the record to accept this condition. 20 Plaintiffs argue that "[t]here is a growing consensus to deny stay requests" where, as here, 21 the PTO has not yet decided whether to institute the requested IPR proceedings. Opp. at 6. The 22 Court disagrees. See DSS Tech. Mgmt., Inc., 2015 WL 1967878, at *3 (finding this factor weighed 23 in favor of a stay even though institution decision not expected for another two months); Sec. 24 People, Inc. v. Ojmar US, LLC, No. 14-cv-04968-HSG, 2015 WL 3453780 (N.D. Cal. May 29, 25 2015) (finding this factor weighed in favor of a stay even though institution decision not expected 26 for another two months); OpenTV, Inc. v. Apple Inc., Case No. 3:14-cv-01622-HSG, Dkt. No. 217 27 (N.D. Cal. Oct. 21, 2015) (granting stay even though institution decision not expected for another 28 month); Pragmatus AV, 2011 WL 4802958, at *3 ("[I]t is not uncommon for [courts] to grant 5 1 stays pending reexamination prior to the PTO deciding to reexamine the patent."). Furthermore, 2 either party may file a motion to lift the stay if any part of the petitions for IPR are denied by the 3 PTO—so "any concern that the motion[] [is] premature is alleviated by the short time frame of the 4 initial stay and the Court's willingness to reevaluate the stay if inter partes review is not instituted 5 for all of the asserted claims." Evolutionary Intelligence, 2014 WL 261837, at *3. Here, the case 6 would be stayed for less than two months until the PTO is expected to decide whether to institute 7 IPR proceedings. 8 The Court finds that this factor weighs in favor of granting a stay conditioned on 9 Blackberry's agreement to be bound as if it were a party to the IPR petitions. If instituted, IPR is 10 likely to simplify the case. Moreover, a six-week delay before the PTO's decision whether to 11 institute IPR on all of the asserted patents is minimal. See PersonalWeb Techs., 2014 WL 116340, 12 at *4 (finding that four-month delay before PTO's institution decision would issue was "relatively Northern District of California United States District Court 13 short" and did not outweigh anticipated simplification of issues); Delphix, 2014 WL 6068407, at 14 *2 ("At a minimum, instituting a brief, limited stay of approximately five months to see whether 15 and how the PTAB will act on Defendant's IPR petitions will conserve judicial resources and 16 avoid inconsistent results."). 17 D. Undue Prejudice 18 The third factor for the Court to consider is whether Plaintiffs will be unduly prejudiced by 19 a stay. Plaintiffs argue that they will be unduly prejudiced because "the timing [of the filing of the 20 IPR petitions] suggests a dilatory motive." Opp. at 10. 21 The Court declines to read a dilatory motive into Defendants' timely exercise of their 22 statutory rights, standing alone. See Software Rights Archive, LLC v. Facebook, Inc., No. 12-cv- 23 03970-RMW, 2013 WL 5225522, at *6 (N.D. Cal. Sept. 17, 2013) ("Although defendants did wait 24 nearly a year to file the IPR petitions, they properly filed the petitions within the statutory time 25 frame, and the delay was not unreasonable under the facts here."); Cypress Semiconductor, 2014 26 WL 5477795, at *3 (finding that the fact that defendant filed its IPR petitions close to the end of 27 the statutory deadline "does not demonstrate undue delay"); Evolutionary Intelligence, LLC v. 28 Sprint Nextel Corp., No. 13-cv-04513-RMW, 2014 WL 819277, at *4 (N.D. Cal. Feb. 28, 2014) 6 1 ("[T]he IPR petitioners filed the petitions properly within the statutory time frame. Under these 2 facts, this delay was not unreasonable, and [plaintiff] does not point to any tangible undue 3 prejudice resulting from the IPR petitioners exercising their statutory rights."); Delphix, 2014 WL 4 6068407, at *3 ("[W]hile the Court does not condone gamesmanship, it will not require a patent 5 infringement defendant to file a petition for inter partes review significantly earlier than the time 6 allowed by statute."). 7 Furthermore, courts have consistently found that where, as here, the parties are not direct 8 competitors, Plaintiffs "do[] not risk irreparable harm by [Defendant's] continued use of the 9 accused technology and can be fully restored to the status quo ante with monetary relief." 10 Software Rights Archive, 2013 WL 5225522, at *6; see also Adaptix v. HTC Corp., No. 14-cv- 11 02359-PSG, slip op. at 6 (N.D. Cal. Aug. 5, 2015) ("[C]ourts decline to find undue prejudice 12 where the parties are not direct competitors and where any resulting prejudice can be addressed Northern District of California United States District Court 13 through a final damages award."). 14 Finally, Plaintiffs argue that a stay would "risk undermining [the] preparation of [their] 15 case." Opp. at 11. But the only example Plaintiffs give of such interference is the general 16 statement that they have "preservation concerns" regarding documents subpoenaed from third 17 parties. Id. Plaintiffs do not give any specific reason to worry about document preservation 18 issues, nor do they explain how a stay would prejudice any other aspect of their case preparation. 19 As a result, the Court finds that no risk of undue prejudice exists. 20 Because a stay will not cause undue prejudice to Plaintiffs, the Court finds that this factor 21 weighs in favor of granting the stay. 22 * * * 23 After weighing the three factors outlined above, the Court finds that a stay is warranted 24 here and will "effectuate[] the intent of the AIA by allowing the agency with expertise to have the 25 first crack at cancelling any claims that should not have issued in the patents-in-suit before costly 26 litigation continues." Software Rights Archive, 2013 WL 5225522, at *6. 27 28 7 1 III. CONCLUSION 2 For the foregoing reasons, the Court GRANTS Defendants' motion to stay the case 3 pending decision by the PTO whether to institute IPR of the claims asserted in all of Defendants' 4 petitions. Per its agreement on the record at the November 5 hearing, Defendant BlackBerry is 5 subject to the same scope of estoppel that applies to IPR practitioners under 35 U.S.C. § 315(e). 6 The parties shall file a joint status report within five days of the issuance of the PTO's decision(s) 7 on whether to institute IPR challenging the patents-in-suit, informing the Court of the PTO's 8 decision. After the PTO has made a decision on all of Defendants' petitions, the Court will issue 9 an order addressing further proceedings in the case. 10 IT IS SO ORDERED. 11 Dated: November 12, 2015 12 ______________________________________ Northern District of California United States District Court HAYWOOD S. GILLIAM, JR. 13 United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8