Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 1 of 13 Page ID #:2306
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`CIVIL MINUTES- GENERAL
`UNDER SEAL
`
`CASE NO.: SA CV 16-00545 SJO
`(MRWx)
`TITLE:
`
`Nichia Corporation v. Vizio, Inc.
`
`DATE: February 2, 2017
`
`========================================================================
`PRESENT: THE HONORABLE S. JAMES OTERO, UNITED STATES DISTRICT JUDGE
`
`Victor Paul Cruz
`Courtroom Clerk
`
`Not Present
`Court Reporter
`
`COUNSEL PRESENT FOR PLAINTIFF:
`
`COUNSEL PRESENT FOR DEFENDANT:
`
`Not Present
`
`Not Present
`
`========================================================================
`PROCEEDINGS (in chambers): ORDER GRANTING DEFENDANT'S MOTION TO STAY
`PENDING COMPLETION OF INTER PARTES REVIEW PROCEEDINGS [Docket No. 57]
`
`This matter is before the Court on Defendant VIZIO, Inc.'s ("VIZIO" or "Defendant") Motion to Stay
`Pending Completion of Inter Partes Review Proceedings ("Motion"), filed January 3, 2017. Plaintiff
`Nichia Corporation ("Nichia" or "Plaintiff") opposed the Motion ("Opposition") on January 23, 2017,
`and VIZIO replied ("Reply") on January 30, 2017. The Court found this matter suitable for
`disposition without oral argument and vacated the hearing set for February 13, 2017. See Fed.
`R. Civ. P. 78(b). For the following reasons, the Court GRANTS VIZIO's Motion.
`
`I.
`
`FACTUAL AND PROCEDURAL BACKGROUND
`
`1.
`
`Procedural Background
`
`Nichia initiated the instant action on March 23, 2016 by filing a Complaint for Patent Infringement
`("Complaint") against VIZIO. (See Compl., ECF No. 1.) In its Complaint, Nichia alleges that
`certain VIZIO televisions infringe claims of the following four patents: (1) U.S. Patent No.
`7,901,959 (the "'959 Patent"), entitled "Liquid Crystal Display and Back Light Having a Light
`Emitting Diode;" (2) U.S. Patent No. 7,915,631 (the "'631 Patent"), entitled "Light Emitting Device
`and Display;" (3) U.S. Patent No. 8,309,375 (the "'375 Patent"), also entitled "Light Emitting Device
`and Display;" and (4) U.S. Patent No. 7,855,092 (the "'092 Patent"), entitled "Device or Emitting
`White-Color Light" (together, the "Asserted Patents"). (See generally Compl., ECF No. 1.) The
`Asserted Patents are generally directed to light-emitting diode ("LED") semiconductor chips and
`phosphor materials that are combined to produce white light. (See Compl., Exs. A-D.) Although
`Nichia does not identify all of the allegedly infringed claims of the Asserted Patents in its
`Complaint, it alleges infringement of at least claims 1 and 9 of the '959 Patent; at least claims 1
`and 4 of the '631 Patent; at least claim 4 of the '375 Patent; and at least claim 1 of the '092 Patent.
`(Compl. ¶¶ 8, 14, 20, 26.) Notably, Nichia has not sought preliminary injunctive relief against
`VIZIO. (See generally Compl.)
`
`Page 1 of 13
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`Nichia EX2007
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 2 of 13 Page ID #:2307
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES- GENERAL
`UNDER SEAL
`
`CASE NO.: SA CV 16-00545 SJO
`(MRWx)
`
`DATE: February 2, 2017
`
`Although this action was initially assigned to Judge John F. Walter, it was transferred to this Court
`via this District's Patent Pilot Program on March 24, 2016. (See Order to Transfer Case to the
`Patent Pilot Program, ECF No. 13.) On April 12, 2016, the parties filed their first of several
`stipulations, asking for an additional thirty (30) days for VIZIO to respond to the Complaint. (See
`First Stip. to Extend Time to Respond to Initial Compl., ECF No. 15.) On May 16, 2016, the
`parties filed their second stipulation for an extension of time, submitting they had "agreed to a
`process that they believe will lead to the settlement of this case," and asking for (1) a 120-day
`extension of time, until September 20, 2016, for VIZIO to respond to the Complaint; and (2) a
`status conference, should the Court desire to hold such a conference. (See Second Stip. to
`Extend Time to Respond to Initial Compl., ECF No. 24.) The Court held a telephonic status
`conference with the parties on May 26, 2016 during which it signed and approved the second
`stipulation. (Minutes of Telephonic Status Conference, ECF No. 35.)
`
`VIZIO filed its Answer on September 20, 2016, and the Court held a scheduling conference on
`December 5, 2016. (See Answer, ECF Nos. 35; Order Setting Scheduling Conference, ECF No.
`43; Minutes of Scheduling Conference, ECF No. 53.) During the scheduling conference, the Court
`viewed the parties' technology tutorials, heard argument from counsel regarding various
`scheduling issues, and set the following relevant dates and deadlines:
`
`Infringement Contentions:
`Invalidity Contentions:
`Simultaneous Opening Markman Briefs:
`Markman Hearing:
`Substantial Completion of Document Production:
`Close of Fact Discovery:
`Disclosure of Opening Expert Reports:
`Disclosure of Rebuttal Expert Reports:
`Close of Expert Discovery:
`Dispositive Motion Cutoff:
`Last Day for Hearing Motions:
`Pretrial Conference:
`Jury Trial:
`
`December 28, 2016
`February 3, 2017
`May 9, 2017
`June 26, 2017
`September 15, 2017
`September 29, 2017
`October 13, 2017
`November 17, 2017
`December 28, 2017
`January 15, 2018
`February 26, 2018
`April 2, 2018
`April 17, 2018
`
`(Minutes of Scheduling Conference.) During the scheduling conference, the parties stated that
`although they had engaged in settlement discussions, those discussions were unsuccessful, but
`also indicated theat they might continue such discussions at a later date. (Reporter's Tr. of
`Scheduling Conference ("Scheduling Tr.") at 31:23-32:13, 47:15-48:5, ECF No. 58.) Moreover,
`counsel for VIZIO indicated that VIZIO would file petitions for inter partes review once it received
`Nichia's supplemental infringement contentions to ensure that the petitions would cover each
`asserted claim. (Scheduling Tr. at 45:19-46:8.)
`
`Page 2 of 13
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 3 of 13 Page ID #:2308
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES- GENERAL
`UNDER SEAL
`
`CASE NO.: SA CV 16-00545 SJO
`(MRWx)
`
`DATE: February 2, 2017
`
`///
`
`2.
`
`The IPR Petitions
`
`On December 30, 2016, two days after Nichia served Nichia with its Second Amended and
`Supplemental Infringement Contentions ("Second Amended Infringement Contentions"), VIZIO
`filed four (4) petitions for inter partes review (the "IPR Petitions"). (See Decl. Avraham Schwartz
`in Supp. Mot. ("Schwartz Decl.") ¶ 4; Decl. Richard W. Erwine in Supp. Mot. ("Erwine Decl."), Exs.
`B ("Second Amended Infringement Contentions"), E-H ("IPR Petitions").)1 In its Second Amended
`Infringement Contentions, Nichia accuses certain VIZIO's televisions of infringing (1) claims 1, 3,
`4, 5, and 18 of the '959 Patent; (2) claims 1, 4, 7, and 8 of the '631 Patent; (3) claim 4 of the '375
`Patent; and (4) claims 1 and 12 of the '092 Patent. (See generally Supp'l Infringement
`Contentions.) The IPR Petitions are directed toward these, and other, claims, and each seeks to
`invalidate the listed claims solely on the basis of obviousness under 35 U.S.C. § 103(a). (See
`generally IPR Pets.)2 The principal prior art reference asserted in each of the four IPR Petitions
`is U.S. Patent No. 6,600,175, which issued to inventor Baretz (the "Baretz Reference"). (See
`generally IPR Pets.)
`
`3.
`
`Status of the Parties' Discovery Efforts
`
`Nichia served VIZIO with Nichia's Preliminary Disclosure of Asserted Claims and Infringement
`Contentions on April 25, 2016. (See Decl. David E. Cole in Supp. Opp'n ("Cole Decl.") ¶ 2, Ex.
`A, ECF No. 64-3.) These preliminary infringement contentions include ninety-three (93) pages of
`claim charts based on Nichia's testing of two VIZIO televisions and are directed to each of the
`claims now included in the IPR Petitions. (See Cole Decl. ¶ 2, Ex. A.) Nichia also served over five
`thousand (5,000) pages of documents related to its infringement contentions. (See Cole Decl. ¶ 3,
`Ex. B.)
`
`On May 26, 2016, after the Court granted the parties' second stipulation, Nichia served VIZIO with
`Nichia's Amended and Supplemental Preliminary Disclosure of Asserted Claims and Infringement
`Contentions ("First Amended Infringement Contentions"). (See Cole Decl. ¶ 4, Ex. C.) These
`contentions accuse the same two VIZIO televisions of infringing the same claims that Nichia
`previously asserted and that are now the subject of the IPR Petitions. (See Cole Decl., Ex. C.)
`
`1 Nichia does not contest the accuracy of the IPR Petitions, and the Court therefore takes
`judicial notice of the contents of these documents. See Fed. R. Evid. 201(b) & ©.
`
`2 In particular, VIZIO seeks to invalidate (1) claims 1, 3-5, 7-9, 11-13, and 15-20 of the '959
`Patent; (2) claims 1-4, 7-8, and 10-11 of the '631 Patent; (3) claims 1 and 4 of the '375
`Patent; and (4) claims 1-3, 7-9, 12, and 13 of the '092 Patent. (See generally IPR Pets.)
`Page 3 of 13
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`Nichia EX2007
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 4 of 13 Page ID #:2309
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES- GENERAL
`UNDER SEAL
`
`CASE NO.: SA CV 16-00545 SJO
`(MRWx)
`
`DATE: February 2, 2017
`
`On December 12, 2016, the parties exchanged their initial disclosures, and on December 28,
`2016, Nichia served its Second Amended Infringement Contentions upon VIZIO. (See Cole Decl.
`¶¶ 6-8, Exs. E-G; see also Second Am. Infringement Contentions.) The Second Amended
`Infringement Contentions assert twelve (12) of the previously asserted claims and accuse seven
`(7) VIZIO televisions of infringement. (See Second Am. Infringement Contentions.) On the same
`day, Nichia supplemented its previous document production, making Nichia's document production
`total almost 16,000 pages. (Cole Decl. ¶ 9, Ex. H.) Nichia also served VIZIO with its first sets of
`interrogatories and document requests. (Cole Decl. ¶¶ 10-11, Exs. I, J.)
`
`4.
`
`Everlight and the Michigan Patents
`
`The Asserted Patents are all related to one another insofar as they (1) list the same four inventors;
`(2) share a common specification; and (3) claim priority to the same Japanese patent application,
`P 09-081010, and the same U.S. Patent Application No. 08/902,725, which issued as U.S. Patent
`No. 5,998,925 on July 29, 1997 (the "'925 Patent"). (See Compl., Exs. A-D.)
`
`The '925 Patent, as well as U.S. Patent No. 7,531,960 (the "'960 Patent") (together, the "Michigan
`Patents'), list the same four inventors as the Asserted Patents, share the same specification as
`the Asserted Patents, and also claim priority to P 09-081010. (See Erwine Decl., Exs. I, J.) Non-
`party Everlight Electronics Co., Ltd. ("Everlight") filed a declaratory judgment action in the Eastern
`District of Michigan in 2012 against Nichia and Nichia America Corporation with respect to the
`Michigan Patents. See Complaint, Everlight Elecs. Co., Ltd. et al. v. Nichia Corp. et al.
`("Everlight"), No. 4:12-cv-11758-GAD-MKM (E.D. Mich. Apr. 19, 2012), ECF No. 1. On April 22,
`2015, the jury in Everlight found claims of the Michigan Patents to be invalid as obvious in light
`of. See Verdict Form, Everlight, No. 4:12-cv-11758-GAD-MKM (E.D. Mich. Apr. 22, 2015), ECF
`No. 505.
`
`II.
`
`DISCUSSION
`
`A.
`
`Legal Standards
`
`1.
`
`Inter Partes Review
`
`The Leahy-Smith America Invents Act ("AIA") intended to improve the former inter partes
`reexamination proceeding with a new inter partes review proceeding. See 35 U.S.C. §§ 311-319.
`In pursuit of the AIA's stated goal "to establish a more efficient and streamlined patent system that
`will improve patent quality and limit unnecessary and counterproductive litigation costs," the United
`States Patent and Trademark Office ("PTO") sought "to create a timely, cost-effective alternative
`to litigation" in crafting the inter partes review regulations. Changes to Implement Inter Partes
`Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered
`Business Method Patents, 77 Fed. Reg. 48,680 (Aug. 14, 2012) (codified at 37 C.F.R. §§ 42.100
`
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 5 of 13 Page ID #:2310
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`DATE: February 2, 2017
`
`et seq.). The inter partes review procedure is designed (1) to reduce to 12 months the time the
`PTO spends reviewing validity, from the previous reexamination average of 36.2 months, (id. at
`48,725); (2) to minimize duplicative efforts by increasing coordination between district court
`litigation and inter partes review, (id. at 48,721); and (3) to allow limited discovery in the review
`proceedings, (id. at 48,719).
`
`Inter partes review allows a party other than the patentee to bring an adversarial proceeding in the
`PTO to establish that the patent claims are invalid under 35 U.S.C. sections 102 or 103. See 35
`U.S.C. § 311. Significantly, the AIA "convert[ed] inter partes reexamination from an examinational
`to an adjudicative proceeding." H.R. Rep. No. 112-98, 45 (2011), reprinted in 2011 U.S.C.C.A.N.
`67, 77. While inter partes reexamination was conducted through amendment-and-response
`practice before a PTO examiner, inter partes review is conducted before a panel of three
`technically-trained administrative patent judges of the newly formed Patent Trial and Appeal Board
`("PTAB"). See 35 U.S.C. § 6. The parties can conduct discovery and respond to each other's
`arguments, and have the right to an oral hearing. See 35 U.S.C. § 316(a)(5), (8), (10), and (13).
`To prevail in an inter partes review proceeding, a petitioner need only prove invalidity by a
`preponderance of the evidence. 35 U.S.C. § 316(e).
`
`After a party has filed a petition requesting inter partes review, the patent owner has three months
`to file a preliminary response opposing the request. 35 U.S.C. § 313; 37 C.F.R. § 42.107(b).
`Within three months of the time set for the patent owner's response, the PTO will grant the inter
`partes review request if "there is a reasonable likelihood that the petitioner would prevail with
`respect to at least 1 of the claims challenged in the petition." 35 U.S.C. § 314(a). This standard
`for granting review is more stringent than the previous "substantial new question of patentability"
`standard. If the PTO grants review, a final determination must be issued "not later than 1 year"
`after the petition is granted. 35 U.S.C. § 316(a)(11). The one-year period may be extended for
`good cause by not more than 6 months, although "[e]xtensions of the one-year period are
`anticipated to be rare." 77 Fed. Reg. at 48,695. The patent owner has an opportunity to add or
`amend claims during inter partes review. 35 U.S.C. § 318(b). After review concludes, the party
`that requested review is estopped from asserting that a claim is invalid "on any ground that the
`petitioner raised or reasonably could have raised during that inter partes review." 35 U.S.C.
`§ 315(e)(2).
`
`The AIA also seeks to limit the abuse of inter partes review as a tool for tactical delay by requiring
`that a defendant petition for review within one (1) year after being served with the complaint. 35
`U.S.C. § 315(b). This one-year limit sets a ceiling on the PTO's ability to commence inter partes
`review where there is ongoing litigation, but "does not change the fact that delay in seeking the
`PTO's review of a patent within that year can adversely affect a district court's view of a request
`for a stay pending review." Universal Elecs., Inc. v. Universal Remote Control, Inc., 943 F. Supp.
`2d 1028, 1030 (C.D. Cal. 2013).
`
`MINUTES FORM 11
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 6 of 13 Page ID #:2311
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`CASE NO.: SA CV 16-00545 SJO
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`DATE: February 2, 2017
`
`///
`///
`///
`
`2.
`
`Motion to Stay Pending Inter Partes Review
`
`District courts have broad discretion to stay judicial proceedings pending inter partes review. See
`Star Envirotech, Inc. v. Redline Detection, LLC, No. SACV 12-01861 JGB (MLGx), 2013 WL
`1716068, at *1 (C.D. Cal. Apr. 3, 2013) (citing Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27
`(Fed. Cir. 1988)). Courts in the Central District of California consider the following three
`"significant factors" when determining whether to stay proceedings pending inter partes review:
`(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will
`simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice
`or present a clear tactical disadvantage to the nonmoving party. Universal Elecs., 943 F. Supp.
`2d at 1030-31; Star Envirotech, 2013 WL 1716068, at *1.
`
`The court's inquiry is not limited to these three factors, however, for it is "the totality of the
`circumstances [that] governs." Universal Elecs., 943 F. Supp. 2d at 1031 (quoting Allergan Inc.
`v. Cayman Chem. Co., No. SACV 07-01316 JVS (RNBx), 2009 WL 8591844, at *2 (C.D. Cal. Apr.
`9, 2009)). "Courts have inherent power to manage their dockets and stay proceedings, including
`the authority to order a stay pending conclusion of a PTO reexamination." Ethicon, 849 F.2d
`1422, 1426-27 (Fed. Cir. 1988) (citations omitted). "There is a liberal policy in favor of granting
`motions to stay proceedings pending the outcome" of re-examination, especially in cases that are
`still in the initial stages of litigation and where there has been little or no discovery." Universal
`Elecs., 943 F. Supp. 2d at 1031 (citations omitted).
`
`B.
`
`Analysis
`
`1.
`
`Stage of the Proceedings
`
`The first factor the Court considers is the stage of the proceedings, including "whether discovery
`is complete and whether a trial date has been set." Aten Int'l Co., Ltd v. Emine Tech. Co., Ltd.,
`No. SACV 09-0843 AG (MLGx), 2010 WL 1462110, at *6 (C.D. Cal. Apr. 12, 2010). "The early
`stage of litigation weighs in favor of a stay." PersonalWeb Techs., LLC v. Facebook, Inc., No.
`5:13-CV-01356-EJD, 2014 WL 116340, at *3 (N.D. Cal. Jan. 13, 2014) (citing Target Therapeutics,
`Inc. v. SciMed Life Sys., Inc., No. C-94-20775 RPA (EAI), 1995 WL 20470, at *2 (N.D. Cal. Jan.
`13, 1995)). Where "no significant discovery or trial preparation" has taken place and no
`"substantial expense and time" has been invested by the parties in the litigation, courts typically
`find that this factor weighs in favor of granting a stay. Target Therapeutics, 1995 WL 20470, at
`*2.
`
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 7 of 13 Page ID #:2312
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`CIVIL MINUTES- GENERAL
`UNDER SEAL
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`CASE NO.: SA CV 16-00545 SJO
`(MRWx)
`
`DATE: February 2, 2017
`
`The Court recognizes that Nichia has both served three iterations of detailed preliminary
`infringement contentions on VIZIO and produced a substantial number of documents. (See Cole
`Decl. ¶¶ 2-4, 6, 8-11, Exs. A-C, E, G-J.) Nevertheless, the Court finds this case to be in its relative
`infancy. The discovery cutoff in this case is approximately eight (8) months away, and trial is
`scheduled to commence in approximately fifteen (15) months. (See Minutes of Scheduling
`Conference, ECF No. 32.) Moreover, neither party has filed a Markman brief, nor are they slated
`to do so for several months. See Evolutionary Intelligence LLC v. Yelp Inc., No. 13-cv-03587-
`DMR, 2013 WL 6672451 (N.D. Cal. Dec. 18, 2013) (granting stay where, among other things, "the
`court [had] not substantially intervened in the action such as by conducting a Markman hearing
`or issuing a claim construction order"). Finally, the Court expects that much of the effort Nichia
`has expended to date was required in order to satisfy its Rule 11 obligation to conduct an
`adequate pre-suit investigation.
`
`Accordingly, the Court finds that this factor weighs in favor of staying the litigation.
`
`2.
`
`Simplification of the Issues in Question
`
`The second factor the Court considers is "whether a stay will simplify the issues in question and
`trial of the case." Aten, 2010 WL 1462110, at *6. "[W]aiting for the outcome of the reexamination
`could eliminate the need for trial if the claims are cancelled or, if the claims survive, facilitate trial
`by providing the court with expert opinion of the PTO and clarifying the scope of the claims."
`Target Therapeutics, 1995 WL 20470, at *2.
`
`The IPR Petitions seek review of each of the claims asserted by Nichia in this litigation. As such,
`should the PTO grant any of VIZIO's four IPR Petitions, the proceedings are "guaranteed to finally
`resolve at least some issues of validity because the requesting party is barred from seeking district
`court review on any grounds it could have raised in the reexamination." Avago Techs. Fiber
`IP(Sing.) Pte. Ltd. v. IPtronics, Inc., No. 10-CV-02863-EJD, 2011 WL 3267768, at *5 (N.D. Cal.
`July 28, 2011). Moreover, because Nichia is the only plaintiff in this litigation and is the only other
`party to VIZIO's IPR Petitions, the Court would give the estoppel effect of any inter partes review
`proceedings full weight. See Semiconductor Energy Lab. Co., Ltd. v. Chimei Innolux Corp., No.
`SACV 12-21-JST (JPRx), 2012 WL 7170593, at *2 (C.D. Cal. Dec. 19, 2012). Finally, "[e]ven a
`confirmation by the PTO of all claims is assistive here . . . since staying the case pending
`reexamination will allow the parties to complete the prosecution history, which will inform the
`parties' and the Court's constructions of the asserted claims." Convergence Techs. (USA), LLC
`v. Microloops Corp., No. 5:10-cv-02051 EJD, 2012 WL 1232187, at *3 (N.D. Cal. Apr. 12, 2012).
`
`The Court disagrees with Nichia's submission that "for the requested stay to simplify the trial
`issues in any significant way, the Patent Office must not only grant all four IPR petitions, but also
`must grant them on all twelve claims asserted by Nichia here and ultimately find all twelve claims
`
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`Case 8:16-cv-00545-SJO-MRW Document 68 Filed 02/02/17 Page 8 of 13 Page ID #:2313
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`CASE NO.: SA CV 16-00545 SJO
`(MRWx)
`
`DATE: February 2, 2017
`
`invalid." (Opp'n 7 [emphasis in original].) Should the PTO institute reexamination proceedings
`with respect to any of the twelve challenged claims, certain invalidity issues with respect to such
`claims will be eliminated, which may greatly reduce the issues before the Court and/or the jury
`during the merits phase of the litigation. That VIZIO has asserted invalidity defenses and
`counterclaims unrelated to 35 U.S.C. Sections 102 (anticipation) and 103 (obviousness) does not
`lessen the ability of a reexamination to simplify the issues in this case.
`
`In addition, the Court notes that, in light of the early stage of this litigation and the fact that
`Markman briefs have not been filed by either party, the Court would welcome assistance from the
`PTO regarding forthcoming claim construction issues.
`
`For all of these reasons, the Court finds that this factor weighs in favor of staying the litigation.
`
`3.
`
`Undue Prejudice or Clear Tactical Advantage
`
`Next, the Court considers "whether a stay would unduly prejudice or present a clear tactical
`disadvantage to the nonmoving party." Aten, 2010 WL 1462110, at *6. Mere delay in the litigation
`does not establish undue prejudice. Research in Motion, Ltd. v. Visto Corp., 545 F. Supp. 2d
`1011, 1012 (N.D. Cal. 2008); see also Sorensen ex rel. Sorensen Research & Dev. Trust v. Black
`& Decker Corp., No. 06-CV-1572 BTM (CAB), 2007 WL 2696590, at *4 (S.D. Cal. Sept. 10, 2007)
`("Protracted delay is always a risk inherent in granting a stay, yet courts continue to stay actions
`pending reexamination. The general prejudice of having to wait for resolution is not a persuasive
`reason to deny the motion for stay.").
`
`The Court notes that "prejudice [to the patentee] is heightened when parties to litigation are direct
`competitors," and as a result, "courts presume that a stay will prejudice the non-movant."
`Universal Elecs., 943 F. Supp. 2d at 1034 (internal citations omitted). In this case, however, there
`is no indication that Nichia and VIZIO are direct competitors. Nichia alleges that VIZIO is engaged
`in the business of marketing and selling televisions, and accuses certain of VIZIO's television
`models that contain LEDs of infringing claims of the Asserted Patents. (See Compl. ¶¶ 8, 14, 20,
`26.) Nichia, by contrast, submitted during the scheduling conference in this action that it is "not
`a consumer-facing brand" but is instead "one of the largest LED manufacturers in the world."
`(Scheduling Tr. at 13:4-7.) As such, VIZIO is more properly characterized as a downstream
`customer of LEDs rather than as a direct competitor in the market for LEDs. Because the parties
`are not direct competitors, there is no risk of VIZIO acquiring market share or customers from
`Nichia during a stay. See Semiconductor Energy Lab., 2012 WL 7170593 at *4. Instead,
`monetary damages would adequately compensate Nichia for any infringement. See Smartflash
`LLC v. Apple, Inc., No. 6:13-cv-447, 2014 WL 3366661, at *5 (E.D. Tex. July 8, 2014) ("Since
`Smartflash is not a direct competitor, it would not suffer the same prejudice from a stay as a party
`would if it risked losing market share and goodwill. There may be some prejudice from loss of
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`licensing or collecting new evidence but it could potentially be compensated for through monetary
`damages."). The fact that Nichia has not sought a preliminary injunction suggests that it considers
`monetary damages to be adequate. See Semiconductor Energy Lab., 2012 WL 7170593 at *4
`("[B]ecause SEL does not dispute that it has not sought a preliminary injunction and that SEL and
`CMI are not direct competitors [among other reasons], the Court finds this factor weighs in favor
`of a stay.").
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`Moreover, the Court notes that because the four Asserted Patents claim priority to the '925 Patent,
`they are set to expire this year, between July 29, 2017 and October 29, 2017. See 35 U.S.C.
`§ 154(a)(2).3 As such, even if Nichia and VIZIO were competitors, because the Asserted Patents
`will expire well before the current motion hearing cutoff and trial dates, Nichia would not be entitled
`to injunctive relief against VIZIO even if it were to ultimately prevail in this litigation. Nichia
`contends that a stay for five months or potentially three years would place the asserted patents
`"in limbo for the majority of [the patents'] remaining life" and therefore "would create a clear tactical
`disadvantage" for Nichia. (Opp'n 18 [citing Biomet Biologics, LLC v. Bio Rich Med., Inc., No.
`SACV 10-1582 DOC (PJWx), 2011 WL 4448972, at *2 (C.D. Cal. Sept. 26, 2011)].) The Court
`does not find Biomet to be persuasive in this regard, as nothing would prevent Nichia from
`continuing to enforce its rights under the asserted patent against other entities while this action
`remains stayed.
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`The Court further rejects Nichia's argument that VIZIO waited unduly long to move for inter partes
`review. (See generally Opp'n.) Although it is true that it has been several months since Nichia
`filed its Complaint, the parties jointly stipulated to extending VIZIO's deadline to respond to the
`Complaint in light of ongoing settlement discussions. When it became apparent to the parties that
`settlement discussions would not prove fruitful, VIZIO filed its Answer and the Court held a
`scheduling conference. During the scheduling conference, VIZIO informed the Court of its
`intention to expeditiously move for inter partes review after receiving Nichia's amended initial
`infringement contentions. True to its word, VIZIO filed the four IPR Petitions two days after
`receiving Nichia's newly amended set of preliminary infringement contentions. The Court does
`not find any gamesmanship or lack of diligence on the part of VIZIO.
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`For its part, Nichia presents three additional arguments why it believes it will be prejudiced by a
`stay. First, it contends that third-party discovery efforts might be hampered if this litigation is
`stayed, as these entities are under no obligation to maintain documents relevant to this case.
`(Opp'n 16-17.) Nichia has submitted no evidence indicating that spoliation is anything but a
`remote possibility in this case, and the Court points out that it was Nichia's decision to bring an
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`3 The '631 Patent will expire on October 29, 2017 because of a ninety-day patent term
`extension made pursuant to 35 U.S.C. section 154(b). (See Compl., Ex. B.)
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`infringement suit against a downstream customer rather than its suppliers. Somewhat relatedly,
`Nichia argues that although it and VIZIO are not direct competitors, VIZIO ignores the fact that
`Nichia is allegedly directly harmed by VIZIO's infringing activity and illegitimate sourcing of LEDs.
`(Opp'n 17.) Although this proposition is true, it fails to demonstrate that Nichia would not be made
`whole by money damages. Third, Nichia submits that the lead inventor of the asserted patents
`is not in good health. (Opp'n 17 [citing Decl. Genichi Shinomiya in Supp. Opp'n ("Shinomiya
`Decl.") ¶ 2, ECF No. 64-1].) Although the Court gives its condolences to Mr. Shimizu, the stay in
`this action might be as short as five months, and in any event, the parties will have an opportunity
`to secure his testimony during the IPR proceedings.
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`In summation, the Court finds that this factor weighs in favor of staying the litigation.
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`4.
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`Other Considerations
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`The three-factor analysis conducted above, while important, does not capture every relevant
`consideration. "Although many courts have focused on the [three factors], absent any controlling
`precedent limiting the inquiry to these elements, the Court finds that the analysis is not so limited
`but rather that 'the totality of the circumstances governs.'" Allergan, 2009 WL 8591844, at *2
`(quoting Broadcast Innovation L.L.C. v. Charter Commc'ns, Inc., CIV. A. No. 03-CV-2223-ABJ-
`BNB, 2006 WL 1897165, at *4 (D. Colo. July 11, 2006)).
`
`Nichia submits a stay is not warranted in this case for two main reasons. First, it contends that
`"a majority of courts view as premature and speculative motions to stay made before the Patent
`Office has acted on a review petition" in light of the PTO's discretion to institute reexamination
`proceedings. (Opp'n 7.) Second, Nichia argues the PTO is unlikely to institute such proceedings
`in this case because the primary reference on which VIZIO relies—U.S. Patent No. 6,600,175
`("Baretz")—was considered by the patent examiner during prosecution of the patents in suit.
`(Opp'n 9-11.) Although there is some merit to both of these arguments, the Court nevertheless
`concludes that a stay is warranted in this case.
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`As a threshold matter, the Court acknowledges that district courts across the countr