Imagevision.net Inc. v. Internet Payment Exchange Inc.

Filing 65

MEMORANDUM AND ORDER ADOPTING 62 REPORT AND RECOMMENDATIONS re 50 Second MOTION to Stay the Proceedings Pending Granted Inter Partes Reexamination filed by Internet Payment Exchange Inc., DENYING 50 Second MOTION to Stay the Proceedings Pending Granted Inter Partes Reexamination filed by Internet Payment Exchange Inc. Signed by Chief Judge Gregory M. Sleet on 4/22/2013. (asw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

IMAGEVISION.NET, INC.,
Plaintiff,

v.
INTERNET PAYMENT EXCHANGE, INC.,
Defendants.

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Civil Action No. 12-054-GMS-MPT

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MEMORANDUM
I.

INTRODUCTION
On January 18, 2012 ImageVision.Net, Inc. ("Imagevision") brought this action against

Internet Payment Exchange, Inc. ("IPX") for infringement of U.S. Patent No. 7,567,925 ("the
'925 patent"). (D.I. 1.) The court referred the case to Magistrate Judge Thynge to "conduct all
proceedings related to discovery disputes, alternate dispute resolution, and dispositive and
nondispositive motions, excluding claim construction, up to the pretrial conference." (D.I. 11.)
On June 18, 2012, after filing an inter partes reexamination request with the Patent and
Trademark Office (the "PTO"), IPX filed a motion in this court to stay the case pending
reexamination. (D.I. 14.)

On September 4, 2012 the magistrate judge issued a Report and

Recommendation recommending the denial of IPX's motion to stay.

(D.I. 38.) The court

adopted in part this first Report and Recommendation on November 15, 2012 and denied the
motion the stay. (D.I. 45.)
On December 3, 2012, the PTO granted IPX's request for inter partes reexamination,
(D.I. 51 at 6), and IPX filed a Renewed Motion to Stay the Proceedings Pending Reexamination,

(D.I. 50). The magistrate judge subsequently issued a second Report and Recommendation (the
"R&R") again recommending that IPX's stay request be denied. (D.I. 62.)
Presently before the court are Magistrate Judge Thynge's R&R (D.I. 62) and IPX's
Objections to the Report and Recommendation (D.I. 63). For the reasons that follow, the court
adopts the R&R and denies IPX's Renewed Motion to Stay the Proceedings Pending
Reexamination.

II.

IPX'S OBJECTIONS
IPX suggests that the magistrate judge erred by applying the traditional three-factor test

in determining whether a stay was appropriate and thereby "rejecting Judge Robinson's decision
in the Cellectis 1 case." (D.I. 63 at 3.) Ad~itionally, IPX argues that, even if the three-factor test
remains applicable after Cellectis, the R&R "improperly analyz[ ed] each factor and the weight
that should be given to each, given the USPTO's ruling that IPX is likely to win outright on all
claims (i.e., the '925 patent will likely be declared invalid in its entirety)." (ld.)

III.

STANDARD OF REVIEW
A motion to stay is "not dispositive of a party's claim or defense," and the court's review

of a magistrate judge's order on such a motion is therefore governed by Rule 72(a) of the Federal
Rules of Civil Procedure. Fed. R. Civ. P. 72(a). Accordingly, the court "must consider timely
objections and modify or set aside any part of the order that is clearly erroneous or is contrary to
law." Id.
With regard to the underlying stay request, it is well-settled that a decision to stay a case
lies within the sound discretion of the court. See Cost Bros., Inc. v. Travelers Indent. Co., 760

1

Cellectis S.A. v. Precision Biosciences, 883 F. Supp. 2d 526 (D. Del. 2012).

2

F.2d 58, 60 (3d Cir. 1985); First Am. Title Ins. Co. v. MacLaren, L.L.C., No. 10-363-GMS, 2012
WL 769601, at *4 (D. Del. Mar. 9, 2012); Nokia Corp. v. Apple, Inc., No. 09-791-GMS, 2011
WL 2160904, at *1 (D. Del. June 1, 2011). This authority applies equally to patent cases in
which a reexamination by the PTO has been requested. Ethicon, Inc. v. Quigg, 849 F.2d 1422,
1426-27 (Fed. Cir. 1988) ("Courts have inherent power to manage their dockets and stay
proceedings, including the authority to order a stay pending conclusion of a PTO
reexamination." (internal citation omitted)). In determining whether a stay is appropriate, the
court looks to the following factors: "(1) whether a stay would unduly prejudice or present a
clear tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues in
question and tJ;ial of the case; and (3) whether discovery is complete and whether a trial date has
been set." First Am. Title Ins. Co., 2012 WL 769601, at *4 (quoting Xerox Corp. v. 3 Comm.

Corp., 69 F. Supp. 2d 404, 406 (W.D.N.Y. 1999)).

IV.

DISCUSSION
A.

Legal Standard

IPX first questions whether the magistrate judge applied the correct legal standard in light
of Judge Robinson's decision in Cellectis. (D.l. 63 at 3.) According to IPX:
Judge Robinson's decision in Cellectis . . . held that a granted inter partes
reexamination under the [Leahy-Smith America Invents Act (the "AlA")]
mandated a stay of the proceedings unless the interests of justice dictate
otherwise. That decision is good law and has been followed by other districts ...
Judge Robinson held that in light of the heightened standard mandated by the AlA
for granting inter partes reexamination, the Court was mandated to stay the case
because of the high likelihood that the claims would change. That holding is quite
logical and should be adopted here.
(D.l. 63 at 3-4.) Notwithstanding the Cellectis decision, the court believes the magistrate judge

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was correct in applying the traditional three-factor test.
As an initial matter, it is inaccurate to say that Cellectis "held that a granted inter partes
reexamination under the AlA mandated a stay of the proceedings unless the interests of justice
dictate otherwise." The Cellectis court did observe that "[i]n passing the America Invents Act,
Congress has negated the need for the court's balancing of [the traditional three factors]," and
that "[t]he court is now mandated to stay litigation in favor of inter partes reexamination 'unless
the court before which such litigation is pending determines that a stay would not serve the
interests of justice."' See Cellectis, 883 F. Supp. 2d at 532. This statement, however, appeared
in the context of contrasting a request for a stay pending inter partes reexamination with the
treatment of motions to stay pending ex parte reexaminations. See Cellectis, 883 F. Supp. 2d at
532-33. The latter was the type of motion actually at issue in Cellectis. See id. As such, the
statements regarding the standard applicable to a motion to stay pending inter partes
reexamination represent only dicta and not the holding of the court. See Black's Law Dictionary
1072 (6th ed. 1990) (defining "obiter dictum"); see also Cohens v. Virginia, 19 U.S. 264, 399
(1821) ("It is a maxim not to be disregarded, that general expressions, in every opinion, are to be
taken in connection with the case in which those expressions are used. If they go beyond the
case, they may be respected, but ought not to control the judgment in a subsequent suit when the
very point is presented for decision.").
Moreover, even if the holding of Cellectis were as IPX urges, the court rejects any
attempt by IPX to suggest that it would be bound by such a holding. The Third Circuit has
noted:
[I]t is clear that there is no such thing as "the law of the district." Even where the
facts of a prior district court case are, for all practical purposes, the same as those
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presented to a different district court in the same district, the prior "resolution of
those claims does not bar reconsideration by this Court of similar contentions.
The doctrine of stare decisis does not compel one district court judge to follow
the decision of another."
Threadgill v. Armstrong World Indus., Inc., 928 F.2d 1366, 1371 (3d Cir. 1991) (quoting State
Farm Mut. Auto. Ins. Co. v. Bates, 542 F. Supp. 807, 816 (N.D. Ga. 1982)).
Finally, turning to the substantive issue, the court does not believe the granting of an inter
partes reexamination under the AlA should displace the three-factor test that has been
traditionally employed in assessing a motion to stay. Rather, that test is capable of incorporating
any changes resulting from the AlA. To the extent that IPX focuses on the more searching
standard applied by the PTO in granting a reexamination request, 2 the court accounts for that
heightened standard within its analysis of the "issue simplification" factor. To the extent that
IPX relies on the statutory language cited in Cellectis, indicating that a stay should be granted
unless it "would not serve the interests of justice," the court notes that this language appeared in
the old version of35 U.S.C. § 318 3 and thus was already accounted for in prior decisions of the
court applying the three-factor test.

The court finds no reason to alter the traditional test

employed by judges in this district in considering motions to stay pending inter partes
reexaminations granted both before4 and after 5 the AlA's enactment.

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The AlA now requires that the PTO find "a reasonable likelihood that the petitioner would prevail with
respect to at least 1 of the claims challenged in the petition" before granting a request for inter partes reexamination.
Leahy-Smith America Invents Act ("AlA"), Pub. L. No. 112-29, § 6(a), 125 Stat. 284, 300 (2011).
3

Section 6(a) of the AlA actually removed this language from§ 318. AlA, Pub. L. No. 112-29, § 6(a), 125
Stat. 284, 303-04 (2011).
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See, e.g., Smarter Agent, LLC v. Mobilerealtyapps.com, LLC, 889 F. Supp. 2d 673, 674 (D. Del. 2012);
Enhanced Sec. Research, LLC v. Cisco Sys., Inc., No. 09-571-JJF, 2010 WL 2573925, at *1-3 (D. Del. June 25,
2010).

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B.

Application of Three-Factor Test

IPX next argues that, even if the three-factor test survived Cellectis, the magistrate judge
erred in its application to the facts of this case. The court finds no such error.
1.

Prejudice

The first of the three factors is "whether a stay would unduly prejudice or present a clear
tactical disadvantage to the non-moving party." First Am. Title Ins. Co., 2012 WL 769601, at
*4.

The magistrate judge properly recognized that, in assessing this factor, the court considers

(1) the timing of the reexamination request, (2) the timing of the stay request, (3) the status of the
reexamination proceedings, and (4) the relationship between the parties as well as the related
question of whether the plaintiff's injuries may be compensated through future money damages.
See, e.g., Boston Scientific Corp. v. Cordis Corp., 777 F. Supp. 2d 783, 789 (D. Del. 2011). IPX
suggests, however, that the R&R's analysis of the "status of the reexamination proceedings" and
of"the relationship between the parties" was in error.
a.

Status of the Reexamination

With regard to the "status of the reexamination proceedings" sub-factor, IPX commits the
same mistake it previously made in arguing for its first motion to stay, complaining that "this
Court has specifically held that delay in the reexamination process cannot form the basis for a
prejudice claim." (D.I. 45 at 9; D.I. 63 at 7.) However, the court's past decisions, including the
one cited by IPX itself, actually indicate that "delay does not, by itself, amount to undue

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See, e.g., Walker Digital, LLC v. Google, Inc., No. 11-309-SLR, 2013 WL 1489003, at *2 (D. Del. Apr.
11, 2013); Neste Oil Oyj v. Dynamic Fuels, LLC, No. 12-662-GMS, 2013 WL 424754, at *1 (D. Del. Jan. 31, 2013);
SenoRx, Inc. v. Hologic, Inc., No. 12-173-LPS-CJB, 2013 WL 144255, at *2 (D. Del. Jan. 11, 2013).

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prejudice."6 Wall Corp. v. Bonddesk Grp., LLC, No. 07-844-GMS, 2009 WL 528564, at *2 (D.
Del. Feb. 24, 2009) (emphasis added); see also Neste Oil Oyj v. Dynamic Fuels, LLC, No. 12662-GMS, 2013 WL 424754, at *1 (D. Del. Jan. 31, 2013); ImageVision.Net, Inc. v. Internet
Payment Exchange, Inc., No. 12-054-GMS, 2012 WL 5599338, at *5 (D. Del. Nov 15, 2012).
Here, the magistrate judge based her finding of undue prejudice not only on the potential for
delay but also on the parties' competitive relationship. (D.I. 62 at 13-16.)
IPX further notes that because "[t]he reexamination is nearly complete at the Examiner
level ... [a]ny delay in the proceeding is caused by the time it takes to appeal to the Board of
Patent Appeals and Interferences." (D.I. 63 at 7.) As such, IPX contends that "[t]he R&R erred
by not recognizing that this delay will be

caus~d

by Imagevision appealing a final rejection."

(Id.) The court does not credit this argument-IPX offers no authority in support of this theory,

and it strikes the court as unreasonable to place the onus for a potential delay on the appellant
and not the party that actually initiated the underlying reexamination.
Accordingly, the court can find no error ·in the R&R's treatment of the "status of the
reexamination" consideration.
b.

Relationship Between the Parties

IPX also challenges the magistrate judge's assessment of the "relationship between the
parties," arguing that the R&R gave too much weight to this factor in light of the parties'
supposedly limited market overlap and Imagevision's failure to request a preliminary injunction.
(D.I. 63 at 8.) The parties' status as competitors, however, has already been established in this
litigation, (D.I. 62 at 14), and IPX's suggestion that this competitive relationship is more limited
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Indeed, the court addressed precisely this issue in its November 15, 2012 Memorandum and Order. (D.I.

45 at 9.)

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than described in the R&R is both disputed by Imagevision, (D.I. 64 ay 8), and insufficient to
convince the court that the magistrate judge's finding on this point was clearly erroneous or
contrary to law. Additionally, judges in this district have recognized that, while a request for
preliminary injunctive relief may be indicative of a competitive relationship, it is non-dispositive
as to the issue. See, e.g., Belden Techs. Inc. v. Super. Essex. Commc 'ns LP, No. 08-63-SLR,
2010 WL 3522327, at *3 n.4 (D. Del. Sept. 2, 2010) ("The request for a preliminary injunction is
simply one (non-dispositive) indicia of the presence of direct competition."). The court discerns
no error in the examination of this sub-factor. 7
2.
The second

Issue Simplification
~lement

of the traditional three-factor stay analysis is "whether a stay will

simplify the issues in question and trial of the case." First Am. Title Ins. Co., 2012 WL 769601,
at *4. In examining this factor, the magistrate judge wrote:
In its original. decision, this court found that issue simplification "disfavored" a
stay, but upon review, the district court found simplification weighed slightly in
favor of a stay. Since inter partes reexamination has been granted, and the claims
of the patent have been preliminarily rejected, simplification weighs more
strongly in favor of a stay. Moreover, reexamination was granted under the new
heightened standard of the AlA, which means defendant is reasonably likely to
prevail on invalidity. Regardless of this determination by the PTO, a number of
issues remain that can only be addressed by the court.
(D.I. 62 at 10.) Despite the R&R's explicit recognition that this factor weighs more strongly in
favor of a stay given the PTO' s grant of the reexamination request under the AlA standard, IPX
still complains that the magistrate judge erred in not giving it sufficient weight. (D.I. 63 at 6.) In
particular, IPX appears to take issue with the R&R's observation that the PTO is incapable of
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IPX also suggests that the R&R did not properly take into account the potential for it to be prejudiced if
the stay request is denied. (D.I. 63 at 8-9.) Yet, as the magistrate judge noted, IPX "fail[ed] to cite any legal basis
that litigation alone constitutes hardship or inequity." (D.I. 62 at 16)

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addressing all the matters before the court. (D.I. 62 at 10.) In the defendant's view, "The fact
that there are issues in the litigation that are not addressed in the USPTO should have been given
little, if any, weight. If, as is likely, all claims of the '925 patent are invalid, then every other
issue in the case will be moot." (D.I. 63 at 7.) While this may be true, the court cannot find that
the R&R was in error-IPX fails to recognize the speculative nature of its reexamination
predictions, and the PTO's published statistics suggest that at least some claims will survive
intact or in an amended form. (D.I. 22 at Ex. B.)
3.

Stage of Litigation

The final factor is "whether discovery is complete and whether a trial date has been set."
First Am. Title Ins. Co., 2012 WL 769601, at *4. Staying a case in its early stages "can be said
to advance judicial efficiency and maximize the likelihood that neither the Court nor the parties
expend their assets addressing invalid claims." SenoRx, Inc., 2013 WL 144255, at *5 (internal
quotation omitted). On the other hand, when the court is faced with a stay decision in the later
stages of an action, ''the Court and the parties have already expended significant resources on the
litigation, and the principle of maximizing the use of judicial and litigant resources is best served
by seeing the case through to its conclusion." I d.
The R&R found that this factor does not favor a stay, noting that "[a]lthough no trial date
has been set, discovery is ongoing, a scheduling order has been issued, with cut off dates for
discovery, including expert discovery, and the Markman process and letter briefs on case
dispositive motions loom in the near future." (D.I. 62 at 8.) IPX contends that the magistrate
judge applied the wrong standard and emphasizes the oft-repeated question of "whether
discovery is complete and whether a trial date has been set."
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(D.I. 63 at 5.)

Noting that

discovery is not yet complete here, and that, while a scheduling order is in place, no precise trial
date has been set, IPX maintains that this factor weighs in favor of a stay. (!d.)
Though the court appreciates IPX's argument on this point and believes the analysis of
this factor presents a close call, it again can find no clear error in the R&R's conclusion. While
the formulaic language generally recited by judges in this district is "whether discovery is
complete and whether a trial date has been set," as suggested above, the rationale underlying this
"stage of litigation" factor does not demand such an inflexible approach. See SenoRx, Inc., 2013
WL 144255, at *5 (focusing on whether the court and litigants have already been required to
expend "significant resources on the litigation"). The magistrate judge properly examined this
factor in light of other decisions from this district and found it significant that the parties have
already engaged in substantial discovery. 8 (D.I. 62 at 7-9.)
In both its treatment of the three factors and its ultimate conclusion, the R&R was neither

clearly erroneous nor contrary to law.

V.

CONCLUSION
For the foregoing reasons, the court will adopt the R&R and deny IPX's Renewed

Motion to Stay the Proceedings Pending Reexamination.

Dated: April _H, 2013

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The R&R notes that "[c]ontrary to defendant's representations regarding discovery, plaintiff has produced
almost 38,000 pages of confidential documents in response to defendant's first set of document requests. Plaintiff
points out discovery began in June 2012, written discovery and documents have been exchanged, significant
discovery issues were addressed by the court during a discovery dispute conference in November 2012, the
Marlanan process begins in May, with a claim construction hearing scheduled in June 2013, fact discovery closes in
July, and expert discovery ends in November 2013, which is immediately followed by case dispositive motion
practice." (D.I. 62 at 7.)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

IMAGEVISION.NET, INC.,
Plaintiff,
v.

INTERNET PAYMENT EXCHANGE, INC.,
Defendants.

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Civil Action No. 12-054-GMS-MPT

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ORDER

At Wilmington this

1. l.

day of April 2013, consistent with the memorandum opinion

issued this same date, IT IS HEREBY ORDERED that:
1.

The Magistrate Judge's Report and Recommendation (D.I. 62) is ADOPTED; and

2.

The

defendant's

Renewed

Reexamination (D.I. 50) is DENIED.

Motion

to

Stay

the

Proceedings

Pending