VDF FutureCeuticals, Inc. v. Sandwich Isles Trading Co. Inc. et al
Filing
48
ORDER Staying Proceedings And Administratively Closing The Case. Signed by JUDGE ALAN C KAY on 12/27/11. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
)
Plaintiff, )
)
)
vs.
)
SANDWICH ISLES TRADING CO. INC. )
)
d/b/a Kona Red, Inc., et al.,
)
Defendants. )
)
VDF FUTURECEUTICALS, INC.,
Civ. No. 11-00288 ACK-RLP
ORDER STAYING PROCEEDINGS AND ADMINISTRATIVELY CLOSING THE CASE
Defendant Sandwich Isles has filed a motion to stay
this case pending reexamination of the three patents at issue in
this case by the United States Patent and Trademark Office.
No. 37.)
(ECF
Plaintiff VDF filed an opposition to this motion, and
Sandwich Isles filed a reply in support.
(ECF Nos. 44, 46.)
Both parties have made persuasive arguments in support of their
positions.
The Court has decided to grant the motion to stay.
The parties agree that in evaluating whether to stay
proceedings in this case, the Court should consider the stage of
litigation, whether a stay will unduly prejudice or tactically
disadvantage the nonmoving party, and whether a stay will
simplify the issues in question.
(Mot. Mem. at 8; Opp’n at 16.)
As to the first factor, the case is in an early stage.
The Court has issued a ruling on VDF’s motion to dismiss Sandwich
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Isles’s counterclaim, and initial discovery has commenced, but
the Markman hearing is currently set for May 31, 2012, several
months from now, and the jury trial is set for January 29, 2013,
more than a year from now.1/
The second factor, which VDF asserts is the most
important factor, is the potential for prejudice to the nonmoving
party.
The Court acknowledges that if VDF prevails on its
infringement claims against Sandwich Isles, the damages suffered
may be difficult to measure, and their extent may be larger due
to the additional delay caused by staying the case.
At the same
time, at this early stage of proceedings, there is nothing in the
record that demonstrates any likelihood of success on the merits
for VDF (the Complaint’s allegations of infringement are
threadbare and conclusory, and they are all the Court has to go
on at this point before discovery has been completed).
Moreover, the Court agrees with Sandwich Isles that
VDF’s arguments concerning prejudice from loss of market share
are somewhat speculative, particularly given VDF’s status as a
licensor of patent rights rather than as a direct competitor of
Sandwich Isles.2/
As Sandwich Isles points out, VDF has not
1/
VDF argues that the timing of the request for
reexamination is prejudicial. The Court finds that the delay was
justified by the status of settlement negotiations and was not in
bad faith.
2/
The Court notes that the parties dispute whether SoZo is
(continued...)
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shown any specific evidence that quantifies the loss of customers
or market share.
In any event, it appears that any prejudice
caused by additional delay will be in large part compensable by
money damages.
See Graceway Pharm. LLC v. Perrigo Co., 722 F.
Supp. 2d 566, 577 (D.N.J. 2010).
The Court also notes that the PTO should decide whether
to reexamine the patents very soon.
Consequently, if the PTO
rejects the reexamination request, the delay caused by staying
this case will be minimal, and in any event, the filing of this
motion is not deemed premature.
Finally, the Court agrees with Sandwich Isles that the
time between the issuance of the patent and VDF’s filing of the
complaint in this action, coupled with the lack of a motion for a
preliminary injunction, tends to indicate that VDF is not
suffering irreparable harm based on Sandwich Isles’s allegedly
infringing products.
In sum, the Court finds a stay will not unduly
prejudice or tactically disadvantage VDF.
The final factor weighs heavily in the Court’s
analysis.
The Court is persuaded by the analysis in the Guthy-
Renker Fitness case, set forth at length in Sandwich Isles’s
reply:
2/
(...continued)
a direct competitor of Sandwich Isles; the Court does not, for
purposes of this order, resolve that dispute.
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[W]aiting for the outcome of the
reexamination could eliminate the need for
trial if the pertinent claims are cancelled
or, if the claims survive, facilitate trial
by providing the court with expert opinion of
the PTO and clarifying the scope of the
claims. The claims of the patent will likely
be amended or narrowed during reexamination.
Therefore, the final form of the claims will
remain uncertain until the conclusion of the
reexamination procedure.
It makes sense to ascertain the ultimate
scope of the claims before trying to figure
out whether [Sandwich Isles’s] products
infringe [VDF’s patents]. Absent a stay, the
parties may end up conducting a significantly
wider scope of discovery than necessary, and
the court may waste time examining the
validity of claims which are modified or
eliminated altogether during reexamination.
Moreover, since the Court will need to
interpret the pertinent claims of the patent
at some point during this case, waiting until
after the reexamination will provide this
Court with the expertise of the PTO.
Guthy-Renker Fitness L.L.C. v. Icon Health & Fitness Inc., No. CV
97-7681 LGB (EX), 1998 WL 670240, at *3 (C.D. Cal. July 17, 1998)
(citations omitted).
The Court particularly notes that some or
all of the Court’s determinations at the scheduled Markman
hearing in May could be undermined by the PTO’s reexamination,
forcing the Court to hold a second Markman hearing to address new
versions of the claims.
This would be a waste of the Court’s and
the parties’ resources, whereas awaiting the PTO’s determination
will give the Court the benefit of the PTO’s expertise.
The
statistics cited by both parties tend to indicate that
modification of at least some claims is likely.
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Moreover, the
Court will benefit from the PTO’s decision on the reexamination
request even though the ex parte reexamination will not preclude
Sandwich Isles from arguing its case before this Court.
The
Court notes that Congress made possible the ex parte process in
addition to a court challenge.
Finally, the Court also agrees
with Sandwich Isles that even though reexamination would not
resolve all of the claims in this matter—particularly some of the
claims in Sandwich Isles’s counterclaim—all of the claims in this
action are intertwined with the patents-in-suit such that the
PTO’s further analysis will be beneficial.
The Court recognizes that staying the proceedings while
Sandwich Isles’s originally filed counterclaim remained pending
could have had negative effects on the reputations of those
accused in the counterclaim of inequitable conduct.
But the
Court has dismissed those portions of the counterclaim, and,
having alerted Sandwich Isles to the heightened pleading
requirements for such claims, anticipates that any amended
counterclaim will be carefully measured.
For the foregoing reasons, the Court STAYS proceedings
in this case pending resolution of the pending reexamination
procedures in the PTO.
The following filings will be permitted:
First, Sandwich Isles is permitted to file an amended
counterclaim within thirty days of this order.
Second, VDF is
permitted to answer or otherwise respond to any amended
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counterclaim filed within sixty days of this order.
The Court
will not enter any decision on any such filings until the stay is
lifted.
The parties are DIRECTED to inform the Court within
thirty days of the resolution of the reexamination proceedings,
whether due to a rejection of the reexamination request or the
completion of the reexamination process.
After the deadline for the parties to file the
documents permitted above, the Clerk of Court is DIRECTED to
administratively close this action without prejudice to any
party.
The closing is administrative only and thus has no effect
on the procedural or substantive rights of any party or any
limitations period.
Any party may move to reopen the case after
the PTO rejects the reexamination request or issues its decision,
and the parties shall promptly inform this court in writing of
the disposition of the reexamination request, at which time the
stay will be automatically dissolved if not earlier.
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IT IS SO ORDERED.
DATED:
Honolulu, Hawai#i, December 27, 2011.
________________________________
Alan C. Kay
Sr. United States District Judge
VDF Futureceuticals, Inc. v. Sandwich Isles Trading Co., Civ. No. 11-00288
ACK-RLP: Order Staying Proceedings
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