International Test Solutions, Inc v. MIPOX International Corporation et al

Filing 112

ORDER by Judge Richard Seeborg denying 83 Motion to Stay. (cl, COURT STAFF) (Filed on 4/10/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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INTERNATIONAL TEST SOLUTIONS,
INC,
Plaintiff,

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Case No. 16-cv-00791-RS
ORDER DENYING MOTION TO STAY

v.
MIPOX INTERNATIONAL
CORPORATION, et al.,

United States District Court
Northern District of California

Defendants.
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I.

INTRODUCTION

Defendants Mipox Corporation, Mipox International Corporation, and MGN International,

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Inc. (“Mipox”) move to stay this patent infringement litigation pending an inter partes review

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(“IPR”) by the Patent Trial & Appeal Board (“PTAB”). The United States Patent & Trademark

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Office (“PTO”) has not yet acted on Mipox’s recently-filed petitions for IPR of the three patents at

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issue in this case. Nonetheless, Mipox argues that, if IPR is granted, that process would likely

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narrow or eliminate claims for relief asserted by plaintiff International Test Solutions, Inc.

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(“ITS”). For the reasons discussed below, the motion is denied without prejudice.

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II.

BACKGROUND

ITS filed suit against Mipox International and MGN International on February 17, 2016

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alleging infringement of U.S. Patent Nos. 8,371,316 (‘316 Pat.) and 8,801,869 (‘869 Pat.). On

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March 14, 2016, ITS amended the complaint; it dropped allegations regarding the ‘316 patent and

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added allegations of infringement of U.S. Patent Nos. 6,777,966 (‘966 Pat.) and 7,202,683 (‘683

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Pat.). The parties exchanged infringement and invalidity contentions in June and July 2016. In

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December 2016, ITS sought leave to add Mipox Corporation (“Mipox Japan”) as a defendant.

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The Markman hearing, initially scheduled for January 30, 2017 was continued to allow for Mipox

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Japan’s participation. ITS filed its claim construction brief on December 5, 2016 and its amended

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complaint on January 5, 2017. On February 3, 2017, Mipox filed its response to the claim

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construction brief and, on February 10, 2017, ITS filed its reply. Between February 10 and 16,

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2017, Mipox filed a petition for IPR of each of the patents at issue. On February 17, 2017, Mipox

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filed the current motion to stay judicial proceedings pending disposition of the IPR. The

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Markman hearing was held on February 27, 2017, and a claims construction determination is

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being issued contemporaneously with this order.
III.

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LEGAL STANDARD

The decision to stay a patent case pending IPR rests entirely within a court’s discretion.

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See Viskase Corp. v. Am. Nat’l Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001). A court may grant

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United States District Court
Northern District of California

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a stay “in order to avoid inconsistent results, narrow the issues, obtain guidance from the PTO, or

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simply to avoid the needless waste of judicial resources, especially if the evidence suggests that

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the patents-in-suit will not survive reexamination.” Robert Bosch Healthcare Systems, Inc. v.

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Cardiocom, LLC, 2014 WL 3107447, at *3 (N.D. Cal. July 3, 2014) (citing MercExchange, LLC

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v. eBay, Inc., 500 F.Supp.2d 556, 563 (E.D. Va. 2007)).1 A court, however, “is under no

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obligation to delay its own proceedings by yielding to ongoing PTAB patent reexaminations.” Id.;

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see also Karl Storz Endoscopy-America, Inc. v. Stryker Corp., No. 14-cv-00876-RS, slip op. at *3

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(N.D. Cal. Mar. 30, 2015) (“A court is not required to stay patent litigation simply because parallel

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PTO proceedings have been instituted.”) (citing Viskase, 261 F.3d at 1328). The party requesting

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the stay must show a stay is appropriate. Nken v. Holder, 556 U.S. 418, 433-34 (2009).
Courts traditionally consider three factors in determining whether to stay a case pending

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IPR: “(1) the stage of the case; (2) whether a stay will simplify the court proceedings; and (3)

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whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving

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party.” Stryker, No. 14-cv-00876-RS, slip op. at *3 (citing Evolutionary Intelligence, LLC v.

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District courts in the Ninth Circuit have applied the same framework in considering motions to
stay pending IPR, as applied to motions to stay pending a pre-AIA reexamination. See Robert
Bosch, 2014 WL 3107447, at *3.
ORDER RE: MOTION TO STAY
CASE NO. 16-cv-00791-RS

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Facebook, Inc., No. C 13-4202-SI, 2014 WL 261837, at *1 (N.D. Cal. Jan. 23, 2014)).
IV.

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DISCUSSION

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A. Stage of the Case

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Courts in this district favor granting stays pending reexamination where there has been “no

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material progress in the litigation.” Pragmatus, LLC v. Facebook, Inc., C–11–2168 EJD, 2011

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WL 4802958, at *6–7 (N.D. Cal. Oct. 11, 2011). Where discovery has not yet been completed

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and a trial date has not been set, courts are more likely to issue stays to save the parties and the

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court the unnecessary expenditure of judicial resources. Robert Bosch, 2014 WL 3107447 at *4.

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Where, as here, defendants have been less than expedient in requesting a stay, courts have focused
their inquiry on whether there has been dispositive motion practice. See, e.g., Stryker, slip op. at

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United States District Court
Northern District of California

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*1-*2 (granting stay where IPR petition was filed nearly one year after the initial complaint was

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filed and after the parties filed claim construction briefing because “no dispositive motions ha[d]

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been filed”); Cypress Semiconductor Corp. v. LG Elects., Inc., No. 13-4034, 2014 WL 5477795, at

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*1-*2 (N.D. Cal. Oct. 29, 2014) (same).

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Here, the stage of the case weighs against a stay. Although the pleadings have yet to settle

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and significant electronic discovery looms on the horizon, the parties have now argued and briefed

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a dispositive issue. At the claims construction hearing, Mipox challenged the definiteness of

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every asserted claim. The parties fully briefed (even with supplemental briefing) the dispositive

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issue of indefiniteness and that issue has now been decided. Accordingly, dispositive motion

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practice is well under way. See Nautilus v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124 (2014)

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(holding that claim construction is dispositive when a defendant challenges claim definiteness as

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“a patent [claim] is invalid for indefiniteness”). Unlike in Stryker, Mipox did not move to

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continue the Markman hearing or make any effort to ensure that the stay motion could be heard

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before the parties and court expended time and resources in resolving the claim construction

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issues. Nor was Mipox ever “transparent about its intention to move for a stay.” Security People

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Inc. v. Ojmar US, LLC, 2015 WL 3453780, at *3 (N.D. Cal. May 29, 2015). This case is thus

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distinguishable from the cases granting stays at later stages, including those granting last-minute
ORDER RE: MOTION TO STAY
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stays on the eve of claim construction.

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B.

Narrowing of Issues

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If granted, an IPR will, likely, simplify this case. See id., at *3 (“the outcome of IPR could

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simplify the case by . . . estopping [defendant] from asserting any arguments it raised or

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reasonably could have raised in the IPR”). Yet, several courts in this district have recently

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declined to grant a stay, where, as here, “the PTAB has not yet acted on the petitions.” Hewlett-

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Packard Co. v. ServiceNow, Inc., 2015 WL 1737920, at *2 (N.D. Cal. April 9, 2015); see also

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SAGE Electrochromics, Inc. v. View, Inc., 2015 WL 66415, at *3 (N.D. Cal. Jan. 5, 2015) (“the

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uncertainty surrounding whether the PTO will elect to institute IPR proceedings weighs against a

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finding of likelihood of simplification of the issues”).

United States District Court
Northern District of California

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Mipox stresses the potential for simplified litigation by way of IPR estoppel and claim

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invalidation. An IPR petition, though, is not an instituted proceeding. “[T]he filing of an IPR

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request by itself does not simplify the issues in question and trial of the case. Ultimately, the PTO

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may not institute IPR proceedings.” TPK Touch Solutions, Inc v. Wintek Electro–Optics

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Corporation, No. 13–CV–02218–JST, 2013 WL 6021324, at *4 (N.D. Cal. Nov. 13, 2013).

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Here, Mipox is correct that an IPR, if granted, would increase the likelihood of simplification, but

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this argument is largely undercut by the reality that an IPR has not yet been instituted. See SAGE,

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2015 WL 66415, at *3. Ultimately, the uncertainty surrounding whether the PTO will elect to

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institute IPR proceedings weighs against a finding of likelihood of simplification of issues. This

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factor thus weighs against a stay at this time. If IPR proceedings are instituted on any of the three

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patents at issue in this case, the potential for simplification would increase.

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C.

Undue Prejudice or Tactical Advantage
1. Tactical Advantage

Courts expect “accused infringers to evaluate whether to file, and then to file, IPR petitions

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as soon as possible after learning that a patent may be asserted against them.” Asetek Holdings,

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Inc. v. Cooler Master Co., Ltd., No. 13–cv–00457–JST, 2014 WL 1350813, at *5 (N.D. Cal. Apr.

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3, 2014). “Provided an accused infringer is diligent, delay due to preparing an IPR petition,
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ascertaining the plaintiff's theories of infringement, or otherwise researching the patents that have

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been asserted in an action does not unduly prejudice the patent owner.” Id. Likewise, “waiting

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

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petitions for review does not cause undue prejudice.” Cypress Semiconductor Corp., 2014 WL

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5021100, at *4.

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While Mipox filed its IPR petitions within the statutory deadline, it did so nearly a year
after this lawsuit was filed, seven months after ITS’s infringement contentions were served, and

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little more than one week before a dispositive Markman hearing after the issues were fully briefed.

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Defendants’ only justification for this undue delay is that Mipox Japan, the parent company of

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Mipox International, was not added to this case until January 2017. This argument is not well-

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United States District Court
Northern District of California

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taken. As the parent company, Mipox Japan has likely been on notice of this suit pending against

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its subsidiary since February 2016. Moreover, it has certainly been on notice of ITS’s intention to

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add it to this litigation since December 2016 before the claim construction briefing was filed. The

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late-addition of Mipox Japan, in January 2017, does not explain why defendants waited until after

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the completion of the claim construction briefing to move to stay and why they did not indicate

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their intent to make such a request earlier or take any action to prevent avoidable expenditure of

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resources. Moreover, all three defendants are represented by the same counsel, have submitted

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briefing in unison, and appear to be engaged in a common defense. Mipox’s failure to offer any

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justification for the improvident timing of its stay motion weighs against a stay.

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2. Undue Prejudice

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ITS argues that a stay would cause it substantial competitive harm, as the parties are direct

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competitors. Specifically, ITS claims that it does not license patents to competitors and thus,

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absent Mipox’s conduct, ITS would be the only participant in the market. On this basis, it

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contends that delaying the litigation will have outsized consequences, including potential loss of

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market share.

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Where parties are direct competitors, “the likelihood of undue prejudice to the non-moving
party is heightened.” Robert Bosch, 2014 WL 3107447, at *6. Courts in this district, however,
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“require evidence to substantiate an argument that direct competition will result in prejudice to the

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non-moving party.” Security People, 2015 WL 3453780, at *5 (quotation omitted). Mipox has

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provided evidence that there are other companies that sell products that compete with the ITS

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products at issue. See Naggar Decl. ¶ 4. Mipox has also provided evidence that defendants have

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not sold any allegedly infringing products since October 2016. See Murata Decl. ¶ 3. If Mipox

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has ceased sales of the accused products, ITS’s harm is mitigated. This factor standing alone,

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therefore, would support the issuance of a stay but as noted above, in light of the other factors at

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play, on balance no such stay is warranted at this juncture.
V.

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CONCLUSION

Mipox has failed to show a stay is appropriate at this juncture. The motion to stay is thus

United States District Court
Northern District of California

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denied without prejudice. Mipox may renew the motion if the PTAB grants any of its IPR

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petitions.

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IT IS SO ORDERED.

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Dated: April 10, 2017
______________________________________
RICHARD SEEBORG
United States District Judge

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ORDER RE: MOTION TO STAY
CASE NO. 16-cv-00791-RS

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