4:12-cv-11758-GAD-MKM Doc # 79 Filed 04/30/13 Pg 1 of 19 Pg ID 2817
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`Civil Action No.12-cv-11758
`HONORABLE GERSHWIN A. DRAIN
`
`EVERLIGHT ELECTRONICS CO., LTD.,
`and EMCORE CORPORATION,
`
`Plaintiffs and
`Counter-Defendants,
`
`v.
`
`NICHIA CORPORATION, and
`NICHIA AMERICA CORPORATION,
`
`Defendants and
`Counter-plaintiffs,
`
`v.
`
`EVERLIGHT AMERICAS, INC.,
`
`Defendants.
`_________________________________/
`
`OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR LEAVE TO FILE
`SECOND AMENDED COMPLAINT [#60], DENYING DEFENDANTS’ MOTION TO
`STAY AND SEVER THE ‘215 PATENT CLAIMS AND COUNTERCLAIMS [#62] AND
`ADOPTING PLAINTIFFS’ PARAGRAPHS 6(F)(3) AND (7) AND REQUIRING THE
`PARTIES TO SUBMIT A STIPULATED PROTECTIVE ORDER NO LATER THAN
`MAY 1, 2013
`
`I.
`
`INTRODUCTION
`
`On April 19, 2012, Plaintiffs Everlight Electronics Co., Ltd.’s and Emcore Corporation’s
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`(hereinafter “Plaintiffs”) filed the instant patent infringement action against Defendants, Nichia
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`Corporation and Nichia America Corporation (hereinafter “Defendants”). The parties are direct
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`business competitors in the manufacture and supply of light-emitting diode (“LED”) products.
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`Presently before the Court is Plaintiffs’ Motion for Leave to File Second Amended Complaint, filed
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`on February 20, 2013. Plaintiffs seek to add inequitable conduct counts to the Second Amended
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`Complaint. They argue their proposed amendment addresses the inequitable conduct pleading
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`deficiencies identified by this Court’s November 2, 2012 Order dismissing Plaintiffs’ claims from
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`the First Amended Complaint. See Dkt. No. 50. Defendants counter that Plaintiffs request should
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`be denied, not only because it is their third bite at the apple, but also because the proposed
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`amendment does not address the specific intent nor the materiality pleading deficiencies identified
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`by the Court’s order, thus the amendment is futile and would not withstand a Rule 12(b)(6) motion
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`to dismiss.
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`Also, before the Court is Defendants’ Motion to Stay and Sever the ‘215 Patent’s claims and
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`counterclaims, filed on February 25, 2013. Defendants argue that the Court should stay all the
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`proceedings concerning the ‘215 Patent pending the United States Patent and Trademark Office’s
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`(PTO) reexamination of the ‘215 Patent and resulting determination concerning validity of its
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`claims. Defendants further maintain that the ‘215 Patent claims and counterclaims should be
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`severed from this action pursuant to Rule 21 of the Federal Rules of Civil Procedure. Plaintiffs
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`argue that a stay and severance of the ‘215 Patent claims will be severely prejudicial, as well as will
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`not simplify the issues before the Court, thus both requests should be denied.
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`Additionally, the parties have submitted memoranda concerning their dispute over two
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`provisions in their proposed protective order. Specifically, the parties have been unable to mutually
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`agree on a party’s use of non-confidential information (paragraph 6(F)(3)) and a prosecution bar
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`prohibiting Plaintiffs’ attorneys from prosecution activities before the PTO (paragraph 7).
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`These matters are fully briefed and the Court finds that oral argument will not aid in the
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`resolution of these matters. Accordingly, these matters will be resolved on the briefing submitted.
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`See E.D. Mich. L.R. 7.1(f)(2). For the reasons that follow, Plaintiffs’ Motion for Leave to File
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`Second Amended Complaint is granted, Defendants’ Motion to Stay and Sever the ‘215 Patent
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`claims is denied. Lastly, the Court adopts Plaintiffs’ proposed protective order.
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`II.
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`FACTUAL AND PROCEDURAL BACKGROUND
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`On April 19, 2012, Plaintiffs filed the instant action for patent infringement of their patent
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`entitled “Contact to N-GaN with Au Termination,” United States Patent Number 6,653,215 (“‘215
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`Patent”), and seeking declaratory judgment of non-infringement, invalidity and unenforceability of
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`Defendants’ patent entitled “Light Emitting Device Having a Nitride Compound Semiconductor and
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`a Phosphor Containing a Garnet Fluorescent Material,” United States patent number 5,998,925
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`(“‘925 Patent”), and a declaratory judgment of non-infringement, invalidity and unenforceability
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`of Defendants’ patent entitled “Light Emitting Device with Blue Light LED and Phosphor
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`Components,” United States patent number 7,531,960 (“‘960 Patent”) (collectively “patents-in-
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`suit”).
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`Plaintiffs filed a First Amended Complaint on June 18, 2012. On July 18, 2012, Defendants
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`filed their Answer asserting an affirmative defense of non-infringement and invalidity of the ‘215
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`Patent, as well as raised counterclaims of infringement of their patents-in-suit. Also on July 18,
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`2012, Defendants filed a Motion to Dismiss Plaintiffs’ claims of unenforceability, Counts III and
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`VI, of the First Amended Complaint. Before the pending motion to dismiss was resolved, this
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`matter was reassigned to the undersigned on October 3, 2012.
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`Meanwhile, on September 16, 2012, Defendants filed a Petition for inter partes review of
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`all claims of the ‘215 Patent, which was the first day this procedure became available at the PTO.
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`This Court held a status conference on October 25, 2012, and entered a Scheduling Order the next
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`day setting various deadlines and dates, most relevant for the purposes of the present motions
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`include the following:
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`Join Additional Parties and Amend Pleadings:
`Exchange of Prop. Terms and Claims for Construction:
`Fact Discovery Cutoff:
`Dispositive Motion Cutoff:
`Trial:
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`February 20, 2013
`April 12, 2013
`October 15, 2013
`February 26, 2014
`June 16, 2014
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`Thereafter, on November 2, 2012, the Court entered an Order Granting Defendants’ Motion
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`to Dismiss counts III and VI of the First Amended Complaint. The Court’s Order found that
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`Plaintiffs failed to plausibly allege that Defendants’ patents were unenforceable based on purported
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`inequitable conduct before the PTO because the allegations failed to sufficiently identify the actor
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`who engaged in the misconduct before the PTO, nor that such individual withheld or misrepresented
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`information with the specific intent to deceive the PTO. See Dkt. No. 50 at 10-11, 16-18, and 20.
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` The Court also rejected Plaintiffs’ claim of “infectious unenforceability” relative to the ‘960 Patent.
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`Id. at 19.
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`On November 5, 2012, the parties exchanged their preliminary infringement contentions.
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`Defendants’ invalidity contentions cover all the same grounds asserted in its Petition before the
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`PTO. Additionally, Defendants’ invalidity contentions include defenses such as laches, waiver,
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`estoppel, and lack of standing and ownership of the ‘215 Patent. Discovery has just started in this
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`matter. The parties have propounded written discovery requests, but few documents have been
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`produced because the parties have yet to agree on a protective order nor on an agreement for the
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`storage of electronically stored discovery information.
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`On February 12, 2013, the PTO granted Defendants’ Petition for inter partes review of the
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`‘215 Patent. In its decision, the PTO stated “we determine that Nichia has demonstrated sufficiently
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`that there is a reasonable likelihood that it will prevail with respect to the challenge of claims 1-17.”
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`III.
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`LAW & ANALYSIS
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`A.
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`Plaintiffs’ Motion for Leave to File Second Amended Complaint
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`After an answer to the complaint has been filed, Federal Rule of Civil Procedure 15(a)
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`provides that a party may file an amended complaint “only by leave of court or by written consent
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`of the adverse party.” Fed. R. Civ. P. 15(a). Rule 15(a) provides that such “leave shall be freely
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`given when justice so requires.” Id. Rule 15 “reinforce[s] the principle that cases should be tried
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`on their merits rather than the technicalities of pleadings.” Moore v. Paducah, 790 F.2d 557, 559
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`(6th Cir. 1986).
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`The United States Court of Appeals for the Sixth Circuit has identified various factors that
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`this Court must consider when determining whether to grant leave to amend:
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`Undue delay in filing, lack of notice to the opposing party, bad faith by the moving
`party, repeated failure to cure deficiencies by previous amendments, undue prejudice
`to the opposing party, and futility of amendment are all factors which may affect the
`decision. Delay by itself is not sufficient reason to deny a motion to amend. Notice
`and substantial prejudice to the opposing party are critical factors in determining
`whether an amendment should be granted.
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`Brooks v. Celeste, 39 F.3d 125, 129 (6th Cir. 1994) (citing Head v. Jellico Housing Auth., 870 F.2d
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`1117, 1123 (6th Cir. 1989)). “[W]hen there is a lack of prejudice to the opposing party and the
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`amended complaint is obviously not frivolous or made as a dilatory maneuver in bad faith, it is an
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`abuse of discretion to deny the motion.” U.S. v. Marsten Apartments, Inc., 175 F.R.D. 257, 260
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`(E.D. Mich. 1997).
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`Plaintiffs argue that they have not unduly delayed in seeking amendment. The Court’s
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`scheduling order set February 20, 2013 as the cut off date for amending the pleadings. Discovery
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`is in its infancy, thus this is not a situation where discovery needs to be reopened. Any discovery
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`associated with the inequitable misconduct claims does not reach beyond the subject matter of the
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`patents-in-suit. Thus, there is no prejudice to Defendants.
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`Defendants counter that Plaintiffs’ motion should be denied because they have repeatedly
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`failed to cure the deficiencies in their inequitable conduct allegations. Plaintiffs have attempted to
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`plead inequitable conduct on two previous occasions, however both times their claims were
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`implausible under the pleading standards for inequitable conduct under Exergen Corp. v. Wal-Mart
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`Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) and Therasense, Inc. v. Becton, Dickinson & Co., 649
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`F.3d 1276 (Fed. Cir. 2011). Defendants further argue that the proposed amendment is futile because
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`it still fails to meet the heightened pleading standards required by Exergen and Therasense, therefore
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`it cannot defeat a Rule 12(b)(6) motion to dismiss.
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`“To prevail on the defense of inequitable conduct, the accused infringer must prove that the
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`applicant misrepresented or omitted material information with the specific intent to deceive the
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`PTO.” Therasense, 649 F.3d at 1287. Both elements-intent and materiality-must be established by
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`clear and convincing evidence. Id. The Exergen court held that “in pleading inequitable conduct
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`in patent cases, Rule 9(b) requires identification of the specific who, what, when, where, and how
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`of the material misrepresentation or omission committed before the PTO.” Exergen, 575 F.3d at
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`1327.
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`While “knowledge” and “intent” may be alleged generally, “a pleading of inequitable
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`conduct under Rule 9(b) must include sufficient allegations of underlying facts from which a court
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`may reasonably infer that a specific individual (1) knew of the withheld material information or of
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`the falsity of the material misrepresentation, and (2) withheld or misrepresented this information
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`with a specific intent to deceive the PTO.” Id. at 1328-29. To adequately plead materiality, the
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`allegations must “explain both ‘why’ the withheld information is material and not cumulative, and
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`‘how’ an examiner would have used this information in assessing the patentability of the claims.”
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`Id. at 1329-30. “[A]ffirmative representations by the patentee, in contrast to misleading omissions,
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`are more likely to be regarded as material.” Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d
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`1354, 1367 (Fed. Cir. 2003).
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`Here, the Court finds that the proposed amendment addresses and remedies the inequitable
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`conduct pleading deficiencies identified by the Court in its November 2, 2012 Order. As an initial
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`matter, the Court notes that it has already determined that the allegations raised in the First Amended
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`Complaint sufficiently pled “but for” materiality. See Dkt. No. 50 at 16-18. The Court concludes
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`that the Second Amended Complaint likewise sufficiently alleges that had the PTO known of the
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`fictitious phosphors and fabricated examples, independent claims 1 and 23 of the ‘925 Patent and
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`claim 14 of the ‘960 Patent would not be allowed due to lack of enablement under 35 U.S.C. §
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`112,¶1, as well as would not be allowed pursuant to 35 U.S.C. §§ 101,102(f).
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`Further, the proposed amendment identifies the specific individuals and their deliberate
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`misrepresentations made with the intent to deceive the PTO. There are sufficient “facts from which
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`it is plausible that the applicant had an intent to deceive.” Human Genome Scis., Inc. v. Genentech,
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`Inc., No. 11-6519, 2011 U.S. Dist. LEXIS 153834, at *12 (C.D. Cal. Dec. 9, 2011). Specifically, the
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`‘925 Patents’ Inventors, Yasunobu Noguchi (“Noguchi”), Kensho Sakano (“Sakano”) and Yoshinori
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`Shimizu (“Shimizu”), knew that the ‘215 Patent claimed subject matter that none of the named
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`inventors actually invented and claimed fictitious experimental data and results to defraud the PTO.
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`See Sec. Am. Compl., ¶¶149-276, 334-406.
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`In particular, the proposed amendment identifies a separate patent application filed by
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`Noguchi with Japan’s Patent Office, patent number H10-36835 (“‘835 Patent”), which Plaintiffs
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`assert was filed the same day as the filing of the first application to which the patents-in-suit claim
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`priority. In this application, Noguchi concludes, based on experimental data, that full replacement
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`of yttrium with gadolinium in YAG composition by the methods disclosed in the patents-in-suit
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`would not work to emit light. See Sec. Am. Compl., ¶¶52-57, 156-61. Thus, Plaintiffs have
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`alleged that Noguchi knew he did not invent or enable the LEDs using full substitution of yttrium
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`with gadolinium by the methods of the patents-in-suit, and that this would not work to emit light.
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`Further, the Second Amended Complaint alleges that Shimizu and Sakano were aware of Noguchi’s
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`data and conclusions disclosed in the ‘835 Patent. Specifically, both inventors incorporated
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`substantial disclosures from the ‘835 Patent application, however they chose not to carry over the
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`disclosure that the full substitution of yttrium with gadolinium would not work to emit light. Id. at
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`¶¶ 193, 204, 234, 245, and 274.
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`Additionally, Plaintiffs have alleged that all three inventors had specific intent based on the
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`fact that over half of the examples included to support enablement contain demonstrably false and
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`fictitious data results. Noghuchi, Sakano and Shimizu are alleged to have personal knowledge that
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`independent claims 1 and 23 of the ‘925 Patent and claim 14 of the ‘960 Patent, which cover full
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`gadolinium substitution, included within their scope subject matter that none of the named inventors
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`actually invented. Id. at ¶¶ 42, 95-112, 334-406. Similarly, these same inventors knew that claims
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`1 and 23 of the ‘925 Patent, covering full indium substitution, included within their scope subject
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`matter that none of the named inventors had actually invented. Id. at ¶¶ 164-67, 176, 178, 205-07,
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`213, 220, 246, 253, 258 and 260. The Second Amended Complaint describes that these inventors
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`used five other examples of LED experiments containing false data and overstated performance
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`measurements in order to deceive the PTO.
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`Defendants argue that the ‘835 Patent application was actually published in 1998 and was
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`public record at the time Plaintiffs filed this action in April of 2012, thus the motion to amend should
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`be denied on this basis alone. They also insist that the ‘835 Patent application does not support an
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`inference of specific intent to deceive the PTO. However, the Court concludes that a plausible
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`inference that can be drawn from the amended allegations is that the inventors knew that full
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`substitution as described in the patents was not possible, knew they had not achieved full
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`substitution in the multiple examples provided in their work, and knowingly claimed full substitution
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`as part of their invention to the PTO. Furthermore, the Court finds that Defendants’ arguments
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`attacking Plaintiffs’ specific intent allegations are appropriate for a Rule 56(c) motion for summary
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`judgment, and not at this stage of the proceedings.
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`For instance, Defendants argue that the ‘835 Patent does not support the conclusion that
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`Noguchi, or any of the other inventors, knew that the full substitution of yttrium with gadolinium
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`would not work to emit light relying on a variety of hypothetical reasoning. In support, Defendants
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`rely on Table 1 of the ‘835 Patent application to suggest that a phosphor with full substitution of
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`yttrium with gadolinium was not made. Thus, Defendants theorize, Plaintiffs cannot establish that
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`Noguchi knew full substitution would not work to emit light.
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`In further support of their contention that Plaintiffs have not sufficiently alleged specific
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`intent, Defendants argue that Noguchi was not the only named inventor of the ‘835 Patent, thus his
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`co-inventor could have had the knowledge concerning full substitution that Plaintiffs attribute solely
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`to Noguchi. Additionally, the patents-in-suits’ inventors are Japanese, therefore they are unfamiliar
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`with U.S. patent laws and their use of Markush group language.
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`Defendants remaining hodgepodge of reasons why amendment would be futile are similarly
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`inappropriate to resolve at this stage of the proceedings. Specifically, Defendants argue that the
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`‘835 Patent application cannot be compared with the ‘925 Patent because Figure 3's phosphor
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`composition is not the same as Example 8's phosphor composition. Figure 3 includes only
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`aluminum and the phosphor composition in Example 8 includes 50% aluminum and 50% gallium.
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`Lastly, Defendants argue that claim 14 of the ‘960 Patent’s specification shows enablement with
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`wavelengths of 510 to 600 nm in Embodiment 2, thus Plaintiffs’ mischaracterize the scope of the
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`‘960 Patent.
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`Because all of Defendants arguments are suited for summary judgment or trial proceedings,
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`the Court declines to address these arguments. At this stage of the proceedings, the Court is required
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`to accept Plaintiffs’ well pleaded factual allegations as true and view these facts in the light most
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`favorable to Plaintiff. Based on the above analysis, the Court finds that the Second Amended
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`Complaint’s allegations permit a reasonable inference that Noguchi, Sakano and Shimizu
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`misrepresented and omitted material information with the specific intent to deceive the PTO. Thus,
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`Plaintiffs’ proposed inequitable conduct claims are not futile and have satisfied the pleading
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`standards set forth in Exergen and Therasense. Plaintiffs’ Motion for Leave to File Second
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`Amended Complaint is therefore granted.
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`B.
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`Defendants’ Motion to Stay and Sever the ‘215 Patent Claims
`and Counterclaims Pending Inter Partes Review
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`Defendants argue that the Court should stay all the proceedings concerning the ‘215 Patent
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`pending the outcome of the inter partes review by the PTO. Defendants assert that all three factors
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`this Court must consider to determine the propriety of a stay weigh in favor of granting a stay.
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`Specifically, Defendants argue that a stay will not unduly prejudice or present a clear tactical
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`disadvantage to Plaintiffs, as well as will simplify the issues before the Court. Defendants further
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`argue that the claims and counterclaims of the ‘215 Patent should be severed from this action and
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`should proceed as a separate action pursuant to Rule 21 of the Federal Rules of Civil Procedure.
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`Defendants maintain that there are few or no overlapping common issues between Defendants’
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`patents-in-suit and the ‘215 Patent, thus there is no judicial economy in keeping them in the same
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`action.
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` 1.
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`Stay
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`District courts “have the broad discretion to stay discovery until preliminary questions that
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`may dispose of the case are determined.” Hahn v. Star Bank, 190 F.3d 708, 719 (6th Cir. 2007).
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`It is the party requesting the stay that “bears the burden of showing that the circumstances justify
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`the exercise of that discretion.” Nken v. Holder, 556 U.S. 418, 433-34 (2009). “A stay is not a
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`matter of right, even if irreparable injury might otherwise result. It is instead an exercise of judicial
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`discretion, and the party requesting a stay bears the burden of showing that the circumstances justify
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`the exercise of that discretion.” Indiana State Police Pension Trust v. Chrysler LLC, 129 S.Ct.
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`2275, 2776-77 (2009) (citations omitted). “The propriety of a stay is dependent upon the
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`circumstances of the particular case, and the traditional stay factors contemplate individualized
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`judgments in each case.” Id.
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`In patent cases, courts have the inherent and discretionary authority to stay litigation pending
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`reexamination. See Ethicon Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (“Courts have
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`inherent power to manage their docket and stay proceedings, including the authority to order a stay
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`pending conclusion of a PTO reexamination.”). “[T]here is a liberal policy in favor of granting
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`motions to stay proceeding pending the outcome of USPTO reexaminations or reissuance
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`proceedings.” ASCII Corp. v. STD Ent. USA, Inc., 844 F.Supp. 1378, 1381 (N.D. Cal. 1994);
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`Magna Donnelly Corp. v. Pilkington N. Am., Inc., No. 06-cv-126, 2007 U.S. Dist. LEXIS 17536,
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`*2 (W.D. Mich. March 12, 2007).
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`Courts must consider the following factors when determining whether to stay a case pending
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`reexamination, “‘whether a stay would unduly prejudice or present a clear tactical disadvantage to
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`the non-moving party; and (2) whether discovery is complete and a trial date has been set.’” Visual
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`Interactive Phone Concepts, Inc. v. Samsung Telecomms. Am., LLC, No. 11-12945, 2012 U.S.
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`Dist. LEXIS 42857, *6-7 (E.D. Mich. March 28, 2012) (quoting Magna Donnelly Corp., 2007 U.S.
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`Dist. LEXIS 17536, at *2 (W.D. Mich. March 12, 2007)).
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` a)
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`Prejudice
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`Defendants argue that Plaintiffs will not suffer prejudice from a stay. Plaintiffs counter that
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`Defendants are seeking a tactical advantage by requesting this matter proceed with the infringement
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`claims concerning Defendants’ patents-in-suit, but stay and sever Plaintiffs’ infringement claims
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`relative to the ‘215 Patent. Thus, Plaintiffs oppose resolving the infringement claims raised herein
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`in separate trials.
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`Here, the Court finds that a stay would be unreasonably prejudicial to the Plaintiffs in light
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`of the procedural posture of this action. The PTO will issue its decision no later than February 16,
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`2014, or two weeks before the cut off for dispostive motions and four months before trial.
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`Therefore, the Court can incorporate the PTO’s decision into its adjudication of the parties’
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`infringement claims. Conversely, a stay will require Plaintiffs to proceed with two separate trials,
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`resulting in an obvious tactical advantage to Defendants who will have the benefit of litigating their
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`infringement claims in front of a jury that does not know Defendant is similarly accused of patent
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`infringement. See Visteon Global Tech., Inc. v. Garmin Intern., Inc., No. 10-cv-10578, 2013 WL
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`434135, *2 (E.D. Mich. Feb. 4, 2013) (finding a stay inappropriate because the plaintiffs “will be
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`in the unenviable position of having to potentially ramp up twice for a trial on the merits .. [which
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`shows] clear prejudice and tactical disadvantage.”). Situations such as this have been found to be
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`“unreasonable” because they prejudice the non-movants, who would face infringement allegations
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`while being deprived of their own during the stay. See Fujitsu Ltd. v. Nanya Tech. Corp., No. 06-
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`6613, 2007 WL 3314623, *3 (N.D. Cal. Nov. 6, 2007); see also Nokia Corp. v. Apple Inc., No.
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`09-791, 2011 WL 2160904, *1 (D. Del. June 1, 2011) (“The court further concludes that a partial
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`stay regarding Apple’s claims would not simplify the case because the majority of this case will
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`proceed regardless of whether Apple’s claims are stayed.”); Life Techs. Corp. v. Illumina, Inc., No.
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`09-706, 2010 WL 2348737, *3 (D. Del. June 7, 2010) (“The prejudice that would result from the
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`indefinite nature of the stay is increased by the fact that the stay would apply to the four
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`counterclaim patents while the three patents alleged in the Complaint would continue on.”)
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`Additionally, Plaintiffs will be further prejudiced because they are direct competitors with
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`Defendants in the LED industry. Courts routinely deny requests for stay during the pendency of
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`PTO proceedings where the parties are direct competitors. See ADA Solutions, Inc. v. Engineered
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`Plastics, Inc., 826 F. Supp.2d 348, 351-52 (D. Mass. 2011) (“Compounding the prejudice that a
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`stay would work on ADA Solutions is the fact that the parties are direct competitors in a relatively
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`narrow sector of the ADA-compliance industry.”); see also Cooper Notification, Inc. v. Twitter,
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`Inc., No. 09-865, 2010 WL 5140573, *2-5 (D. Del. Dec. 13, 2010) (“Courts are reluctant to stay
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`proceedings where the parties are direct competitors.”); Tesco Corp. v. Weatherford Int’l, Inc., 599
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`F.Supp. 2d 848, 852 (S.D. Tex. 2009) (noting that “[w]here the parties are direct competitors, a stay
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`would likely prejudice the non-movant”); SenoRx v. Hologic, No. 12-173, 2013 WL 144255, *8-9
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`(D. Del. Jan. 11, 2013).
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`While Defendants argue that other courts find no impropriety in granting a stay where the
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`parties are direct competitors, those cases are distinguishable from this case. See Hill-Rom Servs.
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`v. Stryker Corp., No. 11-cv-1120, 2012 U.S. Dist. LEXIS 165470, *7-8 (S.D. Ind. Nov. 20, 2012)
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`(denying non-movant’s argument of prejudice based on the parties status as direct competitors
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`because the non-movant waited nearly six years to bring its infringement action); Generac Power
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`Sys. v. Kohler Co., 807 F. Supp. 2d 791, 798 (E.D. Wis. 2011) (rejecting the plaintiff’s argument
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`that it would face irreparable harm if an injunction was not granted because the parties were
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`competitors); Hansen Mfg. Corp. v. Enduro Sys., No. 11-4030, 2012 U.S. Dist. LEXIS 14061,
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`*14-15 (D.S.D. Feb. 6, 2012) (rejecting non-movant’s contention that it would suffer prejudice
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`because the parties were competitors because the non-movant “had yet to enjoy success in the
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`market.”)
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`Plaintiffs argue that Defendants’ motion fails to cite any authority where a stay was granted
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`when the parties were direct competitors and where the stay would result in one party’s claims
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`proceeding while its competitor’s claims were stayed. In their Reply, Defendants cite to Network
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`Appliance, Inc. v. Sun Microsystems, Inc., No. 07-0653,2010 U.S. Dist. LEXIS 20732, *7-8,10,
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`17-18 (N.D. Cal. Feb. 11, 2010) to support their argument that courts have stayed one party’s
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`patent claims and permitted its direct competitor to proceed with its infringement claims against the
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`other party. However, Network Appliance is distinguishable from the facts of this case. In Network
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`Appliance, the court had previously denied the defendant’s request for stay on two previous
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`occasions. Network Appliance, 2010 U.S. Dist. LEXIS 20732, *at 5. Further, neither party was left
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`with no cross-claims of infringement, thus there was no tactical disadvantage because both parties
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`4:12-cv-11758-GAD-MKM Doc # 79 Filed 04/30/13 Pg 15 of 19 Pg ID 2831
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`had remaining patents in the suit. Network Appliance, 2010 U.S. Dist. LEXIS 20732, *at 18.
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`Based on the foregoing considerations, the Court concludes that the prejudice to Plaintiffs
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`favors denying a stay.
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` b)
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`Simplification of Issues
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`As to the second factor, whether a stay will simplify issues for trial, courts have noted that
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`“the primary purpose of the reexamination procedure is to ‘eliminate trial of that issue or to facilitate
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`trial of that issue by providing the district court with the expert view of the [USPTO].’” Donnelly,
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`2007 U.S. Dist. LEXIS 78055, at *11; see also Ethicon, 849 F.2d at 1426. In Visual Interactive
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`Phone Concepts, Inc. v. Samsung, No. 12945, 2012 U.S. Dist. LEXIS 42857, *11-12 (E.D. Mich.
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`March 28, 2012), the court recently issued a stay in part due to “the probability that some changes
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`will be made [and] it is an improvident use of the Court’s time to interpret a phrase that is later
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`modified during the reexamination proceeding, thus effecting the Court’s construction.” Visual
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`Interactive, 2012 U.S. Dist. LEXIS 42857, at *11-12.
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`However, “to truly simplify the issues . . . the outcome of the reexamination must finally
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`resolve all issues in the litigation.” Esco. Corp. v. Berkeley Forge & Tool, Inc., No. 09-1635, 2009
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`WL 3078463, *2-4 (N.D. Cal. Sept. 28, 2009) (citations omitted). “If regardless of the result of
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`the reexamination, there are still claims or counterclaims that need to be resolved by the Court, then
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`reexamination clearly fails to provide final resolution.” Largan Precision Co. Ltd. v. Fujifilm
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`Corp., No. 10-1318, 2011 WL 794983, *at 4 (N.D. Cal. March 1, 2011). Thus, where “the scope
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`of the issues to be resolved during litigation substantially exceeds the scope of the issues that can
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`be resolved during the reexamination proceedings, this factor disfavors a stay.” ImageVision.Net,
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`Inc. v. Internet Payment Exch., No. 12-054, 2012 WL 3866677, *1-5 (D. Del. Sept. 4, 2012)
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`4:12-cv-11758-GAD-MKM Doc # 79 Filed 04/30/13 Pg 16 of 19 Pg ID 2832
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`Defendants argue that a stay will save the Court’s resources by eliminating certain issues
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`from claim construction, or eliminating the need for claim construction altogether. See Magna
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`Donnellly, 2007 U.S. Dist. LEXIS 17536, at *10 (“Courts routinely have recognized the benefits
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`[] of having USPTO expertise and experience to inform patent trial proceedings.”). Defendants
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`assertion requires this Court to assume that all or many of the ‘215 Patent claims will be invalidated.
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`However, under both the new and old reexamination procedures, the PTO grants roughly 93% of
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`petitions, yet 58% of those cases result in either certification without modification or some, but not
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`all, of the claims are issued with changes. In 42% of cases, claims are cancelled.
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`Further, as already noted a stay is likely to require two trials and such an outcome is
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`disfavored because “[i]ssuing a partial stay would likely result in greater costs and delay by
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`requiring [Plaintiff] to proceed with two separate patent litigations in this Court, [where] [t]here
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`would be clear efficiencies gained for the Court and the parties from trying the issues concerning
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`the two similar patents in a single case, rather than substantially duplicating proceedings.” Largan
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`Precision, 2011 WL 794983, at *4. It is unreasonable for Defendants to argue that their patents-in-
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`suit and the ‘215 Patents are wholly unrelated when both relate to LED technology and the parties
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`are direct competitors in the market.
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`Lastly, a stay will not simplify the issues related to the ‘215 patent because Defendants have
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`asserted defenses such as laches, waiver, estoppel, and standing which will not be reviewed by the
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`PTO. See Pentair Water Pool and Spa, Inc. v. Hayward Industries, Inc., No. 11-cv-459, 2012 WL
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`6608619, *2-4 (E.D. N.C. 2012) (denying a stay because the court was required to consider a
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`broader range of evidence than the PTO). In Pentair, the court held in pertinent part:
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`[T]he cour