Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 1 of 11
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`Case No. 15-cv-01277-BLF
`Related Case Nos. 16-cv-01578-BLF; 16-cv-
`01579-BLF; 16-cv-01580-BLF; 16-cv-
`01581-BLF; 16-cv-02252-BLF
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`ORDER (1) CONDITIONALLY
`GRANTING JOINT MOTION TO STAY
`PROCEEDINGS (2) DENYING
`WITHOUT PREJUDICE MOTION TO
`DISMISS
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`[RE: ECF 134]
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`LAM RESEARCH CORPORATION,
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`Plaintiff,
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`v.
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`DANIEL L. FLAMM, et al.,
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`Defendants.
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`DANIEL L. FLAMM,
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`Plaintiff,
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`v.
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`GLOBAL FOUNDRIES U.S. INC.,
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`Defendant.
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`DANIEL L. FLAMM,
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`Plaintiff,
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`v.
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`INTEL CORPORATION,
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`Defendant.
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`DANIEL L. FLAMM,
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`Plaintiff,
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`v.
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`MAXIM INTEGRATED PRODUCTS,
`INC.,
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`Defendant.
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 2 of 11
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`DANIEL L. FLAMM,
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`Plaintiff,
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`v.
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`MICRON TECHNOLOGY, INC.,
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`Defendant.
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`DANIEL L. FLAMM,
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`Plaintiff,
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`v.
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`SAMSUNG ELECTRONICS CO LTD, et
`al.,
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`Defendants.
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`The above-captioned patent infringement actions involve the patent holder, Dr. Daniel L.
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`Dr. Flamm (“Dr. Flamm”) who owns patents relating to methods used in the fabrication of
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`semiconductors; the manufacturer, Lam Research Corporation (“Lam”) who makes and sells
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`semiconductor fabrication equipment; and a number of Lam’s customers including,
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`GLOBALFOUNDRIES U.S. Inc. (“GLOBALFOUNDRIES”), Intel Corporation (“Intel”), Maxim
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`Integrated Products, Inc. (“Maxim”), Micron Technology, Inc. (“Micron”), and Samsung
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`Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Semiconductor, Inc., and
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`Samsung Austin Semiconductor, LLC (collectively, “Samsung”) (collectively together,
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`“customers”) who use Lam’s products. The Court refers to Lam and its customers, collectively as
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`“chipmakers.” Case No. 15-1277 is a declaratory judgment action filed by Lam against Dr.
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`Flamm asserting non-infringement of Dr. Flamm’s U.S. Patent Nos. 5,711,849 (“the ’849 patent”),
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`6,017,221 (“the ’221 patent”), and RE 40,264 (“the ’264 patent”) (collectively, the “asserted
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`patents”). The remaining cases are Dr. Flamm’s actions claiming infringement of the asserted
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`patents against each of the customers.
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`Pending before the Court are Dr. Flamm’s motion to dismiss Lam’s declaratory judgment
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`action and a joint motion to stay by the chipmakers in all of the cases. For the reasons stated
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 3 of 11
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`below, the Court CONDITIONALLY GRANTS the joint motion to stay. As a result, the Court
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`DENIES without prejudice Dr. Flamm’s motion to dismiss. When the stay is lifted, Dr. Flamm
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`may re-notice its motion to dismiss or file a new motion to dismiss.
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`I. BACKGROUND1
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`Dr. Flamm is the owner and inventor of the ’849, ’221, and ’264 patents, which claim
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`methods used in manufacturing semiconductors. Exhs. A-C to SAC, ECF 52-4-52-6. Lam
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`designs, manufactures, and sells semiconductor processing tools that are used to fabricate
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`semiconductors. SAC ¶ 2, ECF 52-8; Ans. to SAC ¶ 2, ECF 66.
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`Around September 2014, Dr. Flamm’s attorneys sent letters to some of Lam’s
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`customers accusing them of infringing the patents-in-suit. SAC ¶¶ 29-30, Ans. to SAC ¶¶ 29-
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`30. Lam, alleging that it may be required to indemnify its customers, SAC ¶ 47, filed Case No.
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`15-1277 seeking declaratory judgment of non-infringement on its own part and in regards to its
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`customers. Dr. Flamm responded by filing a Third-Party Complaint against the customers
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`GLOBALFOUNDRIES, Intel, Maxim, and Micron. Third-Party Complaint, ECF 50-4. Dr.
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`Flamm also filed a complaint in the Western District of Texas against Lam’s customer
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`Samsung. Case No. 1:15-cv-00613 (W.D. Tx.) at ECF 1. The Court severed Dr. Flamm’s claims
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`against GLOBALFOUNDRIES, Intel, Maxim, and Micron, ECF 120, and Dr. Flamm filed new
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`complaints against each of those entities, Case No. 15-1578, 15-1579, 15-1580, 15-1581. On
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`April 22, 2016, the court in the Western District of Texas granted Samsung’s motion to transfer
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`the case to the Northern District of California. Case No. 15-2252, ECF 53.
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`At the same time the parties were engaging in litigation in the district courts, in August
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`2015, Lam filed five petitions for inter partes review directed to all claims of the ’221 and ’264
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`patents. In January 2016, Lam filed four additional IPR petitions that are directed towards the
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`’849 and ’264 patents. The status of each of the IPR petitions is summarized in the chart below:
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`1 All citations refer to docket entries in Case No. 15-1277 unless otherwise specified.
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 4 of 11
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`Patent
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`’849
`’221
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`’264
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`IPR Request
`Covering Asserted
`Claim
`2016-00466
`2015-01767
`2015-01759
`2015-01764
`2015-01766
`2015-01768
`2016-00468
`2016-00469
`2016-00470
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`Instituted?
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`No
`Yes
`No
`Yes
`No
`Yes
`No
`No
`No
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`Anticipated Date of
`Final Written
`Decision
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`February 24, 2017
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`February 24, 2017
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`February 24, 2017
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`Although the customers did not request any of the instituted IPRs or file motions to join
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`them, they have represented that they are willing to agree not to reargue invalidity grounds in the
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`above-captioned cases that the PTAB considers and overrules in final written decisions on the
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`instituted IPR petitions. Reply 1, 3, ECF 138.
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`II. LEGAL STANDARD
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`A district court has inherent power to manage its own docket and stay proceedings,
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`“including the authority to order a stay pending conclusion of a PTO reexamination.” Ethicon,
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`Inc. v. Quigg, 849 F.2d 1422, 1427 (Fed. Cir. 1988). A court is under no obligation to stay
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`proceedings pending parallel litigation in the PTAB. See Aylus Networks, Inc. v. Apple, Inc., No.
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`C-13-4700 EMC, 2014 WL 5809053, at *1 (N.D. Cal. Nov. 6, 2014). The factors that courts in
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`this district consider when determining whether to stay litigation are: “(1) whether discovery is
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`complete and whether a trial date has been set; (2) whether a stay will simplify the issues in
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`question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear
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`tactical disadvantage to the nonmoving party.” PersonalWeb Techs., LLC v. Apple, Inc., 69 F.
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`Supp. 3d 1022, 1025 (N.D. Cal. 2014).
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`III. DISCUSSION
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`The parties dispute whether the Court should defer ruling on the motion to stay until Dr.
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`Flamm’s motion to dismiss Lam’s Second Amended Complaint is resolved. Dr. Flamm argues
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`that it would not be fair for the Court to stay proceedings without resolving the question of
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 5 of 11
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`whether federal subject matter jurisdiction has been established especially since the motion to
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`dismiss was filed first. Opp. 2-3, ECF 137. The chipmakers argue that Dr. Flamm’s argument
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`overlooks the fact that Dr. Flamm has admitted that regardless of the outcome of the motion to
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`dismiss, subject matter jurisdiction will still exist over Lam’s declaratory judgment action. Reply
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`1, ECF 138 (citing Mot. to Dismiss 4, ECF 64 (noting that “Lam successfully alleges the existence
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`of a case or controversy regarding claim 10 of the ’849 Patent….”). As a result, the chipmakers
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`argue that in the interests of conserving judicial and party resources, the motion to stay should be
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`resolved first
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`The Court agrees with the chipmakers and finds that in the interests of judicial economy,
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`the motion to stay should be decided before the motion to dismiss. First, contrary to Dr. Flamm’s
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`argument, the Court does not need to resolve the motion to dismiss to determine whether federal
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`subject matter jurisdiction has been established. By Dr. Flamm’s own admission, this Court has
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`subject matter jurisdiction regardless of the outcome of the motion to dismiss. Mot. to Dismiss 4,
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`ECF 64 (“Lam successfully alleges the existence of a case or controversy regarding claim 10 of
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`the ’849 Patent….”). Second, the Court notes that Dr. Flamm also filed a prior motion to stay in
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`Case No. 15-1277 that was pending at the same time as his motion to dismiss. Yet, Dr. Flamm
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`never argued that the Court should first rule on his motion to dismiss and defer ruling on his
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`motion to stay; Dr. Flamm’s new-found concern about ruling on a motion to dismiss before a
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`motion to stay rings hollow. Accordingly, in the interest of conserving resources and given the
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`fact that Dr. Flamm has admitted subject matter jurisdiction exists, the Court will first rule on the
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`motion to stay.
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`A.
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`Stage of Litigation
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`First, the Court looks to the question of whether the litigation has progressed significantly
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`enough for a stay to be disfavored. See PersonalWeb Techs., LLC, 69 F. Supp. 3d at 1025. The
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`chipmakers argue that this case is in its early stages because no significant activities have taken
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`place in this case. Mot. 4-5, ECF 134. For example, the chipmakers note that no case schedule
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`has been set yet including dates for (1) claim construction briefing and a hearing, (2) Patent Local
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`Rule disclosures, (3) the close of fact discovery, (4) the close of expert discovery, (5) summary
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 6 of 11
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`judgment, and (5) trial. Id. at 5. The chipmakers also note that no documents have been produced
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`and no depositions have occurred. Id.
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`Dr. Flamm does not dispute that the case is in its early stages but argues that Case No. 15-
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`1277 was filed in March 2015. Opp. 3, ECF 137. In light of the lack of significant progress, Dr.
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`Flamm argues if the Court were to stay the case, then he should be entitled to conduct limited
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`discovery to provide more detailed infringement contentions to the customers. Id
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`The Court agrees with the parties’ assessment and finds that this case is in its early stages.
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`As to Dr. Flamm’s comment about the lack of progress in Case No. 15-1277, which was filed in
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`March 2015, that happened because of continuances that were sought or agreed to by Dr. Flamm.
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`First, Dr. Flamm glosses over the fact that although the case was filed in March 2015, service was
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`not effectuated until May 15, 2015. ECF 18 at 2. In any event, the Court set an initial case
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`management conference for June 25, 2015, ECF 13, but on May 20, 2015, Dr. Flamm filed a
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`stipulation seeking to continue the case management conference to no earlier than August 13,
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`2015. ECF 18 at 2-3. Consequently, the Court set a case management conference for August 13,
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`2015. ECF 19.
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`After filing two stipulations extending time to respond to Lam’s declaratory judgment
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`action, ECF 18, 22, Dr. Flamm filed a motion to dismiss, ECF 24. Thereafter, in light of the
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`pending motion to dismiss, the Court continued the parties’ case management conference to
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`November 12, 2015. ECF 34. At that conference, Dr. Flamm informed the Court that he was in
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`the process of serving third-party complaints on the customers and that the Court should wait for
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`the parties to settle the pleadings before setting any dates. See, e.g., Transcript 3:7-18 (Counsel
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`for Dr. Flamm stating, “Until all the players are at the table, it doesn’t make a lot of sense to start
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`setting deadlines.”). As a result, the Court did not set dates and set a further case management
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`conference for February 18, 2016. ECF .
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`Then, the parties filed a joint motion to continue the case management conference to
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`March 24, 2016. ECF 67. At that conference, the Court discussed its concerns about effectively
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`managing this sprawling action and because of Samsung’s motion to transfer pending in the
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`Western of District of Texas, the Court could not yet set dates but scheduled a case management
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 7 of 11
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`conference for July 28, 2016. Transcript, ECF 118. By that point, the instant motion to stay had
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`been filed. As a result, Dr. Flamm cannot now complain about the lack of progress in this case
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`when he previously agreed to continuances and extensions. Finally, with respect to allowing Dr.
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`Flamm early discovery, if this case is stayed, the Court sees no benefit in allowing for discovery.
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`Thus, given the early stage of the cases at issue, the first factor weighs heavily in favor of a stay.
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`B.
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`Simplification of Issues
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`“A stay pending reexamination is justified where ‘the outcome of the reexamination would
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`be likely to assist the court in determining patent validity and, if the claims were canceled in the
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`reexamination, would eliminate the need to try the infringement issue.’” Evolutionary Intelligence,
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`LLC v. Apple, Inc., No. 13-CV-04201-WHA, 2014 WL 93954, at *2 (N.D. Cal. Jan. 9, 2014)
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`(quoting Slip Track Sys., Inc. v. Metal Lite, Inc., 159 F.3d 1337, 1341 (Fed. Cir. 1998)). The
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`chipmakers argue that a stay will simplify the issues in this case because a majority of the asserted
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`claims are subject to IPR proceedings. Mot. 6-8, ECF 134. For the ’264 patent, IPR has been
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`instituted on 34 of the 59 claims, including five of the six independent claims and for the ’221
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`patent, IPR has been instituted on 5 of the 7 claims, including the sole independent claim. Id. at 7.
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`Dr. Flamm does not seriously dispute that this case may be simplified pending IPRs but
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`argues that this would only apply to Lam and not to its customers. Dr. Flamm notes that Lam is
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`the only party to file for IPRs and thus will be the only party estopped from challenging the
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`validity of the surviving claims “on any ground that the petitioner raised or reasonably could have
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`raised during that inter partes review.” Opp. 4-5, ECF 137. Dr. Flamm argues that the customers
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`are seeking to obtain all the benefit of Lam’s IPR petitions without assuming any of the downside
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`associated with filing IPRs. Id. at 5. Dr. Flamm argues that if the Court is going to grant a stay, it
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`should be conditioned on the customers agreeing to be bound by the same IPR estoppel
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`provisions. Id. In reply, the customers state that they would agree to be bound by any grounds
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`raised by Lam and adjudicated by the PTAB but that a stay should not be conditioned on them
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`agreeing to be bound by any grounds that reasonably could have been raised by Lam. Reply 2-3,
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`ECF 138.
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`The Court finds that a stay would simplify this action. A majority of the asserted patents,
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 8 of 11
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`and within each patent, a majority of the asserted claims, including a majority of the independent
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`claims, are under IPR. See, e.g., Netlist, Inc. v. Smart Storage Sys., Inc., Case No. 13-cv-5889-
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`YGR, 2015 WL 1738192, at *1 (N.D. Cal. April 9, 2015) (“[The] PTAB’s determination to
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`proceed with review on the majority of claims—strongly indicates that a stay would simplify the
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`case.”). As to Dr. Flamm’s estoppel argument, the Court finds that this issue more appropriately
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`pertains to the Court’s consideration of proper conditions to impose on a stay. Since courts have
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`routinely granted stays where a majority of asserted claims are subject to IPR, this factor weighs in
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`favor of a stay. See, e.g., Delphix Corp. v. Actifio, Inc., No. 13-CV-04613-BLF, 2014 WL
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`6068407, at *2 (N.D. Cal. Nov. 13, 2014).
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`C. Undue Prejudice
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`Third, the Court considers whether a stay would unduly prejudice or present a clear tactical
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`disadvantage to Dr. Flamm. The chipmakers argue that a stay would not cause prejudice or a
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`tactical disadvantage to Dr. Flamm as Dr. Flamm also sought of a stay all the pending disputes
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`except for his dispute with Samsung. Mot. 9, ECF 134. Further, the chipmakers argue that Dr.
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`Flamm is not their competitor and all of the asserted patents have expired, precluding the
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`possibility of irreparable harm. Id. Dr. Flamm argues that staying this action would unfairly
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`prejudice his ability to protect his intellectual property rights. Opp. 6, ECF 137. Dr. Flamm also
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`responds that the reason he did not seek a stay of the Samsung action because that action was
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`poised to move much quicker than the actions pending before this court. Id. at 6. Finally, Dr.
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`Flamm argues that it would be unfair to stay this case when the customers are not subject to the
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`IPR estoppel provisions. Id.
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`The Court finds that a stay would not cause undue prejudice or present a clear tactical
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`disadvantage to Dr. Flamm. He does not argue that he is a competitor of the chipmakers and thus,
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`does not face the prospect of irreparable harm stemming from a delay caused by a stay.
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`Evolutionary Intelligence, LLC v. Sprint Nextel Corp., Case No. 13-04513-RMW, 2014 WL
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`819277, at *5 (N.D. Cal. Feb. 28, 2014) (“Sprint”) (“[Because the parties] are not
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`competitors…[Plaintiff] does not risk irreparable harm by defendants’ continued use of the
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`accused technology and can be fully restored to the status quo ante with monetary relief.”).
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 9 of 11
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`Second, Dr. Flamm’s explanation on why he did not seek to stay the Samsung action glosses over
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`the fact that, as the Court explained supra I.A, Dr. Flamm caused the delay in this case by seeking
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`or agreeing to continuations and extensions of deadlines and the case schedule. Finally, as to Dr.
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`Flamm’s estoppel argument, the Court finds that is not an appropriate consideration as to whether
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`a stay is warranted but a more appropriate consideration as to what conditions should be imposed
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`on the stay. Accordingly, this factor also weighs heavily in favor of granting a stay.
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`D.
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`Summary
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`After reviewing all of the factors, the Court finds a stay is warranted. The facts that this
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`case is in its early stages, that two out of the three asserted patents are subject to IPR, including a
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`majority of the asserted independent claims, and that there is no undue prejudice, all weigh
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`towards granting a stay. The Court furthers finds that a stay is conditioned upon all customers
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`agreeing to the conditions set forth below. Absent unanimous agreement by customers, there is no
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`benefit to a stay and it will be denied.
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`E.
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`Statutory Estoppel2
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`The Court appreciates Dr. Flamm’s concern that it would be unfair for the customers to
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`obtain the benefit of a stay without being subject to the statutory estoppel provisions. Without
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`estoppel, accused infringers would have multiple opportunities to assert the same grounds to
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`invalidate a patent and IPRs would have no appreciable effect on simplifying actions. Pi-Net Int’l,
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`Inc. v. Focus Bus. Bank, Case No. C-12-4958-PSG, 2013 WL 5513333, at *2 (N.D. Cal. Oct. 3,
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`2013). In Sprint, the Court explained when a party should be subject to estoppel:
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`In Pi–Net, the court’s holding turned on the defendants’ level of
`involvement in the IPR proceedings. If Sprint and IPR petitioners
`communicate on strategy, Sprint should be bound by the full statutory
`estoppel provision. If, however, Sprint has no input on the IPR strategy, it
`should not be precluded from raising arguments that could have been
`raised in the IPR proceedings. Id. At the hearing, Sprint represented to the
`court that it did not assist the IPR petitioners with any prior art search, that
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`2 The parties’ characterizations of case law in this district surrounding statutory estoppel are not
`well taken. Dr. Flamm perplexingly cites to a decision in his argument that in a footnote he
`explains was overturned on a motion for reconsideration. Opp. 5, ECF 5. Meanwhile, the
`customers fail to discuss the key proposition in Sprint and Pi-Net that the level of estoppel
`depends on their involvement with Lam’s IPR petitions.
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 10 of 11
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`it took no part in drafting the IPR petitions, and that it is not in
`communication with the IPR petitioners concerning the IPR.
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`Sprint, 2014 WL 819277, at *5. In that case, Sprint represented “that it did not assist the IPR
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`petitioners with any prior art search, that it took no part in drafting the IPR petitions, and that it is
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`not in communication with the IPR petitioners concerning the IPR.” Id. As a result, the Court
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`found that Sprint should be bound by a weaker estoppel requirement than statutorily required and
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`conditioned a stay on “Sprint's agreement to be estopped only from asserting any invalidity
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`contention that was actually raised and finally adjudicated in the IPR proceedings.”
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`In Pi-Net, “Focus and Bridge represented that, while they were notified of the IPR
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`petitions, they had no occasion to see SAP’s filings or provide any input on the arguments that
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`SAP presented to the PTO prior to SAP's submission. Presidio represented to the court that it was
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`not aware of SAP’s IPR petitions until much later.” Pi-Net, 2013 WL 5513333, at *2. The Court
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`conditioned the stay on “Defendants’ agreement to be estopped from raising any invalidity
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`reference, or combination of references, that was already presented to the PTO in SAPs IPR
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`petitions, including those for which the PTO declined to institute review.”
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`The Court finds the reasoning in Sprint and Pi-Net persuasive. In this case, although the
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`customers have agreed to not “reargue invalidity grounds here that the PTAB considers and
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`overrules in final written decisions on Lam’s IPR petitions,” Reply 1, ECF 138, the customers
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`have not told the Court their level of involvement in Lam’s IPR petitions. To the extent the
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`customers had input in Lam’s IPR petitions, the Court sees no reason why they should not be
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`bound by the same statutory estoppel provisions that apply to Lam. If the customers did not have
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`input, a weaker form estoppel, such as that proposed by the customers, is more appropriate. Thus,
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`the Court will condition the stay based on the customers agreeing to an appropriate level of
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`estoppel.
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`IV. ORDER
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`For the foregoing reasons, IT IS HEREBY ORDERED that:
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`1. Based upon the Court’s conclusion that all three factors weigh in favor of staying this case
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`and each of the related cases, the Court CONDITIONALLY GRANTS the joint motion to
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`stay.
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`Case 5:16-cv-01581-BLF Document 27 Filed 08/08/16 Page 11 of 11
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`2. The stay is CONDITIONED on each customer’s agreement to the following:
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`a. For any customer that had involvement in Lam’s IPR petitions, the stay is
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`conditioned on that customer’s consent to be estopped from raising any invalidity
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`defense that Lam raised or reasonably could have raised in the IPR proceedings.
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`b. For any customer that did not have any involvement in Lam’s IPR petitions, the
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`stay is condition on that customer’s consent to be estopped from asserting any
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`invalidity contention that was actually raised and finally adjudicated in the IPR
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`proceedings.
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`3. Each customer shall file a declaration stating its level of involvement in Lam’s IPR
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`petitions and its agreement to be bound by the appropriate estoppel condition set forth
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`above. Each customer shall file its declaration and agreement to be bound on or before
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`August 19, 2016.
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`4. In the event that all of the customers agree to these conditions, the stay shall become
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`effectively immediately. If less than all the customers consent by August 19, 2016, no stay
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`will go into effect.
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`5. If the stay goes into effect, the Court ORDERS the parties to file a joint status report
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`within 21 days of the PTO’s final decisions on the IPR petitions.
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`6. The Court DENIES without prejudice Dr. Flamm’s motion to dismiss. If the stay does not
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`go into effect by August 19, 2016, Dr. Flamm simply needs to file a one page notice
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`stating that no stay is in place, and the Court will issue an order on Dr. Flamm’s motion to
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`dismiss. If the stay goes into effect, Dr. Flamm may re-notice the motion to dismiss or re-
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`file a motion to dismiss when the stay is lifted.
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`IT IS SO ORDERED.
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`Dated: August 8, 2016
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` ______________________________________
`BETH LABSON FREEMAN
`United States District Judge
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