Sage Electrochromics, Inc. v. View, Inc.

Filing 215

ORDER DENYING MOTION TO STAY by Judge Jon S. Tigar denying 200 Motion to Stay. (wsn, COURT STAFF) (Filed on 1/5/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAGE ELECTROCHROMICS, INC.,

Case No. 12-cv-06441-JST

Plaintiff,
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v.

ORDER DENYING MOTION TO STAY

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Re: ECF No. 200

VIEW, INC.,
Defendant.

United States District Court
Northern District of California

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Before the Court is Defendant's Motion to Stay Litigation Pending Inter Partes Review.

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ECF No. 200. The Patent Trademark Office has not yet acted on View’s recently-filed petitions

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for inter partes review (“IPR”) of certain patents at issue in this litigation. Nonetheless, View

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argues that, if IPR is granted, that process would be likely to simplify the issues for discovery and

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trial.
For the reasons set forth below, the motion is DENIED.

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I.

BACKGROUND

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Plaintiff SAGE Electrochromics, Inc. (“SAGE”) filed this action in December 2012,

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alleging that Defendant View, Inc. (View”) infringed SAGE’s United State Patents Nos. 5,724,177

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(“’177 patent”) and 7,372,610 (“’610 patent”). ECF No. 1. Both companies design and

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manufacture electrochromic glass technology used in windows and are direct competitors in the

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market. Id. at ¶¶ 13, 22; ECF No. 200 at 19. Electrochromic glass, also known as dynamic glass,

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can change between clear and tinted states via electric charges. ECF No. 1 ¶ 13. SAGE alleges

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that it is a “pioneer in the creation and development of a market for its dynamic glass products, to

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create the emerging market for ‘green windows’ that exists today.” ECF No. 206 at 8.

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In February 2013, View filed its answer and asserted several counterclaims, alleging that

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SAGE infringed View's United States Patent No. 8,243,357 (the “’357 patent”) and seeking

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declaratory judgment on the ’177 and ’610 patents. ECF No. 29 ¶¶ 12-37. In May 2013, View

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amended its answer and counterclaims, alleging that SAGE also infringed View's United States

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Patents Nos. 5,831,851 (the “’851 patent”) and 8,432,603 (the “’603 patent”). ECF No. 58.
On April 11, 2014, SAGE filed a First Amended Complaint (“FAC”), alleging View also

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infringed four other SAGE patents--United States Patents Nos. 6,039,850 (“the ’850 patent”);

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5,830,336 (“the ’336 patent”); 6,337,758 B1 (“the ’758 patent”); and 7,193,763 B2 (“the ’763

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patent”). ECF No. 161 ¶¶ 13-76. SAGE allegedly served View with infringement contentions for

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the four newly asserted patents on May 16, 2014. ECF No. 200-1 ¶ 3. On August 8, 2014,
pursuant to a Court order, SAGE allegedly served View a Preliminary Election of Asserted Claims

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United States District Court
Northern District of California

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which substantially narrowed the number of asserted claims across the total six SAGE patents

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from 67 to 24 claims. Id. ¶ 5.
In November 2014, View petitioned the Patent and Trademark Office (“PTO”) for inter

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partes review (“IPR”) of each asserted claim in three of the newly asserted patents. ECF Nos.

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200-2, 200-5, 204-1. View also promptly filed its motion to stay on November 7, 2014. ECF No.

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200. Technology tutorials and a claim construction hearing (“Markman hearing”) for the newly

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asserted claims are scheduled to take place in January 2015. ECF No. 172. Intervenor-Plaintiff

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Leybold Optics, GMBH submitted a statement of neutral non-opposition to View's motion to stay,

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and SAGE opposes the motion. ECF Nos. 205-06.

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II.

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LEGAL STANDARD
“Courts have inherent power to manage their dockets and stay proceedings, including the

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authority to order a stay pending conclusion of a PTO reexamination.” Ethicon, Inc. v. Quigg, 849

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F.2d 1422, 1426–27 (Fed.Cir.1988) (internal citations omitted). In determining whether to stay a

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case pending review by the PTO, courts consider the following factors: (1) whether discovery in

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the case is complete and whether a trial date has been set; (2) whether a stay would simplify the

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issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a

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clear tactical disadvantage to the non-moving party. Cygnus Telecomms. Tech., LLC, Patent

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Litig., 285 F.Supp.2d 1022, 1023 (N.D.Cal.2005); see also Universal Elecs., Inc. v. Universal
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Remote Control, Inc., 943 F.Supp.2d 1028, 1030–31 (C.D.Cal.2013) (applying the framework

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applicable to motions to stay pending reexamination by the PTO to motions to stay pending the

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newer inter partes review process). While case law supplies these general considerations, the

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Court ultimately must decide whether to issue a stay on a case-by-case basis. Asetek Holdings,

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Inc. v. Cooler Master Co., Ltd., No. 13–cv–00457–JST, 2014 WL 1350813, at *1 (N.D.Cal. Apr.

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3, 2014).

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III.

ANALYSIS

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A.

Stage of the Proceedings

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View argues that the first factor—the stage of the proceedings—“weighs heavily in favor
of a stay.” ECF No. 200 at 11. In support of its position, View argues that no trial date is set,

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United States District Court
Northern District of California

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discovery is ongoing, no depositions have been taken, no emails have been collected or produced,

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no expert testimony has been conducted, no dispositive motions have been scheduled or heard,

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and a claim construction proceeding for five of the nine patents-in-suit will not take place until

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January 2015. Id. at 12. SAGE counters that the litigation is not in fact in its infancy, but has

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“progressed significantly,” as the parties have exchanged documents, responded to discovery

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requests, litigated a discovery dispute, underwent claim construction for four patents, and briefed

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claim construction on the remaining five patents. ECF No. 206 at 18.

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The Court concludes that, although the complaint was first filed two years ago and four of

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the claims already have been construed, the case is not so far along as to weigh against a stay.

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Discovery has not significantly advanced and a trial date has not yet been set. No dispositive

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motions have been scheduled or heard, and only written discovery has taken place—neither party

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has taken any depositions or conducted expert testimony. In addition to the small scope of

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completed discovery, the nature of the completed discovery is less burdensome on the parties than

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the discovery that remains in this case. See Versata Software, Inc. v. Callidus Software, Inc., No.

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14-1468, 2014 WL 6480522, at *5 (Fed. Cir. Nov. 20, 2014) (finding the timing of the

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proceedings strongly favored stay where no witnesses or experts were deposed, but many

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documents had been exchanged); Cypress Semiconductor Corp. v. GSI Tech., Inc., No. 13-CV-

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02013-JST, 2014 WL 5021100, at *2 (N.D. Cal. Oct. 7, 2014) (finding stay appropriate where
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“parties have engaged in some discovery [but] . . . no depositions have been taken or scheduled,

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little expert discovery has been conducted, claim construction has only occurred with respect to

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the patents that are not the subject of this motion, and no dispositive motions have been scheduled

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or heard”).

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B.

Simplification of the Issues and Trial of the Case

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View argues that there is a “judicially recognized likelihood that [] IPRs will simplify or

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eliminate issues” in most disputes. ECF No. 200 at 15. View proposes that granting stay in this

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case will also likely simplify or eliminate validity issues for at least three of the patents-in-suit. Id.

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at 14. SAGE argues that this factor weighs against stay because (1) IPR has not yet been instituted
and (2) View’s IPR petitions only challenge some—as opposed to all—of the overall asserted

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Northern District of California

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claims. ECF No. 206 at 17-18.

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SAGE’s first argument—that the potential for simplification does not weigh in favor of a

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stay when the PTO has yet to decide whether to institute IPR proceedings—is persuasive.

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Previously, this Court has held that “the filing of an IPR request by itself does not simplify the

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issues in question and trial of the case. Ultimately, the PTO may not institute IPR proceedings.”

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TPK Touch Solutions, Inc v. Wintek Electro-Optics Corporation, No. 13-CV-02218-JST, 2013

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WL 6021324, at *4 (N.D. Cal. Nov. 13, 2013). Here, View is correct that IPR, if granted, would

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increase the likelihood of simplification, but this argument is largely undercut by the reality that

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IPR has not yet been instituted. See id. at n.1 (“This Court believes the balance does not shift in

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[favor of stay] [] until the PTO has granted the [IPR] application.”).

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SAGE’s second argument against the potential of IPR to simply the issues—that the

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pending petitions challenge some but not all of the patents asserted—is somewhat less persuasive.

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“[T]here can still be simplification of the issues when only some, but not all, of the claims asserted

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in litigation are challenged in [IPR].” Versata Software, Inc., 2014 WL 6480522, at *3. For this

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reason, “[a] proper simplification analysis would look to what would be resolved by [IPR] review

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versus what would remain.” Id. In this case, although View has only filed IPR petitions for three

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of the six patents asserted by SAGE, View alleges that a fourth patent (the ’850 patent) “is a

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continuation-in-part of the challenged ’336 patent, and implicates overlapping subject matter with
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the ’336 patent including identical claim limitations.” ECF No. 200 at 14. SAGE notes that only

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a third of the asserted claims are challenged by View’s IPR petitions. Nonetheless, the claims and

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patents challenged by the IPR petitions relate to the issues in this case at their earliest stages,

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having just been added to the litigation this past April. Therefore, if those patents were to be

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found invalid as a result of IPR proceedings, the issues in play in the case would be significantly

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simplified.

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Nonetheless, the uncertainty surrounding whether the PTO will elect to institute IPR

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proceedings weighs against a finding of likelihood of simplification of the issues. This factor

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therefore weighs against a stay at this time. The Court recognizes, however, that if IPR
proceedings are instituted on three of the six patents at issue in this case, the potential for

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simplification of the issues would increase.

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C.

Prejudice and Disadvantage

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The last factor is “whether a stay would unduly prejudice or present a clear tactical

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disadvantage to the non-moving party.” Delay alone does not usually constitute undue prejudice,

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because “parties having protection under the patent statutory framework may not ‘complain of the

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rights afforded to others by that same statutory framework.’” KLA–Tencor Corp. v. Nanometrics,

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Inc., No. 05–cv–03116–JSW, 2006 WL 708661, at * 3 (N.D.Cal. Mar. 16, 2006) (quoting Pegasus

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Dev. Corp. v. DirecTV, Inc., 2003 WL 21105073, at *2 (D.Del. May 14, 2003)). Nevertheless, in

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evaluating prejudice, “courts also consider evidence of dilatory motives or tactics, such as when a

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party unduly delays in seeking reexamination of a patent.” Id. Such tactics include seeking

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reexamination on the “eve of trial or after protracted discovery.” Id.

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The District of Delaware has adopted a set of four sub-factors for evaluating prejudice that

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this Court finds helpful: “(1) the timing of the reexamination request; (2) the timing of the request

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for stay; (3) the status of reexamination proceedings; and (4) the relationship of the parties.” Ever

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Win Int'l Corp. v. Radioshack Corp., 902 F.Supp.2d 503, 508 (D.Del.2012).

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Timing of Reexamination Request

View argues that this sub-factor does not weigh in favor of a finding of undue prejudice,
because View filed its IPR petitions less than six months after Plaintiff served its infringement
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contentions on the newly asserted patents and just two months after Plaintiff settled on a narrowed

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set of claims. ECF No. 200 at 16. SAGE argues that View did not act with diligence, because

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SAGE learned of View’s intent to amend the complaint to add the contested patents in February

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2014, but did not file its IPR petitions until November. ECF No. 206 at 15.

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“This Court expects accused infringers to evaluate whether to file, and then to file, IPR
petitions as soon as possible after learning that a patent may be asserted against them. Provided an

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accused infringer is diligent, delay due to preparing an IPR petition, ascertaining the plaintiff's

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theories of infringement, or otherwise researching the patents that have been asserted in an action

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does not unduly prejudice the patent owner.” Asetek, 2014 WL 1350813, at *5. “[W]aiting until

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after receiving infringement contentions to analyze the claims alleged and then filing petitions for

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review does not cause undue prejudice.” Cypress Semiconductor Corp., 2014 WL 5021100, at *4.

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See also Evolutionary Intelligence LLC v. Yelp Inc., No. C-13-03587 DMR, 2013 WL 6672451,

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at *9 (N.D. Cal. Dec. 18, 2013) (finding that petitioning for IPR five months after being served

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preliminary infringement contentions was reasonable timing).

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View filed its petitions within the one-year statutory limit. See Asetek, 2014 WL

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1350813, at *4 (“Delay alone [within the statutory deadline] does not usually constitute undue

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prejudice because parties having protection under the patent statutory framework may not

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complain of the rights afforded to others by that same statutory framework.”) (citations and

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internal quotations omitted). Although SAGE claims that View could have acted more

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expeditiously, there is no support for the contention that View unduly delayed its filing of the IPR

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petitions. As View notes, as a result of its continued amendments to its complaint and

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infringement contentions, SAGE bears some responsibility for the already-protracted length of the

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litigation and thus cannot complain of the rights afforded to View by that same statutory

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framework. See KLA–Tencor Corp., 2006 WL 708661, at * 3.

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View acted with reasonable diligence in filing its IPR petitions within six months of being

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served with SAGE’s revised infringement contentions. Therefore, this factor does not support a

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finding of undue prejudice.

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Timing of Request for Stay

Both parties concede that View promptly filed its motion to stay soon after it filed its IPR

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petitions, but SAGE argues that this sub-factor should carry little weight because View delayed

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filing its petition for IPR. ECF No. 200 at 17; ECF No. 206 at 16. As discussed above, the timing

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of View’s petition for IPR does not support a finding of unreasonable delay. Accordingly, this

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sub-factor also does not support a finding of undue prejudice. Cypress Semiconductor Corp.,

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2014 WL 5021100, at *4 (finding the timing of request for stay weighed against finding of undue

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prejudice where defendant moved for stay promptly after institution of IPR).

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3.

Status of Reexamination Proceedings

View argues first that this sub-factor weighs in favor of granting stay because the PTO will

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more likely than not institute IPR proceedings, as statistics from the PTO's website indicate that to

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date it has instituted IPR proceedings for 67 percent of claims challenged. ECF No. 200 at 19

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n.11. SAGE argues that this sub-factor weighs against a stay at this time, as the PTO has not yet

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decided whether to institute IPR proceedings. Because View filed its IPR petitions between

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November 6 and 19, 2014, SAGE will have until February to respond to the petitions. ECF No.

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206 at 7-8. From that point, PTAB has three months to determine whether to grant the petitions.

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Id. (citing 35 U.S.C. § 314(b)).

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This Court has previously concluded that this sub-factor weighs against issuing a stay

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when the PTO has not yet decided whether to grant IPR. See TPK Touch Solutions, Inc, 2013 WL

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6021324, at *5 (citing Tokuyama Corp. v. Vision Dynamics, LLC, No. 08–cv–2781–SBA, 2008

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WL 4532565, at *1 (N.D.Cal. Oct. 9, 2008) (distinguishing delay based on mere filing of IPR

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petition from delay based on ongoing IPR trial)). Because PTAB may not act on the petition until

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May 2015, this sub-factor weighs against granting a stay at this time.

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4.

Relationship of the Parties

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SAGE urges that the relationship of the parties sub-factor weighs heavily against granting

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a stay, as the parties are direct competitors and a stay would cause SAGE substantial competitive

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harm. SAGE argues that the parties are the only two competitors in the high-end segment of the

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rapidly-developing market in architectural electrochromic glass technology. See Hayes
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Declaration, ECF No. 206-2. View counters that SAGE cannot claim undue prejudice would

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result from a stay as SAGE itself has delayed the resolution of the case “by waiting (largely

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without justification) over a year into the litigation before adding four of the six asserted patents.”

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ECF No. 200 at 19. View also notes that SAGE has not yet filed a preliminary injunction,

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undercutting its claim that it View’s status as a direct competitor makes expeditious resolution of

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this litigation necessary to prevent undue prejudice.

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“[C]ompetition between parties can weigh in favor of finding undue prejudice.”

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VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1318 (Fed. Cir. 2014); see also TPK

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Touch Solutions, Inc, 2013 WL 6021324, at *5 (“Because [the parties] are direct competitors, the
risk of prejudice is higher to the non-moving party than it would be otherwise”). SAGE has

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Northern District of California

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provided particularly compelling evidence of the competitive injury it could suffer if a stay were

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granted. SAGE argues that the potential for prejudice is particularly high because View is

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SAGE’s only direct competitor in the high-end market. See id. at *6 (finding that a small number

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of market participants increases the potential for competitive harm). If allowed to stall this

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litigation, View could gain a foothold in the market by undercutting SAGE’s pricing on new

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building projects. ECF No. 206-2 at ¶ 27. SAGE argues the competitive injury posed by View is

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amplified by the nascent nature of the marketplace for architectural electrochromic glass

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technology, as “larger numbers of new projects are more likely to lead to incumbency effects as

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developers and architects stick with what they have tried, either SAGE or View, depending on

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which company they start out with.” Id. at ¶ 26.

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It is true that SAGE’s failure to seek a preliminary injunction to date does bear on the

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undue prejudice analysis. See VirtualAgility, 759 F.3d at 1319 (acknowledging that “there could

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be a variety of reasons that a patentee does not move for a preliminary injunction,” but noting that

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a party’s failure to seek a preliminary injunction “contradict[ed] [that party’s] assertion that it

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needs injunctive relief as soon as possible.”) Nonetheless, the Court is not persuaded that SAGE’s

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failure to seek an injunction entirely outweighs the gravity of the competitive injury SAGE would

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suffer if this litigation were stayed. This Court concluded above that, given the recent

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amendments to the complaint and the lack of extensive discovery completed to date, the
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proceedings are still in the somewhat early stages. Therefore, the fact SAGE has not yet filed for

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injunctive relief does not mean that SAGE would not suffer undue prejudice if the case were put

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on an indefinite hold.
The relationship of the parties’ sub-factor weighs heavily in favor of a finding that undue

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prejudice could result from a stay of the litigation at this time. Because the status of the re-

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examination proceedings and the relationship of the parties weigh in favor of a finding of undue

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prejudice, the Court finds this factor weighs against a stay.

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III.

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CONCLUSION
The Court concludes that a stay is not merited at this time. Although the litigation has not

advanced to the point where a stay would be untenable, the PTO has not yet decided whether to

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open IPR proceedings and SAGE has submitted compelling evidence of the competitive injury it

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would suffer as a result of a stay. The Court therefore denies View’s motion for a stay without

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prejudice should View wish to renew the motion after the PTO has acted upon the IPR petitions.

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IT IS SO ORDERED.
Dated: January 5, 2015
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JON S. TIGAR
United States District Judge

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