Case: 1:16-cv-05667 Document #: 40 Filed: 01/26/17 Page 1 of 10 PageID #:1113
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`T-REX PROPERTY AB,
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`No. 16 C 5667
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` Judge Virginia M. Kendall
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` Plaintiff,
` v.
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`ADAPTIVE MICRO SYSTEMS, LLC,
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` Defendant.
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`MEMORANDUM OPINION AND ORDER
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`Plaintiff T-Rex Property AB (“T-Rex”) sued Defendant Adaptive Micro Systems, LLC
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`(“Adaptive”) alleging infringement of three patents related to controlling and coordinating digital
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`information systems to multiple displays and devices. Following minimal discovery, Adaptive
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`filed the instant motion seeking a stay of this case pursuant to Section 18(b) of the America
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`Invents Act (“AIA”) pending United States Patent Trial and Appeal Board’s (“PTAB”) review of
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`the three patents. For the following reasons, Adaptive’s Motion to Stay [28] is granted. The
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`parties are ordered to file a status report with the Court within 24 hours of receipt of each of the
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`PTAB’s institution decisions.
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`BACKGROUND
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`T-Rex, a non-practicing entity, has filed at least 58 lawsuits, including this one, against
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`various defendants alleging infringement of U.S. Patent Nos. RE39,470 (the “’470 Patent”);
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`7,382,334 (the “’334 Patent”); and 6,430,603 (the “’603 Patent”) (collectively, the “Asserted
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`Patents”). (See Dkt. No. 30 at 1-2.) BroadSign International, LLC (“Broadsign”), a defendant in
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`a separate case, filed two petitions for inter partes review (“IPR”) and one petition for covered
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`business method review (“CBM”) before the PTAB challenging the validity of the Asserted
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`Patents. (See Dkt. No. 31-1 (IPR petition challenging ’470 Patent); Dkt. No. 31-2 (IPR petition
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`Case: 1:16-cv-05667 Document #: 40 Filed: 01/26/17 Page 2 of 10 PageID #:1114
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`challenging ’334 Patent); Dkt. No. 31-3 (CBM petition challenging ’603 Patent).) The PTAB
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`has not yet issued decisions regarding any of the petitions, but the decisions are due as follows:
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`Petition
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`Date Filed
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`IPR for ’470 Patent
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`Sept. 24, 2016
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`IPR for ’334 Patent
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`Oct. 6, 2016
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`CBM for ’603 Patent
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`Oct. 28, 2016
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`Latest Date for
`Institution Decision
`March 24, 2017
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`April 6, 2017
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`April 28, 2017
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`Following a hearing on November 21, 2016, the Court stayed discovery pending its
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`ruling on the present motion. (See Dkt. No. 35.)
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`LEGAL STANDARD
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`Section 18 of the AIA provides for the establishment of transitional post-grant review
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`proceedings to reexamine the validity of covered business method patents. Leahy-Smith
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`America Invents Act, Pub. L. No. 112-29, § 18, 125 Stat. 284 (Sept. 16, 2011). The AIA also
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`establishes protocol with respect to related patent infringement actions and authorizes the district
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`courts to stay such parallel litigation under certain circumstances. Specifically, Section 18(b)(1)
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`states:
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`If a party seeks a stay of a civil action alleging infringement of a
`patent under section 281 of title 35, United States Code, relating to
`a transitional proceeding for that patent, the court shall decide
`whether to enter a stay based on--
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`(A) whether a stay, or the denial thereof, will simplify the
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`issues in question and streamline the trial;
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`(B) whether discovery is complete and whether a trial date
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`has been set;
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`(C) whether a stay, or the denial thereof, would unduly
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`prejudice the nonmoving party or present a clear tactical
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`advantage for the moving party; and
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`(D) whether a stay, or the denial thereof, will reduce the
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`burden of litigation on the parties and on the court.
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`2
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`Id. The statutory test closely resembles the stay analysis courts have applied in assessing a
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`motion to stay pending inter partes or ex parte reexamination by the PTAB. See, e.g., Genzyme
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`Corp. v. Cobrek Pharm., Inc., No. 10 CV 00112, 2011 WL 686807, at *1 (N.D. Ill. Feb. 17,
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`2011) (applying three-factor stay test that considers “whether a stay will (1) unduly prejudice or
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`tactically disadvantage the non-moving party, (2) simplify the issues in questions and streamline
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`the trial, and (3) reduce the burden of litigation on the parties and on the court”); JAB Distribs.,
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`LLC v. London Luxury, LLC, No. 09 C 5831, 2010 WL 1882010, at *1 (N.D. Ill. May 11, 2010).
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`The fourth factor was included, in part, to favor the granting of stays. See, e.g., Segin
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`Sys., Inc. v. Stewart Title Guar. Co., 30 F. Supp. 3d 476, 480 (E.D. Va. 2014) (fourth factor
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`“designed to place a thumb on the scales in favor of a stay”); Market-Alerts Pty. Ltd. v.
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`Bloomberg Fin. L.P., 922 F. Supp. 2d 486, 489-90 (D. Del. 2013) (fourth factor included “to
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`ease the movant’s task of demonstrating the need for a stay”). Finally, as the movant, Adaptive
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`bears the burden of demonstrating that a stay is warranted. See, e.g., Segin, 30 F. Supp. 3d at
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`479.
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`DISCUSSION
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`Adaptive argues that a stay is appropriate because the PTAB’s review of the patents will
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`streamline the case and simplify the issues before the Court. T-Rex counters that Adaptive’s
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`motion is premature and that it will be prejudiced by a stay.
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`A.
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`Simplification of the Issues
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`Staying a patent infringement case pending administrative review of the asserted patents’
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`validity can simplify litigation in several ways:
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`1. All prior art presented to the Court will have been first
`considered by an expert PTO examiner;
`2. The reexamination may alleviate discovery problems relating to
`the prior art;
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`3
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`3. The suit will likely be dismissed if the reexamination results in
`effective invalidity of the patent;
`4. The outcome of the reexamination may encourage settlement;
`5. The record of the reexamination would likely be entered at trial
`and thus reduce the complexity and length of the litigation;
`6. The reexamination will facilitate limitation of issues, defenses,
`and evidence in pre-trial conferences;
`7. Litigation costs to the parties and the Court will likely be
`reduced.
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`Genzyme, 2011 WL 686807, at 3-4 (quoting Emhart Indus., Inc. v. Sankyo Seiki Mfg. Co., Ltd.,
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`No. 85 C 7565, 1987 WL 6314, at 2 (N.D. Ill. Feb. 2, 1987); see also, e.g., Tap Pharm. Prods.,
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`Inc. v. Atrix Labs., Inc., No. 03 C 7822, 2004 WL 422697, at *1 (N.D. Ill. Mar. 3, 2004) (stay
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`warranted because “[t]here is a significant chance that the PTO will either invalidate this patent
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`or drastically decrease its scope [due to reexamination] . . . [creating] a very real possibility that
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`the parties will waste their resources litigating over issues that will ultimately be rendered moot
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`by the PTO’s findings”).
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`Adaptive argues that a stay is appropriate pending the PTAB’s institution decisions as all
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`three Asserted Patents and every asserted claim may be under review by the end of April, just
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`over three months away. The fact that some, if not every, asserted claim may be under review in
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`such a short time period of time weighs in favor of granting a stay. See, e.g, Versata Software,
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`Inc. v. Dorado Software, Inc., No. 2:13-cv-00920-MCE-DAD, 2014 WL 1330652, at *3 n.2
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`(E.D. Cal. Mar. 27, 2014) (staying case where CBM review granted for only one of three
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`asserted patents); Destination Maternity Corp. v. Target Corp., 12 F. Supp. 3d 762, 769 (E.D.
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`Pa. 2014) (“courts have found significant potential for issue simplification even in cases where
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`some but not all of the asserted claims are subject to PTO review”); Genzyme, 2011 WL 686807,
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`at *3 (stay warranted even though “certain issues may remain in dispute even upon conclusion of
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`the reexamination proceedings”). Given the Court’s inherent ability to stay cases even before the
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`4
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`PTAB acts, see Intellectual Ventures II LLC v. JPMorgan Chase & Co., 781 F.3d 1372, 1378-79
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`(Fed. Cir. 2015) (“our holding does not prevent a district court from choosing to decide a motion
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`before the PTAB acts on a CBMR petition.”), and the upcoming deadlines for determinations,
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`the first factor weighs in favor granting the stay.
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`T-Rex, however, argues that Adaptive’s motion is (1) premature and speculative because
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`none of the reviews have actually been instituted and (2) inappropriate because “[t]he only
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`circumstance in which the issues…will be substantially simplified is if the PTAB initiates review
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`of all of the asserted claims and then invalidates all of the asserted claims of the” Asserted
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`Patents. (Dkt. No. 36 at 9.) While it is certainly true that merely filing a petition for CBM or
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`IPR review does not ensure that a review will in fact follow (or that even if a review were to
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`follow, the patent would be found invalid), it is equally the case that the burden on the Court and
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`the parties would be significantly lessened if any (or all) of these petitions led to IPR or CBM
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`institutions.1 Versata, 2014 WL 1330652, at *2. The fact that the PTAB has not yet rendered
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`institution decisions does not eliminate the benefits of a stay. For example, if the PTAB
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`institutes review proceedings, staying the case avoids duplicitous litigation on potentially moot
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`claims and issues. See VirtualAgility, 759 F.3d at 1314 (disposing of the entire litigation is “the
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`ultimate simplification of issues”); see also, e.g., Old Reliable Wholesale, Inc. v. Cornell Corp.,
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`635 F.3d 539, 548 (Fed. Cir. 2011) (“PTO has acknowledged expertise in evaluating prior art
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`and assessing patent validity”); SenoRx, Inc. v. Hologic, Inc., No. 12-173-LPS-CJB, 2013 WL
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`1 T-Rex also argues that the PTAB is unlikely to institute a review of the ‘603 Patent because Broadsign’s petition
`for review cited to the PTAB decision that Federal Circuit overturned in Unwired Planet L.L.C. v. Google, Inc., No.
`2015-1966, 2016 WL 6832982 (Fed. Cir. Nov. 21, 2016). (See Dkt. No. 36 at 4.) Even if T-Rex’s argument is
`correct – Adaptive noticeably does not dispute the substance of T-Rex’s position in its Reply – a stay is nevertheless
`appropriate because the PTAB may still institute reviews of the other two Asserted Patents. See, e.g., Trading
`Techs. Int'l, Inc. v. BCG Partners, Inc., 186 F. Supp. 3d 870 (N.D. Ill. 2016), aff'd sub nom. Trading Techs. Int'l,
`Inc. v. Rosenthal Collins Grp., LLC, No. 2016-2223, 2016 WL 5899197 (Fed. Cir. Oct. 11, 2016) (collecting cases
`supporting proposition that a stay is appropriate where only some claims or patents are under review).
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`144255, at *4 (D. Del. Jan. 11, 2013) (courts benefit from the PTO’s analysis of prior art that is
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`later presented in litigation regardless of the outcome of the review).
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`T-Rex’s reliance on Trover Grp., Inc. v. Dedicated Micros USA, No. 2:13-CV-1047-
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`WCB, 2015 WL 1069179, at *7 (E.D. Tex. Mar. 11, 2015) is misplaced. Although that court
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`held that a stay prior to PTAB action was inappropriate, it noted, through analyzing Landmark
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`Technology, LLC v. iRobot Corp., No. 6:13–cv–411, 2014 WL 486836 (E.D.Tex. Jan. 24, 2014),
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`that a stay could be appropriate where (1) “the PTAB was due to decide whether to grant the
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`CBM review petition within four months” of the court ruling on the stay motion, (2) discovery
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`had just began, and (3) the claim construction hearing was not scheduled to occur until four
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`months after the PTAB’s decision was due. See, e.g., Trover, 2015 WL 1069179, at *6. Those
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`considerations mirror the situation here as the PTAB’s decisions are due in less than four months
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`from the time of this Order, discovery has only just begun (only one set of initial disclosures and
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`initial contentions have been exchanged, see Dkt. No. 39 at 12:12-15), and a claim construction
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`hearing date has not been set (the parties’ claim construction briefing does not even begin until
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`May 25, 2017, see Dkt. No. 26). As such, despite T-Rex’s contentions to the contrary, the
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`Trover court’s analysis supports the granting of a stay.
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`B.
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`Stage of the Litigation
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`“Staying a case at an early juncture can be said to advance judicial efficiency and
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`maximize the likelihood that neither the Court nor the parties expend their assets addressing
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`invalid claims.” See, e.g., Trading Techs. Int'l, 2015 WL 1396632, at *4 (citations omitted). As
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`detailed in Adaptive’s Motion, no depositions have been taken or noticed, initial disclosures
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`were recently issued, final contentions are not due for four more months, and no trial date has
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`been set. (See Dkt. No. 30 at 7); VirtualAgility, 759 F.3d at 1317 (the stage of litigation factor
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`6
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`favored stay where no trial date had been set, fact discovery had yet to be completed, and claim
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`construction statements had yet to be filed); Versata, 2014 WL 1330652, at *3 (factor supported
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`stay in part because neither a Markman claim construction nor a trial date had been set). T-Rex
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`does not dispute this factor. (See Dkt. No. 36; Dkt. No. 38 at 2.) Accordingly, the early stage of
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`the litigation favors a stay.
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`C.
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`Undue Prejudice or Tactical Advantage
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`“When assessing the third factor in determining whether to grant a stay pending CBM
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`review, courts consider a variety of factors to determine the prejudice to the non-movant,
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`including the timing of the stay request, the status of review proceedings, and the relationship
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`between the parties.” Trading Techs., 2015 WL 1396632, at *5. Although the potential for
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`delay “does not, by itself, establish undue prejudice,” the Court recognizes “that waiting for the
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`administrative process to run its course risks prolonging the final resolution of the dispute and
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`thus may result in some inherent prejudice to the plaintiff.” See, e.g., Mkt.-Alerts, 922 F. Supp.
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`2d at 494 (emphasis in original). A review of the above factors shows that a stay is appropriate
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`in this case as (1) Adaptive filed the Motion two weeks after Broadsign filed the last of its
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`petitions, (2) decisions regarding the petitions are due in only three months, and (3) the parties
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`are not competitors such that a delay will unduly prejudice T-Rex. Cf. VirtualAgility, 759 F.3d at
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`1318 (“competition between parties can weigh in favor of finding undue prejudice”); see also
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`CANVS Corp. v. United States, 118 Fed. Cl. 587, 596 (2014) (“Weighing in favor of stay here is
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`the fact that the parties are not direct competitors.”).
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`T-Rex argues both that it will be unduly prejudiced by a stay and that Adaptive is seeking
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`the stay to gain a tactical advantage. T-Rex first contends that it will be unduly prejudiced
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`because a stay will delay its ability to timely enforce its patent rights. Specifically, T-Rex argues
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`7
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`that because the ‘470 and ‘334 Patents are expired, it will only be permitted to recover for any
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`infringement for a period of six years under 35 U.S.C. § 286. Based on that limited time period,
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`T-Rex argues that any delay in this case will not only curtail its ability to recover damages here,
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`but also will cause it to lose damages from “yet-to-be served defendants” because it will not have
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`the capital to initiate lawsuits against those other defendants if this case is stayed. (See Dkt. No.
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`36 at 7-8.) There are numerous issues with this position. First, as noted above, delay within
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`itself does not establish undue prejudice, particularly where the delay is for a short period of
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`time. See, e.g., Mkt.-Alerts, 922 F. Supp. 2d at 494; Black & Decker Inc. v. Positec USA, Inc.,
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`No. 13 C 3075, 2013 WL 5718460, at *2 (N.D. Ill. Oct. 1, 2013) (“And should the PTO deny
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`review, the delay in waiting for that decision will be fairly short. Delay in itself, moreover, does
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`not constitute undue prejudice.”) (citation omitted). Second, T-Rex does not dispute that it is a
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`non-practicing entity and that it only seeks monetary remedy. See, e.g., Cascades Computer
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`Innovation, LLC v. SK hynix Inc., No. 11 C 4356, 2012 WL 2086469, at *1 (N.D. Ill. May 25,
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`2012) (granting stay in part because defendant, as a non-practicing entity seeking only monetary
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`damages, would be able to “collect damages that accumulate during the stay, including interest,
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`ameliorating the delay caused by the stay” if the defendant ultimately prevailed.) Third, T-Rex’s
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`contention that it will lose prospective damages against other, unnamed defendants in future
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`cases is both speculative and wholly unsupported. T-Rex fails to set forth any case law or other
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`authority, and the Court has found none, supporting its contention that a stay in this case should
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`be denied so that it will be able to pursue other, future cases against unnamed third party
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`defendants. Indeed, if the Court were to credit such an argument, it is difficult to imagine any
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`circumstance in which a stay in any case could be warranted. Even if the Court were to consider
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`T-Rex’s position tenable from a legal or policy perspective, from a factual standpoint, T-Rex
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`8
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`fails to provide any documentation showing that it is incapable of financing other lawsuits in the
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`event that this case is stayed, particularly given that it has already filed some 58 other lawsuits.
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`(See Dkt. No. 36 at 9 (T-Rex itself indicating that it has filed “over 50 lawsuits.”). Finally, T-
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`Rex’s failure to seek a preliminary injunction severely undermines its claim of undue prejudice.
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`See, e.g., Trading Techs., 186 F. Supp. 3d 870, at *7 (collecting cases indicating that claims of
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`undue prejudice are belied by a plaintiff’s failure to seek a preliminary injunction).
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`T-Rex’s argument that a stay would tactically advantage Adaptive is similarly flawed.
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`The crux of T-Rex’s position, laid out in one short paragraph at the very beginning of its
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`Response, is that because Adaptive did not “agree to be estopped from presenting invalidity
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`arguments that Broadsign raised or could have raised in the event the IPRs and CBM do not
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`reach a final determination,” Adaptive could unfairly get to “two chances to argue the same
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`invalidity positions.” (Dkt. No. 36 at 1.) Yet again, T-Rex fails to cite to any authority
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`indicating that Adaptive should be barred from raising the same issues raised in the petitions in
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`the situation where the petitions do not reach a final determination. If this Court institutes a stay
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`and Broadsign subsequently withdraws its petitions prior to a final determination by the PTAB,
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`Adaptive would then raise those invalidity positions before this Court for the first time. On the
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`other hand, if the petitions do reach a final determination and the patents are found to survive the
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`PTAB’s review, Adaptive will be barred from relitigating those determinations here. Adaptive
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`acknowledged as much during the parties’ hearing on November 21, 2016, when its counsel
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`twice represented that “[w]e’re going to live and die with Broadsign.” (Dkt. No. 39 at 16:12-15.)
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`D.
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`Burden of Litigation
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`The fourth factor is “designed to place a thumb on the scales in favor of a stay…[and]
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`will usually weigh to some degree in favor of stay.” See, e.g., Segin Sys., 30 F. Supp. 3d at 480.
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`Much of the analysis conducted under the first factor is relevant here as the burden of litigation
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`will be significantly lessened if the PTAB institutes and invalidates any or all of the Asserted
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`Patents. The parties briefing regarding which will suffer a more significant burden if the case is
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`stayed does not affect the requisite analysis in any substantial way. For example, T-Rex requests
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`that the Court allow “minimal fact discovery” to go forward without explaining why that
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`discovery is necessary immediately rather than four months from now if the PTAB declines to
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`review the Asserted Patents. (See Dkt. No. 36 at 12.) On the other hand, Adaptive argues that
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`the burden of the litigation is substantial for it because it is a small company, but does not
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`provide any factual basis for that claim. (Dkt. No. 38 at 4.) As such, this factor similarly weighs
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`in support of granting a stay.
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`CONCLUSION
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`For the reasons stated herein, Adaptive’s Motion to Stay [28] is granted. The parties are
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`ordered to file a status report with the Court within 24 hours of receipt of each of the PTAB’s
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`institution decisions.
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`________________________________________
`Virginia M. Kendall
`United States District Court Judge
`Northern District of Illinois
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`Date: 1/26/2017
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