Infinite Data LLC v. eBay Inc.

Filing 31

MEMORANDUM re 23 MOTION to Stay Customer Case. Signed by Judge Richard G. Andrews on 1/23/2014. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
INFINITE DATA LLC,
Plaintiff,
Civil Action No. 12-1618-RGA

V.

EBAYINC.,
Defendant.

MEMORANDUM

I have assigned to me twenty-one cases in which Infinite Data has sued for patent
infringement. I also have one case in which Mellanox Technologies has sued Infinite Data for a
declaratory judgment that its technology does not infringe Infinite Data's patent, and that the
patent is invalid. Infinite Data has answered the declaratory judgment amended complaint, and
alleged as a counterclaim that Mellanox's technology does infringe its patent. Thus, the usual
issues of infringement and invalidity are present in the Mellanox case. Mellanox alleges that it
has received indemnification requests from "many" of the twenty-one defendants, and that many
of them are users and/or customers ofMellanox's technology.
All twenty-one defendants have filed motions to stay, arguing that they do use
Mellanox's technology, 1 and that the Court should exercise its discretion to stay their cases while
the Mellanox case proceeds. Besides for briefing, I have had oral argument, on October 11,
2013. At the argument, I asked the defendants to state their positions on being bound by any of
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Defendant Home Depot does not concede that it uses Mellanox technology. (No. 13-260, D.l.
20 at 1). Thus, there is no particular reason to grant a stay in relation to Home Depot.

the Mellanox proceedings. The defendants submitted various positions, which I will describe
shortly.
The standard for granting a stay is: (I) whether granting the stay will simplify the issues
for trial; (2) whether discovery is complete and a trial date is set; and (3) whether granting a stay
would cause the non-moving party to suffer undue prejudice from any delay, or a clear tactical
disadvantage. See, e.g., Vehicle IP LLC v. Wal-Mart Stores, Inc., 20IO WL 4823393, *I (D.Del.
20IO).
When I consider these factors, the second one clearly favors a stay. The requests have
been made at the beginning of the case. The Rule I6 conference scheduled in October 2013 was
postponed on the Court's initiative, there is no trial date, and there has been no formal discovery.
To some extent the considerations relating to the first and third factors overlap. In regard
to the first factor, Mellanox knows its technology better than the defendants. It is in the best

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position, and probably has the most motivation, to litigate issues of infringement and invalidity.

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As a practical matter, if it settles the case, in view of its indemnification obligations, it will have

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to resolve at least some of the customer cases. If the case is litigated to the end, it might resolve

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either infringement or invalidity issues decisively, or, ifthe decisions are in favor of Infinite
Data, in such a way that as a practical matter there are fewer issues remaining. Thus, there is
significant potential for simplification of the issues if the Mellanox litigation goes first.
In regard to the third factor, there is almost always prejudice in delay, and this case is no
different. Infinite Data is not a competitor, so it can be recompensed by monetary damages.
Thus, any prejudice is not particularly great, as a monetary judgment at a later time should still
adequately compensate Infinite Data for its injury. I also consider tactical disadvantages. I
would have to be willfully blind not to understand that it is a significant tactical advantage for

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Plaintiff to be herding twenty-one defendant cats, and that it would significantly alter the tactical
landscape ifthe defendants are able to sit on the sidelines and let their champion, Mellanox, do
battle.
In short, a stay is a reasonable thing to consider.
The theoretical reason for staying "customer cases" is that the manufacturer is in a better
position, and has a greater interest, in defending its product. The concept is a little more
complicated here, because Mellanox does not sell a product that the customers resell. Rather the
claim is that the customers use the product, and perhaps modify it in doing so, and then make
profits from its use in their diverse business operations. The extent to which litigation with
Mellanox will result in patent exhaustion is not an entirely clear issue.
Thus, it makes sense to me to proceed with the Mellanox case and stay the others, since I
think resolution of the Mellanox case will most likely significantly advance the ball towards
resolution of, at least, many of the cases. I am, however, concerned about fairness to Infinite
Data, which, after all, did not sue Mellanox. Thus, it seems to me that if I am going to force
Infinite Data to forego chasing its preferred targets, Infinite Data ought to get something
concrete out of it, which would also offer a better chance of locking in the simplification that
could result from Mellanox going first. In that regard, I think the defendants ought to get one
shot at invalidity, and, if they are willing to have Mellanox take that shot, then I believe that the
balance tips in favor of granting a stay. For the defendants who want to be able to litigate (or
relitigate) invalidity, it seems best to have them do so on the same schedule as Mellanox, and,
for them, I will deny a stay.
Based on my readings ofthe submission by eighteen defendants (D.I. 30 in No. 12-1616),
I will grant the stay motions (No. 12-1616, D.I. 19; No. 12-1617, D.I. 15; No. 12-1618, D.I. 23;

No. 12-1622, D.I. 20; No. 12-1623, D.I. 18; No. 12-1638, D.I. 13; No. 13-251, D.I. 8; No. 13252, D.I. 8; No. 13-253, D.I. 10; 13-254, D.I. 13; No. 13-255, D.I. 8; No. 13-256, D.I. 16; No.
13-257, D.I. 13; No. 13-258, D.I. 10; No. 13-261, D.I. 8; No. 13-264, D.I.; No. 13-266, D.I. 8;
No. 13-267, D.I. 8) for the defendants who have agreed to be bound by any final decision on
invalidity in the Mellanox case. 2 For Home Depot, which has not agreed to be bound by any
final invalidity decision (No. 13-260, D.I. 20 at 2), and, which may not even use the Mellanox
technology, the motion to stay (No. 13-260, D.I. 16) will be denied. For General Motors, which
does not argue that it does not use Mellanox technology, but also has not agreed to be bound by
any final invalidity decision (No. 13-259, D.I. 18 at 2), the motion to stay (No. 13-259, D.I. 10)
will be denied. Mastercard takes a position that is very close to that of the "eighteen
defendants." (No. 13-262, D.I. 16).

Mastercard agrees to be bound by a final invalidity

decision "to the extent it involves a Mellanox product, product feature, or product component at
issue in the Mellanox declaratory judgment action." (No. 13-262, D.I. 16 at 3). This contrasts
with the position of the "eighteen defendants"- "To the extent Infinite Data asserts new
infringement allegations in its suit against a Customer or a subsequent suit against the same party
or parties, Customer may seek leave from the Court to raise issues of validity or unenforceability

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Infinite Data opposes any stay. Infinite Data has raised various points in regard to the
proposed stays should I be inclined to grant them. (No. 12-1616, D.l. 31). First, Infinite Data objects to
the defendants' stipulation that it cannot raise any infringement claim against the customers that could
have been raised in the Mellanox lawsuit. I agree with Infinite Data that this is more than is necessary at
this stage, and therefore I am not going to so bind Infinite Data. I think Mellanox, by virtue of its
declaratory judgment, has the power to raise whatever infringement issues it wants to raise, and by
virtue of its position relative to its customers and as the maker of the technology at issue, has the
incentive to do so. In view of the invalidity stipulation, if new infringement allegations are raised later,
there may also be new invalidity allegations. I expect there will be incentives for both Infinite Data and
Mellanox to resolve as much as possible in their action. Second, Infinite Data believes a final invalidity
decision should be final. Defendants noted that Infinite Data might argue for broader claim
construction in subsequent lawsuits. It does not strike me as impossible that Infinite Data might do so.
Thus, I think the extent to which the defendants are bound by the invalidity determination should, like
infringement, be related to what is actually determined in the context of the Mellanox action.

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oflnfinite Data's new infringement allegations." ((No. 12-1616, D.I. 30 at 7). Ifl am reading
these two stipulations correctly, the major difference is that the "eighteen defendants" would
leave the issue ofwhat to do ifinfinite Data accuses non-Mellanox technology (or Mellanox
technology not at issue in the declaratory judgment action) to my discretion, and Mastercard
would prefer not to do so. Since I expect I would exercise my discretion to grant such leave,
were it to come to pass, and since the "eighteen defendants" sought to have the benefit of any
"narrower agreement to be bound," I will grant Mastercard's motion for a stay (No. 13-262, D.I.
8), and treat the "eighteen defendants" as having stipulated to what Mastercard stipulated to, in
regard to invalidity. 3

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If any of the "eighteen defendants" prefers to adhere to the original stipulation, the party
should file something in writing within two weeks stating that decision.