Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 1 of 20 PageID #: 3401
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`
`
`No. 2:15-cv-01278-JRG-RSP
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`CONSOLIDATED INTO
`
`No. 2:15-cv-01274-JRG-RSP
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`JURY TRIAL DEMANDED
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`
`
`
`
`
`
`BLITZSAFE TEXAS, LLC,
`
`Plaintiff,
`
` v.
`
`VOLKSWAGEN GROUP OF AMERICA,
`INC. and VOLKSWAGEN GROUP OF
`AMERICA CHATTANOOGA
`OPERATIONS, LLC,
`
`
`Defendants.
`
`
`
`
`
`DEFENDANTS’ MOTION TO STAY
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`

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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 2 of 20 PageID #: 3402
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`
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`TABLE OF CONTENTS
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`Page
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`INTRODUCTION ......................................................................................................................... 1
`BACKGROUND ........................................................................................................................... 2
`A.
`Plaintiff Blitzsafe ................................................................................................... 2
`B.
`The Stage Of These Litigations ............................................................................. 3
`C.
`The Toyota, VWGoA, Honda, and Hyundai/Kia IPR Proceedings ....................... 4
`LEGAL STANDARD .................................................................................................................... 5
`ARGUMENT ................................................................................................................................. 6
`A.
`Granting A Stay Will Not Unduly Prejudice Or Tactically Disadvantage
`Blitzsafe, But Will Instead Benefit Both Parties ................................................... 7
`A Stay Is Highly Likely To Simplify The Issues For Trial Because Almost
`Two-Thirds Of The Asserted Patent Claims Will Be Reviewed By The
`Patent Office And Are Likely To Be Found Invalid In The IPR
`Proceedings ............................................................................................................ 9
`The Stage Of The Litigation Favors Granting A Stay Because, Although
`Fact Discovery Is Already Underway, Expert Discovery, Dispositive
`Motions, And Trial Preparation Have Not Yet Begun ........................................ 13
`CONCLUSION ............................................................................................................................ 14
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`B.
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`C.
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`i
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 3 of 20 PageID #: 3403
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`
`TABLE OF AUTHORITIES
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`Page(s)
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`Cases
`
`Amazon.com, Inc. v. Barnesandnoble.com, Inc.,
`239 F.3d 1343 (Fed. Cir. 2001)......................................................................................... 11
`
`B & B Hardware, Inc. v. Hargis Indus., Inc.,
`135 S.Ct. 1293 (2015) ....................................................................................................... 11
`
`Crossroads Sys., Inc. v. Dot Hill Sys. Corp.,
`No. A-13-CA-1025-SS, 2015 WL 3773014 (W.D. Tex. June 16, 2015) ........................... 7
`
`e2Interactive, Inc. v. Blackhawk Network, Inc.,
`561 Fed. Appx. 895 (Fed. Cir. 2014) ................................................................................ 11
`
`EchoStar Techs. Corp. v. TiVo, Inc.,
`No. 5-05 CV 81 DF, 2006 WL 2501494 (E.D. Tex. July 14, 2006)........................... 13, 14
`
`Emed Techs. Corp. v. Repro-med Sys., Inc.,
`No. 2:15-CV-1167-JRG-RSP, 2016 WL 2758112 (E.D. Tex. May 12, 2016) ................... 5
`
`Employment Law Compliance, Inc. v. Compli, Inc.,
`No. 3:13–CV–3574–N, 2014 WL 3739770 (N.D. Tex. May 27, 2014) ............................. 7
`
`Ericsson Inc. v. TCL Commc’n Tech. Holdings, Ltd.,
`No. 2:15-cv-00011-RSP, 2016 WL 1162162 (E.D. Tex. March 23, 2016) ............... passim
`
`e-Watch, Inc. v. ACTi Corp., Inc.,
`No. SA–12–CA–695–FB, 2013 WL 6334372 (W.D. Tex. Aug. 9, 2013) ......................... 7
`
`E-Watch, Inc. v. Lorex Canada, Inc.,
`No. H–12–3314, 2013 WL 5425298 (S.D. Tex. Sept. 26, 2013) ................................. 7, 10
`
`Flexiteek Am., Inc. v. PlasTEAK, Inc.,
`No. 08-60996-CIV, 2012 WL 5364247 (S.D. Fla. Oct. 31, 2012) ................................... 10
`
`Flexiteek Am., Inc. v. PlasTEAK, Inc.,
`No. 08-60996-CIV, 2012 WL 5364263 (S.D. Fla. Sept. 10, 2012) .................................. 10
`
`Fresenius USA, Inc. v. Baxter Int’l,
`721 F.3d 1330 (Fed. Cir. 2013)......................................................................................... 10
`
`Gould v. Control Laser Corp.,
`705 F.2d 1340 (Fed. Cir. 1983)....................................................................................... 5, 6
`
`
`
`ii
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 4 of 20 PageID #: 3404
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`Krippelz v. Ford Motor Co.,
`667 F.3d 1261 (Fed. Cir. 2012)......................................................................................... 11
`
`Marlowe Pat. Holdings LLC v. Dice Elecs. LLC, et al.,
`Case No. 3:10-cv-01199-PGS-DEA (D.N.J.) ..................................................................... 3
`
`Marlowe Pat. Holdings LLC v. Ford Motor Co.,
`Case No. 3:11-cv-07044-PGS-DEA (D.N.J.) ..................................................................... 3
`
`NFC Tech. LLC v. HTC Am., Inc.,
`No. 2:13–CV–1058–WCB, 2015 WL 1069111 (E.D. Tex. Mar. 11, 2015) .............. passim
`
`Translogic Tech., Inc. v. Hitachi, Ltd.,
`250 Fed. Appx. 988 (Fed. Cir. 2007) ................................................................................ 10
`
`Transocean Offshore Deepwater Drilling, Inc. v. Seadrill Am., Inc.,
`No. CIV.A. H-15-144, 2015 WL 6394436 (S.D. Tex. Oct. 22, 2015) ............................... 8
`
`VirtualAgility, Inc. v. Salesforce.com, Inc.,
`759 F.3d 1307 (Fed. Cir. 2014)................................................................................... 5, 6, 9
`
`Statutes
`
`35 U.S.C. § 313 ............................................................................................................................... 5
`
`35 U.S.C. § 314 ............................................................................................................................... 5
`
`35 U.S.C. § 315 ............................................................................................................................. 12
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`35 U.S.C. § 316 ............................................................................................................................... 8
`
`Rules
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`E.D. Tex. P.R. 3-1 ........................................................................................................................... 3
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`iii
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 5 of 20 PageID #: 3405
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`INTRODUCTION
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`In this litigation and in the consolidated lawsuits, plaintiff (“Blitzsafe”) is asserting
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`claims for infringement of U.S. Patent Nos. 7,489,786 and 8,155,342 against defendants
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`Volkswagen Group of America, Inc., Volkswagen Group of America Chattanooga Operations,
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`LLC (“VWGoA and VWGoA Chattanooga”) and defendants Honda, Hyundai/Kia, Nissan, and
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`Toyota. See, e.g., Case No. 2:15-cv-01278-JRG-RSP, D.E. 22 (Blitzsafe’s First Amended
`
`Complaint against VWGoA and VWGoA Chattanooga).1 The U.S. Patent Office Patent Trial
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`and Appeal Board (“PTAB” or “Board”) recently instituted two inter partes reviews of the ’786
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`and ’342 patents requested by Toyota, after finding that almost 60% of Blitzsafe’s asserted
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`patent claims—41 of 69—are not reasonably likely to be patentable over the prior art.2 VWGoA
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`also recently filed three IPR petitions, and Honda and Hyundai/Kia recently filed four additional
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`IPR petitions, challenging the remaining asserted claims, as well as the claims already under
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`review, on additional grounds that have not yet been considered by the Board.3
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`The court should stay this litigation until the conclusion of these IPR proceedings,
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`including any appeals. Each of the relevant factors favors a stay. First, Blitzsafe will not be
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`unduly prejudiced by a stay because it does not compete with VWGoA and VWGoA
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`Chattanooga, and money damages will be adequate to compensate it for any delay. Second, a
`
`
`1 The ’342 patent claims the priority of the ’786 patent through a chain of a continuation-in-part
`patent applications. In its P.R. 3-1 infringement contentions, Blitzsafe asserts that VWGoA and
`VWGoA Chattanooga infringe claims 1–2, 4–8, 13–14, 23–24, 44, 47, 57–58, 60–65, 86, 88–92,
`94, 97, and 98 of the ’786 patent, and claims 49–54, 56, 62–64, 71, 73–78, 95, 97, 99–101, 106,
`109–11, and 120 of the ’342 patent. See Ex. 1 (Blitzsafe infringement contentions) at 2.
`2 See Exs. 2–3 (Institution Decisions in IPR2016-00418 and IPR2016-00421).
`3 See Exs. 4–6 (VWGoA Petitions in IPR2016-01445, IPR2016-01448 and IPR2016-01449,
`filed July 20, 2016); Exs. 7–8 (Honda Petitions in IPR2016-01472 and IPR2016-01473, filed
`July 21, 2016); Exs. 9–10 (Hyundai/Kia Petitions in IPR2016-01476 and IPR2016-01477, filed
`July 21, 2016).
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`1
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 6 of 20 PageID #: 3406
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`stay is very likely to simplify the issues in this case. Now that inter partes reviews of almost
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`two-thirds of the asserted patent claims have been instituted, there is approximately a 70%
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`probability that all the claims under review will be found unpatentable. Even in the unlikely
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`event the claims are found patentable, the ongoing IPR proceedings will still be relevant, and
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`must be considered, because until the Patent Office proceedings are complete, the construction of
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`the claims of the ’786 and ’342 patents would be based on an incomplete record, and any rulings
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`by the court might have to be vacated or revisited. Finally, the stage of the case also favors a
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`stay, because expert discovery, dispositive motion practice, and trial preparation have not begun,
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`and therefore a stay would prevent duplicative proceedings addressing many of the same
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`overlapping issues being considered by the Board in the IPRs.
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`VWGoA and VWGoA Chattanooga accordingly respectfully submit that this litigation
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`should be stayed until the Patent Office completes its inter partes reviews of the Blitzsafe patent
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`claims, including any appeals.
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`A.
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`Plaintiff Blitzsafe
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`BACKGROUND
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`Plaintiff Blitzsafe is a Texas limited liability company organized by Ira Marlowe, the
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`named inventor of the ’786 and ’342 patents, approximately one week before it filed suit in July
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`of 2015. Compare Ex. 11 (Blitzsafe Certificate of Formation) at 1, and Ex. 12 (Blitzsafe Initial
`
`Disclosures) at 5, with Case No. 2:15-cv-01278-JRG-RSP, D.E. 1 (Blitzsafe Complaint).4
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`Before organizing plaintiff Blitzsafe, Mr. Marlowe’s patents were assigned to another patent
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`assertion company, Marlowe Patent Holding LLC, which filed two suits in the District of New
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`4 Blitzsafe filed an original Complaint against VWGoA and VWGoA Chattanooga on July 17,
`2015 and a First Amended Complaint on October 2, 2015 in Member Case No. 2:15-cv-01278-
`JRG-RSP (see D.E. 1, 22). Unless otherwise noted, the citations in this brief are to the docket
`entries in Lead Case No. 2:15-cv-01274-JRG-RSP.
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`2
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`Jersey alleging infringement of the ’786 patent by other defendants, including Ford and Dice
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`Electronics.5
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`B.
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`The Stage Of These Litigations
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`In its Complaint, Blitzsafe alleges that VWGoA and VWGoA Chattanooga directly and
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`indirectly infringe one or more claims of the ’786 and ’342 patents, and willfully infringe one or
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`more claims of the ’786 patent, by making and selling Volkswagen and Audi brand vehicles
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`equipped with “infotainment systems” that are compatible with various commercial multimedia
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`portable devices, such as Apple and Android smartphones. See generally Case No. 2:15-cv-
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`01278-JRG-RSP, D.E. 22 (Blitzsafe Amended Complaint).6
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`Pursuant to the court’s Local Patent Rules, Blitzsafe served its Disclosure of Asserted
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`Claims and Infringement Contentions in November of 2015 (see D.E. 42), and VWGoA and
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`VWGoA Chattanooga served their Invalidity Contentions in January of 2016 (see D.E. 69).7
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`The parties have also exchanged written discovery and produced documents, and taken
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`additional discovery from third parties. Claim construction briefs were filed in May and June of
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`2016 (D.E. 98, 101, 106, 111); a Markman hearing was held July 1, 2016 (see D.E. 115); fact
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`discovery closes September 19, 2016; expert discovery closes and dispositive motions are to be
`
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`5 See Marlowe Pat. Holdings LLC v. Dice Elecs. LLC, et al., Case No. 3:10-cv-01199-PGS-
`DEA (D.N.J.); Marlowe Pat. Holdings LLC v. Ford Motor Co., Case No. 3:11-cv-07044-PGS-
`DEA (D.N.J.).
`6 Defendant VWGoA distributes Volkswagen and Audi brand automobiles, including
`automobiles manufactured by VWGoA Chattanooga, to franchised dealerships in the United
`States.
`7 Although Blitzsafe has subsequently served a “preliminary election of asserted claims”
`identifying a different set of claims (see Ex. 13 at 1), these “elections” have no effect, because
`the Model Order they are based on has not been entered in this case. Blitzsafe has not sought
`leave to amend its P.R. 3-1 contentions to assert infringement of the “elected” claims, and
`Blitzsafe states that it “reserves the right to revise, modify, or amend its preliminary election of
`asserted claims as discovery progresses.” See id. All the elected claims are challenged in the
`defendants’ pending petitions for inter partes review.
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`3
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 8 of 20 PageID #: 3408
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`filed by October 31, 2016; and jury selection is set for February 6, 2017. See D.E. 56 (Docket
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`Control Order) at 1–2.
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`C.
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`The Toyota, VWGoA, Honda, and Hyundai/Kia IPR Proceedings
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`In December of 2015, Toyota, a co-defendant in these consolidated litigations, filed four
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`petitions for inter partes review of the asserted claims of the ’786 and ’342 patents.8 In July of
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`2016, VWGoA filed three petitions, and Honda and Hyundai/Kia filed four additional petitions,
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`for inter partes review of Blitzsafe’s patents challenging the asserted claims.9 The PTAB
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`granted two of the Toyota petitions on July 7 and July 8, 2016, finding that 41 of the 69 claims
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`asserted against VWGoA and VWGoA Chattanooga, including all 39 of the asserted claims of
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`Blitzsafe’s ’342 patent, are not reasonably likely to be found patentable in the IPR proceedings.10
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`According to the USPTO’s most recent statistics, it is very likely (a 70% to 85% probability) that
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`at least some of the challenged claims will be found invalid in the Toyota IPRs.11
`
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`8 See IPR2016-00418, IPR2016-00419, IPR2016-00421, and IPR2016-00422; see also Exs.
`14–15 (Petitions in IPR2016-00418 and IPR2016-00421).
`9 See Exs. 4–6 (VWGoA Petitions in IPR2016-01445, IPR2016-01448, and IPR2016-01449);
`Exs. 7–8 (Honda Petitions in IPR2016-01472 and IPR2016-01473); Exs. 9–10 (Hyundai/Kia
`Petitions in IPR2016-01476 and IPR2016-01477).
`10 More specifically, two of the 30 asserted claims of the ’786 patent (claims 44 and 47), and all
`39 asserted claims of the ’342 patent, are currently under review in the two instituted IPR
`proceedings requested by Toyota. See Ex. 3 (Institution Decision in IPR2016-00421) at 1
`(“Petitioner has demonstrated a reasonable likelihood that it would prevail in establishing the
`unpatentability of claims 44 and 47. . . . We institute an inter partes review of claims 44 and 47
`of the ’786 patent.”); Ex. 2 (Institution Decision in IPR2016-00418) at 1 (“Having considered
`both the Petition and the Preliminary Response, we determine that Petitioner has demonstrated a
`reasonable likelihood that it would prevail in establishing the unpatentability of claims 49–57,
`62–64, 66, 68, 70, 71, 73–80, 94, 95, 97, 99–103, 106, 109–111, 113, 115, and 120 of the ’342
`patent. Accordingly, we institute an inter partes review of those claims.”). The other petitions
`for inter partes review of the ’786 and ’342 patents filed by Toyota (see IPR2016-00419 and
`IPR2016-00422), and a petition filed by non-party Unified Patents (see IPR2016-00118), have
`been denied by the Board.
`11 See Ex. 16 (June 30, 2016 USPTO PTAB Statistics) at 10.
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`4
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 9 of 20 PageID #: 3409
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`Trials in the Toyota IPRs are set for February of 2017, the same time as trial in this case
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`is scheduled. Compare Ex. 17 at 3, and Ex. 18 at 2, with D.E. 117 (Docket Control Order) at 1.
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`At about the same time, the PTAB will issue decisions on whether to institute inter partes
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`reviews of the asserted patent claims in view of the additional invalidity grounds presented in
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`VWGoA’s, Honda’s, and Hyundai/Kia’s seven pending IPR petitions. See, e.g., 35 U.S.C. §§
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`313–14. USPTO statistics indicate that there is approximately a 70% probability that there will
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`be a decision to institute inter partes review of at least some of the challenged patent claims in
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`response to the VWGoA, Honda, and Hyundai/Kia petitions. See, e.g., Ex. 16 at 7.
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`LEGAL STANDARD
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`A U.S. Patent Office decision to institute inter partes review of patent claims asserted in
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`litigation weighs heavily in favor of staying the litigation until the conclusion of the Patent
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`Office proceedings. See VirtualAgility, Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1313–15
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`(Fed. Cir. 2014); Emed Techs. Corp. v. Repro-med Sys., Inc., No. 2:15-CV-1167-JRG-RSP, 2016
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`WL 2758112, at *1 (E.D. Tex. May 12, 2016); see also Gould v. Control Laser Corp., 705 F.2d
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`1340, 1342 (Fed. Cir. 1983). The benefits of a litigation stay until Patent Office reviews are
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`completed that are often noted by the courts are:
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`1. All prior art presented to the Court will have been first
`considered by the PTO, with its particular expertise.
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`2. Many discovery problems relating to prior art can be alleviated
`by the PTO examination.
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`3. In those cases resulting in effective invalidity of the patent, the
`suit will likely be dismissed.
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`4. The outcome of the reexamination may encourage a settlement
`without the further use of the Court.
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`5. The record of reexamination would likely be entered at trial,
`thereby reducing the complexity and length of the litigation.
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`5
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`6. Issues, defenses, and evidence will be more easily limited in pre-
`trial conferences after a reexamination.
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`7. The cost will likely be reduced both for the parties and the
`Court.
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`See, e.g., NFC Tech. LLC v. HTC Am., Inc., No. 2:13–CV–1058–WCB, 2015 WL 1069111, at *4
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`(E.D. Tex. Mar. 11, 2015) (Bryson, J., sitting by designation); Gould, 705 F.2d at 1342.
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`“District courts typically consider three factors when determining whether to grant a stay
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`pending inter partes review of a patent in suit: (1) whether the stay will unduly prejudice the
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`nonmoving party, (2) whether the proceedings before the court have reached an advanced stage,
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`including whether discovery is complete and a trial date has been set, and (3) whether the stay
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`will likely result in simplifying the case before the court.” NFC Tech., 2015 WL 1069111, at *2.
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`“[S]ince the circuit court’s decision in VirtualAgility, courts have been nearly uniform in
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`granting motions to stay proceedings in the trial court after the PTAB has instituted inter partes
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`review proceedings.” Id. at *5–7 (“That near-uniform line of authority reflects the principal
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`point made by the court in VirtualAgility—that after the PTAB has instituted review proceedings,
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`the parallel district court litigation ordinarily should be stayed. The decisions cited above have
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`applied the same general approach in the analogous setting of inter partes review.”).
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`ARGUMENT
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`USPTO inter partes reviews of almost two-thirds of the asserted claims of the ’786 and
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`’342 patents have now been instituted, and seven additional petitions seeking inter partes review
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`of the asserted Blitzsafe patent claims are pending. As explained below, each of the three
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`relevant factors that must be considered in weighing a request for a stay very strongly favors
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`staying this litigation until the completion of the IPR proceedings, including any appeals.
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`6
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`A.
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`Granting A Stay Will Not Unduly Prejudice Or Tactically Disadvantage Blitzsafe,
`But Will Instead Benefit Both Parties
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`The first factor considers whether a stay would unduly prejudice Blitzsafe. NFC Tech.,
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`2015 WL 1069111, at *2–3. The “delay inherent in granting a stay . . . is present in every case in
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`which a patentee resists a stay, and it is therefore not sufficient, standing alone, to defeat a stay
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`motion.” Id. at *2; E-Watch Inc. v. Lorex Canada Inc., No. H–12–3314, 2013 WL 5425298, at
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`*2 (S.D. Tex. Sept. 26, 2013) (“[T]he mere fact of a delay alone does not constitute prejudice
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`sufficient to deny a request for stay.”). Instead, courts consider whether a stay would harm the
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`patentee’s business operations or place it at a clear tactical disadvantage in the lawsuit. NFC
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`Tech., 2015 WL 1069111, at *2–3; Ericsson Inc. v. TCL Commc’n Tech. Holdings, Ltd., No.
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`2:15-cv-00011-RSP, 2016 WL 1162162, at *2 (E.D. Tex. March 23, 2016); see also Crossroads
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`Sys., Inc. v. Dot Hill Sys. Corp., No. A-13-CA-1025-SS, 2015 WL 3773014, at *2 (W.D. Tex.
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`June 16, 2015).
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`Granting a stay will not unduly prejudice Blitzsafe because it is a patent holding company
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`formed shortly before this suit was filed. See supra Background, Part A. Blitzsafe “does not
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`compete with [VWGoA and VWGoA Chattanooga, and] monetary relief will be sufficient to
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`compensate it for any injury to its patent rights” during the stay. NFC Tech., 2015 WL 1069111,
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`at *3; Ericsson, 2016 WL 1162162, at *2–3 (“Ericsson will not suffer prejudice because Ericsson
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`does not practice the patents-in-suit and because Ericsson and TCL are not direct competitors.”);
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`see also Employment Law Compliance, Inc. v. Compli, Inc., No. 3:13–CV–3574–N, 2014 WL
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`3739770, at *2 (N.D. Tex. May 27, 2014) (“ELC fails to show that the parties are direct
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`competitors or how it would be adversely affected by a stay. . . . The Court concludes that this
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`factor weighs in favor of a stay.”); e-Watch, Inc. v. ACTi Corp., Inc., No. SA–12–CA–695–FB,
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`2013 WL 6334372, at *8 (W.D. Tex. Aug. 9, 2013) (“E-Watch has not submitted ‘any evidence
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`7
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`that the parties have ever competed for a sale or are direct competitors.’. . . In sum, this factor
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`weighs in favor of a stay.”); Transocean Offshore Deepwater Drilling, Inc. v. Seadrill Am., Inc.,
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`No. CIV.A. H-15-144, 2015 WL 6394436, at *3 (S.D. Tex. Oct. 22, 2015) (granting stay where
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`“no evidence has been presented to suggest that the two parties compete for any of the same
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`customers or contracts”).12
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`Nor would granting a stay place Blitzsafe at a tactical disadvantage in this lawsuit. The
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`final determinations in the Toyota IPRs will issue in less than a year, and, if the Patent Office
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`grants VWGoA’s, Honda’s, and Hyundai/Kia’s petitions, those proceedings should also be
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`complete in late 2017 or early 2018. See 35 U.S.C. § 316(A)(11). If this lawsuit is stayed until
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`that time, the parties’ pretrial work to date will not be wasted, and there will be no danger of lost
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`evidence, because fact discovery is almost complete. Compare supra Background, Part B, with
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`NFC Tech., 2015 WL 1069111, at *3 (“A blanket statement that evidence may become stale or
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`be lost does not amount to a compelling showing of prejudice.”), and Ericsson, 2016 WL
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`1162162, at *2 (“Both fact and expert discovery have concluded in the ‘Track I’ schedule in this
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`case, and fact discovery has concluded in the ‘Track II schedule. Thus both parties have had the
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`opportunity to seek production of relevant documents and to depose witnesses. It is not clear
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`what evidentiary prejudice, if any, Ericsson would suffer.” (record citation omitted)).
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`If, on the other hand, this litigation is not stayed, it will shortly proceed into expert
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`discovery, dispositive motion practice, and trial preparation on many of the same issues that will
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`be simultaneously addressed by the parties and the PTAB in the IPR proceedings. A stay will
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`12 Blitzsafe’s parent company, Blitzsafe of America, Inc., also is not a direct competitor of
`VWGoA and VWGoA Chattanooga. Blitzsafe of America, Inc. merely sells after-market
`devices, such as connectors, for integrating a car stereo system with a portable device. See Ex.
`12 at 5. It does not manufacture or sell automobile infotainment systems, which are accused of
`infringing Blitzsafe’s patents in this case.
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`8
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 13 of 20 PageID #: 3413
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`benefit, not prejudice, both parties by avoiding duplication and waste. The first factor
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`accordingly weighs in favor of granting a stay. NFC Tech., 2015 WL 1069111, at *2, *5 (“The
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`court in VirtualAgility held that the patentee, which could be adequately compensated through a
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`damages remedy, could not make a showing of undue prejudice from a stay, and that the
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`evidence did not indicate that a stay would give the defendants a clear tactical advantage.
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`Moreover, the court found that the disposition of the review would streamline the proceedings
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`before the district court and decrease the burden on the parties and the court . . . . [W]hether a
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`stay will reduce the burden of litigation on the parties and the court—is a consideration that
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`courts often take into account in determining whether to grant a stay pending inter partes
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`review.” (citation omitted)).
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`B.
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`A Stay Is Highly Likely To Simplify The Issues For Trial Because Almost Two-
`Thirds Of The Asserted Patent Claims Will Be Reviewed By The Patent Office And
`Are Likely To Be Found Invalid In The IPR Proceedings
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`“[T]he most important factor bearing on whether to grant a stay in this case is the
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`prospect that the inter partes review proceeding[s] will result in simplification of the issues
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`before the Court.” Id. at *4. When the Patent Office has decided to review the asserted patent
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`claims because they are likely to be unpatentable, this factor “weighs heavily in favor of granting
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`the stay.” See VirtualAgility, 759 F.3d at 1313–15; NFC Tech., 2015 WL 1069111, at *5–7
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`(“[C]ourts have been nearly uniform in granting motions to stay proceedings in the trial court
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`after the PTAB has instituted inter partes review proceedings.”)
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`Now that the Patent Office has ordered inter partes review of almost two-thirds of the
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`claims of the ’786 and ’342 patents asserted to be infringed by VWGoA and VWGoA
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`Chattanooga, there is a 70% probability that all of those claims, and an 85% probability that at
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`least some of the claims, will be found unpatentable. See supra Background, Part C. In addition,
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`VWGoA has filed three petitions for inter partes review, and Honda and Hyundai/Kia have filed
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`9
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 14 of 20 PageID #: 3414
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`four petitions, challenging the claims that are currently the subject of instituted inter partes
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`reviews as well as the remaining asserted claims of the ’786 patent, and there is approximately a
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`70% probability that the VWGoA, Honda, and Hyundai/Kia petitions will be granted and
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`additional inter partes reviews of the challenged claims will be instituted. See supra id.
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`If any of the asserted claims of the’786 and ’342 patents are ruled invalid by the Board,
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`then, absent a stay, any claim construction, infringement, and validity issues relating to those
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`claims litigated by the parties and ruled on by the court may become moot or have to be vacated.
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`See, e.g., Translogic Tech., Inc. v. Hitachi, Ltd., 250 Fed. Appx. 988, 988 (Fed. Cir. 2007);
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`Fresenius USA, Inc. v. Baxter Int’l, 721 F.3d 1330, 1340, 1347 (Fed. Cir. 2013) (“[I]f the PTO
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`confirms the original claim in identical form, a suit based on that claim may continue, but if the
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`original claim is cancelled or amended to cure invalidity, the patentee’s cause of action is
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`extinguished and the suit fails.”); NFC Tech., 2015 WL 1069111, at *4 (“[I]f the proceedings
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`result in cancelation of some or all of the asserted claims, either some portion of the litigation
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`will fall away, or the litigation will come to an end altogether.”).13
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`In addition, even if the claims are not found unpatentable in the IPRs, the court’s claim
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`construction, infringement, and invalidity rulings may still need to be vacated or revisited
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`because the IPR proceedings are relevant evidence that must be considered as part of the court’s
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`construction of the asserted claims of both patents, including those claims of the ’786 patent that
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`are not currently being reviewed by the Patent Office. See, e.g., Ericsson, 2016 WL 1162162, at
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`13 See also E-Watch, 2013 WL 5425298, at *2 (“[I]f the USPTO in any way alters or invalidates
`a claim of any of the patents-in-suit, the matters at issue in this court will change.”); Flexiteek
`Am., Inc. v. PlasTEAK, Inc., No. 08-60996-CIV, 2012 WL 5364263, at *9–10, *12–13, *15
`(S.D. Fla. Sept. 10, 2012), adopted by 2012 WL 5364247, at *2–3 (S.D. Fla. Oct. 31, 2012)
`(“Claim 1—the claim which Defendants were found to have infringed in the present action—was
`cancelled . . . . Therefore, Plaintiffs’ Claim 1 was unenforceable, and the current Final
`Judgment—based on Defendants’ infringement of Claim 1—should be vacated.”).
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`Case 2:15-cv-01274-JRG-RSP Document 133 Filed 08/15/16 Page 15 of 20 PageID #: 3415
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`*3 (“[T]he claim construction positions taken by the parties before the PTAB may inform
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`subsequent claim construction proceedings in this Court.”); e2Interactive, Inc. v. Blackhawk
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`Network, Inc., 561 Fed. Appx. 895, 896–98 (Fed. Cir. 2014); Krippelz v. Ford Motor Co., 667
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`F.3d 1261, 1266–67 (Fed. Cir. 2012); B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S.Ct.
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`1293, 1299, 1310 (2015) (“[A] court should give preclusive effect to [USPTO] decisions if the
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`ordinary elements of issue preclusion are met.”); Amazon.com, Inc. v. Barnesandnoble.com, Inc.,
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`239 F.3d 1343, 1351 (Fed. Cir. 2001) (“[T]he claims must be interpreted and given the same
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`meaning for purposes of both validity and infringement analyses.”).
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`As an example of the potential impact of the IPR proceedings on the court’s claim
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`construction rulings, since the court’s July 1, 2016 Markman hearing, the Board issued
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`institution decisions in the Toyota IPRs that construe three of the terms of the ’786 patent claims
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`(“portable,” “interface,” and “device presence signal”) that are also proposed for construction in
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`this case. Compare, e.g., Ex. 3 (Institution Decision in IPR2016-00421) at 11–18, with D.E. 111
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`(Joint Claim Construction Chart) at 15, 17, 22–23, 25, 28, 30, 32–33, 40. The Board decided not
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`to institute review of the remaining asserted claims of the ’786 patent based on a construction of
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`the term “interface” that requires the interface to have “a functional and structural identity
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`separate from” the other elements of the claims.14 The arguments Blitzsafe made in support of
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`patentability in the IPR proceedings were based on this narrow construction of the term,15 even
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`14 See Ex. 3 at 12–16 (“Construing the term ‘interface’ in light of the Specification, other
`language in the claims, as well as the prosecution history noted by Petitioner, we determine
`that—interface is a physical unit that connects one device to another and that has a functional
`and structural identity separate from that of both connected devices.”).
`15 See, e.g., Ex. 19 (Blitzsafe Preliminary Response in IPR2016-00421) at 7–9, 15–17
`(“Petitioner’s arguments fail when the claims are construed to require an interface functionally
`and structurally sep