LifeScan Scotland, Ltd. v. Shasta Technologies, LLC et al

Filing 245

ORDER granting in part and denying in part 175 Motion to Stay signed by Judge Edward J. Davila on 3/19/2013. (ejdlc4S, COURT STAFF) (Filed on 3/19/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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United States District Court
For the Northern District of California

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LIFESCAN, INC. and LIFESCAN SCOTLAND, )
LTD.,
)
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Plaintiffs,
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v.
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SHASTA TECHNOLOGIES, LLC,
)
INSTACARE CORP., PHARMATECH
)
SOLUTIONS, INC., and CONDUCTIVE
)
TECHNOLOGIES, INC.,
)
)
)
Defendants.
)

Case No.: 5:11-CV-04494-EJD
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION TO STAY

[Re: Docket No. 175]

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Presently before the court is Defendants Shasta Technologies, LLC (“Shasta”), Instacare

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Corp. (“Instacare”), Pharmatech Solutions, Inc. (“Pharmatech”), and Conductive Technologies,

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Inc.’s (“Conductive”) (collectively, “Defendants”) Motion to Stay Pending Reexamination of U.S

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Patent Nos. 6,241,862 (“the ’862 patent”) and 5,708,247 (“the ’247 patent”). The court found this

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matter suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and

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previously vacated the hearing. Having fully reviewed the parties’ briefing, and for the reasons set

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forth below, the court GRANTS in part and DENIES in part Defendants’ Motion to Stay.

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I.

BACKGROUND
The facts of this case are well known to the parties, and sufficiently recited in the court’s

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prior orders. Therefore, the court repeats the facts only to the extent they are applicable to the

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instant motion. Plaintiff LifeScan Scotland, Ltd. filed this suit on September 9, 2011, alleging

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infringement of its U.S. Patent Nos. 6,241,862 (“the ’862 patent”) and 5,708,247 (“the ’247

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
STAY

patent”). Dkt. No. 1. Nearly a year later, LifeScan Scotland amended the complaint to add

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LifeScan, Inc. as an additional Plaintiff. Dkt. No. 134. On September 12, 2012, Pharmatech filed

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a request for ex parte reexamination of the ’247 and the ’862 patents, and the next day filed a

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request for ex parte reexamination of Plaintiffs’ U.S. Patent No. 5,951,836, which is related to the

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’247 and ’862 patents. The Patent and Trademark Office (“PTO”) granted these requests on

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November 19, 2012, finding substantial new questions of patentability with respect to multiple

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claims in these patents, including all but one of these patents’ claims at issue in this litigation. See

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Dkt. No. 175. On December 5, 2012, the court granted Plaintiffs leave to amend their complaint

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(Dkt. No. 169), and on December 10, 2012, Plaintiffs filed their amended complaint, adding a

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United States District Court
For the Northern District of California

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claim for indirect infringement of their U.S. Patent No. 7,250,105 (“the ’105 patent”) (Dkt. No.

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170). Defendants now seek a stay pending resolution of the reexamination proceedings.

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II.

LEGAL STANDARD
“Any person at any time may file a request for reexamination by the [PTO] of any claim of

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a patent on the basis of any prior art” consisting of patents or printed publications. 35 U.S.C. § 302

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(amended 2011). “The stay of pending litigation to enable PTO review of contested patents was

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one of the specified purposes of the reexamination legislation.” Patlex Corp. v. Mossinghoff, 758

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F.2d 594, 606, aff'd on reh ‘g, 771 F.2d 480 (Fed. Cir. 1985). “Patent validity is a commonly

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asserted defense in litigation and courts are cognizant of Congress’s intention of utilizing the

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PTO’s specialized expertise to reduce costly and timely litigation.” Canady v. Erbe Elektromedizin

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GmBH and Erbe U.S.A., 271 F.Supp.2d 64, 78 (D.D.C. 2002) (citation omitted).

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A stay is within the discretion of the court. See Ethicon, Inc. v. Quigg, 849 F.2d 1422,

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1426-27 (Fed. Cir. 1988) (“Courts have inherent power to manage their dockets and stay

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proceedings, including the authority to order a stay pending conclusion of a PTO reexamination.”).

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A court may grant a motion to stay “in order to avoid inconsistent results, narrow the issues, obtain

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guidance from the PTO, or simply to avoid the needless waste of judicial resources, especially if

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the evidence suggests that the patents-in-suit will not survive reexamination.” MercExchange,

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L.L.C. v. eBay, Inc., 500 F.Supp.2d 556, 563 (E.D. Va. 2007). In this district, “there is a liberal

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
STAY

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policy in favor of granting motions to stay proceedings pending the outcome of USPTO

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reexamination or reissuance proceedings,” (ASCII Corp. v. STD Entm’t USA, 844 F. Supp. 1378,

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1381 (N.D. Cal. 1994)), though some courts have begun to rethink that policy in recent years (see,

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e.g., Network Appliance Inc. v. Sun Microsystems Inc., No. 07-CV-06053, 2008 WL 2168917, at

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*3 (N.D.Cal. May 23, 2008)).

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Courts consider three main factors in determining whether to stay a case pending

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reexamination: “(1) whether discovery is complete and whether a trial date has been set; (2)

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whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay

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would unduly prejudice or present a clear tactical disadvantage to the non-moving party.” Telemac

United States District Court
For the Northern District of California

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Corp. v. Teledigital, Inc., 450 F.Supp.2d 1107, 1111 (N.D. Cal. 2006) (citation omitted).
III.

DISCUSSION
a. Stage of Proceedings
The early stage of a litigation weighs in favor of a stay pending reexamination. See Target

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Therapeutics, Inc. v. SciMed Life Sys. Inc., 33 U.S.P.Q.2d 2022, 2023 (N.D. Cal. 1995). This

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element of the stay analysis focuses on the stage of litigation proceedings, not the length of time

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that has passed since the filing of the case. See Convergence Tech. (USA), LLC v. Microloops

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Corp., No. 5:10-CV-02051, 2012 WL 1232187, at *4 (N.D. Cal. April 12, 2012) (finding that a

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case that was over two years old had not reached the “point of no return” because, though

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discovery was ongoing, the court had not yet heard claim construction and no trial date had been

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set). The distinction is an important one here, where the case was filed more than a year ago, but

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the parties have not progressed to the later stages of litigation. In this case, discovery is underway

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but only moderate progress has been made—no depositions have been taken and document

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production is ongoing. The court has only recently heard the parties’ arguments as to Plaintiffs’

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Motion for Preliminary Injunction. See Dkt. No. 176. The parties have filed an opening claim

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construction brief, but the court has not held a tutorial or a claim construction hearing. Close of

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discovery is three months away, close of expert discovery is seven months away, and the

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
STAY

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dispositive motion filing deadline is ten months away. No trial date has been set. Given the status

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of the litigation, the court finds that this first factor weighs moderately in favor of a stay.

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b. Simplification of Issues
“[W]aiting for the outcome of the reexamination could eliminate the need for trial if the

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claims are cancelled or, if the claims survive, facilitate trial by providing the court with expert

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opinion of the PTO and clarifying the scope of the claims.” Target Therapeutics, 33 U.S.P.Q.2d at

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2023. The pending reexaminations deal directly with two of the patents-in-suit and nearly all of

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the claims at issue. However, the reexamination does not cover the ’105 patent, which is major

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component of this litigation and the subject of Plaintiffs’ Motion for Preliminary Injunction. While

United States District Court
For the Northern District of California

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the court certainly stands to benefit from the PTO’s guidance as to the scope and validity of the

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’247 and the ’862 patents, it is not convinced that reexamination would provide any substantial

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benefit to the evaluation of the issues related to the ’105 patent. The court recognizes that a

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“purpose of the reexamination procedure is to eliminate trial of that issue (when the claim is

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cancelled) or to facilitate trial of that issue by providing the district court with the expert view of

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the PTO (when a claim survives the reexamination proceeding), and so finds that this factor weighs

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heavily in favor of a stay as to the ’247 and ’862 patents, but weighs against a stay as to the ’105

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patent. AT&T Intellectual Prop. v. Tivo, Inc., 774 F. Supp. 2d 1049, 1051 (N.D. Cal. 2011) (citing

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Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983).

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c. Undue Prejudice
Plaintiffs argue that they will be unduly prejudiced by a stay in this case because the ex

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parte reexamination process can take more than two years to complete, and because they stand to

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lose significant market share and suffer injury to their goodwill in the interim. The delay inherent

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to the reexamination process does not generally, by itself, constitute undue prejudice. Telemac

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Corp. v. Teledigital, Inc., 450 F.Supp.2d 1107, 1111 (N.D. Cal. 2006). However, Plaintiffs here do

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not rely on delay alone. Rather, they argue that because Defendants’ entire business is based on

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selling a nearly identical copy of Plaintiffs’ test strips for use only in Plaintiffs’ meters, the

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competitive injury during the litigation, let alone the pendency of the reexamination, would be

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Case No.: 5:11-CV-04494-EJD
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
STAY