Edisync Systems Inc v. Centra Software Inc, et al

Filing 322

ORDER to Stay and Administratively Close Case. ORDERED that the Order to Show Cause is DISCHARGED. ORDERED that this matter is STAYED pending the final outcome of the Patent Office's reexamination of the '320 patent, including any subs equent appeal. Since the length of this process is uncertain, this matter is ADMINISTRATIVELY CLOSED pursuant to D.C.COLO.LCivR 41.2 with leave to be reopened for good cause shown. In furtherance of the administrative closure, the parties are orde red to submit joint status reports to the Court every four months starting August 1, 2013. ORDERED that in light of the administrative closure of this matter, all briefing deadlines, pretrial submissions, and the hearing set for June 11, 2013 are hereby VACATED by Judge Wiley Y. Daniel on 04/10/13. (jjhsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Wiley Y. Daniel
Civil Action No. 03-cv-1587-WYD-MEH
EDISYNC SYSTEMS, INC.,
Plaintiff,
v.
CENTRA SOFTWARE INC.;
CENTRA SOFTWARE, LLC; and
SABA SOFTWARE, INC.,
Defendants.

ORDER TO STAY AND ADMINISTRATIVELY CLOSE CASE

I.

INTRODUCTION
THIS MATTER comes before me on the Notice of Patent Office Action in

Pending Reexamination (ECF No. 312), filed by Defendants on March 15, 2013.
According to this filing, “on March 12, 2013, the United States Patent and Trademark
Office (“PTO” or “Patent Office”) mailed a nonfinal Office Action in the pending
re-examination of United States Patent No. 5,799,320 (“the ‘320 patent”), the patent in
suit, finding unpatentable all of the claims of that patent.” (Not. at 1). The Patent Office
has given Plaintiff Edisync two months to respond to the rejection. If the Patent Office is
unpersuaded by Plaintiff’s response, the Patent Office will then issue a certificate of
reexamination canceling all the claims. As a result, the cancellation, unless reversed or
vacated on appeal, will render the ‘320 patent invalid, which would result in the
dismissal of this action. (Not. at 2).
In response to the Patent Office’s notice, on March 19, 2013, I issued an Order to

Show Cause why this matter should not be stayed and administratively closed pending
the final outcome of the Patent Office’s reexamination of the ‘320 patent. The parties
filed written responses. Defendant agreed that a stay of the case is appropriate while
Plaintiff objects to stay. For reasons stated below, I find that this matter should be
stayed. The Order to Show Cause is discharged.
II.

DISCUSSION
Any person may request PTO reexamination of the patentability of an unexpired

United States patent. 35 U.S.C. § 302 (2006). A request for patent reexamination may
be based on prior art patents or publications (i.e., patents or publications predating the
patent at issue) that raise a “substantial new question of patentability.” Id. § 303(a).
Within three months of such a request, the Patent Office, through patent examiners
familiar with the technologies involved in the patent, must determine whether a
“substantial new question of patentability” exists. Id. § 303(a); Broadcast Innovation,
L.L.C. v. Charter Comm., Inc., 2006 WL 1897165, at *1-2 (D. Colo. July 11, 2006).
Significant to this case, a Patent Office decision to cancel a patent renders the
patent unenforceable in pending litigation. Broadcast Innovation, 2006 WL 1897165, at
*1-2 (citing 35 U.S.C. §§ 301-02, 307[a] ). Alternatively, although not binding, a Patent
Office decision upholding the validity of reexamined patent claims is strong evidence
that a district court must consider in assessing whether the party asserting invalidity has
met its burden with clear and convincing evidence. Id.; Custom Accessories, Inc. v.
Jeffrey-Allan Indus., Inc., 807 F.2d 955, 961 (Fed. Cir. 1986).
By way of background, “Congress instituted the reexamination process to shift
the burden of reexamination of patent validity from the courts to the PTO. Patent
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validity is a commonly asserted defense in litigation and courts are cognizant of
Congress's intention of utilizing the PTO's specialized expertise to reduce costly and
timely litigation.” Canady v. Erbe Elektromedizin GmbH, 271 F. Supp. 2d 64, 78 (D.D.C.
2002). Courts recognize that shifting the patent validity issue to the Patent Office has
many advantages, including: (1) all prior art presented to the court will have been first
considered by the Patent Office, with its particular expertise; (2) the outcome of the
reexamination many encourage a settlement; (3) issues, defenses, and evidence will be
more easily limited in final pretrial conferences after a reexamination; and (4) costs will
likely be reduced both for the parties and the court. Emhart Indus., Inc. v. Sankyo Seiki
Mfg. Co., 3 U.S.P.Q.2d 1889, 1890 (N.D. Ill.1987).
My decision to stay this action pending the resolution of the reexamination
proceeding is within my sound discretion. Braintree Labs., Inc. v. Nephro-Tech, Inc.,
1997 WL 94237, at *8 (D. Kan. 1997). Indeed, the Supreme Court has recognized that
“the power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for
itself, for counsel, and for litigants. How this can best be done calls for the exercise of
judgment. . . .” Landis v. N.Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153
(1936). I also note that “[t]he legislative history surrounding the establishment of the
reexamination proceeding evinces congressional approval of district courts liberally
granting stays.” Robert H.Harris Co. v. Metal Mfg. Co., 19 U.S.P.Q.2d 1786, 1788 (E.D.
Ark.1991). Further, “[w]hen a district court stays patent validity proceedings before it
until completion of a reexamination proceeding, that stay must be accepted if the
purpose of the reexamination statute is to be preserved.” Gould v. Control Laser Corp.,
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705 F.2d 1340, 1342 (Fed. Cir.), cert. denied, 464 U.S. 935, 104 S.Ct. 343, 78 L.Ed.2d
310 (1983).
The factors Courts generally apply when determining whether to stay an action
pending reexamination are: (1) whether a stay will simplify the issues in question and
streamline the trial; (2) whether discovery is complete and whether a trial date has been
set; (3) whether a stay would unduly prejudice the nonmoving party or present a clear
tactical advantage for the moving party; and (4) whether a stay will reduce the burden of
litigation on the parties and on the court. Broadcast Innovation, 2006 WL 1897165, at
*4 (citing Tap Pharm. Prods. Inc. v. Atrix Labs., Inc., 2004 WL 422697, 70 U.S.P.Q.2d
1319, 1320 [N.D. Ill. 2004]; Nexmed Holdings, Inc. v. Block Inv., Inc., 2006 WL 149044,
at *1 [D. Utah Jan. 19, 2006] ). Courts frequently collapse the first and fourth factors.
See id. at *4 n. 6.
Here, I find that the four factors are satisfied. The reexamination procedure was
intended “to provide an inexpensive, expedient means of determining patent validity
which, if available and practical, should be deferred to by the courts.” Digital Magnetic
Sys., Inc. v. Ansley, 213 U.S.P.Q. 290, 290 (W.D.Okla.1982). The Federal Circuit has
explained that a major “purpose of the reexamination procedure is to eliminate trial of
that issue (when the claim is canceled) or facilitate trial of that issue by providing the
district court with the expert view of the PTO (when a claim survives the reexamination
proceedings).” Gould, 705 F.2d at 1342. Accordingly, the first and fourth factors weigh
heavily in favor of issuing a stay for the following reasons: (1) if the Patent Office
reverses its nonfinal Office Action finding unpatentable all of the claims of ‘320 Patent,
then I will have an expert opinion to assist me in resolving the pending summary
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judgment motions; and (2) if the reexamination ultimately leads to the cancellation of the
'320 Patent's claims, then Plaintiff's case will evaporate.
Moreover, the issues before the Patent Office are similar (if not identical) to those
before me on the pending summary judgment motions. Defendant asserts that the
Patent Office applied the same constructions that I adopted in my June 15, 2012 claim
construction ruling. See ECF No. 258. Thus, if this case were to proceed on its current
track, I would be applying the same constructions as the Patent Office has just applied
in the reexamination for purposes of summary judgment. The Patent Office has just
found all of the claims unpatentable. I find that it would clearly simplify the issues and
streamline the case for me wait for the Patent Office’s final action before repeating its
analysis.
Second, while summary judgment motions are pending, a trial date has not been
set. Third, Plaintiff would not suffer an unnecessary delay in prosecution of its case.
On the contrary, Defendant states that a stay would actually expedite the
reexamination. MPEP §2263 requires the Patent Office to reduce, from two months to
one month, the statutory period for a response to an office action, where a court stays a
litigation for purposes of re-examination. Thus, although Plaintiff has two months to
respond to the March 12, 2013 Office Action, if this matter is stayed, Plaintiff’s response
to future office actions will be accelerated by a month. (Def’s Resp. at 5).
III.

CONCLUSION
Based on the foregoing, although the parties and the Court have devoted

extensive resources to the case up to this point, in light of the recent nonfinal Office
Action by the Patent Office in the pending reexamination of United States Patent No.
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5,799,320, I find that a stay is appropriate. Accordingly, it is
ORDERED that the Order to Show Cause is DISCHARGED. It is
FURTHER ORDERED that this matter is STAYED pending the final outcome of
the Patent Office’s reexamination of the ‘320 patent, including any subsequent appeal.
Since the length of this process is uncertain, this matter is ADMINISTRATIVELY
CLOSED pursuant to D.C.COLO.LCivR 41.2 with leave to be reopened for good cause
shown. In furtherance of the administrative closure, the parties are ordered to submit
joint status reports to the Court every four months starting August 1, 2013. Based
upon those status reports, the Court will determine the appropriate course of action. It
is
FURTHER ORDERED that in light of the administrative closure of this matter, all
briefing deadlines, pretrial submissions, and the hearing set for June 11, 2013 are
hereby VACATED.
Dated: April 10, 2013
BY THE COURT:

s/ Wiley Y. Daniel
WILEY Y. DANIEL,
SENIOR UNITED STATES DISTRICT JUDGE

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