Hysitron Incorporated v. MTS Systems Corporation

Filing 27

MEMORANDUM in Support re 16 MOTION to Stay filed by MTS Systems Corporation. (Koch, Ehrich)

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H y s i t r o n Incorporated v. MTS Systems Corporation D o c . 27 IN THE UNITED STATES DISTRICT COURT D I S T R IC T OF MINNESOTA _________________________________ ) H Y S IT R O N INCORPORATED, ) C i v i l Action No. 07-CV-1533 ADM/AJB a Minnesota corporation, ) ) P l a i n ti f f , ) ) DEFENDANT MTS SYSTEMS v. ) CORPORATION'S MEMORANDUM IN ) SUPPORT OF MOTION TO STAY M T S SYSTEMS CORPORATION, ) a Minnesota corporation, ) ) De fend ant. ) _________________________________ ) I N TR O D U C T I O N P l a i n ti f f alleges that MTS Systems Corporation ("M TS ") has infringed two of P l a intiff's patents. On May 25, 2007, MTS filed Requests for Ex Parte Reexamination of t h e s e patents with the United States Patent and Trademark Office ("PTO"). MTS' requests dem onstra te that the claims of the patents-in-suit are invalidated by prior art references which w e r e not provided to the PTO by Plaintiff at the time the patents were prosecuted. M T S ' request for reexamination will likely be granted. The PTO grants more than n i n e of every ten requests for reexamination. Broadcast Innovation, LLC v. Charter C o m m u n i c a t i o n s, 2006 WL 1897165, *8, n.8 (D. Colo. 2006), citing United States Patent and Trademark Office, Ex Parte Reexamination Filing Data, at 1, 5 (Sept. 30, 2005). In the likely event the PTO grants MTS' request, there is a "74% likelihood that the P T O will eliminate, amend, or otherwise limit the claims at issue, which will significantly a l t er the nature and amount of work for the attorneys, the court and the jury." Broadcast Dockets.Justia.com I n n o v a t io n , 2006 WL 1897165, at *8, n.8. This compels a stay pending the reexamination t o avoid duplicative and unnecessary proceedings. M T S now respectfully moves this Court for an Order granting a stay of all p r o c e e d in g s in this matter pending reexamination of the two patents-in-suit. Such stays are liberally granted in the early stages of litigation. As the Courts recognize that stays pending r e e x a m i n a ti o n further the interests of judicial economy, conserve the parties' resources and s i m p l if y the issues, MTS' motion should be granted. P R O C E D U R A L POSTURE P l a i n ti f f Hysitron Incorporated (Hysitron) filed this action on March 14, 2007. In its Co mp laint, Plaintiff alleges MTS directly, indirectly, and contributorily infringed two p a t e n t s , United States Patent No. 6,026,677 ("the `677 Patent") and United States Patent No. 5,553,486 ("the `486 Patent"). Both patents were assigned to Plaintiff by the inventor. O n May 25, 2007, MTS submitted a Request for Ex Parte Reexamination of both p a t e n t s . MTS seeks reexamination of claims 1-24 of the `677 Patent. Reexamination of t h e s e claims is requested in light of the following references: (1) Todd, J.D. and Pethica J.B., A Shear Model for STM Imaging of Layered Material, J. Phys.: Condens. Matter 1, pp. 98239 8 3 1 (1989); (2) Pethica, J.B. and Oliver, W.C., Tip Surface Interactions in STM and AFM, P h y s ic a Scripta, Vol. 119, pp. 61-67 (1987); (3) Oliver et al. U.S. Patent No. 4,848,141; (4) H a n s m a et al. U.S. Patent No. 4,800,274; (5) Sikorra, U.S. Patent No. 4,196,632. M T S additionally seeks reexamination of claims 1-3, 5-6, 10-12, 25-27, 31 and 32 of 2 t h e `486 Patent.1 Reexamination of these claims is requested in light of the same references c i t ed above. Bo th of MTS' Requests for Ex Parte Reexamination specifically disclose the subject l i ti g a t io n . T h e Court issued the Pretrial Scheduling Order approximately one week ago on May 2 9 , 2007. The parties have not exchanged discovery other than Rule 26(a) initial disclosures. ARGUMENT I. M o t i o n s to Stay Pending PTO Reexamination Are Liberally Favored And R o u t i n el y Granted. A. O r d e r i n g a stay is within the court's power and discretion. C o u r ts have the inherent power to manage their dockets and stay proceedings, i n c l u d in g the authority to order a stay pending the conclusion of a PTO reexamination. 3M I n n o v a t iv e Props. Co. v. DuPont Dow Elastomers, LLC, 2005 WL 2216317 (D. Minn. 2005), c i t in g Ethicon Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988). The decision whether to grant a motion to stay proceedings is within the court's discretion. 3M Innovative Props. C o . , 2005 WL 2216317, at *1; Pacesetter, Inc. v. Cardiac Pacemakers, Inc., 2003 WL 2 3 3 0 3 4 7 3 (D. Minn. 2003), citing Xerox Corp. v. 3Com Corp., 69 F. Supp. 2d 404, 406 The cou r t s reco g n i z e that partial stays of only the claim s subje c t to reexamination a r e essentially i m p o s s i b l e . "Although such circumstances might not present the optimal scenario for granting a stay, there is no o b v i o u s better alternative. See CNS, Inc. v. Silver Eagle Labs, Inc., 2004 WL 3631121, at *1 (D.Minn. Nov. 29, 2 0 0 4 ) (noting lack of `any solutions for an efficient and effective division of the case between' the reexamined c l a i m s and the rest). Cf. Pacesetter Inc. v. Cardian Pacema k e r s , Inc., 2003 W L 2330 3 4 7 3 , at *1, *3 (D.Minn. Nov. 2 9 , 2003) (rejecting `option of a partial stay of the two patents that are not in reexamination' as `impracticable, if not impo ssible')." 1 3 (W.D .N.Y. 1999). B. S t a y s pending PTO Reexamination are liberally granted. T h e courts' liberal policy favoring the granting of stays pending PTO reexamination c o m p e l s the granting of MTS' motion. Courts routinely grant motions to stay proceedings w h e n a reexamination by the PTO is pending. Card Tech. Corp., 2007 WL 551615. A stay is warranted as the PTO's reexamination could likely alter the claims at issue and facilitate r e s o lu t i o n of the action. Id at *2; ASCII Corp., 844 F. Supp. at 1381("[T]here is a liberal p o l i c y in granting motions to stay"); "Courts have adopted a liberal policy in favor of g r a n t in g motions to stay proceedings pending the outcome of reexamination proceedings;" V d a ta , LLC., 2006 WL 3392889, *4. C. A l l Relevant Factors Favor Granting a Stay. Co urts consider the following factors in considering whether to grant a stay: (1) w h e t h e r a stay will simplify the issues in question and trial of the case; (2) whether discovery is complete and whether a trial date has been set; and (3) whether a stay would unduly p r e j u d ic e or present a clear tactical advantage to the nonmoving party. Xerox Corp., 69 F. S u p p . 2 d at 406; see 3M Innovative Properties Co., 2005 WL 2216317, at *3 (D. Minn. 2005). St ays further the interests of judicial economy and conserve the parties' resources by s i m p l if y in g the issues; Pacesetter, Inc., 2003 WL 23303473, at *3. A stay pending r e e x a m i n a ti o n is routinely granted when discovery is at an early stage. CNS, Inc. v. Silver 4 Eag le Labs, Inc., 2004 WL 3631121, at *1 (D. Minn. 1994). Any delay resulting from a stay is not prejudicial when the delay is offset by the considerable benefit of the PTO's expert gui dan ce. Card Tech. Corp. v. Datacard Corp., 2007 WL 551615, *4 (D. Minn. 2007). All three factors favor granting a stay in the present matter. 1. A stay is appropriate as the PTO reexamination will likely e l i m i n a te , amend or otherwise limit the patents, simplifying the issues. C o n g r e s s instituted the reexamination process to shift the burden of reexamination of p a t e n t validity from the courts to the PTO with the intent to reduce costly and timely lit i g at i o n . eSoft, Inc. v. Blue Coat Systems, Inc., 2007 WL 549843, *2 (D. Colo. 2007), c i t in g Canady v. Erbe Elektromedizin GmbH, 271 F. Supp. 2d 64, 78 (D.D.C. 2002)(citing H . R . Rep. No. 1307, 96th Cong., 2d Sess., pt. 7 at 4 (1980), reprinted in 1980 U.S.C.C.A.N. 6460). "If no claims survive, neither does the court's work." eSoft, Inc. v. Blue Coat S y s t e m s , Inc., 2007 WL 549843, at *2, citing Broadcast Innovation, 2006 WL 1897165, at *2. " [ G ] r a n t in g a stay will promote judicial economy by `maximizing the likelihood that n e i t h er the Court nor the parties expend their assets addressing invalid claims.'" 3M I n n o v a t iv e Props. Co., 2005 WL 2216317, at *2, citing Softview Computer Prods. Corp. v. H a w o r t h , Inc., 56 U.S.P.Q.2d 1633, 1636 (S.D.N.Y. 2000). "[I]t is usually prudent for a court to await the PTO's reassessment of the patents at i s s ue before resuming litigation over the validity, enforceability, or infringement of those 5 pate nts." Card Tech. Corp., 2007 WL 551615, at *3. Awaiting the PTO decision enables p a r t ie s to "settle validity disputes more quickly and less expensively than the often protracted l i ti g a t io n involved in such cases and [will] allow courts to refer patent validity questions to t h e expertise of the Patent Office." Id. at *2. Reliance upon the PTO expertise is particularly advantageous in this case because of t h e highly specialized claims and prior art references comprising MTS' requests for r e e x a m i n a ti o n . Moreover, "because this prior art was not before the PTO during its original p a t e n t examination, the Court would benefit immensely from the PTO analysis of it." B r o a d c a s t Innovation, 2006 WL 1897165, at *7, citing Softview Computer Prods., 56 U . S . P . Q . 2 d at 1636. As the courts recognize, the impact of these several prior art references a re better suited for interpretation and resolution by the PTO than by the court. Broadcast I n n o v a t io n , 2006 WL 1897165, at *7, citing Ethicon, Inc., 849 F.2d at 1427. A s the courts recognize, many significant benefits will accrue upon a stay of this matter: First, any patentability issues relating to the prior art will be addressed by the P T O examination and the PTO will determine the effect of the prior art on the validity of the paten ts-in-suit; S e c o n d , all prior art will have first been considered by the PTO, with its p a r t ic u l a r expertise, which is a significant advantage in this case given the highly technical nature of the nanotechnology patents, patent claims, and prior art; T h i r d , if the reexamination results in effectively invalidating either patent, 6 e i t h er the suit will be dismissed or the claims related to the invalid patent will be dismissed; F o u r t h , the outcome of reexamination may encourage a settlement without the furthe r involvement of the Court; F i f t h , in the event this case proceeds to trial, the record of the patent r e e x a m i n a ti o n will likely be entered, thereby reducing the complexity and length of litigation a n d the burden on the parties to clearly set forth all necessary admissible evidence; S i x t h , issues, defenses and evidence will be more easily limited in pre-trial c o n f e r e n c e s after a reexamination due to a narrowing of the issues based upon the PTO's r e e x a m i n a ti o n decision; and Fi na lly, because of a narrowing of the issues, a streamlined discovery process, a n d a determination on the validity of the patents-in-suit, both the parties and the court will b e n e f i t from reduced costs and expeditious litigation. Card Tech. Corp., 2007 WL 551615, at *4, citing Arctic Cat, Inc. v. Injection Research S p e c i a l i s t s, Inc., 2003 WL 22047872, *2 (D. Minn. 2003); Vdata, Inc., 2006 WL 3392889, at *6; 3M Innovative Props. Co., 2005 WL 2216317, at *2. 2. A stay is appropriate as the parties have undertaken little discovery a n d the case is in the early stages of litigation. A stay is regularly granted when, as in the case at bar, the parties have exchanged only w r i t te n discovery, have not conducted depositions, and have not presented the court with p r o p o s e d claim constructions or developed admissible evidence. CNS, Inc., 2004 WL 3 6 3 1 1 2 1 , at *2. 7 A stay pending reexamination is routinely ordered where discovery has not progressed p a s t the early stages. CNS, Inc. v. Silver Eagle Labs, Inc., 2004 WL 3631121, at *1 (D. M i n n . 1994); Vdata, LLC, 2006 WL 3392889, at *8 (Stay warranted where discovery will later be conducted with the benefit of the reexamination). St ays are particularly appropriate when "the parties are in the initial stages of the l a w s u i t . . . have undertaken little or no discovery [and] the case has not been set for trial." A S C I I Corp. v. STD Entertainment USA, Inc., 844 F. Supp. 1378, 1381 (N.D. Cal. 1994); V d a t a , LLC v. Aetna, Inc., 2006 WL 3392889, *8 (D. Minn. 2006)(Benefit of a stay is maxim ized where discovery process has not commenced). In the present matter, the Court just issued its Pretrial Scheduling Order a week ago o n May 29, 2007. The parties have not exchanged any discovery other than Rule 26(a) Initial D i s c l o s u r e s . The parties have not taken depositions, exchanged their respective claim charts, n o r presented the Court with proposed claim constructions. Discovery need not be completed until June 1, 2008; dispositive motions are not due until December 1, 2008; and trial r e a d i n es s in this case is not until February 1, 2009. T h e s e factors weigh heavily in favor of a stay pending PTO reexamination. Card T e c h . Corp., 2007 WL 551615, at *7 "The usual reason for denying . . . a stay is that the case h a s progressed through the bulk of pre-trial proceedings and is scheduled for trial shortly" Id.; Vdata, LLC, 2006 WL 3392889, at *8 ("`[C]ourts which have denied stays pending r e e x a m i n a ti o n proceedings have generally done so where the request for reexamination came 8 late in the litigation, after extensive discovery or trial preparation"). D. A stay will not unduly prejudice Plaintiff or place it at a disadvantage. A stay of proceedings will narrow the contested claims and issues, prevent the l i ti g a t io n of irrelevant matters, and expedite the resolution of this dispute. This benefits both p a r t i e s . The mere existence of a delay is not prejudiced. In fact, as the District Court r e c o g n i ze d in Card Tech. Corp., "not all delay is necessarily prejudicial and here any cost of t h e delay is likely offset by the gains to be achieved by obtaining the PTO's expert guidance o n these matters." Card Tech. Corp., 2007 WL 551615, at *4. T h e Card Tech court also rejected the argument that the delay would be unfairly long: " A l t h o u g h Defendant raises the specter of a lengthy and open-ended delay, this Court notes that `[a]ll reexamination proceedings under this section, including any appeal to the Board of Patent Appeals and Interferences, will be conducted with special d i s p a tc h within the Office.' 35 U.S.C. 305. [FN4] F N 4 The PTO's own regulations likewise provide that `[a]ll ex parte r e e x a m i n a ti o n proceedings, including any appeals to the Board of Patent Ap peals and Interferences, will be conducted with special dispatch.' 37 C.F.R. 15 50( a)." I d . Further, " [a]ny cases involved in litigation, whether they are reexamination proceedings o r reissue applications, will have priority over all other cases." M.P.E.P. 2261. Thus, MTS' r e q u e s ts for reexamination will be swiftly resolved. T o the extent Plaintiff incurs any prejudice, the prejudice is negligible and easily o u t w e i g h e d by the benefits gained from staying the case. See Card Tech. Corp., at *4-7 (court granted motion to stay when claimed prejudice in staying action failed to outweigh the 9 benefits of a stay). C O N C L U S IO N F o r the reasons stated above, MTS Systems Corporation respectfully requests that t h e se proceedings be stayed pending the United States Patent and Trademark Office's reexa mina tion of the patents-in-suit. LO M M E N , ABDO, COLE, KING & STAGEBERG, P.A. D A T E D : June 6, 2007 BY s/Ehrich L. Koch Phillip A. Cole, I.D. No. 17802 E h r i c h L. Koch, I.D. No. 159670 A t t o r n e ys for Defendant 2 0 0 0 IDS Center 8 0 South Eighth Street M i n n e a p o l i s , MN 55402 ( 6 1 2 ) 339-8131 F A X : (612) 339-8064 10

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