Advanced Marketing Systems, LLC v. Walgreen Co.
Filing
10
MEMORANDUM AND OPINION AND ORDER. The Court GRANTS Walgreens Motion to Stay Pending Covered Business Method Review. The Court also STAYS Case No. 6:15-cv-137. The Clerk is directed to ADMINISTRATIVELY CLOSE Case Nos. 6:15-cv-134 and -137. Signed by Magistrate Judge K. Nicole Mitchell on 6/14/2016. (gsg)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
ADVANCED MARKETING SYSTEMS,
LLC
v.
CVS PHARMACY, INC.
ADVANCED MARKETING SYSTEMS,
LLC
v.
WALGREEN CO.
§
§
§
§
§
§
§
§
§
§
§
§
§
§
Case No. 6:15-cv-134-JRG-KNM
LEAD CASE
JURY TRIAL DEMANDED
Case No. 6:15-cv-137-JRG-KNM
JURY TRIAL DEMANDED
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Walgreen Co.’s Motion to Stay Pending Covered Business
Method Review (Doc. No. 76). Recently, Defendant CVS Pharmacy, Inc. filed a Notice (Doc.
No. 151) joining in Walgreen’s Motion and agreeing to be estopped to the same extent that
Walgreen is following the pending Covered Business Method (“CBM”) review proceedings
before the U.S. Patent and Trademark Office (“PTO”). Having considered the parties’ arguments
and for the reasons set forth below, Walgreen’s Motion is GRANTED and all captioned cases
are STAYED until the PTO has completed its CBM review.
BACKGROUND
On February 20, 2015, Plaintiff Advanced Marketing Systems, LLC (“AMS”), filed
actions against CVS, Walgreen, and Brookshire Grocery Company alleging infringement of
Claim 9 of U.S. Patent No. 8,219,445 (the ‘445 Patent); Claims 15 and 28 of U.S. Patent No.
8,370,199 (the ‘199 Patent); and Claim 1 of U.S. Patent No. 8,538,805 (the ‘805 Patent). The
1
actions were consolidated into the lead case, No. 6:15-cv-134, on June 25, 2015, for pretrial
issues other than venue, and on March 29, 2016, the Court granted AMS’s motion to dismiss its
suit against Brookshire Grocery Company. The Court held a Markman hearing on February 25,
2016, and the pre-trial conference in this case is scheduled for August 9, 2016.
Together with three other non-parties, Walgreen filed four petitions for CBM review on
November 10, 2015, challenging the validity of all asserted claims of the patents-in-suit. Shortly
thereafter, Walgreen filed the instant motion to stay these actions pursuant to Section 18(b) of the
America Invents Act. Between May 13, 2016, and June 1, 2016, the Patent Trial and Appeal
Board (“PTAB”) granted all four petitions on all asserted claims. See Doc. No. 144-1
(CBM2016-00012); Doc. No. 144-2 (CBM2016-00013); Doc. No. 144-3 (CBM2016-00014);
Doc. No. 147-1 (CBM2016-00015). Walgreen filed timely notices with the Court that the PTAB
had instituted CBM review proceedings, and on June 3, 2016, CVS filed its Notice of Joinder in
Walgreen’s Motion.
APPLICABLE LAW
Section 18(a)(1) of the Leahy-Smith America Invents Act (“AIA”) provides for the
creation of “a transitional post-grant review proceeding for review of the validity of covered
business method patents.” Section 18(b)(1) of the AIA sets forth the following four factors a
district court must consider when deciding whether to grant a stay pending such a CBM review:
(A) whether a stay, or the denial thereof, will simplify the issues in question and
streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party
or present a clear tactical advantage for the moving party; and
2
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the
parties and on the court.
In VirtualAgility Inc. v. Salesforce.com, Inc., the Federal Circuit addressed the proper
application of the § 18(b) factors. 759 F.3d 1307 (Fed. Cir. 2014). The Court jointly considered
factors (A) and (D)—simplification of issues and reduced burden of litigation—holding that,
although parties may put forward similar arguments for the simplification of issues factor and the
burden of litigation factor, both “factor[s] are listed separately in the statute [and] [t]hus, even
when both factors point in the same direction—in favor of or against the stay—they continue to
be separate, individual factors which must be weighed in the stay determination.” Id. at 1310,
1313.
The Federal Circuit further noted that “[u]nder the [AIA’s] statutory scheme, district
courts have no role in reviewing the PTAB’s determinations regarding the patentability of claims
that are subject to CBM proceedings.” Id. at 1313. Thus, regardless of the PTAB’s particular
grounds for granting CBM review, it weighs heavily in favor of granting the stay if the PTAB
grants CBM review on every asserted claim of the patents. Id. A “simplification argument would
be stronger if all of the prior art or relevant invalidity issues were in the CBM review, as this
would entirely eliminate the trial court’s need to consider validity in the event that some claims
survive CBM review.” Id.
With regard to factor (B)—whether discovery is complete and whether a trial date has
been set—the Court noted that “the case for a stay is stronger after post-grant review has been
instituted.” Id. at 1316. Generally, the time of filing the motion is the relevant time to measure
the stage of litigation. Id. at 1317. However, “the district court may consider evidence that
develops after the date of the stay motion—for example, the fact that the PTAB granted the
3
CBM petition . . .” Id. Thus, there is “no error in also taking into account the stage of litigation as
of the date that CBM review was granted.” Id. at 1317, n.6.
With regard to factor (C)—undue prejudice or tactical advantage—the Court observed
that “competition between parties can weigh in favor of finding undue prejudice.” Id. at 1318,
1326 (citation omitted). However, “whether the patentee will be unduly prejudiced by a stay in
the district court proceedings during the CBM review, like the irreparable harm-type inquiry,
focuses on the patentee’s need for an expeditious resolution of its claim.” Id.
DISCUSSION
As noted above, the PTAB has instituted CBM review on all asserted claims of the
patents-in-suit. Accordingly, the PTAB’s review could potentially “dispose of the entire
litigation: the ultimate simplification of issues.” VirtualAgility, 759 F.3d at 1314. Moreover,
CVS has also agreed to be bound by the applicable estoppel provisions of a CBM proceeding,
thereby preventing it from re-raising certain issues. 35 U.S.C. § 18(a)(1)(D) (“petitioner . . . may
not assert . . . that the claim is invalid on any ground . . . raised during that transitional
proceeding”); see Doc, No. 151 at 2–3. The Court also notes that although fact discovery has
been substantially completed and jury selection has been scheduled for September 12, 2016, the
parties have yet to take the deposition of at least one fact witness, and expert discovery has not
been completed.
Additionally, AMS does not directly compete against Walgreen or CVS, and thus, a stay
will not cause any unduly prejudice. While AMS has an interest in the timely enforcement of its
patent rights, the compressed time frame allotted by Congress for CBM review greatly lessens
any potential prejudice of a stay to AMS. See Landmark Tech., LLC v. iRobot Corp., 6:13-cv411-JDL, 2014 WL 486836, at *4 (E.D. Tex. Jan. 24, 2014). Furthermore, a stay will not affect
4
the relief sought by AMS, but will only delay any remedies that it may be entitled to. See
VirtualAgility, 759 F.3d at 1318 (“A stay will not diminish the monetary damages to which [the
patent owner] will be entitled if it succeeds in its infringement suit—it only delays realization of
those damages and delays any potential injunctive remedy.”); Zillow, Inc. v. Trulia, Inc., No.
C12-1549, 2013 WL 5530573, at *6 (W.D. Wash. Oct. 7, 2013) (“Many courts have found,
however, that attempts by a patentee to argue undue prejudice are undermined if the patentee has
elected not to pursue preliminary injunctive relief.”) (citations omitted).
Finally, the Court is mindful that CBM review is a transitional program where Congress
“places a very heavy thumb on the scale in favor of a stay being granted. . . . Since the entire
purpose of the transitional program at the PTO is to reduce the burden of litigation, it is nearly
impossible to imagine a scenario in which a district court would not issue a stay.” 157 Cong.
Rec. S1363 (daily ed. Mar. 8, 2011) (Sen. Charles Schumer). Here, the Court finds no
exceptional circumstances to overcome the heavy thumb Section 18(b) places in favor of a stay.
CONCLUSION
Having considered the factors of § 18(b)(1) of the AIA, the balance of the factors favors
granting a stay. The Court therefore GRANTS Walgreen’s Motion to Stay Pending Covered
Business Method Review (Doc. No. 76). The Court ORDERS that the case is STAYED,
pending a final written decision on CBM2016-00012, -00013, -00014, and -00015. Pursuant to
CVS’s Notice of Joinder (Doc. No. 151), the Court also STAYS Case No. 6:15-cv-137. The
Clerk is directed to ADMINISTRATIVELY CLOSE Case Nos. 6:15-cv-134 and -137 pending
completion of the PTAB’s CBM review. Within seven days of a final written decision in the lastresolved review proceeding, the parties shall file a joint status report, and AMS shall file a
5
motion proposing a case schedule and requesting that the cases be moved back to the Court’s
active docket if claims of the patents-in-suit survive.
So ORDERED and SIGNED this 14th day of June, 2016.
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?