KING SHENG CO., LTD v. HOLLYWOOD ENGINEERING

Filing 67

ORDER denying without prejudice 51 Motion for Partial Summary Judgment; denying without prejudice 53 Motion; denying without prejudice 58 Motion to Strike ; granting in part and denying in part 59 Motion to Stay. Signed by Judge William T. Lawrence on 2/8/2018. (JDC)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
KING SHENG CO., LTD, et al.,
Plaintiffs,
vs.
HOLLYWOOD ENGINEERING, INC.,
Defendant.

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) Cause No. 1:16-cv-3256-WTL-MPB
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ENTRY REGARDING MOTION TO STAY
This cause is before the Court on the Defendant’s Motion to Stay Proceedings Pending
Reexamination by the United States Patent and Trademark Office (Dkt. No. 59). The motion is
fully briefed and the Court, being duly advised, GRANTS IN PART the motion for the reasons
set forth below.
The Plaintiffs in this case allege that several of the products sold by the Defendant
infringe upon a patent held by Plaintiff David Tsai and exclusively licensed by Plaintiff King
Sheng Co., Ltd. (hereinafter referred to as the “’816 Patent”). The Defendant has filed a
counterclaim in which it seeks declaratory judgment that the ’816 Patent is unenforceable as to it
on the grounds of waiver, equitable estoppel and laches; that its products do not infringe the ’816
Patent; and that the ’816 Patent is “invalid and/or unenforceable (at least as to [the Defendant]
itself).” Dkt. No. 17 at 12. The products at issue are bicycle racks used to carry bicycles on
vehicles. King Sheng and the Defendant are competitors in the bicycle rack market.
In the instant motion, the Defendants argue that this case should be stayed because on
June 22, 2017, the United States Patent and Trademark Office (“USPTO”) issued a Decision

Granting Ex Parte Reexamination of claims 1-2, 4-7, 14-17, and 20 of the ’861 patent. The
Plaintiff objects to a stay being entered.
The parties agree on the relevant factors to be considered by the Court in deciding
whether a stay is appropriate during the reexamination process: (1) whether a stay will unduly
prejudice or tactically disadvantage the non-moving party; (2) whether a stay will simplify the
issues in question and streamline the trial; and (3) whether a stay will reduce the burden of
litigation on the parties and the Court. Dkt. No. 59 at 4 (citing Arrivalstar S.S. v. Canadian
Nat'l Railway Co., 2008 WL 2940807, at *2 (N.D. Ill. Jul. 25, 2008); Cook Inc. v. Endologix,
Inc., 2010 WL 325960, at *1 (S.D. Ind. Jan. 21, 2010); Tap Pharmaceutical Prods., Inc. v. Atrix
Laboratories, Inc., 2004 WL 422697, at *1 (N.D. Ill. Mar. 3, 2004); Dkt. No. 63 at 4 (citing
Cook, 2010 WL 325960, at *1 (citing Centillion Data Sys., LLC v. Convergys Corp., 2005 WL
2045786, at *1 (S.D. Ind. Aug. 24, 2005) (citing Xerox Corp. v. 3 Com Corp., 69 F. Supp. 2d
404, 406 (W.D.N.Y. 1999))).
The Defendant argues that the second and third factors weigh in favor of a stay in this
case:
The proceedings before the USPTO are likely to alter substantially the issues
presented in this litigation by cancelling some or all of the claims that are
currently under reexamination. Therefore the scope and nature of the present
allegations are likely to change significantly. There are twenty claims under the
’816 Patent, and eleven of those are subject to the reexamination proceedings.
Therefore it makes little sense for the parties to address the claims in any
meaningful way until the USPTO has completed its proceedings. Moreover, the
reexamination may greatly reduce the burden on the Court and the parties by
invalidating claims of the ’816 Patent and perhaps negating entirely the necessity
of trial.
Dkt. No. 59 at 2. The Defendant further notes that “[t]his litigation is still in its early stages.
Written discovery and document production have commenced and are ongoing. The parties have
not exchanged proposed claim constructions, and have not briefed to the Court any claim
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construction issues. There is almost infinitely more litigation potentially ahead of the parties than
has been conducted thus far in this case.” Id. at 3. A stay, the Defendant argues, could
significantly reduce the cost and burden of litigation by postponing this action
until the USPTO determines the ultimate contours of the patent claims. The
alternative is to undertake these costly and time-consuming activities now, only to
re-do them later to account for the changed nature of the reexamined claims—or,
worse yet, to realize that some or all of the effort was wasted because some or all
of the claims were canceled.
Id. at 8.
The Plaintiffs counter that
the net effect of a stay will likely be de minimis, because the results of an ex parte
reexamination have no preclusive effect unless the USPTO cancels the claims in
Plaintiff’s patent in their entirety. According to USPTO’s statistics, an ex parte
reexamination results in cancellation of all claims only 13% of the time. See
Bruce Decl. Exh. A p. 1. Therefore, there is an 87% chance that, should the Court
grant a stay, the Court and the parties will still be required to litigate all the issues
currently before the Court.
Dkt. No. 63 at 5. That argument ignores entirely the possibility that the reexamination process
will result in modification of some or all of the claims relevant to this case and therefore affect
the issues in this case even in the absence of a complete cancellation of the claims. Cf. Inogen,
Inc. v. Inova Labs, Inc., 2012 WL 4748803, at *2 (C.D. Cal. Mar. 20, 2012) (“‘[W]aiting for the
outcome of the reexamination could eliminate the need for trial if the claims are cancelled or, if
the claims survive, facilitate trial by providing the court with expert opinion of the [US]PTO and
clarifying the scope of the claims.’”) (quoting Target Therapeutics, Inc. v. SciMed Life Sys., Inc.,
33 U.S.P.Q.2d 2022, 2023 (N.D. Cal. 1995)).
As is true in any case in which a stay pending reexamination is requested, it is impossible
to know at this point the extent to which the reexamination process ultimately will alter the
litigation of this case, or even if it will at all. It is clear, however, that there is a possibility that it
will reducedor even eliminate the burden of litigation on the parties and the Court. This
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possibility must be weighed against the extent to which the Plaintiffs would be prejudiced by a
stay.
The Defendant argues that far from prejudicing the Plaintiffs, “the stay will enable King
Shen [sic] to avoid the significant burden and expense of the claim construction process,
infringement contentions and validity contentions on claims that are likely to be canceled or
amended as a result of the reexamination process.” Dkt. No. 59 at 5. The Plaintiffs, on the other
hand, argue that they would be prejudiced by the requested stay because the Defendant would
“be allowed to continue to erode Plaintiffs’ business, brand recognition, as well as revenues for
several years if a stay [were] granted.” Dkt. No. 63 at 1; see also id. at 5 (“In staying the
proceeding for three to six years, Hollywood will permanently erode Plaintiffs’ business by
continuing to offer infringing products.”); id. at 7 (The Defendant “continues to infringe the
Patent-in-Suit, taking away Plaintiffs’ business, thereby irreparably harming Plaintiffs.”).
In its reply brief, however, the Defendant states that it “ceased selling the accused
products shortly after this lawsuit was filed, the last of the relevant inventory having been
disposed of by October, 2016.” Dkt. No. 66 at 3 (citing declaration found at Dkt. No. 52-1 at ¶¶
31-32). This would seem to eliminate the prejudice asserted by the Plaintiffs, leaving only the
potential delay inherent in any stay. Accordingly, the balance of the relevant factors weighs in
favor of granting the stay.1

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The Plaintiffs also argue that the Court should consider what it terms the Defendant’s
dilatory tactics in bringing this motion, noting that the Defendant “after nearly a year of
litigating, only now seeks to stay the litigation based on a [sic] ex parte reexamination that they
themselves did not even request.” Dkt. No. 63 at 7-8. However, the Defendant acted promptly
to seek a stay once the USPTO took action in September 2017. To the extent that the Plaintiffs
fault the Defendant for not seeking reexamination itself at an earlier time, it is unclear to the
Court what motivation the Defendant had to seek reexamination of the patent until it was sued
for infringing it.
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The Court is only granting the Defendant’s motion to stay in part, however, because the
Defendant has requested that the Court stay everything but its consideration of the Defendant’s
pending motion for partial summary judgment. Given the Defendant’s position that the
reexamination process could eliminate entirely the need to litigate this case, the Court finds that
the interests of judicial economy are best served by staying the case in its entirety, including
consideration of the pending motion, even though the pending motion does not directly involve
validity or infringement issues. Accordingly, this case is STAYED. Within 21 days of the
date the reexamination process is completed by the USPTO, the parties shall confer and file a
joint motion to reopen the case and a proposed amended case management plan. The current
final pretrial conference and trial dates are VACATED.2 The pending motion for partial
summary judgment (Dkt. No. 51) and related motion for oral argument (Dkt. No. 53) and motion
to strike (Dkt. No. 58) are denied without prejudice to reassert them once the stay is lifted and a
new case management plan is entered.
SO ORDERED: 2/8/18
_______________________________
Hon. William T. Lawrence, Judge
United States District Court
Southern District of Indiana

Copies to all counsel of record via electronic notification

2

The Court notes that the parties already have sought and been granted an extension of
their case management deadlines that rendered these dates obsolete. See Dkt. No. 48.
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