Intellectual Ventures II LLC v. SunTrust Banks, Inc. et al

Filing 175

OPINION AND ORDER that Defendants' 151 Motion to Stay Pending Inter Partes review is GRANTED, and this matter is STAYED until the IPR proceedings and, appeals, if any, are completed. The parties shall advise the Court when the IPR proceedings are concluded. Signed by Judge William S. Duffey, Jr on 10/7/2014. (anc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
INTELLECTUAL VENTURES II
LLC,
Plaintiff,
v.

1:13-cv-02454-WSD

SUNTRUST BANKS, INC., and
SUNTRUST BANK,
Defendants.

OPINION AND ORDER
This matter is before the Court on the Defendants’ Motion to Stay Pending
Inter Partes Review [151] (“Motion to Stay”).
I.

BACKGROUND
On July 24, 2013, Plaintiff Intellectual Ventures II LLC (“Plaintiff”) filed a

Complaint against Defendants SunTrust Banks, Inc. and SunTrust Bank
(collectively, “Defendants”), in which it alleged that the Defendants infringed U.S.
Patents Nos. 6,715,084 (the “084 Patent”), 6,314,409 (the “409 Patent”), 5,745,574
(the “574 Patent”), 6,826,694 (the “694 Patent”), and 7,634,666 (the “666 Patent”)
(collectively, the “Patents”). Non-parties International Business Machines
Corporation (“IBM”), BBVA Compass Bancshares, Inc. and Compass Bank,

Commerce Bancshares, Inc. and Commerce Bank, and First National Bank of
Omaha and First National of Nebraska, Inc. have filed thirteen (13) petitions
requesting inter partes (“IPR”) review of the Patents that are the subject of this
infringement action.
On April 16, 2014, the Patent Trial and Appeal Board (“PTAB”) instituted
IPR proceedings on all claims of the 666 Patent, and found that non-party IBM had
established a reasonable likelihood of showing that Claims 1-11 are invalid over
the prior art. On September 22, 2014, the PTAB denied IBM’s request for IPR
regarding various claims of the 409 Patent, including claims asserted by Plaintiff
against Defendants. On September 24, 2014, the PTAB instituted IPR of claim 1
of the 694 Patent, and found that the non-parties had established a reasonable
likelihood of showing that the claim was invalid under 35 U.S.C. §§ 102 and/or
103. Plaintiff has asserted this claim against the Defendants. The remaining nonparty petitions that seek IPR challenge the validity of every claim asserted by the
Plaintiff against the Defendants in this matter.
The PTAB is expected to decide whether IPR proceedings should be
instituted on the remaining petitions by the end of October, 2014. The PTAB is
expected to issue final written decisions on the pending petitions by October, 2015.
See 25 U.S.C. §§ 314(b); 316(a)(11).

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On June 6, 2014, the Defendants filed their Motion to Stay this action
pending the outcome of the PTAB’s review. On June 23, 2014, Plaintiff filed a
response in opposition to the Motion to Stay. On August 18, 2014, the Court held
a telephone conference with the parties, and determined that it was required to stay
discovery in this case until the Court ruled on Defendants’ Motion to Stay.
II.

DISCUSSION
A.

Legal Standard

The IPR petitions regarding the Patents in this action were filed by various
non-parties pursuant to the Leahy-Smith America Invents Act, which authorizes
the PTAB to conduct an IPR of the validity of a patent, on the basis of prior art.
See generally 35 U.S.C. §§ 311–319 (2006 & Supp. V 2011). If the PTAB grants
review and finds the patent invalid, the patent is cancelled, and any infringement
litigation becomes moot. 35 U.S.C. § 311. If the PTAB finds the patent valid, the
challenger in the IPR proceeding is estopped from asserting invalidity, on the same
grounds, in subsequent litigation. 35 U.S.C. § 315(e)(2).
If any party seeks IPR of an allegedly infringed patent, the district court has
the discretion to stay the action pending the PTAB’s review. See Procter &
Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 850–49 (Fed. Cir. 2008).
Several courts have noted the benefits of staying infringement litigation in the face

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of IPR:
All prior art presented to the Court will have been first considered by
the PTO, with its particular expertise[;] Many discovery problems
relating to prior art can be alleviated by the PTO examination[;] In
those cases resulting in effective invalidity of the patent, the suit will
likely be dismissed[;] The outcome of the reexamination may
encourage a settlement without the further use of the Court[;] The
record of reexamination would likely be entered at trial, thereby
reducing the complexity and length of the litigation[;] Issues,
defenses, and evidence will be more easily limited in pretrial
conferences after a reexamination[; and] The cost will likely be
reduced both for the parties and the Court.
Tomco2 Equip. Co. v. Se. Agri-Sys., Inc., 542 F. Supp. 2d 1303, 1307 (N.D. Ga.
2008) (alterations in original) (quoting Datatreasury Corp. v. Wells Fargo & Co.,
490 F. Supp. 2d 749, 754 (E.D. Tex. 2006)).
Despite these benefits, there are “potential difficulties” with staying a case,
including “the possible length of the [review]” and the fact that the review process
“only considers the validity of the patent with regard to prior art,” leaving for the
court “other infringement issues or other grounds for invalidity.” Id. In balancing
the benefits and difficulties, courts consider three factors: (1) “whether discovery is
complete and a trial date has been set”; (2) “whether a stay will simplify the issues
in the case”; and (3) “whether a stay would unduly prejudice or present a tactical
disadvantage to the nonmovant.” Id. (citing Xerox Corp. v. 3Com Corp., 69 F.
Supp. 2d 404, 406 (W.D.N.Y.1999)); accord Semiconductor Energy Lab. Co. v.

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Chimei Innolux Corp., No. SACV 12-21-JST, 2012 WL 7170593, at *1 (C.D. Cal.
Dec. 19, 2012).
B.

Analysis
1.

Progress of the Litigation

This case is at an early stage. Only four depositions have been taken, and
the parties intend to depose several other witnesses. To date, the Court has not
held a Markman hearing. Fact discovery will continue until forty five (45) days
after the Court’s claim construction ruling. Neither party has moved for summary
judgment, and the Court has not set a date for trial. The Court concludes that the
progress of this case favors a stay. See Tomco2, 542 F. Supp. 2d at 1312.
2.

Simplification of the Issues

This case involves the alleged infringement of five Patents. If the PTAB
finds that any of the Patents are invalid, the Court will not be required to construe
the disputed terms of the invalidated Patents. To date, the PTAB has instituted IPR
proceedings on one claim of the 694 Patent, and all claims of the 666 Patent.
There is thus a reasonable likelihood of showing that the claims asserted in this
action that are based on the 694 and 666 Patents are invalid. Even if the PTAB
concludes that some, but not all, the Patents are invalid, the scope of this case may
be significantly narrowed. In construing the Patents, the Court also will be aided

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by the interpretation offered by the PTAB. The Court finds that staying this action
will result in significant simplification of issues.
3.

Prejudice or Disadvantage to Plaintiff

The delay in this case caused by a grant of the Motion to Stay is minimized
by the fact that the PTAB is expected to determine whether to institute IPR
proceedings on the remaining Patents by the end of this month. If the petitions are
granted, the PTAB is required to issue its final decision within one year, or, “for
good cause,” within 18 months. See 37 C.F.R. § 42.100(c). Any party may then
appeal the PTAB’s decision to the United States Court of Appeals for the Federal
Circuit. See 35 U.S.C. § 319 (cross-referencing 35 U.S.C. §§ 141-144). The
PTAB has granted two IPR petitions regarding the 694 and 666 Patents. If the
Court grants a stay, the PTAB’s decision on the validity of the 694 and 666 Patents
will be issued by October, 2015, or if there is “good cause” for the delay, by April,
2016. Because any decision issued by the PTAB will significantly simplify the
issues in this matter, the Court finds that any delay that may occur while the PTAB
review is processed is outweighed by the benefits of awaiting PTAB review.
Plaintiff argues that staying this case will give the Defendants an unfair
tactical advantage because Defendants are not subject to the litigation estoppel
provision of 35 U.S.C. § 315. Under Section 315, the petitioner in an IPR

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proceeding, or the real party in interest or privy of the petitioner, may not assert, in
any civil action, that “the claim is invalid on any ground that the petitioner raised
or reasonably could have raised during the inter partes review.” See 35 U.S.C. §
315(e)(2). The estoppel provision of Section 315 does not apply to Defendants
because they are not a party to the IPR proceeding, a real party in interest, or in
privity with the non-parties that seek IPR of the five Patents that are the subject of
this litigation.
Even though the Defendants cannot be statutorily estopped from asserting
that the Patents are invalid, a stay is appropriate because the outcome of the IPR
proceedings will simplify the issues in this case. See Pi-Net Int’l., Inc. v. Hertz
Corp., 2013 WL 7158011, at *3-4 (C.D. Cal. June 5, 2013) (staying case even
though the defendant was not subject to statutory estoppel because the “issues
would likely be simplified and would promote judicial efficiency.”); e-Watch, Inc.
v. Acti Corp., Inc., 2013 WL 6334372, at *7 (W.D. Tex. Aug 9, 2013) (finding that
even if no formal estoppel applies, “if the USPTO invalidates any of the three
patents-in-suit at issue or changes the scope and terms of any claim, the matters at
issue in this Court will change. It is not necessary . . . to be a party to the IPR
proceedings for the USPTO’s substantive decisions in reexamination proceedings
to have an effect on the patent issues to be litigated in this case.”).

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The Court concludes that a stay of this action is appropriate, and
Defendants’ Motion to Stay is granted.1
III.

CONCLUSION
Accordingly, for the foregoing reasons,
IT IS HEREBY ORDERED that Defendants’ Motion to Stay Pending Inter

Partes review is GRANTED, and this matter is STAYED until the IPR
proceedings and, appeals, if any, are completed. The parties shall advise the Court
when the IPR proceedings are concluded.

SO ORDERED this 7th day of October, 2014.

1

Plaintiff here has filed infringement actions across the country alleging
infringement by the Defendants in this case and against other corporations in the
same industry. These cases are pending before various district court judges in
different districts across the nation. This presents two problems: the prospect for
inconsistency in a complex and unfamiliar area of the law, and the inefficiency that
will result from this multi-district litigation. There must be some mechanism for
consolidating these cases in a way that the potential for inconsistency is limited
and efficient processing of these actions is promoted. There may be a way for the
Multi District Litigation Panel to consolidate these cases. The prospect for
consolidation has greater potential if all the parties agreed to consolidate the cases
in the interests of efficiency and judicial economy.

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