Hewlett Packard Company v. ServiceNow, Inc.
Filing
115
ORDER DENYING 92 MOTION FOR STAY; AND SETTING CASE MANAGEMENT CONFERENCE. Case Management Conference set for 9/17/2015 01:30 PM in Courtroom 3, 5th Floor, San Jose. Signed by Judge Beth Labson Freeman on 4/9/2015. (blflc1, COURT STAFF) (Filed on 4/9/2015)
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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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HEWLETT-PACKARD COMPANY,
Case No. 14-cv-00570-BLF
Plaintiff,
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ORDER DENYING MOTION FOR
STAY; AND SETTING CASE
MANAGEMENT CONFERENCE
v.
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SERVICENOW, INC.,
[RE: ECF 92]
Defendant.
United States District Court
Northern District of California
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Defendant ServiceNow, Inc. (“ServiceNow”) moves for a stay of litigation pending inter
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partes review (“IPR”) and covered business method (“CBM”) review of the patents-in-suit.
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Plaintiff Hewlett-Packard Company (“HP”) opposes the motion. The Court has considered the
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briefing as well as the oral argument presented at the hearing on April 2, 2015. For the reasons
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discussed below, the motion for stay is DENIED and a further Case Management Conference is
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HEREBY SCHEDULED for September 17, 2015 at 1:30 p.m.
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I.
BACKGROUND
HP filed the complaint in this action on February 6, 2014, alleging ServiceNow’s
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infringement of eight patents covering a variety of products and services. The asserted patents are
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United States Patent Nos. 7,925,981; 7,945,860; 7,392,300; 7,027,411; 7,890,802; 7,610,512;
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8,224,683; and 6,321,229. In November 2014, HP filed amended infringement contentions,
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asserting infringement of forty-four claims across the eight patents-in-suit.
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In December 2014, ServiceNow filed a motion for summary judgment pursuant to Alice
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Corp. Pty. Ltd. v. CLS Bank Int’l, 135 S. Ct. 2347 (2014), seeking summary judgment of invalidity
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with respect to the asserted claims of the ’802, ’512, ’683, and ’229 patents. Shortly thereafter,
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ServiceNow filed petitions for IPR challenging the validity of all of the claims identified by HP in
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its amended infringement contentions. ServiceNow also filed a petition for CBM review of the
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asserted claims of the ’981 patent. The parties expect that the Patent Trial and Appeal Board
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(“PTAB”) of the United States Patent and Trademark Office will act on those petitions by late
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August 2015.
In February 2015, ServiceNow filed the present motion for stay pending IPR and CBM
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review. After HP filed opposition but before ServiceNow filed a reply, the Court granted the Alice
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motion in its entirety, reducing the number of patents-in-suit from eight to four. ServiceNow
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thereafter filed a reply to HP’s opposition to the motion for stay.
At the April 2, 2015 hearing on the stay motion, the Court indicated that it was not inclined
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to stay the litigation but that it would continue the scheduled tutorial and Markman hearing
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United States District Court
Northern District of California
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beyond the last date that the PTAB could be expected to act on the petitions. The Court directed
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the courtroom deputy clerk to reschedule the June 5, 2015 tutorial for December 11, 2015 and the
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June 12, 2015 Markman hearing for December 18, 2015. The courtroom deputy clerk did so by
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clerk’s notice entered April 2, 2015. See Clerk’s Notice, ECF 112.
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II.
LEGAL STANDARD
The factors relevant to a stay pending IPR have been developed by the courts. In this
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district, courts consider three factors to determine whether a stay of litigation is warranted:
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“(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will
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simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice
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or present a clear tactical disadvantage to the nonmoving party.” PersonalWeb Tech., LLC v.
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Apple Inc., --- F. Supp. 3d ----, 2014 WL 4757816, at *2 (N.D. Cal. Sept. 24, 2014) (internal
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quotation marks and citation omitted).
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The factors relevant to a stay pending CBM review are mandated by statute. Those
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factors, which are set forth in the America Invents Act (“AIA”), have been summarized by the
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Federal Circuit as follows: “(A) whether a stay, or the denial thereof, will simplify the issues in
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question and streamline the trial; (B) whether discovery is complete and whether a trial date has
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been set; (C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or
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present a clear tactical advantage for the moving party; and (D) whether a stay, or the denial
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thereof, will reduce the burden of litigation on the parties and on the court.” VirtualAgility Inc. v.
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Salesforce.com, Inc., 759 F.3d 1307, 1309 (Fed. Cir. 2014) (citing AIA § 18(b)(1)). “This test
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resembles the one that courts have applied in assessing a motion to stay pending inter partes or ex
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parte reexamination by the PTO.” Xilidev, Inc. v. Boku, Inc., No. 13cv2793 DMS (NLS), 2014
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WL 3353256, at *1 (S.D. Cal. July 1, 2014) (internal quotation marks and citation omitted). “The
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primary difference between this test and the one employed by courts in the ordinary patent
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reexamination context is the inclusion of the fourth factor regarding whether a stay will reduce the
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burden of litigation.” Id. (internal quotation marks and citation omitted). With respect to motions
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for stay pending CBM review, “Congress apparently adopted the fourth factor to place a thumb on
the scale in favor of granting stays.” Moneycat Ltd. v. Paypal Inc., No. 14-cv-02490-JST, 2014
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United States District Court
Northern District of California
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WL 5689844, at *2 (N.D. Cal. Nov. 4, 2014).
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III.
DISCUSSION
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A.
Stage of the Litigation (IPR & CBM)
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The stage of the litigation generally is measured as of the time that the motion for stay was
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filed. See VirtualAgility, 759 F.3d at 1317 (“Generally, the time of the motion is the relevant time
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to measure the stage of the litigation.”). At the time ServiceNow filed the present motion, the
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action had been pending for approximately one year. The parties had exchanged infringement and
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invalidity contentions and the Court had heard and submitted a motion for partial summary
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judgment (since decided) directed to four out of eight patents-in-suit. The parties were starting to
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gear up for the Markman hearing, which at that time was scheduled for June 12, 2015. Some
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discovery had been conducted, but a great deal more remained (and remains) to be done. Fact
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discovery does not cut off until sixty days after the Markman order issues, and trial is not set to
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commence until May 16, 2016. Thus although the Court would not characterize this case as being
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in its “infancy” as asserted by ServiceNow, see Def.’s Reply at 1, ECF 109, neither would the
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Court characterize it as being at an “advanced” stage as asserted by HP, see Pl.’s Opp. at 13, ECF
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99-4. The Court concludes that this factor moderately favors a stay. See MoneyCat, 2014 WL
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5689844, at *4 (stage of litigation favored stay where fact discovery deadline was six months
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away and the parties had not yet filed claim construction briefs).
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B.
Simplification of Issues (IPR & CBM)
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Every claim asserted by HP in this case is the subject of a currently pending petition for
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IPR or CBM review. Thus if the PTAB institutes IPR and/or CBM review, the issues in this case
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could be simplified considerably. However, the PTAB has not yet acted on the petitions and is not
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expected to do so for several months. In similar circumstances, other judges in this district have
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been reluctant to grant a stay, especially where – as here – the patent holder and the accused
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infringer are direct competitors. See Boundaries Solutions, Inc. v. Corelogic, Inc., No. 5:14-cv-
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00761-PSG, 2014 U.S. Dist. LEXIS 175590 (N.D. Cal. Dec. 19, 2014) (stay denied when PTAB
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had not yet acted on petition for IPR and parties were direct competitors). Other courts have
granted only a partial stay pending decision on the IPR petition. See, e.g., Evolutionary
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United States District Court
Northern District of California
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Intelligence, LLC v. Apple, Inc., No. C 13-04201 WHA, 2014 WL 93954, at *2 (N.D. Cal. Jan. 9,
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2014) (circumstances warranted “[a] modest partial stay to learn the PTAB’s decision whether to
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grant inter partes review of any (or all) of the asserted claims”).
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Given the length of time before the PTAB can be expected to act on the petitions and the
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uncertainty as to what the PTAB will do, the Court concludes that this factor does not favor the
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full stay requested by ServiceNow but it could support a more limited stay pending disposition of
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the petitions before the PTAB.
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C.
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As noted above, HP and ServiceNow are direct competitors, and HP has presented
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evidence regarding lost sales that it attributes to ServiceNow’s accused products. “[C]ompetition
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between parties can weigh in favor of finding undue prejudice.” VirtualAgility, 759 F.3d at 1318.
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ServiceNow argues that HP’s evidence does not establish conclusively that HP’s lost sales are
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attributable to ServiceNow’s conduct rather than to some other cause. ServiceNow is, of course
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correct – such uncertainty necessarily is present prior to disposition of infringement claims on the
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merits. However, “direct evidence of competition is not required to establish” that the parties are
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competitors. Id. Given evidence that the parties do compete directly, the Court concludes that
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staying the action would prejudice HP.
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Undue Prejudice or Tactical Advantage (IPR & CBM)
The question is whether that prejudice would be “undue.” Id. at 1318. “[W]hether the
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patentee will be unduly prejudiced by a stay in the district court proceedings . . . like the
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irreparable harm-type inquiry, focuses on the patentee’s need for an expeditious resolution of its
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claim.” Id. ServiceNow argues that any asserted need for expeditious resolution of this litigation
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is undercut by HP’s failure to sue on these patents until several years after their issuance. A
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patentee’s failure to bring suit soon after issuance of the patent can weigh against issuance of a
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stay. Id. at 1319. HP asserts that ServiceNow only recently began selling the accused products
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that allow it to compete with HP for larger, sophisticated customers, and that HP filed this action
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as soon as it determined that those products infringe HP’s patents. In light of evidence that the
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parties are direct competitors and HP’s plausible explanation for the timing of this lawsuit, the
Court concludes that HP has a strong interest in expeditious resolution of this litigation that would
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United States District Court
Northern District of California
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be prejudiced if a stay were issued.
The Court is not persuaded, however, that ServiceNow would gain a tactical advantage if
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the stay motion were granted. Courts consider “evidence of dilatory motives or tactics, such as
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when a party unduly delays in seeking reexamination of a patent.” ServiceNow filed its petitions
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in the PTAB only a few months after HP served its amended infringement contentions. The
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record evidence does not suggest that ServiceNow delayed in filing those petitions or acted for
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improper purposes.
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Accordingly, the Court concludes that granting the motion for stay would not give
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ServiceNow a tactical advantage but would unduly prejudice HP. This factor thus weighs against
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a stay.
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D.
Reduction of Burden of Litigation (CBM Only)
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In addition to the three factors discussed above, which relate to stay pending either IPR or
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CBM review, the Court must consider a fourth factor – the potential reduction of the litigation
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burden – which relates only to stay pending CBM review. ServiceNow has sought CBM review
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only as to the asserted claims of the ’981 patent. Moreover, because the PTAB has not acted on
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the petition for CBM review, any potential reduction of burden is only speculative at this point.
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Accordingly, the Court concludes that this factor weighs only very slightly in favor of a stay.
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E.
Summary
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Having weighed the three factors relevant to a stay pending IPR and the four factors
relevant to a stay pending CBM review, the Court concludes that a stay is not warranted at this
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time. The Court is reluctant to derail an infringement action by a patentee against a direct
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competitor when, as here, the Court can only speculate as to whether the PTAB will institute IPR
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or CBM review. The Court could address this uncertainty by waiting to rule on the stay motion
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until after the PTAB acts on the petitions. See VirtualAgility, 759 F.3d at 1315-16. However, the
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Court believes that the more sensible course is to deny the stay motion without prejudice to
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renewal, if appropriate. The Court is mindful of the enormous amount of resources that go into
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Markman proceedings, particularly when – as here – there are numerous claim terms in dispute.
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United States District Court
Northern District of California
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Because those resources could be expended to no purpose depending upon the PTAB’s IPR and
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CBM determinations, the Court has continued the tutorial and Markman hearing until after the
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PTAB’s expected decisions on the petitions. The Court believes that this approach will address
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most of the concerns underlying ServiceNow’s motion for stay while preserving HP’s rights to
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pursue its patent claims. The Court also believes that it would be useful to hold a further Case
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Management Conference in September to evaluate the effect ( if any) of the PTAB’s decisions on
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this litigation.
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IV.
ORDER
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(1)
The motion for stay is DENIED WITHOUT PREJUDICE; and
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(2)
A Case Management Conference is scheduled for September 17, 2015 at 1:30 p.m.
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Dated: April 9, 2015
______________________________________
BETH LABSON FREEMAN
United States District Judge
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