Capital Security Systems, Inc. v. ABNB Federal Credit Union
Filing
64
OPINION and ORDER GRANTING 50 Motion to Stay action. Signed by Judge William S. Duffey, Jr on 6/18/2015. (adg)
OPINION AND ORDER
This matter is before the Court on Defendants SunTrust Banks Inc.’s and
SunTrust Bank’s (“the SunTrust Defendants”) Motion to Sever, or, in the
alternative, Stay [47] the claims against them in Capital Security Systems Inc. v.
NCR Corporation, et al., 14-cv-1516-WSD (“Capital Security v. NCR”),
Defendant Capital One, N.A.’s (“Capital One”) Motion to Stay [42] the action in
Capital Security Systems Inc. v. Capital One, N.A., 14-cv-3370-WSD
(“Capital Security v. Capital One”) and Defendant ABNB Federal Credit Union’s
(“ABNB”) Motion to Stay [50] the action in Capital Security Systems, Inc. v.
ABNB Federal Credit Union, 14-cv-3371-WSD (“Capital Security v. ABNB”).
I.
BACKGROUND
A.
Capital Security v. NCR
On May 19, 2014, Plaintiff Capital Security Systems Inc. (“Plaintiff”) filed a
patent infringement action, in this Court, against NCR Corporation (“NCR”) and
its customers, the SunTrust Defendants. Defendant NCR is a computer hardware,
software and electronics company, based in Duluth, Georgia, that provides
businesses with point-of-sale terminals, automated teller machines (“ATM”),
check processing systems and barcode scanners. NCR produces ATMs that
incorporate Scalable Deposit Module (“SDM”) technology, which allows
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customers of a bank to deposit cash into their accounts without an envelope. In
July 2012, the SunTrust Defendants entered into an exclusive contract to purchase
more than twelve hundred (1200) ATMs from NCR. Plaintiff, a company based in
San Diego, California, alleges that it owns Patents Nos. 5,897,625
(“the ′625 Patent”), 7,653,600 (“the ′600 Patent”), 7,991,696 (“the ′696 Patent”),
and 8,121,948 (“the ′948 Patent”). These four Patents purport to claim a method or
apparatus for depositing checks into an ATM machine without the need of an
envelope.
Plaintiff alleges that NCR infringed the ′600, ′625 and ′948 Patents by
manufacturing ATMs that incorporated SDM technology, and that the SunTrust
Defendants infringed the Patents by providing their customers with ATMs supplied
by NCR. Plaintiff contends that the ′696 Patent is infringed directly by the
SunTrust Defendants but not NCR.1
On November 12, 2014, the SunTrust Defendants invoked the customer suit
exception in moving to sever or, in the alternative, stay Plaintiff’s patent
infringement claims against them. The SunTrust Defendants argue that the case
against NCR should proceed first because it is the party that manufactured and sold
1
On August 18, 2014, NCR asserted counterclaims of patent invalidity and
non-infringement, including that Plaintiff’s claims related to the ′696 Patent are
invalid.
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the ATMs, and the SunTrust Defendants were post-manufacture purchasers of the
ATMs from NCR.
On December 1, 2014, Plaintiff responded to the SunTrust Defendants’
Motion to Sever or Stay Plaintiff’s claims. Plaintiff does not oppose staying the
claims against the SunTrust Defendants, and argues that NCR’s counterclaim
based on the ′696 Patent against Plaintiff should also be stayed.
B.
Capital Security v. Capital One and Capital Security v. ABNB
On March 21, 2014, and April 23, 2014, Plaintiff filed patent infringement
actions against ABNB and Capital One respectively, in the United States District
Court for the Eastern District of Virginia (“District Court for the EDVA”). ABNB
and Capital One are financial institutions that, like the SunTrust Defendants,
purchased ATMs from NCR.
On October 20, 2014, the District Court for the EDVA found that the
customer suit exception applied, and transferred the customer suits in
Capital Security v. Capital One and Capital Security v. ABNB to this Court. The
District Court for the EDVA concluded that the issues in Capital Security v. NCR
predominate over the issues in the customer suits against Capital One and ABNB
because NCR, as the manufacturer of the ATMs, is the true defendant. The
District Court for the EDVA concluded that the claims against NCR must proceed
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first before any claims against Capital One and ABNB can be addressed and
resolved.
On November 6, 2014, ABNB and Capital One moved to stay Plaintiff’s
customer suits now pending in this Court on the ground that the case against NCR
should proceed first because it manufactured and sold the ATMs, and ABNB and
Capital One are merely customers that purchased the ATMs from NCR. Plaintiff
does not oppose staying its claims against ABNB and Capital One.
II.
DISCUSSION
The Court has the inherent power to manage its docket and stay proceedings,
and the decision whether to stay a case rests “within the sound discretion of the
[C]ourt.” See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988). In
determining whether to stay a patent infringement action, courts typically weigh
the following factors: (1) whether a stay will unduly prejudice or present a clear
tactical disadvantage to the nonmoving party, (2) whether a stay will simplify the
issues, and (3) whether discovery is complete and a trial date has been set. See
Robior Marketing Group v. GPS Indus. Inc., 633 F. Supp. 2d 1341, 1347
(S.D. Fla. 2008); Baxa Corp. v. ForHealth Tech., Inc., No. 6:06-cv-0353-Orl19JGG, 2006 WL 4756455, at *1 (M.D. Fla. May 5, 2006).
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In patent cases, there is a “customer suit” exception that gives priority to
actions against a manufacturer over patent actions against customers of the
manufacturer. This exception “exists to avoid, if possible, imposing the burdens of
trial on the customer, for it is the manufacturer who is generally the ‘true
defendant’ in the dispute.” In re Nintendo of America, Inc., 756 F.3d 1363, 1365
(Fed. Cir. 2014); see also Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464 (Fed. Cir.
1990) (citation omitted) (“[L]itigation against or brought by the manufacturer of
infringing goods takes precedence over a suit by the patent owner against
customers of the manufacturer.”); Spread Spectrum Screening LLC v. Eastman
Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011).
In Nintendo, the Federal Circuit applied the “customer suit exception” to
actions against the distributors of Nintendo, and held that “since Nintendo’s
liability is predicate to recovery from any of the defendants, the case against
Nintendo must proceed first . . . we conclude that the district court should have
exercised its discretion to grant the [stay].” 756 F.3d at 1366.
The customer-suit exception applies here because ABNB, Capital One and the
SunTrust Defendants are merely purchasers of ATMs manufactured by NCR that
use the technology for which Plaintiff claims it holds the Patents. Recovery from
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the customers is dependent upon a resolution of the infringement and validity of
the Patents, which is a focus of the litigation between Plaintiff and NCR.
The Court concludes that Plaintiff’s actions against ABNB and Capital One,
and claims against the SunTrust Defendants, are required to be stayed pending the
resolution of the dispute between Plaintiff and NCR.2 Staying these actions to
allow a resolution of Plaintiff’s infringement claims against NCR avoids
potentially inconsistent results and otherwise promotes litigation efficiency.3
III.
CONCLUSION
Accordingly, for the foregoing reasons,
IT IS HEREBY ORDERED that Defendants SunTrust Banks Inc.’s and
SunTrust Bank’s Motion to Sever, or, in the alternative, Stay [47] the claims
2
Plaintiff’s request to stay NCR’s counterclaim regarding the ′696 Patent is not
properly raised. It is inappropriate to include a request for affirmative relief
against a defendant in a response to a motion filed by another defendant. See
Rosenberg v. Gould, 554 F.3d 962, 967 (11th Cir. 2009). Plaintiff’s request to stay
NCR’s counterclaim is not considered because it is not a proper motion.
3
In its Response to the customer Defendants’ Motions to Stay, Plaintiff seeks
clarification that the stay will not prevent it from seeking third-party discovery
from NCR’s customers, including the SunTrust Defendants, ABNB and Capital
One, to the extent the discovery is relevant to prosecuting its claims against NCR.
ABNB, Capital One and the SunTrust Defendants do not dispute that they are
required to comply with third party discovery requests pursuant to Rule 45 of the
Federal Rules of Civil Procedure. The stay does not limit Plaintiff from seeking
discovery from third parties, including the customer Defendants.
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against them in Capital Security v. NCR, 14-cv-1516-WSD, Defendant Capital
One’s Motion to Stay [42] the action in Capital Security v. Capital One,
14-cv-3370-WSD, and Defendant ABNB’s Motion to Stay [50] the action in
Capital Security v. ABNB, 14-cv-3371-WSD, are GRANTED.
IT IS FURTHER ORDERED that Plaintiff’s claims against SunTrust
Banks Inc. and SunTrust Bank in Capital Security v. NCR, 14-cv-1516-WSD are
STAYED until further order of the Court.4
IT IS FURTHER ORDERED that the actions in Capital Security v. Capital
One, 14-cv-3370-WSD, and Capital Security v. ABNB, 14-cv-3371-WSD, are
STAYED until further order of the Court.
SO ORDERED this 18th day of June, 2015.
_______________________________
WILLIAM S. DUFFEY, JR.
UNITED STATES DISTRICT JUDGE
4
The Stay does not apply to Plaintiff’s claims against NCR.
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