Rembrandt Gaming Technologies, LP v. Boyd Gaming Corporation et al

Filing 73

ORDER Granting 60 Motion to Stay. The matter is STAYED pending the PTO's reexamination of the '477 patent. FURTHER ORDERED that Plaintiff Rembrandt shall file a status report every ninety (90) days to update the Court on the reexaminatio n proceedings and to provide notice to the Court when the reexamination proceedings conclude and the PTO issues its decision in the reexamination request. The parties are then to confer and submit a joint status report to the Court. ALL OTHER PENDING MOTIONS ARE DENIED with leave for the moving party to renew when the stay is lifted. Signed by Judge Miranda M. Du on 12/3/12. (Copies have been distributed pursuant to the NEF - MMM)

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF NEVADA 8 *** 9 10 REMBRANDT GAMING TECHNOLOGIES, Case No. 2:12-cv-00775-MMD-GWF LP, Plaintiff, 11 13 (Defs.’ Motion to Stay – dkt. no. 60) v. 12 ORDER BOYD GAMING CORPORATION, et al., Defendants. 14 15 16 I. SUMMARY Before the Court is Defendants’ Motion to Stay. (Dkt. no. 60.) For the reasons 17 18 discussed below, the Motion is granted. 19 II. BACKGROUND 20 Plaintiff Rembrandt Gaming Technologies, LP (“Rembrandt”) filed this patent 21 infringement suit against Defendants WMS Gaming, Inc., Boyd Gaming Corporation, 22 Caesars Entertainment Operating Company, Inc., MGM Resorts International, Inc., and 23 LV Gaming Ventures, LLC on May 9, 2012, alleging Defendants infringed Rembrandt’s 24 “Electronic Second Spin Slot Machine” patent, U.S. Patent No. 6,641,477. (See dkt. no. 25 1.) 26 infringe on its ‘477 patent. Defendants operate various video slot machine games that Rembrandt alleges 27 On June 29, 2012, Defendants filed a request for ex parte reexamination of the 28 ‘477 patent with the United States Patent and Trademark Office (“PTO”) pursuant to 35 1 U.S.C. § 302. (See dkt. no. 60-B.) On August 21, 2012, the PTO granted the 2 reexamination request on the ground that “substantial new question of patentability 3 affecting claims 1, 32, and 34” of the ‘477 patent was raised by the reexamination 4 request. (See dkt. no. 60-A.) 5 Shortly thereafter, Defendants filed this Motion to Stay on August 24, 2012, 6 arguing that the case should be stayed pending the results of the PTO’s reexamination 7 of the patent claims. (Dkt. no. 60.) 8 III. LEGAL STANDARD 9 Reexamination is a procedure that allows the PTO to reconsider the validity of an 10 existing patent. 35 U.S.C. §§ 301, et seq. Reexamination of patent validity in the PTO is 11 a “useful and necessary alternative for challengers and for patent owners to test the 12 validity of United States patents in an efficient and relatively inexpensive manner.” 13 H.Rep. No. 96-1307(I), at 4. As the Federal Circuit has explained, “[o]ne purpose of the 14 reexamination procedure is to eliminate trial of that issue . . . or to facilitate trial of that 15 issue.” Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983). “Courts 16 need not expend unnecessary judicial resources by attempting to resolve claims which 17 may be amended, eliminated or lucidly narrowed by the patent reexamination process 18 and the expertise of its officers.” Anascape, Ltd. v. Microsoft Corp., 475 F. Supp. 2d 19 612, 615 (E.D. Tex. 2007). 20 “[T]here is a liberal policy in favor of granting motions to stay proceedings pending 21 the outcome of USPTO reexamination or reissuance proceedings.” ASCII Corp. v. STD 22 Entm’t USA, Inc., 844 F. Supp. 1378, 1381 (N.D. Cal. 1994). 23 proceedings is incidental to the power inherent in every court to control the disposition of 24 the causes on its docket with economy of time and effort for itself, for counsel, and for 25 litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “How this can best be done 26 calls for the exercise of judgment, which must weigh competing interests and maintain 27 an even balance.” 28 proceedings does not operate as an automatic stay of federal court litigation involving Id. at 254-55. The “power to stay “Although the commencement of reexamination 2 1 identical claims, a district court retains the authority, pursuant to its inherent power to 2 control and manage its docket, to stay an action pending the outcome of reexamination 3 proceedings before the PTO.” Spread Spectrum Screening LLC v. Eastman Kodak Co., 4 277 F.R.D. 84, 87 (W.D.N.Y. 2011). 5 Local Rule 16.1-20 governs stays of patent infringement suits pending 6 reexamination proceedings, and largely echoes the standards set out in other districts. 7 In particular, it instructs courts to consider, among other factors, “(1) whether a stay will 8 unduly prejudice or present a clear tactical disadvantage to the nonmoving party, (2) 9 whether a stay will simplify the issues in question and the trial of the case, (3) whether 10 discovery is complete, and (4) whether a trial date has been set.” Local Rule 16.1-20; 11 see, e.g., Anascape, 475 F. Supp. 2d at 615. 12 IV. DISCUSSION 13 A. Undue Prejudice or Tactical Disadvantage 14 Defendants argue that a stay will not unduly prejudice Rembrandt because 15 Rembrandt does not compete against Defendants, does not seek a permanent 16 injunction, and does not practice these patents. Rembrandt contends that a stay will be 17 prejudicial primarily due to the lengthy reexamination process. 18 argues that discovery has already commenced with Rembrandt producing thousands of 19 pages of documents, while Defendants have not yet disclosed “anything similar.” Rembrandt further 20 The Court begins its analysis with a summary of the relevant background on the 21 patent reexamination process. According to the PTO, a total of 11,737 patents 22 reexamination decisions have been made by the PTO. (See dkt. no. 60-C.) Of those, 23 92% were granted. Of the granted reexamination requests, 22% confirmed all claims, 24 67% altered some claims, and 11% cancelled all claims. On average, reexaminations 25 take approximately 25.4 months to complete, notwithstanding Congress’ express 26 instruction that PTO reexaminations be “conducted with special dispatch.” (Id. at 2.); see 27 35 U.S.C. § 305. 28 /// 3 1 While this data does suggest that the parties may be in line for a lengthy delay 2 should a stay issue, “some prejudice . . . is inherent in any delay, but delay alone is 3 insufficient to prevent a stay.” Spread Spectrum Screening LLC., 277 F.R.D. at 88. 4 Rembrandt does not contest Defendants’ representations that it does not practice the 5 patent and does not compete with Defendants, nor does Rembrandt seek an injunction. 6 See e.g., Visual Interactive Phone Concepts, Inc. v. Samsung Telecomms. Am., LLC, 7 No. 11-12945, 2012 WL 1049197, at *3 (E.D. Mich. Mar. 28, 2012) (granting motion to 8 stay in part because plaintiff did not practice patent and did not seek an injunction); 9 Round Rock Research LLC v. Dole Food Co. Inc., No. 11-1241, 2012 WL 1185022, at *1 10 (D. Del. Apr. 6, 2012) (same). But see BarTex Research, LLC v. FedEx Corp., 611 F. 11 Supp. 2d 647, 651-52 (E.D. Tex. 2009) (denying motion to stay on the grounds in part 12 that the inter partes reexamination process may require an average of 78.4 months to 13 complete). The Court emphasizes that the parties do not directly compete against each 14 other, which lessens the risk of prejudice to the non-moving party. 15 Weatherford Int’l, Inc., 599 F. Supp. 2d 848, 851 (S.D. Tex. 2009) (“Where the parties 16 are direct competitors, a stay would likely prejudice the non-movant.”). Tesco Corp. v. 17 Accordingly, the Court holds that while a potentially lengthy delay may be 18 inconvenient for Rembrandt or Defendants, no viable threat of prejudice toward 19 Rembrandt exists should a stay issue. 20 B. Simplification of Issues 21 Where the PTO grants reexamination to reconsider the prior art of a patent, “any 22 review of prior art that the Court may conduct will be enhanced by the PTO’s expert 23 opinion.” Medicis Pharm. Corp. v. Upsher-Smith Labs., Inc., 486 F. Supp. 2d 990, 994 24 (D. Ariz. 2007); see also In re Etter, 756 F.2d 852, 857 (Fed. Cir. 1985) (“When the 25 patent is concurrently involved in litigation, an auxiliary function [of reexamination] is to 26 free the court from any need to consider prior art without the benefit of the PTO’s initial 27 consideration.”). 28 reexamination will result in a simplification of issues in the suit and would narrow the Grounded in this principle, Defendants also argue that the PTO 4 1 inquiry the Court will be required to make. There is much to recommend in this basic 2 argument, but it need not carry the day with respect to this factor, for “[a] stay will always 3 simplify the issues in the litigation to some extent.” IMAX Corp. v. In-Three, Inc., 385 F. 4 Supp. 2d 1030, 1032 (C.D. Cal. 2005). 5 reexamination potentially will eliminate only one issue out of many, a stay is not 6 warranted.” Id. But “[a]s some courts have noted, when 7 As the litigation is in its early stages, the precise nature of the parties’ arguments 8 has not been disclosed to the Court. Consequently, the Court does not have a basis to 9 determine what range of defenses will be deployed. For example, if Defendants argue 10 invalidity of the patent on a number of additional bases beyond those which the PTO 11 may consider on a request for reexamination 12 printed publications,” 35 U.S.C. § 301(a) 13 address other patent invalidity arguments. Given the different standards that the PTO 14 and courts apply between a reexamination and a patent infringement suit, this Court will 15 not automatically assume the issues will be significantly simplified after reexamination. 16 See Bausch & Lomb Inc. v. Alcon Labs., Inc., 914 F. Supp. 951, 953 (W.D.N.Y. 1996) 17 (because courts and the PTO apply different standards and can consider different 18 evidence, courts’ findings on patent validity are not binding on PTO and vice versa). namely “prior art consisting of patents or the Court will nevertheless be forced to 19 Further, the statistics cited by the parties are susceptible to competing 20 interpretations. “[B]y focusing on the high likelihood that at least some claims will be 21 canceled, or the high likelihood that at least some claims will survive,” the Court is left to 22 speculate what effect the reexamination process will have on simplifying the issues here. 23 See A.R. Arena Prods., Inc. v. Grayling Indus., Inc., No. 5:11-CV-1911, 2012 WL 24 2953190, at *7 (N.D. Ohio June 25, 2012) (report and recommendation of special 25 master). 26 Similarly, the impact reexamination might have on analyses of damages weighs 27 little in the Court’s analysis. While Defendants correctly indicate that an amendment or 28 cancellation of the claims that gave rise to this litigation invariably affects the calculation 5 1 of damages, such calculations are no more expedited if the PTO amends claims 32 and 2 34. At bottom, someone will have to calculate damages if infringement is found. Short 3 of an outright cancellation of both these claims 4 statistics cited by Defendants 5 calculated differently than if no reexamination was granted. perhaps an unlikely scenario, given the it is of little consequence that damages must be 6 Lastly, the Court recognizes that the expertise the PTO may offer after completing 7 its reexamination is proportional to how technical the patent at issue is. That is, staying 8 the litigation benefits the Court more where the infringement suit revolves around 9 complex matters that rely heavily on specialized expertise. See A. R. Arena Prods., Inc., 10 2012 WL 2953190, at *8 (“[The PTO’s] expertise may certainly be valuable to the Court 11 in any patent case, but probably more so when the patent-in-suit is highly technical.”). 12 Upon review, the ‘477 patent at issue here is not the type that requires considerable 13 technical expertise to interpret. Accordingly, no greater need than usual exists for PTO 14 reexamination. 15 Based on the foregoing, this factor in the stay analysis is at best neutral, as it 16 requires the Court to speculate upon the nature of the parties’ arguments at this early 17 stage in the litigation. Rembrandt has failed to demonstrate with particularity why a 18 reexamination would not simplify the issues, and relies only on speculation when arguing 19 that it will pursue the lawsuit even after reexamination closes, regardless of the outcome. 20 C. Status of Discovery and Trial 21 This Motion comes before the Court at an early stage in the litigation. Rembrandt 22 filed their Amended Complaint on July 20, 2012. (See dkt. no. 38.) 23 answered on August 9, 2012. (See dkt. nos. 47-51.) On August 20, Magistrate Judge 24 George Foley, Jr. entered a scheduling order. 25 Defendants filed this Motion. No trial date has been set, and no Markman hearing has 26 been scheduled. 27 order, this factor weighs in favor of granting a stay. See, e.g., Tesco Corp., 599 F. Supp. 28 2d at 853 (procedural posture favored a stay where the case was young, no trial date (Dkt. no. 53.) Defendants Four days later, Although discovery has begun after the issuance of a scheduling 6 1 had been set, and no scheduling order was issued); ESN, LLC v. CISCO Systems, Inc., 2 No. 5:08-cv-20, 2008 WL 6722763, at *5 (E.D. Tex. Nov. 20, 2008) (holding that the 3 stage of litigation factor weighed in favor of a stay even though 20,000 pages of 4 documents had been produced and claim construction hearing and trial dates had been 5 set); Spread Spectrum Screening LLC, 277 F.R.D. at 89 (while discovery was 6 undertaken, that no Markman hearing and trial was scheduled counseled for granting a 7 stay). 8 D. Assessment of All Factors 9 In light of the discussion above, the Court holds that a stay is warranted. While 10 the second factor concerning simplification of the issues is difficult to judge at this stage 11 of the litigation, Rembrandt has failed to adequately demonstrate that it will be 12 prejudiced by a stay, and the procedural posture of the case counsels in favor of a stay. 13 While the Court is mindful that filing a reexamination request ought not be turned into a 14 prerequisite for the prosecution of a patent infringement claim, see Viskase Corp. v. 15 American Nat. Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001) (“The court is not required 16 to stay judicial resolution in view of the reexaminations”), a stay is appropriate in these 17 circumstances. 18 Faced with the possibility of a stay, Rembrandt requests certain conditions be 19 imposed if the Court issues a stay, including the exchange of all infringement, invalidity, 20 and unenforceability contentions called for by Local Rules 16.1-16.1-12, along with an 21 agreement that Defendants will not file additional reexamination requests and will not 22 raise the same prior art arguments raised in the reexamination requests. Rembrandt 23 argues that these conditions “would reduce, though not completely eliminate, the 24 prejudice to Rembrandt in the event of a stay.” (Dkt. no. 65 at 9:15-16.) The Court 25 disagrees. 26 requests, should they be filed with the PTO, will be reexamined in light of all facts, 27 including whether or not Defendants’ conduct was intended to unnecessarily delay 28 litigation. A stay will be issued only for this reexamination request; any further And given the differing standards and procedures involved in a patent 7 1 reexamination as compared to a patent infringement lawsuit, Defendants’ ability to 2 defend this suit would be unfairly hamstrung by imposing estoppel conditions upon them. 3 This is especially true in light of the “public policy interest in removing invalid patents 4 from the public arena” through the reexamination process. Smithkline Beecham Corp. v. 5 Apotex Corp., 403 F.3d 1331, 1354 (Fed. Cir. 2005) (Garajsa, J., concurring). 6 V. CONCLUSION 7 After careful consideration of the relevant factors, the Court finds that the interests 8 of justice are best served by the issuance of a stay. Accordingly, and for the above 9 reasons, IT IS HEREBY ORDERED that Defendants’ Motion to Stay (dkt. no. 60) is 10 GRANTED. 11 This matter is STAYED pending the PTO’s reexamination of the ‘477 patent. 12 IT IS FURTHER ORDERED that Plaintiff Rembrandt shall file a status report 13 every ninety (90) days to update the Court on the reexamination proceedings and to 14 provide notice to the Court when the reexamination proceedings conclude and the PTO 15 issues its decision in the reexamination request. The parties are then to confer and 16 submit a joint status report to the Court. 17 18 ALL OTHER PENDING MOTIONS ARE DENIED with leave for the moving party to renew when the stay is lifted. 19 20 DATED THIS 3rd day of December 2012. 21 22 23 MIRANDA M. DU UNITED STATES DISTRICT JUDGE 24 25 26 27 28 8