Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_07-cv-05194/USCOURTS-cand-4_07-cv-05194-5/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1051 Trademark 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

EPISTAR CORPORATION,

Plaintiff and Counterclaim

Defendant,

v.

PHILIPS LUMILEDS LIGHTING COMPANY,

LLC,

Defendant and

Counterclaimant.

 /

No. C 07-5194 CW

ORDER GRANTING IN

PART, DENYING IN

PART AND

DEFERRING RULING

IN PART ON

DEFENDANT'S

MOTION TO STAY

Defendant and Counterclaimant Philips Lumileds Lighting

Company has filed a motion to stay this action pending the final

resolution of In the Matter of Certain High-Brightness Light

Emitting Diodes and Products Containing Same, Inv. No. 337-TA-566,

a related investigation before the International Trade Commission

(ITC). The ITC's final determination is on appeal to the Federal

Circuit. Plaintiff and Counterclaim Defendant Epistar Corporation

opposes the motion. The motion was submitted on the papers. 

Case 4:07-cv-05194-CW Document 49 Filed 04/02/08 Page 1 of 10
United States District Court

For the Northern District of California

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Having considered all of the parties' papers, the Court grants in

part, denies in part and defers ruling in part on Defendant's

motion.

BACKGROUND

This case is part of a series of disputes between the parties

relating to the alleged infringement by Epistar of a light emitting

diode (LED) patent, United States Patent No. 5,008,718 (‘718

patent), held by Lumileds. 

In September, 1999, UEC filed suit against Defendant Lumileds,

Hewlett-Packard Co. and Agilent Technologies, seeking, among other

things, a declaration that UEC's products did not infringe the '718

patent. UEC and Lumileds settled that litigation in 2001 and

entered into two separate agreements: a settlement agreement (2001

UEC/Lumileds settlement agreement) and a patent license agreement

(UEC/Lumileds patent license agreement). 

In 2002, Lumileds filed a complaint against several of

Epistar's customers in this Court, alleging infringement of the

'718 patent (2002 suit). On January 6, 2003, Epistar filed suit in

the Central District of California against Lumileds, seeking a

declaration that its products did not infringe the '718 patent and

that the '718 patent was invalid (2003 suit). The 2003 suit was

transferred to this Court after Lumileds amended its complaint in

the 2002 suit to name Epistar as a defendant and to include

allegations that Epistar's products infringed the '718 patent. The

cases were consolidated and were resolved when Epistar and Lumileds

entered into a settlement agreement. The agreement included a

covenant by Lumileds not to sue Epistar for infringement of the

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1The 2005 suit was stayed pursuant to 28 U.S.C. § 1659, which

provides, 

In a civil action involving parties that are also

3

'718 patent based on Epistar's Omnidirectional Mirror Adhesive

(OMA) LED products and a license to Epistar to make, sell, use,

offer to sell and import AlGaInP absorbing-substrate LEDs (2004

Epistar/Lumileds settlement agreement). 

In August, 2005, Epistar and UEC finalized a merger agreement

through which Epistar would acquire all of UEC's assets and

operations. The merger took effect on December 30, 2005 and UEC

was dissolved. 

On November 4, 2005, Lumileds filed a complaint with the ITC

alleging, among other things, a violation of the Tariff Act of 1930

based on the import of certain LED products that infringe the '718

patent. Epistar was one of the respondents named in Lumileds'

complaint. During the course of the investigation, Lumileds

alleged that Epistar's OMA products infringed the '718 patent. The

ITC entered a final determination that Epistar's OMA products

infringe the '718 patent and entered an exclusion order precluding

Epistar from importing its OMA LED products into the United States. 

Epistar appealed the ITC's final determination to the Federal

Circuit.

At the same time that it filed its complaint with the ITC,

Lumileds filed another complaint in this Court, alleging

infringement of patents including the '718 patent (2005 suit). 

That case was stayed at Epistar's request pending resolution of the

ITC proceedings.1

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parties to a proceeding before the United States

International Trade Commission under section 337 of

the Tariff Act of 1930, at the request of a party to

the civil action that is also a respondent in the

proceeding before the Commission, the district court

shall stay, until the determination of the Commission

becomes final, proceedings in the civil action with

respect to any claim that involves the same issues

involved in the proceeding before the Commission.

4

On October 10, 2007, Epistar filed the instant complaint

alleging that, after the entry of the ITC final determination,

Lumileds sent false and misleading letters to Epistar's existing

and potential customers about the scope of the ITC's findings. 

Those letters, Epistar argues, improperly suggest that the ITC

determined that all of Epistar's products infringe all three of the

patents it considered. Therefore, Epistar claims that the letters

constitute (1) unfair competition under the Lanham Act, 

(2) intentional interference with Epistar's prospective economic

advantage, and (3) unfair competition in violation of California

Business and Professions Code § 17200. Epistar seeks to enjoin

Lumileds from continuing the allegedly misleading communications. 

Epistar also asserts that Lumileds breached the covenant not to sue

contained in the 2004 Epistar/Lumileds settlement agreement by

filing the ITC complaint and the 2005 suit alleging infringement of

the '718 patent. Finally, Epistar seeks a declaration that the

2001 UEC/Lumileds settlement agreement became null and void when

Epistar acquired UEC and that the Epistar/Lumileds settlement

agreement controls. 

DISCUSSION

It is well-established that "the power to stay proceedings is

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incidental to the power inherent in every court to control the

disposition of the cases on its docket with economy of time, effort

for itself, for counsel, and for litigants." Landis v. North Amer.

Co., 299 U.S. 248, 254 (1936); see also Ethicon, Inc. v. Quigg, 849

F.2d 1422, 1426-27 (Fed. Cir. 1988) ("Courts have inherent power to

manage their dockets and stay proceedings.") As the Ninth Circuit

instructs, 

A trial court may, with propriety, find it is efficient

for its own docket and the fairest course for the

parties to enter a stay of an action before it, pending

resolution of independent proceedings which bear upon

the case. This rule applies whether the separate

proceedings are judicial, administrative, or arbitral in

character, and does not require that the issues in such

proceedings are necessarily controlling of the action

before the court. 

Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863-64 (9th

Cir. 1979).

"In determining whether to grant a stay, courts generally

consider whether doing so would cause undue prejudice or present a

clear tactical disadvantage to the non-moving party." ASCII Corp.

v. STD Entm't USA, Inc., 844 F. Supp. 1378, 1380 (N.D. Cal. 1994). 

Courts may also consider the stage in litigation, whether

substantial discovery has already taken place, and whether the

matter has been set for trial. Id. The party seeking a stay "must

make out a clear case of hardship or inequity in being required to

go forward, if there is even a fair possibility that the stay for

which he prays will work damage to some one else." Landis, 299

U.S. at 255. 

Lumileds seeks a stay of this action pending the final

resolution of its claim before the ITC. Lumileds argues that the

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stay's duration would be finite and that the instant claims could

then be litigated along with the 2005 suit. Moreover, Lumileds

argues that there is significant overlap between this case, the ITC

claim and the 2005 suit.

I. Breach of contract claim based on the covenant not to sue

Lumileds asserts that Epistar's likely defenses to the

infringement claims in the 2005 suit are substantially intertwined

with Epistar's current breach of contract claim. Lumileds predicts

that Epistar will raise as a defense to the infringement claim, the

covenant not to sue contained in the 2004 Epistar/Lumileds

settlement agreement. This would be the converse of Epistar's

present breach of contract claim. Epistar does not dispute that

there is overlap between its breach of contract claim in this case

and the patent issues in the ITC proceeding and the 2005 suit. 

Instead Epistar argues, "For efficient and orderly litigation

however, the issue of whether the license defense is successful

should preferably be decided first." Opposition at 6. 

In addition to the overlap between the breach of contract

claim and the infringement claim in the stayed 2005 suit and the

potential for judicial economy in consolidating those claims,

Lumileds argues that Epistar will not be prejudiced if this claim

is stayed but Lumileds will be prejudiced if it is forced to

litigate the same issues twice. First, Lumileds asserts that

Epistar cannot argue that it will be prejudiced by a stay of this

suit because it is Epistar that requested a stay of the 2005 suit. 

Epistar responds that it would be prejudiced because the ITC

exclusion order covers products that it claims are included in the

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covenant not to sue contained in the 2004 Epistar/Lumileds

settlement agreement. Therefore, Epistar asserts that staying this

claim will prolong the time for which it is wrongfully prevented

from importing products it is permitted to import under the terms

of the 2004 settlement agreement. Lumileds responds that Epistar

originally raised the covenant not to sue as a defense in the ITC

proceeding, but elected to abandon it on the fourth day of the

hearing before the ITC and therefore has now waived it. 

Epistar replies that the parties agreed that Epistar's defense

that Lumileds breached the covenant not to sue "would be tried

separately in district court." It is not clear whether the parties

agreed to this, or, if not, whether Epistar has waived either its

claim or defense based on the covenant not to sue. This could be

resolved by motion, now or later. In any event, the scope of the

covenant not to sue necessarily requires an analysis of which

products are properly classified as OMA products that are subject

to the covenant. Lumileds argues that this is a technical issue

that is substantially related to the stayed patent suit. 

The Court tentatively grants Lumileds' motion to stay with

respect to the breach of contract claim. The parties shall come to

the May 6, 2008 case management conference prepared to discuss the

factual issues necessary for the Court to rule on this question.

II. Declaratory relief claim regarding the UEC/Lumileds patent

license agreement

Lumileds also argues that Epistar's claim for a declaration

that it is not bound by the UEC/Lumileds patent license agreement,

entered into as part of the settlement of the 2001 suit between UEC

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and Lumileds, should be stayed pending the resolution of the ITC

claim because Epistar has addressed this issue in its defense of

the ITC action. Epistar counters that it has only relied upon the

UEC/Lumileds consent judgment and the 2001 UEC/Lumileds settlement

agreement, not the UEC/Lumileds patent license agreement. Lumileds

responds that one of Epistar's own briefs before the ITC recognizes

that these three documents were part of the settlement of the 2001

suit. Moreover, Lumileds points out that the UEC/Lumileds patent

license agreement and the consent judgment are themselves exhibits

to the 2001 UEC/Lumileds settlement agreement. Therefore, Lumileds

asserts that the patent license agreement is necessarily at issue

in the ITC proceeding and not properly before this Court. 

The ITC found that Epistar is precluded from raising an

invalidity defense to Lumileds' claims because Epistar is bound by

the UEC/Lumileds consent judgment and the 2001 UEC/Lumileds

settlement agreement. The ITC also found that under the terms of

the UEC-Epistar merger agreement and Taiwanese law, under which the

merger agreement was executed, Epistar has assumed all of UEC's

rights and obligations and is therefore UEC's successor. Based on

these findings, the ITC concluded that Epistar was bound by an

agreement not to challenge the validity of the '718 patent

contained in the UEC/Lumileds settlement agreement and dismissed

Epistar's invalidity affirmative defense. This is one of the

issues Epistar appealed to the Federal Circuit. In its brief to

the Federal Circuit, the ITC states that "Epistar, now standing in

UEC's shoes is barred from raising an invalidity defense to the

assertion of infringement of the '718 patent against any product,

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including 'future products.'" Wu Decl., Ex. F at 15. 

None of Lumileds' exhibits demonstrate that the ITC considered

the UEC/Lumileds patent license agreement. In fact, the ITC

specifically states that it considered the UEC/Lumileds consent

judgment and the 2001 UEC/Lumileds settlement agreement but does

not mention the patent license agreement. Nonetheless, it is quite

clear that the interpretation of the UEC-Epistar merger agreement

is at issue in the ITC. The meaning of the merger is one of the

key questions that will need to be determined before deciding

whether Epistar is bound by the UEC/Lumileds patent license

agreement. Therefore, the Court grants Lumileds' motion to stay

with respect to this claim.

III. Claims for injunctive relief

Finally, Epistar argues that the injunctive relief it seeks on

its claims for unfair competition and intentional interference with

prospective economic advantage weigh against granting the stay. 

These claims assert that Lumileds has improperly represented to

Epistar's customers the scope of the ITC's exclusion order. 

Lumileds counters that the scope and propriety of the exclusion

order remain in question and are presently on appeal to the Federal

Circuit. However, the Federal Circuit's decision will not impact

claims related to the manner in which Lumileds has represented and

continues to represent the ITC's exclusion order. Epistar claims

that it has and will continue to suffer harm based on the alleged

misrepresentations. Therefore, the Court denies Defendant's motion

to stay with respect to these claims. 

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CONCLUSION

For the foregoing reasons, the Court GRANTS in part, DENIES in

part and DEFERS ruling in part on Defendant's motion to stay

(Docket No. 30). As stated above, the parties shall come to the

May 6, 2008 case management conference prepared to discuss 

the extent of the technical issues raised by the question of which

products are properly classified as OMA products subject to the

covenant not to sue. 

IT IS SO ORDERED.

Dated: 4/2/08 

CLAUDIA WILKEN

United States District Judge

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