Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 1 of 10
`
`Kenneth M. Albridge, III (Admitted via Pro
`Hac Vice)
`kmalbridge@michaelbest.com
`MICHAEL BEST & FRIEDRICH LLP
`One South Pinckney Street, Suite 700
`P.O. Box 1806
`Madison, WI 53701-1806
`Phone: 608.257.3067
`Fax:
`608.283.2275
`
`Rachel N. Bach (Admitted via Pro Hac
`Vice)
`rnbach@michaelbest.com
`MICHAEL BEST & FRIEDRICH LLP
`100 East Wisconsin Avenue, Suite 3300
`Milwaukee, WI 53202-4108
`Phone: 414.271.6560
`Fax:
`414.277.0656
`
`Patricia L. Peden (SBN 2064440)
`Patricia.Peden@leclairryan.com
`LECLAIRRYAN LLP
`44 Montgomery Street, Suite 3100
`San Francisco, California 94104
`Phone: 415.391.7111
`Fax: 415.391.8766
`
`Arthur Gollwitzer III(Admitted via Pro Hac Vice)
`agollwitzer@michaelbest.com
`MICHAEL BEST & FRIEDRICH LLP
`Terrace 7 Building
`2801 Via Fortuna, Suite 300
`Austin, Texas 78746
`Phone: 512.640.3161
`Fax:
`512.640.3170
`
`Larry Saret (Admitted via Pro Hac Vice)
`llsaret@michaelbest.com
`MICHAEL BEST & FRIEDRICH LLP
`River Point
`444 West Lake Street, Suite 3200
`Chicago, Illinois 60606
`Phone: 312.661.2116
`Fax:
`312.222.0818
`
`Attorneys for Defendant DYNACRAFT BSC, Inc.
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`SAN FRANCISCO DIVISION
`
`FISHER-PRICE, INC. and
`MATTEL, INC.,
`
`Plaintiffs,
`
`v.
`
`DYNACRAFT BSC, INC.,
`
`Defendant.
`
`Case No. 17-CV-03745-PJH
`
`DEFENDANT DYNACRAFT’S
`MOTION TO STAY LITIGATION
`PENDING INTER-PARTES REVIEW AND
`SUPPORTING MEMORANDUM OF
`POINTS AND AUTHORITIES
`
`Date: November 15, 2017
`Time: 9:00 a.m.
`Courtroom: 3, 3rd Floor
`Judge: Honorable Phyllis J. Hamilton
`
`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
`
`17-CV-03745-PJH
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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 2 of 10
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`NOTICE OF MOTION
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`PLEASE TAKE NOTICE that on November 15, 2017 at 9:00 a.m., or as soon thereafter
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`as the Court’s calendar permits, in Courtroom 3 on the 3rd Floor of the above-entitled Court
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`located at 1301 Clay Street, Oakland, California, Defendant Dynacraft BSC, Inc. (“Dynacraft”)
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`will, and hereby do, move this Court to stay the above-captioned case pending inter-partes
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`review of the patents-in-suit. This motion is based on this Notice of Motion and Motion, the
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`points and authorities herein, all pleadings and records in this case, and such oral argument and
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`evidence as may be allowed by the Court at the time of the hearing.
`
`Dated: October 10, 2017
`
`/s/ Patricia L. Peden
`Patricia L. Peden (SBN 206440)
`LECLAIRRYAN LLP
`
`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
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`- 2 -
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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 3 of 10
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`Motion to Stay Litigation Pending Inter-Partes Review
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` The Court should stay this action pending inter-partes review of the four patents-in-suit:
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`U.S. Patent Nos. 7,950,978, 7,222,684, 7,487,850, and 7,621,543. On October 9, 2017, defendant
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`Dynacraft filed four petitions seeking inter-partes review, demonstrating the invalidity of all
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`relevant claims in each of those patents. Stated simply, it would be a waste of time, money, and
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`resources to litigate this case until the IPRs are resolved.
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`A stay is appropriate in this case for at least three reasons.
`First, a stay will simplify the central issues in this case and reduce the burden on the
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`Court and the parties. If the Patent Office rejects some or all of the patent claims at issue in this
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`case, then this case will either be terminated or significantly streamlined. Moreover, even if some
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`of the claims are upheld, the Court and parties would benefit by litigating a streamlined version of
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`this case armed with the Patent Office’s guidance regarding claim construction and invalidity.
`Second, because this case is still in its early stages, a stay will conserve resources and not
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`interfere with the administration of justice. Indeed, this Court has not yet conducted a case
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`management conference or established a schedule for resolving this dispute.
`Third and finally, plaintiffs Fisher-Price and Mattel (collectively “Fisher-Price”) will not
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`suffer unfair prejudice if a stay is granted. Indeed, any delay resulting from a stay will be
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`relatively short in light of the expedited inter-partes review process mandated by the America
`
`Invents Act.
`
`Facts
`
`Fisher-Price filed this suit in January 2017 in the United States District Court for the
`
`District of Delaware, alleging that Dynacraft infringes four patents – the ’978, ’684, ’850, and
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`’543 patents. (Dkt. 1.) The asserted claims relate to three technologies – a “slow-start” control
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`system for children’s electric ride-on vehicles, blow-molded wheels for such vehicles, and a drive
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`assembly and shifter mechanism for such vehicles.
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`On June 27, the Delaware court transferred this case to this Court in light of the Supreme
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`Court’s recent decision in TC Heartland. (See Dkt. 14-16.) On July 24, this case was assigned to
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`this Court (Dkt. 27), and this Court set the initial case management conference for October 12
`DEFENDANT DYNACRAFT’S MOTION
`17-CV-03745-PJH
`- 1 -
`TO STAY LITIGATION
`
`

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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 4 of 10
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`(Dkt. 28). That is, this case has just begun. The parties conducted their Rule 26(f) conference on
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`September 17, but no party has made its initial disclosures or served any discovery requests.
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`In the meantime, Dynacraft filed four inter-partes review petitions, demonstrating that all
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`four patents are invalid on October 9. (See IPR Nos. 2018-0038, 2018-0039, 2018-0040, and
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`2018-0042.) In these IPR petitions, Dynacraft establishes that all of the relevant claims are
`obvious in light of prior art patents and publications.1
`Argument
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`The Court should stay this case in light of the requested inter-partes reviews. A district
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`court has the inherent power to manage its docket and stay proceedings, a power which extends to
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`patent cases where parties have asked the Patent Office to review the patents-in-suit. See, e.g.,
`
`Ethicon, Inc.v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988). Indeed, judicial efficiency and
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`the desire to avoid inconsistent results counsel in favor of a stay even before the Patent Trial and
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`Appeal Board has acted on pending IPR petitions. See Sec. People, Inc. v. Ojmar US, LLC, 2015
`
`U.S. Dist. LEXIS 70011, *3-4 (N.D. Cal. May 29, 2015). In fact, some courts in this district have
`
`recognized “a liberal policy in favor of granting motions to stay proceedings pending the outcome
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`of USPTO” proceedings. Id. at *4.
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`Courts generally consider three factors when deciding whether to stay a case pending an
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`inter-partes review: (i) whether a stay will simplify the issues in the case; (ii) whether discovery
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`is complete and a trial date has been set; and (iii) whether a stay would unduly prejudice or
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`present a tactical disadvantage to the non-moving party. Sec. People, 2015 U.S. Dist. LEXIS at
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`*4; Finjan, Inc. v. Palo Alto Networks, Inc., 2016 U.S. Dist. LEXIS 69363, *2 (N.D. Cal. May
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`26, 2016 (J. Hamilton).
`
`1 Specifically, Dynacraft explains that the ‘684 patent is anticipated and rendered obvious by
`U.S. Patent No. 5,859,509 (Bienz), U.S. Patent No. 4,634,941 (Klion), and U.S. Patent No.
`5,994,853 (Ribbe). The ‘978 is anticipated and rendered obvious by U.S. Patent No. 5,859,509
`(Bienz), U.S. Patent No. 4,634,941 (Klion), and U.S. Patent No. 5,994,853 (Ribbe). The ‘543
`patent is anticipated and rendered obvious by U.S, Patent Pub. No. 2005/0056474 (Damon), U.S.
`Patent No. 5,924,506 (Perego), U.S. Patent No. 4,513,981 (DeGraaff), U.S. Patent No. 3,910,332
`(Feller), and the Plastic Blow Molding Handbook by Norman Lee. And the ‘850 patent is
`anticipated and rendered obvious by U.S. Patent Pub. No. 2005?0056474 (Damon) and U.S.
`Patent Pub. No. 2005/0087033 (Chi).
`
`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
`
`- 2 -
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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 5 of 10
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`These factors largely overlap with the factors Congress enumerated for stays pending
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`analogous covered business method (“CBM”) review proceedings. See Leahy-Smith America
`
`Invents Act, Pub. L. No. 112-29, § 18(b)(1), 125 Stat. 284, 331 (2011). A fourth factor identified
`
`for CBM reviews – minimizing the burdens of litigation – also favors granting stay motions in
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`inter-parties review proceedings.
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`As demonstrated below, each of these factors weigh strongly in favor of a stay in this
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`case.
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`I.
`
`A Stay Will Simplify the Issues, Streamline Trial, and Reduce the Burden on the
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`Parties and the Court.
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`The Court should stay this case because doing so will simplify the issues and reduce the
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`litigation burden on the parties and the Court. Indeed, the pending inter-partes review petitions
`likely will resolve this entire case because they demonstrate how every asserted claim of the
`
`patents-in-suit is invalid in light of the prior art. And when a patent claim is cancelled in a Patent
`
`Office proceeding, “the patentee loses any cause of action based on that claim, and any pending
`
`litigation in which the claims are asserted becomes moot.” Advanced Connection Tech., Inc. v.
`
`Toshiba Am. Info. Sys., 2013 U.S. Dist. LEXIS 172989 (N.D. Cal. Nov. 27, 2013) (quoting
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`Fresenius USA, Inc. v. Baxter Int’l Inc., 721 F.3d 1330, 1340 (Fed. Cir. 2013)).
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`Even if the PTAB upholds the validity of some or all of the claims, its decision would still
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`streamline the issues in this case. See Finjan, 2016 U.S. Dist. LEXIS 69363, *2 (granting a stay
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`where the PTAB instituted 6 of 13 IPR petitions affecting only 4 of 10 asserted patents). In
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`Finjan, this Court noted that allowing the suit to proceed only with respect to 6 of the 10 asserted
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`patents, while IPR petitions were pending for just 4 of the 10 asserted patents would be
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`“cumbersome” and “proceeding in a piecemeal fashion could lead to duplicative efforts.” Id.
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`Waiting for the inter-partes review to conclude before proceeding in this case provides a
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`number of advantages:
`
`•
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`•
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`The prior art patents and printed publications relied on by Dynacraft will have
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`been first considered by the PTAB in light of its technical expertise.
`
`In cases where inter-partes review is instituted, the estoppel rules will limit
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`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
`
`- 3 -
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`17-CV-03745-PJH
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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 6 of 10
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`Dynacraft’s ability to present arguments based on prior art that was raised or
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`reasonably could have been raised in the inter-partes review, see 35 U.S.C. §
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`315(e)(2).
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`•
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`•
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`•
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`•
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`The PTAB will address the patents’ priority dates, field of art, and level of
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`ordinary skill in the art.
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`The PTAB will address claim construction and provide guidance for any claim
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`construction hearing in this Court and may even eliminate claim construction
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`disputes altogether.
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`In cases where the inter-partes review results in invalidity of all of the challenged
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`patent claims, the suit may be dismissed.
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`The inter-partes review outcome may encourage settlement without further burden
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`on the Court.
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`See e.g. Sec. People, 2015 U.S. Dist. LEXIS 70011, at *7-8; Finjan, 2016 U.S. Dist. LEXIS
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`69363, at *3-4; see also Constellation IP, LLC v. Allstate Corp., 2008 U.S. Dist. LEXIS 46820, at
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`*8-9 (E.D. Tex. May 12, 2008) (listing factors relevant to a stay pending reexamination).
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`If the Court does not stay this case, there is considerable risk that the Court and the parties
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`will waste valuable time and money on overlapping and potentially inconsistent litigation. Since
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`the inter-partes review procedure was established and as of March 31, 2017, the PTAB has
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`invalidated all of the challenged claims in 65% of the inter-partes review proceedings that have
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`proceeded to a final written decision. https://www.uspto.gov/patents-application-
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`process/appealing-patent-decisions/statistics/aia-trial-statistics. Further the PTAB has invalidated
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`some of the claims under review in another 16% of such cases. Id. That is, the PTAB has
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`invalidated some or all claims in 81% of instituted cases. Courts have considered this high
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`likelihood of cancellation as a strong reason to stay parallel litigation. See Brisham Solutions Ltd.
`
`v. Juniper Networks, Inc., 2014 U.S. Dist. LEXIS 58770, at *3-4 (N.D. Cal. April 28, 2014)
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`(staying proceedings in light of the substantial likelihood of claim cancellation).
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`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
`
`- 4 -
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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 7 of 10
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`II.
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`Discovery Has Not Even Begun in this Case; Therefore a Stay Will Conserve the
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`Court’s and the Parties’ Resources.
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`The early stage of this case “weighs strongly in favor” of granting a stay because the vast
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`majority of the work in this case has not yet been performed. See Finjan, 2016 U.S. Dist. LEXIS
`
`69363, at *3-4 (granting stay even though the parties had exchanged infringement contentions);
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`see also Advanced Micro Devices, Inc. v. LG Elecs., Inc., 2015 U.S. Dist. LEXIS 15496, at *9-11
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`(N.D. Cal. Feb. 9, 2015) (granting stay after the parties exchanged some discovery, including
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`infringement contentions); Sec. People, 2015 U.S. Dist. LEXIS 70011, at *5-6 (granting stay and
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`citing cases where stays were granted after claim construction briefing and even after issuance of
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`a claim construction order).
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`The facts of this case weigh in favor of a stay even more heavily than the cases cited
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`above. The Court has not held the Case Management Conference – currently set for October 12 –
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`much less set a case schedule or trial date. Moreover, the parties have not served any discovery
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`and have not begun the claim construction process set out in the local patent rules, much less
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`received a claim construction decision as in Advanced Micro Devices. This case has barely
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`begun, so this is the best time to enter a stay.
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`III.
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`A Stay Will Not Unfairly Prejudice or Place Fisher-Price at Any Tactical
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`Disadvantage.
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`Finally, issuing a stay will not unfairly prejudice Fisher-Price or place it at a tactical
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`disadvantage for at least two reasons.
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`First, it is well-established that mere potential for delay, which is inherent in any stay,
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`does not constitute prejudice sufficient to deny a request for a stay. See Neste Oil Oyj v. Dynamic
`
`Fuels, LLC 2013 U.S. Dist. LEXIS 92416, at *4 (D. Del. July 2, 2013). If any delay constituted
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`“unfair prejudice,” courts would rarely grant motions to stay, but that is not the case.
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`Second, the expedited inter-partes review schedule mandated by statute provides an
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`important safeguard to Fisher-Price. One of Congress’ primary goals in establishing the inter-
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`partes review procedure was to reduce the high cost of litigation involving patents that are
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`invalid. See 157 Cong. Rec. S7413 (Nov. 14, 2011 (statement of Rep. Smith) (“The new
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`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
`
`- 5 -
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`17-CV-03745-PJH
`
`

`

`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 8 of 10
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`transitional program . . . creates an inexpensive and speedy alternative to litigation – allowing
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`parties to resolve [disputes] rather than spending millions of dollars in litigation costs”). To
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`achieve these goals, the PTAB conducts inter-partes review proceedings on a strict schedule.
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`After the PTAB assigns a filing date to the petition, the patent owner can file a preliminary
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`response within three months or “may expedite the proceedings by filing an election to waive the
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`patent owner preliminary statement.” 37 C.F.R. § 42107(b). The PTAB must determine whether
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`to institute an inter-partes review within three months of the later of the patent owner’s
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`preliminary response or the last date on which such response could be filed. 35 U.S.C. § 314(b).
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`The PTAB is then required by statute to issue a final written decision no later than one year after
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`instituting an inter-partes review. 35 U.S.C. § 316(a)(11) (the PTAB may extend the one-year
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`period by up to six months for good cause). Altogether, the entire IPR procedure must be
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`concluded within 18 months as a matter of law.
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`These strict IPR timing requirements limit undue delay and negate claims of undue
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`prejudice. Indeed, the IPR process is faster than the likely time to trial in the district court.
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`Moreover, any additional lost profits or other damages incurred by Fisher-Price can be recouped
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`by the appropriate monetary relief at the end of the case. See Finjan, 2016 U.S. Dist. LEXIS
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`69363, at *4.
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`Instead of being prejudiced or placed at a tactical disadvantage, both parties and the Court
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`stand to benefit from the PTAB decisions regarding the invalidity of the asserted claims. If this
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`case proceeds and the PTAB subsequently invalidates all, or even a portion, of Fisher-Price’s
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`patent claims, then the parties and the Court will have wasted substantial resources litigating non-
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`existent patent rights.
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`Conclusion
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`For the foregoing reasons, this Court should enter an order staying this case pending
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`resolution of the pending inter-partes review petitions.
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`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
`
`- 6 -
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`17-CV-03745-PJH
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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 9 of 10
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`Dated: October 10, 2017
`
`By: /s/ Patricia L. Peden
`Patricia L. Peden (SBN 2064440)
`LECLAIRRYAN LLP
`44 Montgomery Street, Thirty First Floor
`San Francisco, California 94104
`Phone:
`415.391.7111
`Fax:
`415.391.8766
`Email: Patricia.Peden@leclairryan.com
`
`Arthur Gollwitzer III
`(Admitted via Pro Hac Vice)
`MICHAEL BEST & FRIEDRICH LLP
`Terrace 7 Building
`2801 Via Fortuna, Suite 300
`Austin, Texas 78746
`Phone:
`512.640.3161
`Fax: 512.640.3170
`Email: agollwitzer@michaelbest.com
`
`Larry Saret (Admitted via Pro Hac Vice)
`MICHAEL BEST & FRIEDRICH LLP
`River Point
`444 West Lake Street, Suite 3200
`Chicago, Illinois 60606
`Phone:
`312.661.2116
`Fax: 312.222.0818
`Email: llsaret@michaelbest.com
`
`Kenneth M. Albridge, III
`(Admitted via Pro Hac Vice)
`MICHAEL BEST & FRIEDRICH LLP
`One South Pinckney Street, Suite 700
`P.O. Box 1806
`Madison, WI 53701-1806
`Phone:
`608.257.3067
`Fax: 608.283.2275
`Email: kmalbridge@michaelbest.com
`
`Rachel N. Bach (Admitted via Pro Hac Vice)
`MICHAEL BEST & FRIEDRICH LLP
`100 East Wisconsin Avenue, Suite 3300
`Milwaukee, WI 53202-4108
`Phone:
`414.271.6560
`Fax:
`414.277.0656
`Email: rnbach@michaelbest.com
`
`Attorneys for Defendant Dynacraft BSC, Inc.
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`DEFENDANT DYNACRAFT’S MOTION
`TO STAY LITIGATION
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`- 7 -
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`17-CV-03745-PJH
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`

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`Case 4:17-cv-03745-PJH Document 44 Filed 10/10/17 Page 10 of 10
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`CERTIFICATE OF SERVICE
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`I hereby certify that on October 10, 2017, the foregoing DEFENDANT DYNACRAFT’S
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`MOTION TO STAY LITIGATION PENDING INTER-PARTES REVIEW AND
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`SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES was electronically
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`filed using the Court’s ECF system and thus will be electronically served upon all counsel of
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`record.
`
`/s/ Adriana L. Lawrence
` Adriana L. Lawrence
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`18
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`19
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`20
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`21
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`22
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`23
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`25
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`26
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`28
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`