MASA LLC v. Apple Inc.

Filing 53

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendant Apple Inc.s motion to stay pending inter partes review is GRANTED. (Doc. No. 45 .) This case is STAYED pending final resolution of Defendants petition for inter partes review. IT IS FURTHER ORDERED that within seven (7) days following final resolution of Defendants petition for inter partes review, Defendant shall file an appropriate motion as to lifting of the stay and the parties shall submit a joint proposed schedule for the remai nder of this litigation. IT IS FURTHER ORDERED that this case shall be deemed closed administratively, for statistical purposes only, subject to reopening upon lifting of the stay herein imposed or other appropriate Order. Signed by District Judge Audrey G. Fleissig on 05/09/2016. (KCB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
MASA LLC,
Plaintiff,
vs.
APPLE INC.,
Defendant.

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Case No. 4:15-CV-00889-AGF

MEMORANDUM AND ORDER
This matter is before the Court on the motion (Doc. No. 45) of Defendant Apple
Inc. to stay this case pending inter partes review (“IPR”). Apple filed a petition for IPR
with the United States Patent Trial and Appeal Board (“PTAB”), seeking to invalidate
United States Patent No. 8,519,834 (“the ‘834 patent”) held by Plaintiff Masa LLC in
view of prior art that the United States Patent and Trademark Office (“PTO”) did not
consider before it issued the ‘834 patent. For the following reasons, Apple’s motion to
stay will be granted.
BACKGROUND
Masa filed this action on June 5, 2015, alleging that certain of Apple’s watch
products infringed the ‘834 patent. Masa seeks only monetary relief. On July 20, 2015,
Apple filed an answer and counterclaim in which Apple seeks declarations of invalidity
and non-infringement. The parties are not direct competitors.
The Court held a Rule 16 conference on September 2, 2015, and issued a Case
Management Order (“CMO”) two days later. The CMO set deadlines for initial

disclosures, preliminary infringement and invalidity contentions, claim construction
proceedings, and mediation, but did not set deadlines for proceedings following claim
construction, such as fact discovery, expert discovery, dispositive motions, or trial. The
parties have made initial disclosures, exchanged preliminary infringement and invalidity
contentions, exchanged preliminary claim constructions, filed a joint claim construction
chart, and made preliminary document productions. However, custodial document
productions have not yet been made, no depositions have been taken, no claim
construction briefs have been filed, and a Markman hearing has not yet occurred. The
parties participated in a Court-ordered mediation on January 27, 2016, but they were not
successful in resolving their dispute.
Apple filed its petition for IPR on March 21, 2016. Every patent claim Masa
asserts in this lawsuit is also at issue in the IPR. Apple asserts that the ‘834 patent is
invalid in light of three items of prior art that the PTO did not consider before issuing the
‘834 patent. Apple filed this motion to stay the case on March 25, 2016, four days after
filing the IPR petition.
Apple argues that a stay is appropriate because the case is at an early stage, and a
stay would simplify the case by avoiding the need to litigate all or certain issues. Apple
further argues that Masa will not be harmed by a stay because the parties are not direct
competitors and because Masa would be able to recover monetary damages if it prevailed
in this action. Although the PTAB has not yet decided whether to institute IPR, Apple
notes that, by statute, it must make that decision within six months, before the end of
September. Apple argues that the PTAB is likely to institute IPR, and that if it does, it
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must by statute issue a final decision within one year thereafter, such that the maximum
duration of the stay is finite and limited to 18 months. Alternatively, Apple argues, if the
PTAB declines to institute IPR, the stay may be lifted within six months.
Masa argues that granting the motion to stay would be premature in this case and
cites a string of cases declining to stay litigation after an IPR petition was filed but before
IPR was instituted. Nevertheless, Masa agrees to a partial stay until the PTAB decides
whether to institute IPR. Masa suggests that, under this partial stay, the parties would
proceed with claim construction proceedings, including a Markman hearing, but that all
post-claim construction proceedings would be stayed. Masa argues that because the
Court and the PTAB construe claim terms under different standards, the IPR proceedings
would not likely simplify the claim construction issues in this case. Masa contends that
staying the case pending IPR would unnecessarily delay litigation.
DISCUSSION
Congress created IPR proceedings in 2011 as part of the Leahy-Smith America
Invents Act. See Pub. L. No. 112–29, § 6(a), 125 Stat. 284, 299–304 (2011), codified at
35 U.S.C. §§ 311–319. The IPR process replaced the previous inter partes reexamination
proceeding, with the purpose of “convert[ing] inter partes reexamination from an
examinational to an adjudicative proceeding.” Abbott Labs. v. Cordis Corp., 710 F.3d
1318, 1326 (Fed. Cir. 2013) (quoting H.R. Rep. No. 112–98, pt. 1, at 46–47 (2011)). The
new IPR process “offers a timely, cost-effective alternative to litigation, designed to
produce a more efficient and streamlined patent system that will improve patent quality
and limit unnecessary and counterproductive litigation costs.” Intellectual Ventures II
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LLC v. Commerce Bancshares, Inc., No. 2:13-CV-04160-NKL, 2014 WL 2511308, at *1
(W.D. Mo. June 4, 2014) (quoting Changes to Implement Inter Partes Review
Proceedings, 77 Fed.Reg. 48680–01 (Aug. 14, 2012) (codified at 37 C.F.R. §§ 42.100 et
seq.)).
Federal courts have the inherent power to grant a stay pending IPR. Procter &
Gamble Co. v. Kraft Foods Glob., Inc., 549 F.3d 842, 849 (Fed. Cir. 2008). In
determining whether to grant a stay in the present context, courts generally consider the
following factors: (1) whether discovery is complete and whether a trial date has been set;
(2) whether a stay of litigation will simplify the issues in question and facilitate the trial;
and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage for
the non-moving party. Intellectual Ventures, 2014 WL 2511308, at *2.
The Court first concludes that the motion to stay is not premature. While some
courts have (as noted by Masa) preferred to wait until the PTAB decides whether to
institute IPR before granting a stay, others (as noted by Apple) have granted stays before
the PTAB instituted IPR, and the Federal Circuit has “express[ed] no opinion on which is
the better practice.” VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1315-16
(Fed. Cir. 2014) (citing cases on both sides). Therefore, the Court will turn to the factors
listed above to determine whether the circumstances of this case warrant a stay, and if so,
what that stay should entail. The PTAB will make a decision one way or the other in just
six months, and if the PTAB decides not to institute IPR, such a short stay (particularly
given the state of the proceedings, as discussed below) will not have prejudiced Masa.

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Here, each of the relevant factors weighs in favor of a stay of all proceedings
pending final resolution of IPR. Regarding the first factor, discovery is not complete, and
a trial date has not been set. Indeed, this case is still in its infancy, discovery has just
begun, and no depositions have been taken. If, however, the Court were to proceed with
claim construction briefing and a Markman hearing as Masa suggests, the considerable
resources and effort expended by the parties and the Court on that process would likely
militate against a stay. See, e.g., CANVS Corp. v. United States, 118 Fed. Cl. 587, 595
(Fed. Cl. 2014) (suggesting that where the court has “expended significant resources” or
reached “significant milestones” such as the completion of claim construction, this factor
would weigh against a stay).
The second factor also weighs in favor of a stay of all proceedings. IPR will
resolve some or all of the issues in this case if the claims are invalidated. And if the
claims survive, IPR will still streamline the litigation because Apple will be subject to
statutory estoppel, precluding it from asserting invalidity in this lawsuit “on any ground
that [it] raised or reasonably could have raised during that inter partes review.” 35 U.S.C.
§ 315(e)(2). “This critical limitation results in a more streamlined litigation and reduces
the likelihood of inconsistent judgments.” PersonalWeb Tech., LLC v. Google, Inc., No.
5:13–cv–1317–EJD, 2014 WL 4100743, at *5 (N.D. Cal. Aug. 20, 2014). Cf. United Pet
Group, Inc. v. MiracleCorp Prods., No. 4:12CV00440AGF, 2012 WL 2458539, at *3
(E.D. Mo. June 27, 2012) (noting that where ex parte reexamination was involved, which
“(unlike inter partes reexamination) does not estop the requestor (Defendant) from later

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arguing in litigation the same invalidity theories based on prior art that were advanced in
the reexamination,” the second factor was “speculative”).
The Court disagrees with Masa’s assertion that IPR will not simplify the claim
construction issues in this case. If IPR invalidates some or all of the claims, the need for
claim construction will be avoided entirely (and if already done, will have been a waste).
But even if all of the claims survive, the Court may benefit from the “expert opinion of
the PTO and clarifying the scope of the claims.” Intellectual Ventures, 2014 WL
2511308, at *2.
Finally, the third factor, too, weighs in favor of a full stay. In weighing this factor,
courts consider whether the parties are direct competitors, whether the non-moving party
seeks solely monetary damages or instead seeks injunctive relief, and whether the moving
party possessed a “dilatory motive” or is otherwise attempting to gain an unfair tactical
advantage. VirtualAgility, 759 F.3d at 1318-19. “The mere potential for delay, however,
is insufficient to establish undue prejudice.” Intellectual Ventures, 2014 WL 2511308, at
*3. Here, the parties are not direct competitors, and Masa seeks solely monetary
damages that will not be diminished by a stay. Moreover, the Court does not believe that
Apple possessed any dilatory motive. It was not unreasonable for Apple to wait until
after the parties attempted to resolve their dispute in mediation before preparing and
filing its IPR petition. Apple filed its IPR petition before claim construction briefing
began in this case, and Apple promptly filed this motion to stay just four days later.
Given the limited and finite nature of the stay in this case, the Court finds that Masa will
not be unduly prejudiced or tactically disadvantaged. Cf. United Pet Group, 2012 WL
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2458539, at *3 (noting that the “prejudice factor weigh[ed] strongly against” a stay where
the parties were direct competitors and the lengthy reexamination process would take up
the majority of the remaining life of the patent in issue).
CONCLUSION
For the reasons set forth above,
IT IS HEREBY ORDERED that Defendant Apple Inc.’s motion to stay pending
inter partes review is GRANTED. (Doc. No. 45.) This case is STAYED pending final
resolution of Defendant’s petition for inter partes review.
IT IS FURTHER ORDERED that within seven (7) days following final
resolution of Defendant’s petition for inter partes review, Defendant shall file an
appropriate motion as to lifting of the stay and the parties shall submit a joint proposed
schedule for the remainder of this litigation.
IT IS FURTHER ORDERED that this case shall be deemed closed
administratively, for statistical purposes only, subject to reopening upon lifting of the stay
herein imposed or other appropriate Order.

_______________________________
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 9th day of May, 2016. 

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