Apple Motion to Stay Litigation Pending an IPR Is Denied by the District Court for the Northern District of California

November 11, 2014

In the matter pending in the Northern District of California, Aylus Networks, Inc. v. Apple, Inc., Apple moved to stay the litigation pending inter partes review of the patent-in-suit. On October 9, 2013, plaintiff Aylus Networks filed suit against Apple for infringement of U.S. Patent No. RE44,414. On September 29, 2014, Apple filed two petitions for inter partes review of the '414 patent. On September 30, 2014, Apple filed the instant stay motion.

The Court began by reciting the applicable law, particularly in cases such as this one where the motion to stay was sought before the PTAB instituted any proceedings against the patent-in-suit:

Courts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO reexamination." Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (citations omitted). However, a "court is under no obligation to delay its own proceedings" where parallel litigation is pending before the PTAB. See Robert Bosch Healthcare Systems, Inc. v. Cardiocom, LLC, C-14-1575 EMC, 2014 WL 3107447 at *2 (N.D. Cal. Jul. 3, 2014). This is especially true when the Patent Office has yet to decide whether to institute IPR proceedings. See, e.g., VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1315-16 (Fed. Cir. 2014) (noting that the case for a stay is "stronger after post-grant review has been instituted"); Loyalty Conversion Sys. Corp. v. American Airlines, Inc., 13-CV-665, 2014 WL 3736514 at *1-2 (E.D. Tx. Jul. 29, 2014) (Bryson, J.) (noting that the "majority of courts . . . have denied stay requests when the PTAB has not yet acted on the petition for review").

In determining whether to stay this litigation, the Court considers three factors: "(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 non-moving party." Robert Bosch, 2014 WL 3107447 at *3 (citation omitted).

Turning to the first factor, the Court determined that the first factor was neutral because although no trial date had been set and no dispositive motions had been filed, the parties already had undertaken considerable discovery and briefed claim construction. As such the Court held that "while the case is not in its infancy, it is not in its adolescence either."

In terms of the second factor (the simplification of the issues and trial), the Court relied on the fact that the IPR petitions had not yet been instituted -- "[b]ecause it is speculative whether the PTAB will grant the petition, the second factor does not cut in favor of a stay."

Finally, the Court held that the third factor (prejudice to the non-moving party) also was neutral. The Court stated that while the plaintiff "might be spared a great deal of expense and effort if PTAB's review resolved this dispute," the plaintiff contends that "staying the proceedings will cause further expense and delay, and will prejudice them regardless of whether the petition is granted or denied." Accordingly, the Court viewed this factor as neutral.

Citing the eighteen months between the filing of the action and a decision by the PTAB on the petition and the neutrality of the three factors, the Court denied Apple's "pre-institution" stay of the proceedings.

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This decision illustrates the importance of seeking post-grant review of a patent-in-suit and moving for a stay pending the post-grant review early in the litigation, ideally before the litigation moves into its adolescence. This decision also underscores that courts can be reluctant to attribute any simplification of the issues until the post-grant review actually is initiated and becomes more than a possibility. Aylus Networks, Inc. v. Apple, Inc., Case No. C-13-4700, Docket No. 61 (N.D. Cal. Nov. 6, 2014) (J. Chen)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. The authors represent inventors, patent owners and technology companies in patent licensing and litigation in U.S. District Courts and in the United States Patent and Trademark Office, including numerous IPRs currently pending before the PTAB. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Greg Cordrey at 949.623.7236 or GCordrey@jmbm.com.