Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 1 of 8
`
`UNITED STATES DISTRICT COURT
`
`DISTRICT OF MASSACHUSETTS
`
`
`APLIX IP HOLDINGS
`
`CORPORATION,
`
`Plaintiff,
`
`
`v.
`
`SONY COMPUTER ENTERTAINMENT,
`
`INC.
`
`and
`
`SONY COMPUTER ENTERTAINMENT
`
`AMERICA LLC,
`
`Defendants.
`
`Civ. No. 14-cv-12745-MLW
`
`MEMORANDUM AND ORDER
`
`WOLF, D.J.
`
`September 28, 2015
`
`On June 27, 2014, Aplix IP Holdings Corporation ("Aplix")
`
`filed a complaint against Sony Computer Entertainment,
`
`Inc.
`
`(" SCE") and Sony Computer Entertainment America, LLC
`
`(" SCEA")
`
`(collectively, "Sony"), alleging infringement of three patents.
`
`On October 16, 2014, SCE and SCEA answered in separate filings.
`
`Each asserted, among other affirmative defenses, non-infringement
`
`and
`
`invalidity of
`
`the
`
`three patents.
`
`Additionally,
`
`SCEA
`
`counterclaimed to seek declaratory judgments of non-infringement
`
`and invalidity of those patents. On October 30, 2014, Aplix filed
`
`an amended complaint asserting infringement of
`
`two additional
`
`patents. On December 31, 2014, SCE and SCEA updated their answers
`
`and counterclaims to include the two additional patents.
`
`
`
`UNITED STATES DISTRICT COURT
`
`DISTRICT OF MASSACHUSETTS
`
`
`APLIX IP HOLDINGS
`
`CORPORATION,
`
`Plaintiff,
`
`
`v.
`
`SONY COMPUTER ENTERTAINMENT,
`
`INC.
`
`and
`
`SONY COMPUTER ENTERTAINMENT
`
`AMERICA LLC,
`
`Defendants.
`
`Civ. No. 14-cv-12745-MLW
`
`MEMORANDUM AND ORDER
`
`WOLF, D.J.
`
`September 28, 2015
`
`On June 27, 2014, Aplix IP Holdings Corporation ("Aplix")
`
`filed a complaint against Sony Computer Entertainment,
`
`Inc.
`
`(" SCE") and Sony Computer Entertainment America, LLC
`
`(" SCEA")
`
`(collectively, "Sony"), alleging infringement of three patents.
`
`On October 16, 2014, SCE and SCEA answered in separate filings.
`
`Each asserted, among other affirmative defenses, non-infringement
`
`and
`
`invalidity of
`
`the
`
`three patents.
`
`Additionally,
`
`SCEA
`
`counterclaimed to seek declaratory judgments of non-infringement
`
`and invalidity of those patents. On October 30, 2014, Aplix filed
`
`an amended complaint asserting infringement of
`
`two additional
`
`patents. On December 31, 2014, SCE and SCEA updated their answers
`
`and counterclaims to include the two additional patents.
`
`
`
`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 2 of 8
`
`On January 15, 2015, Sony moved to stay this action pending
`
`a review by the United States Patent and Trademark Office ("PTO")
`
`of the validity of the five patents at issue in this litigation
`
`(" inter partes review"). Sony argued that staying the case pending
`
`inter partes review would simplify or moot this litigation, saving
`
`the court and parties time and resources. Aplix opposed the
`
`motion, arguing that it was premature. Aplix noted that Sony had
`
`not yet requested review of the two patents added by the October
`
`30, 2014 amended complaint, and that the PTO had not yet granted
`
`inter partes review of any of the disputed patents. Sony's March
`
`31, 2015 reply stated that it had requested review of all five
`
`patents.
`
`In a series of filings dated between May 22, 2015 and
`
`July 29, 2015, Sony notified the court that the PTO has granted
`
`inter partes review of each of the five disputed patents.
`
`For the following reasons,
`
`the court finds that a stay of
`
`this
`
`litigation pending
`
`inter partes
`
`review
`
`is appropriate.
`
`Therefore, Sony's motion to stay is being allowed.
`
`I.
`
`STANDARDS
`
`Congress recently created the inter partes review process
`
`through the America Invents Act of 2011.
`
`35 U.S.C. §§311-319.
`
`The Act provides that "a person who is not the owner of a patent
`
`may file with the [PTO] a petition to institute an inter partes
`
`review of the patent." Id. at §311(a). The PTO may grant an inter
`
`2
`
`
`
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`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 3 of 8
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`partes review only if "there is a reasonable likelihood that the
`
`petitioner would prevail with respect to at least one of the claims
`
`challenged in the petition."
`
`Id. at §314 (a) .
`
`The PTO must
`
`generally reach a decision within one year of the granting of a
`
`petition for inter partes review.
`
`Id. at §316 (a) (11) .
`
`Inter partes review is barred if a petitioner has filed a
`
`civil action challenging
`
`the validity of a patent.
`
`Id. at
`
`§315 (a) (1). However, "[a] counterclaim challenging the validity
`
`of a claim of a patent does not constitute a civil action
`
`challenging the validity of a claim of a patent for purposes of
`
`this subsection."
`
`Id. at §315 (a) (3) .
`
`If a petitioner "files a
`
`civil action challenging the validity of a claim of the patent" on
`
`or after the date of the application for inter partes review, "that
`
`civil action shall be stayed automatically" until certain motions
`
`are filed.
`
`Id. at §315 (a) (2). The statute does not address the
`
`staying of civil actions initiated by a patent owner when defendant
`
`has sought inter partes review.
`
`A district court has the inherent power to manage its docket
`
`by staying proceedings. Landis v. N. Am. Co., 299 u.s. 248, 254
`
`55
`
`(1936); Procter & Gamble Co. v. Kraft Foods Global, Inc., 549
`
`F.3d 842, 848-49 (Fed. Cir. 2008)
`
`(" [D] istrict courts have broad
`
`discretion to manage their dockets, including the power to grant
`
`a stay of proceedings[.]"); Marquis v. FDIC, 965 F.2d 1148, 1154
`
`3
`
`
`
`
`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 4 of 8
`
`(1st Cir. 1992)
`
`(" It is beyond cavil that, absent a statute or
`
`rule to the contrary, federal district courts possess the inherent
`
`power
`
`to stay pending litigation[.]").
`
`This
`
`inherent power
`
`includes the power "to stay an action pending the resolution of a
`
`related matter in the PTO."
`
`In re SOl Technologies, Inc., 456
`
`Fed. App'x 909, 911
`
`(Fed. Cir. 2012); In re Columbia University
`
`Patent Litigation, 330 F. Supp. 2d 12, 15 (2004).
`
`Al though neither the First Circuit nor the Federal Circuit
`
`has spoken to this question in further detail, the district courts
`
`have consistently considered
`
`three
`
`factors
`
`to guide
`,
`
`their
`
`discretion in deciding a motion to stay:
`
`(1) the stage of the litigation, including whether discovery
`is complete and a trial date has been set; (2) whether a stay
`will simplify the issues in question and the trial of the
`case; and (3) whether a stay will unduly prejudice or present
`a clear tactical disadvantage to the nonmoving party.
`
`ACQIS, LLC v. EMC Corp., -- F. Supp. 3d --, 2015 WL 3617106, at *2
`
`(D. Mass.
`
`June 10, 2015);
`
`see also SCVNGR,
`
`Inc. v. eCharge
`
`Licensing, LLC, No. 13-cv-12418-DJC, 2014 WL 4804738, at *8
`
`(D.
`
`Mass. Sept. 25, 2014); PersonalWeb Technologies, LLC v. Apple Inc.,
`
`69 F. SUpp. 3d 1022, 1025 (N.D. Cal. 2014); Freeny v. Apple Inc.,
`
`No. 2:13-CV-00361-WCB, 2014 WL 3611948, at *2
`
`(E.D. Tex. July 22,
`
`2014) .
`
`4
`
`
`
`
`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 5 of 8
`
`II. ANALYSIS
`
`All three factors weigh in favor of granting a stay pending
`
`the resolution of the inter partes review process.
`
`This litigation is in its early stages. Aplix filed its
`
`amended complaint approximately eleven months ago.
`
`Sony has
`
`answered and counterclaimed. However, discovery has not occurred
`
`and the court has not set a trial date. Courts have frequently
`
`granted motions to stay pending inter partes review at similar or
`
`more advanced stages of litigation.
`
`See, e.g., ACQIS, 2015 WL
`
`3617106, at *3
`
`(granting stay pending inter partes review where
`
`"discovery [wa]s not yet complete, and a trial date ha[q] not been
`
`set"); SCVNGR, 2014 WL 4804738, at *9 (stage-of-case factor weighed
`
`in favor of stay where "Court ha [d] not set a schedule for
`
`discovery or claim construction, never mind trial"); Evolutionary
`
`Intelligence, LLC v. Apple, Inc., No. 13-cv-04201-WHA, 2014 WL
`
`93954, at *2
`
`(N.D. Cal.
`
`Jan. 9, 2014)
`
`(granting stay where
`
`II substantial portions of discovery on the merits of this action
`
`hard] yet to occur"); e-Watch, Inc v. ACTi Corp., No. SA-12-695,
`
`2013 WL 6334372
`
`(W.D. Tex. Aug. 9, 2013)
`
`(granting stay pending
`
`inter partes review thirteen months after filing of complaint).
`
`This case has progressed far less than cases where courts
`
`have declined to issue a stay.
`
`See SurfCast, Inc. v. Microsoft
`
`Corp., 6 F. Supp. 3d 136, 142-43 (D. Me. 2014)
`
`(denying stay when
`
`5
`
`
`
`
`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 6 of 8
`
`"case ha[d] been underway for over a year and fact discovery [wa]s
`
`complete"); Verinata Health, Inc. v. Ariosa Diagnostics, Inc., No.
`
`12-cv-05501-SI, 2014 WL 121640, at *2
`
`(N.D. Cal. Jan. 13, 2014)
`
`(denying stay where "trial date has been set
`
`. and discovery
`
`is well underway with
`
`the parties having exchanged initial
`
`disclosures,
`
`infringement and invalidity contentions, and some
`
`document productions") .
`
`A stay is likely to simplify the issues in this litigation.
`
`The PTa has granted inter partes review on all five patents at
`
`issue in this litigation.
`
`See ACQIS, 2015 WL 3617106, at *4
`
`(granting stay even where "only 2 of the 11 patents-in-suit .
`
`are under review").
`
`If the PTa finds all five patents invalid,
`
`the inter partes review would "simplify the case by rendering all
`
`of
`
`[Aplix]' s
`
`claims
`
`for
`
`infringement moot."
`
`Evolutionary
`
`Intelligence, 2014 WL 261837, at *2.
`
`If the PTa finds at least
`
`one patent valid,
`
`the issues in this case will be simplified
`
`because Sony will be "estopped from raising the same invalidity
`
`contentions" before this court. Crossroads Sys., Inc. v. Dot Hill
`
`Sys. Corp., No. A-13-CA-I025-SS, 2015 WL 3773014, at *3
`
`(W.O. Tex.
`
`June 16, 2015); see also 35 U.S.C. §315 (e) (2).
`
`A stay will not unduly prejudice the nonmoving party. Aplix
`
`argues that it has "an interest in the timely enforcement of its
`
`patent right" and warns that "further delay threatens to cause
`
`6
`
`
`
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`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 7 of 8
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`this litigation to drag on for years." Opp ,
`
`to Mot.
`
`to Stay,
`
`Docket No. 33, at 10-11. However, "potential for delay does not,
`
`by itself, establish undue prejudice."
`
`SCVNGR, 2014 WL 4804738,
`
`at *9; see also Crossroads Sys., 2015 WL 3773014, at *2
`
`("mere
`
`delay in collecting damages does not constitute undue prejudice") .
`
`While the court must be vigilant and deny dilatory motions for a
`
`stay, Sony sought inter partes review while this litigation was in
`
`its early stages, and the PTO found the applications sufficiently
`
`meritorious to grant review for all five patents. Moreover, if
`
`some of the patents in dispute are found to be invalid by the PTO,
`
`the narrowed case may proceed more quickly.
`
`Therefore, inter
`
`partes review has the potential to expedite the resolution of this
`
`case.
`
`Where the litigants are direct competitors, "[ c] ourts are
`
`hesitant to grant a stay." SCVNGR, 2014 WL 4804738, at *9. The
`
`risk of prejudice is greater, for example, when the parties are
`
`competing for market share or weighing whether to bring a product
`
`to market. However, Aplix has not argued that it practices these
`
`patents or sells products
`
`that compete with
`
`the allegedly
`
`infringing Sony products. See Reply in Support of Mot. to Stay,
`
`Docket No. 36, at 7.
`
`Aplix has not sought a preliminary
`
`inj unction, further "undermining its claim of undue prej udice. "
`
`ACQ IS, 2015 WL 361 71 06 , at * 5 .
`
`Aplix does seek a permanent
`
`7
`
`
`
`
`Case 1:14-cv-12745-MLW Document 42 Filed 09/28/15 Page 8 of 8
`
`injunction, as well as monetary damages.
`
`It will still be able to
`
`seek such an
`
`injunction, as well as monetary damages with
`
`prej udgment interest, for any claims that survive inter partes
`
`review.
`
`III. ORDER
`
`In view of the foregoing, it is hereby ORDERED that:
`
`1. Defendant's Motion to Stay (Docket No. 30) is ALLOWED
`
`and this case is STAYED.
`
`2. Within thirty days of the PTa issuing its final decisions
`
`regarding the five disputed patents, the parties shall confer and
`
`file a joint status report informing the court of:
`
`(a) the PTa's
`
`decisions; and (b) whether any inter partes review decision will
`
`be appealed to the Federal Circuit.
`
`3.
`
`Unless otherwise ordered, the stay will continue through
`
`the conclusion of any appellate proceedings or the expiration of
`
`the parties' rights to appeal.
`
`8
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