Opinion
Case No. 4:17-cv-00273-SMR-SBJ
2022-03-14
G.W. LISK COMPANY, INC., Plaintiff, v. POWER PACKER NORTH AMERICA, INC. d/b/a GITS Manufacturing Co., Defendant.
Espnola F. Cartmill, Belin McCormick, P.C., Des Moines, IA, Brittany A. Washington, Pro Hac Vice, Candace M. Polster, Pro Hac Vice, Jason C. White, Pro Hac Vice, Nicholas A. Restauri, Pro Hac Vice, Morgan Lewis & Bockius LLP, Chicago, IL, Erika N.D. Stanat, Pro Hac Vice, Jessica Nicole Clemente, Pro Hac Vice, Harter Secrest & Emery LLP, Rochester, NY, Michael J. Berchou, Pro Hac Vice, Harter, Secrest & Emery LLP, Buffalo, NY, for Plaintiff. Jeffrey D. Harty, Allison Elizabeth Kerndt, Matthew A. McGuire, Nyemaster Goode PC, Des Moines, IA, Adam A. Allgood, Pro Hac Vice, Alan M. Fisch, Pro Hac Vice, Elizabeth Bernard, Pro Hac Vice, Jeffrey M. Saltman, Pro Hac Vice, Lisa N. Phillips, Pro Hac Vice, R. William Sigler, Pro Hac Vice, Fisch Sigler LLP, Washington, DC, Jonathan H. Margolies, Pro Hac Vice, Katherine W. Schill, Pro Hac Vice, Melanie J. Reichenberger, Pro Hac Vice, Michael Best & Friedrich LLP, Milwaukee, WI, for Defendant.
Espnola F. Cartmill, Belin McCormick, P.C., Des Moines, IA, Brittany A. Washington, Pro Hac Vice, Candace M. Polster, Pro Hac Vice, Jason C. White, Pro Hac Vice, Nicholas A. Restauri, Pro Hac Vice, Morgan Lewis & Bockius LLP, Chicago, IL, Erika N.D. Stanat, Pro Hac Vice, Jessica Nicole Clemente, Pro Hac Vice, Harter Secrest & Emery LLP, Rochester, NY, Michael J. Berchou, Pro Hac Vice, Harter, Secrest & Emery LLP, Buffalo, NY, for Plaintiff.
Jeffrey D. Harty, Allison Elizabeth Kerndt, Matthew A. McGuire, Nyemaster Goode PC, Des Moines, IA, Adam A. Allgood, Pro Hac Vice, Alan M. Fisch, Pro Hac Vice, Elizabeth Bernard, Pro Hac Vice, Jeffrey M. Saltman, Pro Hac Vice, Lisa N. Phillips, Pro Hac Vice, R. William Sigler, Pro Hac Vice, Fisch Sigler LLP, Washington, DC, Jonathan H. Margolies, Pro Hac Vice, Katherine W. Schill, Pro Hac Vice, Melanie J. Reichenberger, Pro Hac Vice, Michael Best & Friedrich LLP, Milwaukee, WI, for Defendant.
ORDER ON DEFENDANT'S MOTION TO STAY THE PROCEEDINGS
STEPHANIE M. ROSE, CHIEF JUDGE
Plaintiff G.W. Lisk Company ("Lisk") brought this suit against Defendant Power Packer North America, Inc. ("Power Packer"), which is doing business as GITS Manufacturing Company, alleging that Defendant infringed on its patent. [ECF No. 1]. After years of litigation, Defendant filed a Motion to Stay Proceedings pending the completion of an ex parte reexamination ordered by the United States Patent & Trademark Office ("PTO"). [ECF No. 142]. For the reasons below, Defendant's Motion to Stay is DENIED.
I. BACKGROUND
A. Procedural Background
On July 15, 2016, Plaintiff Lisk filed suit against Power Packer in the United States District Court for the Western District of New York, alleging that Defendant infringed upon U.S. Patent No. 6,601,821 (the ‘821 patent), which covers an exhaust gas recirculation system. [ECF No. 1]. After Defendant filed a Motion to Dismiss for Improper Venue, [ECF No. 11], the parties stipulated to transfer the case to the United States District Court for the Southern District of Iowa on July 20, 2017. [ECF No. 14]. On October 19, 2017, Defendant filed a Motion to Stay the Action pending potential inter partes review of the patent by the Patent Trial and Appeal Board ("PTAB"). [ECF No. 32]. The Court denied this Motion without prejudice. [ECF No. 40]. Defendant renewed the Motion to Stay after the PTAB agreed to conduct an inter partes review, [ECF No. 48], which the Court granted. [ECF No. 49].
On May 9, 2019, the United States Patent and Trademark Office ("PTO"), through the PTAB, invalidated much of the ‘821 patent. [ECF Nos. 50-1; 50-2]. Specifically, the Board held that most of the patent's twenty-two claims, except for claims 6-11, 14, 15, and 19, did not comply with the basic legal requirements of patentability. [ECF Nos. 50-1 at 4; 50-2 at 4]. The parties filed cross appeals with the United States Court of Appeals for the Federal Circuit, which affirmed the PTAB in whole on April 13, 2021. [ECF Nos. 71-3; 71-4].
On April 21, 2021, the parties filed a joint Motion to Dissolve the Stay and reinstitute discovery and scheduling deadlines. [ECF No. 71]. The Court granted the joint motion. [ECF No. 72]. On August 27, 2021, Lisk and Power Packer filed their opening claim construction briefs and asked the Court to define four disputed terms. [ECF Nos. 94–94-4; 95–95-8]. On September 9, 2021, the parties submitted their responsive claim construction briefs. [ECF Nos. 97; 98]. The Court conducted a technical tutorial on November 12, 2021. [ECF No. 112]. On December 3, 2021, the parties presented oral arguments on how to define the disputed terms. [ECF No. 114].
On January 26, 2022, while the Court considered the proper construction of claim terms in the patent, Defendant Power Packer requested that the PTO conduct an ex parte reexamination of "the nine remaining claims asserted by Plaintiff G.W. Lisk Company." [ECF Nos. 123; 139-1 at 2]. On February 24, 2022, the PTO granted Defendant's request for reexamination. Id. at 45. Specifically, the PTO agreed to reexamine the entire patent based on numerous instances of prior art. Id. Defendant notified the Court of this grant on the same day. [ECF No. 139]. It further stated that it would confer with Plaintiff and then file a Motion for Stay. Id.
On March 1, 2022, Defendant filed a Motion to Stay Pending Resolution of the Ex Parte Reexamination. [ECF No. 142]. The Court directed Plaintiff to file a response by March 7, 2022, [ECF No. 143], which was timely filed. [ECF No. 144]. The Court then ordered Defendant to respond by no later than March 9, 2022, [ECF No. 147], which it did. [ECF Nos. 149; 150]. The Court allowed Plaintiff to file a surreply on March 10. [ECF No. 152]. On consideration of the whole record, Defendant's Motion to Stay Proceedings, [ECF No. 142], is DENIED.
B. Ex Parte Reexamination Proceedings
An ex parte reexamination is an administrative proceeding the PTO conducts to evaluate the validity of a patent. See 35 U.S.C. § 301. Anyone may request a reexamination based on prior art, which consists of patents or printed publications available when the challenged patent was issued, at any time during a patent's enforcement. Id. at § 302. Once the request is filed, the PTO has three months to decide whether the request raises a "substantial new question of patentability." Id. at § 303(a). If the PTO finds there is a substantial new question, i.e., the patented item in dispute is potentially unpatentable, then it initiates an ex parte reexamination. Id. This process is conducted on an expedited basis. Id. at § 305.
II. GOVERNING LAW
District courts have the discretionary power to stay proceedings when the PTO is reexamining the validity of the patent in dispute. Ethicon, Inc. v. Quigg , 849 F.2d 1422, 1426–27 (Fed. Cir. 1988) ; see also Slip Track Sys., Inc. v. Metal Lite, Inc. , 159 F.3d 1337, 1341 (Fed. Cir. 1998). In considering whether to grant a stay, the courts use a three-factor test: "(i) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (ii) whether a stay will simplify the issues in question and trial of the case; and (iii) whether discovery is complete and whether a trial date has been set." Murata Mach. USA v. Daifuku Co., Ltd. , 830 F.3d 1357, 1361 (Fed. Cir. 2016) (quoting Nokia Corp. v. Apple Inc. , No. C.A. 09–791, 2011 WL 2160904, at *1 (D. Del. June 1, 2011)). They may also consider a fourth factor: "the burden litigation places on the court and the parties when IPR proceedings loom." Id. at 1362. The primary purpose of this analysis is to "balance the competing interests of the parties and the interest of the judicial system." Markel Am. Ins. Co. v. Dolan , 787 F. Supp. 2d 776, 779 (N.D. Ill. 2011) ; see Univ. Elecs., Inc. v. Univ. Remote Control, Inc. , 943 F. Supp. 2d 1028, 1031 (C.D. Cal. 2013).
III. ANALYSIS
A. Prejudice and Tactical Advantage
Parties vigorously contest whether a stay will prejudice Plaintiff. They also dispute whether Defendant will get a tactical advantage if the Court grants a stay. Based on the record, the first factor strongly supports denying Defendant's Motion to Stay.
Delay alone does not constitute undue prejudice. Wi-LAN Inc. v. Huizhou TCL Mobile Commc'n Co. , Case No. SACV 19–870 JVS (ADSx), 2020 WL 1269837, at *2 (C.D. Cal. Feb. 7, 2020). This is because "protracted delay is always a risk inherent in granting a stay, yet courts continue to stay actions pending reexamination." Sorensen ex rel. Sorensen Rsch. & Dev. Tr. v. Black & Decker Corp. , No. 06-cv-1572 BTM, 2007 WL 2696590, at *4 (S.D. Cal. Sept. 10, 2007). A court may consider whether a party has been forthcoming with their intentions to seek review and if their conduct "evidences an intention to prejudice Plaintiff[ ]." CDX Diagnostics, Inc. v. U.S. Endoscopy Grp., Inc. , No. 13-cv-05669 (NSR), 2014 WL 2854656, at *4 (S.D.N.Y. June 20, 2014).
The review begins with Defendant's conduct earlier in the proceeding. In 2017, Defendant filed a Motion to Stay this action pending potential inter partes review. [ECF No. 32]. In its analysis of the motion, the Court noted that Defendant engaged in considerable delay in seeking inter partes review of the disputed patent. [ECF No. 40 at 7]. Specifically, Defendant waited eleven months before seeking the review in question. Id. The length of delay in filing its motion was significant enough to lead the Court to "conclude[ ] the third factor also weighs in favor of denying the motion to stay." Id.
Now Defendant seeks a second stay based on the PTO granting its petition for ex parte reexamination. [ECF No. 142]. On October 26, 2021, Defendant received some of the prior art that serves as the basis for its petition for ex parte reexamination. [ECF No. 142-1 at 19]. The Defendant waited three months to file its petition with the PTO, which it did on January 26, 2022. [ECF No. 123]. During this time, parties submitted numerous briefs on claim construction and the Court conducted two hearings on the matter. They completed significant fact discovery. [ECF No. 119]. Lisk and Power Packer both presumably started expert reports in this time period. Id. This behavior appears dilatory, particularly in light of Defendant's previous conduct in this litigation. The analysis is further bolstered by the fact that nine months elapsed between the restart of litigation and Defendant filing the petition for ex parte reexamination. Thus, the first factor weighs against staying this proceeding.
B. Simplification of Case
Plaintiff and Defendant strenuously disagree whether an ex parte reexamination will simplify this dispute. Defendant argues the PTO could invalidate every claim in the patent, which would resolve the litigation. [ECF No. 142-1 at 13]. It highlights that the previous IPR proceeding simplified the case by eliminating claims. [ECF No. 149 at 2]. Plaintiff asserts there is a low likelihood of the PTO invalidating the entire patent and Defendant would be liable if any claim survives reexamination. [ECF No. 145 at 16–17]. This factor opposes staying the case.
"The second factor the Court considers is ‘whether a stay will simplify the issues in question and trial of the case.’ " Univ. Elecs. , 943 F. Supp. 2d at 1032 (quoting Aten Int'l Co., Ltd. v. Emine Tech. Co., Ltd. , No. SAVC 09-0843 AG (MLGx), 2010 WL 1462110, at *6 (C.D. Cal. Apr. 12, 2010) ). "[W]aiting for the outcome of the reexamination could eliminate the need for trial if the claims are cancelled or, if the claims survive, facilitate trial by providing the court with expert opinion of the PTO and clarifying the scope of the claims." Target Therapeutics, Inc. v. SciMed Life Sys., Inc. , No. C-94-20775 RPA, 1995 WL 20470, at *2 (N.D. Cal. Jan. 13, 1995). This reasoning is especially strong "where the ex parte reexamination will address all of the claims at issue in the litigation." TPK Touch Sols., Inc. v. Wintek Electro-Optics Corp. , Case No. 13-cv-02218-JST, 2013 WL 5289015, at *2 (N.D. Cal. Sept. 18, 2013) (italics in original).
Reexamination does not necessarily "limit or simplify the issues before the Court." Tric Tools, Inc. v. TT Techs., Inc. , No. 12-CV-3490 YGR, 2012 WL 5289409, at *2 (N.D. Cal. Oct. 25, 2012). This is because "the reexamination process considers only the validity of the subject patent with regard to prior art." ADA Sols., Inc. v. Engineered Plastics, Inc. , 826 F. Supp. 2d 348, 351 (D. Mass. 2011). Although parties may raise claim construction and other issues before the PTO, the ex parte reexaminations are not governed by the estoppel principles applied in IPR proceedings, which means parties may reraise their contentions in the trial court. Avago Techs. Fiber IP (Singapore) Pte. Ltd. v. IPtronics Inc. , No. 10-CV-02863-EDJ, 2011 WL 3267768, at *5 (N.D. Cal. July 28, 2011) ("Since the reexaminations ... are both ex parte , the only way they will finally resolve any issues of validity is if the PTO cancels some claims entirely.").
The Motion to Stay creates a challenging issue. The entire patent could be invalidated at any stage of the reexamination or subsequent appeals, which would terminate this proceeding. Fresenius USA, Inc. v. Baxter Int'l, Inc. , 721 F.3d 1330, 1340 (Fed. Cir. 2013) (a party must have a valid patent to continue a patent infringement suit). However, the likeliest outcome is that the additional litigation will invalidate some of the claims in the patent, but not all of them. When this situation occurs, a stay is generally unwarranted. See IMAX Corp. v. In–Three, Inc. , 385 F. Supp. 2d 1030, 1032 (C.D. Cal. 2005) ; see also Soverain Software LLC v. Amazon.com, Inc. , 356 F. Supp. 2d 660, 663 (E.D. Tex. 2005). Thus, the second factor slightly favors denying the stay.
C. Court Deadlines
"In assessing the status of the litigation, the court considers, among other things, ‘whether discovery is complete and whether a trial date has been set.’ " LG Elecs., Inc. v. Toshiba Samsung Storage Tech. Korea Corp. , Civ. Action No. 12-1063-LPS-CBJ, 2015 WL 8674901, at *4 (D. Del. Dec. 11, 2015) (quoting Neste Oil Oyj v. Dynamic Fuels, LLC , Civ. Action No. 12-662-GMS, 2013 WL 424754, at *1 (D. Del. Jan. 31, 2013) ). "When a request to stay a case comes after discovery is complete or nearly complete, or after the Court and the parties have expended significant effort on the litigation, the principle of maximizing the use of judicial and litigant resources may be best served by seeing the case through to its conclusion." Id. (citation omitted). This factor supports denying Defendant's Motion to Stay.
First, numerous fact and expert discovery deadlines have already passed. Per the Court's scheduling order, fact discovery closed on February 4, 2022. [ECF No. 119]. During this period, parties produced and exchanged roughly fifteen thousand pages of documents and emails. [ECF No. 145-1 at ¶ 4]. The parties completed eleven depositions regarding factual issues. Id. at ¶ 5.
Second, the parties have engaged in extensive preparation and exchange of expert reports. Opening expert designations and reports were submitted before or on February 23, 2022. [ECF No. 119]. Rebuttal expert designations and reports were due by March 10, 2022. Id. Reply expert designations and reports are due on March 18, 2022. Id.
Third, there has been extensive litigation in this case in addition to voluminous discovery. The parties have engaged in significant efforts on the inter partes review over the course of three years, which included an appeal to the Federal Circuit. They submitted opening and responsive claim construction briefs. The Court conducted a technical tutorial and a Markman hearing. Further, Plaintiff and Defendant have presented at least one discovery dispute to this Court.
Ultimately, the third factor weighs in favor of denying Defendant's Motion to Stay.
D. Conclusion
For the reasons above, Defendant's Motion to Stay, [ECF No. 142] is DENIED.
IT IS SO ORDERED.