Nautilus, Inc. v. Icon Health & Fitness, Inc.

Filing 119

MEMORANDUM DECISION AND ORDER denying 107 Motion to Lift Stay; granting 111 Motion to Continue Stay pending a final resolution of new ex parte reexamination proceedings regarding plaintiff's asserted patents, including any related appeals. Signed by Judge David Nuffer on 2/13/19 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
NAUTILUS, INC.,

v.

MEMORANDUM DECISION AND ORDER
DENYING MOTION TO LIFT STAY and
GRANTING MOTION TO CONTINUE
STAY

ICON HEALTH & FITNESS, INC.,

Case No. 1:17-cv-00154-DN

Plaintiff,

Defendant.

District Judge David Nuffer

Plaintiff Nautilus, Inc. (“Nautilus”) seeks to lift the stay of this case because the U.S.
Patent and Trademark Office’s (“USPTO”) ex parte reexamination proceedings that formed the
basis for the stay are now resolved. 1 Defendant ICON Health & Fitness, Inc. (“ICON”)
responded and filed a cross-motion seeking to continue the stay because new ex parte
reexamination proceedings are pending before the USPTO and the relevant circumstances of the
case have not materially changed. 2
Because the new reexamination proceedings have a likelihood of simplifying the issues in
this case; because discovery is not complete and trial has not been scheduled; and because
continuing the stay will not cause Nautilus undue prejudice, Nautilus’s Motion to Lift Stay3 is
DENIED and ICON’s Motion to Continue Stay4 is GRANTED.

1

Plaintiff’s Motion to Lift Stay and Memorandum in Support (“Motion to Lift Stay”), docket no. 107, filed Dec. 12,
2018.
2

ICON Health & Fitness, Inc.’s Memorandum (1) Opposing Motion to Lift Stay and (2) Supporting Cross-Motion
to Continue Stay (“ICON’s Response”), docket no. 110, filed Jan. 11, 2019; ICON Health & Fitness, Inc.’s CrossMotion to Continue Stay (“Motion to Continue Stay”), docket no. 111, filed Jan. 11, 2019.
3

Docket no. 107, filed Dec. 12, 2018.

4

Docket no. 111, filed Jan. 11, 2019.

BACKGROUND
On September 4, 2018, this case was stayed pending the final resolution of the USPTO’s
ex parte reexamination proceedings regarding Nautilus’s four asserted patents. 5 Two months
after the stay’s issuance, the USPTO issued Ex Parte Reexamination Certificates, which resolved
the reexamination proceedings: 59 of the asserted patents’ 158 claims, including 52 of the 127
claims asserted against ICON, survived the reexamination proceedings. 6
However, in October and November 2018, ICON filed new requests for ex parte
reexamination of Nautilus’s asserted patents. 7 The USPTO granted these requests. 8 And in
December 2018, the USPTO issued Notices of Intent to Issue Ex Parte Reexamination
Certificate for two of the asserted patents—U.S. Patent No. 6,689,019 and U.S. Patent No.
8,323,155—confirming the patents’ claims. 9 The USPTO also issued Non-Final Office Actions
objecting to or rejecting 36 claims in the other two asserted patents—U.S. Patent No. 7,632,219
and U.S. Patent No. 7,341,542—which provided Nautilus the opportunity to respond. 10 Nautilus
indicates that it will be promptly filing responses contesting the objection to and rejection of
these patents’ claims. 11

5

Memorandum Decision and Order Granting Motion to Stay (“Order to Stay”) at 8, docket no. 103, filed Sept. 4,
2018.
6

Declaration of J. Christopher Carraway in Support of Plaintiff’s Motion to Lift the Stay (“Carraway Declaration”)
¶ 3, docket no. 107-1, filed Dec. 21, 2018; Ex Parte Reexamination Certificates, docket no. 107-2, Dec. 21, 2019;
ICON’s Response at 1.
7

Carraway Declaration ¶ 7; ICON’s Response at 3.

8

Orders Granting Request for Ex Parte Reexamination, docket no. 110-2, filed Jan. 11, 2019.

9

Declaration of Andrew M. Mason in Support of Nautilus’ Combined Reply on its Motion to Lift the Stay and
Opposition to Defendant’s Cross-Motion to continue the Stay (“Mason Declaration”) ¶¶ 4-5, docket no. 112-1, filed
Jan. 22, 2019; Notice of Intent to Issue Ex Parte Reexamination Certificate, docket no. 112-2, filed Jan. 22, 2019;
Notice of Intent to Issue Ex Parte Reexamination Certificate, docket no. 112-3, filed Jan. 22, 2019.
10

Mason Declaration ¶¶ 6, 8.

11

Id.

2

DISCUSSION
Nautilus seeks to lift the stay of this case because the USPTO’s reexamination
proceedings that were pending at the time the stay issued are now resolved. 12 ICON does not
dispute that the original basis for the stay is resolved. 13 But ICON argues the stay should
continue because the USPTO granted its requests for new reexamination proceedings regarding
Nautilus’s asserted patents. 14 These new reexamination proceedings are currently pending at the
USPTO. 15 Nautilus counters by arguing that extending the stay would be prejudicial because
ICON can continue to file new requests for reexamination, which will lead to a stay of indefinite
duration. 16
“[C]ourts have ‘inherent power to manage their dockets and stay proceedings, including
the authority to order a stay pending conclusion of a [US]PTO reexamination.’” 17 “[T]here is a
liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO
reexamination proceedings.” 18 “[T]he three factors courts routinely employ in determining
whether to stay a patent infringement action pending reexamination [are]: (1) whether a stay will
simplify the issues in question and trial of the case; (2) whether discovery is complete and a trial
date has been set; and (3) whether a stay would unduly prejudice or present a clear tactical
disadvantage to the non-moving party.” 19 These factors are considered anew each time a motion

12

Motion to Lift Stay at 4-5.

13

Carraway Declaration ¶ 3; Ex Parte Reexamination Certificates; ICON’s Response at 1.

14

ICON’s Response at 2.

15

Orders Granting Request for Ex Parte Reexamination.

16

Motion to Lift Stay at 5-7.

17

Pool Cover Specialists Nat., Inc. v. Cover-Pools Inc., Case No. 2:08-cv-00879-DAK, 2009 WL 2999036, *1 (D.
Utah Sept. 18, 2009) (quoting Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1989)).
18

Id. at *2 (quoting ASCII Corp. v. STD Ent. USA, Inc., 844 F.Supp. 1378, 1381 (N.D. Cal. 1994)).

19
Id. at *1 (citing In re Cygnus Telecomm. Tech., LLC, 385 F.Supp.2d 1022, 1023 (N.D. Cal. 2005); Soverain
Software, LLC v. Amazon.com, Inc., 356 F.Supp.2d 660, 662 (E.D. Tex. 2005)).

3

for stay is made. That factors support a case’s stay in one instance does not necessarily mean
they will support a stay in subsequent motions for stay.
The new reexamination proceedings have a likelihood of simplifying the issues in this case
Although the reexamination proceedings that formed the basis for the case’s stay are now
resolved, 20 the USPTO granted ICON’s new requests for ex parte reexamination of Nautilus’s
asserted patents. 21 The USPTO could grant these new requests only by “determin[ing] that ‘a
substantial new question of patentability affecting any claim of the patent[s] concerned [wa]s
raised by the request[s].’” 22 And in the new reexamination proceedings, the USPTO has already
confirmed the claims in two of Nautilus’s asserted patents, 23 and initially objected to or rejected
36 claims in the other two asserted patents. 24
Under these circumstances, the new reexamination proceedings have a likelihood of
simplifying the issues in this case. In the reexamination, Nautilus has the opportunity to, and
will, contest the claims that were initially objected to and rejected. 25 But the USPTO’s decision
will still be “beneficial in the simplification of litigation.” 26 “Any claims that are cancelled
during examination will not need to be litigated[.]” 27 And even if the USPTO does not cancel the
patents’ claims, the reexamination will “provide valuable analysis” of the prior art. 28 Therefore,

20

Ex Parte Reexamination Certificates.

21

ICON’s Response at 3; Orders Granting Request for Ex Parte Reexamination.

22

In re Swanson, 540 F.3d 1368, 1375 (Fed. Cir. 2008) (quoting 35 U.S.C. § 303(a)).

23

Mason Declaration ¶¶ 4-5; Notice of Intent to Issue Ex Parte Reexamination Certificate, docket no. 112-2; Notice
of Intent to Issue Ex Parte Reexamination Certificate, docket no. 112-3.
24

Mason Declaration ¶¶ 6, 8.

25

Id.

26

Pool Cover Specialists Nat., Inc., 2009 WL 2999036, at *2 (quoting Ethicon, 849 F.2d at 1428).

27

Id. (quoting Ethicon, 849 F.2d at 1428).

28

Id.

4

the first factor favors continuing the case’s stay pending resolution of the new reexamination
proceedings.
This case is not in advanced procedural stages
This case is not in advanced procedural stages. Nothing has changed in the case since the
stay was put in place on September 4, 2018. Discovery and claim construction remain
incomplete, and no trial date is set. Therefore, the second factor favors continuing the case’s stay
pending resolution of the new reexamination proceedings.
Continuing the stay will not cause Nautilus undue prejudice
Nautilus argues that continuing the stay will cause it prejudice because ICON can
continue to request round after round of ex parte reexamination, effectively receiving a “neverending stay” of the infringement claims in this case. 29 Nautilus also argues that ICON gains a
tactical advantage from its serial ex parte reexamination requests because Nautilus is bound by
the USPTO’s decisions, but ICON may still introduce the same prior art references in court to
challenge Nautilus’s infringement claims. In essence, Nautilus’s arguments are that the statutory
scheme regarding ex parte reexamination is inefficient and inherently prejudicial. These
arguments lack merit.
“Delay inherent in the reexamination process does not constitute, by itself, undue
prejudice.” 30 And serial requests for reexamination have diminishing returns with both the
USPTO and motions to stay litigation. The USPTO’s “substantial new question of patentability”
requirement in reexamination “act[s] to bar reconsideration of any argument already decided by

29

Plaintiff’s Combined Reply on its Motion to Lift the Stay and Opposition to Defendant’s Cross-Motion to
Continue the Stay at 1 (“Nautilus’s Reply”), docket no. 112, filed Jan. 22, 2019; see also Motion to Lift Stay at 5-7.
30
Pool Cover Specialists Nat., Inc., 2009 WL 2999036, at *2 (quoting SFK Condition Monitoring, Inc v. SAT Corp.,
2008 WL 706851, *6 (S.D. Cal. Feb. 27, 2008)).

5

the [USPTO], whether during the original examination or an earlier reexamination.” 31 Therefore,
as prior art references diminish, so too does a party’s ability to request and be granted ex parte
reexamination. And each motion to stay litigation pending ex parte reexamination is analyzed on
its own merits. Courts have discretion to determine when it is appropriate to stay litigation
pending reexamination, and when such a stay will cause undue prejudice. 32 A stay will not
necessarily be granted solely because USPTO reexamination proceedings are pending.
Congress has chosen to implement a statutory scheme that permits concurrent
proceedings of USPTO ex parte reexamination and court litigation. Ex parte reexamination by
definition is one sided. ICON can only request that the USPTO consider a prior art reference.
Unlike Nautilus, ICON does not have the opportunity to participate in the reexamination
proceedings after making a request. 33 It is not prejudicial to allow ICON to later raise its
arguments regarding prior art in court. The statutory scheme provides avenues for both parties to
have their arguments regarding prior art heard and decided.
Nautilus has failed to demonstrate that the continued stay of this case pending resolution
of the new reexamination proceedings will cause it undue prejudice. Nautilus points only to
effects inherent to the statutory scheme which, by itself, does not constitute undue prejudice. 34
Regardless, the new reexamination proceedings are progressing. The USPTO has already
confirmed the claims in two of Nautilus’s asserted patents. 35 And Nautilus indicates that it will
promptly file responses contesting the USPTO’s initial rejection of 30 claims in its other two

31

In re Swanson, 540 F.3d at 1375 (internal quotations omitted).

32

Pool Cover Specialists Nat., Inc., 2009 WL 2999036, at *1.

33

35 U.S.C. § 304.

34

Pool Cover Specialists Nat., Inc., 2009 WL 2999036, at *2.

35

Mason Declaration ¶¶ 4-5; Notice of Intent to Issue Ex Parte Reexamination Certificate, docket no. 112-2; Notice
of Intent to Issue Ex Parte Reexamination Certificate, docket no. 112-3.

6

asserted patents. 36 Therefore, the third factor favors continuing the case’s stay pending resolution
of the new reexamination proceedings.
Estoppel does not apply to ICON’s requests for ex parte reexamination
Nautilus argues that if the stay is continued, ICON should be estopped from using prior
art the USPTO considered during reexamination as part of its invalidity defense in this case. 37
Nautilus also argues that ICON should be estopped from making additional requests with the
USPTO for ex parte reexamination. 38 Nautilus points to the statutory provision for estoppel in
inter parties review, 39 maintaining that the same should apply to ex parte reexamination. 40
Nautilus’s argument lacks merit.
If Congress had intended for estoppel to apply to ex parte reexamination, it would have
included provision for it in the statutory language. Unlike inter parties review, 41 Congress did
not include provision for a party to be estopped in court from arguing prior art considered by the
USPTO during reexamination. Nor did Congress include language limiting the number of
requests for ex parte reexamination a party may make. Instead, the statutory language for ex
parte reexamination provides that “[a]ny person at any time may file a request for reexamination
by the [USPTO] of any claim of a patent on the basis of any prior art . . . .” 42 And reexamination
is limited by the requirement that a party’s request must show “a substantial new question of

36

Mason Declaration ¶¶ 6,8.

37

Nautilus’s Reply at 8-9.

38

Id.

39

35 U.S.C. § 315(e).

40

Nautilus’s Reply at 8- 9.

41

35 U.S.C. § 315(e)(2).

42

Id. § 302.

7

patentability.” 43 And “[a] determination . . . that no substantial new question of patentability has
been raised [is] final and nonappealable.” 44 Estopping ICON from using prior art the USPTO
considered during reexamination in its invalidity defense in this case, or from making additional
requests for ex parte reexamination, would be contrary to the statutory scheme Congress created.
Therefore, because the new reexamination proceedings have a likelihood of simplifying
the issues in this case; because discovery is ongoing and trial has not been scheduled; and
because continuing the stay will not cause Nautilus undue prejudice, Nautilus’s Motion to Lift
Stay45 is DENIED and ICON’s Motion to Continue Stay46 is GRANTED.
ORDER
IT IS HEREBY ORDERED that Nautilus’s Motion to Lift the Stay47 is DENIED and
ICON’s Motion to Continue Stay48 is GRANTED. This case is STAYED pending a final
resolution of the new ex parte reexamination proceedings regarding Nautilus’s asserted patents,
including any related appeals. This stay will not automatically lift. Either party may file a motion
to lift the stay upon the final resolution of the new ex parte reexamination proceedings.
Signed February 13, 2019.
BY THE COURT

________________________________________
David Nuffer
United States District Judge

43

Id. § 303(a).

44

Id. § 303(c).

45

Docket no. 107, filed Dec. 12, 2018.

46

Docket no. 111, filed Jan. 11, 2019.

47

Docket no. 107, filed Dec. 21, 2018.

48

Docket no. 111, filed Jan. 11, 2019.

8