Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-03317/USCOURTS-cand-4_05-cv-03317-1/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

INTERVIDEO DIGITAL TECHNOLOGY

CORPORATION,

Plaintiff and Counterdefendant,

v.

DELL, INC.,

Defendant and Counterclaimant.

 /

No. C 05-3317 CW

ORDER GRANTING

DEFENDANT's

MOTION TO STAY

PENDING 

RE-EXAMINATION

Defendant and Counter-claimant Dell, Inc. has filed a motion

to stay this action until the conclusion of the re-examination of

United States Patent No. 6,765,788 (the '788 patent), which is

currently proceeding in the U.S. Patent and Trademark Office. 

Plaintiff and Counter-defendant InterVideo Digital Technology Corp.

opposes this motion. Having considered all of the papers filed by

the parties, the Court grants Defendant's motion to stay this

action.

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 1 of 8
United States District Court

For the Northern District of California

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BACKGROUND

The '788 patent issued on July 20, 2004; it consists of ten

claims. Approximately four months after it issued, a third party

requestor, not a party to this suit, requested that the Patent

Office re-examine the '788 patent. On February 9, 2005, the Patent

Office granted the re-examination request. In its order, the

Patent Office stated that all ten claims will be re-examined,

noting that several items of prior art, not considered by the

Patent Office during the original prosecution, raise substantial

new questions of patentability as to all ten claims. 

On August 15, 2005, half a year after the initiation of the

re-examination proceedings, Plaintiff filed this lawsuit alleging

that Defendant infringed the '788 patent. Defendant filed an

answer to the complaint and filed counterclaims alleging invalidity

of the patent under 35 U.S.C. §§ 102, 103 and 112. 

 On November 15, 2005, Defendant filed this motion to stay

pending the re-examination. At the end of November, 2005, the

Patent Office issued an Office Action; the summary of the action

noted that claims one to ten are rejected. The Detailed Action

explained that claims one to ten were rejected under 35 U.S.C. §

102(b) as being anticipated by "Lindy Multimedia User Manual Hotkey

Driver Installation, First Addition"; claims one, six and ten were

rejected under 35 U.S.C. § 102(b) as being anticipated by

U.S. Patent No. 5,613,135 to Sakai; and claims two through five and

seven through nine were rejected under 35 U.S.C. § 103 as being

obvious in view of the combination of the Lindy reference and the

Sakai patent. 

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 2 of 8
United States District Court

For the Northern District of California

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On December 6, 2005, Plaintiff filed a complaint with the

International Trade Commission (ITC) seeking an investigation

pursuant to section 337 of the Tariff Act of 1930, as amended

19 U.S.C. § 1337, naming Dell and others as respondents and alleged

infringers of the '778 patent. The ITC investigation has begun.

On December 20, 2005, a patent examiner interviewed

Plaintiff's representatives regarding the '788 patent. The

Reexamination Interview Summary states that an agreement with

respect to the claims was not reached:

The Patent Owner's representative discussed the

invention and argued how the customizable bios and the

electronic device mode allegedly distinguish the claims

over the prior art of record. The Examiner indicated

that additional limitations would be constructive in

distinguishing the claims over prior art and that any

new limitations would require further search and

consideration.

There has been no discovery.

DISCUSSION

As the Federal Circuit has noted, "Courts have inherent power

to manage their dockets and stay proceedings, including the

authority to order a stay pending conclusion of a PTO examination." 

Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988)

(citation omitted). While courts are not required to stay judicial

proceedings pending re-examination of a patent, a stay for purposes

of re-examination is within the district court's discretion. See,

e.g., Patlex Corp. v. Mossinghoff, 758 F.2d 594, 603 (Fed. Cir.

1985). One court in this district has noted that there is "a

liberal policy in favor of granting motions to stay proceedings

pending the outcome" of re-examination or re-issuance proceedings,

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 3 of 8
United States District Court

For the Northern District of California

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especially in cases that are still in the initial stages of

litigation and where there has been little or no discovery.

ASCII Corp. v. STD Entm't USA, Inc., 844 F. Supp. 1378, 1381 (N.D.

Cal. 1994).

In determining whether to stay this case pending 

re-examination, the Court considers the following factors:

(1) whether discovery is complete and whether a trial date has been

set; (2) whether a stay will simplify the issues in question and

trial of the case; and (3) whether a stay would unduly prejudice or

present a clear tactical disadvantage to the non-moving party. In

re Cygnus Telecomm. Tech., LLC Patent Litig., 385 F. Supp. 2d 1022,

1023 (N.D. Cal. 2005). The factors here weigh in favor of a stay.

1. Stage of Proceedings

This case is in its earliest stages. It was filed five months

ago; no discovery has been initiated and no trial date set. 

Plaintiff's only rejoinder is that the procedural posture of this

case does not mandate a stay. This is true, but it is a factor

that weighs heavily in favor of a stay. As stated in a case

Plaintiff cites, "Courts which have denied stays pending reexamination of the patent's validity have generally done so where

the request for re-examination came late in the litigation

proceedings, after extensive discovery or trial preparation." 

Gladish v. Tyco Toys, Inc., 29 U.S.P.Q.2d 1718, 1719 (E.D. Cal.

1993).

2. Simplification

Defendant argues that a stay of this case pending 

re-examination will simplify this case. It notes the Cygnus

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 4 of 8
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court's findings that: 

there is little question that a stay would “simplify

the issues in question and trial of the case.” If the

USPTO cancels any of the 21 claims asserted in the two

patents, infringement and validity issues that could

potentially be raised in any of the multiple

litigations consolidated before this court would be

resolved. For those claims that survive the

reexamination, this court may have a richer prosecution

history upon which to base necessary claim construction

determinations or reconsideration. 

385 F. Supp. 2d at 1024.

Plaintiff, however, responds that a stay will not necessarily

simplify the issues, in part, because Defendant asserts a

declaratory judgment counterclaim that the '788 patent is invalid

under 35 U.S.C. §§ 102, 103 and 112, and the re-examination

proceeding only addresses invalidity under sections 102 and 103. 

The re-examination proceeding will not address section 112, nor

will it address Plaintiff's claims of infringement. But, as

Defendant notes, the re-examination proceeding will address the

central issue in this case: the scope of the claims of the '788

patent. If the claims are canceled, this case can be dismissed; if

the claims are amended, the scope of Plaintiff's patent rights will

be narrowed, resulting in simplification of the case and any

possible trial. Furthermore, because the patent examiner rejected

all ten claims and told Plaintiff that "addition limitations would

be constructive in distinguishing the claims over the prior art,"

cancellation or amendment of the claims is very likely. 

Plaintiff cites Gladish, but that case is inapposite. As

Defendant notes, the facts here are not at all similar to the facts

in Gladish. In Gladish, the court found that re-examination

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proceedings would not resolve all the issues in the litigation: 

Unless all claims of the patent were cancelled, validity would

still remain an issue because not all of the prior references in

the case were being considered by the Patent Office; issues of

infringement and whether the case was exceptional entitling the

defendants to attorneys' fee also remained. 29 U.S.P.Q.2d at 1720. 

But the court denied the stay, sought by the plaintiff, for other

reasons not present here: 

Plaintiff chose this forum, forced Tyco to expend time

and money in responding to a motion for preliminary

injunction and a motion for sanctions, and now, after

the litigation has progressed almost a year and Tyco's

discovery efforts are bearing fruit, seeks reexamination

of his patent based on prior references known to

plaintiff since April of 1992. Plaintiff has not set

out a case of hardship should the stay be denied. Under

the circumstances, the court concludes that the issuance

of a stay would be unfair to defendants. 

Id. Thus, the Court finds that this factor too weighs in favor of

a stay pending re-examination.

3. Undue Prejudice or Clear Tactical Disadvantage 

Defendant asserts that, although a stay will dely discovery

and the trial date in this case, Plaintiff will not be unduly

prejudiced. Plaintiff disagrees. It notes that re-examination is

a lengthy process. The court in Cygnus found that re-examinations

generally take from six months to three years. 385 F. Supp. 2d at

1023. Plaintiff argues that Defendant and others may continue to

infringe the '788 patent while it waits for the Patent Office to

complete the re-examination; it notes that it has licensed the

technology in question to several companies and delaying this

action may detrimentally affect sales by its licensees and

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 6 of 8
United States District Court

For the Northern District of California

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subsequent attempts to license the technology to others. This does

not show that a stay would unduly prejudice Plaintiff or present a

clear tactical disadvantage to Plaintiff. More than possible

prejudice is required. 

A stay will not prevent Plaintiff from later recovering for

past infringement or seeking an injunction to prevent future

infringement. Defendant notes that a pending re-examination

proceeding where all ten claims stand rejected could have a

negative effect on Plaintiff's ability to license the technology,

but this negative effect would exist with or without a stay. The

stay may prejudice Plaintiff and its licensees who may be adversely

affected, but Plaintiff makes no showing that it would be unduly

prejudiced by the stay. Nor does Plaintiff make any argument or

present any evidence to show that the stay would result in a clear

tactical disadvantage.

Thus, the Court finds that this factor, like the two other

factors, weighs in favor of a stay pending re-examination. 

 4. ITC Proceedings

Plaintiff argues that there is no need for the Court to

consider Defendant's motion at this time; instead, Plaintiff

proposes that the Court accept its consent to a stay based on the

ITC complaint and prospective availability of 28 U.S.C. § 1659,

which provides for a stay in civil actions involving parties that

are also parties to a proceeding before the ITC. But, as Defendant

notes, the stay can be invoked only by "a party to the civil action

that is also a respondent in the proceeding before" the ITC. 28

U.S.C. § 1659(a). Plaintiff is not the respondent in that action;

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 7 of 8
United States District Court

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thus, the Court cannot grant Plaintiff's request to stay this

action under section 1659. Plaintiff's argument that relying upon

its consent to a stay based on the ITC action quickly resolves the

stay issue before this Court is without merit.

CONCLUSION

For the foregoing reasons, the Court GRANTS Defendant's Motion

to Stay Pending Reexamination (Docket No. 19). The Court stays

this action until further order of the Court or a re-examination

determination, whichever occurs first. A case management

conference will be held on September 8, 2006 at 1:30 p.m. unless

the parties notify the Court earlier that the re-examination has

concluded.

IT IS SO ORDERED.

Dated: 1/17/06

 

CLAUDIA WILKEN

United States District Judge

Case 4:05-cv-03317-CW Document 39 Filed 01/17/06 Page 8 of 8