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District Court Denies Stay Based on Inter Partes Review (“IPR”) Where Less than 25% of Claims at Issue were Subject to IPR

Defendants HTC America, Inc., HTC Corporation, AT&T Mobility LLC, Cellco Partnership, Sprint Spectrum L.P., Kyocera Corporation, Boost Mobile, T-Mobile USA, Inc. and ZTE (USA), Inc. filed a motion to stay pending resolution of an inter partes review before the Patent Trial and Appeal Board (“PTAB”).

The court began its analysis by explain that “[p]art of the quid pro quo of any stay pending inter partes review before the Patent Office is the promise of simplification. Not a guarantee, to be sure, but at least a promise that in exchange for freezing a case on the court’s docket, significant issues may go away for good. Where the IPR will address some, but not all, claims asserted in the district court, relative to the quo the value of the quid shrinks considerably.”

The court then noted that “[c]ourts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of PTO reexamination.” ‘In determining whether to grant a stay pending PTO review, courts consider: (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 nonĀ¬moving party.'”

Turning to the first factor, the court found that discovery in the cases is advanced. “Courts in this district have routinely refused to grant a stay pending IPR where a case is past the early stages of proceedings. While the range of what qualifies as “early stage” is relative, there is a general consensus that where ‘the parties have fully briefed the issue of claim construction, attended a Markman hearing, and received a claim construction order,’ discovery is well underway such to counsel against granting a stay. And there is no colorable claim that these cases are any different. Here, a trial date is set for August 2016, the court has construed claims not once, not twice, but three times, the parties have exchanged voluminous document productions–in the Wave 1 cases at the very least–and fact discovery is set to close in just over a month. With the trial date just under a year away, these cases have already reached an advanced stage, and this court has put significant work into getting these cases this far. This all weighs against granting a stay.”

The court also concluded that the second factor weighed against granting a stay because “it seems unlikely that the PTAB’s review will simplify the issues in these cases enough to justify granting a stay. Sure, ‘waiting for the outcome of the reexamination could eliminate the need for trial if the claims are cancelled or, if the claims survive, facilitate trial by providing the court with expert opinion of the PTO and clarifying the scope of the claims.’ But here, the PTAB only instituted IPR in Kyocera’s petition as to the ‘748 patent, which only encompasses four claims. By contrast, the PTAB denied Kyocera’s petition as to all 17 claims challenged in the ‘212 patent. With fewer than 25 percent of the claims at issue subject to inter partes review, the overall effect of any PTAB decision–whether it cancels all or some claims, amends all or some claims, or allows all or some claims to survive–will be minimal relative to the number of claims not under review.”

With respect to the third factor, Adaptix could not show that “a stay would [cause undue] prejudice or present a clear tactical disadvantage. Mere delay in the litigation does not establish undue prejudice. Rather, courts decline to find undue prejudice where the parties are not direct competitors and where any resulting prejudice can be addressed through a final damages award. Here, while it is undisputed that the parties are not in direct competition, Adaptix argues that a stay would hamper its ability to enforce and license its patents. While at least one court has given a nod to this kind of harm, the court is not persuaded that Adaptix would suffer any cognizable prejudice from a stay of these proceedings.”

Nonetheless, because of the findings on the first and second prongs of the analysis, the court concluded that on balance the stay was inappropriate.

Adaptix, Inc. v. HTC Corporation, Case No. 5:14-cv-02359-PSG (N.D. Cal. Aug. 5, 2015)

The authors of are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or