Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 1 of 12 PageID #: 384
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`VARTA MICROBATTERY GMBH,
`
`Plaintiff,
`
` v.
`
`COSTCO WHOLESALE CORPORATION
`
`C.A. No. 2:20-cv-0051-JRG
`
`BEST BUY CO., INC, ET AL
`
`PEAG, LLC
`
`LEAD CASE
`
`C.A. No. 2:20-cv-00054-JRG
`
`C.A. No. 2:20-cv-00071-JRG
`
`AUDIO PARTNERSHIP LLC, ET AL
`
`C.A. No. 2:20-cv-00138-JRG
`
`DEFENDANTS PEAG, LLC D/B/A JLAB AUDIO, AUDIO PARTNERSHIP LLC AND
`AUDIO PARTNERSHIP PLC D/B/A CAMBRIDGE AUDIO’S
`OPPOSED MOTION TO STAY PENDING INTER PARTES REVIEW
`IN CASE NOS. 2:20-CV-00071 AND 2:20-CV-00138
`
`VARTA Ex. 2005 Page 1 of 13
`PEAG/Audio Partnership v. VARTA
`IPR2020-01212
`
`

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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 2 of 12 PageID #: 385
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`TABLE OF CONTENTS
`
`INTRODUCTION......................................................................................................................... 1
`I.
`STATEMENT OF FACTS ................................................................................................... 2
`II. LEGAL STANDARD ........................................................................................................... 3
`III.
`ARGUMENT ..................................................................................................................... 4
`A. A Stay Will Significantly Simplify or Eliminate Issues in This Litigation .................. 4
`B. VARTA Will Not Suffer Undue Prejudice from a Stay ................................................ 5
`C. The Stage of the Case Weighs in Favor of a Stay ........................................................... 6
`CONCLUSION ............................................................................................................................. 7
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`ii
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`VARTA Ex. 2005 Page 2 of 13
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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 3 of 12 PageID #: 386
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Cases
`
`Aylus Networks, Inc. v. Apple Inc.,
`856 F.3d 1353 (Fed. Cir. 2017)........................................................................................................5
`
`Customedia Techs. v. Dish Network Corp.,
`No. 2:16-CV-129, Dkt. No. 187, slip op. (E.D. Tex. Aug. 9, 2017) ................................................3
`
`Cywee Grp. Ltd. v. Samsung Elecs. Co.,
`No. 2:17-CV-140, Dkt. No. 331, slip op. (E.D. Tex. Feb. 14, 2019) ..........................................6, 7
`
`Ericsson Inc. v. TCL Commc’n Tech. Holdings, Ltd.,
`No. 2:15-CV-00011, 2016 WL 1162162 (E.D. Tex. Mar. 23, 2016) ..............................................3
`
`Finjan, Inc. v. Symantec Corp.,
`139 F. Supp. 3d 1032 (N.D. Cal. 2015) ...........................................................................................4
`
`Intellectual Ventures II LLC v. Bitco General Ins. Corp.,
`No. 6:15-CV-59, 2016 WL 4394485 (E.D. Tex. May 12, 2016).....................................................4
`
`NFC Tech. LLC v. HTC Am.,
`No. 2:13-CV-1058, 2015 WL 1069111 (E.D. Tex. Mar. 11, 2015) ....................................3, 4, 5, 6
`
`Norman IP Holdings, LLC v. TP-Link Techs., Co.,
`Case No. 6:13-CV-384, 2014 WL 5035718 (E.D. Tex. Oct. 8, 2014) ............................................7
`
`Uniloc USA, Inc. v. Samsung Elecs. Am., Inc.,
`No. 2:16-CV-642, 2017 WL 9885168 (E.D. Tex. June 13, 2017)...............................................4, 5
`
`VirtualAgility v. Salesforce.com,
`759 F.3d 1307 (Fed. Cir. 2014)................................................................................................5, 6, 7
`
`Wi-LAN, Inc. v. LG Elecs., Inc.,
`No. 3:17-CV-358, 2018 WL 2392161 (S.D. Cal. May 22, 2018) ...................................................4
`
`Statutes
`35 U.S.C. § 316(a)(11) .....................................................................................................................3
`
`Other Authorities
`
`Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and
`Transitional Program for Covered Business Method Patents, 77 Fed. Reg. 48680–81 (Aug.14,
`2012) (to be codified at 37 C.F.R. pt. 42)………………………………………………………..…6
`
`iii
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`VARTA Ex. 2005 Page 3 of 13
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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 4 of 12 PageID #: 387
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`INTRODUCTION
`
`Defendants PEAG, LLC d/b/a JLab Audio (“JLab”), Audio Partnership LLC and Audio
`
`Partnership PLC d/b/a Cambridge Audio (“Cambridge”) (collectively “Defendants”) respectfully
`
`move the Court to stay Case Nos. 2:20-cv-00071 and 2:20-cv-00138 until the Patent Trial and
`
`Appeal Board (“PTAB”) has concluded inter partes review (“IPR”) of all four patents asserted in
`
`these cases: U.S. Patent Nos. 9,153,835; 9,496,581; 9,799,858; and 9,799,913 (collectively, the
`
`“Asserted Patents”).
`
`Defendants diligently filed four IPR petitions with the PTAB seeking review of the
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`Asserted Patents on July 7, 2020, less than two months after Plaintiff VARTA Microbattery GmbH
`
`(“VARTA”) disclosed the asserted claims in its infringement contentions. Defendants’ IPR
`
`petitions challenge the patentability of all of the asserted claims and others, citing prior art
`
`combinations that the United States Patent and Trademark Office did not consider during
`
`prosecution.
`
`Resolution of the pending IPRs will significantly narrow the scope of the present litigation,
`
`or altogether render it moot. Additionally, VARTA’s statements in these IPR proceedings will be
`
`relevant to issues here, including issues of claim construction, which process has not yet begun in
`
`this case.
`
`Defendants bring this motion now when the factors this Court considers—the
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`simplification of pending issues, state of the proceedings, and risk of undue prejudice to the
`
`plaintiff—all weigh in favor of a granting a stay.
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`1
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`VARTA Ex. 2005 Page 4 of 13
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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 5 of 12 PageID #: 388
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`I.
`
`STATEMENT OF FACTS
`
`VARTA filed complaints against JLab and Cambridge in the Eastern District of Texas on
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`March 4, 2020 and May 4, 20201, respectively, asserting infringement of four patents. On May
`
`12, 2020, VARTA served infringement contentions on Defendants and identified the patent claims
`
`it contends Defendants infringe. Less than two months after receiving VARTA’s infringement
`
`contentions, Defendants filed IPR petitions, seeking to invalidate each asserted claim of each
`
`Asserted Patent. Those four IPR petitions also address certain claims that have not been asserted
`
`in litigation:
`
`
`
`
`
`IPR Case No. Patent Challenged
`Claims
`IPR2020-1211 ’581
`1–12
`
`Actual Filing
`Date
`July 7, 2020
`
`Notice of Filing
`Date Accorded
`July 22, 2020
`
`Institution Decision
`Deadline
`January 7, 2021
`
`IPR2020-1212 ’835
`
`1–12
`
`July 7, 2020
`
`July 22, 2020
`
`January 7, 2021
`
`IPR2020-1213 ’858
`
`1–8
`
`July 7, 2020 August 6, 2020
`
`January 7, 2021
`
`IPR2020-1214 ’913
`
`1–8
`
`July 7, 2020 August 6, 2020
`
`January 7, 2021
`
`The actual and accorded filing date for Defendants’ petitions is July 7, 2020. VARTA has
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`three months from the notice of filing date to file a preliminary response to each petition. The
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`PTAB is set to issue institution decisions on Defendants’ petitions in less than six months, i.e., on
`
`
`1 VARTA filed a complaint against Cambridge in the Northern District of Illinois on March 3, 2020 (Case No. 1:20-
`cv-01568). That complaint was voluntarily dismissed and refiled in this District on May 4, 2020.
`
`
`
`2
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`VARTA Ex. 2005 Page 5 of 13
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`

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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 6 of 12 PageID #: 389
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`or before January 7, 2021. Final decisions in the four IPR proceedings will issue within one year
`
`of each petition’s institution date. See 35 U.S.C. § 316(a)(11).
`
`The claim construction hearing is set for January 15, 2021, fact discovery closes on January
`
`29, 2021, expert discovery ends on March 12, 2021, and dispositive motions are due March 15,
`
`2021. Dkt. No. 45. Jury selection and trials are set well into next year, starting June 7, 2021. Id.
`
`II.
`
`LEGAL STANDARD
`
`The Court “has the inherent power to control its own docket, including the power to stay
`
`proceedings before it.” Ericsson Inc. v. TCL Commc’n Tech. Holdings, Ltd., No. 2:15-CV-00011,
`
`2016 WL 1162162, at *1 (E.D. Tex. Mar. 23, 2016) (granting motion to stay pending inter partes
`
`review). A stay pending IPR proceedings is especially justified where the outcome of the
`
`proceedings will likely simplify the case by helping the court determine validity issues or
`
`eliminating the need to try infringement issues. Id. (citing NFC Tech. LLC v. HTC Am., No. 2:13-
`
`CV-1058, 2015 WL 1069111, at *2 (E.D. Tex. Mar. 11, 2015) (granting motion to stay all
`
`proceedings pending inter partes review)).
`
`In determining how to manage its docket, the district court “must weigh competing
`
`interests and maintain an even balance.” Customedia Techs. v. Dish Network Corp., No. 2:16-CV-
`
`129, Dkt. No. 187, slip op. at 1 (E.D. Tex. Aug. 9, 2017) (citing Landis v. N. Am. Co., 299 U.S.
`
`248, 254–55 (1936)) (granting motion to stay pending inter partes review). When deciding
`
`whether to stay a case pending IPR, the court will consider “(1) whether the stay will unduly
`
`prejudice the nonmoving party, (2) whether the proceedings before the court have reached an
`
`advanced stage, including whether discovery is complete and a trial date has been set, and (3)
`
`whether the stay will likely result in simplifying the case before the court.” NFC Tech., 2015 WL
`
`1069111, at *2. “Based on those factors, courts determine whether the benefits of a stay outweigh
`
`the inherent costs of postponing resolution of the litigation.” Id.
`
`3
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`VARTA Ex. 2005 Page 6 of 13
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`

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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 7 of 12 PageID #: 390
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`Notably, other courts have granted stays while institution decisions from the PTAB are
`
`pending, particularly when the IPRs will clarify and streamline the issues for the court. See, e.g.,
`
`Finjan, Inc. v. Symantec Corp., 139 F. Supp. 3d 1032, 1037 (N.D. Cal. 2015) (granting stay
`
`“pending a decision by the PTO concerning whether to institute IPR” and noting “were the Court
`
`to deny the stay until a decision on institution is made, the parties and the Court would expend
`
`significant resources on issues that could eventually be mooted by the IPR decision”); Wi-LAN,
`
`Inc. v. LG Elecs., Inc., No. 3:17-CV-358, 2018 WL 2392161, at *2 (S.D. Cal. May 22, 2018)
`
`(granting a stay “pending the PTO’s decisions regarding institution of [Defendant’s] IPR petitions”
`
`finding that a “stay would further promote the interest of justice and judicial economy”).
`
`III. ARGUMENT
`
`Each of the three factors relevant to the instant motion favor granting a stay pending the
`
`institution and results of Defendants’ IPR petitions. Granting a stay will simplify or dispose of the
`
`issues before the Court, not unduly prejudice VARTA, and conserve this Court’s and the parties’
`
`resources given the early stage of the case.
`
`A. A Stay Will Significantly Simplify or Eliminate Issues in This Litigation
`
`Granting a stay will lead to the simplification or even elimination of the issues in this
`
`litigation. “[T]he most important factor bearing on whether to grant a stay in this case is the prospect
`
`that the inter partes review proceeding will result in simplification of the issues before the Court.”
`
`NFC Tech., 2015 WL 1069111, at *4; see also Intellectual Ventures II LLC v. Bitco General Ins.
`
`Corp., No. 6:15-CV-59, 2016 WL 4394485, at *3 (E.D. Tex. May 12, 2016). “A stay is particularly
`
`justified when the outcome of a PTO proceeding is likely to assist the court in determining patent
`
`validity or eliminate the need to try infringement issues.” NFC Tech., 2015 WL 1069111 at *1
`
`(internal quotations omitted); see also Uniloc USA, Inc. v. Samsung Elecs. Am., Inc., No. 2:16-CV-
`
`642, 2017 WL 9885168, at *1 (E.D. Tex. June 13, 2017) (granting motion to stay and noting that
`
`
`
`4
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`VARTA Ex. 2005 Page 7 of 13
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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 8 of 12 PageID #: 391
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`“even if the PTAB does not invalidate every claim on which it has instituted IPR, there is a
`
`significant likelihood that the outcome of the IPR proceedings will streamline the scope of this case
`
`to an appreciable extent.”).
`
`The pending IPR petitions address every asserted claim in all four Asserted Patents. Thus,
`
`resolution of the IPR petitions will not only simplify the issues but may potentially dispose of these
`
`cases. If the Court stays this case and the PTAB later invalidates the asserted claims of the
`
`Asserted Patents in the IPR proceedings, the Court and the parties will have saved significant costs,
`
`time, and resources that they would otherwise expend in litigation. Even if only some of the claims
`
`are invalidated, the IPR proceedings will inform the parties and this Court on the construction of
`
`certain claim terms and on issues of infringement and invalidity. See NFC Tech., 2015 WL
`
`1069111, at *7 (determining that even where all claims were not reviewed during IPR proceedings,
`
`“any disposition by the PTAB is likely to simplify the proceedings before this Court”); see also
`
`Aylus Networks, Inc. v. Apple Inc., 856 F.3d 1353, 1364 (Fed. Cir. 2017) (“[S]tatements made by
`
`a patent owner during an IPR proceeding, whether before or after an institution decision, can be
`
`relied upon to support a finding of prosecution disclaimer.”). Further, an immediate stay would
`
`allow the parties and the Court to avoid the burden and expense of the claim construction briefing
`
`and hearing process, which has not yet begun. If Defendants’ motion is denied, the time spent by
`
`the Court deciding claim construction issues may be futile if the PTAB finds certain claims invalid
`
`or VARTA takes positions during the IPR proceedings that impact claim scope, such as amending
`
`the claims.
`
`B. VARTA Will Not Suffer Undue Prejudice from a Stay
`
`VARTA will not suffer undue prejudice if the Court stays these cases. “[W]hether the
`
`patentee will be unduly prejudiced by a stay in the district court proceedings . . . focuses on the
`
`patentee’s need for an expeditious resolution of its claim.” VirtualAgility v. Salesforce.com, 759
`
`5
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`VARTA Ex. 2005 Page 8 of 13
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`

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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 9 of 12 PageID #: 392
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`F.3d 1307, 1318 (Fed. Cir. 2014). Monetary relief will sufficiently compensate VARTA for any
`
`purported damages, and a “stay will not diminish the monetary damages to which [VARTA] will
`
`be entitled if it succeeds in its infringement suit—it only delays realization of those damages . . .
`
`.” Id. As this Court has determined, a delay of the vindication of patent rights alone cannot defeat
`
`a motion to stay. See, e.g., NFC Techs., 2015 WL 1069111, at *2. Finally, VARTA did not move
`
`for a preliminary injunction, which weighs against any assertion that it will be unduly prejudiced
`
`by a stay. VirtualAgility Inc., 759 F.3d at 1319.
`
`In contrast, Defendants will suffer undue prejudice without a stay by incurring the burden
`
`of continuing to defend against infringement allegations of thirty-eight patent claims across four
`
`patents that the PTAB may ultimately invalidate. Without a stay, this case will advance toward
`
`trial, and the parties and the Court will continue to invest significant time and resources in
`
`preparing the case, especially as claim construction proceeds.
`
`Rather than cause undue prejudice to VARTA, a stay will benefit both parties by allowing
`
`them to benefit from the IPR system that Congress intended to aid courts as an essential part of an
`
`“efficient and streamlined patent system that will improve patent quality and limit unnecessary
`
`and counterproductive litigation costs.” Changes to Implement Inter Partes Review Proceedings,
`
`Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents,
`
`77 Fed. Reg. 48680–81 (Aug. 14, 2012) (to be codified at 37 C.F.R. pt. 42). This is particularly
`
`true here, where Defendants filed their IPR petitions promptly, well before the one-year statutory
`
`deadline, and Defendants’ IPR petitions address all the patents and claims subject to litigation.
`
`C. The Stage of the Case Weighs in Favor of a Stay
`
`Defendants have been diligent in pursuing a stay since the early stages of this case.
`
`Defendants filed their IPR petitions less than two months after receiving VARTA’s infringement
`
`contentions, and promptly filed this motion after filing IPR petitions on July 7, 2020. At this point,
`
`6
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`VARTA Ex. 2005 Page 9 of 13
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`

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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 10 of 12 PageID #: 393
`
`“[t]he most burdensome parts of the case . . . all lie in the future.” Cywee Grp. Ltd. v. Samsung
`
`Elecs. Co., No. 2:17-CV-140, Dkt. No. 331, slip op. at 1 (E.D. Tex. Feb. 14, 2019) (granting
`
`motion to stay). Many months of work remain for the parties and the Court in this case, which
`
`favors granting Defendants’ request for a stay. See, e.g., Norman IP Holdings, LLC v. TP-Link
`
`Techs., Co., Case No. 6:13-CV-384, 2014 WL 5035718, at *3 (E.D. Tex. Oct. 8, 2014) (“Courts
`
`often find the stage of litigation weighs in favor of a stay if there remains a significant amount of
`
`work ahead for the parties and the court, even when the parties and/or the court have already
`
`devoted substantial resources to the litigation.”) (internal citations omitted).
`
`The claim construction process has yet to begin, and the claim construction hearing is set
`
`for five months away, over a week (and perhaps longer) after the institution decisions are
`
`anticipated in all four of Defendants’ IPR petitions. The case is also still in the early stages of fact
`
`discovery, with the close of fact discovery also more than five months away. The parties have not
`
`deposed a single witness, expert discovery has not begun, summary judgment is seven months
`
`away, and trial is ten months away. With claim construction and the substantial discovery deadline
`
`well into the future, the case is at an ideal stage for a stay. See, e.g., VirtualAgility Inc., 759 F.3d
`
`at 1317 (determining that a stay pending administrative review is proper where “there remained
`
`eight months of fact discovery, the joint claim construction statements had yet to be filed, and jury
`
`selection was a year away”). A stay would not only avoid relitigation of claim construction or
`
`discovery, but the final decisions of the PTAB may ultimately dispose of these cases.
`
`CONCLUSION
`
`For all the reasons above, Defendants respectfully request that the Court grant their motion
`
`to stay this case until the PTAB has concluded IPR proceedings for the Asserted Patents. In the
`
`alternative, should the Court decide that this case does not justify a pre-institution stay, Defendants
`
`7
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`VARTA Ex. 2005 Page 10 of 13
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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 11 of 12 PageID #: 394
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`request that the Court deny this Motion without prejudice and order expedited briefing on
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`Defendants’ anticipated post-institution stay motion after the PTAB issues its institution decisions.
`
`
`
`
`
`
`
`
`
`Date: August 20, 2020
`
`
`
`Respectfully submitted,
`
`/s/ Melissa R. Smith
`
`Paul A. Ragusa
`New York Bar No. 2591162
`paul.ragusa@bakerbotts.com
`Jennifer C. Tempesta
`New York Bar No. 4397089
`jennifer.tempesta@bakerbotts.com
`BAKER BOTTS L.L.P.
`30 Rockefeller Plaza
`New York, NY 10112
`(212) 408-2500
`
`Jeff D. Baxter
`Texas Bar No. 24006816
`jeff.baxter@bakerbotts.com
`BAKER BOTTS L.L.P.
`2001 Ross Avenue, Suite 900
`Dallas, Texas 75901
`(214) 953-6500
`
`Melissa Smith
`Texas Bar No. 24001351
`melissa@gillamsmithlaw.com
`GILLAM & SMITH L.L.P.
`303 South Washington Avenue
`Marshall, Texas 75670
`(903) 934-8450
`
`Attorneys for Defendants
`PEAG, LLC d/b/a JLab Audio, and
`Audio Partnership LLC and
`Audio Partnership PLC
`d/b/a Cambridge Audio
`
`
`
`8
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`VARTA Ex. 2005 Page 11 of 13
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`Case 2:20-cv-00051-JRG Document 64 Filed 08/20/20 Page 12 of 12 PageID #: 395
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`CERTIFICATE OF CONFERENCE
`
`Pursuant to Local Rules CV-7(h) and (i), counsel for Defendants met and conferred with
`
`counsel for VARTA. Jennifer Tempesta, counsel for Defendants, spoke by telephone with J. Karl
`
`Gross, counsel for VARTA, on August 17, 2020. The parties discussed the proposed motion but
`
`could not reach agreement as to a stay of the litigation at this time. VARTA’s counsel confirmed
`
`on August 20, 2020, that VARTA opposes the relief sought by this Motion. Thus, this issue has
`
`come to an impasse requiring the Court’s intervention.
`
`/s/Melissa R. Smith______________________
`
`CERTIFICATE OF SERVICE
`
`The undersigned hereby certifies that all counsel of record who are deemed to have
`
`consented to electronic service are being served with a copy of the foregoing document through
`
`the Court’s CM/ECF system per Local Rule CV-5(a)(3) this August 20, 2020.
`
`/s/ Melissa R. Smith______________________
`
`9
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`VARTA Ex. 2005 Page 12 of 13
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`Case 2:20-cv-00051-JRG Document 64-1 Filed 08/20/20 Page 1 of 1 PageID #: 396
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`VARTA MICROBATTERY GMBH,
`
` Plaintiff,
`
` v.
`
`
`
`COSTCO WHOLESALE CORPORATION
`
`BEST BUY CO., INC, ET AL
`
`PEAG, LLC
`
`AUDIO PARTNERSHIP LLC, ET AL
`
`
`
`C.A. No. 2:20-cv-0051-JRG
`
`LEAD CASE
`
`C.A. No. 2:20-cv-00054-JRG
`
`C.A. No. 2:20-cv-00071-JRG
`
`C.A. No. 2:20-cv-00138-JRG
`
`
`
`ORDER GRANTING DEFENDANTS OPPOSED MOTION TO STAY PENDING INTER
`PARTES REVIEW IN CASE NOS. 2:20-CV-00071 AND 2:20-CV-00138
`
`Before the Court is Defendants’ Opposed Motion to Stay Pending Inter Partes Review in
`
`Case Nos. 2:20-Cv-00071 and 2:20-Cv-00138. The Court, having considered same, is of the
`
`opinion the motion should be GRANTED.
`
`
`
`
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`VARTA Ex. 2005 Page 13 of 13
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`