Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 1 of 17 PageID #:2727
`
`IN THE UNITED STATES DISTRICT COURT FOR THE
`NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`VELOCITY PATENT LLC,
`
`Plaintiff,
`
`v.
`
`AUDI OF AMERICA, INC.
`
`Defendant.
`
`Case No: 1:13-cv-8418
`
`Honorable John W. Darrah
`
`Magistrate Judge Michael T. Mason
`JURY TRIAL DEMANDED
`
`DEFENDANT’S MEMORANDUM IN SUPPORT OF ITS MOTION TO STAY THE
`PROCEEDINGS PENDING REEXAMINATION OF THE PATENT-IN-SUIT
`
`Velocity, Patent Owner - Exhibit 2002
`Volkswagen Group of America, Inc. v. Velocity Patent, LLC
`Case No. IPR2015-00276
`Page 1 of 210
`
`

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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 2 of 17 PageID #:2728
`
`TABLE OF CONTENTS
`
`Page
`
`TABLE OF AUTHORITIES ..........................................................................................................ii
`
`TABLE OF EXHIBITS ................................................................................................................. iv
`
`INTRODUCTION .......................................................................................................................... 1
`
`BACKGROUND ............................................................................................................................ 2
`
`A.
`
`B.
`
`C.
`
`Plaintiff Velocity..................................................................................................... 2
`
`The ’781 Patent-In-Suit........................................................................................... 2
`
`Reexamination Of The ’781 Patent......................................................................... 3
`
`LEGAL STANDARD..................................................................................................................... 4
`
`ARGUMENT.................................................................................................................................. 5
`
`A.
`
`B.
`
`C.
`
`Granting A Stay Of This Litigation Will Not Unduly Prejudice Or Tactically
`Disadvantage Velocity, But Will Benefit Both The Parties And The Court .......... 5
`
`The Reexamination Of The ’781 Patent Is Very Likely To Resolve This Lawsuit
`Or At Least Simplify The Issues For Trial ............................................................. 8
`
`Because This Lawsuit Is In Its Preliminary Stages, A Stay Is Very Likely To
`Reduce The Burden Of Litigation On Both The Parties And The Court.............. 10
`
`CONCLUSION............................................................................................................................. 11
`
`i
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`Page 2 of 210
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 3 of 17 PageID #:2729
`
`Cases
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Allied Machine & Engineering Corp. v. Competitive Carbide, Inc.,
`No. 1:11CV2712, 2013 WL 5566158 (N.D. Ohio Oct. 8, 2013).................................... 6, 7
`
`Arrivalstar S.S. v. Canadian Nat. Ry. Co.,
`No. 08 c 1086, 2008 WL 2940807 (N.D. Ill. July 25, 2008).................................... 8, 9, 10
`
`Black & Decker Inc. v. Positec USA, Inc.,
`No. 13 C 3075, 2013 WL 5718460 (N.D. Ill. Oct. 1, 2013)................................. 5, 7, 8, 10
`
`Brixham Solutions Ltd. v. Juniper Networks, Inc.,
`No. 13–cv–00616–JCS, 2014 WL 1677991 (N.D. Cal. Apr. 28, 2014)............................. 7
`
`Cascades Computer Innovation, LLC v. SK hynix Inc.,
`No. 11 C 4356, 2012 WL 2086469 (N.D. Ill. May 25, 2012) .................................... 5, 6, 9
`
`CIVIX v. National Ass’n of Realtors,
`No. 05 C 6869, 2007 WL 7759150 (N.D. Ill. Sept. 17, 2007)............................................ 4
`
`Emhart Indus., Inc. v. Sankyo Seiki Mfg. Co., Ltd.,
`No. 85 C 7565, 1987 WL 6314 (N.D. Ill. Feb. 2, 1987)............................................... 4, 10
`
`Evolutionary Intelligence, LLC v. Facebook, Inc.,
`Nos. C 13-4202 SI, -4204 SI, 2014 WL 261837 (N.D. Cal. Jan. 23, 2014) ....................... 7
`
`Flexiteek Americas, Inc. v. PlasTEAK, Inc.,
`No. 08-60996-CIV, 2012 WL 5364247 (S.D. Fla. Oct. 31, 2012) ................................... 11
`
`Flexiteek Americas, Inc. v. PlasTEAK, Inc.,
`No. 08-60996-CIV, 2012 WL 5364263 (S.D. Fla. Sept. 10, 2012).................................. 11
`
`Fresenius USA, Inc. v. Baxter Int’l,
`721 F.3d 1330 (Fed. Cir. 2013)..................................................................................... 9, 10
`
`Genzyme Corp. v. Cobrek Pharm., Inc.,
`No. 10 CV 112, 2011 WL 686807 (N.D. Ill. Feb. 17, 2011).......................................... 7, 8
`
`Global Patent Holdings, LLC v. Green Bay Packers, Inc.,
`No. 00 C 4623, 2008 WL 1848142 (N.D. Ill. Apr. 23, 2008)................................... 4, 9, 10
`
`Gould v. Control Laser Corp.,
`705 F.2d 1340 (Fed. Cir. 1983)..................................................................................... 4, 10
`
`Hamilton Indus., Inc. v. Midwest Folding Prods. Mfg. Corp.,
`No. 89 C 8696, 1990 WL 37642 (N.D. Ill. Mar. 20, 1990) ................................................ 4
`
`ii
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`Page 3 of 210
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`

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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 4 of 17 PageID #:2730
`
`Ignite USA, LLC v. Pacific Market International, LLC,
`No. 1:14–cv–00856, 2014 WL 2505166 (N.D. Ill. May 29, 2014) ............................ 5, 6, 7
`
`Intellectual Ventures II LLC v. Commerce Bancshares, Inc.,
`No. 2:13–CV–04160–NKL, 2014 WL 2511308 (W.D. Mo. June 4, 2014) ....................... 7
`
`JAB Distributors, LLC v. London Luxury, LLC,
`No. 09 C 5831, 2010 WL 1882010 (N.D. Ill. May 11, 2010) ................................... passim
`
`Krippelz v. Ford Motor Co.,
`667 F.3d 1261 (Fed. Cir. 2012)..................................................................................... 9, 10
`
`Landis v. North American Co.,
`299 U.S. 248 (1936)............................................................................................................ 4
`
`Lincoln Nat. Life Ins. Co. v. Transamerica Financial Life Ins. Co.,
`No. 1:08-CV-135-JVB-RBC, 2009 WL 1108822 (N.D. Ind. Apr. 24, 2009) .... 7, 9, 10, 11
`
`Marine Polymer Techs., Inc. v. Hemcon, Inc.,
`659 F.3d 1084 (Fed. Cir. 2011)........................................................................................... 9
`
`Marine Polymer Techs., Inc. v. Hemcon, Inc.,
`672 F.3d 1350 (Fed. Cir. 2012)........................................................................................... 9
`
`Pactool Intern. Ltd. v. Dewalt Indus. Tool Co.,
`No. C06-5367BHS, 2008 WL 312677 (W.D. Wash. Feb. 1, 2008) ................................... 7
`
`Pragmatus AV, LLC v. Facebook, Inc.,
`No. 11–CV–02168–EJD, 2011 WL 4802958 (N.D. Cal. Oct. 11, 2011) ........................... 7
`
`Proctor & Gamble Co. v. Kraft Foods Global, Inc.,
`549 F.3d 842 (Fed. Cir. 2008)............................................................................................. 9
`
`Progressive Cas. Ins. Co. v. Safeco Ins. Co.,
`No. 1:10 CV 1370, 2010 WL 4699870 (N.D. Ohio Nov. 12, 2010) .............................. 7, 9
`
`Radio Sys. Corp. v. E. Mishan & Sons, Inc.,
`No. 3:13-CV-383, 2014 U.S. Dist. LEXIS 65975 (E.D. Tenn. Mar. 28, 2014) ................. 6
`
`Seaquist Closures LLC v. Rexam Plastics,
`No. 08C0106, 2008 WL 4691792 (E.D. Wis. Oct. 22, 2008)......................................... 6, 7
`
`Southwall Techs., Inc. v. Cardinal IG Co.,
`54 F.3d 1570 (Fed. Cir. 1995)........................................................................................... 10
`
`SP Techs., LLC v. HTC Corp.,
`No. 08 C 3760, 2009 WL 1285933 (N.D. Ill. May 6, 2009) .......................................... 6, 7
`
`iii
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`Page 4 of 210
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`

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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 5 of 17 PageID #:2731
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`Translogic Tech., Inc. v. Hitachi, Ltd.,
`250 Fed. Appx. 988 (Fed. Cir. 2007)................................................................................ 11
`
`Statutes
`
`35 U.S.C. § 305............................................................................................................................... 5
`
`TABLE OF EXHIBITS
`
`Exhibit 1
`
`Exhibit 2
`
`Exhibit 3
`
`May 22, 2014 Request for Ex Parte Reexamination of U.S. Patent No. 5,954,781
`Pursuant to 37 C.F.R. § 1.510 (without exhibits)
`
`June 27, 2014 Decision Granting Ex Parte Reexamination
`
`and Trademark Office, Statistical Data, Central
`United States Patent
`Reexamination Unit (CRU), Ex Parte (EP) and Inter Partes (IP) Proceedings,
`Fiscal Years 2012–2013
`
`iv
`
`Page 5 of 210
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 6 of 17 PageID #:2732
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`INTRODUCTION
`
`In its Complaint, Plaintiff (“Velocity”) alleges that Defendant (“Audi”) has infringed, and
`
`is continuing to infringe, U.S. Patent No. 5,954,781 (the “’781 patent”).1 On May 22, 2014,
`
`about six weeks after Velocity served its preliminary infringement contentions identifying the
`
`’781 patent claims it contends are being infringed in this lawsuit (see D.E. 80, Ex. 1 at 2–4),
`
`Audi requested the United States Patent and Trademark Office to reexamine those claims in view
`
`of new prior art never considered by the Office when its decision to grant the ’781 patent was
`
`made. See generally Ex. 1. The Patent Office has now considered that prior art and ordered
`
`reexamination of the ’781 patent, finding that the new prior art raises “substantial new questions
`
`of patentability” of the claims being asserted by Velocity in this litigation. See generally Ex. 2.
`
`Each of the three factors that this court must consider when ruling on Audi’s motion
`
`strongly favors staying this litigation until the reexamination of Velocity’s patent is complete.
`
`Velocity will not be prejudiced by a stay, since it is a patent holding company and is not a
`
`competitor of Audi. Nor will a stay subject Velocity to a tactical disadvantage, since this lawsuit
`
`has advanced only to its preliminary stages: this court has not even entered a scheduling order
`
`governing pre-trial events.
`
`In contrast, the Patent Office reexamination of validity has already
`
`started and, unless Velocity chooses to appeal a finding that the claims are not patentable, a final
`
`decision can be expected within the next eleven months.
`
`See Ex. 3 at 5.
`
`Finally,
`
`the
`
`reexamination is very likely to simplify the issues in this lawsuit and avoid wasting the time and
`
`resources of the parties and the court since more than eighty-five percent of patent claims under
`
`review during ex parte reexamination proceedings are either revised or canceled. Id. at 19.
`
`1 Audi of America, Inc. is a registered trade name of defendant Volkswagen Group of America,
`Inc.
`
`1
`
`Page 6 of 210
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 7 of 17 PageID #:2733
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`Audi respectfully submits that this litigation should be stayed until the Patent Office
`
`completes its reexamination of the Velocity patent claims, including any appeals taken by
`
`Velocity.
`
`BACKGROUND
`
`A.
`
`Plaintiff Velocity
`
`Plaintiff Velocity is a limited liability company organized one week before it filed this
`
`lawsuit. The sole business purpose of the company is the licensing and litigating of the ’781
`
`patent-in-suit, which it acquired on the same day. Velocity does not have a permanent place of
`
`business or permanent employees, and it does not conduct any business other than licensing of
`
`the ’781 patent and litigating lawsuits for infringement.2
`
`B.
`
`The ’781 Patent-In-Suit
`
`Velocity’s ’781 patent describes and claims a “Method and Apparatus for Optimizing
`
`Vehicle Operation” and was granted on September 21, 1999 based on a U.S. patent application
`
`filed on March 10, 1997. See D.E. 28, Ex. A. The claims Audi is accused of infringing (claims
`
`1–2, 4–5, 7–8, 10, 12–13, 15, and 17–32, see D.E. 80, Ex. 1 at 2–4) describe a system that uses a
`
`processor to read data from a road speed sensor, an engine speed sensor, a manifold pressure
`
`sensor, a throttle position sensor, and/or a radar detector, and to compare this data to information
`
`saved in a memory. Based on that comparison, the system activates one or more of a “vehicle
`
`proximity alarm circuit,” a “fuel overinjection notification circuit,” and/or an “upshift” or
`
`“downshift notification circuit.” See generally D.E. 28, Ex. A, col. 13, l. 54–col. 22, l. 6.
`
`2 Velocity does not dispute these facts. Compare D.E. 51 at 1 (Audi’s memorandum in support
`of its motion to transfer), with D.E. 69 (Velocity’s response to same).
`
`2
`
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 8 of 17 PageID #:2734
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`C.
`
`Reexamination Of The ’781 Patent
`
`On May 22, 2014—about six weeks after Velocity served preliminary infringement
`
`contentions identifying those claims of the ’781 patent it alleges are being infringed—Audi
`
`submitted a request for the ex parte reexamination of all the claims Velocity is contending are
`
`infringed in view of new prior art that has never been considered by the U.S. Patent Office.3 See
`
`generally Ex. 1. The Patent Office granted Audi’s request and ordered reexamination on June
`
`27, 2014 after concluding that this new prior art raises “substantial new questions of patentability
`
`affecting” the asserted claims:4
`
`A substantial new question of patentability affecting claims 1, 2, 4,
`5, 7, 8, 10, 12, 13, 15, and 17 – 30 of United States Patent Number
`5,954,781 is raised by the Request for ex parte reexamination
`based on the Jurgen, Saturn ‘452, Toyota ‘599, and Volkswagen
`‘070 cited areas supplied by the Requester.
`
`A substantial new question of patentability affecting claims 31 and
`32 of United States Patent Number 5,954,781 is raised by the
`Request for ex parte reexamination based on the Davidian, and
`Tonkin cited areas supplied by the Requester.
`
`Therefore, claims 1, 2, 4, 5, 7, 8, 10, 12, 13, 15, and 17 – 32 will be
`reexamined.
`
`Ex. 2 at 8–29.
`
`3 Although counsel for the parties submitted an agreed scheduling order to Judge Gottschall
`before reassignment of this lawsuit (D.E. 34, Ex. 1), and re-submitted the proposed order to this
`court (D.E. 68, Ex. 1), no scheduling order has yet been entered.
`4 Claims 1–2, 4–5, 7–8, 10, 12–13, 15, and 17–27 were originally granted because they
`specifically describe the combination of a shift notification circuit and a processor subsystem
`that determines when to activate the circuit. Claims 28–30 were granted because they
`specifically describe the combination of a fuel overinjection notification circuit and a processor
`subsystem that determines whether to activate this circuit based on data received from road
`speed, throttle position, and manifold pressure sensors. Claims 31–32 were granted because they
`specifically describe the combination of a processor subsystem that activates a vehicle proximity
`alarm circuit based on separation distance data received from a radar detector, vehicle speed data
`received from a road speed sensor, and a vehicle speed/stopping distance table stored in memory.
`See, e.g., Ex. 2 at 2–5.
`
`3
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 9 of 17 PageID #:2735
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`Because more than eighty-five percent of all ex parte reexamination proceedings result in
`
`amendment or cancellation of the claims being reviewed (Ex. 3 at 19), reexamination of the ’781
`
`patent is very likely to affect the claim construction, infringement, and invalidity issues that will
`
`be decided in this case. As a result, the courts in this district, and in others, have adopted a
`
`“liberal policy in favor of granting motions to stay” patent
`
`litigation until concurrent
`
`reexaminations of the asserted patents are completed. CIVIX v. National Ass’n of Realtors, No.
`
`05 C 6869, 2007 WL 7759150, at *5 (N.D. Ill. Sept. 17, 2007); Hamilton Indus., Inc. v. Midwest
`
`Folding Prods. Mfg. Corp., No. 89 C 8696, 1990 WL 37642, at *1 (N.D. Ill. Mar. 20, 1990) (“In
`
`passing the legislation establishing the reexamination proceeding, Congress stated its approval of
`
`district courts liberally granting stays . . . .”).
`
`LEGAL STANDARD
`
`A district court’s discretion to control its docket is well-established and includes the
`
`power to stay litigation until the completion of reexamination proceedings in the U.S. Patent
`
`Office. Landis v. North American Co., 299 U.S. 248, 254 (1936); Gould v. Control Laser Corp.,
`
`705 F.2d 1340, 1342 (Fed. Cir. 1983); Global Patent Holdings, LLC v. Green Bay Packers, Inc.,
`
`No. 00 C 4623, 2008 WL 1848142, at *5 (N.D. Ill. Apr. 23, 2008). As a general proposition, a
`
`stay of a patent
`
`infringement
`
`lawsuit while the Patent Office completes reexamination
`
`proceedings is widely recognized as likely to result in numerous benefits to the parties as well as
`
`the court. See, e.g., Emhart Indus., Inc. v. Sankyo Seiki Mfg. Co., Ltd., No. 85 C 7565, 1987 WL
`
`6314, at *2 (N.D. Ill. Feb. 2, 1987); JAB Distributors, LLC v. London Luxury, LLC, No. 09 C
`
`5831, 2010 WL 1882010, at *4 (N.D. Ill. May 11, 2010); Gould, 705 F.2d at 1342.
`
`In order to determine whether a stay of litigation is appropriate, courts in this Circuit
`
`consider three factors: (1) whether a stay will unduly prejudice or tactically disadvantage the
`
`4
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 10 of 17 PageID #:2736
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`patent owner, (2) whether a stay is likely to simplify the issues for trial, and (3) whether a stay
`
`will reduce the burden of litigation on the parties and on the court. See, e.g., Black & Decker
`
`Inc. v. Positec USA, Inc., No. 13 C 3075, 2013 WL 5718460, at *1 (N.D. Ill. Oct. 1, 2013).
`
`ARGUMENT
`
`As explained below, each of the factors that must be considered strongly favors staying
`
`this litigation until the completion of the reexamination of the ’781 patent and any related
`
`appeals that may be taken by Velocity.
`
`A.
`
`Granting A Stay Of This Litigation Will Not Unduly Prejudice Or Tactically
`Disadvantage Velocity, But Will Benefit Both The Parties And The Court
`
`The first factor considers whether a stay would unduly prejudice Velocity.
`
`Id. The
`
`temporary delay caused by a stay does not constitute undue prejudice under this factor because,
`
`as stated in the order granting reexamination, the “proceedings ‘will be conducted with special
`
`dispatch’” by the Patent Office. Compare Ex. 2 at 2 (quoting 35 U.S.C. § 305), with JAB
`
`Distributors, 2010 WL 1882010, at *3; see also Black & Decker, 2013 WL 5718460, at *2;
`
`Ignite USA, LLC v. Pacific Market International, LLC, No. 1:14–cv–00856, 2014 WL 2505166,
`
`at *2 (N.D. Ill. May 29, 2014); Cascades Computer Innovation, LLC v. SK hynix Inc., No. 11 C
`
`4356, 2012 WL 2086469, at *1 (N.D. Ill. May 25, 2012). Unless Velocity chooses to appeal an
`
`examiner ruling that the claims being reviewed are not patentable, a final decision regarding the
`
`validity of the claims asserted in this lawsuit can be expected within the next eleven months.5
`
`5 The average ex parte reexamination takes twelve months to progress from filing of a request
`until
`the Patent Office’s notification that
`it
`intends to issue a reexamination certificate
`confirming patentability of the challenged claims. See Ex. 3 at 5.
`If, however, claims are
`rejected as not patentable, the examiner’s decision can be appealed by the patent owner to the
`USPTO Patent Trial Appeals Board (which affirms examiner rejections in eighty percent of the
`appeals before it), and subsequently, if the examiner is not reversed, to the United States Court of
`Appeals for the Federal Circuit. See id. at 6–7, 11, 16. Third parties such as VWGoA requesting
`ex parte reexamination cannot appeal Patent Office decisions, and a patent holder as a result
`(continued…)
`
`5
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 11 of 17 PageID #:2737
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`Thus, the proper inquiry instead is whether a stay would in some way damage the patent holder’s
`
`business or place it at a clear tactical disadvantage in the lawsuit.
`
`Ignite USA, 2014 WL
`
`2505166, at *2–3.
`
`Velocity is a patent holding company with no permanent office or employees, and is not a
`
`competitor of Audi, and, thus, would not be prejudiced by a stay of this litigation. Compare
`
`supra Background, Part A, with SP Techs., LLC v. HTC Corp., No. 08 C 3760, 2009 WL
`
`1285933, at *3 (N.D. Ill. May 6, 2009) (a “patent holding company” has no “separate business
`
`interests that might be jeopardized by a delay pending reexamination”). Velocity is not seeking
`
`injunctive relief (see D.E. 28 ¶ 19 & Prayer for Relief), and monetary damages will fully
`
`compensate it if this court concludes there actually has been any infringement. Cascades
`
`Computer Innovation, 2012 WL 2086469, at *1 (“Cascades does not contest that it is a non-
`
`practicing entity and that it seeks only a monetary remedy.
`
`If Cascades ultimately prevails, it
`
`will be able to collect damages that accumulate during the stay, including interest, ameliorating
`
`the delay caused by the stay.”); Ignite USA, 2014 WL 2505166, at *3; JAB Distributors, 2010
`
`WL 1882010, at *3; Seaquist Closures LLC v. Rexam Plastics, No. 08C0106, 2008 WL
`
`4691792, at *2 (E.D. Wis. Oct. 22, 2008); Allied Machine & Engineering Corp. v. Competitive
`
`Carbide, Inc., No. 1:11CV2712, 2013 WL 5566158, at *2 (N.D. Ohio Oct. 8, 2013); Brixham
`
`Solutions Ltd. v. Juniper Networks, Inc., No. 13–cv–00616–JCS, 2014 WL 1677991, at *2 (N.D.
`
`cannot be prejudiced by any delay caused by its own decision to appeal a Patent Office ruling
`that claims are not patentable. See, e.g., Radio Sys. Corp. v. E. Mishan & Sons, Inc., No. 3:13-
`CV-383, 2014 U.S. Dist. LEXIS 65975, at *6–7 (E.D. Tenn. Mar. 28, 2014) (“Plaintiffs also
`argue, if either side exercises its right to appeal, the administrative proceedings might take an
`additional two years. However, because the reexamination in this case is ex parte, Defendant
`would not be entitled to appeal an adverse ruling. This additional two year period would only
`occur if Plaintiffs were to exercise their appeal rights, presumably as a result of an adverse
`ruling. This delay does not weigh against a stay.” (citations omitted)).
`
`6
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`Page 11 of 210
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 12 of 17 PageID #:2738
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`Cal. Apr. 28, 2014) (“[A]s a non-practicing entity, BSL cannot demonstrate any irreparable harm
`
`that might result from a stay.”).
`
`Nor would a stay place Velocity at a tactical disadvantage.
`
`Ignite USA, 2014 WL
`
`2505166, at *3. Audi promptly requested reexamination after Velocity identified the claims it
`
`alleges are being infringed in its preliminary infringement contentions (compare D.E. 80, Ex. 1
`
`at 2–4, with Ex. 1), and the Patent Office has now granted Audi’s request, finding that the new
`
`prior art identified in the request raises substantial new questions as to whether the claims are
`
`patentable. See Ex. 2.6 This lawsuit has progressed only through its preliminary stages, and no
`
`scheduling order has yet been entered. As a result, Velocity will not be tactically disadvantaged
`
`by a stay of this litigation. See Ignite USA, 2014 WL 2505166, at *2; Genzyme Corp. v. Cobrek
`
`Pharm., Inc., No. 10 CV 112, 2011 WL 686807, at *4 (N.D. Ill. Feb. 17, 2011); Seaquist
`
`Closures, 2008 WL 4691792, at *1; Allied Machine & Engineering, 2013 WL 5566158, at *2.7
`
`6 Although reexamination has been ordered, courts “routinely grant stays” based only on a
`request for Patent Office reexamination. See, e.g., Intellectual Ventures II LLC v. Commerce
`Bancshares, Inc., No. 2:13–CV–04160–NKL, 2014 WL 2511308, at *3–4 (W.D. Mo. June 4,
`2014); Black & Decker, 2013 WL 5718460, at *1–2; SP Techs., 2009 WL 1285933, at *1, *3;
`Ignite USA, 2014 WL 2505166, at *4; Lincoln Nat. Life Ins. Co. v. Transamerica Financial Life
`Ins. Co., No. 1:08-CV-135-JVB-RBC, 2009 WL 1108822, at *3–4 (N.D. Ind. Apr. 24, 2009);
`Seaquist Closures, 2008 WL 4691792, at *1–2; Progressive Cas. Ins. Co. v. Safeco Ins. Co., No.
`1:10 CV 1370, 2010 WL 4699870, at *4–5 (N.D. Ohio Nov. 12, 2010); Pactool Intern. Ltd. v.
`Dewalt Indus. Tool Co., No. C06-5367BHS, 2008 WL 312677, at *1–2 (W.D. Wash. Feb. 1,
`2008); Brixham Solutions, 2014 WL 1677991, at *1–3; Evolutionary Intelligence, LLC v.
`Facebook, Inc., Nos. C 13-4202 SI, -4204 SI, 2014 WL 261837, at *2–4 (N.D. Cal. Jan. 23,
`2014); Pragmatus AV, LLC v. Facebook, Inc., No. 11–CV–02168–EJD, 2011 WL 4802958, at
`*3 (N.D. Cal. Oct. 11, 2011).
`7 The only pre-trial events that have taken place so far in this case have been the exchange of
`information required by this court’s patent rules, and the submission of procedural motions
`relating to the sufficiency of Velocity’s pleadings, the transfer of this lawsuit to the Eastern
`District of Michigan on convenience grounds, and discovery issues related to the parties’
`discovery requests and the court’s patent rules. See, e.g., D.E. 26, Ex. 1 at 1–2; D.E. 36–38; D.E.
`50–53; D.E. 54–56.
`
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 13 of 17 PageID #:2739
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`Unless this lawsuit is stayed until the Patent Office review is complete, however, both the
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`litigation and reexamination proceedings will move forward simultaneously. The parties will
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`litigate the same or similar issues in two different forums, including claim construction, validity,
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`and (indirectly) infringement, and those issues are very likely to change or cease to exist as a
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`result of the decisions reached during the reexamination. Compare supra Background, Part C,
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`with Arrivalstar S.S. v. Canadian Nat. Ry. Co., No. 08 c 1086, 2008 WL 2940807, at *3 (N.D.
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`Ill. July 25, 2008) (The USPTO’s statistics “suggest a very real possibility that, if this litigation
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`proceeds in tandem with the PTO reexamination proceedings, the parties will have wasted their
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`resources litigating issues that ultimately may be mooted by the PTO’s findings.”). A stay would
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`benefit, not prejudice, both parties, as well as this court, by avoiding duplicative proceedings,
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`and this first factor strongly weighs in favor of a stay of this litigation. See Arrivalstar, 2008 WL
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`2940807, at *2–3; Genzyme, 2011 WL 686807, at *4 (“The Court is sensitive to the fact that
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`Defendant already has expended some resources litigating this matter,” but “far more resources
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`of both parties likely would be squandered by denying the stay and embarking further in parallel
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`proceedings.”).
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`B.
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`The Reexamination Of The ’781 Patent Is Very Likely To Resolve This
`Lawsuit Or At Least Simplify The Issues For Trial
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`The second factor considers whether a stay will simplify the issues in dispute and the trial
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`of this litigation. Black & Decker, 2013 WL 5718460, at *1.
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`The Patent Office has ordered reexamination in view of prior art that it has already
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`concluded is more relevant to the patentability of the claims Velocity is asserting than the prior
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`art considered when the patent was originally granted (see supra Background, Parts B-C), and it
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`is highly likely that these claims will be either revised to avoid the prior art, or canceled by the
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`Patent Office, which will materially affect the claim construction, infringement, and validity
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 14 of 17 PageID #:2740
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`issues that will be addressed both before and after trial by the parties and this court. Compare
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`Ex. 3 at 19, with Lincoln Nat. Life Ins., 2009 WL 1108822, at *3–4 (“[S]ince it is at least
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`statistically likely that the one independent claim of the ’608 Patent will be affected, . . . it
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`follows that the reexamination will likely simplify these proceedings.”); JAB Distributors, 2010
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`WL 1882010, at *4–5; Global Patent Holdings, 2008 WL 1848142, at *5; Progressive Cas. Ins.,
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`2010 WL 4699870, at *4–5; see also Fresenius USA, Inc. v. Baxter Int’l, 721 F.3d 1330, 1340
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`(Fed. Cir. 2013) (“[I]f the PTO confirms the original claim in identical form, a suit based on that
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`claim may continue, but if the original claim is cancelled or amended to cure invalidity, the
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`patentee’s cause of action is extinguished and the suit fails.”); Lincoln Nat. Life Ins., 2009 WL
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`1108822, at *4; Cascades Computer Innovation, 2012 WL 2086469, at *2.
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`Even if the ’781 patent claims are not ultimately canceled or amended, a stay would still
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`be beneficial since the parties and this court must consider the reexamination proceedings when
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`addressing claim construction and infringement. See Arrivalstar, 2008 WL 2940807, at *2; JAB
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`Distributors, 2010 WL 1882010, at *4; Krippelz v. Ford Motor Co., 667 F.3d 1261, 1266–67
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`(Fed. Cir. 2012); Marine Polymer Techs., Inc. v. Hemcon, Inc., 659 F.3d 1084, 1091–92 (Fed.
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`Cir. 2011) (“[A]rguments made to the PTO on reexamination can create an estoppel or disavowal
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`and thereby change the scope of claims even when the language of the claims did not change.”),
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`rev’d on other grounds, 672 F.3d 1350 (Fed. Cir. 2012); Proctor & Gamble Co. v. Kraft Foods
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`Global, Inc., 549 F.3d 842, 847–48 (Fed. Cir. 2008).
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`The dispositive issues presented by Velocity’s Complaint in this litigation are whether the
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`claims of the ’781 patent are invalid in view of the prior art, and whether those claims, if valid,
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`as construed by the court, are infringed. The reexamination proceedings will moot or simplify
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 15 of 17 PageID #:2741
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`one or both of these issues if the claims are amended or canceled during the Patent Office
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`reexamination. This second factor accordingly also favors a stay of this litigation.
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`C.
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`Because This Lawsuit Is In Its Preliminary Stages, A Stay Is Very Likely To
`Reduce The Burden Of Litigation On Both The Parties And The Court
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`The final factor considers whether a stay is likely to reduce the burden of litigation on the
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`parties and the court. Black & Decker, 2013 WL 5718460, at *1.
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`Because the parties have only exchanged limited information pursuant to the court’s local
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`patent rules and filed procedural motions, it is not too late to achieve the efficiencies that the
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`reexamination statute was intended to provide. Compare supra Argument, Part A, with Gould,
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`705 F.2d at 1342; Arrivalstar, 2008 WL 2940807, at *2 (“Courts frequently issue stays pending
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`reexamination when the litigation is at an early stage.”); Emhart Indus., 1987 WL 6314, at *3
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`(staying case when “discovery has already taken place” but “substantially no trial preparations
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`have been carried out”); Black & Decker, 2013 WL 5718460, at *1; JAB Distributors, 2010 WL
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`1882010, at *4; Lincoln Nat. Life Ins., 2009 WL 1108822, at *3.
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`It would be a waste of judicial resources to proceed with this litigation only to have the
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`asserted claims be amended or canceled during the reexamination. Global Patent Holdings,
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`2008 WL 1848142, at *5 (“[A] significant amount of time and effort in claim construction and
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`other litigation would have been wasted if we had forged ahead without the benefit of the PTO’s
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`examination (and subsequent rejection) of those claims.”); Arrivalstar, 2008 WL 2940807, at *3
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`(same); see also Krippelz, 667 F.3d at 1266–67; Southwall Techs., Inc. v. Cardinal IG Co., 54
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`F.3d 1570, 1576 (Fed. Cir. 1995) (“Claims may not be construed one way in order to obtain their
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`allowance and in a different way against accused infringers.”). Until the reexamination, and any
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`appeals, are concluded, a trial on the merits could be futile, and any judgment issued by the
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`Court may need to be modified or vacated. Fresenius USA, 721 F.3d at 1335–36, 1340–48 (“In
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`Case: 1:13-cv-08418 Document #: 86 Filed: 07/08/14 Page 16 of 17 PageID #:2742
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`light of the cancellation of Baxter’s remaining claims [in the co-pending reexamination], Baxter
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`no longer has a viable cause of action against Fresenius. Therefore, the pending litigation is
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`moot. We vacate the district court’s judgment and remand with instructions to dismiss.”);
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`Translogic Tech., Inc. v. Hitachi, Ltd., 250 Fed. Appx. 988, 988 (Fed. Cir. 2007); Flexiteek
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`Americas, Inc. v. PlasTEAK, Inc., No. 08-60996-CIV, 2012 WL 5364263, at *9–10 (S.D. Fla.
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`Sept. 10, 2012), adopted by 2012 WL 5364247, at *2 (S.D. Fla. Oct. 31, 2012) (“Claim 1—the
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`claim which Defendants were found to have infringed in the present action—was cancelled . . . .
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`Therefore, Plaintiffs’ Claim 1 was unenforceable, and the current Final Judgment—based on
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`Defendants’ infringement of Claim 1—should be vacated.”). The third factor, thus, also favors a
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`stay of this litigation. See Lincoln Nat. Life Ins., 2009 WL 1108822, at *4.
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`CONCLUSION
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`This litigation has advanced only to its preliminary stages, the Court has yet to set a pre-
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`trial schedule or trial date, and the U.S. Patent Office has ordered reexamination of every claim
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`that Velocity is asserting in its infringement contentions in view of new prior art. Audi
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`respectfully submits that each of the three relevant factors weighs strongly in favor of staying
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`this lawsuit until reexamination of the ’781 patent, including any appeals that Velocity may take,
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`is complete.
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`11
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`Case