Opinion
Civil Action No. 21-cv-02112-CMA-SKC
2022-03-22
SMITH SPORT OPTICS, INC., and Koroyd Sarl, Plaintiffs, v. The BURTON CORPORATION, Defendant.
Elliot James Hales, Mark A. Miller, Dorsey & Whitney LLP, Salt Lake City, UT, Erin Cooke Kolter, Dorsey & Whitney LLP, Seattle, WA, Maral Shoaei, Gregory Scot Tamkin, Dorsey & Whitney LLP, Denver, CO, for Plaintiffs. Bryan S. Conley, Claire E. Schuster, Michael A. Albert, Emma L. Frank, Marie A. McKiernan, John L. Strand, Wolf, Greenfield & Sacks, P.C., Boston, MA, Robert R. Brunelli, Scott Robert Bialecki, Sheridan Ross, P.C., Denver, CO, for Defendant.
Elliot James Hales, Mark A. Miller, Dorsey & Whitney LLP, Salt Lake City, UT, Erin Cooke Kolter, Dorsey & Whitney LLP, Seattle, WA, Maral Shoaei, Gregory Scot Tamkin, Dorsey & Whitney LLP, Denver, CO, for Plaintiffs.
Bryan S. Conley, Claire E. Schuster, Michael A. Albert, Emma L. Frank, Marie A. McKiernan, John L. Strand, Wolf, Greenfield & Sacks, P.C., Boston, MA, Robert R. Brunelli, Scott Robert Bialecki, Sheridan Ross, P.C., Denver, CO, for Defendant.
ORDER GRANTING MOTION TO STAY
CHRISTINE M. ARGUELLO, United States District Judge
This matter is before the Court on Defendant The Burton Corporation's Motion to Stay Pending Inter Partes Review ("Motion"). (Doc. # 60.) For the following reasons, the Motion is granted.
I. BACKGROUND
This is a patent infringement case. Plaintiffs Smith Sport Optics, Inc. and Koroyd Sarl (collectively "Plaintiffs") initiated this action on August 24, 2021. (Doc. # 1.) Plaintiffs allege that The Burton Corporation ("Burton") has infringed upon their patent, entitled "Helmet with Shock Absorbing Inserts," U.S. Patent No. 10,736,373 (the "’373 Patent"). (Id. at ¶¶ 1, 4.) Plaintiffs allege that they are co-owners of the ’373 Patent, and they began selling helmets based on the technology under the Smith brand. (Id. at ¶ 3.)
Plaintiffs allege "Defendant began selling ski and snowboard helmets" under the Anon brand "incorporating Plaintiffs’ patented technology in direct competition with the patented" Smith helmets, over Plaintiffs’ objections. (Id. at ¶ 4.) Plaintiffs further allege that Burton's helmets infringe on claim 1 (in 6 ways), 2, 3, and 7 of the ’373 Patent.
Plaintiffs seek to "preliminarily and permanently enjoin" Burton from infringing on the ’373 Patent. (Id. at ¶ 6.) Plaintiffs filed a motion for preliminary injunction on August 16, 2021 (Doc. # 22), which the Court denied on October 21, 2021 (Doc. # 50).
On December 21, 2021, Burton filed the Motion, seeking a stay of this action pending inter partes review ("IPR") of the ’373 Patent. (Doc. # 60.) Burton filed an IPR petition with the Patent Trial and Appeal Board ("PTAB") of the U.S. Patent and Trademark Office ("PTO") the same day. (Id. ) Plaintiffs oppose the Motion. (Doc. # 64.) This matter is now ripe for review. (Doc. # 70.)
II. LEGAL STANDARD
Congress has clearly expressed its intent regarding the purpose of allowing issued patents to be evaluated for validity within the PTO: to "permit efficient resolution of questions about the validity of issued patents without recourse to expensive and lengthy infringement litigation." H.R. Rep. No. 96-1307, pt. 1, at 2 (1980), as reprinted in 1980 U.S.C.C.A.N. 6460, 6463.
A. THE COURT'S POWER TO STAY PENDING IPR
Courts have the inherent power to stay proceedings to manage their dockets. Landis v. N. Am. Co. , 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936) ("[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants."). With respect to determining whether to stay a case based on an IPR pending at the PTO, courts consider:
(1) whether a stay will simplify the issues in question and streamline the trial; (2) whether discovery is complete and whether a trial date has been set; (3) whether a stay would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and (4) whether a stay will reduce the burden of litigation on the parties and on the court.
eSoft, Inc. v. Blue Coat Sys., Inc. , 505 F. Supp. 2d 784, 787 (D. Colo. 2007) (applying the four factors to a determination of whether to stay proceedings in a patent infringement suit) (hereinafter " eSoft factors"); Kamstrup A/S v. Axioma Metering UAB , No. 19-cv-1669-WJM-SKC, 2019 WL 6296699, at *2 (D. Colo. Nov. 25, 2019) ("The Court finds that these factors continue to be helpful when considering whether to enter a stay pending IPR proceedings."). No one factor is determinative, and the totality of the circumstances are considered. Broad. Innovation, L.L.C. v. Charter Commc'n, Inc. , No. 03-cv-2223-ABJ-BNB, 2006 WL 1897165, at *4 (D. Colo. July 11, 2006).
B. INTER PARTES REVIEW
IPR is an adversarial process created by the Leahy-Smith America Invents Act ("AIA"). 35 U.S.C. § 100 et seq (2011). One of Congress's goals in enacting the AIA was to reduce the burden of litigation on courts. More specifically, its purpose in replacing the pre-AIA inter partes reexamination procedure with IPR in the AIA was to "giv[e] the Patent Office significant power to revisit and revise earlier patent grants." Cuozzo Speed Techs., LLC v. Lee , 579 U.S. 261, 136 S. Ct. 2131, 2139–40, 195 L.Ed.2d 423 (2016) (citing H.R. Rep. No. 112-98, pt. 1, at 45, 48 (2011)); see 157 Cong. Rec. 9778 (2011) (Rep. Goodlatte noting that IPR "screen[s] out bad patents while bolstering valid ones").
See H.R. Rep. No. 112-98, pt. 1, at 40 (2011) ("The legislation is designed to establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs."); see also 157 Cong. Rec. S1363 (daily ed. Mar. 8, 2011) (Sen. Schumer commenting that "[l]itigation over invalid patents places a substantial burden on U.S. courts and the U.S. economy.").
IPR is considered to be at least a partial and, in some situations, a complete alternative to litigation of patent validity issues. See SAS Inst., Inc. v. ComplementSoft, LLC. , 825 F.3d 1341, 1354 (Fed. Cir. 2016) (Newman, J., dissenting) ("The AIA proceeding is structured as a complete alternative to litigation of these issues."). The pre-AIA inter partes reexamination process did not allow for discovery, expert evidence, oral argument, the application of rules of evidence and procedure, and cross-examination. IPR, on the other hand, does allow for such procedures, which further corroborates that Congress intended IPRs to be a substitute for litigation. See 35 U.S.C. § 316(a) ; 42 C.F.R. §§ 42.51–.53, .57–.65, .70–.71.
IPR is conducted by administrative patent judges within the PTAB of the PTO, 35 U.S.C. § 6(4)(b), and those judges are "of competent legal knowledge and scientific ability." Id. § 6(a). As such, these experts within the PTO are more likely come to correct decisions regarding the validity of patent claims faster than would be achieved via litigation in district court. See SAS Inst., Inc. , 825 F.3d at 1354 (Newman, J., dissenting) ("Congress designed the AIA to achieve expeditious and economical final resolution."); see also 157 Cong. Rec. S1352 (daily ed. Mar. 8, 2011) (Sen. Udall commenting that "a panel of experts is more likely to reach the correct decision on a technical question compared to a jury composed of laypeople.").
IPR allows any third-party to challenge the validity of issued patents at the PTAB. Id. § 311 (a)–(b). An IPR petition must be filed within one year of the initiation of litigation alleging infringement of the claims sought to be challenged for validity. Id. § 315(b). Once a petition for IPR is filed, the patent owner can respond within 3 months, justifying why review of the contested claims should not be instituted. 37 C.F.R. § 42.107(b) ; 35 U.S.C. § 313. The PTAB typically decides whether to institute IPR by the later of three months of the filing date of the patent owner's response or the due date for such a filing. See Kamstrup A/S , 2019 WL 6296699, at *1. The PTAB institutes IPR if "there is a reasonable likelihood that at least one of the claims challenged in the petition is unpatentable." 37 C.F.R. § 42.108(c).
Once IPR is instituted, the PTO evaluates the contested claims for patentability in light of prior art in the form of patents or printed publications. 35 U.S.C. § 311(b). The petitioner bears the burden of proving, by a preponderance of the evidence, that claims are unpatentable. Id. § 316(e). The patent owner may amend the patent one time by motion to cancel claims or to offer a reasonable number of substitute claims to be considered by the PTAB. Id. § 316(d)(1)(A-B). Additional motions to amend may be allowed to advance settlement negotiations. Id. § 316(d)(2).
The PTAB then renders a final written decision on the patentability of the contested claims within one year from the date an IPR is instituted, although an extension of 6 months for good cause is allowed. 37 C.F.R. § 42.100(c). In the final decision, the PTAB may cancel claims because they are unpatentable. See 35 U.S.C. §§ 102 – 03. Parties may also settle any issue; however, this does not preclude the PTAB from continuing to issue a final decision regarding patentability. 37 C.F.R. § 42.74. Any party not satisfied with the final decision of the PTAB may request a rehearing, Id. § 42.71(d)(2), or appeal the decision to the Federal Circuit. 35 U.S.C. § 141(c). Following a written decision by the PTAB, both the petitioner and any other real party-in-interest are estopped from asserting in a civil action that a claim is invalid on any ground that the petitioner raised or reasonably could have raised during IPR. Id. § 315(e).
III. DISCUSSION
When deciding whether to grant a stay when an IPR petition is pending at the PTAB of the PTO, the Court analyzes the eSoft factors, supra Section II.A, in light of the specific procedural posture of the case. In analyzing these factors, the Court is mindful of Congress's intent to allow for reevaluation of patents within the PTO.
A. SIMPLIFYING AND STREAMLINING TRIAL
When weighing this factor, courts consider (1) the role of the PTO's expertise in determining claim validity and the assistance such determination will assist the Court in its own analysis; and (2) whether "claims, arguments and defenses can be narrowed or entirely disposed of ...." Broad. Innovation, L.L.C. , 2006 WL 1897165, at *5 (quoting Gould v. Control Laser Corp. , 705 F.2d 1340, 1342 (Fed. Cir. 1983) ("One purpose of the reexamination procedure is to eliminate trial of that issue ....")).
Based on Burton's IPR filing, Plaintiffs’ claims face one or more of the following fates: they (1) survive intact because Defendant's request for IPR is denied; (2) survive intact on their merits following reexamination or review; (3) are cancelled; or (4) are narrowed by amendment.
The PTAB has not granted Defendant's IPR petition. However, if it does grant the request, it is inevitable that, in some way, any trial will be simplified by a stay of proceedings. If the PTAB grants the IPR petition, the Court will gain valuable expert insight as to the issues underlying claim validity. Gould , 705 F.2d at 1342 ("One purpose of the reexamination procedure is to ... facilitate trial of that issue by providing the district court with the expert view of the PTO ...."); Softview Comput. Prods. Corp. v. Haworth, Inc. , No. 97-cv-8815-KMW-HBP, 2000 WL 1134471, at *3 (S.D.N.Y. Aug. 10, 2000) ("If the reexamination proceeding invalidates or narrows a claim or claims, the issues at trial will be simplified.").
As Plaintiffs concede (Doc. # 64 at 2), the PTAB will decide whether to grant Defendant's IPR petition within the next few months. See Kamstrup A/S , 2019 WL 6296699, at *1 (noting that the PTAB typically decides whether to institute IPR by the later of three months of the filing date of the patent owner's response or the due date for such a filing). Therefore, staying proceedings to determine whether the PTAB grants the IPR petition, and, if granted, continuing the stay until after the IPR petition is decided, will result in a simpler and more streamlined trial. Thus, this factor weighs in favor of granting Defendant's Motion.
B. STATUS OF DISCOVERY AND DATE FOR TRIAL
When weighing this factor, courts look not only to whether discovery has been completed and a trial date has been set, but also to other aspects of litigation proceedings such as summary judgment arguments and the status of the final pretrial order. Broad. Innovation, L.L.C. , 2006 WL 1897165, at *8 (citing Gioello Enters. Ltd. v. Mattel, Inc. , No. C.A. 99-375 GMS, 2001 WL 125340, at *1 (D. Del. Jan. 29, 2001) (noting that future motions for summary judgment could be rendered moot by decisions from the PTO)); Softview Comput. Prods. Corp. , 2000 WL 1134471, at *3 (noting "the Pretrial Order has not yet been prepared.").
The Court recognizes that there is significant variation in when, during litigation proceedings, a stay pending IPR might be granted. Compare Gould , 705 F.2d at 1342 (granting a motion to stay 5 years into litigation and 20 days before trial) with Tru-Balance, LLC v. Alcoa, Inc. , No. 11-cv-01127-CMA-BNB, 2012 WL 619114, at *1 (D. Colo. Feb. 27, 2012) (granting a stay when discovery was not complete and no trial date had been set).
In this case, the Court is not persuaded that discovery has proceeded so far as to weigh significantly against staying proceedings. To date, the parties have served initial disclosures and patent-related contentions. (Doc. # 73.) Plaintiffs served written discovery requests; Defendant has not served any discovery requests. (Id. ) Neither party has taken any depositions. (Id. ) As noted above, a motion for preliminary injunction was denied. However, little else of substance has happened. The expert discovery deadline is not until September 28, 2022, and the dispositive motion deadline is not until October 19, 2022. In short, this case is in a relatively early stage of the proceedings, and this factor weighs in favor of granting Defendant's Motion.
C. UNDULY PREJUDICING THE NONMOVING PARTY
In weighing this factor, courts evaluate: (1) whether a delay caused by a stay of proceedings unduly prejudices the remedy to which the nonmoving party is entitled; and (2) whether the movant unfairly gains a tactical advantage from any stay granted. Broad. Innovation, L.L.C. , 2006 WL 1897165, at *10. The Court is not persuaded that Plaintiffs will be unduly prejudiced by granting Defendant's Motion or that a stay would create a strategic advantage for Burton.
Courts frequently find that mere delay caused by IPR is not prejudicial. See, e.g. , Photoflex Prods., Inc. v. Circa 3 LLC , No. C 04-03715 JSW, 2006 WL 1440363, at *2 (N.D. Cal. May 24, 2006) ("The delay inherent to the reexamination process does not constitute, by itself, undue prejudice."); Micrografx, LLC v. Samsung Telecomm. Am., LLC , No. 3:13-CV-3599-N, 2014 WL 8239371, at *1 (N.D. Tex. July 9, 2014) ("A delay caused by the inter partes review process, without more, does not justify denial of a stay."). As discussed above, IPR provides a more efficient and timely resolution to disputes of patent validity than can be achieved by litigation. It is entirely unclear whether validity proceedings in district court would proceed any more expeditiously than they would at the PTO. Although there certainly exists the possibility of delay due to extension of the IPR process by the PTAB, the exercise of the right to appeal for rehearing at the PTAB, and exercise of the right of appeal to the Federal Circuit, those delays are merely speculative.
Plaintiffs contend that a stay is prejudicial because they are direct competitors with Defendant. (Doc. # 64 at 11–12.) When two parties are in competition in the marketplace, there is a risk that a patent-holder whose patent is being infringed will be prejudiced in ways that are not easily calculated to render monetary damages. Universal Elecs., Inc. v. Universal Remote Control, Inc. , 943 F. Supp. 2d 1028, 1033–34 (C.D. Cal. 2013) (citing ADA Sols., Inc. v. Engineered Plastics, Inc. , 826 F. Supp. 2d 348, 350–51 (D. Mass. 2011) ("A common complaint among litigating patent-holders is that a stay prevents them from vindicating their patent rights for an extended period of time .... This prejudice is heightened when parties to litigation are direct competitors ....")). Thus, this factor weighs in favor of denying the Motion.
To determine whether Burton obtains a tactical advantage from a stay of proceedings, the Court considers the timing of Defendant's IPR petition filings at the PTO. Burton's IPR was filed after the instant litigation commenced, and after the motion for preliminary injunction had been decided. However, Burton filed its IPR petition seven months before its statutory bar to do so. Courts generally find such timing reasonable, where the defendant does not wait until days before the statutory deadline to file an IPR petition. Cocona, Inc. v. VF Outdoor, LLC , No. 16-cv-02703-CMA-MLC, 2018 WL 10910847, at *8 (D. Colo. Mar. 19, 2018) (noting that the patent statute allows up to one year after service of the complaint to file an IPR petition, suggesting that Congress found a year after service of an infringement complaint to be a reasonable time period for an alleged infringer to decide whether to pursue IPR); ACQIS, LLC v. EMC Corp. , 109 F. Supp. 3d 352, 359 (D. Mass. 2015) (finding that filing IPR petitions within a week of the statutory deadline was not unreasonable).
Therefore, based on the totality of the circumstances, any delay experienced by Plaintiffs does not weigh against granting Burton's Motion.
D. REDUCING THE BURDEN OF LITIGATION
In determining whether a stay of proceedings pending IPR would reduce the burden of litigation, courts consider (1) the impact of prior art evaluation by the PTO during IPR; (2) any reduction in costs to the judiciary and to the parties; and (3) the likelihood that claims will be narrowed or cancelled. Softview Comput. Prods. Corp. , 2000 WL 1134471, at *2 (citations omitted). "Courts recognize that shifting the patent validity issue to the PTO has many advantages, including ... all prior art presented to the court will have been first considered by the PTO ...." eSoft, Inc. , 505 F. Supp. 2d at 786.
As discussed above, if the PTAB grants the IPR petition, review and possible narrowing of claims will simplify the issues before the Court. See supra section III.A. Such simplification reduces the burden of litigation on the Court and on the parties. Therefore, the burdens of litigation—particularly the parties’ anticipated substantial costs for factual and expert discovery and the Court's time—are accordingly reduced. Staying proceedings will likely reduce the burden of litigation on the Court and the parties, which weighs in favor of granting Burton's Motion.
In summary, based on the four factors articulated by the eSoft court, and considering the totality of the circumstances, the scales tip heavily in favor of granting Burton's Motion to Stay.
IV. CONCLUSION
For the foregoing reasons, the Court ORDERS as follows:
(1) Defendant's Motion to Stay Pending Inter Partes Review (Doc. # 60) is GRANTED;
(2) This case is STAYED from the date of this Order until further notice; and
(3) The parties shall advise the Court, within seven days, of the PTO's decisions to institute Defendant's pending petition for IPR. Additionally, the parties shall submit quarterly status updates informing the Court of any relevant developments, beginning June 27, 2022.