Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 1 of 10 Page ID #:291
`
`
`
`Matthew G. Berkowitz (SBN 310426)
`matthew.berkowitz@shearman.com
`Yue (Joy) Wang (SBN 300594)
`joy.wang@shearman.com
`SHEARMAN & STERLING LLP
`1460 El Camino Real, 2nd Floor
`Menlo Park, CA 94025
`Telephone: 650.838.3600
`Fax: 650.838.3699
`
`L. Kieran Kieckhefer (SBN 251978)
`kieran.kieckhefer@shearman.com
`SHEARMAN & STERLING LLP
`535 Mission Street, 25th Floor
`San Francisco, CA 94105
`Telephone: 415.616.1100
`Fax: 415.616.1199
`
`Attorneys for Defendant NetSuite Inc.
`
`
`UNILOC 2017 LLC,
`
`Plaintiff,
`
`v.
`
`NETSUITE INC.,
`
`Defendant.
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`SOUTHERN DIVISION
`
` Case No. 8:19-cv-01151-JLS-DFM
`
`MEMORANDUM OF POINTS AND
`AUTHORITIES IN SUPPORT OF
`NETSUITE’S MOTION TO STAY
`DISCOVERY PENDING LIMITED
`MARKMAN PROCEEDING
`Judge:
`Hon. Josephine L. Staton
`Date:
`January 10, 2020
`Time:
`10:30 AM
`Location:
`Ronald Reagan Federal
`Building, Courtroom 10A
`
`
`
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 2 of 10 Page ID #:292
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`I.
`
`INTRODUCTION
`The patents asserted in this case—U.S. Patent Nos. 6,324,578 (“the ’578
`patent”) and 7,069,293 (“the ’293 patent”)—have a long litigation history. As
`Defendant NetSuite Inc. (“NetSuite”) set out in its pending Motion to Dismiss First
`Amended Complaint, Judge Schroeder of the United States District Court for the
`Eastern District of Texas has already construed numerous claim terms in a manner
`that, if adopted here, would absolve NetSuite of liability. Indeed, the construction of
`just one of these terms—“application program(s)/ application(s)”—is likely to be
`case-dispositive if the Court confirms Judge Schroeder’s ruling. See D.I. 27. Uniloc
`has all but agreed. In the face of NetSuite’s September 12, 2019 Motion to Dismiss
`(D.I. 24), Uniloc filed a first Amended Complaint that mainly deleted factual detail
`and clearly based the sole remaining infringement read on a construction of
`“application program(s) / application(s)” that Judge Schroeder has already rejected.
`See D.I. 27 at 15. Staying discovery pending confirmation of Judge Schroeder’s
`construction, either as part of NetSuite’s pending Motion to Dismiss, or an
`abbreviated Markman proceeding, is the fastest and most efficient way to proceed,
`before the parties spend time and resources on discovery, and before the Court spends
`time and resources resolving unnecessary discovery disputes or dealing with other
`motion practice.
`Moreover, Uniloc is a non-practicing entity that has asserted these patents on-
`and-off for years (including against NetSuite in 2016, before voluntarily dismissing
`the case). It does not request an injunction. See D.I. 26. Nor could it, because one of
`the asserted patents is already expired and the other expires in early 2021, before any
`likely trial in this case. In other words, Uniloc will not be prejudiced by a short delay
`to the start of discovery, which can likely be completed, if need be, in nearly the same
`time frame as may otherwise have been permitted, following any Markman ruling
`that diverges from Judge Schroeder’s prior construction of “application program(s) /
`application(s).” Accordingly, this Court should exercise its broad case management
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`1
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 3 of 10 Page ID #:293
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`powers to stay non-claim construction discovery until claim construction issues have
`been resolved.
`II.
`FACTS
`A single claim construction issue, already decided by another federal Judge, is
`dispositive of this case. More specifically, each of the asserted patent claims contains
`the limitation “application program(s),” which has already been construed by Judge
`Schroeder in the Eastern District of Texas in a manner that, if adopted here, would
`absolve NetSuite of liability and end the case. See D.I. 27.
`A. The ADP Cases
`In July 2016, Uniloc’s predecessors-in-interest asserted, inter alia, the ’578 and
`’293 patents against ADP, LLC in the Eastern District of Texas, which was
`consolidated with several other suits (“the ADP Cases”). D.I. 27-1 at 6. After more
`than a year of litigation and extensive claim construction briefing and argument,
`Judge Schroeder issued a claim construction order construing several key terms of the
`claims that Uniloc is now asserting against NetSuite, including the term “application
`program(s) / application(s)” to mean “the code associated with the underlying
`program functions that is a separate application from a browser interface and does
`not execute within the browser window.” Id. (emphasis added). Judge Schroeder’s
`construction of the term “application program(s) / application(s)” relied on the
`applicant’s limiting arguments made during prosecution of the related U.S. Patent No.
`6,510,466 (“the ’466 patent”), which he held to be equally applicable to the ’578 and
`’293 patents. Id. at 6-7. Uniloc never appealed this claim construction order,
`meaning that it continues to govern in the ADP Cases. Id.
`B.
`The Present NetSuite Case
`On June 10, 2019, Uniloc brought a complaint against NetSuite asserting the
`same ’578 and ’293 patents that are at issue in the ADP cases. D.I. 1.1 On September
`
`1 This is the second time NetSuite has been sued on these patents. In August 2016,
`Uniloc’s predecessors-in-interest asserted the ’578 and ’293 patents against NetSuite
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`2
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 4 of 10 Page ID #:294
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`12, 2019, NetSuite filed a motion to dismiss under Federal Rule of Civil Procedure
`12(b)(6) on the ground that Uniloc’s Complaint fails to state a plausible claim for
`infringement under Judge Schroeder’s governing construction of the term
`“application program (s) / application(s).” See D.I. 24.
`On October 1, 2019, Uniloc filed a first Amended Complaint that mainly
`deleted details about its infringement position, without adding any new substantive
`allegations or addressing NetSuite’s earlier motion to dismiss. Compare D.I. 1 with
`D.I. 26 (Uniloc’s Original vs. Amended Complaints). To the contrary, Uniloc now
`specifically alleges that “[a]n application program can be executed on a server within
`a user’s browser window,” which directly conflicts with Judge Schroeder’s ruling that
`the application program cannot execute within a user’s browser window. See D.I. 26,
`¶ 6; D.I. 27-1 at 6, 10, 12-15. On October 16, 2019 NetSuite filed a Motion to
`Dismiss Uniloc’s First Amended Complaint (“Motion to Dismiss”) on the basis that
`the first Amended Complaint again fails to state a plausible claim for infringement
`based on the term “application program(s) / application(s).” See D.I. 27.
`On October 18, 2019, the parties filed their Joint Report Pursuant to Federal
`Rule of Civil Procedure 26(f), Local Rule 26-1(a)-(f), and the Court’s September 16,
`2019 Order. See D.I. 29. In this report, NetSuite proposed an expedited schedule for
`a limited claim construction proceeding because a simple confirmation of Judge
`Schroeder’s construction of “application program(s) / application(s)” will be case-
`dispositive and it would be most efficient to resolve that issue before proceeding with
`the rest of the litigation. See id.
`
`
`
`
`
`in the Eastern District of Texas (“the 2016 Action”). D.I. 27-1 at 7. The parties
`litigated for more than a year, until Uniloc voluntarily dismissed the case on
`September 29, 2017. Id. at 7-8.
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`3
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 5 of 10 Page ID #:295
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`III. ARGUMENT
`A. The Court has Broad Discretionary Powers to Control the Timing of
`Claim Construction and Discovery
`“[A] district court has broad powers of case management, including the power
`to limit discovery to relevant subject matter and to adjust discovery as appropriate to
`each phase of litigation . . . . When a particular issue may be dispositive, the court
`may stay discovery concerning other issues until the critical issue is resolved.” Vivid
`Techs., Inc. v. Am. Sci. & Eng’g, Inc., 200 F.3d 795, 803-804 (Fed. Cir. 1999)
`(affirming stay of discovery pending resolution of early claim construction) (citing
`Fed. R. Civ. P. 1, 26); Little v. City of Seattle, 863 F.2d 681, 685 (9th Cir. 1988)
`(“[T]he district court has wide discretion in controlling discovery. Such rulings will
`not be overturned unless there is a clear abuse of discretion.”); Mireskandari v. Daily
`Mail & Gen. Tr. PLC, No. CV 12-02943 MMM (FFMx), 2013 WL 12129944, at *1
`(C.D. Cal. Jan. 14, 2013) (“The court has the discretion to stay proceedings and
`discovery as part of its ‘inherent power to control the disposition of the causes on its
`docket in a manner which will promote economy of time and effort for itself, for
`counsel, and for litigants.’”).
`The factors to be considered in deciding whether to stay discovery pending
`resolution of a potentially dispositive issue are: “(1) the interests of the plaintiff in
`proceeding expeditiously with the civil action and the potential prejudice to plaintiffs
`of a delay; (2) the burden on the defendants; (3) the convenience to the court; (4) the
`interests of persons not parties to the civil litigation; and (5) the public interest.” See
`Top Rank, Inc. v. Haymon, No. CV 15-4961-JFW (MRWx), 2015 WL 9952887, at *2
`(C.D. Cal. Sept. 17, 2015) (staying discovery pending resolution of motion to
`dismiss). Additional factors considered in this District include:
`1. whether the issue is potentially dispositive of the entire case;
`2. whether the issue can be decided without additional discovery;
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`4
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 6 of 10 Page ID #:296
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`3. whether, upon a preliminary analysis of the merits of the issue there
`appears to be an immediate and clear possibility that it will be decided in
`the movant’s favor;
`4. whether the issue is a matter of law or fact;
`5.
`the nature and complexity of the action;
`6. whether counterclaims and/or cross-claims have been interposed;
`7. whether some or all of the defendants join in the request for a stay;
`8.
`the posture or stage of the litigation;
`9.
`the expected extent of discovery in light of the number of parties and
`complexity of the issues in the case; and
`10. any other relevant circumstances.
`See id. (citing Skellerup Indus. Ltd. v. City of L.A., 163 F.R.D. 598, 601 (C.D. Cal.
`1995)); Mireskandari, 2013 WL 12129944, at *1-2 (staying discovery pending
`resolution of motion to strike and anti-SLAPP motion) (citing GTE Wireless, Inc. v.
`Qualcomm, Inc., 192 F.R.D. 284, 286 (S.D. Cal. 2000) (in patent infringement case,
`staying discovery pending ruling on potentially dispositive motion for summary
`adjudication); Skellerup, 163 F.R.D. at 601)).
`Here, NetSuite has separately proposed that the Court conduct an early,
`abbreviated Markman proceeding regarding construction of “application program(s)”
`because that construction may resolve or at least streamline this matter. See D.I. 29.
`This approach—staying discovery pending an early Markman—has been utilized by
`other judges with busy patent dockets and/or where resolution of a limited set of
`claim construction issues may be case dispositive or help focus the case. See Judge
`Alan Albright, Order Governing Proceedings – Patent Case, W.D. Tex., available at
`https://www.txwd.uscourts.gov/judges-information/standing-orders/index.html (select
`“Waco Division”) (“Except with regard to discovery necessary for claim
`construction, all other discovery is stayed until after the Markman hearing.”); Vivid
`Techs., Inc. 200 F.3d at 803-804 (affirming stay of discovery pending resolution of
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`5
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 7 of 10 Page ID #:297
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`early claim construction); Tech. Innovations Assocs. v. Google, Inc., No. 13-0355-
`LPS, D.I. 33 (D. Del. Jun. 9, 2014) (“the Court will hold a Markman hearing limited
`to the construction of the ‘sticky path’ claim terms….[and] the remainder of these
`cases is STAYED until further order of the Court…”) (Declaration of Matthew G.
`Berkowitz in Support of NetSuite’s Motion to Stay Discovery Pending Limited Claim
`Construction (“Berkowitz Decl.”), Ex. A); Tyco Healthcare Retail Servs. AG v.
`Kimberly-Clark Corp., No 06–3762, 2007 WL 2155571, at *1-2 (E.D. Penn. July 24,
`2007) (construing a single disputed term early because it “may prove dispositive” and
`furthers the “salutary goals of speed and economy”).
`B. All Relevant Factors Favor a Stay of Discovery Pending Resolution
`of the Construction of the Term “Application Program(s).”
`Here, all relevant factors support a stay of discovery. The construction of
`“application program(s)/application(s)” is potentially case dispositive; that
`construction turns on an issue of law; another federal Judge has already construed that
`term in a manner that would absolve NetSuite of liability; the case is at a very early
`stage; and Uniloc, as a non-practicing entity that is not seeking an injunction, would
`not be prejudiced by a short delay.
`1.
`The Court Can Address the Construction of “Application
`Program(s)” with Limited Briefing and a Review of Judge
`Schroeder’s Prior Order
`This case is unique in the sense that the parties have crystallized a case-
`dispositive dispute that turns upon the construction of a single claim term,
`“application program(s)/ application(s),” which has already been addressed by
`another Judge. As detailed in NetSuite’s Motion to Dismiss, Uniloc declined to
`address infringement under Judge Schroeder’s claim construction of this term in its
`First Amended Complaint, and instead took the exact opposition position, alleging
`that NetSuite infringes because its software uses application programs that can
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`6
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 8 of 10 Page ID #:298
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`execute directly within a browser window (thereby implying that its infringement
`read depends upon this Court disagreeing with Judge Schroeder). See D.I. 26 at ¶ 6.
`Moreover, construction of “application program(s)” likely turns on a
`straightforward question of law—whether a disclaimer in a related application applies
`with equal force to the ’293 and ’578 patents. See D.I. 27-1 at 12-15. Indeed, in the
`2016 Action, Uniloc already acknowledged that Judge Schroeder’s construction is
`correct in the context of the related ’466 patent. Id. at 12. Uniloc just disputed
`whether, as a matter of law, the construction should apply to related patents like the
`’578 and ’293 patents. D.I. 24-5 at 13.
`Even if construction of this term is not dispositive, resolution of the issue
`would still save party resources on unnecessary discovery and save the parties and
`this Court the time and expense of resolving disputes and potential motion practice
`regarding the same. Tech. Innovations Assocs., No. 13–0355–LPS, D.I. 33 (D. Del.
`Jun. 9, 2014) (staying discovery pending a limited claim construction proceeding)
`(Berkowitz Decl., Ex. A). More specifically, Uniloc has tied its discovery requests
`directly to the infringement allegations in its pleadings. See Berkowitz Decl., Ex. B
`(defining “Accused Products” as “the products, devices, and services identified in the
`Complaint”); id., Ex. C (seeking contractual information “relating to the Accused
`Products with respect to the accused or similar functionality” and marketing
`documents concerning the Accused Products and “any products making use of or
`otherwise incorporating the accused functionality”). Early resolution of the parties’
`dispute about the proper construction of “application program(s)/ application(s)” is
`highly likely to focus the scope of the Accused Products and the “accused or similar
`functionality” for which Uniloc seeks discovery. A stay of discovery pending
`resolution of this claim construction issue would therefore streamline the parties’
`discovery efforts and potentially reduce the likelihood that the parties engage in
`motion practice about the proper scope of discovery.
`
`
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`7
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 9 of 10 Page ID #:299
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`2.
`
`This Case is in Its Early Stages and Uniloc Would not be
`Prejudiced by a Delay
`The procedural posture of this case also favor a short stay pending limited
`claim construction. This case is in its early stages. A trial date has not been set.
`NetSuite’s responses to Uniloc’s discovery served thus far are not due until
`November, and NetSuite has not yet served discovery on Uniloc. See Autoalert, Inc.
`v. Dominion Dealer Solutions, LLC, No. 12-1661-JST, 2013 WL 8014977, at *2
`(C.D. Cal. May 22, 2013) (“This case is in its infancy . . . Thus, the Court concludes
`that the stage of this litigation weighs heavily in favor of granting a stay.”)
`Further, Uniloc would not be prejudiced by a brief delay while the construction
`of “application program(s)/ application(s)” is resolved. Uniloc and its predecessors-
`in-interest are non-practicing entities2 and seek only money damages, not an
`injunction. See D.I. 26 at 5; see also Evolutionary Intelligence LLC v. Yelp, Inc., C-
`13-03587 DMR, 2013 WL 6672451, at *8 (N.D. Cal. Dec. 18, 2013) (“If the parties
`are not competitors (meaning that the plaintiff does not market any products or
`services covered by the claims of the patents-in-suit and does not seek a preliminary
`injunction), the plaintiff does not risk irreparable harm by the defendant’s continued
`use of the accused technology and can be fully restored to the status quo ante with
`monetary relief . . . This Factor would strongly favor granting the stay.”)
`Even if the Court declines to adopt Judge Schroeder’s construction of
`“application program(s) / application(s),” the parties can likely complete discovery in
`an expedited manner to get the case nearly back on the same track as it would have
`been absent a stay. Discovery in this case is likely to be limited and mainly focused
`on specific issues of standing, infringement and patent invalidity between the parties,
`
`
`2 See, e.g., Daniel Nazer, Apple Says Patent Troll Case Should be Dismissed because
`[REDACTED] but the Public Should Know Why, Elec. Frontier Found. (Jan. 9, 2019),
`https://www.eff.org/deeplinks/2019/01/apple-says-patent-troll-case-should-be-
`dismissed-because-redacted-public-should (“Uniloc is one of the most active patent
`trolls in the world, and filed more than 170 lawsuits in 2018.”).
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`8
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`

`

`Case 8:19-cv-01151-JLS-DFM Document 30-1 Filed 10/21/19 Page 10 of 10 Page ID
` #:300
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`without many (if any) third-party depositions, and little concern about extraterritorial
`issues or other possible time-consuming discovery complications. See D.I. 29.
`IV. CONCLUSION
`For the reasons stated above, NetSuite respectfully requests that this Court
`exercise its broad powers of case management to stay discovery in this action until
`conclusion of an early, limited claim construction proceeding pertaining to the term
`“application program(s) / application(s).”
`
`Dated: October 21, 2019
`
`Respectfully submitted,
`SHEARMAN & STERLING LLP
`
`/s/ Matthew G. Berkowitz
`Matthew G. Berkowitz
`
`Attorney for Defendant NetSuite Inc.
`
`
`
`
`
`MEMO. ISO NETSUITE’S
`MOT. TO STAY DISCOVERY
`
`9
`
`CASE NO. 8:19-cv-01151-JLS-DFM
`
`