CANFIELD SCIENTIFIC, INC. v. DR. RHETT DRUGGE et al

Filing 90

ORDER granting Plaintiff's 34 Motion to Stay, and ADMINISTRATIVELY TERMINATING this matter pending the completion of inter partes review before the PTAB. All pending motions [Dkt. Nos. 74, 76, 78, 81] shall be ADMINISTRATIVELY TERMINATED, etc. Signed by Magistrate Judge James B. Clark on 6/13/18. (cm, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

CANFIELD SCIENTIFIC, INC.,
Civil Action No. 16-4636 (JMV)

Plaintiff,

OPINION AND ORDER

v.
DR. RHETT DRUGGE, et al.,
Defendants.

CLARK, Magistrate Judge
THIS MATTER comes before the Court on a motion by Plaintiff Canfield Scientific, Inc.
(“Canfield” or “Plaintiff”) to stay this action pending inter partes review before the Patent Trial
and Appeal Board (“PTAB”) [Dkt. No. 34]. Defendants Dr. Rhett Drugge and Melanoscan LLC
(collectively “Defendants” or “Melanoscan”) oppose Plaintiff’s motion [Dkt. No. 36]. For the
reasons set forth below, Plaintiff’s motion to stay [Dkt. No. 34] is GRANTED.
I.

BACKGROUND
Defendant Melanoscan is the owner of U.S. Patent No. 7,359,748 (“the ‘748 patent”), titled

“Apparatus for Total Immersion Photography.” Compl. at ¶ 11. Dr. Drugge is the inventor of the
‘748 patent and the founder of Melanoscan. Id. at ¶ 4. The ‘748 patent relates to the detection,
diagnosis and treatment of skin cancer. Canfield is “a global leader in imaging systems, services,
and products for scientific research and healthcare applications.” Id. at ¶ 2. Among the products
sold by Canfield is an imaging system called the Vectra WB360 (the “Vectra”). Id. at ¶ 13. Dr.
Drugge believes that the Vectra violates the ‘748 patent. According to Canfield, when Dr. Drugge
learned that certain Canfield customers had purchased the Vectra, Dr. Drugge emailed one of
Canfield’s customers along with other doctors and institutions in the dermatological field on June
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18, 2016, stating his belief that the Vectra violated the ‘748 patent and encouraging the recipients
of the email to cease all use of the device. Id. at ¶¶ 15-17. Subsequently, on July 15, 2016, an
attorney for Melanoscan sent a letter to Canfield accusing Canfield of infringing on the ‘748 patent
and a letter to another of Canfield’s clients requesting that the client refrain for purchasing any
additional systems from Canfield. Id. at ¶¶ 21-22.
Plaintiff filed its Complaint on August 1, 2016. Dkt. No. 1. The Complaint alleges five
causes of action: (1) declaratory judgment of non-infringement of the ‘748 patent; (2) tortious
interference with contractual and prospective business advantage; (3) unfair competition under the
Lanham Act § 43(a) – 15 U.S.C. § 1125(a); (4) commercial disparagement under New Jersey
common law; and (5) unfair competition under New Jersey common law. In response, Defendants
filed a motion to dismiss Counts Two through Five of Plaintiff’s Complaint. See Dkt. No. 15. The
Court granted Defendants’ motion without prejudice as to Counts Two and Four and as to the
allegations related to the two July 15, 2016 letters in Counts Three and Five. Dkt. No. 21.
Defendants’ motion was denied as to the allegations concerning the June 18, 2016 email in Counts
Three and Five. Id. Although the Court granted Plaintiff leave to file an amended complaint within
thirty days, Plaintiff did not do so. Accordingly, all that remains of Plaintiff’s Complaint is
Plaintiff’s claim for declaratory judgment of non-infringement and Plaintiff’s claims for unfair
competition related to the June 18, 2016 email. On June 9, 2017, Defendants filed their Answer
along with a Counterclaim stating a single cause of action for infringement of the ‘748 patent. See
Dkt. No. 23. On June 30, 2017, Plaintiff asserted an additional claim for declaratory judgment of
invalidity. See Dkt. No. 25.

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II.

DISCUSSION
It is well-settled that “the power to stay proceedings is incidental to the power inherent in

every court to control the disposition of the cases on its docket with economy of time and effort
for itself, for counsel, and for litigants.” Depomed Inc. v. Purdue Pharma L.P., C.A. No. 13-0571
(JAP), 2014 WL 3729349, at *2 (D.N.J. July 25, 2014) (quoting Landis v. North Am. Co., 299 U.S.
248, 254 (1936)). In particular, “[t]he decision to stay a patent case in which a reexamination by
the PTO has been requested is within the discretion of the district court.” Thermolife Int'l, LLC v.
Prosource Performance Prod., C.A. No. 15-2037 (FLW/LHG), 2015 WL 9480023, at *6 (D.N.J.
Dec. 29, 2015) (citing cases from the Federal Circuit and the District of New Jersey).
Because staying a case pending IPR proceedings offers both costs and benefits, courts
traditionally balance the following three factors in determining whether to grant a stay: “(1)
whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving
party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether
discovery is complete and a trial date has been set.” Depomed, 2014 WL 3729349, at *2 (citations
omitted); see also Thermolife, 2015 WL 9480023, at *6 (quoting Mondis Tech. Ltd. v. LG Elecs.,
Inc., C.A. No. 15-4431 (SRC/CLW), 2015 WL 7012747, at *6 (D.N.J. Nov. 12, 2015)). While
courts in this District have noted a “generally liberal policy toward granting stays pending patent
reexamination by the PTO,” Mondis Tech., 2015 WL 7012747, at *5 (citations omitted), a stay is
not automatic as a “stay in litigation inevitably causes further delay in an already lengthy process,
and could potentially harm [the opposing party].” Id. (quoting Brass Smith, LLC v. RPI Indus.,
Inc., C.A. No. 09-06344 (NLH/JS), 2010 WL 4444717, at *2 (D.N.J. Nov. 1, 2010)). “The party
seeking a stay of civil litigation bears the burden to show that the stay would be appropriate.” Id.
(citing Landis, 299 U.S. at 255).

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Prior to addressing the individual factors, the Court notes that the parties’ briefing on
Plaintiff’s present motion was submitted prior to the PTAB’s institution of inter partes review.
Accordingly, the large portion of Defendants’ opposition to Plaintiff’s motion arguing that
Plaintiff’s petition was somehow barred or would be unlikely to succeed is no longer applicable.
A. Prejudice to the Non-Moving Party
In determining whether a stay will likely result in undue prejudice to the non-moving party
or place them at a clear tactical disadvantage, the Court considers a number of factors including
“the timing of the request for reexamination, the timing of the request for [a] stay, the status of the
reexamination proceedings and the relationship of the parties.” Depomed, 2014 WL 3729349, at
*2 (quoting Boston Scientific Corp. v. Cordis Corp., 777 F. Supp. 2d 783, 789 (D. Del. 2011)).
As to the timing of Plaintiff’s petition and the present motion to stay, Defendants assert
that Plaintiff’s delay in moving for inter partes review evidences Plaintiff’s “dilatory motive” in
the filing of its petition. Dkt. No. 36 at p. 25. Plaintiff’s claim for invalidity was first asserted in
this action on June 30, 2017. See Dkt. No. 25. Plaintiff filed its petition for inter partes review on
September 21, 2017. The Court held an initial scheduling conference with the parties and entered
a Pretrial Scheduling Order in this matter on September 29, 2017. See Dkt. No. 33. Pursuant to
Plaintiff’s statements during the initial scheduling conference notifying Defendants and the Court
Scheduling Order of November 9, 2017 for Plaintiff to file the present motion. See Id. at ¶ 32.
of its intention to move for the presently sought stay, the Court included a deadline in the Pretrial

Plaintiff filed its motion to stay on the November 9, 2017 deadline. Despite Defendants’

contentions to the contrary, the Court does not find that the approximately three-month delay
between Plaintiff’s assertion of its invalidity claim and the filing of its IPR petition or the less than

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two-month delay between the filing of the petition and the present motion demonstrates a dilatory
motive on Plaintiff’s part. Accordingly, the Court finds this sub-factor to be neutral.
Turning to the status of the IRP proceedings, the Court find that this sub-factor favors
Defendants. On March 30, 2018, the PTAB instituted review as to the claims challenged by
Plaintiff. Under the governing statute, the presently instituted IRP proceedings are not expected to
be fully resolved until March 2019, with a possibility of a six-month extension for “good cause.”
35 U.S.C. 316(a)(11); see also Toshiba Samsung Storage Tech. Korea Corp. v. LG Elecs., Inc.,
C.A. No. 15-691 (LPS), 2016 WL 3437605, at *5 (D. Del. June 17, 2016) (finding the “status of
IPR” sub-factor weighed against a stay because the recently instituted IPR and the possibility of a
six-month extension for good cause and/or two or more years of IPR appellate proceedings would
be prejudicial to the non-movant).
Under the final sub-factor, the Court considers the relationship between the parties. Courts
are generally reluctant to grant a stay in a matter where the parties are direct competitors on the
rationale that a stay would likely cause the non-movant to lose substantial profits and goodwill on
the market. See, e.g., Depomed, 2014 WL 3729349, at *4 (quoting Neste Oil OYJ v. Dynamic
Fuels, LLC, C.A. No. 12-1744 (GMS), 2013 WL 3353984, at *3 (D. Del. July 2, 2013));
Thermolife, 2015 WL 9480023, at *6 (finding because the parties are direct competitors, a stay of
the litigation would result in prejudice to the non-movant). The presence of multiple active firms
in the relevant market, however, may decrease the likelihood of such harm befalling the plaintiff.
Id. at *3; Air Vent, Inc. v. Owens Corning Corp, No. 10–1699–TFM, 2012 WL 1607145, at *3
(W.D. Pa. May 8, 2012).
While it is clear that the parties are competitors, Defendants do not assert that they are
direct competitors and it is unclear whether there are other systems besides the Vectra which

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compete with Melanoscan. “Where the question of ‘direct competition’ remains unanswered,
courts have sometimes considered whether the plaintiff sought a preliminary injunction.” Neste
Oil Oyj, 2013 WL 424754, at *3; see also SenoRx, Inc., 2013 WL 144255, at *8; see also Ever
Win Int'l Corp. v. Radioshack Corp., No. 11–1104–GMS–CJB, 2012 WL 4801890, at *7 (D. Del.
Oct. 9, 2012). The decision by a litigant to seek such injunctive relief may suggest that the parties,
in fact, do compete and that real prejudice will flow from the imposition of a stay. See SenoRx,
Inc., 2013 WL 144255, at *8. Here, Defendants did not seek a preliminary injunction against
Plaintiff and there has been no assertion or evidence that the parties are “direct competitors.” See
Neste Oil OYJ v. Dynamic Fuels, LLC, No. CV 12-1744-GMS, 2013 WL 3353984, at *4 (D. Del.
July 2, 2013). Accordingly, the Court finds this sub-factor to be neutral.
Based upon the foregoing, with one of the sub-factors weighing against a stay and the other
two being neutral, the Court finds that the overall consideration of prejudice caused to Defendants
weighs against a stay.
B. Simplification of the Issues
Courts have noted several ways in which a stay pending IPR proceedings can simplify a
pending litigation: (1) a review of all prior art presented to a court by the PTO, with its particular
expertise; (2) the potential alleviation of numerous discovery problems relating to prior art by PTO
examination; (3) the potential dismissal of a civil action should invalidity of a patent be found by
the PTO; (4) encouragement to settle based upon the outcome of the PTO reexamination; (5) an
admissible record at trial from the PTO proceedings which would reduce the complexity and length
of the litigation; (6) a reduction of issues, defenses and evidence during pre-trial conferences; and
(7) a reduction of costs for the parties and a court. Eberle v. Harris, C.A. No. 03-5809 (SRC), 2005

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WL 6192865, at *2 (D.N.J. Dec. 8, 2005) (citing GPAC, Inc. v. D.W.W. Enters., Inc., 144 F.R.D.
60, 63 (D.N.J. 1992)).
The “issue simplification” factor does not require a complete invalidation of all asserted
claims by the IPR proceedings and simplification can occur even where “some or all of the claims
are found not invalid.” See Depomed, 2014 WL 3729349, at *5 (quoting Softview LLC v. Apple
Inc., C.A. No. 10-389 (LPS), 2013 WL 4757831, at *1 (D. Del. Sept. 4, 2013)). Issue simplification
can occur where the number of asserted claims and patents are reduced due to invalidation or the
estoppel effect of the IPR proceedings. Id.; see also 35 U.S.C. § 315(2)(e) (barring the petitioner
in an IPR proceeding that results in a final decision by the PTO from asserting in a civil action
invalidity arguments that the petitioner raised or reasonably could have raised during the IPR
proceedings). Therefore, the number of claims asserted in the pending litigation relative to the
number of claims subject to the IPR proceedings is a significant factor for the Court to consider.
See Depomed, 2014 WL 3729349, at *5 (“The more the scope of the litigation exceeds the scope
of the IPR proceedings, the less likely the IPR proceedings and requested stay will simplify the
issues.”) (citing Princeton Digital Image Corp. v. Konami Digital Entm't Inc., C.A. No. 12-1461
(LPS/CJB), 2014 WL 3819458, at *3 (D. Del. Jan. 15, 2014)).
Defendants have asserted 41 claims in this matter related to the ‘748 patent. Out of the 41
asserted claims, 11 are under IPR proceedings. 1 According to Defendants, the 11 claims under IRP
proceedings do not represent a large enough portion of the claims at issue in this case to justify a
stay. In response, Plaintiff claims that its IPR petition challenges all of the independent claims in
the ‘748 patent and that Defendants “decided to strategically assert an additional 30 dependent

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Although Defendants state that 11 claims are under IPR proceedings, it appears that Plaintiff’s IPR petition
requests inter partes review of claims 1-8, 11, 30, 32-34, 46, and 51, which amounts to fifteen claims. Because this
discrepancy does not affect the Court’s decision, the Court will give Defendants the benefit of accepting their count
of eleven claims for purposes of this analysis.
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claims” after Plaintiff filed its IPR petition in order to support their present argument against a
stay. Dkt. No. 45 at p. 8. Defendants further assert that the outcome of the IPR proceedings will
not affect Plaintiff’s remaining unfair competition claims.
Although Defendants are correct that the claims for which inter partes review has been
instituted do not represent all claims at issue in this litigation, the Court finds that the resolution
of the IPR proceedings will significantly simplify the issues in this case. First, all of the
independent claims in the ‘748 patent are under IPR review and the remaining claims asserted in
this action are dependent upon those independent claims. Secondly, it appears that the reason that
the non-overlapping claims were not included in Plaintiff’s petition for inter partes review is that
when that petition was filed, Defendants had not yet asserted those claims. “The absence . . . of
those claims from the inter partes review is therefore chargeable to [Defendants], not to
[Plaintiff].” NFC Tech. LLC v. HTC Am., Inc., No. 2:13-CV-1058-WCB, 2015 WL 1069111, at
*7 (E.D. Tex. Mar. 11, 2015). Finally, while Plaintiff’s remaining unfair competition claims will
not be directly affected by the outcome of the IPR proceedings, the unfair competition claims,
which Defendants characterize as relating “exclusively to Defendants’ alleged dissemination of a
single email in June 2016” will likely require minimal discovery and proceed quickly to final
disposition. Based upon the foregoing, and in light of the fact that the PTAB has instituted review
of all of the claims included by Plaintiff in its petition, the Court finds the simplification of the
issues which will result from the resolution of the IPR proceedings weighs in favor of a stay.
C. Stage of the Litigation
“Courts are more willing to stay a case in its early stages pending IPR proceedings because
it can advance judicial efficiency by conserving resources expended by the parties and the Court
on claims that may subsequently be found invalid.” Eagle View Techs., Inc. v. Xactware Sols.,

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Inc., No. CV 15-7025 (RBK/JS), 2016 WL 7165695, at *8 (D.N.J. Dec. 7, 2016) (citing Toshiba
Samsung, 2016 WL 3437605, at *3). On the other hand, “when a matter has already reached its
later stages with discovery being complete and/or a trial date being set, requests to stay are less
frequently granted.” Depomed, 2014 WL 3729349, at *6. Where the parties and the court have
expended “substantial time and resources ... in [the] case to scheduling and the resolution of
discovery disputes” and other motion practices, the “litigation stage” factor weighs against a stay
even at a relatively early stage. SoftView LLC v. Apple Inc., C.A. No. 10-389 (LPS), 2012 WL
3061027, at *4 (D. Del. July 26, 2012).
Here, written discovery is still ongoing, depositions have not yet begun, and no trial date
has been set. Although the parties have certainly expended time and resources in this matter, it
appears that the bulk of the expenses and time to be invested by the parties in this matter is still to
come. The parties have indicated that they are likely to have significant objections to written
discovery requests and responses as indicated by their numerous requests for an extension of the
deadline set by the Court for raising objections to written discovery. See Dkt. Nos. 47, 51, 57, 67,
74, 81. Furthermore, the recently filed motions related to the enforcement of subpoenas indicate
that the remainder of the discovery process is unlikely to run smoothly. See Dkt. Nos. 76, 78.
Accordingly, it appears to the Court that a stay of this matter at its present stage pending the
outcome of the IPR proceedings will save the parties and the Court from a possibly unnecessary
and likely significant expenditure of resources. Therefore, the Court finds that this factor weighs
in favor of Plaintiff’s motion to stay.
Based upon the foregoing, the Court finds that one factor weighs against a stay and two
weigh in favor. Accordingly, Plaintiff’s motion for a stay [Dkt. No. 34] is GRANTED.

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III.

CONCLUSION AND ORDER
The Court having considered the papers submitted pursuant to Fed. R. Civ. P. 78, and for

the reasons set forth above;
IT IS on this 13th day of June, 2018,
ORDERED that Plaintiff’s motion to stay [Dkt. No. 34] is GRANTED; and it is further
ORDERED that this matter shall be STAYED and ADMINISTRATIVELY
TERMINATED pending the completion of inter partes review before the PTAB; and it is further
ORDERED that the parties shall promptly advise the Court in writing when the PTAB
issues a decision in the inter partes review proceeding; and it is further
ORDERED that all pending motions [Dkt. Nos. 74, 76, 78, 81] shall be
ADMINISTRATIVELY TERMINATED.

s/ James B. Clark, III
JAMES B. CLARK, III
United States Magistrate Judge

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