Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 1 of 7 Page ID #:4510
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`Case No.:
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
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`CIVIL MINUTES - GENERAL
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`STAY
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`ED CV 18-00356 AB (SPx)
`ED CV 18-00357 AB (SPx)
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`Date:
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`February 12, 2019
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`Title:
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`Sleep Number Corporation v. Sizewise Rentals, LLC
`Sleep Number Corporation v. American National Manufacturing, Inc.
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`Present: The Honorable
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`Attorney(s) Present for Plaintiff(s):
`None Appearing
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`[IN CHAMBERS] Order GRANTING Defendants’ Motions to
`Stay (EDCV 18-00356 AB (SPx), Dkt. No. 133; EDCV 18-00357
`AB (SPx), Dkt. No. 134)
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`ANDRÉ BIROTTE JR., United States District Judge
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`Carla Badirian
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`Deputy Clerk
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`N/A
`Court Reporter
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`Attorney(s) Present for Defendant(s):
`None Appearing
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`Proceedings:
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`Before the Court are Motions to Stay Pending Inter Partes Review (EDCV 18-
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`00356 AB (SPx), Dkt. No. 133; EDCV 18-00357 AB (SPx), Dkt. No. 134) filed by
`Defendants Sizewise Rentals LLC and American National Manufacturing, Inc.
`(“Defendants”) in the two above-captioned cases. Plaintiff Sleep Number Corporation
`(“Plaintiff”) filed oppositions and Defendants filed replies.
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`Having considered the matters raised with respect to the motions, the Court
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`concludes that the matter can be decided without oral argument. Pursuant to Local Rule
`7-15, the Court VACATES the hearing for the motions. Based on the arguments
`presented by the parties and as stated herein, the Court GRANTS the motions, with one
`exception explained in the Conclusion section of this order.
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`CV-90 (12/02)
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`Initials of Deputy Clerk: CB
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`CIVIL MINUTES – GENERAL
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 1
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`Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 2 of 7 Page ID #:4511
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`BACKGROUND
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`I.
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`Before the Court are two substantially similar patent actions brought by Plaintiff
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`against Defendants, with Defendants represented by the same counsel. Plaintiff accuses
`Defendants, among other things, of making, using, selling, and/or offering to sell
`products that infringe U.S. Patent No. 5,904,172 (“the ’172 Patent”), U.S. Patent No.
`9,737,154 (“the ’154 Patent”), and 8,769,747 (“the ’747 Patent”). EDCV 18-00356 AB
`(SPx), Dkt. No. 37 (First Amended Complaint). Defendants have filed the same Motion
`to Stay in both cases, and the opposition and reply papers are likewise the same in both
`cases. See, e.g., EDCV 18-00356 AB (SPx), Dkt. No. 133 (listing the case captions and
`case numbers for both cases on the title page of the motion). The Court will therefore
`resolve both motions in this single order. All subsequent docket citations in this order
`will be to Case No. EDCV 18-00356 unless otherwise noted.
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`Plaintiff filed these cases on February 20, 2018. Dkt. No. 1. They were filed in this
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`District after, in response to a venue challenge, Plaintiff voluntarily dismissed two
`identical actions that it had filed in the Northern District of Texas on December 29, 2017.
`See, e.g., Sleep Number Corp. v. American National Manufacturing, Inc., No. 3:14-cv-
`3517 (N.D. Tex. Dec. 29, 2017); Dkt. No. 137 at 3. The current schedule in these cases
`sets the Claim Construction Hearing on June 21, 2019, with claim construction-related
`deadlines beginning in February 2019. Dkt. No. 127. The non-expert discovery cut-off is
`July 19, 2019, the expert discovery cut-off is September 13, 2019 and trial is set for
`February 11, 2020. Id. The Court also recently entered a joint stipulation by the parties to
`modify the scheduling order to specify certain dates for the parties to file amended
`contentions. Dkt. No. 139. Plaintiff’s Amended Infringement Contentions were due
`January 25, 2019 and Defendants’ Amended Invalidity Contentions are due February 21,
`2019, “regardless of the outcome of Defendants’ pending Motion to Stay.” Id.
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`From December 21 to December 29, 2018, brushing up against the year
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`anniversary of Plaintiff’s service of the complains in the N.D. Tex. cases, Defendant
`American National Manufacturing, Inc. filed petitions for inter partes review (“IPR”) of
`certain claims of the asserted patents before the Patent Trial and Appeal Board
`(“PTAB”). Defendant Sizewise Rentals is named as a real party in interest in the IPR
`petitions. Plaintiff does not dispute that Defendants have challenged all asserted claims of
`the asserted patents. The PTAB must issue decisions by approximately June 2019
`indicating whether it will institute IPR based on Defendants’ IPR petitions. If one or
`more of the IPRs are instituted, the PTAB will be required to issue a final written
`decision regarding any instituted IPR by approximately June 2020.
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`II. LEGAL STANDARDS
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`CV-90 (12/02)
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`CIVIL MINUTES – GENERAL
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`Initials of Deputy Clerk: CB
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 2
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`Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 3 of 7 Page ID #:4512
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`“A district court has the inherent power to stay its proceedings. This power to stay
`is ‘incidental to the power inherent in every court to control the disposition of the causes
`on its docket with economy of time and effort for itself, for counsel, and for litigants.’”
`Rivers v. Walt Disney Co., 980 F. Supp. 1358, 1360 (C.D. Cal. 1997) (quoting Landis v.
`N. Am. Co., 299 U.S. 248, 254 (1936)).
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`In deciding whether to grant a stay pending inter partes review proceedings, courts
`in this District have considered three factors that were originally used to consider
`requests for stays pending PTO reexamination proceedings: “(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., Inc. v. Universal
`Remote Control, Inc., 943 F. Supp. 2d 1028, 1030–31 (C.D. Cal. 2013). While these three
`factors are important, ultimately, “the totality of the circumstances governs.” Allergan
`Inc. v. Cayman Chem. Co., No. SACV 07-01316 JVS (RNBx), 2009 WL 8591844, at *2
`(C.D. Cal. Apr. 9, 2009).
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`III. DISCUSSION
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`A.
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`Stage of the Proceedings
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`The first factor is the stage of the proceedings, including “whether discovery is
`complete and whether a trial date has been set.” Universal Elecs., 943 F. Supp. 2d at
`1031 (quoting Aten, 2010 WL 1462110, at *6). “The Court's expenditure of resources is
`an important factor in evaluating the stage of the proceedings.” Id.
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`Defendants’ arguments suggest that the parties have significant, ongoing disputes
`related to contentions and discovery. Dkt. No. 133-1 at 15–16. These disputes highlight
`some of the work ahead in this case. Although Plaintiff emphasizes that the parties have
`already exchanged tens of thousands of documents and many written discovery requests,
`Plaintiff also acknowledges that the parties have only taken a single deposition thus far.
`Dkt. 137 at 3-4. Although this case is no longer in its “nascent” stages and perhaps not
`even in its “early” stages, the arguments presented support the conclusion that more work
`lies ahead for the Court and the parties than what lies behind them.
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`The fact that the parties have only just begun their claim construction exchanges is
`particularly relevant to informing the stage of the proceedings. The Court, like other
`courts, considers the status of claim construction proceedings a significant turning point
`in evaluating this factor. See, e.g., Wonderland Nursery Goods Co. v. Baby Trend, Inc.,
`No. EDCV 14-01153-VAP, 2015 WL 1809309, at *3 (C.D. Cal. Apr. 20, 2015)
`(“although the parties have submitted claim construction briefs, the Markman hearing has
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`CV-90 (12/02)
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`CIVIL MINUTES – GENERAL
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`Initials of Deputy Clerk: CB
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 3
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`Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 4 of 7 Page ID #:4513
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`not yet taken place and no disputed claim terms have been construed by this Court. This
`makes the present case unlike Universal Electronics, in which the court had already
`expended significant resources in conducting a Markman hearing and in construing
`disputed claim terms.”).
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`Plaintiff argues that Defendants’ decision to wait the full year to file their IPR
`petitions should also be considered in connection with this factor. But Plaintiff has not
`suggested gamesmanship or improper motive in Defendants’ timing of its IPR petitions.
`The fact that the parties have had ongoing discussions regarding the adequacy of
`contentions is informative in this regard and also could alternatively suggest other
`reasons for the timing of Defendants’ IPR petitions.
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`The stage of the proceedings factor weighs less strongly in favor of stay in this
`case compared to other cases because of the judicial resources the Court has already
`expended relating to the parties’ pleading disputes. Although Plaintiff would place heavy
`emphasis on these disputes and the judicial resources expended in resolving them (Dkt.
`No. 137 at 8), they are not sufficiently significant to eclipse consideration of the even
`more significant amount of work that lies ahead in this case, including claim construction
`proceedings. After weighing the competing circumstances, the Court finds this factor is
`neutral or at most weighs somewhat in favor of a stay.
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`B.
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`Simplification of the Issues
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`The second factor is “whether a stay will simplify the issues in question and trial of
`the case.” Universal Elecs., 943 F. Supp. 2d at 1032 (quoting Aten, 2010 WL 1462110, at
`*6). The possibility of simplification “is particularly true where . . . a party has requested
`reexamination of each of the patents-in-suit.” See, e.g., Semiconductor Energy Lab. Co. v.
`Chimei Innolux Corp., No. SACV12-21-JST (JPRx), 2012 WL 7170593, at *2 (C.D. Cal.
`Dec. 19, 2012).
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`Courts have expressed differing views on whether it is appropriate to grant stays
`before the PTAB has issued an institution decision on IPR petitions. See, e.g., Nichia
`Corp. v. Vizio, Inc., No. SACV 16-00545 SJO (MRWx), 2017 WL 3485767, at *8 (C.D.
`Cal. Feb. 2, 2017); Universal Elecs., 943 F. Supp. 2d at 1031 (“The undecided status of
`the petitions clouds the simplification inquiry. While courts have granted stays before the
`USPTO has issued a reexamination order, the fact that the petitions have not yet been
`granted or denied makes it more difficult to predict whether the issues are likely to be
`simplified.” (internal citations omitted)); Wonderland, 2015 WL 1809309, at *3 (“It is
`certainly true that the USPTO may choose not to institute an IPR, in which case no
`simplification of issues will result from the stay. However, if an IPR is not instituted, the
`stay will be relatively short and the action can continue with minimal delay.”). The Court
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`CV-90 (12/02)
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`CIVIL MINUTES – GENERAL
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`Initials of Deputy Clerk: CB
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 4
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`Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 5 of 7 Page ID #:4514
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`agrees with Nichia’s observation that “[t]he discretionary nature of the PTO’s decision
`whether to institute such proceedings is but one factor courts consider in determining
`whether a stay is appropriate.” Id.
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`In SCA Hygiene Products Aktiebolag (“AB”) and SCA Tissue N. Am., LLC v.
`Tarzana Enters., LLC, No. CV 17-04395-AB (JPRx), slip op. at *11 (C.D. Cal. Sept. 27,
`2017), the Court similarly considered a motion to stay pending IPR proceedings before
`IPR petitions had been instituted, stating:
`Even if the outcome of the IPR does not completely resolve the case, the
`Court finds that it will simplify this case. Here, [defendant] has petitioned
`for review over all the asserted claims of the patents in suit. Thus, IPR
`review could potentially moot both of [plaintiff]’s claims and five of
`[defendant]’s counterclaims, leaving only one claim to be decided by this
`Court. Moreover, even if all of the asserted claims survive review, the case
`would still be simplified because [defendant] would be limited in which
`arguments it could raise before this Court. See 35 U.S.C. § 315(e). Even still,
`the Court believes it will benefit from the expert evaluation of the issues by
`the Patent Office.
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`Id. (citations omitted). The same reasoning applies in this case.
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`Plaintiff also argues that simplification of the issues is unlikely because the IPR
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`petitions are “plainly defective.” Dkt. 137 at 13. The Court declines to consider the merits
`of Defendants’ IPR petitions, leaving that task to the PTAB. If Plaintiff is correct about
`Defendants’ petitions, any “stay will be relatively short and the action can continue with
`minimal delay.” Wonderland, 2015 WL 1809309, at *3.
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`For these reasons, the simplification of the issues factor weighs somewhat in favor
`of a stay in this case.
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`C.
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`Prejudice to Nonmovant
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`Third, the Court considers “whether a stay would unduly prejudice or present a
`clear tactical disadvantage to the nonmoving party.” Universal Elecs., 943 F. Supp. 2d at
`1033 (quoting Aten, 2010 WL 1462110, at *6). The fact that parties are direct
`competitors may increase the likelihood of undue prejudice, particularly if a plaintiff
`presents evidence or argument to show that the alleged infringement is “caus[ing] harm
`in the marketplace that is not compensable by readily calculable money damages.” Avago
`Techs. Fiber IP (Singapore) Pte. Ltd. v. IPtronics Inc., No. 10-CV-02863-EJD, 2011 WL
`3267768, at *5 (N.D. Cal. July 28, 2011). On the other hand, a plaintiff’s delay in filing
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`CV-90 (12/02)
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`CIVIL MINUTES – GENERAL
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`Initials of Deputy Clerk: CB
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 5
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`Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 6 of 7 Page ID #:4515
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`suit or otherwise seeking to enforce its patent rights may suggest that plaintiff will not be
`unduly prejudiced by a stay pending IPR proceedings. Universal Elecs., 943 F. Supp. 2d
`at 1034 (“Plaintiff may suffer some prejudice resulting from the stay, although the level
`of prejudice is less than compelling given Plaintiff's own delay.”).
`Defendants argue that Plaintiff waited “over a decade to sue Defendants on the
`patents-in-suit, even though it knew of the accused products as early as 2006.” Dkt. No.
`133-1 at 23. Defendants also observe that Plaintiff brought an ITC complaint in October
`2015 related to the same patents and accused products, yet waited until “six more months
`after the ITC exclusion order expired” to bring a lawsuit against Defendants in district
`court. Id. Defendants also present arguments attempting to downplay the competitor
`status between the various parties. Id. at 23–24.
`Although Plaintiff challenges Defendants’ characterizations of the timeline from its
`filing of the ITC complaint to its filing of these cases, Plaintiff does not challenge
`Defendants’ assertion that Plaintiff has known of the accused product since 2006. See
`Dkt. No. 137 at 15. Whether or not the parties are direct competitors, this substantial
`delay, particularly to assert a patent that issued in 1999 (see ’172 Patent), undercuts
`Plaintiff’s arguments regarding undue prejudice.
`Plaintiff also argues that Defendants are improperly seeking a stay so that they can
`gain a tactical advantage with their invalidity arguments in district court litigation,
`learning from the PTAB’s analysis and relying on it to sharpen their invalidity arguments
`in this forum later on. Courts are currently split on the scope of IPR statutory estoppel
`and it would be premature for the Court to analyze its appropriate scope as it relates to
`this case. Regardless, Plaintiff’s tactical advantage arguments are unpersuasive
`particularly in light of the parties’ recent joint stipulation agreeing that Defendants would
`serve amended invalidity contentions in this case by a date certain regardless of whether
`the Court grants a stay.
`Accordingly, this factor weighs in favor of a stay.
`IV. CONCLUSION
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` After considering the totality of the circumstances, including the three factors
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`discussed herein and the arguments presented by the parties, the Court GRANTS the
`motions and STAYS this litigation, with one exception: Although the parties’ motion
`practice related to the pleadings is not enough to tip the scales for the stage of the
`proceedings factor, the Court finds it would be inefficient to let the parties’ ongoing
`pleading disputes related to Defendants’ inequitable conduct counterclaims linger while
`this matter is stayed pending IPR. The Court recently resolved Plaintiff’s third Motion to
`Dismiss Defendants’ inequitable conduct counterclaims by granting-in-part the motion
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`CV-90 (12/02)
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`CIVIL MINUTES – GENERAL
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`Initials of Deputy Clerk: CB
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 6
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`Case 5:18-cv-00357-AB-SP Document 142 Filed 02/12/19 Page 7 of 7 Page ID #:4516
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`with leave for Defendants to file amended counterclaims as to certain inequitable conduct
`invalidity theories. Dkt. No. 140. Defendants’ amended counterclaims are due in just a
`few days, and as the Court’s Order regarding Plaintiff’s third Motion to Dismiss
`explained (id. at 10), “[t]o the extent the parties continue to dispute Defendants’
`allegations after Defendants file another amended pleading, the Court would be amenable
`to hearing the parties’ dispute on an expedited basis after they have meaningfully met
`and conferred on all challenges.” Id. (emphasis in original). The Court maintains its
`position on this issue and thus does not extend the stay of litigation to the parties’ dispute,
`if any, regarding Defendants’ anticipated amended counterclaims.1 The parties are
`expected to proceed with addressing any remaining dispute with Defendants’ anticipated
`amended counterclaims until all pleadings in this case have been filed.
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`In order to permit the Court to monitor this action, the Court orders the parties to
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`file periodic status reports indicating the status of the IPR proceedings and what steps
`remain in the IPR proceedings. The first such report is to be filed on April 15, 2019.
`Successive reports shall be filed every 70 days thereafter or within 14 days of a decision
`from the PTAB concluding IPR proceedings as to any of the IPR petitions filed by
`Defendants on the Asserted Patents, whichever occurs earlier. Each report must indicate
`on the face page the date on which the next report is due.
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`This Court retains jurisdiction over this action and this Order shall not prejudice
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`any party to this action.
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`All pending calendar dates are vacated by the Court.
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`IT IS SO ORDERED.
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`1 In their reply brief, Defendants suggest that Plaintiff intends to file a further amended
`complaint that would add new accused products to this case. Dkt. No. 140 at 5. The Court
`does not intend for its carveout to the stay to include motion practice relating to a Rule 15
`& 16 request to file an amended pleading. If Plaintiff indeed seeks to file such an
`amended complaint, it must wait until after the stay in this matter is lifted.
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`CV-90 (12/02)
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`Initials of Deputy Clerk: CB
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`CIVIL MINUTES – GENERAL
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`AMERICAN NATIONAL MANUFACTURING, INC. - EX 1030 - IPR2019-00514 - Page 7
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