Evolve Composites, Inc. et al v. Diversitech Corporation
Filing
17
ORDER AND OPINION granting 11 Defendant's Motion to Stay the Proceedings Pending Reexamination. The Clerk shall administratively terminate this action. Either party may reopen the action within sixty (60) days of a determination by the United States Patent and Trademark office or earlier, for good cause shown. Signed by Judge Julie E. Carnes on 3/11/13. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
EVOLVE COMPOSITES, INC. and
POLYSLAB INTERNATIONAL PTY.
LTD.,
Plaintiff,
v.
CIVIL ACTION NO.
1:12-cv-02028-JEC
DIVERSITECH CORPORATION,
Defendant.
ORDER AND OPINION
This case is before the Court on defendant’s Motion to Stay
Pending Reexamination [11].
The Court has reviewed the record and
the arguments of the parties and, for the reasons set out below,
concludes that the defendant’s Motion to Stay [11] should be GRANTED.
BACKGROUND
This case alleging patent infringement was brought by the
plaintiffs Evolve Composites, Inc. and Polyslab International Pty.
Ltd. (together, “Evolve”) on June 12, 2012.
Evolve alleges that the
defendant’s equipment pads infringe U.S. Patent No. 8,152,129 (the
“‘129 Patent”), specifically claim 12 of the ‘129 patent.
(Compl.
[1] at ¶ 16.)
On August 6, 2012, the defendants filed an inter partes Request
AO 72A
(Rev.8/82)
for Reexamination to the United States Patent and Trademark Office
(“PTO”).
(Def.’s Mot. to Stay [11] at Ex. E.)
In their Request,
Diversitech asserts that all of the claims in the ‘129 are either
anticipated under 35 U.S.C. § 102(b) or obvious under 35 U.S.C. §
103(a).
(Id.)
On September 25, 2012, the PTO granted Diversitech’s request for
reexamination on Claims 1-6, 11, and 12 of the ‘129 Patent.1
(Def.’s
Supplemental Filing [16] at Ex. A.) The PTO rejected the request for
claims 7-10 of the ‘129 Patent.
(Id.)
On the same date, the PTO
issued an Office Action rejecting claims 1, 11, and 12 of the ‘129
Patent as anticipated by the prior art and rejecting claims 2-6 as
obvious in view of the prior art.
There
is
a
related
(Id. at Ex. B.)
matter,
also
in
this
Court,
in
which
Diversitech alleges that Evolve’s Polyslab® equipment pads infringe
U.S. Patent No. 7,891,635, which is held by Diversitech.
Resp. [14] at Ex. A.)
(Pls.’
In that case (the “‘635 Patent Action”), the
Court appointed a Special Master to conduct Markman proceedings. The
Special Master heard oral arguments at a Markman hearing and issued
1
Diversitech originally made their request for reexamination
under the old standard, which required the request to raise a
“substantial new question of patentability.” The Leahy-Smith America
Invents Act that went into effect on September 16, 2011 now requires
a higher standard for a reexamination to be granted: that there is a
reasonable likelihood that the requester will prevail. 35 U.S.C. §
314.
However, the PTO still found that the request reached this
heightened burden when the request for reexamination was granted.
2
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(Rev.8/82)
his report and recommendation regarding claim construction on July
18, 2012.
The parties have filed their objections and this Court’s
decision on the Special Master’s Report is pending.
DISCUSSION
I.
LEGAL STANDARD
Inter partes reexamination allows a person who is not the owner
of a patent to petition the PTO to cancel or amend one or more claims
of a patent.
35 U.S.C. § 311.
However, the PTO will not review all
issues of patentability, but only those issues under 35 U.S.C. §§ 102
and
103.
Id.
Essentially,
“reexamination
reconsider the validity of an existing patent.”
allows
the
PTO
to
Tomco Equip. Co. v.
Se. Agri-Sys., Inc., 542 F. Supp. 2d 1303, 1306 (N.D. Ga. 2008).
Congress permits reexaminations to provide a “quality check” on
patents and to allow the government to remove erroneously granted
patents.
In re Swanson, 540 F.3d 1368, 1375 (Fed. Cir. 2008).
The
petitioner in an inter partes review is bound by the decision of the
PTO and may not assert that a “claim is invalid on any ground that
the petitioner raised or reasonably could have raised during [the]
inter partes review.”
35 U.S.C. § 315(e)(2).
These rules dovetail with the goal of reexamination, which is to
“permit [the] efficient resolution of questions about the validity of
issued patents without recourse to expensive and lengthy infringement
litigation.”
Graywire, LLC v. Ciena Corp., Civil Action File No.
3
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1:08-CV-2993-BBM, 2009 WL 8590870, at *2 (N.D. Ga.
July 17, 2009)
(Martin, J.)(citing H.R. Rep. No. 96-1307(I), at 3-4 (1980)).
well-recognized
purpose
of
“the
reexamination
procedure
is
A
to
eliminate trial of [an] issue (when the claim is canceled) or to
facilitate trial of [an] issue by providing the district court with
the
expert
view
of
the
reexamination proceeding).”
1340,
1342
(Fed.
Cir.
PTO
(when
[the]
claim
survives
the
Gould v. Control Laser Corp., 705 F.2d
1983).
The
Eastern
District
of
Texas
succinctly outlined the other benefits that reexamination provides:
1.
All prior art presented to the Court will
have been first considered by the PTO, with
its particular expertise;
2.
Many discovery problems relating to prior
art
can
be
alleviated
by
the
PTO
examination;
3.
In those cases resulting in effective
invalidity of the patent, the suit will
likely be dismissed;
4.
The outcome of the reexamination may
encourage a settlement without the further
use of the Court;
5.
The record of reexamination would likely be
entered at trial, thereby reducing the
complexity and length of the litigation;
6.
Issues, defenses, and evidence will be more
easily limited in pretrial conferences
after a reexamination; and
7.
The cost will likely be reduced both for
the parties and the Court.
4
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Datatreasury Corp. v. Wells Fargo & Co., 490 F. Supp. 2d 749, 754
(E.D.
Tex.
2006)(quoting
Fisher
Controls
Co.,
Inc.
v.
Control
Components, Inc., 443 F. Supp. 581, 582 (S.D. Iowa 1977).
The Supreme Court has long recognized district courts’ ability
and broad discretion to manage their dockets, including the power to
grant a stay of proceedings.
Procter & Gamble Co. v. Kraft Foods
Global, Inc., 549 F.3d 842, 848-49 (Fed. Cir. 2008)(citing Landis v.
N. Am. Co., 299 U.S. 248, 254-55 (1936)).
However, as many courts
and the parties point out, reexamination can be a lengthy process
that may take several years to complete.
Reexamination is also
limited to certain issues of patentability so litigation may be
necessary regardless of the PTO’s reexamination of the patent.
Because of these potential pitfalls, courts deciding whether to
grant a stay pending a PTO reexamination generally consider three
factors.
See Tomco Equip. Co., 542 F. Supp. 2d at 1307; Xerox Corp.
v. 3Com Corp., 69 F. Supp. 2d 404, 406-7 (W.D.N.Y. 1999).
Courts
look to (1) whether a stay would unduly prejudice or present a
tactical disadvantage to the non-moving party; (2) whether a stay
will simplify the issues of the case; and (3) the stage of the
litigation.
Xerox Corp., 69 F. Supp. 2d at 406-7.
5
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II.
ANALYSIS OF FACTORS
The Court now addresses each factor in determining whether to
grant the stay.
A.
Undue Prejudice And Tactical Advantage
The plaintiffs contend that a stay would be prejudicial because
reexamination through the PTO could potentially exceed three years,
which delay prevents them from vindicating their patent rights, as
well as hinders their ability to prosecute the infringement claims
later because of the faded memories of witnesses and evidence that is
potentially lost.
(Pls.’ Resp. [14].)
The parties are also direct
competitors and thus the potential for irreparable harm to the
plaintiff is higher.
(Id.)
The plaintiffs are correct in their assertion that district
courts recognize that the potential for prejudice to a patent holder
increases when the alleged infringer is a direct competitor.
See
e.g. ADA Solutions, Inc. v. Engineered Plastics, Inc., 826 F. Supp.
2d 348 (D. Mass. 2011); Cooper Notification, Inc. v. Twitter, Inc.,
Civ. No. 09-865-LPS, 2010 WL 5149351 (D. Del. Dec. 13, 2010)(Stark,
J.); Wyeth v. Abbott Labs., Civil Action No. 09-4850 (JAP), 2011 WL
380902 (D.N.J. Feb. 1, 2011)(Pisano, J.).
However, the litigants’
status as a direct competitor does not mandate the denial of a stay.
See Xpedite Sys., LLC v. J2 Global Commc’n, Inc., Civil Action No.
1:11-CV-0706-RWS, 2011 WL 6712766 (N.D. Ga. Dec. 21, 2011)(Story,
6
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J.); Tomco Equip. Co., 542 F. Supp. 2d 1303.
Significantly to this analysis, plaintiffs fail to allege any
specific facts about how they will be adversely affected by the delay
or how the direct competition harms them.
Instead, they simply cite
cases where other district courts, whose precedent is not binding on
this Court, declined to grant a stay pending reexamination where the
parties were direct competitors.
The cited cases, however, are
largely distinguishable from the present case based on the other two
factors that courts consider.2
2
In ADA Solutions Inc. v. Engineered Plastics, Inc., 826 F.
Supp. 2d at 351, the defendants asserted a “myriad [of] federal and
state counterclaims,” so the reexamination would have done nothing to
simplify these other claims. Further, some discovery had already
been taken and a trial date had been set.
In Cooper Notification, Inc. v. Twitter, Inc., 2010 WL 5149351,
the patent-holder expressly represented to the court that it would
not amend any of its claims during the reexamination and the court
had already invested much time in setting a scheduling order and date
of the trial. The court also questioned the tactical motives of the
defendants, who had waited ten months after the complaint was filed
to file for reexamination.
In Nat’l Prods., Inc. v. Gamber-Johnson LLC, No. 2:12-CV-00840,
2012 WL 3527938 (W.D. Wash. Aug. 14, 2012)(Lasnik, J.), the PTO
granted reexamination of two of the claims being asserted, but denied
reexamination of two others, so the court would have necessarily
needed to conduct a trial on those claims anyway.
In LG Elecs. U.S.A., Inc. v. Whirlpool Corp., Civil Action No.
09-5142 (GEB-ES), 2011 WL 487574 (N.D.J. Feb. 7, 2011)(Brown, C.J.),
discovery had already been completed, the trial date had been set,
and the movant had waited between 8 and 15 months to file
reexamination requests for the various patents being asserted.
7
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Courts must also take in to account any tactical advantage a
stay pending reexamination might give a party.
Recognizing that a
request for reexamination may be used as a stall technique, courts
are often wary when a party petitions for reexamination long after
the suit has been filed.
See, e.g. LG Elecs. U.S.A., Inc. v.
Whirlpool Corp., 2011 WL 487574 (denying stay after movant waited
between 8 and 15 months to file a reexamination request with the PTO
on the various patents being asserted); Esco Corp. v. Berkeley Forge
& Tool, Inc., No. C 09-1635 SBA, 2009 WL 3078463 (N.D. Cal. Sept. 28,
2009)(Armstrong, J.)(denying stay and specifically expressing concern
that defendant, which waited over six months to file reexamination
request, had only filed the request after failed attempts to license
the patent from the plaintiff).
Unlike these cases, the defendant here filed its reexamination
request
less
than
two
months
after
the
complaint
was
served.
Considering the complexity of preparing an inter partes reexamination
request, it seems unlikely that the defendant delayed the filing of
its reexamination request to give itself a tactical advantage, nor
In Life Technologies Corp. v. Illumina, Inc., Civil Action No.
09-706-RK, 2010 WL 2348737 (D. Del. June 7, 2010)(Kelly, J.), the
court refused to grant a stay on the defendant’s counterclaims
because it would still be proceeding as to plaintiff’s claims and
considerable discovery had taken place.
8
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does the short delay provide defendant with such an advantage.3
Finally, prejudice may also arise when there are other claims
unrelated to the reexamination pending that will also be put on hold
if the stay is granted.
This is not an issue in the instant case.
A single claim of the ‘129 Patent is being asserted in this case and
the PTO has not only granted reexamination as to that claim, but has
initially
rejected
it
in
light
of
the
prior
art.
(Def.’s
Supplemental Filing [16] at Ex. B.)
In short, as to prejudice, the Court finds this factor to be
either neutral or weighing only slightly in favor of denying the
defendant’s motion for a stay.
B.
Simplification Of Issues
Diversitech argues that the reexamination will greatly simply
the issues for trial since the PTO granted reexamination of the
single claim being asserted.
will
either
be
cancelled,
At the end of reexamination, the claim
amended,
3
or
confirmed.
As
to
this
Defendant Diversitech argues that the related matter, the ‘635
Patent Action, abates any prejudice the plaintiffs may experience.
Defendant asserts that the extensive discovery and depositions taken
in the ‘635 Patent Action will preserve any evidence that may be lost
with the passage of time. (Def.’s Mot. to Stay [11].) The Court is
unpersuaded by this particular argument. As Evolve points out, the
discovery and depositions taken in the ‘635 Patent Action concern
that patent, and not the ‘129 Patent. While there could be some
overlapping evidence preserved by the related action, the defendants
go too far in asserting that the related action negates any potential
harm to Evolve.
9
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argument, both sides spend much time in their briefs discussing the
rates at which the PTO cancels, amends or confirms claims during
reexamination.
By both accounts, a high probability exists that the
claims will be either amended or cancelled.4
Cancellation of a claim
obviously simplifies the issues to be tried as the case will be
rendered moot.
Even if the claim is not canceled, however, an
affirmation or amendment will greatly assist the Court in its
infringement determination.
The Court will not have to consider any
of the prior art considered by the PTO during reexamination and will
have guidance from the experts at the PTO regarding the scope of the
claims, including claim 12: the single claim being asserted.
Evolve argues that a stay would not simplify the issues in the
case because a reexamination will only address two grounds for
invalidity, while Diversitech contends invalidity on five additional
grounds, as well as alleging that Evolve’s claims are barred by
prosecution
history
estoppel
and
patent
misuse.
Although
the
plaintiffs are correct that the reexamination will not necessarily
simplify all the issues, it does not follow that reexamination will
not simply issues for trial.
As noted above, although there still
4
Defendant Diversitech cites statistics from September 2009 to
September 2010 to show that 84% of claims were amended or cancelled.
(Def.’s Reply in Support of Mot. to Stay [15].) Evolve uses Wyeth to
show that 24% of reexamined claims are cancelled, but conspicuously
makes no mention about the rate that claims are amended.
10
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may need to be a trial after reexamination, the scope of the claims
will be more easily and accurately determined in light of the PTO’s
findings.
Further, the cases cited by Evolve are distinguishable.
In
Cooper Notification, Inc., 2010 WL 5149351, the parties had already
completed their Markman briefings and the court had heard oral
arguments on claim construction.
Id. at, *3.
Thus, the PTO’s
determination of the scope of many of the asserted claims would have
been less useful to the court.
Id.
In Esco Corp., 2009 WL 3078463,
the PTO did reject many of the claims of one of the patents being
asserted, but confirmed the claims in the other patents being
asserted. Therefore, a full trial of issues would have been required
due to the confirmed patent claims, regardless of the outcome of a
reexamination.
Here, the PTO has not only granted the reexamination of the
single claim being asserted, but has initially rejected it as being
anticipated by the prior art.
Ex. B.)
(Def.’s Supplemental Filing [16] at
It is likely that the claim will be canceled or amended
during the reexamination process, but even if the PTO confirms the
claim without amendment, the findings by the PTO will be extremely
helpful to the Court when determining the scope of the ‘129 Patent
and whether it covers the accused equipment pad.
For these reasons,
this factor weighs heavily in support of granting the stay.
11
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C.
Stage Of Litigation
The final factor that courts consider when determining whether
or not to grant a stay is stage of the litigation.
Where a case is
in the early stage of litigation, this factor weighs in favor of a
stay.
See Graywire, LLC, 2009 WL 8590870, at *6; Tomco Equip. Co.,
542 F. Supp. 2d at 1311-12.
Both parties agree that this litigation is in its early stages,
as no deadlines have been set nor any discovery taken.
[14].)
(Pls.’ Resp.
Evolve believes that even though this action is in its
earliest stages, a stay should be denied because of the related suit
in the ‘635 Patent Action.
would
prevent
any
(Id.)
coordination
Evolve argues that granting a stay
between
the
cases.5
The
Court
concludes that the early stage of litigation means that the parties
have not invested much time, money or effort thus far, and therefore
somewhat favors a stay.
That said, should the need arise in the
related ‘635 Patent Action to wait for, or coordinate with, the
present stayed action, either party may make that request.
D.
Summary
In short, the Court finds a stay to be appropriate.
Although
there is always some possibility of prejudice when a case is stayed,
5
Evolve makes this argument even though earlier in its
briefing, it had argued that the two cases were not related enough to
help preserve any evidence that Evolve might ultimately need in an
action on the merits.
12
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the
PTO’s
preliminary
reexamination
may
conclusions
greatly
simplify
in
this
the
case
issues
suggest
here.
that
Further,
continuing on with this case while reexamination is occurring would
likely result in the Court performing duplicative work and could
result in conflicting determinations by the undersigned and the PTO
examiner.
These considerations outweigh the factors asserted by
Evolve in opposition to a stay.
CONCLUSION
For the foregoing reasons, the Court GRANTS defendant’s Motion
to Stay the Proceedings Pending Reexamination [11].
ADMINISTRATIVELY TERMINATE this action.
The Clerk shall
Either party may reopen the
action within sixty (60) days of a determination by the United States
Patent and Trademark office or earlier, for good cause shown.
SO ORDERED, this 11th day of MARCH, 2013.
/s/ Julie E. Carnes
JULIE E. CARNES
CHIEF UNITED STATES DISTRICT JUDGE
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