DOUGLAS E. ARPERT, Magistrate Judge.
This matter comes before the Court on a Motion by Defendant Vatech America, Inc. ("Defendant" or "VAI") to stay this case pending completion of the U.S. Patent and Trademark Office's ("USPTO") inter partes reexamination of the `763 and `022 patents ("patents-in-suit") [dkt. entry. no. 53], originally returnable July 5, 2011. Separately, by letter dated January 12, 2012, Defendant has submitted an application for leave to serve supplemental Invalidity Contentions. For the reasons stated herein, Defendant's Motion to stay and application to serve supplemental Invalidity Contentions are
On September 23, 2010, Plaintiff Oy Ajat, Ltd. ("Plaintiff") filed a Complaint against Defendants VAI, E-Woo Technology U.S.A., Inc. ("EWU"), Vatech Co., Ltd. ("VAK"), and E-Woo Technology Co., Ltd. ("EWK") (collectively, "Defendants") alleging infringement of U.S. Patent No. 7,336,763 ("`763 patent"), entitled "Dental Extra-Oral X-Ray Imaging System and Method", and U.S. Patent No. 7,676,022 ("`022 patent"), entitled "Extra-Oral Digital Panoramic Dental X-Ray Imaging System" (collectively, "patents-in-suit"). See Pl.'s Comp., dkt. entry no. 1 at 2-3, Exhs. A-B. On January 14, 2011, Defendant filed a motion to dismiss for failure to state a claim of induced infringement. See dkt. entry no. 12. On April 14, 2011, the Court granted Defendant's motion to dismiss with respect to induced infringement claims arising prior to the date of Plaintiff's Complaint but denied the motion with respect to induced infringement claims arising after Plaintiff served Defendant with the Complaint. See dkt. entry no. 32 at 9. Subsequently, on April 18, 2011, Defendants VAK and EWK filed a motion to dismiss for lack of personal jurisdiction. See dkt. entry no. 33. On January 17, 2012, the Court granted Defendants' motion to dismiss with respect to EWK but denied the motion with respect to VAK. See dkt. entry no. 68.
On March 25, 2011, Defendant filed a request for inter partes reexamination of the `763 and `022 patents with the USPTO. See Def.'s Decl. of Michael R. Annis, Esq. ("Annis"), dkt. entry no. 53-2, Exhs. D-E. On April 29, 2011, the USPTO granted Defendant's requests for inter partes reexamination of the patents-in-suit. Id. at Exh. A-B. Specifically, the USPTO concluded that "a substantial new question of patentability affecting claims 1-29 of ... United States Patent Number 7,336,763" and "claims 1-27 of...United States Patent Number 7,676,022 ... is raised by the request for inter parte[s] reexamination." Id. On June 10, 2011, Defendant filed the instant Motion to stay pending the USPTO's inter partes reexamination of the patents-in-suit. See dkt. entry no. 53. The Court administratively terminated the Motion, without prejudice to reinstatement, on January 5, 2012 pending disposition of Defendants' then pending motions to dismiss and for jurisdictional discovery. See dkt. entry no. 65. Upon the request of defense counsel, the Motion was reinstated on January 23, 2012 and made returnable on February 21, 2012.
On January 27, 2012, Defendant provided the Court with a factual update stating:
See Def.'s Letter dated January 27, 2012 at 1-2. On February 3, 2012, Plaintiff responded by providing the Court with its own factual update, stating:
See Pl.'s Letter dated February 3, 2012, dkt. entry no. 72 at 1-3.
On March 2, 2012, Plaintiff submitted a supplemental brief and update indicating that the USPTO had issued an Action Closing Prosecution ("ACP") with respect to the `022 and `763 patents. See Pl.'s Letter dated March 2, 2012 at 1. Plaintiff maintains that the USPTO "confirm[ed] the patentability of each asserted and unamended claim" in the `022 patent and "explained why none of the references submitted by [Defendant] ... renders the asserted `022 patent claims unpatentable". Id. Similarly, Plaintiff maintains that the USPTO "confirm[ed] the patentability of one of the asserted and unamended claims" in the `763 patent and "explained why none of the references submitted by [Defendant] ... renders the claims unpatentable". Id. Plaintiff asserts that because the USPTO "has confirmed asserted claims as patentable in the ACPs, there is an even higher probability that these claims will survive reexamination without amendment" and therefore prejudice will accrue to Plaintiff if the case is stayed. Id. at 2.
On March 9, 2012, Defendant responded by providing its own supplemental brief and update indicating that the "impact [of the] recent interim orders from the [USPTO] with respect to the reexaminations of the patents-in-suit ... is none" because "the salient facts and rationale to stay this litigation as urged in [Defendant's] original motion remain fundamentally unchanged". See Def.'s Letter dated March 9, 2012 at 1. Defendant maintains that although the USPTO has "confirmed certain of the claims of the patents-in-suit", it has in fact "rejected two-thirds of the claims at issue here ... [while] confirming only three ...". Id. Further, Defendant notes that the "[US]PTO proceedings are not yet final" given that after the comment period concludes, "the assigned examiner will have an opportunity to reassess his ultimate conclusions ... and the parties will have the option of taking the reexamination to another level of review". Id. at 2. Defendant asserts that "it would not be judicially economical to burden the Court and the parties with continued litigation before the reexamination proceedings are fully and finally concluded". Id.
Separately, in a letter dated January 12, 2012, Defendant submitted an application seeking leave to serve supplemental Invalidity Contentions. See Def.'s Letter dated January 12, 2012. Defendant served its original Invalidity Contentions on July 20, 2011, therein citing "the same prior art relied upon by the [US]PTO in cancelling the patents-in-suit". Id. at 2. Defendant maintains that Plaintiff "responded to the [US]PTO examiner's rejection of the patents-in-suit" on August 23 and 24, 2011 by "argu[ing] for the first time ... [about] the meaning of certain claim limitations in the patents-in-suit". Id. As a result, Defendant claims that it "presented the [USPTO] examiner with two additional prior art references that it contends invalidate ... [the] patents-in-suit". Id. Further, on September 24, 2011, Defendant "filed additional third-party comments with the [US]PTO as part of the reexamination proceedings ... [and simultaneously] provided copies of this prior art to [Plaintiff's] ... counsel". Id. Defendant seeks leave to include these two (2) additional prior art references in this lawsuit by serving supplemental Invalidity Contentions. Id. at 2-3. Plaintiff filed opposition to this application on January 18, 2012 and Defendant replied on February 3, 2012.
Initially, citing 1679, 96 Cong., 1 Sess. § 310 (1979), H.R. 5075, 96 Cong., 1 Sess. § 310 (1979), and S.R. 446, 96 Cong., 2d Sess. § 310 (1980), Defendant maintains that "Congress intended the courts [to] defer to the reexamination process ... and [that] early versions of the reexamination statute expressly provided for a stay of court proceedings during reexamination". See Def.'s Br., dkt. entry no. 53-1 at 8. Citing ASCII Corp. v. Std. Entm't USA, 844 F.Supp. 1378, 1381 (N.D. Cal. 1994), Defendant contends that in order to be "consistent with ... Congress's intent, district courts have adopted a `liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO reexamination or reissuance proceedings'". Id. at 9. Pursuant to 35 U.S.C. § 314, Defendant notes that "an inter partes reexamination, in contrast to an ex parte reexamination, provides a third-party the right to participate in the reexamination process". Id. Citing 35 U.S.C. § 315 and Tomco 2 Equip. Co. v. Southeastern Agri-Systems, Inc., 542 F.Supp.2d 1303, 1306 (N.D. GA. 2008), Defendant argues that "the results of the reexamination are ... binding upon the third party requester in any subsequent or concurrent civil action". Id. As such, Defendant contends that "Congress created the inter partes review to provide an alternative method of resolving disputes ... using the expertise of the USPTO". Id. at 10; see also Tomco 2, 542 F. Supp. 2d at 1306-07.
Citing Eberle v. Harris, 2005 WL 6192865, at *2 (D.N.J. 2005) and ICI Uniqema, Inc. v. Kobo Prod., Inc., 2009 WL 4034829, at *1 (D.N.J. 2009), Defendant states that there are multiple benefits of staying actions pending reexamination, including:
Id. at 10-11. Further, Defendant acknowledges that pursuant to Brass Smith, LLC v. RPI Indus., Inc., 2010 WL 4444717, at *6 (D.N.J. 2010), when deciding whether to stay a matter pending reexamination, "courts typically consider: (1) [w]hether discovery is completed and whether a trial date has been set; (2) [w]hether a stay will simplify the issues in question and trial of the case; and (3) [w]hether a stay will unduly prejudice or present a clear tactical advantage to the non-moving party". Id. at 11.
Citing CCP Sys. AG v. Samsung Elec. Corp., Ltd., 2010 WL 5080570, at *4 (D.N.J. 2010), Brass Smith, LLC, 2010 WL 4444717, at *6, ICI Uniqema, Inc., 2009 WL 4034829, at *2, and Manometrics, Inc. v. Nova Measuring Instruments, Ltd., 2007 WL 627920, at *2 (N.D. Cal. 2007), Defendant maintains that because no trial date has been set, discovery is still in its preliminary stages, and "significant work remains to be completed by all parties and the Court before trial", a stay is appropriate and will likely narrow and clarify the issues for trial. Id. at 13-14. Noting that "[a]ll claims of the [p]atents-in-[s]uit have now been rejected by the [US]PTO in its first office action", Defendant also argues that the USPTO proceedings are much further along than the litigation in this Court and that this justifies a stay. See Def.'s Reply Br., dkt. entry no. 58 at 7, n.3.
Citing Eberle, 2005 WL 6192865, at *3, Defendant argues that "in patent cases involving reexamination of the patents-in-suit ..., absent a stay, the parties may end up conducting a significantly wider scope of discovery than necessary ... and ... courts will likely waste time examining the validity of claims which are modified or eliminated altogether during reexamination[,] ... particularly where the USPTO has acknowledged that the cited prior art raises `substantial new questions of patentability' as to all of the claims of the [p]atents-in-[s]uit". See Def.'s Br. at 14. Defendant argues that "waiting until after reexaminations have been completed will provide the Court with the expertise of the USPTO as to [the] claim scope, validity[,] and ... construction" when making its own interpretation of the claim terms. Id. Citing 35 U.S.C. §§ 314(b)(2) and 315(c), Tomco 2, 542 F. Supp. 2d at 1309, and Brass Smith, LLC, 2010 WL 4444717, at *5, Defendant notes that "[i]nter partes [r]eexamination has certain estoppel effects against the litigants" and, therefore, "the dynamics of the litigation in issue will potentially alter, and with that alteration, the needs of the parties, the discovery they seek, the witnesses they will name, [and] perhaps even the very basis for the litigation will change". Id. at 15-16. Defendant also notes that on June 23 and June 24, 2011, after a "detailed and extensive analysis of both [p]atents", the USPTO rejected all claims of the patents-in-suit and found them to be invalid under 35 U.S.C. § 102(b) and 103(a). See Def.'s Reply Br. at 1-2. Citing Donald Hill, Jr., 78 Pat. Trademark & Copyright J. (BNA) 132 (May 29, 2009), Defendant notes that "when [an] initial Office Action rejects all claims — as it did in this case — all claims remain rejected in 83% of inter partes reexaminations", thus making the probability high that a trial in this matter will be unnecessary. Id. at 1, 3-4. Citing LMT Mercer Group, Inc. v. Maine Ornamental, LLC, 2011 WL 2039064 (D.N.J. 2011), Defendant argues that "the fact that the reexamination will likely end this litigation altogether strongly favors a stay". Id. at 4. Further, noting that "12% of patents subject to reexamination proceedings survive completely intact", Defendant argues that even if certain claims survive reexamination, they are likely to be amended and therefore a stay is appropriate. Id. at 5.
Citing GPAC Inc. v. DWW Enterprises, Inc., 144 F.R.D. 60, 62 (D.N.J. 1992), Eberle, 2005 WL 6192865, at *2, ASCII Corp., 844 F. Supp. at 1381, Gould v. Laser Control Corp., 705 F.2d 1340 (Fed. Cir. 1983), and EchoStar Tech. Corp. v. TiVo, Inc., 2006 WL 2501494, at *2 (E.D. Tex. 2006), Defendant argues that because "reexamination may result in the elimination of most, if not all, of the issues in the pending litigation", a stay is an appropriate means to achieve efficiency and preserve judicial resources. See Def.'s Br. at 16-18.
Citing Brass Smith, LLC, 2010 WL 4444717, at *4, Defendant argues that although reexamination takes time, "it is well established that the inherent delay caused by reexamination is insufficient to establish undue prejudice to a patent holder". Id. at 18. Defendant also argues that the following "affirmative indications" show that Plaintiff will not be prejudiced by a stay:
Id. at 18-19. Citing LMT Mercer Group, Inc., 2011 WL 2039064, at *12, Defendant argues that Plaintiff's failure to file suit until nearly a year after it allegedly "first investigated [Defendant's] PaX-Primo [dental x-ray imaging systems] in December 2009" and Plaintiff's failure to "seek preliminary injunctive relief" both mean that Plaintiff "will suffer no prejudice by [a] stay". See Def.'s Reply Br. at 8. Citing Data Treasury Corp. v. Wells Fargo & Co., 490 F.Supp.2d 749, 754 (E.D. Tex. 2006), Defendant contends that because Plaintiff is seeking what "amounts to a licensing fee, [it] has an adequate and easily quantifiable legal remedy despite [any] delay ... caused by [a stay]" such that "[m]oney damages will adequately compensate [Plaintiff]". See Def.'s Br. at 19. Finally, Defendant argues that because Plaintiff's "sole request for relief is predicated on the alleged infringement of the [p]atents-in-suit[,] [a]ll claims at issue ... are dependent upon [their] validity" such that "a stay of these proceedings will not delay or put on hold any claims by [Plaintiff] against [Defendant] or the other named defendants". Id. at 19-20.
Plaintiff contends that "[Defendant's] [m]otion for a [s]tay is ... [an] attempt to introduce protracted and unwarranted delay in order to prevent a ruling that [Defendant] is willfully infringing [Plaintiff's] patents-in-suit". See Pl.'s Opp'n. Br., dkt. entry no. 55 at 1. To support this claim, Plaintiff notes that "[o]n March 23, 2010, [Defendant was] notified ... in writing of probable infringement of the patents-in-suit", to which it "replied on April 13, 2010 [by] stating that [it] had reviewed [Plaintiff's] patent rights and concluded that there was no infringement". Id. Plaintiff further notes that "[o]n September 27, 2010, four days after filing its Complaint, [Plaintiff] wrote to each President of the group of four defendant companies ... to seek a business settlement to the dispute" and informed Defendant "that if no response was received by November 30, 2010[,] the Complaint would be served". Id. Plaintiff argues that it was not until November 28, 2010 that Defendant responded, informing Plaintiff that it deemed the patents-in-suit unpatentable and that it intended to file a request for reexamination by the USPTO when Plaintiff initiated service of the Complaint. Id. at 2. As such, Plaintiff argues that Defendant "admitted [to] having formed a basis for alleging invalidity at least as early as April 13, 2010" but "postponed filing its reexamination requests until March 25, 2011 ... and further delayed filing its motion to stay until June 10, 2011", "more than eight months from the date of [the] Complaint and almost three months [after] filing the reexamination requests". Id. at 2-3.
Citing Affinity Labs of Texas, LLC v. Nike, Inc., 2011 U.S. Dist. LEXIS 51665, at *6-7 (N.D. Cal. 2011) and Mike's Train House, Inc. v. Broadway Ltd. Imports, 2011 U.S. Dist. LEXIS 22224, at *11 (D. Md. 2011), Plaintiff argues that "[t]hose delays alone are sufficient grounds to deny [Defendant's] motion to stay". Id. at 3. Plaintiff also argues that Defendant has demonstrated a "pattern of unwarranted delay" and has made "repeated efforts to prevent this action from proceeding to trial", including:
Id. at 4-5.
Plaintiff next contends that "[EWU], the other U.S. entity named in this case, has been served but has not answered the Complaint and is in default". Id. at 5. Although Defendant contends that the two U.S. companies are the same company, Plaintiff refutes this, noting that "[EWU], has a separate corporate charter and registration". Id. Plaintiff also argues that "[Defendant] has not provided discovery describing the corporate status and ties concerning the four indisputably interrelated defendant entities, and particularly has not provided any representations as to the status of [the] Vatech Group of companies during the relevant period of alleged infringement". Id. Plaintiff notes that "[VAK] maintains local telephone numbers and employees, including management, sales and technical personnel, in [its] New Jersey offices ... [and] that [VAK] designates [VAI] as its Branch Office in New Jersey". Id. at 6. Moreover, Plaintiff argues that this information was "withheld from the Court" when the Korean defendants made their motions to dismiss for lack of personal jurisdiction, which was supported by [Defendant's] sworn declaration". Id.
Citing Mike's Train House, 2011 U.S. Dist. LEXIS 22224, at *11, LG Electronics U.S.A. Inc. v. Whirlpool Corp., 2011 U.S. Dist. LEXIS 11488, at *3 (D.N.J. 2011), Innovative Office Products, Inc. v. Spaceco, Inc., 2008 U.S. Dist. LEXIS 67500, at *11-12 (E.D. Pa. 2008), and Xerox Corp. v. 3COM Corp., 69 F.Supp.2d 404, 406 (W.D.N.Y. 1999), Plaintiff argues that although a reexamination of the patents-in-suit has been requested, "[Defendant's] demonstrated pattern of arbitrary and unwarranted delay ... evidences a tactical and dilatory motive which itself is sufficient grounds for denying a stay in this case". Id. at 6-7.
Citing Wyeth v. Abbott Labs, 2011 U.S. Dist. LEXIS 9824, at *3 (D.N.J. 2011) and Ethicon v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988), Plaintiff notes that "[t]he decision whether to stay a patent case in which reexamination by the [USPTO] has been requested is within the sound discretion of the district court". Id. at 7. However, citing LMT Mercer Group, Inc. v. Maine Ornamental, LLC, 2011 U.S. Dist. LEXIS 55549, at *28-9 (D.N.J. 2011) and Gold v. Johns-Manville Sales Corp., 723 F.2d 1068, 1075-76 (3d Cir. 1983), Plaintiff argues that "it is well settled that before a stay may be issued, the petitioner must demonstrate a clear case of hardship or inequity ... if there is even a fair possibility that the stay would work damage on the other party" and that "[l]itigation and reexamination are not mutually exclusive ... [such that] the two proceedings may properly proceed in parallel". Id. at 7-8.
Citing Affinity Labs and referencing the alleged delays discussed above, Plaintiff argues that "[c]ourts have denied motions to stay based solely on similar delays ... even where the remaining `factors' were neutral or slightly favored a stay". Id. at 8-9. Plaintiff maintains that "the undue prejudice and tactical disadvantage to [Plaintiff] resulting from further delay[s] [in] this action ... weigh heavily against a stay". Id. at 9. Citing LG Electronics, 2011 U.S. Dist. LEXIS 11488, at * 4, Plaintiff contends that "[Plaintiff] and [Defendant] are direct competitors in the niche field of extra-oral digital x-ray technology" and therefore "a stay would likely prejudice the non-movant". Id.
Plaintiff argues that "[a] stay in this case would further delay trial by at least three years and[,] more likely[,] more than six years". Id. Referencing Defendant's moving brief (see dkt. entry no. 53-8, Ex. F), Plaintiff notes that "for all inter partes reexaminations conducted since ... 1999 ..., the average time from filing a request to the USPTO's issuance of a reexamination certificate is 36.5 months". Id. at 10. Citing Wyeth, 2011 U.S. Dist. LEXIS 9824, at * 4-5 and Mike's Train House, 2011 U.S. Dist. LEXIS 22224, at *9, Plaintiff argues that the reexamination process, including appeals, could take over six years and that such a delay "would unduly prejudice and disadvantage [Plaintiff's] opportunity to meet its burden on infringement and willfulness when witnesses may have relocated, memories will have faded and documents could have been lost". Id. Plaintiff also argues that it is not "merely seeking what amounts to a licensing fee", but rather has "explicitly [asked] the Court for a permanent injunction prohibiting [Defendant's] further infringement of the patents-in-suit". Id. Citing APP Pharm., LLC v. Ameridose, LLC, 2011 U.S. Dist. LEXIS 23318, at *3 (D.N.J. 2011), Plaintiff argues that "the obvious harm to [Plaintiff] and its status as a viable market competitor by postponing [the] injunction by six years or more would be irreparable". Id. at 10-11. Plaintiff also contends that a stay would be harmful to "third party ... dental practitioners who use infringing x-ray machines purchased from [Defendant] ... to the extent that it would needlessly prolong the time during which the legitimacy of their use of that equipment would remain unresolved". Id. at 11.
Referencing Defendant's moving brief (see dkt. entry no. 53-8, Ex. F), Plaintiff contends that "for all of the 253 inter partes reexamination certificates issued from 1999 through March 31, 2011, less than half, [or] only 45%, resulted in cancellation or disclaimer of all claims" and therefore "reexamination of the patents-in-suit are more likely to conclude with asserted claims being confirmed patentable". Id. at 11-12. Further, citing Wyeth, 2011 U.S. Dist. LEXIS 9824, at *8, Plaintiff argues that when "[v]iewing more current statistics, this Court has observed that the cancellation rate in reexaminations has decreased to 24%", thus "increasing the likelihood that reexamination will conclude with asserted claims confirmed as patentable" and "thereby [minimizing] any possibility that the issues in this case will be rendered moot". Id. at 12. Plaintiff claims that "if the USPTO confirms asserted claims to be patentable, then pursuant to 35 U.S.C. § 315(c)[,] [Defendant] should be estopped from asserting the same invalidity challenge in this case". Id. "[T]o the extent ... the remaining defendants might not be subject to [the] same estoppel [as Defendant,] ... 35 U.S.C. § 317(b) provides that a district court's final decision against a party on that party's invalidity claim precludes that party and its privies from raising or maintaining the same issues in an inter partes reexamination". Id. As such, "permitting this action to proceed to trial ... could relieve the USPTO from expending further resources on the reexaminations in the event that the Court decides against [Defendant's] invalidity claim". Id. at 12-13.
Due to Defendants' extensive motion practice, Plaintiff contends that this case has "already ... imposed substantial ... costs". Id. at 13. Plaintiff notes that it has already "served its Infringement Contentions and other disclosures pursuant to L. PAT. R. 3.1 and served over one-thousand documents pursuant to L. PAT. R. 3.2", that "Defendant['s] Non-Infringement Contentions, Invalidity Contentions and accompanying document productions pursuant to L. PAT. R. 3.2A, 3.3 and 3.4" have been served, and that "[t]he Court has set deadlines for all pretrial matters through and beyond the completion of the claim construction process". Id. at 13-14. Plaintiff maintains that "[i]n this case, the stage of the litigation coupled with the extensive briefing already submitted in connection with [Defendants'] multiple motions and the existence of a set pretrial schedule favors denial of the requested stay". Id. at 14-15. Finally, citing LMT Mercer Group, Inc., 2011 WL 2039064, at *28-29, Plaintiff argues that "[Defendant] failed to demonstrate any hardship or inequity [that] it would incur absent a stay, much less the `clear case of hardship or inequity' it was required to show", and that this deficiency weighs against a stay. Id. at 15.
In response to Plaintiff's opposition, Defendant argues that "[Plaintiff] does not practice the [p]atents-in-[s]uit" and "is apparently unsure whether any other entity practices (or marks) the patents-in-suit". See Def.'s Reply Br. at 8-9. Citing LMT Mercer, 2011 WL 2039064, at *12, Defendant contends that Plaintiff has "no basis to argue that it even competes in the same market" and that "an unsubstantiated claim that a party is a `direct competitor' is insufficient to support a claim of prejudice based on hypothetical changes in the market". Id. at 9.
As to Plaintiff's accusations that Defendant has caused delay and prevented this case from moving forward, Defendant cites LMT Mercer, 2011 WL 2039064, at *12, ICI Uniqema, 2009 WL 4034829, at *2, Stryker Trauma S.A. v. Synthes, 2008 WL 877848, at *2 (D.N.J. 2008), and GPAC, 144 F.R.D. at 60-66 and argues that "the law in this District is absolutely clear: delay is not prejudice". Id. at 9-10. Although Defendant maintains that Plaintiff's arguments of delay are irrelevant, it still specifically rejects any such claims. Id. at 10. Defendant argues that it "did not delay filing the reexamination requests by a year". Id. Rather, "[i]n April 2010, an attorney for [VAK] stated that [VAK] did not infringe the patent because it did not make, use or sell the PaX-Primo in the United States [and] there is no indication that [VAK], let alone [Defendant], had done a prior art search or prepared the 220 pages of analysis constituting the reexamination requests". Id. With regard to allegations of service of process delays, Defendant argues that "[t]he Korean entities did not authorize its U.S. counsel [to act] as an agent to accept service of process[;]... [however, they] did agree to waive service under Rule 4 of the Federal Rules of Civil Procedure", a proposition which Plaintiff rejected. Id. Further, Defendant argues that its motion to dismiss was "directed to Plaintiff's improper pleading under Iqbal...[and] [Plaintiff's] failure to appropriately plead necessary facts in its Complaint and was not `delay' by [Defendant]". Id. at 11. Similarly, Defendant argues that it has a constitutional right to file a motion to dismiss for lack of personal jurisdiction and that asserting this right does not constitute delay. Id. Citing 37 C.F.R. § 1.956, Defendant argues that concerns for future delay "pending the reexamination proceedings [are] mitigated by the [US]PTO's duty to conduct inter partes reexamination proceedings `with special dispatch'". Id. at 12. Citing USPTO Proceedings, p.2 at
With regard to Plaintiff's allegations that Defendant has "stonewalled" discovery, Defendant contends that it "agreed to an inspection of the PaX-Primo subject to an appropriate protocol ... [and] [d]espite Plaintiff's failure to follow the requirements of Rule 34, [Defendant] has offered to formulate a proposed protocol". Id. at 11. Defendant also contends that it "never withheld any documents or information on the basis of confidentiality ... [but rather] lodged ... objections to preserve its right to mark documents subject to the Discovery Confidentiality Order". Id. Defendant notes that it "agreed to produce source code ... and [to] obtain such code from the manufacturer if necessary", denying "Plaintiff's suggestion that [Defendant] has refused most document discovery and limited [its] interrogatory answers". Id. Finally, Defendant argues that it "has made Plaintiff aware [that] [EWU], a New Jersey Corporation, changed its name to [VAI] and recorded the name change with [the] New Jersey Director of Revenue in November of 2010". Id. at 11-12. Given the above factors, Defendant argues that any "perceived delay" is attributable to Plaintiff and not Defendant. Id. at 12-13.
Citing L. PAT. R. 3.7, Defendant "seeks leave to supplement its original Invalidity Contentions" with "additional prior art references that it contends invalidate [Plaintiff's] patents-in-suit" — specifically, "U.S. Patent No. 5,744,806 to Frojd" and "Japanese Pub. No. 2000-217810 to Rika". See Def.'s Letter dated January 12, 2012 at 2. Defendant maintains that "the two new prior art references cited in [its] proposed supplemental contentions became truly material ... to the issue of invalidity of the patents-in-suit ... [for the first time] on August 23, 2011 when [Plaintiff] ... made arguments in [the] reexamination proceedings to avoid invalidity findings by the assigned examiner". See Def.'s Reply Letter dated February 3, 2012 at 1. On September 22, 2011, Defendant "addressed [Plaintiff's] new argument by identifying the previously uncited prior art" and asserting that Plaintiff's "arguments to avoid the reexaminer's finding of invalidity were unavailing". Id. at 1-2. Defendant notes that it provided its "proposed supplemental Invalidity Contentions ... to [Plaintiff] on December 22, 2011", together with "citations to KSR International Co. v. Teleflex Inc., et al., 550 U.S. 398, 415-16 (2007)", and asserts that the "supplemental contentions specifically reference and provide copies of the prior art referenced above that only first became relevant after the submission of [Defendant's original] Invalidity Contentions". See Def.'s Letter dated January 12, 2012 at 2. Further, Defendant argues that it is "in the interests of justice that the lawsuit and reexamination proceeding have at issue the same prior art and arguments regarding invalidity of the patents-in-suit". Id. "Plaintiff has been in receipt of these references, arguments and claim charts for several months and cannot be prejudiced by this supplementation" nor should this supplementation "impact the claims construction briefing or hearing schedule". Id. Based upon the history of this case together with the arguments advanced here, Defendant maintains that it "has provided good cause to allow supplementation of its invalidity contentions". Id. at 2-3.
Citing Int'l Dev., LLC v. Simon Nicholas Richmond and Adventive Ideas, LLC, 2010 WL 3946714, at *3 (D.N.J. 2010), Defendant contends that there are "four factors to address regarding `good cause' for amending Invalidity Contentions: (1) the reason for the delay and whether a party has been diligent; (2) the importance of what is to be excluded; (3) the danger of unfair prejudice; and (4) the availability of a continuance and the potential impact of a delay on judicial proceedings". See Def.'s Reply Letter dated February 3, 2012 at 3. Defendant claims that "the potential materiality of the prior art references ... [that it] seeks to add ... [was] not ... manifested until after original Invalidity Contentions ... [were] served on [Plaintiff]" and, therefore, "any `delay' in identifying the references was caused by Plaintiff's recent arguments made during reexamination". Id. "Although [Defendant] believes that the references cited in its original Invalidity Contentions prove that the asserted claims in this suit are invalid, [Plaintiff] is likely to make similar arguments in this suit to those raised for the first time on August 23, 2011 in the reexamination proceedings" such that "[i]f the Court denies [Defendant's] present request and construes the subject limitations as requested by [Plaintiff], otherwise invalidating prior art may not be before the Court". Id. Defendant argues that Plaintiff "cannot be prejudiced by the requested supplementation" because "Defendant provided [Plaintiff] with everything required under the Local Patent Rules for Invalidity Contentions" on September 22, 2011 in response to Plaintiff's new arguments in the reexamination proceedings. Id. Rather, citing Bettcher Indus. v. Bunzl USA, 661 F.3d 629, 649 (Fed. Cir. 2011) and LMT Mercer Group, Inc. v. Maine Ornamental, LLC, 2011 WL 2039064, at *2 (D.N.J. 2011), Defendant asserts that "it would be manifestly unjust to have two separate proceedings address validity of the same patents where the same prior art was not considered by their triers of fact" because it would leave "the possibility of [an] inconsistent decision on validity". Id. at 3-4. "[W]hatever estoppel effect might be afforded under 35 U.S.C. § 315(c) cannot take effect as a matter of law until the [US]PTO proceedings reach their conclusion" such that Defendant's "request to supplement its Invalidity Contentions may become moot (either based on the estoppel provision or the [US]PTO's final confirmation of its first Office Action cancelling all claims of the patents-in-suit)" only "if this suit is stayed pending reexamination". Id.
Citing Int'l Dev., LLC, 2010 WL 3946714, at *2 and Mondis Tech., Ltd. v. LG Elec., Inc., 2011 WL 2149925, at *3 (E.D. Tex. 2011), Defendant contends that "[d]iligence ... is not a draconian requirement of perfection and clairvoyance" and "does not require that parties perfectly anticipate novel arguments, theories, or newly discovered evidence". Id. at 4. Defendant maintains that "[t]he depth and detail of the reexamination request alone illustrate[s] ... [its] diligence in searching and analyzing prior art" and that it "was not a lack of diligence that led to ... [Defendant's] request to supplement" but, rather, Plaintiff's "arguments in reexamination to overcome the examiner's rejection of the claims based upon [Defendant's] cited prior art" which was a "new argument" developed by Plaintiff "after the time for [Defendant's] Invalidity Contentions had passed". Id. "[W]ithin 30 days of [Plaintiff's] novel interpretation", Defendant notes that it "submitted supplemental comments in the reexamination proceeding including copies of the now material prior art ..., narrative descriptions of its arguments, and detailed claim charts" and that all of this material "was served on [Plaintiff's] ... counsel ... in late September [2011]". Id. at 4-5. Defendant argues that "[s]tanding alone, this disclosure itself would be sufficient to satisfy ... [the requirements] of L. Pat. R. 3.7". Id. at 5. On December 22, 2011, "while in the midst of briefing claim construction,... [Defendant] sought [Plaintiff's] consent to formally move the Court for an order allowing supplementation of [its] Invalidity Contentions to incorporate the prior art, arguments, and claim charts previously provided to [Plaintiff]". Id. Citing Icon Health & Fitness, Inc. v. Octane Fitness, LLC, 2010 WL 1839326, at *5 (D. Minn. 2010), Defendant argues that "[e]ven if ... [it] could have sought leave of Court earlier, this is not a reason to deny supplementation at this time — particularly when the litigation will not be negatively impacted ... and the opposing party has not (and cannot) assert prejudice". Id.
Plaintiff notes that although the time to serve Invalidity Contentions expired on July 20, 2011, Defendant waited until "the last possible date" to serve its contentions despite "admitt[ing] ... [that it] formed its invalidity opinion as early as April 13, 2010". See Pl.'s Letter dated January 18, 2012 at 1-2. "Thus, [Defendant] had well over a year from the time it formed its invalidity opinion in which to solidify and articulate its Invalidity Contentions" and it "also had nearly ten months from when the Complaint was filed, nearly eight months from when the Complaint was served, and nearly four months from when it wrote its invalidity opinion at length and in detail in its requests for reexamination of both patents-in-suit". Id. Plaintiff maintains that Defendant "had more than ample opportunity to complete and serve its Invalidity Contentions by the July 20, 2011 deadline" such that "[i]ts proposed supplement to those contentions represents nothing more than its still-evolving theory of invalidity". Id. Further, Plaintiff contends that applicable local rules regarding Invalidity Contentions "are negated if a party's contentions are open ended". Id.
Plaintiff argues that "by the time it filed its reexamination requests on March 25, 2011 ... [,] [Defendant] had fully developed its invalidity theories" given that its "request for reexamination of the `763 patent included more than 100 pages of argument and more than 130 pages of claim charts asserting eight different references" and given that its "request for reexamination of the `022 patent was even longer". Id. at 2. Plaintiff notes that the "two documents which [Defendant] identifies in its letter were available to [Defendant] long before its Invalidity Contentions were due" given that "U.S. Patent No. 5,744,806 ... was published in 1998" and "Japanese Patent Publication No. 2000-217810 ... was published in 2000" and given the fact that Defendant "does not dispute ... that it knew of those references when it served its contentions in July 2011". Id. "Even if [Defendant] discovered these references only after its Invalidity Contentions were due, they were publicly available". Id.
Further, Plaintiff argues that Defendant's "contention ... that these additional references `only first became relevant' after the deadline for serving Invalidity Contentions had passed" based upon Plaintiff's August 2011 submissions to the USPTO "is incorrect and contradicted by [Defendant's] own statements in the reexamination proceedings". Id. Specifically, "when it submitted the Frojd publication to the USPTO", Plaintiff maintains that Defendant informed the Patent Examiner that
Id. at 2-3. Separately, when it submitted "the Rika publication", Defendant stated that
Id. at 3. Thus, Plaintiff contends that "by its own admission to the USPTO, [Defendant] submitted these additional references not in connection with any dispute over the meaning of claim terms but in response to [Plaintiff's] identification of claim features which were absent from the references submitted by [Defendant] in the first instance". Id.
However, even if the Court accepts Defendant's representation about relevance, Plaintiff argues that Defendant's request for leave to supplement is untimely. Id. Defendant "submitted the Frojd and Rika references along with claim charts and corresponding Invalidity Contentions to the USPTO on September 24, 2011" but "waited more than three months to seek ... leave to amend its contentions in this case". Id. Plaintiff maintains that Defendant's "request to infuse new theories of invalidity some twenty-one months after it formed its opinion that the patents-in-suit are invalid, thirteen months after it gave actual notice to [Plaintiff] of those opinions, six months after its Invalidity Contentions were due, and three months after it submitted its new theories to the USPTO in writing does not remotely approach the `timely application' requirement" of L. PAT. R. 3.7. Id.
Plaintiff contends that Defendant's "proposed supplementation would serve no purpose other than to waste time and resources" given that Defendant "will be precluded by statute from pursuing any invalidity challenge in this case based on the references it is now asking ... [the Court's] permission to add to its contentions". Id. Citing 35 U.S.C. § 315(c) and given that the USPTO "has already issued its section 1313 orders on [Defendant's] requests for reexamination of the patents-in-suit", Plaintiff maintains that Defendant "will be estopped from asserting invalidity in this litigation based on any of the prior art which it already relied upon in the reexamination proceeding" — including "the additional Rika and Frojd publications which [Defendant] now seeks to add to this litigation" — for "any asserted claim that the USPTO confirms to be patentable". Id. at 3-4. "Conversely, for any claim which the USPTO might cancel at the conclusion of its reexamination, [Defendant's] invalidity contentions will be moot". Id. at 4. Plaintiff argues that Defendant's "assertion in its letter that including the same prior art in its Invalidity Contentions that it already submitted in the pending reexamination proceedings is somehow `in the interests of justice' is irresponsibly incorrect ... and plainly far short of the good cause showing required by ... L. PAT. R. 3.7". Id.
Plaintiff contends that in the ACP related to the `022 patent, "the USPTO Examiner explained why none of the references submitted by [Defendant], including Rika, renders the asserted `022 patent claims unpatentable" and "confirm[ed] the patentability of each asserted and amended claim in that patent". See Pl.'s Letter dated March 2, 2012 at 1. Similarly, Plaintiff contends that in the ACP related to the `763 patent, "the USPTO Examiner again explained why none of the references submitted by [Defendant], including both Rika and Frojd, renders the claim unpatentable" and "confirm[ed] the patentability of one of the asserted and unamended claims in that patent". Id. Noting that it has "one month from the date of each ACP to submit comments" and that Defendant "would have thirty days to submit a response" only if Plaintiff chooses to submit comments, Plaintiff cites 37 C.F.R. § 1.953(c) and asserts that "[a]fter [the] comment period expires ... the USPTO will issue a Right of Appeal Notice in each case". Id. at 2. "If no appeal is taken, the USPTO will issue a reexamination certificate in accordance with the Examiner's findings" and thereafter, pursuant to 35 U.S.C. § 315(c), Plaintiff maintains that "a third-party requester of the reexamination is estopped from asserting invalidity in litigation based upon any ground which was raised or which could have been raised in the reexamination proceeding". Id. Here, given that Defendant "based its argument for a stay in part on its contention that the Examiner's initial decision rejecting [Plaintiff's] patent claims created a `high probability' that the USPTO ultimately [would] decide that they [were] invalid", Plaintiff argues that because "the Examiner has confirmed asserted claims as patentable in the ACPs, there is an even higher probability that these claims will survive reexamination without amendment". Id. Citing Tesco Corp. v. Weatherford Int'l, Inc., 722 F.Supp.2d 755, 763 (S.D. Tex. 2010), Plaintiff maintains that the findings in the ACPs "evidence[s] the prejudice ... [that will accrue to Plaintiff] if the case is stayed". Id. As such, Plaintiff argues that "[t]he circumstances of this case do not warrant a stay". Id. at 4.
Plaintiff notes that VAK filed is Answer on January 31, 2012, therein "including counterclaims that each of the patents-in-suit is invalid based upon the same prior art that the USPTO ... [is] consider[ing] in the pending reexamination proceedings". Id. Citing Antor Media Corp. v. Nokia, Inc., 2006 U.S. Dist. LEXIS 96777, at *20 (E.D. Tex. 2006), Plaintiff maintains that the tactic utilized by Defendants "is transparent": "[if] they lose in reexamination on arguments presented there under the identity of [VAI], they will attempt a second bite at the apple by pursuing the same invalidity contentions in this case under the identity of [VAK]". Id. at 2-3. However, "[e]ven where co-defendants are unrelated and the reexaminations are ex parte, other courts have attempted to avert that injustice by requiring each defendant to stipulate that it will not challenge validity in litigation based on any prior art that was considered during the reexamination". Id. at 3. Citing LMT Mercer Group, Inc. v. Maine Ornamental, LLC, 2011 U.S. Dist. LEXIS 55549, at *36 (D.N.J. 2011), Plaintiff argues that "[t]he facts here are even stronger in favor of imposing such a stipulation" given that "Defendants admittedly are related companies" and given that "the pending reexaminations are inter partes". Id. Further, Plaintiff notes that VAI and VAK "have been represented by the same counsel in this case since well before either of the patent reexaminations was requested", that Plaintiff's "infringement contentions identify the same accused products for both [VAI and VAK]", that VAI and VAK's "interests involved in this case and in the reexaminations are identical", and that "both reexaminations were requested by an attorney at the same firm that represents both [VAI and VAK] in this case". Id.
Plaintiff argues that "[i]t would be highly prejudicial and unfair for [VAK] to affirmatively rely upon the reexamination requests and proceedings as a basis for its allegation that its infringement was not willful and simultaneously divorce itself from those same proceedings so as to avoid the estoppel effect of a final determination of patentability by the USPTO". Id. at 4. In fact, "[e]ven [VAI's] motion to stay argues that `inter partes reexamination has certain estoppel effects against the litigants'". Id. "Irrespective of whether the case is stayed, [VAK] should be recognized as a real party in interest in the requests for reexamination of the patents-in-suit ... and subject to the same estoppel consequences as [VAI]". Id. Plaintiff claims that "[w]ithout that check in place, the pending inter partes reexaminations would serve no purpose other than to permit ... [Defendants] to unfairly hedge their bets against unfavorable results in the USPTO by retaining the unfettered future opportunity to raise the same contentions in this Court". Id.
Defendant notes that "[a] detailed background on the reexamination proceedings was set forth in [its] briefing in support of ... [the Motion] ... as well as [its] more recently filed factual update... ". Id. at 3. Defendant also notes that in this litigation, Plaintiff's Infringement Contentions include "claims 1-2, 4, 6, 17-18, and 21 of the `763 patent and claims 17 and 25 of the `022 patent". Id.
Defendant claims that the USPTO's ACPs, issued pursuant to 37 C.F.R. § 1.949, "continued ... [the examiner's] rejection of the majority of the patents' claims but confirmed others". Id. Specifically, "the examiner preliminarily confirmed claims 17 and 25 of the `022 patent and claim 21 of the `763 patent" while finding that "claims 1 and 3-15 of the `022 patent and claims 1-19 of the `763 patent should be rejected ... as the same are invalid as anticipated (35 U.S.C. § 102) in light of the cited prior art". Id. Thus, "six of the nine claims asserted by Plaintiff in this litigation stand rejected". Id. Moreover, Defendant maintains that "[t]his is not the end of either reexamination proceeding" based upon the comment period set forth at 39 C.F.R. § 1.951 and the fact that "Plaintiff may still include a proposed amendment to the claims to salvage them from an ultimate rejection". Id. Thereafter, pursuant to 39, C.F.R. § 1.953 and MPEP § 2601.01, "the examiner may either reopen prosecution and issue another Office action on the merits or issue a Right of Appeal Notice". Id. Finally, "there is the possibility of successive proceedings before the Patent Trial and Appeal Board ("Board") prior to issuance of any final decision". Id. Based on the above, Defendant argues that the ACPs are "interim in nature ... and do not complete the reexamination process for either the `763 or `022 patents". Id.
As set forth more fully in Defendant's earlier arguments, Defendant reiterates that "a stay pending reexamination of the patents-in-suit provides significant advantages in savings of costs and time for the parties and the Court, including the simplification of issues and the creation of an admissible record at trial of the [US]PTO proceedings". Id. at 4. Citing LG Electronics USA v. Whirlpool Corporation, 2011 WL 5599718, at *1 (D.N.J. 2011), Eberle III v. Harris, 2005 WL 6192865, at *1 (D.N.J. 2005), and ICI Uniqema, Inc. v. Kobo Prod., Inc., 2009 WL 4034829 (D.N.J. 2009), Defendant contends that "the fact that some claims have been confirmed ... but others have not ... does not militate against a stay". Id. Further, Defendant argues that "Plaintiff's suggestion that the confirmation of certain claims in the interim orders somehow changes the Court's analysis relative to the pending motion to stay" and reliance on Tesco Corp. v. Weatherford Int'l, Inc., 722 F.Supp.2d 755, 763 (S.D. Tex. 2010) are both wrong and inapposite. Id. "Unlike Tesco", a case where the court "found prejudice based on the fact that the parties ... were direct competitors", in this case "Plaintiff has admitted that it is not a direct competitor to [Defendant] ..., eliminating any ... prejudice any making this case more like LG Electronics". Id. Defendant claims that "Plaintiff all but concedes that a stay here is proper" in its supplemental briefing and that "[t]he majority of [its] letter is nothing more than a last-ditch effort to impose some vague and undefined condition on [VAK] with respect to an alternate order staying this litigation", therein providing "no real basis for such a condition in this case" and failing to "describe what such a condition could possibly contain". Id.
Defendant asserts that "Plaintiff's suggestion that any defendant in this action is looking for `two bites' at the apple rings hollow" given that VAI "filed both its motion to stay and its request for leave to supplement its Invalidity Contentions while [VAK's] motion to dismiss ... was pending". Id. at 4-5. "Whatever estoppel effect the inter partes reexamination proceeding may or may not have on the parties should not be the subject of a last-ditch request for a condition and stay" and "[a]ny impact of the reexamination proceedings should be analyzed at their conclusion ... ". Id. at 5. In sum, Defendant argues that "the majority of the claims asserted by Plaintiff stand rejected by the [US]PTO" and Plaintiff "admits that there are additional proceedings before the examiner (and potentially the Board) in both reexaminations". Id. "Under [these] circumstances", Defendant maintains that "a stay pending finality of the reexamination process is appropriate and will without question promote judicial economy". Id.
Defendant claims that "the assigned examiner did not fully evaluate the validity of the claims of the `022 and `763 patents" in its interim orders by "refus[ing] to review the patents' claims for obviousness under 35 U.S.C. § 103 as submitted by [Defendant]", therein stating that Defendant "failed to provide enough specifics in its petition for reexamination to show why one skilled in the art would have combined the cited prior art references and § 103 to show invalidity by obviousness". Id. Defendant notes that the examiner made this finding while "explicitly agree[ing] with [Defendant] that `the prior art references disclose the claim limitations'", suggesting that Defendant "somehow `waived' its right to provide a rationale for combination of these references in its initial papers". Id. "The examiner's decision is not only incorrect, but an improper procedural decision that contradicts the Manual of Patent Examining Procedure ("MPEP")" because "[i]f the examiner perceived that [Defendant] had failed to provide sufficient rationale to combine references for purposes of an obviousness review", pursuant to MPEP §§ 2617, 2627 "the examiner was required to provide [Defendant] a `Notice of Deficiency' and allow it ... [the opportunity] to cure the purported deficiency". Id. Defendant maintains that in this instance, "[n]o notice of deficiency issued"; nevertheless, Defendant "provided explanation for combination of the cited references in its Supplemental Comments ... which the examiner apparently disregarded". Id. Citing Mars, Inc. v. H.J. HJ Heinz Co., LP, 377 F.3d 1369 (Fed. Cir. 2004), Defendant argues that "this [was] a clear violation of the procedural rules outlined in the MPEP which the examiner must follow" and "will likely lead to the reopening of the reexamination of the three erroneously confirmed claims of the patent-in-suit at issue". Id. Defendant is "confident that once its arguments are fully considered, the remaining claims will ultimately be rejected". Id.
Defendant claims that it "has met its requirement of showing good cause to supplement its [Invalidity] Contentions" and that this "request ... [does] not in any way relate to the interim order[s] ... [issued] by the examiner". Id. at 6. Defendant maintains that Plaintiff's "argument regarding estoppel cannot change the fact that [Defendant] has met its requirement of showing good cause" because "whether any ultimate estoppel might be afforded under 35 U.S.C. § 315(c) has nothing to do ... with [Defendant's] Invalidity Contentions or the interim orders". Id. Citing Bettcher Indus. v. Bunzl USA, 661 F.3d 629, 649 (Fed. Cir. 2011), Defendant contends that "whatever estoppel effect might be afforded cannot take effect as a matter of law until the reexamination proceedings reach their conclusion". Id. "If this suit is stayed pending reexamination, [Defendant's] request to supplement its Invalidity Contentions may become moot (either based on the noted estoppel provision or the [US]PTO's final confirmation of its first Office Action cancelling all claims of the patents-in-suit)". Id. However, "[u]nless there is a stay pending reexamination,... the validity positions will be at issue before this Court and the [US]PTO at the same time" such that "[i]f the same prior art is not put at issue in both proceedings, it risks the possibility of inconsistent decision on validity". Id. Citing LMT Mercer Group, Inc. v. Maine Ornamental, LLC, 2011 WL 2039064, at *2 (D.N.J. 2011), Defendant notes that in other cases "this Court has confirmed that there is significant prejudice to a defendant where a patent found invalid by the [US]PTO nevertheless is found valid in parallel litigation". Id. Based on the above, Defendant argues that "[t]here is simply no impact whatsoever of the [US]PTO's interim orders on [Defendant's] request to supplement its Invalidity Contentions". Id.
It is well-settled that "the 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. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance." Landis v. North American Co., 299 U.S. 248, 254-55 (1936)(citing Kansas City Southern Ry. Co. v. U.S., 282 U.S. 760, 763 (1931); Enelow v. New York Life Ins. Co., 293 U.S. 379, 382 (1935)). "Especially in cases of extraordinary public moment, the individual may be required to submit to delay not immoderate in extent and not oppressive in its consequences if the public welfare or convenience will thereby be promoted." Id. at 256. Unquestionably, "a United States district court has broad power to stay proceedings." Bechtel Corp. v. Laborers' International Union, 544 F.2d 1207, 1215 (3d. Cir. 1976). "In the exercise of its sound discretion, a court may hold one lawsuit in abeyance to abide the outcome of another which may substantially affect it or be dispositive of the issues." Id.; see also American Life Ins. Co. v. Stewart, 300 U.S. 203, 215 (1937). However, "it is well settled that before a stay may be issued, the petitioner must demonstrate `a clear case of hardship or inequity', if there is `even a fair possibility' that the stay would work damage on another party." Gold v. Johns-Mansville Sales Corp., 723 F.2d 1068, 1075-76 (3d Cir. 1983)(citing Landis v. North American Co., 299 U.S. 248, 255 (1936)).
With respect to patent cases, courts have "consistently recognized the inherent power of the district courts to grant a stay pending reexamination of a patent". P&G v. Kraft Foods Global, Inc., 549 F.3d 842, 849 (Fed. Cir. 2008); see also Gould v. Control Laser Corp., 705 F.2d 1340, 1341 (Fed. Cir.), cert. denied, 464 U.S. 935 (1983); Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426 (Fed. Cir. 1988). However, "a stay should ordinarily not be granted unless there is a substantial patentability issue raised" and "both a preliminary injunction and a stay ordinarily should not be granted at the same time" because this "could subject an accused infringer to unfair and undesirable delay in reaching a final resolution". P&G, 549 F.3d at 849; see also Amazon.com v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350-51 (Fed. Cir. 2001).
"A district court is not required to stay a proceeding pending reexamination", although "one purpose of the reexamination procedure is to eliminate trial of that issue (when the claim is cancelled) or to facilitate trial of that issue by providing the district court with the expert view of the [US]PTO (when a claim survives reexamination proceedings)". Cross Atl. Capital Partners., Inc. v. Facebook, Inc., 2008 U.S. Dist. LEXIS 62869, at *2 (E.D. Pa. 2008); see also Viskase Corp. v. Am. Nat'l Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001). "[G]ranting a stay is favored" and is "particularly appropriate when the reexamination result might assist the court in making a validity determination or would eliminate the need to make an infringement determination". Id. at *2-3; see also Alltech, Inc. v. Cenzone Tech, Inc., 2007 U.S. Dist. LEXIS 19989 (S.D. Cal. 2007); ASCII Corp v. STD Entm't USA, Inc., 844 F.Supp. 1378, 1381 (N.D. Cal. 1994); In re Cygnus Telecomm. Tech., LLC Patent Litig., 385 F.Supp.2d 1022, 1023 (N.D. Cal. 2005). In fact, "[a]lthough every case is fact specific, almost every reported New Jersey District Court opinion that has considered the issue has granted a stay where a reexamination request was pending". Brass Smith, LLC v. RPI Indus., 2010 U.S. Dist. LEXIS 116063, at *19-20 (D.N.J. 2010).
However, "litigation and reexamination are not mutually exclusive alternatives for the parties to test the validity of a patent — they may be concurrent proceedings". BarTex Research v. FedEx Corp., 611 F.Supp.2d 647, 650 (E.D. Tex. 2009); see also Ethicon, 849 F.2d 1422, 1427-28. District courts are "under no obligation to delay [their] own proceedings by yielding to ongoing [US]PTO patent reexaminations, regardless of their relevancy to infringement claims which the court must analyze". MercExchange, L.L.C. v. eBay, Inc., 500 F.Supp.2d 556, 563 (E.D. Va. 2007). Adoption of a "per se rule that patent cases should be stayed during reexamination ... would not promote the efficient and timely resolution of patent cases, but would invite parties to unilaterally derail timely patent case resolution by seeking reexamination". Soverain Software LLC v. Amazon.com, Inc., 356 F.Supp.2d 660, 663 (E.D. Tex. 2005).
"Courts have enumerated many advantages with respect to staying a civil action pending [US]PTO reexamination of a patent, which include: (1) a review of all prior art presented to a court by the [US]PTO, with its particular expertise; (2) the potential alleviation of numerous discovery problems relating to prior art by [US]PTO examination; (3) the potential dismissal of a civil action should invalidity of a patent be found by the [US]PTO; (4) encouragement to settle based upon the outcome of the [US]PTO reexamination; (5) an admissible record at trial from the [US]PTO proceedings which would reduce the complexity of the litigation; (6) a reduction of issues, defenses and evidence during pre-trial conferences; and (7) a reduction of costs for the parties and a court". ICI Uniqema, Inc. v. Kobo Prods., Inc., 2009 U.S. Dist. LEXIS 108421, at *3 (D.N.J. 2009); see also Eberle v. Harris, 2005 U.S. Dist. LEXIS 31885 (D.N.J. 2005); GPAC, Inc. v. D.W.W. Enterprises, Inc., 144 F.R.D. 60, 63 (D.N.J. 1992). "District courts have listed the following factors to determine whether a stay is appropriate: (1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set". Cross Atl., 2008 U.S. Dist. LEXIS 62869, at *3-4; see also In re Laughlin Prods. Inc., 265 F.Supp.2d 525, 530-31 (E.D. Pa. 2003); Sabert Corp. v. Waddington North Am., Inc., 2007 U.S. Dist. LEXIS 68092 (D.N.J. 2007); Alltech, 2007 U.S. Dist. LEXIS 19989; Cygnus, 385 F. Supp. 2d at 1023; Xerox Corp. v. 3Com Corp., 69 F.Supp.2d 404, 406 (W.D.N.Y. 1999); ASCII, 844 F. Supp. at 1380; GPAC, 144 F.R.D. at 66; ICI Uniqema, 2009 U.S. Dist. LEXIS 108421, at *4.
The Court also notes that pursuant to 35 U.S.C. § 317(b),
Pursuant to L. PAT. R. 3.7,
The Local Patent Rules "exist to further the goal of full, timely discovery and provide all parties with adequate notice and information with which to litigate their cases." Computer Acceleration Corp. v. Microsoft Corp., 503 F.Supp.2d 819, 822 (E.D. Tex. 2007); see also IXYS Corp. v. Advanced Power Tech., Inc., 2004 U.S. Dist. LEXIS 10934 (N.D. Cal. 2004); STMicroelectronics, Inc. v. Motorola, Inc., 307 F.Supp.2d 845, 849 (E.D. Tex. 2004). "The rules are designed to require parties to crystallize their theories of the case early in the litigation and to adhere to those theories once they have been disclosed." Atmel Corp. v. Information Storage Devices, Inc., 1998 WL 775115, at *2 (N.D. Cal. 1998). Furthermore, courts have recognized that "[t]he party seeking to amend its contentions bears the burden of establishing diligence" (Streak Prods., Inc. v. Antec, Inc., 2010 U.S. Dist. LEXIS 97613, at *5-6 (N.D. Cal. 2010)) and have considered the following factors in determining whether good cause exists to grant leave to supplement invalidity contentions:
See Davis-Lynch, Inc. v. Weatherford Int'l, Inc., 2009 U.S. Dist. LEXIS 1644, at *8 (E.D. Tex. 2009); see also Streak Prods., Inc. v. Antec, Inc., 2010 U.S. Dist. LEXIS 97613, at *5-6 (N.D. Cal. 2010); Sybase, Inc. v. Vertica Sys., 2009 U.S. Dist. LEXIS 110775, at *3-4 (E.D. Tex. 2009); Computer Acceleration, 503 F. Supp. 2d at 822; Garmin Ltd. v. TomTom, Inc., 2007 U.S. Dist. LEXIS 74032 (E.D. Tex. 2007). Rule 3.7 "is not a straitjacket into which litigants are locked from the moment their contentions are served," but instead, "a modest degree of flexibility [exists], at least near the outset." Comcast Cable Communications Corp., LLC v. Finisar Corp., 2007 WL 716131, at *2 (N.D. Cal. 2007). Therefore, while the Local Patent Rules strive to have a party establish their contentions early on, it is important to recognize that "preliminary ... contentions are still preliminary". General Atomics v. Axis-Shield ASA, 2006 WL 2329464, at *2 (N.D.Cal. Aug. 9, 2006).
With respect to Defendant's Motion, the Court finds that advancing this litigation while inter partes reexamination is pending before the USPTO may be an exercise in futility. Although the Court acknowledges that ACPs have been issued by the USPTO with respect to the patents-in-suit pursuant to 37 C.F.R. § 1.949,
See also Eberle v. Harris, 2005 WL 6192865 (D.N.J. 2005).
Further, with respect to the factors used to determine the appropriateness of a stay, the Court finds that they also weigh in Defendant's favor. While the Court appreciates that a stay will delay these proceedings, delay alone is not a sufficient reason to deny a stay. See Stryker Trauma S.A. v. Synthes, 2008 U.S. Dist. LEXIS 23955 (D.N.J. 2008); see also Sorensen v. Black and Decker Corp., 2007 U.S. Dist. LEXIS 66712 (S.D. Cal. 2007). Similarly, while the Court appreciates Plaintiff's contention that Defendant is a competitor which may continue selling infringing goods and eroding market share and goodwill during a stay (see Pl.'s Opp'n Br. at 10-11), Plaintiff did not seek a preliminary injunction in this matter and the Court declines Plaintiff's suggestion to impose any type of restraint on Defendant's business activities at this time. See WABCO Holdings, Inc. v. Bendix Commer. Vehicle Sys., 2010 U.S. Dist. LEXIS 64036, at *8-9 (D.N.J. 2010). Importantly, the Court notes that all of Plaintiff's legal and equitable remedies will be available when the stay is lifted; a stay does not foreclose Plaintiff from any remedy. Given the fact that this case is still in the early stages of discovery, a Markman hearing has not been scheduled, and no trial date has been set, the USPTO's ACPs rejecting some claims — while confirming others — of the patents-in-suit, and the factors cited with respect to the advantages of granting a stay while the USPTO completes a reexamination (see ICI Uniqema, 2009 U.S. Dist. LEXIS 108421, at *3), the Court also finds that a stay may ultimately simplify the issues in question and the trial of this case. As set forth in Sorensen, 2007 U.S. Dist. LEXIS 66712, at *18-19, if the USPTO ultimately does not invalidate or otherwise alter all of the claims of the patents-in-suit, Plaintiff's legal remedies remain unaffected. If the claims of the patents-in-suit are ultimately narrowed, the parties will have benefitted by avoiding the needless waste of resources before this Court and Plaintiff will be able to pursue its claim for monetary damages at trial with respect to any remaining valid claims. If the claims of the patents-in-suit are ultimately confirmed, Plaintiff's position may be strengthened and its likelihood of recovering monetary damages may increase.
Further, based upon the fact that "the Federal Circuit has recently confirmed that the [US]PTO would not be bound in its reexamination by the determinations of [a district court]",
Sorensen, 2007 U.S. Dist. LEXIS 66712, at *15; see also Bausch & Lomb, Inc. v. Alcon Lab., Inc., 914 F.Supp. 951, 952 (W.D.N.Y. 1996). As a result, while the Court appreciates that the Complaint in this case was filed on September 23, 2010 and that the parties have engaged in motion practice and the initial stages of discovery, and based on the fact that a final USPTO decision will be beneficial to the Court by either declaring some/all of the patents-in-suit "unpatentable ... [and thereby] eliminating the need for ... [a] trial" or by finding some/all of the "claims to be valid ... [and thereby] aid[ing] the Court when considering the claims during litigation", the Court finds that failing to grant a stay at this time may in fact prolong, rather than expedite, resolution of this litigation. At this time, the Court also declines to prospectively limit VAI or VAK's ability to challenge the validity of the patents-in-suit based upon prior art cited in the pending inter partes reexamination. Id.; see also GPAC, 144 F.R.D. at 65-66; Gould, 705 F.2d at 1342.
With respect to Defendant's application to serve Supplemental Invalidity Contentions, although the Court notes that the application itself comes approximately five (5) months after Plaintiff's submissions to the USPTO
The Court having considered the papers submitted and opposition thereto, and for the reasons set forth above;
