University of Virginia Patent Foundation v. Hamilton Company et al

Filing 70

MEMORANDUM OPINION. Signed by Judge Norman K. Moon on 9/25/14. (jcj)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
CHARLOTTESVILLE DIVISION

UNIVERSITY OF VIRGINIA
PATENT FOUNDATION ,

CIVIL ACTION NO . 3:13-CV -00033
Plaintiff,

MEMORANDUM OPINION

v.
HAMILTON COMPANY , ET AL.,

NORMAN K. MOON
UNITED STATES DISTRICT JUDGE

Defendants.

Defendant1 filed a motion to stay the proceedings in this patent infringement case pending
the conclusion of inter partes review (“IPR”) of the patents-in-suit in the United States Patent
and Trademark Office (“USPTO”). The matter has been fully briefed and argued. For the
following reasons, I will grant the motion.

I.
This case concerns the development of automated technologies for storing biological
materials at ultra-low temperatures. The goal of these automated technologies is to minimize the
degradation of biological samples in ultra-low freezers. Research by a group led by Professors
Robin Felder and Sean Graves at the University of Virginia’s Medical Automation Research
Center resulted in the patents-in-suit (“the Felder et al. patents”). Plaintiff accuses Defendant of
infringing the Felder et al. patents, namely U.S. Patent Nos. 6,467,285 (“the ’285 patent”);
6,581,395 (“the ’395 patent”); 6,688,123 (“the ’123 patent”); and 6,941,762 (“the ’762 patent”).

1

Although the complaint and subsequent amended complaints name “Hamilton Company” and “ Hamilton
Storage Technologies, Inc.,” the parties refer to “Hamilton” as a single defendant.

Each of these patents is entitled “Automated Storage and Retrieval Apparatus for Freezers and
Related Methods Thereof,” and is based on the same original patent disclosure.
Plaintiff filed its amended complaint on April 25, 2014. Thereafter, Defendant filed its
motion to stay the proceedings pending the conclusion of IPR of the patents-in-suit in the
USPTO. Defendant’s IPR petitions claim that the Felder et al. patents should never have been
issued. One petition has been filed for each Felder et al. patent, and each seeks to cancel the
patent claims that Plaintiff has asserted against Defendant in this litigation.

II.
The Leahy-Smith America Invents Act (“AIA”)2 provides for IPR proceedings in the
USPTO to allow third parties, including defendants in patent litigation, to challenge whether a
patent should have issued in the first place. See 35 U.S.C. § 311-319. Congress created IPR to
shift the burden of reviewing the validity of a patent from the courts to the USPTO in order to
utilize the USPTO’s specialized expertise and reduce costly litigation. Under 35 U.S.C. § 311, a
petitioner in an IPR proceeding may request to cancel one or more claims of a patent on the basis
that the claim is not novel or would have been obvious in light of prior art patents and/or printed
publications. Within three months of filing the IPR petition, the patent owner may file a
preliminary response setting forth the reasons why it believes the USPTO should not institute
IPR. See 35 U.S.C. § 313. The USPTO then has three months to decide whether the information
presented in the petition, and any response thereto, satisfies the threshold for instituting IPR.

2

The AIA was signed into law relatively recently, on September 16, 2011, and as the parties point out, it is
an emerging area of patent law. See http://en.wikipedia.org/wiki/Leahy-Smith_America_Invents_Act (last
accessed September 8, 2014).

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See 35 U.S.C. § 314.
If the USPTO institutes IPR, it must issue a final determination as to the patentability of
the claims within one year (or 18 months for good cause shown). See 35 U.S.C. § 316(11).
During IPR, the parties may engage in discovery, including depositions, and have a right to an
oral hearing. See 35 U.S.C. § 316(5), (10). The IPR petitioner (here, Defendant) is bound by the
final decision of the USPTO, and is estopped from asserting invalidity in a civil action based on
any ground that the petitioner raised or reasonably could have raised during IPR. See 35 U.S.C.
§ 315.
When an IPR petition is filed by a party other than a patent owner or real party in interest,
“the AIA does not contain a mandatory provision requiring a stay of the district court patent
infringement proceedings.” Virginia Innovation Sciences, Inc. v. Samsung Electronics Co., Ltd.,
983 F. Supp. 2d 713, 753 (E.D. Va. January 8, 2014) (citations omitted). “[I]n such a scenario,”
“the decision of whether to stay the district court proceedings in such a scenario is left to the
district court’s discretion . . . if the district court knows about the IPR proceeding.” Id. (citing
Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 848-49 (Fed. Cir. 2008) (“The
Supreme Court has long recognized that district courts have broad discretion to manage their
dockets, including the power to grant a stay of proceedings.”)).
“‘Whether to grant a stay pending the PTO’s review of a patent involved in the lawsuit is
within the court’s discretion.’” Brixham Solutions Ltd. v. Juniper Networks, Inc., 2014 WL
1677991, at *1–2 (N.D. Cal. April 28, 2014) (granting motion to stay patent infringement suit
involving non-practicing entity pending IPR) (quoting Pi–Net International, Inc. v. Focus
Business Bank, 2013 WL 4475940, at *3 (N.D. Cal. Aug. 16, 2013). In determining whether to
issue a stay, courts normally consider the following non-exclusive factors: (1) whether a stay
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will 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. See, e.g., E-Watch, Inc. v. Lorex Canada,
Inc., 2013 WL 5425298, at *2 (S.D. Tex. Sep. 26, 2013); Brixham Solutions, supra, 2014 WL
1677991, at *2.

III.
Here, granting a stay pending IPR may simplify, or even eliminate, many issues before the
court, whereas denying the stay may result in duplicative efforts in two venues. Moreover, this
case is in a fairly early stage of litigation, Plaintiff having only recently filed its second amended
complaint, with relatively minimal discovery to date, and no trial date yet set.3 See, e.g.,
E-Watch, supra, 2013 WL 5425298, at *2 (granting stay prior to USPTO’s determination on IPR
petition, explaining that, “[i]f the USPTO declines the petitions for IPR, the stay will quickly be
lifted resulting in little delay.

However, if the USPTO accepts the IPR petitions, the

continuation of this litigation will likely result in the unnecessary expenditure of the parties’ and
the court’s time and resources on claims that may be fundamentally altered by the USPTO’s
determination regarding the patents-in-suit.”); Software Rights Archive, LLC v. Facebook, Inc.,
2013 WL 5225522 (N.D. Cal. Sep. 17, 2013) (granting stay prior to USPTO’s determination on
3

A claim construction hearing was set for October 30, 2014, but it was canceled pending the outcome of the
instant motion. Although Plaintiff asserts that granting a stay provides Defendant the tactical advantage of
“two bites at the apple,” granting a stay does not provide a tactical advantage to Defendant on claim
construction. The court will be required to construe the claims, if any survive IPR, in light of the legal
standard set forth in Phillips v. AWH Corp., 415 F.3d 1303, 1317 (Fed. Cir. 2005), which involves an
assessment of the entire record before the USPTO. This legal standard for claim construction in court
proceedings does not change because an IPR petition was filed and it does not change if the stay is granted.
If IPR is instituted, Defendant is estopped from challenging the validity of those claims in this court on any
grounds that it raised or reasonably could have raised in the IPR. See 35 U.S.C. § 315.

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IPR petition); Pride Mobility Prods. Corp. v. Permobil, Inc., 2013 WL 8445809 (E.D. Pa. Aug.
14, 2013) (same); SSW Holding Co. v. Schott Gemtron Corp., 2013 WL 4500091, at *3 (W.D.
Ky. Aug. 19, 2013) (same); Star Envirotech, Inc. v. Redline Detection, LLC, 2013 WL 1716068
(C.D. Cal. Apr. 3, 2013) (same); Capriola Corp. v. LaRose Indus., LLC, 2013 WL 1868344, at
*2 (M.D. Fla. Mar. 11, 2013) (same).
Plaintiff does not sell or license products under the asserted patents. It can only seek
monetary relief for infringement, and its damages can be accounted after the conclusion of the
IPR. See ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1339–41 (Fed.
Cir. 2012) (non-competitors can be restored with monetary relief). Many courts have been clear
that such non-practicing entities cannot show the type of prejudice that would weigh in favor of
denying a stay. See, e.g., Brixham Solutions Ltd. v. Juniper Networks, Inc., 2014 WL 1677991
(N.D. Cal. Apr. 28, 2014) (“as a non-practicing entity, BSL cannot demonstrate any irreparable
harm that might result from a stay”); Evolutionary Intelligence LLC v. Sprint Nextel Corporation
Inc., 2014 WL 819277, at *5 (N.D. Cal. February 28, 2014) (“because Evolutionary Intelligence
and Sprint are not competitors (Evolutionary Intelligence does not market any products or
services practicing the patents-in-suit), Evolutionary Intelligence does not risk irreparable harm
by defendants’ continued use of the accused technology and can be fully restored to the status
quo ante with monetary relief”); Software Rights Archive, 2013 WL 5225522 at *6 (same);
Evolutionary Intelligence LLC v. Yelp Inc., 2013 WL 6672451 at *8 (N.D. Cal. Dec. 18, 2013)
(“Courts have consistently found that a patent licensor cannot be prejudiced by a stay because
monetary damages provide adequate redress for infringement.”) (citations omitted)).
Plaintiff will not suffer undue prejudice or tactical disadvantage from a stay because it can
be fully compensated if necessary with money damages, the stay will be relatively short and for
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a definite amount of time, and Defendant acted diligently in filing its IPR petitions and moving
for the stay.

IV.
For the reasons stated above, a stay pending the outcome of the IPR is appropriate. If the
USPTO declines to institute an IPR proceeding, little time is lost by the stay, given that the
USPTO must issue its decision before the end of this year.
An appropriate order accompanies this memorandum opinion.
Entered this

25th

day of September, 2014.

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