Steuben Foods, Inc. v. Shibuya Hoppmann Corporation
Filing
38
DECISION AND ORDER denying defendant's motions to dismiss 7 and to stay pending patent re-examination 9 . Defendant to answer the complaint within 20 days of entry of this Decision and Order. Signed by Hon. Richard J. Arcara on 8/15/2011. (JMB)
UNITED STATES DISTRICT COURT
W ESTERN DISTRICT OF NEW YORK
STEUBEN FOODS, INC.,
Plaintiff,
DECISION AND ORDER
10-CV-781A
v.
SHIBUYA HOPPMANN CORP.,
Defendant.
I.
INTRODUCTION
Pending before the Court are motions by defendant Shibuya Hoppman
Corporation to dismiss plaintiff’s complaint (Dkt. No. 7) and, in the alternative, to
stay this case (Dkt. No. 9) pending re-examination of two of the six patents that
plaintiff has identified as relevant to its infringement claims. Defendant believes
that outright dismissal is appropriate because it does not have sufficient contacts
with New York to create personal jurisdiction, and because plaintiff’s allegations
of patent infringement are too conclusory to survive scrutiny under Rule 12(b)(6)
of the Federal Rules of Civil Procedure (“FRCP”). As an alternative request,
defendant asks the Court to stay the case until the United States Patent and
Trademark Office (“USPTO”) completes its review of two out of the six patents
that plaintiff believes have been infringed. Defendant contends that a revocation
or significant alteration of these patents would have enough of an impact on the
litigation that the Court should wait for guidance from the USPTO.
Plaintiff opposes both motions. According to plaintiff, defendant’s own
admission of occasional sales in New York, coupled with attendance at an annual
trade show in New York and an interactive website that facilitates sales, more
than suffices to establish personal jurisdiction. Plaintiff also contends that it has
set forth its allegations of patent infringement in sufficient detail to put defendant
on notice about the patents and the technology in question. Finally, plaintiff
argues against a stay on the grounds that re-examination of two of the patents in
question does not affect the other four patents that allegedly have been infringed.
At a minimum, according to plaintiff, litigation can proceed with respect to the four
patents that have not been challenged.
The Court held oral argument on July 25, 2011. For the reasons below, the
Court denies both motions.
II.
BACKGROUND
This case concerns plaintiff’s allegations that defendant manufactures and
sells automated bottling machines that infringe on six of its patents. Among other
products or services, both parties manufacture and sell “aseptic filling
systems”—that is, automated machines that fill aseptically sterilized bottles at
high rates of speed. Plaintiff, a New York corporation based in Elma, New York,
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owns six patents pertaining to equipment and processes for bottling that allows it
to sell machines that process more than 100 bottles per minute. The technical
details of these six patents are not relevant to the pending motions, but these
patents generally concern issues such as disinfecting bottles with hydrogen
peroxide, disinfecting bottles in a way that sharply reduces contamination while
bottling at high speed, and filling bottles in a way that preserves the sterility of the
food product. The parties never have worked together, though a corporate
predecessor of defendant visited plaintiff’s Elma facility a few years ago to
discuss the possibility of having defendant install machinery at that facility.
A trade show appears to have brought defendant’s allegedly infringing
conduct to plaintiff’s attention. INTERPHEX is an annual trade show “for industry
professionals and contract service providers in the fields of pharmaceutical and
biopharmaceutical manufacturing.” (Dkt. No. 19-4 at 17.) W hether the location of
INTERPHEX varies is not clear from the record, but the trade show was held in
New York City in 2009, 2010, and 2011. Defendant attended INTERPHEX in
2009, 2010, and 2011. Among other activities in which it may have engaged,
defendant displayed its Dual Robotic Aseptic System and its hydrogen peroxide
decontamination system at INTERPHEX 2009 and its Compact Filler/Capper
machine at INTERPHEX 2010. Plaintiff also attended these INTERPHEX trade
shows; Thomas Taggart, a vice president for plaintiff, claims to have observed
defendant showcasing machinery incorporating sterilization and filling techniques
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covered by plaintiff’s patents. Defendant announced its attendance at
INTERPHEX on both its website and its Facebook page.
In response to the alleged patent infringement that came to its attention,
plaintiff filed its complaint on September 29, 2010. In the complaint, plaintiff
asserted that defendant does business in New York and has engaged in actual,
induced, and contributory infringement. Plaintiff asserted further that it sent
defendant written notice on September 25, 2009 about the existence of its
patents. Defendant allegedly never acknowledged receipt of that written notice.
The complaint contains two causes of action. In the first cause of action, plaintiff
accuses defendant of actual, induced, and contributory infringement that
continues through the present time. In the second cause of action, plaintiff
requests injunctive relief on the grounds that defendant’s continued patent
infringement is causing irreparable harm that monetary relief cannot address.
Defendant filed the pending motions in lieu of answering the complaint.
W ith respect to the motion to dismiss, defendant advances two bases for
dismissal. First, defendant argues a lack of personal jurisdiction or, alternatively,
improper venue. Although defendant acknowledged at oral argument that it has
sold products from time to time in New York, it denies having any physical
presence, employees, mailing addresses, or similar features in New York.
Additionally, defendant contends that its attendance at INTERPHEX by itself does
not suffice to establish personal jurisdiction because that trade show constitutes
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an isolated or sporadic event at which it has not completed sales. To the extent
that plaintiff bases jurisdiction on the features of defendant’s website, defendant
argues that its website is not sufficiently “interactive” to constitute either doing
business in New York or projecting itself into New York for purposes of due
process analysis. Second, defendant argues that the assertion of patent
infringement in the complaint does not identify specific machinery or specific
features of that machinery that allegedly infringes on plaintiff’s patents.
Consequently, according to defendant, plaintiff’s allegations are so conclusory
that the complaint is subject to dismissal under FRCP 12(b)(6).
Along with the motion to dismiss, defendant filed an alternative motion to
stay litigation pending the re-examination of two of plaintiff’s patents by the
USPTO. Of the six patents that plaintiff placed in issue, third parties not affiliated
with defendant have requested and received re-examination for two of them
under 35 U.S.C. §§ 301–307. On June 29, 2010, non-party Joseph W . Holland
requested re-examination of all 20 claims for Patent No. 6,536,188 (the “`188
Patent”). In a decision dated November 5, 2010, the USPTO agreed with Holland
and issued a preliminary rejection of those claims; the re-examination process as
a whole has not ended. On September 24, 2010, non-party Charles A. Gaglia
requested re-examination of all 20 claims for Patent No. 6,945,013 (the “`013
Patent”). That re-examination also is ongoing. Defendant argues that the results
of these re-examinations could change the scope and substance of plaintiff’s
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claims and the rights that are potentially at stake. Accordingly, and because this
case is in its earliest stages, defendant contends that a stay would provide the
benefit of clarifying the issues in the case without imposing any prejudice on
plaintiff. Defendant estimates that a stay would not last long because the reexaminations have been proceeding for some time and because it does not
intend to challenge plaintiff’s other four patents.
Plaintiff opposes both pending motions and urges the Court to allow the
case to move forward. According to plaintiff, proper venue in patent infringement
cases occurs wherever personal jurisdiction exists, and personal jurisdiction
exists here through a combination of factors. Through admitted occasional sales
in New York, repeated attendance at New York trade shows, a sales
representative assigned to New York, and an interactive website that includes a
“shopping cart” feature, defendant supposedly has established sufficient contacts
with New York to satisfy both state and federal law. Plaintiff also emphasizes that
defendant’s sales efforts in New York include the attempted sale to plaintiff a few
years ago, even if defendant’s corporate predecessor technically handled that
negotiation. As for the sufficiency of its claims, plaintiff contends that this is a
simple infringement case and that it has adequately alleged that the infringement
has occurred and continues to occur. Finally, plaintiff argues against any stay
because its claims against defendant do not rest on the outcome of the reexaminations currently under way.
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III.
DISCUSSION
For the sake of clarity, the Court will address each of defendant’s
arguments separately below. In reviewing defendant’s arguments about personal
jurisdiction, the Court will look to precedent from the United States Court of
Appeals for the Federal Circuit. The Court will do so because plaintiff brought
this case in part under 28 U.S.C. § 1338, which gives district courts original
jurisdiction over patent cases, and the Federal Circuit “shall have exclusive
jurisdiction of an appeal from a final decision of a district court of the United
States . . . if the jurisdiction of that court was based, in whole or in part, on section
1338 of this title . . . .” 28 U.S.C. § 1295(a)(1); see also Akro Corp. v. Luker, 45
F.3d 1541, 1543 (Fed. Cir. 1995) (“W e apply the law of the Federal Circuit, rather
than that of the regional circuit in which the case arose, when we determine
whether the district court properly declined to exercise personal jurisdiction over
an out-of-state accused infringer.”) (citation omitted). In contrast, this Court will
apply Second Circuit precedent to defendant’s arguments under FRCP 12(b)(6)
because the Federal Circuit “reviews dismissal for failure to state a claim upon
which relief can be granted under the law of the regional circuit.” Juniper
Networks, Inc. v. Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011) (citation omitted).
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A.
Defendant’s Motion to Dismiss
1.
Personal Jurisdiction
a.
General Standard
Plaintiff bears the burden of establishing personal jurisdiction, but that
burden is fairly light this early in the case. “Because the parties have not
conducted discovery, the plaintiff need[s] only to make a prima facie showing that
the defendant [was] subject to personal jurisdiction.” Silent Drive, Inc. v. Strong
Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003) (internal quotation marks and
citations omitted). “In the procedural posture of a motion to dismiss, a district
court must accept the uncontroverted allegations in the plaintiff’s complaint as
true and resolve any factual conflicts in the affidavits in the plaintiff’s favor.”
Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003) (citations
omitted).
b.
Specific Jurisdiction
“Determining whether specific personal jurisdiction over a nonresident
defendant is proper entails two inquiries: whether a forum state’s long-arm statute
permits service of process, and whether the assertion of jurisdiction would be
inconsistent with due process.” Coyle, 340 F.3d at 1349 (citations omitted).
“Because New York’s long-arm statute does not reach to the limits of due
process, the inquiry in this case is confined to whether a New York court would
have jurisdiction over [defendant] based on the conduct alleged in the complaint
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and in the plaintiffs’ response to [defendant’s] motion to dismiss.” Pieczenik v.
Dyax Corp., 265 F.3d 1329, 1333 (Fed. Cir. 2001) (citation omitted).
In turn, whether a New York court would have personal jurisdiction over
defendant hinges on the application of New York’s “long-arm” statute, N.Y. CPLR
302. Two provisions of CPLR 302 are potentially relevant here: namely, the
provisions covering a defendant who “transacts any business within the state or
contracts anywhere to supply goods or services in the state,” CPLR 302(a)(1); or
who “commits a tortious act within the state,” CPLR 302(a)(2). The parties have
focused on CPLR 302(a)(1). “Interpreting New York and Second Circuit cases,
we have held that for a court to assert jurisdiction over a defendant under section
302(a)(1), the plaintiff must satisfy two requirements: (1) the defendant’s business
activities in New York must be activities by which the defendant projects itself into
New York in a way as to purposefully avail itself of the benefits and protections of
New York laws and (2) the plaintiff’s cause of action must arise out of that
business activity within the state.” Pieczenik, 265 F.3d at 1333 (citation omitted).
“The second requirement, the so-called nexus test, is interpreted very narrowly by
the New York courts. A single business transaction is sufficient to satisfy the
nexus test under section 302(a)(1), but the cause of action must arise from the
transaction of business in New York.” Id. (internal quotation marks and citations
omitted).
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Here, the information available so far from the parties indicates that
defendant has projected itself into New York in several ways. Although it did not
divulge details, defendant itself admitted at oral argument that it has sold
products from time to time in New York. Conducting occasional sales likely
means that defendant has some kind of base of customers in New York for both
machinery sales and for follow-up sales of parts and service. For at least the
past three years in a row, defendant has attended the INTERPHEX trade show in
New York City. Even crediting defendant’s assertion that it never has made a
sale at INTERPHEX, it tried to make sales there by demonstrating various
machinery and by announcing its attendance on its website and Facebook page.
Cf. GTFM, Inc. v. Int’l Basic Source, Inc., No. 01 CIV. 6203, 2002 W L 31050840,
at *4 (S.D.N.Y. Sept. 12, 2002) (“Even though there is no proof that Offending
Goods were sold in the state, the sale of other merchandise, the brochure printed
in New York (which may or may not have advertised the Offending Goods), and
[defendant’s] attendance at a yearly trade show all increased the possibility that
Offending Goods would be purchased.”); Hsin Ten Enter. USA, Inc. v. Clark
Enters., 138 F. Supp. 2d 449, 456 (S.D.N.Y. 2000) (finding personal jurisdiction in
part because the defendants “have representatives who have appeared in trade
shows in New York, and have sold several [items] to New York residents”).
Defendant also tried to make a sale with plaintiff a few years ago, even if by way
of a corporate predecessor.
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Defendant’s website also helps project it into New York. The website does
not appear to contain information specific to New York customers and appears to
lack the ability to complete a sale entirely online. Cf. Stephan v. Babysport, LLC,
499 F. Supp. 2d 279, 287–88 (E.D.N.Y. 2007) (“Babysport’s website does not rise
to the level of transacting business in New York State. Customers cannot
complete a contract for sale via the Babysport website. Instead, the website links
the user to sites such as Amazon.com where the product may be purchased.
The Babysport website is thus best described as a ‘passive’ website which ‘does
little more than make information available to those who are interested’ in the
product.”) (citation omitted). Nonetheless, defendant’s website is not the kind of
website that directs a one-way flow of information. In contrast to defendants who
receive information and simply post it on their own website server, defendant
here will use its New York sales representative to reach out to potential
customers in New York who submit their contact information and ask to be
contacted about potential sales. Cf. Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952
F. Supp. 1119, 1126 (W .D. Pa. 1997) (finding personal jurisdiction through online
business transactions where the “intended object of these transactions has been
the downloading of the electronic messages that form the basis of this suit in
Pennsylvania”); see also Lenahan Law Offices, LLC v. Hibbs, No. 04-CV-6376,
2004 W L 2966926, at *6 (W .D.N.Y. Dec. 22, 2004) (Siragusa, J.) (implying that
personal jurisdiction would exist if defendant had been “transmitting files into New
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York”). Since defendant uses its website as another tool to cultivate customer
relationships in New York, the website contributes to a finding of personal
jurisdiction.
Crediting for now plaintiff’s contention that the completed sales, attempted
sales, and potential sales described above involved machinery infringing on its
patents, the information available to the Court so far indicates that defendant
deliberately projects itself into New York on a sufficiently frequent basis for
business activities that correspond to plaintiff’s causes of action. That is enough
to make a prima facie case of personal jurisdiction at this time, subject to proof by
a preponderance of the evidence at trial.
Because plaintiff has made a prima facie case of specific personal
jurisdiction based on defendant’s business activities in New York, an analysis of
“general jurisdiction” is not necessary. See Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 415–16 (1984) (assessing general
jurisdiction only after noting that specific jurisdiction did not exist). Accordingly,
the Court rejects defendant’s arguments to dismiss this case based on personal
jurisdiction. The Court also need not consider any arguments about venue
because “the venue point is a non-issue. Venue in a patent action against a
corporate defendant exists wherever there is personal jurisdiction. Therefore, no
separate venue inquiry is necessary.” Trintec Indus., Inc. v. Pedre Promotional
Prods., Inc., 395 F.3d 1275, 1280 (Fed. Cir. 2005) (citations omitted).
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2.
Failure to State a Claim Under FRCP 12(b)(6)
Next, the Court turns to defendant’s argument to dismiss this case under
FRCP 12(b)(6). “A pleading that states a claim for relief must contain . . . a short
and plain statement of the claim showing that the pleader is entitled to relief.”
FRCP 8(a)(2). “‘A short and plain statement of the claim’ does not mean ‘a short
and plain statement of the eventual jury charge for that claim’ or ‘a short and plain
recitation of the legal elements for that claim.’ FRCP 8(a)(2) requires a plaintiff to
state, in concise but plausible fashion, what he currently thinks a defendant
actually did to him, subject to revision during later discovery.” Beswick v. Sun
Pharm. Indus., Ltd., No. 10-CV-357, 2011 W L 1585740, at *5 (W .D.N.Y. Mar. 4,
2011) (Arcara, J.). “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face. A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. The plausibility standard is not
akin to a probability requirement, but it asks for more than a sheer possibility that
a defendant has acted unlawfully.” Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct.
1937, 1949 (2009) (internal quotation marks and citations omitted).
Here, plaintiff has set forth just enough of a narrative about patent
infringement that additional factual detail can await discovery. Plaintiff has
alleged that it owns six patents pertaining to aseptic filling systems, and has
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attached copies of those patents to the complaint. Plaintiff also has alleged that
defendant has been manufacturing and selling aseptic filling machines that
infringe on its patents. The written notice of infringement that plaintiff sent
defendant and attached to the complaint (Dkt. No. 1-1 at 111–12) supports
plaintiff’s narrative that defendant is aware of its ongoing infringement and is not
concerned. The level of detail that plaintiff has provided so far matches the level
of detail that would have been sufficient under FRCP 84 had it chosen to use the
complaint set out in FRCP Form 18. See FRCP 84 (“The forms in the Appendix
suffice under these rules and illustrate the simplicity and brevity that these rules
contemplate.”); Automated Transactions, LLC v. First Niagara Fin. Grp., Inc., No.
10-CV-407, 2010 W L 5819060, at *5 (W .D.N.Y. Aug. 31, 2010) (McCarthy, M.J.)
(report and recommendation) (“[N]o greater specificity than that of Form 18 is
necessary in order to state a cause of action for infringement.”) (citation omitted),
adopted by 2011 W L 601559 (W .D.N.Y. Feb. 11, 2011) (Arcara, J.). Neither
FRCP 84 nor Form 18 are restricted to pro se litigants, who would receive more
procedural leeway. Plaintiff obviously will have to flesh out a lot of details to
prove its case at trial. For now, however, plaintiff concisely and plausibly has put
defendant on notice that its aseptic filling machines—as opposed to, for example,
its Compact Filler/Capper—infringe on its patents. See also McZeal v. Sprint
Nextel Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007) (“[A] plaintiff in a patent
infringement suit is not required to specifically include each element of the claims
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of the asserted patent.”) (citation omitted). The Court thus rejects defendant’s
argument to dismiss for failure to state a claim.
B.
Motion to Stay Pending Re-examination
Because the Court has decided not to dismiss the case, it will turn to
defendant’s alternative motion to issue a stay pending the completion of reexamination proceedings for the `188 Patent and the `013 Patent. “Courts have
inherent power to manage their dockets and stay proceedings, including the
authority to order a stay pending conclusion of a PTO reexamination.” Ethicon,
Inc. v. Quigg, 849 F.2d 1422, 1426–27 (Fed. Cir. 1988) (citation omitted).
“However, a district court may allow a case to move forward while reexaminations
are underway since the functions of the courts and the Patent Office are very
different and are concepts not in conflict.” TouchTunes Music Corp. v. Rowe Int’l
Corp., 676 F. Supp. 2d 169, 176 (S.D.N.Y. 2009) (internal quotation marks and
citations omitted). “In determining whether to stay litigation pending
reexamination by the PTO, courts generally consider the following factors: (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 whether a trial date
has been set.” Xerox Corp. v. 3Com Corp., 69 F. Supp. 2d 404, 406 (W .D.N.Y.
1999) (Telesca, J.) (citations omitted).
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Here, the single most important characteristic of this case affecting the
propriety of a stay is that it involves six different patents. These patents all relate
in some way to the aseptic filling process but encompass different technical
details. Four of these patents have not been subjected to re-examination. In the
complaint, plaintiff alleges ongoing infringement of all six. The investigations,
depositions, and document exchanges necessary for discovery in this case will
be substantially similar regardless of whether the case proceeds to trial on six
patents or four. Cf. TouchTunes, 676 F. Supp. 2d at 177 (“W hile there exists
some relationship between all of the [defendant competitor’s] patents-in-suit, the
validity of the `780 and `765 patents is not tied to the outcome of [defendant’s]
appeal from the Examiner’s rejection of its other four patents.”). A complete
revocation of the `188 and `013 Patents thus would appear to require no more
than minor adjustments to plaintiff’s theories of liability. As a result, this case
differs from cases in which a stay made sense because liability rested entirely on
the validity of a single patent. Cf., e.g., Gaymar Indus., Inc. v. Cincinnati
Sub-Zero Prods., Inc., No. 08-CV-299, 2009 W L 3162213, at *3 (W .D.N.Y. Sept.
28, 2009) (Skretny, J.) (granting a stay where “[t]here [was] only one patent at
issue and a single claim of infringement”); K.G. Motors, Inc. v. Specialized Bicycle
Components, Inc., No. 08-CV-6422, 2009 W L 2179129, at *4 (W .D.N.Y. July 22,
2009) (Payson, M.J.) (granting a stay where a single patent was at issue and
“where the alleged infringer represents that it has ceased manufacturing the
16
challenged product and will cease sales of the product before the litigation would
conclude”); Bausch & Lomb Inc. v. Rexall Sundown, Inc., 554 F. Supp. 2d 386,
391 (W .D.N.Y. 2008) (Payson, M.J.) (granting a stay where a single patent was at
issue and where the defendant “[was] not currently selling the alleged infringing
product and [was] willing to condition the stay on its undertaking not to do so
during the pendency of the reexamination proceedings”) (citation omitted). Even
though discovery has not begun here, which would put the third Xerox factor
squarely on defendant’s side, the inability of a stay to simplify the issues in
question shifts considerable weight to the second Xerox factor and puts that
factor on plaintiff’s side.
The indefinite nature of the ongoing re-examination process puts the first
Xerox factor on plaintiff’s side and further weighs against a stay. At oral
argument, the parties did not express any certainty as to when the re-examination
process might conclude. Additionally, although defendant has represented to the
Court that it will not challenge plaintiff’s other four patents, it is not bound by that
representation. Third parties also are not bound by defendant’s representation; in
fact, the first two re-examination requests were submitted by third parties not
connected to defendant. The Court wants to avoid a situation in which
intentionally or coincidentally staggered requests for re-examination hamper this
litigation indefinitely. If later patent revocations or additional re-examination
requests cast serious doubt on the substance of plaintiff’s theories of liability then
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the parties may advise the Court at that time. Until then, the most prudent course
of action is to allow the case to proceed based on all the discovery that has to
occur regardless of how the ongoing re-examinations end. The Court thus denies
defendant’s motion for a stay.
IV.
CONCLUSION
For all of the foregoing reasons, the Court denies defendant’s motions to
dismiss (Dkt. No. 7) and to stay pending patent re-examination (Dkt. No. 9).
Defendant shall answer the complaint within 20 days of entry of this Decision and
Order.
SO ORDERED.
s/ Richard J. Arcara
HONORABLE RICHARD J. ARCARA
UNITED STATES DISTRICT JUDGE
DATED:
August 15, 2011
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