UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CaseNo. m Date May11,2020
`
`CIVIL MINUTES — GENERAL
`
`J 8'6
`
`CV 19-1606 PSG (DFMX)
`
`Title
`
`DivX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`Present: The Honorable
`
`Philip S. Gutierrez, United States District Judge
`
`
`
` Wendy Hernandez Not Reported
`
`Deputy Clerk
`
`Court Reporter
`
`Attorneys Present for Plaintiff(s):
`
`Attorneys Present for Defendant(s):
`
`Not Present
`
`Not Present
`
`Proceedings (In Chambers):
`
`The Court GRANTS Defendants’ Motions to Stay
`
`On March 5, 2019, Plaintiff DivX, LLC (“DivX” or “Plaintiff ’) filed these two actions
`for patent infringement against Defendants Netflix, Inc. (“Netflix”) and Hulu, LLC (“Hulu,”
`collectively with Netflix, “Defendants”). See LACV 19-1602 PSG (DFMx) (“Netflz'x Case”),
`Dkt. # 1 (“Netfll'x Case C0mpl.”); LACV 19-1606 PSG (DFMx) (“Hula Case”), Dkt. # 1
`(“Hula Case C0mpl.”). Plaintiff alleges that Hulu infringes seven of its United States Patents.
`Hula Case Comp]. 1] 9. Plaintiff alleges that Netflix infringes the same seven patents, as well as
`an eighth patent. Netfll'x Case Comp]. 1] 9.1
`
`Before the Court are Defendants’ motions to stay these cases pending inter partes
`review proceedings. See Dkt. # 94 (“Netflix Mot”); Hula Case, Dkt. # 100 (Notice of Hulu’s
`Motion to Stay), 113 (Corrected Memorandum in Support of Hulu’s Motion to Stay, hereinafter
`“Hula Mot”). Plaintiff timely opposed each motion. See Dkt. # 102 (“Opp t0 Netfll'x”); Hula
`Case, Dkt. # 115 (“Opp to Hula”). Defendants each replied. See Dkt. # 104 (“Netfll'x Reply”);
`Hula Case, Dkt. # 119 (“Hula Reply”).
`
`The Court finds these matters appropriate for decision without oral argument. See Fed.
`R. Civ. P. 78; LR. 7-15. After considering the papers, the Court GRANTS Defendants’
`motions. LACV 19-1602, Dkt. # 94; LACV 19-1606, Dkt. # 100.
`
`1 All further citations will be to the Netflix Case unless otherwise noted.
`
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`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case No.
`
`CV 19-1602 PSG (DFMX)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMX)
`
`Title
`
`DiVX, LLC v. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`1.
`
`Background
`
`On February 20, 2020, the same schedule was entered in both the Netflix Case and Hulu
`Case. Dkt. # 89; Hulu Case, Dkt. # 87. The schedule includes a trial date for April 27, 2021
`and a final pretrial conference for April 12, 2021. Id. It set the non-expert discovery cut-off for
`September 24, 2020. It also set a claim construction hearing for August 31, 2020. The parties’
`first deadline for disclosures relating to claim construction only recently passed on May 7,
`2020.2 Id.
`
`The parties also agreed to certain deadlines for reducing the number of asserted patent
`claims and prior art references at issue in these cases. See id. at 2. Plaintiff served Defendants
`with its lists of no more than 30 selected asserted claims on April 16, 2020. Id.
`
`Starting in October 2019, Defendants began filing petitions for inter partes review
`(“IPR”) of certain claims of the asserted patents before the Patent Trial and Appeal Board
`(“PTAB”). Defendants filed the majority of their IPR petitions between February and March
`2020. The deadline for Defendants to file their IPR petitions passed in mid-March 2020, before
`Plaintiffs deadline to reduce the number of asserted claims in this case. See 35 U.S.C.
`
`§ 315(b) (party may not file IPR petition for a patent more than one year after being served
`with complaint for infringement of that patent).
`
`The following table summarizes the status of Defendants’ petitioned IPR proceedings:
`
`
`Asserted
`Patent
`
`Some Selected
`Claims
`
`All Selected
`Claims
`
`Date
`Petition
`
`Date Institution
`Decision
`
`Received or
`Challenged in
`Challenged in
`Defendants’ IPR
`Defendants’ IPR
`Expected
`
`Petitions?
`Petitions?
`(Approximate)?
`10,212,486 N0
`No
`N/A
`
`Filed?
`
`
`
`
`
`
`
`
`N/A
`
`7,295,673
`
`No (Hulu Case)
`Yes (Netflix Case)
`
`No
`
`February
`29, 2020
`
`Expected (Late)
`August 2020
`
`2 Hulu filed an ex parte application for a continuation of the May 7, 2020 deadline and other
`related claim construction deadlines. Dkt. # 120. Hulu’s ex parte application is addressed in
`the conclusion section of this Order.
`
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`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case NO.
`
`CV l9-l602 PSG (DFMx)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMx)
`
`Title
`
`DiVX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`
`8,472,792
`Yes
`No
`March 6,
`Expected
`
`2020
`September 2020
`9,998,515
`Yes
`No (Hulu Case)
`March 11,
`Expected
`
`Yes (Netflix Case)
`2020
`September 2020
`8,139,651
`Yes
`Yes
`October
`Instituted April
`
`18, 2019
`27,2020
`
`
`
`
`
`
`
`
`
`
`
`9,184,920
`(Netflix
`Case
`
`Only)
`
`
`
`Yes
`
`Yes
`
`9,270,720
`Yes
`Yes
`March 11,
`Expected
`
`2020
`September 2020
`10,225,588 Yes
`Yes
`February
`Expected
`
`15, 2020
`August 2020
`February 6, Expected
`2020
`August 2020
`
`11.
`
`Legal Standard
`
`“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, Inc. v.
`Qaigg, 849 F.2d 1422, 1426—27 (Fed. Cir. 1988) (citing Landis v. N. Am. Co., 299 US. 248,
`252 (1936)). District courts have long considered three factors in deciding Whether to grant a
`stay of district court proceedings until the completion of co-pending patent office proceedings,
`including IPR proceedings:
`
`1.
`
`2.
`
`3.
`
`Whether discovery is complete and Whether a trial date has been set;
`
`Whether a stay will simplify the issues in question and trial of the case; and
`
`Whether a stay would unduly prejudice or present a clear tactical
`disadvantage to the non-moving party.
`
`Wonderland Nursery Goods Co. v. Baby Trend, Inc., No. EDCV 14-1153 VAP (SPx), 2015
`WL 1809309, at *2 (CD. Cal. Apr. 20, 2015) (quoting Universal Elecs., Inc. v. Universal
`Remote Control, Inc., 943 F. Supp. 2d 1028, 1030—31 (CD. Cal. 2013)); see also ASCII Corp.
`v. STD Entm ’t USA, Inc., 844 F. Supp. 1378, 1380 (ND. Cal. 1994).
`
`CV-90 (IO/08)
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`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case No.
`
`CV 19-1602 PSG (DFMx)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMx)
`
`Title
`
`DiVX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`Ultimately, courts consider the “totality of the circumstances” in evaluating whether a
`stay is proper. Wonderland Nurserygoods, 2015 WL 1809309, at *2 (“While the case law
`enumerates several general considerations that are helpful in determining whether to order a
`stay, ultimately ‘the totality of the circumstances governs.”’ (quoting Universal Elecs., 943 F.
`Supp. 2d at 1031)).
`
`111.
`
`Discussion
`
`A.
`
`Stage of the Proceedings
`
`Although a trial date has been set, these cases are in their early stages. Claim
`construction proceedings have only just begun, and a claim construction hearing is not
`scheduled until August 31, 2020. Limited discovery has occurred.
`
`Plaintiff emphasizes the steps the parties and Court have already taken to streamline
`these cases. See, e.g. Opp. to Netfll'x 12:4—12. It argues that the stage of the proceedings does
`not weigh in favor of a stay because “[t]rial has been set, the fact discovery period is nearly
`halfway complete, and the parties will make significant headway well before institution
`decisions on the remaining six petitions are due.” Id. 13:8—10. Plaintiff also argues that the
`fact that there has been limited discovery in the case should not weigh in favor of a stay
`because such a determination would “incentivize .
`.
`. an infringement defendant to manufacture
`circumstances supporting a stay motion.” Id. 14:8—9.
`
`There is significantly more work left to be done in this case compared to work that has
`already been completed, and Plaintiff does not reasonably dispute that fact. Id. 14:15—16; see
`also Lodge Mfg. Co. v. Gibson Overseas, Inc., CV 18-8085 PSG (GJSx) (slip op), at *4—5
`(CD. Cal. Sept. 24, 2019) (collecting cases to support that stage of proceedings factor weighs
`in favor of stay where claim construction proceedings have not yet occurred). Moreover, the
`entry of a stay pending patent office proceedings would not mean that the parties’
`commendable efforts to streamline litigation thus far will have been completely in vain. Those
`efforts will remain relevant even after any stay is lifted. Plaintiffs argument regarding the
`status of discovery and concerns about an improper incentive are creative, but also
`unpersuasive here. Plaintiff has not shown that Defendants indeed intentionally delayed
`
`CV-90 (10/08)
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`UNITED STATES DISTRICT COURT
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`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case No.
`
`CV 19-1602 PSG (DFMx)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMx)
`
`Title
`
`DiVX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`discove
`
`in this case in a manner so that the could nefariousl “manufacture circumstances
`.
`y
`.
`supporting a stay motion.”
`
`The coronavirus pandemic is also a relevant consideration under this factor. Defendants,
`particularly Hulu, has stated that the pandemic has hindered their ability to meet certain case
`deadlines. See, e.g. Hulu Case, Dkt. # 120. Plaintiff also recognizes that “the Court, parties,
`and counsel face unprecedented challenges from COVID-l9 and the corresponding guidance
`and restrictions that have disrupted everyday life and routines.” Opp. t0 Netfll'x 14:21—23. It is
`likely that if these cases were to proceed on their current schedule, hearings and trial would be
`subject to delays, particularly because criminal matters will take priority over these patent
`infringement actions.
`
`For these reasons, this factor weighs in favor of a stay.
`
`B.
`
`
`Simplification of the Issues
`
`Defendants have filed IPR petitions challenging claims in some, but not all, of the
`asserted patents. Defendants did not file an IPR petition for the ’486 Patent.3 Hulu also has not
`brought an IPR petition that challenges any claims currently asserted against it for the ’673
`Patent. Even where asserted patents are the subject of Defendants’ current IPR petitions, there
`are still some claims asserted in this case that are not the subject of those petitions.
`Specifically, there are asserted claims in the ’673, ’792, and ’5 15 Patents that are not
`challenged in IPR petitions, even though other asserted claims in those patents have been
`challenged by one or both parties in IPR.
`
`The result is that even if the PTAB institutes IPR proceedings for all of the challenged
`claims before it, there will be asserted patent claims in this case that will necessarily remain for
`adjudication. To support their motions, Defendants emphasize the asserted claims that are the
`subject of IPR petitions, and urge that the simplification factor continues to weigh in favor of
`stay in light of those claims. See generally, e. g. Netfll'x Reply 4:27—7:15. Plaintiff emphasizes
`the asserted claims that are not the subject of IPR petitions, and further notes the fact that the
`
`3 Netflix states that it “expects to move for—and prevail on—summary judgment of non-
`infringement for that asserted patent.” Netfll'x Mat. 1 n. l.
`
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`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case No.
`
`CV 19-1602 PSG (DFMx)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMx)
`
`Title
`
`DiVX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`PTAB has not made preliminary decisions on whether to institute IPR for most of Defendants’
`pending IPR petitions. See generally, e.g. Opp. t0 Netfll'x 15 :9—17:19.
`
`The Court finds this factor only very slightly weighs in favor of stay. That many of the
`IPR proceedings await preliminary decisions from the PTAB “clouds the simplification inquiry,
`but does not inherently mean a stay should be denied.” Lodge Mfg, slip op., at *6 (all
`quotations and citations omitted). That not all asserted claims in the case are subject to pending
`IPR petitions presents the larger issue. However, at least some, if not all, claims in seven of the
`eight asserted patents in these cases are currently under consideration before the PTAB. The
`parties’ disputes regarding the claims in these seven patents not subject to IPR challenge could
`still be influenced by what occurs in PTAB proceedings. There is a possibility, for instance,
`that the parties make characterizations about the scope of the claim language in IPR
`proceedings that become relevant to their disputes in this case, even to claims not challenged in
`IPR. Ultimately, judicial resources would be better served by at least waiting to see the
`outcomes of Defendants” pending IPR petitions. After the PTAB has issued its preliminary
`decisions on those petitions, either party may apply ex parte to reopen some or a portion of the
`case, including as to the ’486 Patent.
`
`C.
`
`Possibility of Undue Prejudice
`
`Plaintiff does not contend that Defendants engaged in “dilatory tactics” in filing their
`IPR petitions. Further, the IPR proceedings are finite in duration. Barring an unusual request
`for a six-month extension of its statutory deadlines, the latest the PTAB could issue a final
`written decision regarding Defendants’ challenges to any of the asserted patents is September
`of next year. Defendants also timely brought their motions to stay after filing their March 2020
`petitions. Finally, Plaintiff does not dispute that Defendants do not compete against Plaintiff.
`
`Plaintiff instead argues that there are
`
`: it may impede
`.
`.
`at least two ways that a stay may cause damage to DivX .
`DivX’s licensing business, and it may preclude DivX from a full and fair
`opportunity to defend its patents with objective considerations of non-
`obviousness.
`
`CV-90 (10/08)
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`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case No.
`
`CV 19-1602 PSG (DFMx)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMx)
`
`Title
`
`DiVX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`Opp. t0 Netfll'x 19: 16—20 (emphasis added). Plaintiffs arguments do not present a fair
`possibility that damage could be caused by a stay of this litigation, let alone a possibility of
`undue prejudice. Regarding Plaintiffs licensing practices, Plaintiff has provided no basis to
`support that its licensees’ decisions to take or renew a license are influenced at all by whether
`this district court litigation is stayed or proceeds in parallel with PTAB proceedings,
`particularly where those PTAB proceedings remain ongoing even if a stay is entered.
`Plaintiffs second suggestion — that PTAB proceedings do not permit an adequate opportunity
`for discovery from Defendants regarding secondary considerations of non-obviousness — is also
`unpersuasive. As recently as April 14, 2020, the PTAB has designated decisions addressing
`secondary considerations of non-obviousness as precedential or informative, providing
`guidance to practitioners on the topic and showing its willingness to consider evidence relating
`to the issue, as is required by the law for evaluating obviousness. See, e.g. Lectrosonl'cs, Inc. v.
`Zaxcom, Inc., Case IPR2018-01129, Paper 33 (Jan. 24, 2020). As Netflix also notes, “[i]n any
`case, the PTAB has the ability and authority to permit or deny the type of discovery DivX
`purports to need.” Netfll'x Reply 8 n3. This factor weighs in favor of a stay.
`
`D.
`
`
`Balancing the Factors and Totality of the Circumstances
`
`The early stage of the proceedings weighs in favor of a stay, the likelihood of
`simplification weighs very slightly in favor of a stay, and the lack of undue prejudice to
`Plaintiff weighs in favor of a stay. Collectively, these factors thus weigh in favor of a stay.
`
`In its opposition, Plaintiff also makes unique arguments regarding the legal authority
`that should govern the stay inquiry, as well as arguments about how various factors should be
`weighed and considered in the analysis. See, e.g. Opp. t0 Netfll'x 6:26—11:19. Those arguments
`are found unpersuasive. First, the Court has considered the same three factors that district
`courts in the Ninth Circuit have adopted and considered for over 25 years in deciding whether
`to stay district court proceedings until the completion of co-pending patent office proceedings.
`See ASCII, 844 F. Supp. at 1380. Second, and more importantly, although the Court has
`considered and balanced those three factors, the totality of the circumstances ultimately
`governs. And here, the Court finds that the totality of the circumstances — including the
`competing interests presented by the parties and the efficient management of this Court’s
`docket — support a stay pending review of asserted patent claims by a specialty administrative
`agency specifically established for that purpose.
`
`CV-90 (10/08)
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`

`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES — GENERAL
`
`Case No.
`
`CV 19-1602 PSG (DFMx)
`
`Date May 11, 2020
`
`CV 19-1606 PSG (DFMx)
`
`Title
`
`DiVX, LLC V. Netflix, Inc.
`
`DiVX, LLC V. Hulu, LLC
`
`IV.
`
`Conclusion
`
`For the reasons stated, the Court GRANTS Defendants’ motions. These cases are
`administratively closed. As noted, any party may apply ex parte to reopen the cases as to some
`or all of the asserted patents (a) after the PTAB has issued preliminary decisions on all of
`Defendants’ pending IPR petitions or (b) after the conclusion of all IPR proceedings.
`
`Because these matters are administratively closed by this Order, Hulu’s ex parte
`application to amend the scheduling order in this case (Dkt. # 120) is MOOT.
`
`IT IS SO ORDERED.
`
`CV-90 (10/08)
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