O
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CV 18-3435-RSWL-GJS
`ORDER re: Defendant’s
`Motion to Stay
`Litigation Pending Inter
`Partes Review [29]
`
`SPIN MASTER LTD.,
`Plaintiff,
`
`v.
`MATTEL, INC.,
`Defendant.
`
`)))))))))))))))))
`
`Plaintiff Spin Master (“Plaintiff”) brought the
`instant Action against Defendant Mattel, Inc.
`(“Defendant”) alleging Defendant’s sale of its Mecard
`line of transformable toys infringes on three of
`Plaintiff’s patents, all entitled “Transformable Toy”:
`U.S. Patent Nos. 8,500,508 (“‘508 Patent”); 9,868,073
`(“‘073 Patent”); and 9,975,058 (“‘058 Patent”),
`(collectively, the “Patents-in-suit”). Currently
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`TIDE 1034
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CV 18-3435-RSWL-GJS
`ORDER re: Defendant’s
`Motion to Stay
`Litigation Pending Inter
`Partes Review [29]
`
`SPIN MASTER LTD.,
`Plaintiff,
`
`v.
`MATTEL, INC.,
`Defendant.
`
`)))))))))))))))))
`
`Plaintiff Spin Master (“Plaintiff”) brought the
`instant Action against Defendant Mattel, Inc.
`(“Defendant”) alleging Defendant’s sale of its Mecard
`line of transformable toys infringes on three of
`Plaintiff’s patents, all entitled “Transformable Toy”:
`U.S. Patent Nos. 8,500,508 (“‘508 Patent”); 9,868,073
`(“‘073 Patent”); and 9,975,058 (“‘058 Patent”),
`(collectively, the “Patents-in-suit”). Currently
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`TIDE 1034
`
`
`
`before the Court is Defendant’s Motion to Stay
`Litigation (“Motion”) [29] pending the United States
`Patent and Trademark Office’s (“USPTO”) inter partes
`review of the Patents-in-suit. Having reviewed all
`papers submitted pertaining to this Motion, the Court
`NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS
`Defendant’s Motion.
`
`A.
`
`I. BACKGROUND
`Factual Background
`Plaintiff is a Canadian toy corporation that does
`business around the globe. First Am. Compl. (“FAC”) ¶¶
`4, 7, ECF No. 17. In 2007, Plaintiff launched a series
`of transforming robot toys, called “Bakugan,” that
`reached over $1 billion in global sales. Id. ¶ 8. The
`name Bakugan translates to “exploding sphere,” and the
`toys do just that, as they transform from spherical
`shapes into Bakugan anime characters. Id. ¶ 9, 10.
`Plaintiff owns three United States patents related to
`its Bakugan toys, all entitled “Transferable Toy”: the
`‘508 Patent, ‘073 Patent, and ‘058 Patent. Id. ¶¶ 15-
`20. In late 2017, Plaintiff announced a reboot of the
`Bakugan brand, intended for release in 2019-2020. Id.
`¶ 12.
`Plaintiff alleges that in trying to capitalize on
`Plaintiff’s success with its Bakugan toys, Defendant
`released its own transforming toy line called “Mecard”
`around late-March or early-April 2018. Id. ¶¶ 13, 21.
`The Mecard line includes at least twenty-five
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`transformable character vehicles (the “infringing
`products”). Id. ¶ 23. The claims allegedly infringed
`by Mecard relate to the use of magnets to transform the
`toy cars. Id. ¶¶ 25-54.
`B.
`Procedural Background
`On May 22, 2018, Plaintiff filed its FAC [17]
`alleging three patent infringement claims against
`Defendant. Defendant filed its Answer [24] on June 29,
`2018. On September 7, 2018, Defendant filed a Motion
`to Stay the Case pending inter partes review [29].
`Plaintiff filed its Opposition [32] on September 18,
`2018. Defendant filed its Reply [34] on September 25,
`2018.
`
`II. DISCUSSION
`
`A.
`
`Legal Standard
`“Courts have the inherent power to manage their
`dockets and stay proceedings, including the authority
`to order a stay pending conclusion of a PTO [inter
`partes review].” Ethicon, Inc. v. Quigg, 849 F.2d
`1422, 1426-27 (Fed. Cir. 1988). Although the district
`court is not required to stay judicial proceedings
`pending inter partes review, “there is ‘a liberal
`policy in favor of granting motions to stay proceedings
`pending the outcome’ of [inter partes review],
`especially in cases that are still in the initial
`stages of litigation and where there has been little or
`no discovery.” Nanometrics, Inc. v. Nova Measuring
`Instruments, Ltd., No. C 06-2252 SBA, 2007 WL 627920,
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`at *1 (N.D. Cal. Feb. 26, 2007) (citations omitted).
`The party moving for a stay bears the burden to
`persuade the court that a stay is appropriate.
`Netlist, Inc. v. Smart Storage Sys., Inc., No.
`13-cv-5889-YGR, 2014 WL 4145412, at *1 (N.D. Cal. Aug.
`21, 2014). Three factors are significant in analyzing
`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. v. Universal Remote Control,
`Inc., 943 F. Supp. 2d 1028, 1030-31 (C.D. Cal.
`2013)(internal quotation marks and citation omitted).
`B.
`Discussion
`1.
`Stage of Litigation
`The first issue is whether the litigation has
`progressed significantly such that a stay would be
`disfavored. The status of discovery, claim
`construction, trial setting, and the Court’s
`expenditure of resources are all relevant
`considerations. See Universal, 943 F. Supp. 2d at
`1031-32.
`This factor weighs in favor of granting the Motion
`to Stay. Plaintiff filed its Complaint [1] on April
`24, 2018, and First Amended Complaint on May 22, 2018
`[17]. Other than initial disclosures, no discovery has
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`taken place thus far. Hutchins Decl. ¶ 2, ECF No. 29-
`2. The Scheduling Order [28] was issued the day before
`the instant Motion was filed, setting the date for
`trial on November 12, 2019. Even though a trial date
`has been set, the other circumstances reveal that this
`case is still in its procedural infancy, and courts
`have concluded this factor weighs in favor of a stay
`even when the parties are significantly more immersed
`in litigation. PersonalWeb Techs., LLC v. Apple Inc.,
`69 F. Supp. 3d 1022 (N.D. Cal. 2014)(stage-of-
`litigation factor weighed in favor of stay even when
`parties exchanged over 150 written discovery requests
`and took over a dozen depositions because the parties
`had yet to undertake the more significant, costly
`stages of litigation).
`The Court is also satisfied that staying the case
`is not premature, even though the PTO has yet to grant
`the petition and institute inter partes review
`proceedings, let alone reach the merits of the inter
`partes review. “It is not uncommon for [courts] to
`grant stays pending reexamination prior to the PTO
`deciding to reexamine the patent.” Pragmatus AV, LLC
`v. Facebook, Inc., No. 11–CV–02168–EJD, 2011 WL
`4802958, at *3 (N.D. Cal. Oct. 11, 2011) (collecting
`cases).
`Simplification of Issues for Trial
`2.
`The next issue is whether granting the stay will
`simplify the issues in question and trial of the case.
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`A stay is favored where “the outcome of the
`reexamination would be likely to assist the court in
`determining patent validity and, if the claims were
`canceled in the reexamination, would eliminate the need
`to try the infringement issue.” Evolutionary
`Intelligence, LLC v. Apple, Inc., No. C 13-04201 WHA,
`2014 WL 93954, at *2 (N.D. Cal. Jan. 9, 2014)
`(citations omitted).
`Here, Defendant has petitioned for inter partes
`review of every asserted claim of the patents-in-suit,
`arguing they are invalid in light of prior art. Mot.
`at 4:4-6. While a patentee loses any cause of action
`based on a canceled claim, this is more so true when a
`party has sought PTO review of all asserted claims in
`the patent-in-suit. See Verinata Health, Inc. v.
`Ariosa Diagnostics, Inc., No. C 12–05501 SI, 2014 WL
`121640, at *2 (N.D. Cal. Jan. 13, 2014).
`The inter partes review determination will also
`prevent unnecessary waste of court and party resources.
`It will resolve whether Plaintiff’s patent infringement
`claims can stand, as they are inextricably bound with
`the inter partes review’s resolution of the patent
`validity. Alternatively, if the patent office
`determines that only certain claims can stand, this
`will at least narrow the claims that will ultimately be
`at issue in this Action. Although the pending status
`of the inter partes review clouds the simplification-
`of-issues inquiry, review of all claims for the patents
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`at issue in this case at least tips this factor in
`favor of granting the Motion to Stay.
`3.
`Undue Prejudice or Clear Tactical Disadvantage
`The Court considers “whether a stay would unduly
`prejudice or present a clear tactical disadvantage to
`the nonmoving party.” Universal, 943 F. Supp. 2d at
`1034 (citations omitted). A court can also consider
`four sub-factors: “(1) the timing of the review
`request; (2) the timing of the request for stay; (3)
`the status of the review proceedings; and (4) the
`relationship of the parties.” Davol, Inc. v. Atrium
`Med. Corp., No. 12–958–GMS, 2013 WL 3013343, at *2 (D.
`Del. June 17, 2013).
`Defendants filed the petition for review and the
`instant Motion four and a half months after the filing
`of the initial Complaint and before the date was set
`for the case management conference. See Compl., ECF
`No. 1; Mot. Exs. 1-3 Petitions for inter partes review,
`ECF Nos. 29-3, 4, 5. This is quite unlike waiting for
`“the eve of trial or after protracted discovery” to
`file the petition. KLA-Tencor Corp. v. Nanometrics,
`Inc., No. C 05-03116 JSW, 2006 WL 708661, at *3 (N.D.
`Cal. Mar. 16, 2006) (finding no undue prejudice where
`defendant filed a request for reexamination five months
`after the complaint was filed).
`Plaintiff argues that he will have to wait up to
`eighteen months for an inter partes review disposition,
`which would be four months longer than the time to
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`trial. Opp’n at 4:23-26. But “[p]rotracted delay is
`always a risk inherent in granting a stay,” and
`“general prejudice of having to wait for resolution is
`not a persuasive reason to deny the motion for stay.”
`Sorensen ex rel. Sorensen Research and Development
`Trust v. Black & Decker Corp., No. 06cv1572 BTM (CAB),
`2007 WL 2696590, at *4 (S.D. Cal. Sept. 10, 2007).
`Plaintiff further argues that it is more likely to
`suffer prejudice because it directly competes with
`Defendant. Opp’n at 3:19-3:4. Plaintiff alleges that
`once it introduces its new line of transformable toys
`in 2019, it will suffer prejudice if the case is stayed
`because it will be competing against Defendant, who is
`infringing Plaintiff’s technology, and this could
`impact Plaintiff’s market share and good will. Opp’n
`at 4:16-20. However, Plaintiff has not yet released
`its new toy line. Id. at 2:8-9. Plaintiff cites to a
`press release announcing the new toy line will be
`introduced in 2019, but the press release disclaims
`that its statements are subject to “uncertainties and
`contingencies which could result in the forward-looking
`statements ultimately being incorrect.”1 Reply, Ex. 1
`Press Release at 5-6, ECF No. 34-2. Further, while it
`is possible that Plaintiff will suffer prejudice if it
`does introduce its new toy line before the PTAB renders
`
`1 Indeed, even the FAC indicates that “Spin Master formally
`announced a reboot of the Bakguan brand, including a reboot of
`the anime series, in late 2017 slated for release in the 2019-
`2020 time-frame.” FAC ¶ 12 (emphasis added).
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`a decision, Plaintiff does not provide any evidence
`establishing that such harm could not be compensated
`through money damages. See Cypress Semiconductor Corp.
`V. GSI Technology, Inc., No. 13-cv-02013-JST, 2014 WL
`5021100, at * 5 (N.D. Cal. 2014) (“[W]hile the Court
`can assume that [Plaintiff] will suffer some prejudice
`as a result of a stay due to the parties’ status as
`competitors, the Court cannot assess the degree of
`prejudice without at least some probative evidence on
`the point.”). Thus, the Court should find that
`Plaintiff’s claims of goodwill and marketplace harm are
`speculative at best. Accordingly, the third factor
`weighs in favor of granting the Motion to Stay.
`Because the stage of the litigation, simplification
`of issues for trial, and undue prejudice to the
`nonmoving party, all weigh in favor of a stay, the
`Court should Grant Defendant’s Motion.
`///
`///
`///
`///
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`III. CONCLUSION
`For the foregoing reasons, the Court GRANTS
`Defendant’s Motion to Stay the proceedings pending the
`PTAB’s final determination in inter partes review. IT
`IS HEREBY ORDERED that the parties shall file a joint
`status report within 14 days of the PTAB’s decision on
`whether to institute inter partes review. All dates
`currently on calendar are vacated.
`
`IT IS SO ORDERED.
`
`DATED: November 21, 2018 s/ RONALD S.W. LEW
` HONORABLE RONALD S.W. LEW
` Senior U.S. District Judge
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