Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 1 of 9 PageID #: 42063
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`CIVIL ACTION NO. 6:12-CV-00855-RWS
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`VIRNETX INC. and LEIDOS, INC.,
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`Plaintiffs,
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`v.
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`APPLE INC.,
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`Defendant.
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`MEMORANDUM OPINION
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`Defendant Apple Inc. (“Apple”) filed a Motion to Stay (Docket No. 518) on February 28,
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`2017. On September 29, 2017, the Court denied the motion with memorandum order to follow
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`and ordered Plaintiff VirnetX Inc. (“VirnetX”) and Apple to meet and confer on a trial date for
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`this case. Docket No. 527.1 The Court now issues this memorandum opinion detailing the reasons
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`for its ruling.2
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`BACKGROUND
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`The case has both a lengthy and complex procedural history. On August 11, 2010, VirnetX
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`filed Case No. 6:10-cv-417 against Apple alleging infringement of U.S. Patent Nos. 6,502,135
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`(“the ’135 Patent”), 7,418,504 (“the ’504 Patent”), 7,490,151 (“the ’151 Patent”) and 7,921,211
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`(“the ’211 Patent”) (collectively, “the asserted patents”). Case No. 6:10-cv-417 (“417 action”),
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`1 Unless otherwise specified, references to the docket refer to the docket in Case No. 6:12-cv-855 (the “855 action”).
`2 The Court recognizes that Apple filed a petition for writ of mandamus with the Federal Circuit on January 5, 2018
`asking the Federal Circuit to vacate the Court’s September 29, 2017 Order and to stay the case pending the appeals of
`several Patent Office (“PTO”) proceedings. See Docket No. 547; Petition for Writ of Mandamus, In re Apple, No.
`18-123 (Fed. Cir. Jan. 5, 2018). In its September 29, 2017 Order, the Court provided the parties with its ruling to
`avoid undue delay and uncertainty while it prepared its full opinion. Although the Court was hesitant to issue this
`memorandum opinion in light of the pending petition, the parties are entitled to the opinion as initially promised.
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`Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 2 of 9 PageID #: 42064
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`Docket No. 1. On November 6, 2012, a jury found that Apple’s accused VPN On Demand and
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`FaceTime features infringed the asserted patents and that the asserted patents were not invalid. 417
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`action, Docket No. 790. On the same day, VirnetX filed Case No. 6:12-cv-855. Docket No. 1.
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`In the 417 action, Apple and VirnetX both filed post-trial motions, which the Court ruled
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`on. 417 action, Docket No. 851. The matter was appealed, and the Federal Circuit affirmed-in-
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`part, reversed-in-part and remanded for further proceedings. 417 action, Docket No. 853; see
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`VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1313–14 (Fed. Cir. 2014).
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`The Federal Circuit affirmed the jury’s finding of infringement of VPN On Demand and
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`affirmed the Court’s denial of Apple’s motion for judgment as a matter of law on invalidity. Id.
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`The Federal Circuit vacated the infringement finding for FaceTime based upon a change in claim
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`construction, holding that the term “secure communication link” requires both “security and
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`anonymity,” and vacated damages for VPN On Demand and FaceTime because it found that the
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`jury relied on a flawed damages model. Id. at 1314.
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`Upon receipt of the Federal Circuit’s mandate, the Court solicited the parties’ proposals on
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`how to proceed. 417 action, Docket No. 855. The parties submitted a status report in which
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`VirnetX proposed the Court consolidate the remaining issues in the 417 action with the upcoming
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`trial in the 855 action. Docket No. 864 at 4. Apple opposed the consolidation. See 417 action,
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`Docket No. 873 at 45:20–46:6. After a status conference on March 10, 2015, the Court
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`consolidated the 855 and 417 actions, designating the 855 action as the lead case with a revised
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`schedule. Docket No. 220. After extensive motion practice (see Docket Nos. 315, 317–323, 326;
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`see also Docket Nos. 362, 468), the case was tried to a jury, and the jury returned a verdict finding
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`infringement of the ’135, ’151, ’504 and ’211 patents.
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`Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 3 of 9 PageID #: 42065
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`Again, both Apple and VirnetX filed post-trial motions (Docket Nos. 462, 463). On July
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`29, 2016, the Court granted Apple’s Motion for a New Trial Based Upon the Consolidation of
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`Cause Nos. 6:10-cv-417 and 6:12-cv-855. Docket No. 500. The Court reasoned that the
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`consolidation and repeated discussion of the complex procedural history and previous jury verdict
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`in front of the jury resulted in an unfair trial. Docket No. 500 at 14. In its Order, the Court
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`explained that “Cause No. 6:10-cv-417 will be retried with jury selection to begin on September
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`26, 2016, unless the parties agree otherwise on an alternative date, and immediately followed by a
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`second trial on the issue of willfulness. Cause No. 6:12-cv-855 will be retried after Cause No.
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`6:10-cv-417.” Id. at 15.
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`After another round of extensive motion practice (see, e.g., 417 action, Docket Nos. 930–
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`931, 937, 944–945), the 417 action was again tried to a jury. The jury returned a verdict finding
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`that FaceTime infringed the ’211 and ’504 patents and awarded approximately $302 million in
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`damages for the collective infringement of the VPN On Demand and FaceTime features in the
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`accused Apple products. 417 action, Docket No. 1025. After the September trial, both parties
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`submitted post-trial motions (see Docket Nos. 1018–1019, 1047, 1062–1063).
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`While the post-trial motions were pending, on February 9, 2017, the Court requested that
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`the parties meet and confer about the timing of the 855 trial and propose a schedule. The parties
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`each filed a response (Docket Nos. 519, 520), and Apple simultaneously filed this motion to stay
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`(Docket No. 518). The Court held a telephonic hearing regarding the parties’ responses, during
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`which VirnetX requested that a schedule for this case not be entered until the post-trial motions
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`from the 417 retrial had been ruled upon. Docket No. 521 at 6:5–11. The Court took no further
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`action on the remaining 855 retrial until September 29, 2017, when the Court issued its
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`memorandum opinion and order on the post-trial motions and issued final judgment in the 417
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`Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 4 of 9 PageID #: 42066
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`action. 417 action, Docket Nos. 1079, 1082. At that point, the Court denied Apple’s motion to
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`stay the 855 action explaining that this memorandum opinion would follow. Docket No. 527.
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`LEGAL STANDARD
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`A district court has the inherent power to control its own docket. Landis v. N. Am. Co., 299
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`U.S. 248, 254 (1936). The party seeking a stay bears the burden of showing that the stay is
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`appropriate. Landis, 299 U.S. at 254–55. This inherent power includes “the authority to order a
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`stay pending conclusion of a PTO reexamination.” Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426–
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`27 (Fed. Cir. 1988). In deciding whether to stay litigation pending PTO proceedings, courts
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`typically consider: (1) whether the stay will unduly prejudice the nonmoving party, (2) whether
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`the proceedings before the court have reached an advanced stage, including whether discovery is
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`complete and a trial date has been set and (3) whether the stay will likely result in simplifying the
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`case before the court. NFC Tech. LLC v. HTC Am., Inc., No. 2:13-CV-1058-WCB, 2015 WL
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`1069111, at *2 (E.D. Tex. Mar. 11, 2015) (Bryson, J.) (citing Lennon Image Techs., LLC v. Macy's
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`Retail Holdings, Inc., No. 2:13-cv-235, 2014 WL 4652117, at *2 (E.D. Tex. Sept. 17, 2014);
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`Market–Alerts Pty. Ltd. v. Bloomberg Fin. L.P., 922 F.Supp.2d 486, 489 (D. Del. 2013); Soverain
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`Software LLC v. Amazon.com, Inc., 356 F.Supp.2d 660, 662 (E.D. Tex. 2005)).
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`These factors are not exclusive, and, ultimately, deciding whether to stay proceedings
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`“calls for the exercise of judgment, which must weigh competing interests and maintain an even
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`balance.” Landis, 299 U.S. at 254–55; see also TruePosition, Inc. v. Polaris Wireless, Inc., No.
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`12-646, 2013 WL 5701529, at *2 (D. Del. Oct. 21, 2013) (citing SoftView LLC v. Apple, Inc., No.
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`10-389-LPS, 2012 U.S. Dist. LEXIS 104677, at *6–7 (D. Del. July 26, 2012)).
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`Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 5 of 9 PageID #: 42067
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`DISCUSSION
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`With this background, the Court now considers the three factors relevant to granting a stay
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`pending PTO proceedings: (1) whether a stay will unduly prejudice or present a clear tactical
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`disadvantage to the nonmovant; (2) whether the proceedings before the court have reached an
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`advanced stage, including whether discovery is complete and a trial date has been set; and (3)
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`whether the stay will likely result in simplifying the case before the court. As outlined below, each
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`of these factors weighs against granting a stay.
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`(1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the
`nonmovant
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`The Court first considers whether a stay would unduly prejudice or present a tactical
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`disadvantage to the nonmovant. Under this factor, courts consider whether the timing of the
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`request for a stay suggests any dilatory motive on behalf of the movant. Market-Alerts, 922 F.
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`Supp. 2d at 494.
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`Granting a stay in this case would result in undue prejudice to VirnetX. VirnetX has an
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`interest in timely enforcing its patents, which is entitled to weight, but is “not sufficient, standing
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`alone, to defeat a stay motion.” NFC Tech., 2015 WL 1069111, at *2. As discussed above,
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`VirnetX first tried this case to verdict in 2012, and, “due to the necessity of [] retrial[s], [VirnetX]
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`has still received no damages award as compensation.” Apple, Inc. v. Samsung Elecs. Co., No. 11-
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`CV-01846-LHK, 2013 WL 6225202, at *5 (N.D. Cal. Nov. 25, 2013) (finding that the prejudice
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`factor weighed against a stay when the plaintiff opposed defendant’s motion to stay pending
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`reexamination after a jury found the patent valid and infringed).
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`Aside from the prejudice relating to the timely enforcement of its patent rights, VirnetX
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`identifies competitive harm it will suffer in the form of lost sales, lost market share, and reputation
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`harm and identifies the unique prejudice from the pendency of the litigation and the impending
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`Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 6 of 9 PageID #: 42068
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`expiration of VirnetX’s patent terms. Docket No. 522 at 13–14. Apple disputes VirnetX’s
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`assertion, arguing that “VirnetX has never identified a single lost sale, any lost market share, or
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`any reputational harm, nor can VirnetX shield itself behind a presumption of irreparable harm
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`(because none exists).” Docket No. 523 at 8.
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`While it is unclear whether VirnetX will suffer more than generalized prejudice resulting
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`from a delay in enforcing its patent rights, the Court is also concerned with the tactical
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`disadvantage to VirnetX that would result from a stay. In considering this factor, the Court
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`considers the timing of Apple’s request for a stay and how granting a stay at this late stage of the
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`proceedings would present a distinct tactical advantage to Apple.
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`To be clear, Apple asked the Court to order the two new trials while it engaged in
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`significant practice at the PTO. When the Court granted Apple’s motion for a new trial—setting
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`aside a significant consolidated jury trial verdict and unconsolidating these cases—it did not take
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`that decision lightly. The Court made a decision it believed the law and fairness required, but it
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`was always the intention of the Court that the two newly unconsolidated trials would be tried
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`seriatim, recognizing the considerable prejudice VirnetX suffered as a result of setting aside the
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`jury’s verdict. Staying the case now would allow Apple to essentially reverse its request for two
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`new trials after the fact, providing Apple with an undue tactical advantage over VirnetX.
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`In sum, a further delay in VirnetX’s ability to enforce its patent rights creates some measure
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`of prejudice, and, coupled with the fact that granting the motion would provide Apple with an
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`unfair tactical advantage, this factor weighs slightly against granting a stay.
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`(2) whether the proceedings before the court have reached an advanced stage, including
`whether discovery is complete and a trial date has been set
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`At the time of Apple’s motion, Apple’s and VirnetX’s dispute in this Court had already
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`spanned almost seven years. As detailed in the lengthy procedural history above, this case has
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`Case 6:12-cv-00855-RWS Document 553 Filed 01/12/18 Page 7 of 9 PageID #: 42069
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`gone through multiple rounds of dispositive and post-trial motion practice, numerous pretrial
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`conferences and three trials—the last of which was at Apple’s request. There can be no question
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`that the case has reached an advanced stage. Discovery was completed four years ago, and the
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`Court had solicited the parties’ proposals regarding a date for the 855 retrial when Apple filed its
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`motion. The only aspect of the case now remaining before the Court is a retrial of the 855 case,
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`the second of Apple’s requested new trials.
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`In its brief, Apple argues that the most “burdensome task” in the litigation is ahead, the 855
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`trial. Docket No. 518 at 12 (citing Smartflash LLC v. Apple Inc., 621 F. App’x 995, 1005 (Fed.
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`Cir. 2015)). To the extent the Court’s decision is informed by the remaining burden on the parties
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`and the Court, the burden of the 855 trial is somewhat minimized by the fact that it is a retrial.
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`Moreover, the burden of the upcoming retrial is relatively minimal when compared to the resources
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`thus far expended in this litigation. The vast majority of litigation costs have already been spent
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`and the heaviest burden of the litigation has already fallen upon the Court. Given this late stage
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`of the litigation, the resources expended thus far by both the Court and the parties—and the fact
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`that the remaining trial is a retrial—this factor strongly disfavors granting a stay.
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`(3) whether the stay will likely result in simplifying the case before the court
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`The third factor relates to the simplification of the issues before the trial court and “[i]n its
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`entirety, the focus of this factor is on streamlining or obviating the trial by providing the district
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`court with the benefit of the PTO’s consideration of the validity of the patents before either the
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`court or the jury is tasked with undertaking that same analysis.” Smartflash, 621 F. App’x at 1000.
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`“When the motion to stay is made post-trial, many of the advantages flowing from the agency’s
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`consideration of the issues—such as resolving discovery problems, using pre-trial rulings to limit
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`defenses or evidence at trial, limiting the complexity of the trial, etc.—cannot be realized.” Id.
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`“The simplification contemplated by the first factor is far less likely to occur once all the legal,
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`procedural, and evidentiary issues involved in a trial have already been resolved.” Id.
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`This case was first tried in 2012. The appeal of the 2012 verdict was resolved by the
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`Federal Circuit, and, on remand, the case was tried again. At Apple’s request, the Court granted a
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`new trial and ordered two new retrials. The first of the new retrials has already been held, post-
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`trial motions have been ruled on, and the verdict is on appeal before the Federal Circuit. Validity
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`is not an issue remaining in the 855 retrial; indeed, the only remaining issues for the jury are
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`infringement and damages—issues “with which the PTO is not concerned.” Smartflash, 621 F.
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`App’x at 1001. Accordingly, it is unclear how the PTO proceedings will simplify the case. Indeed,
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`because this is a retrial of a case that the parties and the Court have already tried to a jury twice,
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`there are few issues for the parties to brief or for the Court to resolve going forward.
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`When Apple filed its motion to stay, the asserted claims had been held unpatentable in
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`various PTO proceedings. Docket No. 518 at 1. Apple contends in its brief that PTO proceedings
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`may be affirmed by the Federal Circuit and result in an “ultimate simplification of the issues.”
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`Docket No. 518 at 12 (citing VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1314 (Fed.
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`Cir. 2014)). But the potential for a PTO proceeding to result in cancelled claims—thereby mooting
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`a parallel district-court proceeding—is present in almost every case where a petitioner seeks a stay.
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`Just as with the prejudice factor—because this factor is present in nearly every case where a motion
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`to stay is filed, it should be insufficient, standing alone, to support a stay motion.3 See NFC Tech.,
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`2015 WL 1069111, at *2 (E.D. Tex. Mar. 11, 2015).
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`3 In its motion to stay, Apple also discusses the Federal Circuit’s Baxter decision, arguing that “[t]he same fate awaits
`this case once the Tried Patent Claims, which are now before the Federal Circuit, are cancelled.” Docket No. 518 at
`9 (citing Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330, 1347 (Fed. Cir. 2013)). Apple’s Baxter argument
`is not materially different from its argument that a stay could result in the “ultimate simplification” of the case.
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`Even accounting for the fact that the stay may result in the ultimate cancellation of claims,
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`this factor weighs at least slightly against granting a stay.
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`* * *
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`While the prejudice and simplification of issues factors both weigh slightly against granting
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`Apple’s motion, the advanced stage of the proceedings weighs strongly against staying the case.
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`This case has been through a first trial, an appeal, a second consolidated trial and a third trial in
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`the 417 action. The case is far past discovery, and there are limited issues left for the Court or the
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`jury to decide going forward. The case is in its latest stages, and no issue remaining in the case
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`would be simplified by the ultimate return of the PTO appeals. Even if the Court considers that
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`the PTO appeals could ultimately moot these proceedings, that singular factor—which would be
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`true for almost all district-court cases with parallel proceedings—does not outweigh the late stage
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`of the case and the undue prejudice to VirnetX if a stay were granted.
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`The Court acknowledges that, “since the circuit court’s decision in VirtualAgility, courts
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`have been nearly uniform in granting motions to stay proceedings in the trial court” in light of
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`instituted PTO proceedings. NFC Tech., 2015 WL 1069111, at *6 (collecting cases and citing
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`VirtualAgility, Inc. v. Salesforce.com, Inc., 759 F.3d 1307 (Fed. Cir. 2014)). But, as explained
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`above, this case presents unique circumstances that separate it from the mine-run of cases. The
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`Court must exercise its judgment to maintain an even balance, and the unique circumstances of
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`this case counsel against granting a stay. Landis, 299 U.S. at 254–55. Accordingly, as indicated
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`in the Court’s September 29, 2017 Order, Apple’s Motion (Docket No. 518) is DENIED.
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`____________________________________
`ROBERT W. SCHROEDER III
`UNITED STATES DISTRICT JUDGE
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`So ORDERED and SIGNED this 12th day of January, 2018.
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