Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03116/USCOURTS-cand-3_05-cv-03116-10/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1331 Fed. Question

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States District C

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For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

KLA-TENCOR CORPORATION, a

Delaware corporation,

Plaintiff,

 v.

NANOMETRICS, INC., a California

corporation,

Defendant.

 /

No. C 05-03116 JSW

ORDER GRANTING

DEFENDANT’S MOTION TO

STAY ALL PROCEEDINGS

PENDING REEXAMINATION

OF PATENTS-IN-SUIT

Now before the Court is Defendant Nanometrics, Inc.’s (“Nanometrics”) Motion to Stay

Proceedings Pending Reexamination of Patents-in-Suit. Having considered the parties’ pleadings,

relevant legal authority, and the parties’ arguments at the hearing on this matter, the Court HEREBY

GRANTS Defendant’s motion and STAYS ALL PROCEEDINGS with respect to all patents-in-suit.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff KLA-Tencor Corporation (“KLA-Tencor”), the assignee of United States Patents

Nos. 6,483,580 (“the `580 patent”) and 6,590,656 (“the `656 patent”), brought this action claiming

that Nanometrics had infringed these patents by manufacturing, offering for sale and/or selling six

devices, including but not limited to the Atlas metrology system and/or other metrology systems. 

(Declaration of Michael N. Edelman in Support of KLA-Tencor’s Opposition to Stay (“Edelman

Decl.”), Ex. A at 2-3; Declaration of Edward V. Anderson in Support of Motion to Stay

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Pending Reexamination (“Anderson Decl. 1”), Ex. A at 1.) KLA-Tencor then filed a first amended

complaint adding a cause of action for infringement of United States Patent No. 6,611,330 (“the `330

patent”). (Edelman Decl., Ex. H.)

This litigation is in the early stages. Both parties have propounded, and one has responded

to, their first set of requests for production of documents. (See Declaration of Edward V. Anderson

in Support of Motion to Stay and Ex Parte Motion to Shorten Time (“Anderson Decl. 2”), Ex. 4; see

also Edelman Decl., Exs. L-N.) The tutorial has been set for August 22, 2006, but no trial date has

yet been set. Magistrate Judge Spero has established a schedule for an exchange of discovery plans

and a date and time for a discovery conference. Neither claim construction briefing nor discovery

has occurred on the `330 patent infringement cause of action that KLA-Tencor has recently added.

On December 21, 2005, the United States Patent & Trademark Office (“PTO”) granted

Nanometrics’s requests for reexamination of the `580 patent and the `656 patent. (Anderson Decl. 2,

Exs. 1, 2.) On February 21, 2006, Nanometrics filed a request for reexamination of the `330 patent

with the PTO. (Nanometrics’s Notice of New Authorities, Ex. A.)

On January 6, 2006, Nanometrics filed the instant motion. Nanometrics moves the Court for

a stay of all proceedings, including the litigation as to the `330 patent infringement cause of action,

pending the reexamination of the `580 and `656 patents. (Mot. at 2.) KLA-Tencor urges this Court

to deny Nanometrics’s motion on the following grounds: (1) a stay should not be entered where the

reexamination does not implicate all patents-in-suit; (2) considerations of judicial efficiency militate

in favor of permitting discovery on the infringement of all patents-in-suit; (3) a stay would

substantially prejudice KLA-Tencor and unnecessarily delay the action given the slow pace of PTO

reexamination proceedings; and (4) a stay would put KLA-Tencor at a clear tactical disadvantage.

ANALYSIS

A. Legal Standards Applicable to a Motion to Stay Proceedings Pending

Reexamination.

The patent reexamination statute provides in pertinent part that “[a]ny person at any time may

file a request for reexamination by the [PTO] of any claim of a patent on the basis of any prior art

cited under the provisions of section 301.” 35 U.S.C. § 302. The PTO must “determine whether a

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substantial new question of patentability affecting any claim of the patent concerned is raised by the

request . . . .” 35 U.S.C. § 303(a). The reexamination statute further provides that “[a]ll

reexamination proceedings . . . including any appeal to the Board of Patent Appeals and

Interferences, will be conducted with special dispatch.” 35 U.S.C. § 305.

The determination of whether to grant a stay pending the outcome of the PTO’s

reexamination is soundly within the Court’s discretion. See Tap Pharm. Prods. Inc. v. Atrix Labs.

Inc., 70 U.S.P.Q. 2d 1319, 1320 (N.D. Ill. 2004) (citing Gould v. Control Laser Corp., 705 F.2d

1340, 1341 (Fed. Cir. 1983)). When ruling on such a stay, courts consider several factors: (1) the

stage of the litigation, including whether discovery is or will be almost completed and whether the

matter has been marked for trial; (2) whether a stay will unduly prejudice or tactically disadvantage

the nonmoving party; and (3) whether a stay will simplify the issues in question and streamline the

trial, thereby reducing the burden of litigation on the parties and on the court. Id.; Methode Elecs.,

Inc. v. Infineon Techs. Corp., No. 99-21142, 2000 U.S. Dist. LEXIS 20689, at *5-6 (N.D. Cal. Aug.

7, 2000). There is a “liberal policy in favor of granting motions to stay proceedings pending the

outcome of USPTO reexamination or reissuance proceedings.” ASCII Corp. v. STD Entertainment,

844 F. Supp. 1378, 1381 (N.D. Cal. 1994).

B. The Early Stage of the Litigation Weighs in Favor of Granting a Stay.

The early stage of a litigation weighs in favor of granting a stay pending reexamination. See

Target Therapeutics, Inc. v. SciMed Life Sys., Inc., 33 U.S.P.Q. 2d 2022, 2023 (N.D. Cal. 1995)

(holding that the absence of “significant discovery” or “substantial expense and time . . . invested” in

the litigation weighed in favor of staying the litigation); see also ASCII Corp., 844 F. Supp. at 1381

(granting stay where parties had undertaken little or no discovery and the case had not yet been set

for trial). Here, discovery has just begun. Nanometrics and KLA-Tencor have each propounded

their first set of requests for the production of documents, and Nanometrics has responded to KLATencor’s first set of requests. (See Anderson Decl. 2, Ex. 4; Edelman Decl., Exs. L-N.) Magistrate

Judge Spero just recently laid out a schedule for an exchange of discovery plans. Neither party has

conducted any discovery with respect to the `330 patent-in-suit. The tutorial has been set for August

22, 2006, but no trial date has been set. Therefore, the fact that this case is still in the early stages

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and the parties have not yet conducted “significant discovery” or invested “substantial expense” into

the litigation weighs in favor of granting a stay. See Target Therapeutics, 33 U.S.P.Q. 2d at 2023.

C. A Stay Will Not Unduly Prejudice KLA-Tencor.

In determining whether to grant a stay, courts also consider any resulting undue prejudice on

the nonmoving party. See Methode Elecs., 2000 U.S. Dist. LEXIS 20689, at *7. Granting a stay

does not cause the nonmoving party undue prejudice when that party has not invested substantial

expense and time in the litigation. Id. KLA-Tencor correctly notes that “the average time for the

completion of a reexamination is approximately 18.2 months,” excluding appeals. Rohm and Haas

Co. v. Brotech Corp., 24 U.S.P.Q. 2d 1369, 1372 (D. Del. 1992). However, parties having

protection under the patent statutory framework may not “complain of the rights afforded to others

by that same statutory framework.” Pegasus Dev. Corp. v. DirecTV, Inc., 2003 WL 21105073, at *2

(D. Del. May 14, 2003). Nanometrics “is legally entitled to invoke the reexamination process,” and

the PTO has already determined to reexamine two of the three patents-in-suit. See id. Moreover, if

after reexamination the PTO again upholds KLA-Tencor’s patents, this will only strengthen KLATencor’s rights because Nanometrics’s burden of proof becomes more onerous. See id. Under such

circumstances, the delay inherent to the reexamination process does not constitute, by itself, undue

prejudice. See id.

As a result, courts also consider evidence of dilatory motives or tactics, such as when a party

unduly delays in seeking reexamination of a patent. Methode Elecs., 2000 U.S. Dist. LEXIS 20689,

at *7. KLA-Tencor has failed to show, beyond the delay implicit in the reexamination process, how

it would be unduly prejudiced or tactically disadvantaged if this Court were to grant a stay. In

particular, the Court finds no evidence of dilatory tactics on Nanometrics’s part in seeking

reexamination at this early stage of the litigation. This is not a case where reexamination is sought

on the eve of trial or after protracted discovery. Cf. Agar Corp., Inc. v. Multi-Fluid, Inc., 983 F.

Supp. 1126, 1128 (S.D. Tex. 1997) (finding that “courts are inclined to deny a stay when the case is

set for trial and the discovery phase has almost been completed”). Rather, KLA-Tencor filed its

complaint on August 1, 2005, the PTO granted Nanometrics’s requests to reexamine the `580 and

`656 patents on December 21, 2005, and Nanometrics filed its motion to stay proceedings on January

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6, 2006. (Edelman Decl., Ex. A at 4; Anderson Decl. 2, Exs. 1, 2.) In addition, KLA-Tencor filed a

stipulation and proposed order seeking to add the `330 patent on January 26, 2006, and Nanometrics

filed a request for reexamination of the `330 patent on February 21, 2006. (Nanometrics, Inc.’s

Notice of New Authorities, Ex. A.) This does not evince dilatory motives. Furthermore, KLATencor will be fully compensated for delays if it prevails at reexamination and trial. See Brown v.

Shimano Am. Corp., 18 U.S.P.Q. 2d 1496, 1496 (C.D. Cal. 1991). Thus, because a stay will not

unduly prejudice KLA-Tencor, this factor also weighs in favor of granting a stay.

D. A Stay Will Simplify the Issues, Streamline the Trial, and Reduce the Burden of

Litigation on Both the Parties and the Court.

The PTO is currently reexamining two of the three patents-in-suit and reviewing

Nanometrics’s request for reexamination of the third patent-in-suit. (Anderson Decl. 2, Exs. 1, 2;

Nanometrics’s Notice of New Authorities, Ex. A.) Statistical information regarding reexamination

indicates that the PTO confirms all claims in approximately 24% of the cases, cancels all claims in

approximately 12% of the cases, and changes some claims in approximately 64% of the cases. Rohm

and Haas, 24 U.S.P.Q. 2d at 1372. These statistics “suggest that in a typical case there is a

substantial probability a reexamination will have a major impact on the issues to be resolved in the

litigation.” Id. This is because “waiting for the outcome of the reexamination could eliminate the

need for trial if the claims are cancelled or, if the claims survive, facilitate the trial by providing the

court with the opinion of the PTO and clarifying the scope of the claims.” Target Therapeutics, 33

U.S.P.Q. 2d at 2023; see also Pegasus, 2003 WL 21105073, at * 1-2 (noting the benefits of granting

a stay pending reexamination include potentially narrowing the issues, reducing the complexity and

length of trial, alleviating discovery problems relating to prior art, and encouraging settlement or

even dismissal if the patent is declared invalid).

When there are overlapping issues between the reexamined patents and other patents in suit,

courts have found staying the entire case to be warranted. In Methode, for example, the court stayed

the litigation of both the reexamined and non-reexamined patents because the issues regarding the

non-reexamined patent “may be narrowed or amended as a result of the PTO’s decision.” Id.

Moreover, the Methode court stayed the litigation of both the reexamined and non-reexamined

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patents because “it appears that there are overlapping issues” in the infringement action of the two

patents. Id. If the court stayed the litigation with respect to the reexamined patents-in-suit only,

duplicative discovery could have resulted because there were likely to be common documents and

witnesses in the infringement litigation of the two patents. Id.

Similarly, here, even though the PTO has not determined yet whether it will reexamine the

`330 patent, a stay of the entire suit is warranted because the reexamination of the `580 and `656

patents may significantly affect the litigation of the `330 patent. First, at the hearing on the instant

motion, KLA-Tencor conceded that it accuses the same Nanometrics products of infringement of all

three patents-in-suit. Second, Nanometrics argued at the hearing on this matter, and KLA-Tencor

did not dispute, that the only real difference in discovery would involve the deposition of the

different inventor of the `330 patent. Otherwise, as Nanometrics argued, the engineering and sales

personnel deposed would be the same for all three patents-in-suit. Third, KLA-Tencor conceded at

the hearing that there are overlapping issues between all three patents-in-suit. For example, the “first

optics focusing a polarized sample beam of broadband radiation onto the surface of the sample”

language of claim 28 of the `330 patent overlaps with the “optics providing a sampling beam of

polarized broadband radiation and directing the beam towards the structure at an oblique angle”

language of claim 111 of the `580 patent. Therefore, a stay will simplify the issues and streamline

the trial, thereby reducing the burden on, and preserving the resources of both the parties and the

Court.

Finally, in determining whether to grant a stay of an entire case, courts consider whether there

would remain, after the PTO reexamination, issues “completely unrelated to patent infringement” for

which a stay would not reduce the burden of litigation on both the parties and the court. Imax Corp.

v. In-Three, Inc., 385 F. Supp. 2d 1030, 1033 (C.D. Cal. 2005). If such matters “would continue to

be an issue . . . a stay would not preserve many resources.” Id. at 6.

Here, the only claims in the case are for patent infringement. Therefore, the Court finds that

there are no issues in the case unrelated to patent infringement for which the PTO’s expertise

resulting from the reexamination process would not be helpful. Accordingly, the Court finds that a

stay of the entire case pending reexamination of the `580 and `656 is warranted. 

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Therefore, having considered the factors relevant in determining whether to grant a stay

pending reexamination, the Court hereby GRANTS Nanometrics’s motion to stay all proceedings

pending reexamination of the `580 and `656 patents. 

CONCLUSION

For the foregoing reasons, the Court GRANTS Nanometrics’s motion to stay pending

reexamination of the `580 and `656 patents. The proceedings are stayed from the date of this Order

until further notice. The Court HEREBY ORDERS the parties to submit a joint status report

regarding the status of the reexamination proceedings every 120 days, or sooner if the PTO issues a

final decision with respect to any of the patents-in-suit, until the stay in this case is lifted.

If the PTO grants Nanometric’s application to reexamine the `330 patent and the

reexamination proceedings for the `330 patent extend beyond those for the `580 and `656 patents, the

Court will entertain a motion extend the stay at that time. 

IT IS SO ORDERED.

Dated: March 16, 2006 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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