Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 1 of 12
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MASSACHUSETTS
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`CIVIL ACTION NO. 1:14-cv-12745-MLW
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`APLIX IP HOLDINGS CORPORATION,
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`Plaintiff,
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`v.
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`SONY COMPUTER ENTERTAINMENT,
`INC. and SONY COMPUTER
`ENTERTAINMENT AMERICA LLC,
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`[LEAVE TO FILE GRANTED ON
`03/31/2015]
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`
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`Defendants.
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`DEFENDANTS’ REPLY IN FURTHER SUPPORT OF THEIR
`MOTION TO STAY PENDING INTER PARTES REVIEW
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 2 of 12
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`I.
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`INTRODUCTION
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`The Court should stay this case because the defendants (collectively “SCE”)1 have filed
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`inter partes review (IPR) petitions against all five of the patents asserted by Aplix.
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`Aplix originally sued on three patents. Prior to filing this motion to stay, SCE lodged
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`five IPR petitions against the three originally-asserted patents.2 Aplix amended its complaint to
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`add two more patents, U.S. Patent Nos. 7,280,097 and 7,932,892 (the “Newly Asserted Patents”).
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`SCE has now lodged IPR petitions against the Newly Asserted Patents as well. Thus, every
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`asserted patent is now subject to IPR petition(s). The Patent Trial and Appeal Board (“PTAB”)
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`will begin deciding whether to institute IPR trials by May 10, less than three months from now.
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`There is a greater than 75% likelihood that IPR trials will be instituted.3 Only 10% of
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`patent claims are found patentable after full IPR scrutiny by the PTAB. D.I. 33 Ex. A. Aplix’s
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`opposition brief does not attempt to refute the strength of SCE’s prior art. Nor does Aplix
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`dispute that the IPRs cover every patent claim that Aplix could conceivably assert against SCE in
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`this case. Thus, the IPRs are likely to simplify this case – or even dispose of it completely.
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`The case is in its earliest stage (no scheduling conference has yet been held and the
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`parties have not begun discovery). Aplix is accusing products that were on sale for years before
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`it filed suit. Aplix does not dispute that it waited years to sue, that it failed to seek a preliminary
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`injunction, or that it does not compete with SCE. Aplix will not be prejudiced, let alone unduly
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`prejudiced, by a stay.
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`1 Sony Computer Entertainment America LLC (“SCEA”) and Sony Computer Entertainment,
`Inc. (“SCEI”) are referred to collectively as “SCE” in this reply and in SCE’s opening brief.
`2 SCEA filed one petition each against two of the originally-asserted patents and three petitions
`that collectively cover the relevant claims of the third originally-asserted patent.
`3 IPR trials are instituted more than 75% of the time when requested. See Ex. H at 4.
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 3 of 12
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`II.
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`UPDATE ON THE IPR PETITIONS
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`A.
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`SCEA (and SCEI As a Named Real-Party-in-Interest) Have
`Now Filed IPR Petitions Against All Asserted Patents.
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`On February 17 & 19, 2015, SCEA filed IPR petitions against the Newly Asserted
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`Patents. As noted in SCE’s opening brief, the Newly Asserted Patents are directed to a remote
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`control for a hand-held electronic device like a PDA. D.I. 31 at 7. Such remote control devices
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`were well-known at the time the Newly Asserted Patents were filed, as shown by the detailed
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`invalidity analysis set forth in the IPR petitions. Exs. A-B (IPR petitions); Exs. C-G, K, L (prior
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`art references). For example, Sony Ericson Mobile Communications AB filed a patent
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`application covering such a remote control device in July 2002 (see Ex. C) – three years before
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`Aplix filed the earliest of its Newly Asserted Patents.
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`While SCEA is the petitioner in each of the seven IPR petitions filed against the five
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`patents-in-suit, SCEI is named as a “real-party-in-interest” in every petition.4 Thus, both SCEA
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`and SCEI (collectively, “SCE”) are subject to the IPR estoppel provision, and will be prevented
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`from challenging, in this Court, any claims that survive a final written IPR decision based on any
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`ground that was raised or reasonably could have been raised in the IPRs. 35 U.S.C. § 315(e)(2).
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`B.
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`The IPRs Attack Every Conceivably Relevant Claim in the Asserted Patents.
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`As with the first round of IPR petitions against the originally-asserted patents, SCE’s IPR
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`petitions against the Newly Asserted Patents attack every claim that could conceivably be
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`relevant to the accused products in this lawsuit. The 19 claims that have not been attacked in the
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`IPRs (out of the 149 total claims in the asserted patents) relate to features that indisputably are
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`absent from SCE’s accused products.
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`4 D.I. 31 Ex. E at 59; Id. Ex. F at 58-59; Id. Ex. G at 59; Id. Ex. H at 59; Id. Ex. I at 59; Ex. A at
`60; Ex. B at 54.
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 4 of 12
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`III. ALL FACTORS FAVOR A STAY
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`A.
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`The IPRs Are Likely to Simplify this Case.
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`The IPRs are likely to simplify this case by:
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`leading to dismissal of the case if all asserted claims are canceled; or
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`if any asserted claims survive:
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`o narrowing the scope of discovery and the issues and evidence to be presented to
`the Court or jury (e.g., through cancellation of some claims and/or IPR estoppel);
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`o providing guidance on technical issues from an expert panel of ALJs, which will
`reduce the complexity and length of the litigation;
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`o encouraging settlement without further involvement of the Court; and
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`o reducing the cost / burden for both the parties and the Court.
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`See D.I. 31 at 12-16.
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`Aplix failed to address any of these points in its opposition. Instead, Aplix argued that
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`the Court should ignore all potential simplification on the ground that “only SCEA [and not
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`SCEI] will be estopped.” D.I. 33 at 9. In fact, Aplix went so far as to suggest that the
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`defendants themselves were angling for SCEI not to be subject to estoppel. Id. It is unclear how
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`Aplix came away with that impression since SCEI is named as a real-party-in-interest in every
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`IPR petition, thus subjecting it to IPR estoppel under 35 U.S.C. § 315(e)(2). Moreover,
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`defendants’ opening brief stated, on the very page cited in Aplix’s opposition brief: “SCE will be
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`estopped.”5 D.I. 31 at 11. Defendant’s opening brief unambiguously defined “SCE” as
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`including both SCEA and SCEI.6
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`5 Emphasis added throughout, unless otherwise noted.
`6 D.I. 31 at 1 (“SCEA and Sony Computer Entertainment, Inc. (“SCEI”) (collectively,
`“SCE”)….”).
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 5 of 12
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` Aplix’s opposition also pointed to a slide produced by the Patent Office concerning
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`recent IPR statistics. D.I. 33 at 8; Id. Ex. A. The Patent Office data strongly support the
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`conclusion that the IPRs are likely to simplify this case.
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`Aplix’s Patent Office slide covers data relating to 617 IPR petitions filed against patents
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`that included a total of 20,206 claims. D.I. 33 Ex. A. The 617 petitions attacked just under half
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`(9,048) of those claims.7 The PTAB instituted IPR proceedings on 68% of the attacked claims.
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`Id. (The institution rate on a petition basis ranges from 75% to 87%, by year, see Ex. H at 4, but
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`the PTAB sometimes institutes proceedings on less than every claim attacked in a petition).
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`According to Aplix’s Patent Office slide (and related Patent Office slides, see Ex. I at 2)
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`there are three main ways that an IPR proceeding can end for a given patent claim:
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` The PTAB can issue a final written decision (“FWD”) either canceling the claim as
`unpatentable or confirming it as patentable;
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` The patent owner itself can voluntarily cancel or disclaim the claim, for example, by
`requesting entry of an adverse judgment (“RAJ”); or
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` The patent owner and the petitioner can settle the IPR (and presumably, any co-
`pending district court litigation).8
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`According to Aplix’s Patent Office slide, the PTAB’s final written decisions have
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`addressed a total of 2,819 claims, finding 2,176 unpatentable and 643 patentable. D.I. 33 Ex. A.
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`Thus, the PTAB has found unpatentable, and canceled, 77% of the patent claims on which it
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`has rendered a final written decision.9
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`7 IPR petitions routinely attack less than all of the claims of a challenged patent. Many IPR
`petitions target patents asserted in litigation. Patent claims vary in scope, and – as in this case –
`patents frequently include some claims that could not conceivably be asserted against the
`products accused of infringement, and thus need not be attacked in IPR.
`8 The PTO also records dispositions by some “Other” means, which occur in 1% of proceedings.
`Ex. I at 2 (9 of 713 dispositions).
`9 (2,176 claims unpatentable) / (2,819 total claims) = 77% unpatentable.
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 6 of 12
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`Another 893 claims (15% of those on which IPR was instituted) were canceled or
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`disclaimed voluntarily by the patent owner. Id. Finally, 2,402 claims (39% of those on which
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`IPR was instituted) “remained patentable” largely because the IPR proceedings were settled by
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`the parties.10 Id. See also Ex. I at 2. Any parallel district court proceedings are necessarily
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`simplified – or even terminated entirely – when claims are canceled (whether by the PTAB in a
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`final written decision or voluntarily by a patent owner) or when the petitioner and the patent
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`owner reach a settlement.
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`Thus, roughly 90% of all patent claims on which IPR is instituted are mooted (the
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`ultimate simplification) – either because they are canceled, or because the parties settle.11
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`Even considering all claims attacked in IPR petitions (including claims on which IPR is
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`not instituted in the first place) the percentage of ultimate simplification is still roughly 61%.12
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`Aplix focuses on the PTAB’s record in canceling 36% of instituted claims, which
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`corresponds to 24% of all claims attacked in IPR petitions. D.I. 33 at 8. Those percentages omit
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`the many claims that patent owners cancel voluntarily, and the many claims that are “simplified”
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`out of IPR proceedings (and hence out of parallel district court litigation) by settlement.
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`Moreover, they omit the telling statistic, noted above, that when IPRs are resolved by a final
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`written decision of the PTAB, 77% of them are canceled. The Patent Office data show that IPR
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`proceedings are very likely to simplify this case, or even resolve it entirely.
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`10 It is not clear how the Patent Office accounts for the claims in the 1% of proceedings subject
`to “Other” disposition, as recorded in Exhibit I, but the effect is insignificant.
`11 36% canceled by PTAB + 15% canceled by patent owner + 39% settled = 90%. D.I. 33 Ex. A.
`12 24% canceled by PTAB + 10% canceled by patent owner + 27% settled = 61%. Id.
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 7 of 12
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`Aplix’s opposition brief also argued that this stay motion was premature since two of the
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`asserted patents were not yet subject to IPR petitions. D.I. 33 at 10. SCE’s filing of IPR
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`petitions against the Newly Asserted Patents took that argument off the table.
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`Aplix also argued that a stay would be inappropriate since SCE’s IPR petitions fail to
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`attack every claim in the asserted patents. Id. However, Aplix was unable to identify a single
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`omitted claim that it could claim in good faith is infringed by the accused products in this case.13
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`While Aplix declined to identify in its complaint the claims that it plans to assert – and to date
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`has likewise refused to do so in response to SCE’s requests – there is no dispute that SCEA has
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`attacked “every claim that Aplix raised during initial settlement negotiations.” See D.I. 33 at 8.
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`Given the likelihood of simplification, and since the Court can always lift the stay if the
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`PTAB declines to institute IPR proceedings, courts routinely grant stays prior to institution
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`decisions. See, e.g., Norred v. Medtronic, Inc., 2014 WL 554685 at *3 (D. Kan. Feb. 12, 2014)
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`(“Even though the [PTAB] has not yet decided whether to initiate an [IPR], a short stay of this
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`case until the [PTAB] issues its decision … is warranted.”).14
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`13 Even if Aplix could assert the omitted claims, that would not change the analysis. IPR could
`still greatly simplify this case. E.g., Evolutionary Intelligence, LLC v. Sprint Nextel Corp., 2014
`WL 4802426 at *3-4, *6 (N.D. Cal. Sept. 26, 2014) (maintaining stay where IPR petition granted
`on one asserted patent but denied on the second); Evolutionary Intelligence, LLC v. Livingsocial,
`Inc., 2014 WL 2735185 at *2-4 (N.D. Cal. June 16, 2014) (same).
`14 See also Medline Indus., Inc. v. C.R. Bard, Inc., No. 14-03618, slip op. at 2-3 (N.D. Ill. Feb.
`11, 2015); Advanced Micro Devices, Inc. v. LG Elecs., Inc., 2015 WL 545534 at *3-4 (N.D. Cal.
`Feb. 9, 2015); Health Diagnostic Lab., Inc. v. Bos. Heart Diagnostic Corp., No. 14-0796, slip
`op. at 3 (E.D. Va. Feb. 4, 2015); Ignite USA, LLC v. Pac. Mkt. Int'l, LLC, 2014 WL 2505166 at
`*4 (N.D. Ill. May 29, 2014); SunPower Corp. v. PanelClaw, Inc., No. 12-01633, slip op. at 4 (D.
`Del. May 16, 2014); TAS Energy, Inc. v. San Diego Gas & Electric Co., 2014 WL 794215 at *4,
`6 (S.D. Cal. Feb. 26, 2014); Evolutionary Intelligence, LLC v. Facebook, Inc., 2014 WL 261837
`at *3 (N.D. Cal. Jan. 23, 2014); Black & Decker Inc. v. Positec USA, Inc., 2013 WL 5718460 at
`*2 (N.D. Ill. Oct. 1, 2013); Pride Mobility Prods. Corp. v. Permobil, Inc., 2013 WL 8445809 at
`*4 (E.D. Pa. Aug. 14, 2013); Semiconductor Energy Lab., Co. v. Chimei Innolux Corp., 2012
`WL 7170593 at *3 (C.D. Cal. Dec. 19, 2012).
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 8 of 12
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`Aplix posits that “[t]he majority of courts have held that whether a stay will result in the
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`simplification of issues is purely speculative before the Board [i.e., PTAB] has instituted trial.”
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`D.I. 33 at 7. Aplix does not provide a survey, however, and the only case cited by Aplix that
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`calls this a “majority” position, Freeny v. Apple, Inc., 2014 WL 3611948 at *1 (E.D. Tex. July
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`22, 2014), cites only 11 cases. The undersigned counted at least 60 decisions before Freeny in
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`which courts granted disputed motions to stay before the PTAB had decided whether to institute
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`IPR petitions. In any event, of the five judges in this District who have considered whether to
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`grant a stay before institution of an IPR, four have done so. See Ex. J (table). Such an approach
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`makes sense. The PTAB renders its decisions quickly (in this case, the first will arrive in less
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`than three months). Depending on the PTAB’s decisions, the stay can always be lifted. If so,
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`“the stay will be short.” TAS Energy, Inc. v. San Diego Gas & Elec. Co., 2014 WL 794215 at *4
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`(S.D. Cal. Feb. 26, 2014).
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`B.
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`Aplix Fails to Identify Any Undue Prejudice.
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`There is no dispute that Aplix:
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`
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`is a non-practicing entity under the asserted patents;
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` does not sell goods that compete with SCE’s accused products;
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` delayed bringing suit and, even after it sued, failed to assert all its patents at once; and
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` did not seek a preliminary injunction.
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`Under these circumstances, there is no undue prejudice. See, e.g., Zond, LLC v. Intel Corp., No.
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`13-11570 (D. Mass. Apr. 18, 2014) (Stearns, J.) (“A stay will not significantly disadvantage
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`Zond as it and Intel are not direct competitors.”).15
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`15 See also Autoalert, Inc. v. Dominion Dealer Solutions, LLC, 2013 WL 8014977, *3 (C.D. Cal.
`May 22, 2013) (“If the Defendants continued sale[s] … w[ere] in fact catastrophic to Plaintiff’s
`business, it is unlikely Plaintiff would have waited more than two years … to file suit.”).
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 9 of 12
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`Aplix argues, circularly, that a stay would be prejudicial because discovery has not yet
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`begun, and a stay would further delay discovery. D.I. 33 at 11. Yet, the early stage of this case
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`is, as a matter of law, a factor favoring entry of a stay. Moreover, the delay that occurs during
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`the term of a stay is inherent to the stay and cannot qualify as “undue prejudice.” See, e.g.,
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`Evolutionary Intelligence, LLC v. Facebook, Inc., 2014 WL 261837 at *3 (N.D. Cal. Jan. 23,
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`2014) (noting that the “delay inherent in the [IPR] process does not constitute, by itself, undue
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`prejudice.”); TPK Touch Solutions, Inc v. Wintek Electro-Optics Corp., 2013 WL 6021324 at *4
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`(N.D. Cal. Nov. 13, 2013) (“[P]arties having protection under the patent statutory framework
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`may not complain of the rights afforded to others by that same statutory framework.”).
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`Aplix also argues that this motion is “timed to gain a tactical advantage” because SCEA
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`and SCEI obtained extensions of time to answer Aplix’s original and amended complaints,
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`worked on the IPR petitions during those extensions, and then file this motion. D.I. 33 at 11.
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`Yet Aplix agreed to the extensions, including a 75-day extension which was less than SCEI, a
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`foreign corporation, was entitled to in exchange for its waiver of service, and another after Aplix
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`elected to file an amended complaint. Moreover, using the initial quiet months of a case to
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`prepare and file IPR petitions – and filing a motion to stay before active discovery commences –
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`is the antithesis of gamesmanship. It is encouraged. See 77 Fed. Reg. 48,680, 48,680 (Aug. 14,
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`2012) (explaining that Congress intended IPR proceedings “to establish a more efficient and
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`streamlined patent system that will improve patent quality and limit unnecessary and
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`counterproductive litigation costs”); Destination Maternity Corp. v. Target Corp., 2014 WL
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`1202941 at *3 (E.D. Pa. Mar. 24, 2014) (“[T]he less time that a party waits to file a motion to
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`stay… the less that the movant’s conduct gives rise to an inference that the delay in so doing was
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`impermissibly tactical.”).
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 10 of 12
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`C.
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`This Case is at the Earliest Stage.
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`This case is at the earliest stage (the pleadings). Accordingly, this factor weighs in favor
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`of a stay as a matter of law. See Zond, No. 13-11570 (staying case pending IPR since the case is
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`“still in its early stage – the Markman process not having commenced”).16
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`Aplix argues that the parties can “make progress” in this litigation before the PTAB
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`issues its orders on institution. D.I. 33 at 11. Again, however, Congress intended IPR
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`proceedings to reduce exactly that sort of burden. Continuing to litigate this case now would
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`force the parties, and Court, to expend resources that will likely be unnecessary: “[I]t makes a
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`lot of sense for [the PTAB] to have an opportunity to reexamine [an asserted patent in an IPR]
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`before it gets litigated with all these presumptions and here it’s so expensive.” Fox Networks
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`Group, Inc. v. Personal Audio, LLC, No. 13-11794, D.I. 37 (Jan. 23, 2013, Hearing Tr.), at 9 (D.
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`Mass.) (Wolf, J.).
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`IV. CONCLUSION
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`Defendants respectfully request that the Court stay this case until the PTAB completes
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`inter partes review proceedings with respect to the asserted patents.
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`16 Accord In re Body Science LLC Patent Litig., 2012 WL 5449667, at *2 (D. Mass. Nov. 2,
`2012) (Saylor, J.) (staying cases pending ex parte reexamination where “[n]o status conference
`ha[d] been held” in two and exchanges of contentions and limited discovery occurred in the two
`others).
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 11 of 12
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`March 31, 2015
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`Respectfully submitted,
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`/s/ Michael N. Rader
`Michael N. Rader (BBO #646990)
`mrader@wolfgreenfield.com
`Eric G. J. Kaviar (BBO #670833)
`ekaviar@wolfgreenfield.com
`Stuart V. C. Duncan Smith (BBO #687976)
`sduncansmith@wolfgreenfield.com
`WOLF, GREENFIELD & SACKS, P.C.
`600 Atlantic Avenue
`Boston, Massachusetts 02210
`617-646-8000 telephone
`617-646-8646 facsimile
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`Attorneys for Sony Computer Entertainment, Inc.
`and Sony Computer Entertainment America LLC
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`Case 1:14-cv-12745-MLW Document 36 Filed 03/31/15 Page 12 of 12
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`CERTIFICATE OF SERVICE
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`I certify that this document is being filed through the Court’s electronic filing system,
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`which serves counsel for other parties who are registered participants as identified on the Notice
`of Electronic Filing (NEF). Any counsel for other parties who are not registered participants are
`being served by first class mail on the date of electronic filing.
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`/s/ Eric G. J. Kaviar
`Eric G. J. Kaviar
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