UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO CIV-COHN/SELTZER ORDER STAYING CASE

Transcription

1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO CIV-COHN/SELTZER JLIP, LLC, Plaintiff, v. STRATOSPHERIC INDUSTRIES, INC., et al., Defendants. / ORDER STAYING CASE THIS CAUSE is before the Court upon the Motion to Stay the Case Pending Reexamination of the Patent-in-Suit [DE 64] ("Motion") of Defendants Frazier Grandison, Land & Sea Motor Sports, Inc., Keith Paul, Jet Pack Flight, LLC, and USA Hydro Sports, LLC. The Court has reviewed the Motion and the record in this case, and is otherwise advised in the premises. For the reasons discussed herein, the Court will grant the Motion and stay this case. I. BACKGROUND In this action, Plaintiff JLIP, LLC ("JLIP") alleges that Defendants have infringed its patent, Patent No. 7,735,772 (the "'772 Patent"). DE 1 (Complaint) 1. The '772 Patent pertains to a "Personal Propulsion Device," which is functionally a personal jetpack that expels fluid such as water to generate propulsion. See id. ex. A. JLIP contends that the many Defendants in this case have infringed the '772 Patent by importing, making, using, or offering for sale an infringing device called the X-jetpack, or by contributing to third parties' infringement. Id

2 Several Defendants responded to the Complaint by moving to dismiss JLIP's claims against them. See DE 10 & 33. Others have filed counterclaims seeking a declaration of non-infringement and invalidity with regard to the '772 Patent and related Patent Nos. 7,258,301 ("'301 Patent") and 7,900,867 ("'867 Patent"), and damages on a claim for breach of contract. See DE 19 & 23. However, on or about January 28, 2015, a Request for Ex Parte Reexamination of the '772 Patent [DE 64-2] ("Reexamination Request") also was filed with the United States Patent and Trademark Office ("PTO"), seeking cancellation of the '772 Patent. See DE 64-2 at 86. In the Motion, Movants ask the Court to stay this case until the PTO has reached a final disposition of the ex parte reexamination. DE 64. The Court now turns to the merits of Movants' request for a stay. II. LEGAL STANDARD A district court has the inherent authority to manage its docket, which includes the power to order a stay pending determinations by the PTO. Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 849 (Fed. Cir. 2008). Courts liberally stay patent-infringement suits pending the outcome of reexamination proceedings. See, e.g., Pool Cover Specialists Nat'l, Inc. v. Cover-Pools Inc., No , 2009 WL at *2 (D. Utah Sept. 18, 2009); Baratta v. Homeland Housewares, LLC, No , 2007 WL at *2 (S.D. Fla. Dec. 13, 2007). "In determining whether to issue a stay of litigation pending the outcome of a PTO reexamination of the patent in suit, courts generally weigh the following three factors: (1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party, (2) whether a stay will simplify issues in question and trial of the case, and (3) whether discovery is 2

3 complete and whether a trial date has been set." Roblor Mktg. Grp., Inc. v. GPS Indus., Inc., 633 F. Supp. 2d 1341, 1347 (S.D. Fla. 2008) ("Roblor"). III. DISCUSSION Movants argue that the Court should impose a stay herein pending resolution of the requested reexamination because PTO review of the '772 Patent stands to simplify the issues in this action which remains in its early stages and would not significantly prejudice JLIP. JLIP responds that a stay would cause it competitive harms, would not aid the resolution of many issues in the case, and is otherwise improper. See generally DE 65. Though some of JLIP's arguments against a stay have merit, the Court determines that the totality of the circumstances favors the grant of a stay pending the PTO's resolution of the issues raised in the Reexamination Request. A. A Stay Presents Potential Prejudice to JLIP The Court first considers whether a stay would unduly prejudice JLIP or present a clear tactical disadvantage. See Roblor, 633 F. Supp. 2d at JLIP licenses its patents to Defendants' competitors in the relatively young market for water-propelled jetpacks and similar devices. JLIP argues that its licensees could suffer irrevocable competitive harms as a result of Defendants' continued infringement of its patents, which would be amplified were the Court to grant a stay that could span a multi-year reexamination process. JLIP concludes that the lasting harms to its licensees' market position and consequently to its own market standing and revenues may be impossible to remedy by way of a judgment for damages at the eventual conclusion of this case. DE 65 at 5, 12. On the other hand, Movants note that JLIP is an IP holding company not engaged in any business of production. Movants argue that JLIP itself stands to lose 3

4 nothing but licensing revenues over the course of any stay; this monetary loss could be compensated by the payment of damages were JLIP to prevail on the merits. DE 64 at 17; accord Implicit Networks, Inc. v. Advanced Micro Devices, Inc., No , 2009 WL at *3 (W.D. Wash. Feb. 9, 2009) ("Courts have consistently found that a patent licensor cannot be prejudiced by a stay because monetary damages provide adequate redress for infringement."). The Court agrees with JLIP that competitive harms to its licensees do raise some potential for lasting prejudice to JLIP that could be difficult to remedy through monetary relief. See Mike's Train House, Inc. v. Broadway Ltd. Imports, LLC, No , 2011 WL at *2 (D. Md. Mar. 3, 2011) (discussing difficulty of compensating for lost market share). JLIP may be removed by one degree from direct competition with Defendants, however it relies upon the competitive success of its licensees for its revenues. To the extent that its licensees suffer irreparable competitive harms, JLIP could also suffer a permanently impacted position in the marketplace. The prospect of a reduced market share resulting from continued infringement for the duration of a stay is the sort of durable harm that may constitute undue prejudice. See Polymer Techs. v. Bridwell, 103 F.3d 970, (Fed. Cir. 1996). Accordingly, this first factor weighs against the grant of a stay. 1 1 The Court notes that Defendants did not delay unreasonably in seeking reexamination of the '772 Patent approximately six months from JLIP's filing of its infringement claim. See Destination Maternity Corp. v. Target Corp., 12 F. Supp. 3d 762, (E.D. Pa. 2014) (discussing length of permissible delay between receipt of infringement claim and filing of review petition). Nor does the timing of the Reexamination Request reflect inappropriate tactical gamesmanship that would amplify any prejudice to JLIP under this first factor. The Court also rejects JLIP's contention that the mere fact of a delay posed by a stay pending PTO review presents undue prejudice. See, e.g., Universal Elecs., Inc. v. Universal Remote Control, Inc., 943 F. Supp. 2d 4

5 B. Resolution of the Reexamination Request Would Simplify the Issues in this Case The second factor the Court considers to determine whether to grant a stay is the extent to which the resolution of the issues raised in the Reexamination Request would simplify the issues in this case. See Roblor, 633 F. Supp. 2d at The Reexamination Request seeks the cancellation of only the '772 Patent. See DE As noted by JLIP, the issues in this case go beyond the viability of the '772 Patent. Several Defendants have filed counterclaims challenging the '301 and '867 Patents, and Grandison has raised a claim against JLIP for breach of contract. Therefore, any guidance provided by the PTO in response to the Reexamination Request would directly address only a portion of the issues in this litigation. On the other hand, the '301, '772, and '867 Patents are closely related. Compare DE 1-3 ('772 Patent) with DE 19-1 ('301 Patent) and DE 19-2 ('867 Patent); see also DE 39 at 5 6 (highlighting similarities in patents). Given the overlapping claims in the patents, a reexamination of the '772 Patent would also shed light on the controversies presented by the '301 and '867 Patents. Accord Finjan, Inc. v. FireEye, Inc., No , 2014 WL at *4 (N.D. Cal. June 2, 2014) (staying case with regard to both reexamination and non-reexamination patents in light of similarities among patents). JLIP also argues that the benefits of the PTO's findings regarding the '772 Patent would have limited value because they could be relitigated before this Court. DE , 1033 (C.D. Cal. 2013) ("Mere delay in the litigation [arising from PTO reexamination] does not establish undue prejudice."). But see Fusilamp, LLC v. Littelfuse, Inc., No , 2010 WL at *4 5 (S.D. Fla. June 7, 2010) (rejecting indefinite stay conditioned upon resolution of patent reexamination as immoderate). 5

6 at 10. The Reexamination Request seeks an ex parte review; a party unsuccessfully challenging a patent in an ex parte reexamination may later argue the same grounds for invalidity before a district court. See Nidec Corp. v. LG Innotek Co., No , 2009 WL at *5 (E.D. Tex. Apr. 3, 2009). First, the Court notes that were the PTO to find the Reexamination Request to have merit, it could narrow the claims of the '772 Patent or cancel the patent altogether. See AT&T Intellectual Prop. I v. Tivo, Inc., 774 F. Supp. 2d 1049, (N.D. Cal. 2011). But even were the '772 Patent to survive the reexamination process, the PTO's efforts would not be in vain, as district courts routinely find the PTO's expert analysis of a patent to provide useful guidance in considering subsequent challenges. See, e.g., Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir. 1983); Ho Keung Tse v. Apple Inc., No , 2007 WL at *3 4 (N.D. Cal. Oct. 4, 2007). Here, were the '772 Patent to survive reexamination, the Court would stand to benefit from the PTO's conclusions. The PTO's resolution of the Reexamination Request would also prove relevant to the issues presented by the related '301 and '867 Patents. Because the claims in the '772 Patent, and to a lesser extent those of the '301 and '867 Patents, are central issues in this suit, the Court determines that the results of the reexamination would simplify and clarify the instant controversy. This factor therefore weighs in favor of granting a stay to allow the PTO the first opportunity to address the validity of the '772 Patent. C. This Case Is In Its Early Stages Finally, the Court considers the progress of this action to date. See Roblor, 633 F. Supp. 2d at Discovery has not advanced beyond its early stages in light of jurisdictional motions to dismiss, the potential disqualification of JLIP's counsel, and the 6

7 Court's resulting decision to impose a temporary stay of these proceedings. See DE 58. Nor is the case set for trial, the original trial date having been stricken. See id. This third factor therefore favors a stay. See Finjan, Inc., 2014 WL at *1. 2 IV. CONCLUSION Considering the circumstances of this action, the Court determines that a stay pending the PTO's review of the '772 Patent is appropriate. Reexamination of the '772 Patent would simplify the issues in this case, which remains in its early stages. These factors weigh in favor of granting the stay. Though JLIP has raised the potential for some resulting competitive prejudice, the Court does not find this prejudice so substantial as to outweigh those factors favoring a stay. Accord Sonics, Inc. v. Arteris, Inc., No , 2013 WL at *4 (N.D. Cal. Feb. 8, 2013) (granting stay despite parties' competitive relationship where other factors favored stay). Accordingly, the Court will grant the Motion and stay this case until the final resolution of the Reexamination Request. It is accordingly ORDERED AND ADJUDGED as follows: 2 The Court rejects JLIP's contention that a stay would be premature because the PTO has not yet accepted the invitation to reexamine the '772 Patent. See DE 65 at 8. The PTO grants the overwhelming majority of ex parte requests to initiate a reexamination. Honeywell Int'l, Inc. v. Furuno Elec. Co., No , 2010 WL at *3 (D. Minn. July 30, 2010). Moreover, the PTO must determine whether to initiate an ex parte reexamination within three months of a request. See 37 C.F.R (a); United Pet Grp., Inc. v. MiracleCorp Prods., No , 2012 WL at *1 n.1 (E.D. Mo. June 27, 2012). Numerous courts therefore have found that a party need not wait until a request for reexamination has been granted before seeking a stay, given that most of the requests are accepted and because the PTO determines whether to act upon a request relatively quickly. See, e.g., Progressive Cas. Ins. Co. v. Safeco Ins. Co., No , 2010 WL at *4 5 (N.D. Ohio Nov. 12, 2010); Honeywell Int'l, Inc., 2010 WL at *3. But see Automatic Mfg. Sys., Inc. v. Primera Tech., Inc., No , 2013 WL at *2 3 (M.D. Fla. May 13, 2013) (refusing to order stay upon "mere fact" of petition for reexamination). 7

8 1. The Motion to Stay the Case Pending Reexamination of the Patent-in-Suit [DE 64] is GRANTED. 2. This action is hereby STAYED pending a final disposition of the United States Patent and Trademark Office regarding the Request for Ex Parte Reexamination of the '772 Patent [DE 64-2]. 3. Movants shall submit status reports regarding the progress of the reexamination proceedings every 60 days from the date of this Order. 4. The Court DEFERS ruling on all other outstanding motions until such time as the above stay has been lifted. 5. The Clerk of Court is directed to CLOSE this case for administrative purposes. DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida, this 25th day of February, Copies provided to: Counsel of record via CM/ECF 8