Slingshot Printing LLC v. HP Inc.

Western District of Texas, txwd-6:2019-cv-00362

REPLY to Response to Motion, filed by HP Inc., re [27] Opposed MOTION to Stay Case Pending Resolution of its Motion To Dismiss filed by Defendant HP Inc.

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION § SLINGSHOT PRINTING LLC, § § Plaintiff, § § § CIVIL ACTION NO. 6:19-cv-362-ADA v. § § JURY TRIAL DEMANDED HP INC., § § Defendant. § § § HP INC.'S REPLY IN SUPPORT OF MOTION TO STAY PENDING RESOLUTION OF ITS MOTION TO DISMISS I. INTRODUCTION HP seeks a stay while the Court addresses the threshold issue of whether the necessary parties are present to maintain this action. By assuring that all owners of the asserted patents are parties to the case, this litigation may proceed without risking inefficiency or error. Hopeful for a settlement, Slingshot instead seeks to hurry the case in an effort to impose burden on HP. Slingshot faces no real prejudice from a stay. Slingshot's primary complaint in its Opposition (Dkt. No. 33) ("Opp.") is that HP already delayed this litigation, but that is not true. HP sought modest extensions to respond to Slingshot's serial complaints asserting unusually large numbers of patents, and Slingshot consented to these extensions. Slingshot collectively asserted 34 patents against HP (31 patents remain asserted), and 18 of these patents were newly raised in three amended complaints and a new complaint filed three months after the original complaints. Moreover, Slingshot delayed in producing the Funai- Slingshot agreements that reveal the defects in Slingshot's statutory standing. HP diligently filed the instant motions after receiving those documents. Slingshot cannot reasonably claim prejudice from a stay to allow the Court to determine whether all necessary parties are present. The benefits of a stay exceed the costs, and a stay should therefore be ordered. II. ARGUMENT A. A Stay Will Not Unduly Prejudice Slingshot 1. The Proposed Stay Will Likely Be Short HP's Motion to Dismiss (Dkt. No. 28) presents a straightforward issue—whether Funai retained substantial rights in patents purportedly assigned to Slingshot. Resolution of this issue turns on patent transfer agreements between Funai and Slingshot that have already been produced and filed with the Court under seal. No other discovery has been requested. Therefore, Gray v. First Winthrop Corp., 133 F.R.D. 39 (N.D. Cal. 1990) (Opp. at 6 n.13) is 1 distinguishable. In Gray, discovery was needed to adjudge the defendants' motions to dismiss on the merits. Gray, 133 F.R.D. at 41. Slingshot concedes that the stay will likely not be more than three months. See Opp. at 7. 2. Slingshot Will Not Suffer Undue Prejudice during the Duration of the Proposed Stay Slingshot does not need relief on an accelerated basis. Slingshot is a non-practicing entity, and monetary damages would be sufficient to make Slingshot whole if any liability is found. Slingshot will therefore not suffer undue prejudice from a stay, particularly one of short duration. These circumstances are distinguishable from the cases cited by Slingshot. In KIPB LLC v. Samsung Elecs. Co., Ltd., No. 2:19-cv-00056-JRG-RSP, 2019 WL 6173365 (E.D. Tex. Nov. 20, 2019), the court found that the proposed stay would have been "very lengthy." Id. at *3. In MiMedx Grp., Inc. v. Tissue Transplant Tech. Ltd., No. SA-14-CA-719, 2015 WL 11573771 (W.D. Tex. Jan. 5, 2015), the parties were direct competitors and the proposed stay would have been at least 17-23 months. Id. at *2. 3. Slingshot Caused the "Delay" of Which It Complains Slingshot's own actions necessitated the extensions granted to date and, in fact, one of the extensions was actually requested by Slingshot itself. In three complaints filed in June 2019, Slingshot asserted 16 patents against HP. HP received an initial 30-day extension in large part to review the large number of asserted patents and infringement allegations against many accused products that included many different printers, printheads, and ink cartridges from diverse product lines. On August 2, 2019, Slingshot informed HP that it would like to file a motion for another 30-day extension because Slingshot planned to amend its complaints to add "one or more additional patents." See Dkt. No. 15 at 1. On September 20, 2019, Slingshot amended its three complaints and filed a fourth complaint, collectively asserting 18 new patents (two of the 2 original 16 patents were dropped). In order to evaluate the 18 new patents (and 32 patents overall) that were asserted against scores of HP products, HP requested, and Slingshot agreed to, reasonable additional extensions of time to respond to Slingshot's complaints. This history demonstrates that the extensions were not part of a scheme by HP to delay, but were instead driven by Slingshot's own decisions to assert so many patents across multiple complaints separated by several months. Far from claiming prejudice at the time, Slingshot consented to the extensions, even requesting one extension itself based on its plans to more than double the number of asserted patents in these cases. Likewise, Slingshot's criticism is unfounded that HP did not raise Slingshot's standing defect earlier. In October 2019, when HP initially requested that Slingshot provide the non- public Funai-Slingshot agreements, Slingshot demurred. After weeks of negotiation, Slingshot eventually agreed to produce the agreements, but only after the parties had a teleconference with this Court to discuss the issue. As ordered by this Court, HP subsequently filed an unopposed motion for production of such documents. This motion was filed on November 19, 2019, and the documents were produced on November 21, 2019. After analyzing the agreements, HP acted diligently to prepare and file its Motions to Dismiss (and Motions to Stay) on December 13, 2019. Had Slingshot agreed to produce the requested agreements earlier, HP's Motions to Dismiss would have been filed earlier. Slingshot needed to produce its agreements with Funai first, so HP cannot be faulted for not discovering Slingshot's standing defect earlier. Indeed, it was fortunate that HP discovered the defect as early as it did—before the parties and Court proceed through contention discovery and claim construction. 4. A Stay Would Not Present a Clear Tactical Disadvantage for Slingshot Slingshot argues that a stay would allow HP to "get an IPR petition(s) on file well ahead of this case." Opp. at 6 (emphasis added). Although it is unclear what Slingshot means, the 3 filing of IPR petitions (if any) would not present a clear tactical disadvantage. Indeed, cases are routinely stayed pending resolution of an IPR (although this Motion makes no such request). See, e.g., Crossroads Sys., Inc. v. Dot Hills Sys. Corp., Nos. A-13-CA-800-SS, 2015 WL 3773014, at *2 (W.D. Tex. June 16, 2015). Moreover, a stay would not affect the one-year deadline for HP to file IPR petitions. See 35 U.S.C. § 315(b). B. A Stay Will Simplify a Foundational Issue of the Case Slingshot is wrong when it asserts that "no issues will be decided or narrowed during the pendency of the stay." Opp. at 6. The proposed stay would run until the Court decides the issue of whether Slingshot has statutory standing (and until Funai is joined, if required). This is a threshold determination, without which proceeding in the case risks inefficiencies (see infra). C. The Early Stage of the Case Favors a Stay Slingshot does not dispute that the case is in its infancy. Instead, Slingshot recycles its incorrect claim that HP has caused delay (see Section II.A.3 supra). D. A Stay Will Reduce the Burden of Litigation on the Parties and the Court If HP's motion is granted, the potential for duplication of work by the parties and the Court will be removed, or the case will be dismissed in its entirety. If the Court determines that Funai has substantial rights in the asserted patents and should be joined, then Funai should participate in all phases of the litigation. One of the prudential concerns behind the statutory standing doctrine is that a patentee should participate in a litigation that may invalidate or render unenforceable its patents. See, e.g., Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1343 (Fed. Cir. 2006). Funai should be present during all phases of the case, especially claim construction, because this process will be central to the issue of the validity of the patents. See A123 Sys., Inc. v. Hydro-Quebec, 626 F.3d 1213, 1221 (Fed. Cir. 2010) (finding that patent owner was indispensable because, among other things, licensee may 4 have sought a claim construction that risks the validity of the patent claims); Nellson Northern Operating, Inc. v. Elan Nutrition, LLC, No. 2:02-cv-304, 2008 WL 11350291, at *8 (D. Vt. Dec. 19, 2008) ("[T]he Court questions how claim construction will go forward without [patent owner], to ensure that all information regarding the patents-in-suit is available, and to protect [patent owner]'s rights."). If Funai is joined later, claim construction may have to be redone. Slingshot's argument that Funai will be a "plaintiff in name only," Opp. at 1, is a distraction. The extent to which Funai and Slingshot would collaborate (or have disputes) in the prosecution of this case is a matter of their private agreement. See Dkt. No. 33-3 at ¶ 9.1. In any event, if the Court finds that Funai retains substantial rights, then Funai should be given an opportunity to participate in the litigation impacting its patents before the case proceeds. In addition, HP should not be deprived of the ability to take timely discovery of Funai. If Funai is a party, the discovery available to HP would be significantly enhanced (e.g., HP may propound interrogatories only on parties) and made more efficient (Funai may invoke its status as a foreign non-party to refuse or delay discovery). If Funai is added later in the litigation, HP may be required to forego certain discovery or have discovery unreasonably delayed. Alternatively, if Funai is required but not able to be joined, the case should be dismissed in its entirety because Funai is an indispensable party under FED. R. CIV. P. 19. Under this outcome (absent a stay), any work done to this point would have been futile. Slingshot's suggestion that it and Funai can fix the statutory standing defect (Opp. at 5 n.12) is simply wrong. Under binding Federal Circuit authority, statutory standing defects cannot be rectified through nunc pro tunc agreements. See Alps South, LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 1384 (Fed. Cir. 2015). III. CONCLUSION For the foregoing reasons, HP respectfully requests that the Court grant its Motion to Stay. 5 Dated: January 13, 2020 Respectfully submitted, /s/ Barry K. Shelton Barry K. Shelton Texas State Bar No. 24055029 SHELTON COBURN LLP 311 RR 620, Suite 205 Austin, TX 78734-4775 bshelton@sheltoncoburn.com (512) 263-2165 (Telephone) (512) 263-2166 (Facsimile) Rick L. Rambo Texas State Bar No. 00791479 rick.rambo@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP 1000 Louisiana Street, Suite 4000 Houston, Texas 77002-5006 T: 713.890.5000 F: 713.890.5001 Andrew V. Devkar (pro hac vice) andrew.devkar@morganlewis.com 2049 Century Park East, Suite 700 Los Angeles, CA 90067-3109 T. 310.907.1000 F. 310.907.2000 Amanda S. Williamson (pro hac vice) amanda.williamson@morganlewis.com 77 West Wacker Drive, Fifth Floor Chicago, IL 60601 T. 312.324.1000 F. 312.324.1001 Counsel for Defendant HP Inc. 6 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the above and foregoing document has been served on all counsel of record via the Court's ECF system. /s/ Barry K. Shelton Barry K. Shelton 7