Stay Pending Inter Partes Review Denied Because Defendant Waited Too Long to File the Petition and Court Had Dedicated Resources to Determining Claim Construction

May 13, 2013

Defendant Universal Remote Control, Inc. ("Universal Remote") filed a motion to stay a patent infringement action filed by Universal Electronics, Inc. ("Universal Electronics") pending an Inter Partes Review in the United States Patent and Trademark Office ("PTO"). Universal Remote and Universal Electronics are competitors in the universal remote control business.

Prior to the Markman hearing, Universal Remote filed a notice of intent to file petitions for Inter Partes Review, notifying the Court that it was preparing to file a motion to stay the case pending the outcome of the PTO proceedings. Before the motion to stay was filed, the district court held the Markman hearing and issued its claim construction order.

As the district court explained, "[w]hile inter partes review is new, at least one court has already analyzed motions to stay pending inter partes review using the framework applicable to motions to stay pending reexamination, and the Court does so now. See Semiconductor Energy Lab. Co., Ltd. v. Chimei Innolux Corp., No. SACV 12-0021 JST (JPRx), 2012 WL 7170593, at *1, n.1 (C.D. Cal. Dec. 19, 2012) ("The Court sees no reason why the three factor assessment would not still be relevant [to the new inter partes review proceeding]."). Three significant factors in deciding whether to stay an action are: "(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party." Aten Int'l Co., Ltd v. Emine Tech. Co., Ltd., No. SACV 09-0843 AG (MLGx), 2010 WL 1462110, at *6 (C.D. Cal. Apr. 12, 2010) (quoting Telemac Corp. v. Teledigital, Inc., 450 F. Supp. 2d 1107, 1111 (N.D. Cal. 2006))."

The district court then examined the stage of the proceeding and found that the court's time in spending a substantial effort construing the claims weighed against a stay. "While not much discovery has occurred, Defendant did not file its inter partes review petitions until almost a year after being served with the complaint, and during that time the Court spent substantial effort construing the claims. The Court's expenditure of resources is an important factor in evaluating the stage of the proceedings. See Interwoven, Inc. v. Vertical Computer Sys., Inc., No. C 10-04645 RS, 2012 WL 761692, at *4 (N.D. Cal. Mar. 8, 2012) (denying stay, noting that discovery was well underway, but that "[m]ore importantly, the parties have fully briefed the issue of claim construction, attended a Markman hearing, and received a claim construction order."); APP Pharm., LLC v. Ameridose LLC, CIV.A. No. 10-4109 JAP, 2011 WL 816622, at *2 (D.N.J. Mar. 8, 2011) ("The Court having invested significant resources in becoming familiar with the patents, relevant art, the parties' drug products, claim construction and the like, it would be a waste of judicial resources to put off litigating the instant matter for the length of time necessary to conclude the reexamination process."). That the schedule in this case set discovery to occur after claim construction does not mean that the case remains in its procedural infancy until discovery is well underway. While prior art searching and preparing PTO petitions takes time, and inter partes review was not available until mid-September 2012, Defendants could have filed its petitions and this motion before claim construction. This factor weighs against a stay."

Turning to the simplification of the issues, the district court determined that "[t]he undecided status of the petitions clouds the simplification inquiry. While courts have granted stays before the USPTO has issued a reexamination order, see,. e.g., ASCII, 844 F. Supp. at 1380-81, the fact that the petitions have not yet been granted or denied makes it more difficult to predict whether the issues are likely to be simplified. If the PTO grants inter partes review, the issues would likely be simplified, either through invalidation of claims or by narrowing Defendant's defenses through estoppel. This factor weighs in favor of a stay."

In addition, looking at the issue of undue prejudice, the district court concluded that "[a]s to Plaintiff's concern that Defendant's motion is a tactical move to delay trial, the fact is that neither party has acted particularly quickly here. Plaintiff sent Defendant a letter accusing it of infringement on March 10, 2010, but did not file the present action until March 2012, almost five years after the expiration of the '067 Patent and shortly before the expiration of the '426 Patent. See Du Pont, 2012 WL 2995182, at *5 (noting that "[d]elay is a two way street" and that "given [plaintiff]'s concerns over lost profits, goodwill and market share, the Court wonders why [the plaintiff] did not file an infringement suit sooner."). To the extent Defendant sought a tactical advantage, it appears to have been to obtain the Court's claim construction before filing its inter partes review petitions, perhaps to see if they were necessary, as Defendant
did not petition for review of the '367 Patent, which the Court's claim construction removed from consideration in this case. That strategy negatively impacted the likelihood that this motion would be granted, but nothing suggests that Defendant sought tactical delay."

As a result, the district court concluded that this factor weighed against a stay, but only slightly so given the plaintiff's own delay.

Finally, the district court noted that "[t]he three-factor analysis just discussed, while important, does not capture every relevant consideration. "Although many courts have focused on the [three factors], absent any controlling precedent limiting the inquiry to these elements, the Court finds that the analysis is not so limited but rather that 'the totality of the circumstances governs.'" Allergan, 2009 WL 8591844, at *2 (quoting Broadcast Innovation L.L.C. v. Charter Commc'ns, Inc., CIV.A. No. 03-CV-2223-ABJ-BNB, 2006 U.S. Dist. LEXIS 46623, at *13 (D. Colo. July 11, 2006)). Another consideration is the Court's ability to control its docket to ensure that cases are managed in the interest of justice. The Court is concerned that allowing the progress of its docket to depend on the status of proceedings elsewhere can interfere with its obligation "to secure the just, speedy, and inexpensive determination of every action." Fed. R. Civ. P. 1. "If litigation were stayed every time a claim in suit undergoes reexamination, federal infringement actions would be dogged by fits and starts. Federal court calendars should not be hijacked in this manner." Comcast Cable Commc'ns Corp., LLC v. Finisar Corp., No. C 06-04206 WHA, 2007 WL 1052883, at *1 (N.D. Cal. Apr. 5, 2007). This consideration weighs against a stay."

Accordingly, the district court denied the motion to stay.


Universal Electronics, Inc. v. Universal Remote Control, Inc. Case No. SACV 12-00329 AG (JPRx) (C.D. Cal. May 2, 2013)

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