NFC Ring, Inc. v. KERV Wearables LTD

Filing 67

ORDER GRANTING 43 MOTION TO STAY AND 47 MOTION TO INTERVENE. Signed by Judge Beth Labson Freeman on 5/30/2017. (blflc4, COURT STAFF) (Filed on 5/30/2017)

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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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JOSEPH PRENCIPE, ET AL.,
Plaintiffs,

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ORDER GRANTING MOTION TO
STAY AND MOTION TO INTERVENE

v.
KERV WEARABLES LTD,

[Re: ECF 43, 47]

Defendant.

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United States District Court
Northern District of California

Case No. 16-cv-07159-BLF

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Plaintiffs Joseph Prencipe and McLear & Co. d/b/a NFC Ring (“NFC Ring”) bring this suit

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against Kerv Wearables LTD (“Kerv”), for infringement of Plaintiffs’ patent, U.S. Patent No.

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9,313,609 (the ’609 patent) and violation of the Lanham Act, as well as the Defense of the Trade

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Secret Act, based on allegations relating to Kerv’s contactless payment ring. First Am. Compl.

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(“FAC”), ECF 14. Before the Court are the parties’ joint motion to stay litigation and a motion by

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non-party Esos Rings, Inc. (“Esos”) to intervene in this action. Stay Mot., ECF 43; Mot. to

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Intervene, ECF 47. Pursuant to Civ. L.R. 7-1(b), the Court finds these motions suitable for

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submission without oral argument and hereby VACATES the hearing scheduled for October 5,

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2017. For reasons set forth below, the Court GRANTS the stay motion and GRANTS the motion

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to intervene.

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With respect to non-party Esos’ motion to intervene, Esos moves on the basis that it (and

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not NFC Ring) is the rightful owner of the ’609 patent, and that all the claims in the FAC are

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premised on the infringement of the ’609 patent. ECF 47. Kerv does not oppose Esos’

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intervention but urges the Court to grant the stay motion. ECF 57. Accordingly, the Court

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GRANTS Esos’ motion to intervene in this case.

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Turning to Kerv’s stay motion, Kerv moves to stay this case pending the resolution of

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state court litigation that bears directly on NFC Ring’s ownership of and authority to enforce the

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’609 patent. Stay Mot. 2. NFC Ring is currently embroiled in state court litigation with Esos,

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who claims to be the true owner of the ’609 patent and seeks an order restraining NFC Ring from

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taking any action with respect to the ’609 patent. Id. at 2-3; Ex. C to Stay Mot., ECF 44-3. After

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meeting and conferring, NFC Ring and Kerv agree that litigating this action prior to resolving the

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dispute regarding the ’609 patent would be a waste of judicial and parties’ resources. Stay Mot. 3.

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NFC Ring thus does not oppose the stay motion. Id. at 2.

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Esos submits a proposed opposition to the stay motion, assuming that this Court permits it

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to intervene. Esos’ Proposed Opp’n, ECF 50-3. Given that the Court is granting Esos’ motion to
intervene, Esos’ opposition to the stay request will be considered. Esos first argues that no

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United States District Court
Northern District of California

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standing or procedural issues would bar Esos’ intervention. Id. at 4-5. It then avers that it would

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suffer irreparable harm and loss of goodwill if the case is stayed. Id. at 3.

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“In considering whether a stay is appropriate, the Court weighs three factors: [1] the

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possible damage which may result from the granting of a stay, [2] the hardship or inequity which a

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party may suffer in being required to go forward, and [3] the orderly course of justice measured in

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terms of the simplifying or complicating of issues, proof, and questions of law which could be

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expected to result from a stay.” See Gustavson v. Mars, Inc., Case No. 13-cv-04537-LHK, 2014

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WL 6986421, at *2 (N.D. Cal. Dec. 10, 2014) (internal quotation marks and citation omitted)

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(brackets in original).

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NFC Ring submits that a stay would be beneficial because the clarity provided by the

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resolution of the ownership dispute would enable it to assert the patent in this and other cases. A

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stay would also avoid hardship and inequity to Kerv. Kerv persuasively argues that it would

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suffer hardship or inequity if the state court eventually determines that NFC Ring is not the

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rightful owner of the patent, subjecting it to liability from a different party and having to litigate

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against multiple parties. In the Court’s view, a resolution of the patent ownership dispute would

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simplify issues in this matter and preserve the orderly course of justice. The Court finds that these

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factors weigh strongly in favor of a stay.

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Esos in its opposition fails to demonstrate how any of the factors discussed above should
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weigh against a stay. First, Esos contends that there are no standing or procedural issues barring

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its intervention and that its intervention would eliminate Kerv’s concern of being “subject to

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another lawsuit from the true owner.” Esos’ Proposed Opp’n 3-4. However, whether there are

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standing or procedural issues does not bear on the factors pertinent in determining a stay motion.

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Moreover, while Kerv might no longer be concerned about being “subject to another lawsuit from

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the true owner,” Esos fails to address the “hardship or inequity” that Kerv may suffer by being

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compelled to litigate against an additional party only later to be informed by the state court

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judgment that only one of the plaintiffs is the rightful owner of the patent in suit. If this case were

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to proceed with Esos as a newly added plaintiff, Kerv would have to litigate against both NFC
Ring and Esos, including responding to motions and discovery requests from two parties. See e.g.,

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United States District Court
Northern District of California

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Gen-Probe, Inc. v. Amoco Corp., 926 F. Supp. 948, 963 (S.D. Cal. 1996) (granting the motion to

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stay due to a pending state court litigation over patent ownership). Kerv would be further

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deprived of any possibility of a settlement as an alternative to litigation due to the ownership

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dispute. Reply 4. Accordingly, the factor of hardship and inequity against Kerv remains favorable

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of a stay.

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Esos further argues that “justice does not require a stay,” and attempts to distinguish from

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cases where courts have granted a stay given similar circumstances. Esos’ Proposed Opp’n 6.

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First, this argument pertaining to “justice” fails to demonstrate how a denial of stay advances “the

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orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and

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questions of law.” See CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). Second, the

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distinguishable facts do not bear on any of the factors to be evaluated in determining whether a

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stay is warranted. For example, Esos attempts to distinguish Loral Fairchild Corp. v. Matsushita

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Elec. Indus. Co. because the plaintiff there sought to add claims against parties involved in the

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patent ownership dispute, unlike here where Esos has not asserted any claims against NFC Ring.

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840 F. Supp. 211, 213 (E.D.N.Y. 1994); Esos’ Proposed Opp’n 6. Esos also attempts to

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distinguish Intermedics Infusaid, Inc. v. Regents of Univ. of Minn. because the state court action

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could “preclude[] or moot” the federal case, while here, this case would be litigated regardless of

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who is ultimately determined to be the owner of the ’609 patent. 804 F.2d 129, 135 (Fed. Cir.
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1986); Esos’ Proposed Opp’n 7. However, the granting of the stay in those cases did not turn

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those differences highlighted by Esos. Rather, in both of these cases, the courts noted the

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importance of prejudice to the parties or potential for the duplicative or piecemeal litigation as

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factors in determining whether to grant a stay. Intermedics, 804 F.2d at 135 (finding no prejudice

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to the plaintiff resulting from a stay); Loral Fairchild, 840 F. Supp. at 218 (noting that “avoidance

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of piecemeal adjudication” is one of the most important factors in Colorado River abstention

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doctrine).

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Finally, Esos conclusorily avers that it would suffer irreparable harm and loss of goodwill
if the case is stayed. Esos’ Opp’n 3. However, Esos fails to make a showing why money damages
would be insufficient to remedy those harms. Given that this claim of irreparable harm is

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United States District Court
Northern District of California

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unsubstantiated, it does not overcome the other reasons favoring a stay discussed above. See, e.g.,

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CMAX, 300 F.2d at 269 (holding that where the party opposing the stay seeks money damages, a

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delay in recovery of damages “is not the kind of prejudice which should move a court to deny a

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requested postponement”). Accordingly, in light of the factors favoring a stay and Esos’ failure to

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make a strong showing against a stay, the Court finds that a stay would be appropriate and

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GRANTS the motion to stay pending the resolution of the ownership dispute in connection with

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the ’609 patent.

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For the foregoing reasons, the Court GRANTS the motion to stay and GRANTS the

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motion to intervene. The case is stayed until the state court action disposes of the claim relating to

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the ownership of the ’609 patent. The parties are directed to jointly submit a status update by

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November 30, 2017 or when the state court disposes of the claim relating to the ownership of the

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’609 patent, whichever is earlier.

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IT IS SO ORDERED.

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Dated: May 30, 2017
______________________________________
BETH LABSON FREEMAN
United States District Judge

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