Adidas America, Inc et al v. Skechers USA, Inc.

Filing 144

Opinion and Order - Defendant's Motion to Stay Pending Inter Partes Review (ECF 119 ) is GRANTED. The parties shall file a joint status report not later than thirty days after the PTAB issues its final decision concerning the matters relevant to this lawsuit. Signed on 6/12/2017 by Judge Michael H. Simon. (mja)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

ADIDAS AMERICA, INC., a Delaware
corporation; ADIDAS AG, a foreign entity,
Plaintiffs,

Case No. 3:16-cv-1400-SI
OPINION AND ORDER
GRANTING STAY

v.
SKECHERS USA, INC., a Delaware
corporation,
Defendant.
Stephen M. Feldman, PERKINS COIE LLP, 1120 NW Couch Street, Tenth Floor, Portland,
OR 97209; Mitchell G. Stockwell, KILPATRICK TOWNSEND & STOCKTON LLP, 1100 Peachtree
Street, Suite 2800, Atlanta, GA 30309; Matias Ferrario and Michael Morlock, KILPATRICK
TOWNSEND & STOCKTON LLP, 1001 West Fourth Street, Winston-Salem, NC 27101. Of
Attorneys for Plaintiffs.
Kenneth R. Davis II and Parna A. Mehrbani, LANE POWELL PC, 601 SW Second Avenue,
Suite 2100, Portland, OR 97204; Mark A. Samuels, Brian M. Berliner, Andrea LaFountain, and
Sina S. Aria, O’MELVENY & MYERS LLP, 400 S. Hope Street, Suite 1800, Los Angeles,
CA 90071; Cameron W. Westin, O’MELVENY & MYERS LLP, 610 Newport Center Drive, 17th
Floor, Newport Beach, CA 92660. Of Attorneys for Defendant.
Michael H. Simon, District Judge.
Plaintiffs adidas America, Inc. and adidas AG (collectively, “adidas”) bring this lawsuit
against Defendant Skechers USA (“Skechers”) for patent infringement. Plaintiffs allege that

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Defendant’s “Mega Blade 2.0” and “Mega Blade 2.5” shoes (collectively, the “Mega Blade
shoes”) infringe Plaintiffs’ United States Patent Nos. 9,339,079 (the “’079 patent”)
and 9,345,285 (the “’285 patent”) (collectively, the “patents-in-suit”). Defendant has filed five
petitions with the United States Patent and Trial Appeals Board (“PTAB”) requesting that the
PTAB conduct an inter partes review (“IPR”) of all patent claims asserted in the patents-in-suit.
On April 26, 2017, the PTAB instituted IPR in response to the first two petitions and scheduled
trial (i.e., oral argument) before the PTAB on January 8, 2018. On May 30, 2017, the PTAB
declined to institute IPR on the third and fourth of the five petitions. A decision from the PTAB
on whether to institute IPR on the fifth petition is due August 27, 2017. Defendant moves for an
order from this Court staying the litigation pending the PTAB’s final resolution of all instituted
IPR proceedings related to the patents-in-suits. For the reasons that follow, the Court grants
Defendant’s motion to stay.
STANDARDS
A. Inter Partes Review
The Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112-29, 125 Stat. 284
(2011) (codified in various sections of Title 35 of the United States Code), was enacted to
improve and replace, among other things, the former inter partes reexamination proceeding with
a new IPR proceeding and post-grant review. One of the goals of the new IPR proceeding is “to
minimize duplicative efforts by increasing coordination between district court litigation and inter
partes review.” Wonderland Nursery Goods Co. v. Baby Trend, Inc., 2015 WL 1809309, at *1
(C.D. Cal. Apr. 20, 2015).
Under the AIA, any “person who is not the owner of a patent may file with the [PTAB] a
petition to institute an inter partes review of the patent.” 35 U.S.C. § 311(a). Petitioners “may
request to cancel as unpatentable 1 or more claims of a patent only on a ground that could be
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raised under section 102 or 103 [relating to invalidity of the patent or any claim on the basis of
prior art].” Id. § 311(b). Before it may institute IPR, the PTAB must determine that the petition
presents “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the
claims challenged in the petition.” Id. § 314(a). If IPR is instituted, the petitioner has the burden
of proving lack of patentability by a preponderance of the evidence. Id. § 316(e).
The current IPR timeline is more compressed than the timeline under its predecessor inter
partes reexamination procedure.1 After an IPR petition is filed, the patent owner may, within
three months, file a preliminary response “setting forth the reasons why no inter partes review
should be instituted.” 37 C.F.R. § 42.107(a). Alternatively, the patent owner may expedite the
proceeding by waiving the preliminary response. Id. § 42.107(b). The PTAB must decide
whether to institute IPR within three months from when the patent owner’s preliminary response
is due. 35 U.S.C. § 314(b). The PTAB must issue a final decision within one year from granting
IPR, with the possibility of one six-month extension on a showing of good cause. Id.
§ 316(a)(11); Id. § 318(a). A dissatisfied party may appeal the PTAB’s decision to the Court of
Appeals for the Federal Circuit. Id. § 141(c). If the PTAB issues a final written decision and the
time for appeal has expired or any appeal has terminated, the PTAB “shall issue and publish a
certificate canceling any claim of the patent finally determined to be unpatentable [and]
confirming any claim of the patent determined to be patentable.” Id. § 318(b).
B. Motion to Stay
A court’s “power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
1

The average length of an inter partes reexamination previously was approximately
36 months, and if either party appealed the determination from the reexamination, the process
could extend another three years. Affinity Labs of Tex. v. Apple Inc., 2010 WL 1753206, at *2
(N.D. Cal. Apr. 29, 2010).

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counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936); Murata Mach. USA
v. Daifuku Co., Ltd., 830 F.3d 1357, 1361 (Fed. Cir. 2016) (“The ability to stay cases is an
exercise of a court’s inherent power to manage its own docket.”). In deciding how best to
exercise this inherent power, the court “must weigh competing interests and maintain an even
balance.” Landis, 299 U.S. at 254-55. With regard to deciding whether to stay litigation pending
IPR, courts generally consider the following three factors:
1. whether discovery is complete and whether a trial date has been
set;
2. whether a stay will simplify the issues in question and trial of
the case; and
3. whether a stay would unduly prejudice or present a clear
tactical disadvantage to the non-moving party.
Wonderland Nursery Goods, 2015 WL 1809309, at *2 (quoting Universal Elecs., Inc. v.
Universal Remote Control, Inc., 943 F. Supp. 2d 1028, 1030-31 (C.D. Cal. 2013)). Courts also
look to whether “the outcome of the reexamination [or IPR] would be likely to assist the court in
determining patent validity and, if the claims were cancelled in the reexamination [or IPR],
would eliminate the need to try the infringement issue.” Id. (quoting In re Cygnus Telecomms.
Tech., LLC, Patent Litig., 385 F. Supp. 2d 1022, 1023 (N.D. Cal. 2005)).
Generally, courts apply a “liberal policy in favor of granting motions to stay proceedings
pending the outcome of . . . IPR proceedings.” Semiconductor Energy Lab. Co. v. Chimei
Innolux Corp., 2012 WL 7170593, at *4 (C.D. Cal. Dec. 19, 2012). Nonetheless, “the totality of
the circumstances governs,” and “a stay is never required.” Wonderland Nursery Goods, 2015
WL 1809309, at *2 (quoting Universal Elecs., 943 F. Supp. 2d at 1031). Whether “to grant a stay
falls within the court’s sound discretion.” CANVS Corp. v. United States, 118 Fed. Cl. 587, 591

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(2014). The moving party has the burden to persuade the court that a stay is appropriate. Netlist,
Inc. v. Smart Storage Sys., Inc., 2014 WL 4145412, at *1 (N.D. Cal. Aug. 21, 2014).2
BACKGROUND
Adidas AG is the owner by assignment of the patents-in-suit. Adidas America is the
exclusive licensee in the United States under the patents-in-suit. The ’079 patent is titled “Shoe
and Sole.” Issued on May 17, 2016, the ’079 patent describes the invention as including specific
“leaf spring elements” intended to provide cushioning properties that minimize disadvantages
associated with the use of foamed materials, which are typically used in shoe construction.
The ’285 patent also is titled “Shoe and Sole.” Issued on May 24, 2016, the ’285 patent describes
the invention similarly. On July 11, 2016, Plaintiffs filed a complaint against Defendant, alleging
that Defendant’s Mega Blade shoes infringe one or more claims of the patents-in-suit. Since
then, Defendant has filed a total of five petitions for IPR, raising validity challenges in each
petition to all asserted claims from the patents-in-suit. The primary differences among the several
petitions relate to the prior art.
On October 24, 2016, Defendant filed its first two petitions seeking IPR (the “Luthi/Chan
Petitions”).3 In these two petitions, Defendant asks the PTAB to institute IPR on all of the claims
that Plaintiffs have asserted in this lawsuit as of the date of those petitions. This consists of all

2

These standards mirror those used when courts analyze motions to stay pending
reexamination under the pre-AIA statutory framework in effect before September 16, 2012. See,
e.g., Aten Int’l Co. v. Emine Tech. Co., 2010 WL 1462110, at *6 (C.D. Cal. Apr. 12, 2010).
Courts agree that “[a]lthough inter partes review is a new means to challenge patent validity, the
same general principles that governed stays pending the old inter partes reexamination process
should apply with equal force to stays pending the new inter partes review.” CANVS Corp., 118
Fed. Cl. at 591 n.5.
3

The Luthi/Chan Petitions refer to the following three patents: (1) U.S. Patent
No. 6,769,202 B1 issued to Luthi et al. (“Luthi ’202”); (2) U.S. Patent No. 5,461,800 issued to
Luthi et al. (“Luthi ’800”); and (3) U.S. Patent No. 7,383,647 B2 issued to Chan et al. (“Chan”).

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thirty claims of the ’079 patent and claims 20-32 of the ’285 patent. In the Luthi/Chan Petitions,
Defendant asserts that the challenged claims are invalid as obvious in view of certain prior art in
combination with ordinary skill in the art and other references. On April 26, 2017, the PTAB
instituted IPR on both Luthi/Chan Petitions. In response to one of the Luthi/Chan Petitions, the
PTAB instituted review to determine whether claims 1-30 of the ’079 patent are unpatenable
under 35 U.S.C. § 103 based on Luthi ’202 either alone or in combination with Luthi ’800 and
Chan. In response to the other Luthi/Chan Petition, the PTAB instituted review to determine
whether claims 20-32 of the ’285 patent are unpatenable under 35 U.S.C. § 103 based on
Luthi ’202 either alone or in combination with Luthi ’800 and Chan. In response to both
Luthi/Chan Petitions, the PTAB determined that Defendant “establishes a reasonable likelihood
that [it] will prevail in showing the unpatentability of at least one of the [asserted] claims” in
each of the patents-in-suit. ECF 133-1 at 2; ECF 133-2 at 2.
On November 22, 2016, Defendant filed its third and fourth IPR petitions (the
“Dillon/Lyden Petitions”).4 The Dillon/Lyden Petitions challenge the same claims as the
Luthi/Chan Petitions, however, they are based on different prior art. On May 31, 2017, the PTAB
declined to institute IPR in connection with the Dillon/Lyden Petitions.
On December 2, 2016, after Defendant had filed its first four IPR petitions, Plaintiffs
served their infringement contentions. In that document, Plaintiffs asserted several additional
claims from the ’285 patent that Plaintiffs had not previously raised in connection with their
motion for preliminary injunction, filed on July 29, 2016. Defendant then filed its fifth IPR
petition on February 2, 2017, which addresses Plaintiffs’ newly asserted claims 1, 2, 8, and 13-18
4

The Dillon/Lyden Petitions refer to the following two patents: (1) U.S. Patent
No. 7,549,236 B2 issued to Dillion et al. (“Dillon”); and (2) U.S. Patent No. 7,107,235 B2 issued
to Lyden et al. (“Lyden”).

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of the ’285 patent. The PTAB has not yet ruled upon this fifth petition, but a ruling is expected
by August 27, 2017. See 35 U.S.C. § 314(b). On February 9, 2017, one week after Defendant
filed with the PTAB Defendant’s fifth petition for IPR, Defendant filed with this Court the
pending motion to stay.
DISCUSSION
In deciding whether to stay proceedings, the Court assesses three factors, which are
identified in Universal Elecs., 943 F. Supp. 2d at 1030-31, and Wonderland Nursery Goods,
2015 WL 1809309 at *2, along with the totality of the circumstances. The three factors are:
(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will
simplify the issues in question and trial of the case; and (3) whether a stay would unduly
prejudice or present a clear tactical disadvantage to the non-moving party.
A. Stage of Litigation
This case is still in a relatively early stage. The claim construction, or Markman, hearing
has not yet occurred, although it is scheduled to take place on June 27, 2017. Fact discovery is
not scheduled to close until September 14, 2017. Initial expert reports are not due until
October 12, 2017, and rebuttal expert reports are not due until November 17, 2017. Expert
discovery must be completed by December 18, 2017. Dispositive motions are not due until
January 22, 2018, and likely will not be heard in oral argument until sometime in March 2018.
Finally, a trial date has not yet been scheduled.
In considering this first factor, “district courts should generally consider whether
discovery is complete and whether a trial date has been set.” VirtualAgility Inc. v.
Salesforce.com, Inc., 759 F.3d 1307, 1317 n.6 (Fed. Cir. 2014) (quotation marks omitted).
Neither has yet occurred. At least three more months of fact discovery remain, expert discovery
has not yet begun, and trial likely will not occur for at least 12 months. Thus, the first factor
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weighs in favor of granting a stay. Id.; see also Destination Maternity Corp. v. Target Corp., 12
F. Supp. 3d 762, 770 (E.D. Pa. 2014) (“Courts often find the stage of litigation weighs in favor of
a stay if there remains a significant amount of work ahead for the parties and the court, even
when the parties and/or the court have already devoted substantial resources to the litigation.”).
B. Simplification of the Issues
Defendant argues that, because the PTAB has instituted IPR for the first two petitions,
simplification of the issues in this case is assured. According to Defendant, 81 percent of final
written IPR decisions result in invalidation of at least some of the challenged claims and, in close
to half of all cases, invalidation of all challenged claims occurs. Defendant also argues that
staying this action will provide the Court with the PTAB’s expert view on the validity of the
patents-in-suit, minimize any remaining discovery issues, reduce the costs and burdens to both
parties, encourage settlement without the intervention of the Court, and, if some of Plaintiffs’
claims were to survive, limit the invalidity grounds that Defendant could assert at trial.
Plaintiffs counter that there is a 75 percent chance that at least one of the challenged
claims will survive. Plaintiffs also argue that the claim construction standard used by the PTAB
is materially different from the standard used in district court proceedings and, therefore, that any
claim construction the PTAB provides is only preliminary and subject to change. Finally,
Plaintiffs argue that IPR will not necessarily foreclose Defendant from raising other grounds for
challenging the patents-in-suit.
The Court agrees with Defendant. Defendant has petitioned for review of all asserted
claims from the patents-in-suit, making the outcome of IPR potentially case-dispositive. See
Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330, 1340 (Fed. Cir. 2013) (“[I]n general,
when a claim is cancelled, the patentee loses any cause of action based on that claim, and any
pending litigation in which the claims are asserted becomes moot.”). Further, even if the PTAB
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does not grant Defendant’s final remaining petition, the PTAB’s review of the claims challenged
in the Luthi/Chan Petitions is likely to simplify the issues for trial. If the PTAB cancels the
claims challenged in the Luthi/Chan Petitions, Plaintiffs will no longer be able to base their
patent infringement cause of action on any alleged infringement of the ’079 patent and will be
limited to asserting significantly fewer claims from the ’285 patent.
Plaintiffs argue that IPR review will not “guarantee” resolution or simplification of the
issues, but that is not the standard. Rather, “[w]hatever outcome occurs, there is the potential for
the simplification of issues for trial, either by reducing the number of claims at issue, confirming
the validity of the surviving claims, or narrowing the scope of a modified claim.” SenoRx, Inc. v.
Hologic, Inc., 2013 WL 144255, at *3 (D. Del. Jan. 11, 2013). “[E]ven if certain (or all) of the
claims are ultimately confirmed, the Court will likely benefit . . . from the [PTAB’s] analysis.”
Id. at *4; accord Destination Maternity, 12 F. Supp. 3d at 769 (concluding that, “[a]lthough there
may be issues or defenses that cannot be addressed through inter partes review,” the PTAB’s
review of a high percentage of the asserted claims “will very likely provide significant
simplification of the issues”). Thus, the second factor weighs in favor of granting a stay.
C. Undue Prejudice or Clear Tactical Disadvantage
Defendant argues that a stay will not unduly prejudice or present a clear tactical
disadvantage to Plaintiffs. In response, Plaintiffs argue that a stay will result in undue prejudice
caused by the irreparable harm that adidas has suffered and continues to suffer as a result of
Defendant’s ongoing sale of the infringing Mega Blade shoes. The Court, however, has denied
Plaintiffs’ motion for preliminary injunctive relief on several grounds, including that Plaintiffs
have failed to show a likelihood of irreparable harm. Thus, the third factor weighs in favor of
granting a stay. Finally, the Court also concludes that the totality of the circumstances justifies
granting a stay.
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CONCLUSION
Defendant’s Motion to Stay Pending Inter Partes Review (ECF 119) is GRANTED. The
parties shall file a joint status report not later than thirty days after the PTAB issues its final
decision concerning the matters relevant to this lawsuit.
IT IS SO ORDERED.
DATED this 12th day of June, 2017.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge

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