iMTX Strategic LLC v. Vimeo LLC

Filing 70

ORDER RESOLVING MOTION TO STAY AND JOINDERS. Signed by Judge JEFFREY S. WHITE on 7/6/15. (jjoS, COURT STAFF) (Filed on 7/6/2015)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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IMTX STRATEGIC LLC,

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For the Northern District of California

United States District Court

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Plaintiff,
v.
VIMEO LLC,
SPOTIFY USA INC.,
RHAPSODY INTERNATIONAL, INC.
HOME BOX OFFICE, INC.
HULU, INC.
NETFLIX, INC.
VERIZON SERVICES CORP. and VERIZON
ONLINE, LLC, AND
VUDU INC.,

No. C 15-00592 JSW
No. C 15-00593 JSW
No. C 15-00594 JSW
No. C 15-00595 JSW
No. C 15-00596 JSW
No. C 15-00597 JSW
No. C 15-00598 JSW
No. C 15-00599 JSW
ORDER RESOLVING MOTION
TO STAY AND JOINDERS

Defendants.

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Now before the Court for consideration is the Motion to Stay Pursuant to Section 18(b)

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of the America Invents Act, filed by Defendants Vimeo, LLC (“Vimeo”), Spotify USA Inc.

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(“Spotify”), Hulu, LLC (“Hulu”) and Netflix, Inc. (“Netflix”) (collectively the “Moving

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Defendants”). Defendants Rhapsody International, Inc. (“Rhapsody”), Home Box Office, Inc.

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(“HBO”), and Verizon Services Corp. and Verizon Online, LLC (collectively “Verizon”), and

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Vudu, Inc. (“Vudu”) (collectively the “Joinder Defendants”), have joined in the motion.

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The Court has considered the parties’ papers, relevant legal authority, and the record in

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this case, and it finds the motion suitable for disposition without oral argument. See N.D. Civ.

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L.R. 7-1(b). The Court VACATES the hearing scheduled for July 31, 2015, and it HEREBY

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GRANTS the motion to stay as to the Moving Defendants and CONDITIONALLY GRANTS

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the motion as to the Joinder Defendants.
BACKGROUND

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Plaintiff, iMTX Strategic, LLC alleges that each of the Moving and Joinder Defendants

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infringe United States Patent No. 7,269, 854, entitled “Transaction System for Transporting

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Media Files from Content Provider Sources to Home Entertainment Devices” (the “‘854

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Patent”). (See, e.g., iMTX Strategic, LLC v. Vimeo, LLC, 15-cv-592-JSW, Docket No. 1,

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Complaint.)1

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On June 13, 2015, the Moving Defendants filed a petition with the Patent Trial and
Appeal Board (“PTAB”) for Covered Business Method (“CBM”) review of the ‘854 Patent,

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For the Northern District of California

United States District Court

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pursuant to 35 U.S.C. section 321 and Section 18 of the America Invents Act, Pub. L. No. 112-

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29, 125 Stat. 284 (2011). (Docket No. 59, Declaration of Jennifer J. Schmidt (“Schmidt

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Decl.”), Ex. E.) The Joinder Defendants are not parties to that petition.2

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The Court will address additional facts as necessary in the analysis.

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ANALYSIS
A.

The Court Conditionally Stays These Cases.

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Under Section 18(b) of the AIA,

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the district court [should] consider the following four factors when
deciding whether to grant a stay:

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(A) whether a stay, or the denial thereof, will simplify the issues in
question and streamline the trial;

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(B) whether discovery is complete and whether a trial date has been set;

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© whether a stay, or the denial thereof, would unduly prejudice the
nonmoving party or present a clear tactical advantage for the moving party;
and

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Because the parties’ briefs and declarations are identical, all future reference
to docket numbers shall be from iMTX Strategic, LLC v. Vimeo, 15-cv-592-JSW.
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In addition to the CBM Petition, a non-party, Unified Patents, Inc. (“Unified
Patents”) has initiated a petition for inter partes review of the ‘854 Patent. (Docket No. 641, Declaration of Stephen W. Ritcheson, Esq., ¶ 3, Ex. 1.)

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(D) whether a stay, or the denial thereof, will reduce the burden of
litigation on the parties and on the court.

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VirtualAgility, Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1309 (Fed. Cir. 2014) (quoting AIA

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§ 18(b)(1)). The factors are similar to the factors to be applied when a court evaluates a motion

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to stay in light of inter partes review. However, the fourth factor was added “in order to ease

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the movant’s task in demonstrating the need for a stay.” GTNexus, Inc. v. Intra, Inc., 2014 WL

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3373088, at *2 (N.D. Cal. July 9, 2014) (citing Market-Alerts Pty. Ltd. v. Bloomberg Finance

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L.P., 922 F. Supp. 2d 486, 489-490, 496 n.14 (D. Del. 2013) and Zillow, Inc. v. Trulia, Inc.,

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2013 WL 5530573, at *3 (W.D. Wash. Oct. 7, 2013)).
1.

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For the Northern District of California

United States District Court

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iMTX argues that a stay would not simplify the issues. In the context of inter partes

Simplification of Issues.

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review, a stay may be justified where “the outcome of the reexamination would be likely to

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assist the court in determining patent validity and, if the claims were canceled in the

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reexamination, would eliminate the need to try infringement issues.” Slip Track Sys., Inc. v.

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Metal Lite, Inc., 159 F.3d 1337, 1341 (Fed. Cir. 1998). A stay also may be granted in order to

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avoid inconsistent results, obtain guidance from the PTAB, or avoid needless waste of judicial

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resources. To the extent claims survive the reexamination process, the reexamination would

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“facilitate trial by providing the Court with expert opinion of the PTO and clarifying the scope

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of the claims.” Target Therapeutics, Inc. v. SciMed Life Sys., Inc., 33 U.S.P.Q.2d 2022, 2023

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(N.D. Cal. 1995).

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The Moving Defendants have challenged every claim of the ‘854 Patent. Although the

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PTAB has not yet ruled on the petition, if it were to accept review of all claims, it could dispose

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of these cases in their entirety. The Federal Circuit has found, in the context of CBM review,

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that such a situation “weighs heavily in favor of granting the stay.” See, e.g., VirtualAgility,

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759 F.3d at 1314; cf. Slip Tracks Sys., 159 F.3d at 1341 (noting that “the outcome of the

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reexamination would be likely to assist the court in determining patent validity and, if the

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claims were cancelled ..., would eliminate the need to try infringement issues”). Even if the

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PTAB accepted review, but did not find all claims invalid, those rulings may also clarify claim

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construction positions for the parties, raise estoppel issues, and encourage settlement.

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iMTX argues that until the PTAB actually determines that it will conduct a CBM

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review, the motion to stay is premature and should be denied on that basis. The Court does not

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find this argument persuasive, and for reasons set forth in more detail in its discussion of the

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fourth factor, the Court concludes it is appropriate to rule on the motion at this time. First,

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while the Federal Circuit has noted that “it [is] not error for the district court to wait until the

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PTAB” makes its decision on a petition for CBM review, it also expressed no opinion on

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whether deferring a ruling is a “better practice” than ruling on a motion once a petition has been
filed. VirtualAgility, 759 F.3d at 1315-16. In addition, iMTX’s argument was premised, in

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For the Northern District of California

United States District Court

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part, on the fact that the Verizon defendants had not yet joined in the motion. That point is now

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moot, because the Verizon defendants have filed a notice of joinder.

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As a secondary argument, iMTX argues that because five defendants would not be

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bound by the ruling in the CBM review, the issues would not be simplified. However, the

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Court can resolve that issue by granting the Joinder Defendants’ motion on the condition that

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they agree to be estopped from raising any issues that are raised and actually decided before the

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PTAB.

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Accordingly, the Court concludes that this factor weighs in favor of a stay.

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2.

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iMTX does not dispute that each of these cases are in the early stages of litigation. The

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parties stipulated to continue the initial case management conferences pending a ruling on this

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motion. Therefore, the Court has not set any deadlines in this matter. Although iMTX has

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served some discovery, that discovery has been limited in scope to whether any of the

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Defendants have a relationship with Unified Patents. (See, e.g., Docket No. 69, Reply

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Declaration of Jennifer J. Schmidt, ¶¶3-7, Exs. A-E.)

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Discovery and Trial Dates.

The Court concludes that this factor weighs in favor of granting the motion.

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//

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In examining the prejudice or tactical advantage factor, courts have looked to the timing

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of both requests for CBM review and requests for stays, the status of the CBM proceedings, and

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the relationship between the parties. See, e.g., Market-Alerts, 922 F. Supp. 2d at 494. iMTX

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does not argue that it would be unduly prejudiced by a stay. Rather, it argues that the

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Defendants are attempting to obtain a tactical advantage by taking “multiple bites at the

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invalidity ‘apple’.” (Docket No. 64, Opp. Br. at 9:6-7.) iMTX also argues that the Moving

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Defendants delayed in filing their CBM petition. Defendants, in turn, argue that although

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iMTX began to file these lawsuits in November 2013, it did not effect service on the Defendants
until August 2014.

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For the Northern District of California

United States District Court

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Prejudice or Tactical Advantage.

The Moving Defendants filed their motion to stay shortly after seeking CBM review. It

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appears to the Court that there have been delays on both sides. However, there is no suggestion

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that the parties are competitors, which lessens the potential prejudice to iMTX from a stay. See,

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e.g., VirtualAgility, 759 F.3d at 1318.

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On balance, the Court finds that this factor weighs slightly in favor of a stay.

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4.

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iMTX also argues that a stay will not reduce the burden of litigation. This argument

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again is premised, in part, on the fact that the Joinder Defendants are not parties to the CBM

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review and on the fact that the Verizon defendants had yet joined the motion. The Court is not

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persuaded. Even if the Court were to grant an unconditional stay, the burden of litigation would

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be reduced if the PTAB decision is favorable to the Moving Defendants. In addition, if the

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Court were to deny the motion as premature and await a decision on whether the PTAB will

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accept review, there is the possibility of further motion practice on this very issue.

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Reduce the Burden of Litigation.

On balance, the Court also finds that this factor weighs in favor of granting the stay.

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CONCLUSION

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For the foregoing reasons, the Court GRANTS the motion to stay as to the Moving

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Defendants, and it STAYS the following cases: 15-cv-592, 15-cv-593, 15-cv-596, and 15-cv-

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597.
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The Court CONDITIONALLY GRANTS the Joinder Defendants’ motion, on the

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condition that the Joinder Defendants agree to be estopped from asserting any invalidity

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contention that was actually raised and finally adjudicated in the CBM proceedings. The

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Joinder Defendants shall file notices by no later than July 17, 2015, setting forth whether they

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accept or reject this condition. At that time, the Court shall issue a further order with directions

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to the parties about how it will proceed.

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IT IS SO ORDERED.

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Dated: July 6, 2015
JEFFREY S. WHITE
UNITED STATES DISTRICT JUDGE

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For the Northern District of California

United States District Court

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