Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_08-cv-02781/USCOURTS-cand-4_08-cv-02781-0/pdf.json

Parties Involved:
Tokuyama Corporation
Counter-defendant
Vision Dynamics, LLC
Counter-claimant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TOKUYAMA CORPORATION,

Plaintiff,

v.

VISION DYNAMICS, LLC,

Defendant.

 /

No. C 08-2781SBA

ORDER

[Docket No. 9]

Before the Court is defendant Vision Dynamic’s “Motion to Stay the Litigation for the

Reexamination of the ‘017 Patent,” [Docket No. 9, Motion], the plaintiff’s “Opposition” [Docket

No. 34] and defendant’s “Reply” [Docket No. 37]. After reading and considering the arguments

presented by the parties, the Court finds this matter appropriate for resolution without a hearing. For

the reasons that follow, the Court DENIES Defendants’ motion.

BACKGROUND

Plaintiff Tokuyama Corporation (“Tokuyama”) filed the instant patent infringement

Complaint on June 4, 2008, asserting one patent infringement claim against Defendant Vision

Dynamics. [Docket No. 1, Complaint]. Tokuyama alleges that Vision Dynamics infringed its ‘017

patent by “making, importing, selling and/or offering to sell products and/or technology that embody

Tokuyama’s patented technology.” [Compl. ¶13]. Three weeks later, on June 25, 2008, Vision

Dynamics filed with the PTO a request for reexamination of the Reexamined Patent. [Motion, Ex.

2]. Vision Dynamics filed its Answer and Counterclaims in August 2008, withdrew it by stipulation

and resubmitted an amended Answer and Counterclaims on September 22, 2008. [Docket No. 34]. 

The three counterclaims seek a declaration of patent invalidity and/or unenforceability, a declaration

of noninfringement and allege antitrust violations based on the bringing of this action to enforce a

patent in bad faith for attempted monopolization. [Docket No. 36, Answer and Counterclaims]. 

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Prior to bringing this action, Tokuyama proposed a license agreement, the terms of which

were ultimately rejected by Vision Dynamics. In the course of their correspondence between

February 2007 and May 2007, they also discussed their infringement and invalidity theories. [Pl.’s

Opp’n, Shimoda Decl., ¶¶ 2-4, Exs. A and B]. 

The Court has scheduled a case management conference, but has not yet entered a scheduling

order nor held the case management conference. No discovery has been submitted or

occurred. The parties have not served infringement contentions, invalidity contentions, or engaged

in any claim construction whatsoever. Finally, the Court has not set this case for trial. [Motion, p. 2]. 

In opposing this motion, Tokuyama asserts that in spite of the case being in the initial stages, it has

nevertheless expended significant amounts of time, money, and internal resources conducting

detailed analyses of Vision Dynamics’ alleged infringement and preparing a proposed license

agreement for Vision Dynamics. [Pl.’s Opp’n, Shimoda Decl. ¶ 4]. 

Defendant filed the instant motion to stay all proceedings pending the outcome of their

Request for Reexamination. The defendant’s request for reexamination has not yet been granted.

[Pl.’s Opp’n, p. 1]. 

LEGAL STANDARD

Re-examination is a procedure by which any person can request that the PTO re-examine or

re-evaluate the patentability of an unexpired United States patent. See 35 U.S.C. § 302; see also

eSoft, Inc. v. Blue Coat Systems, Inc., 505 F.Supp.2d 784, 786 (D.Colo. 2007). “Congress instituted

the reexamination process to shift the burden or reexamination of patent validity from the courts to

the PTO.” Canady v. Erbe Elektromedizin GmbH, 271 F. Supp. 2d 64, 78 (D.D.C. 2002). Patent

validity is a commonly asserted defense, and courts are cognizant of Congress’s intent to utilize the

PTO’s specialized expertise to reduce costly and time-consuming litigation. Id.

Courts are not required to stay judicial proceedings pending re-examination of a patent. It is,

however, within a district court’s discretion to do so. See, e.g., Ethicon, Inc. v. Quigg, 849 F.2d

1422, 1426-27 (Fed. Cir. 1988) (citations omitted) (“Courts have inherent power to manage their

dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO

examination”); Patlex Corp. v. Mossinghoff, 758 F.2d 594, 603 (Fed. Cir. 1985); Telemac Corp. v.

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Teledigital, Inc., 450 F. Supp. 2d 1107, 1110 (N.D. Cal. 2006) (Wilken, J.). There is “a liberal

policy in favor of granting motions to stay proceedings pending the outcome” of re-examination,

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); see

also Robert H. Harris Co. v. Metal Mfg. Co., 19 U.S.P.Q. 2d 1786, 1788 (E.D. Ark. 1991) (“[t]he

legislative history surrounding the establishment of the reexamination proceeding evinces

congressional approval of district courts liberally granting stays”). 

However, a court is under no obligation to delay its own proceedings by yielding to ongoing

PTO patent reexaminations, regardless of their relevancy to infringement claims which the court

must analyze. See NTP, Inc. v. Research In Motion, Ltd., 397 F.Supp.2d 785, 787 (E.D. Va. 2005)

(citing Viskase Corp. v. Am. Nat'l Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001)) . There is no per

se rule that patent cases should be stayed pending reexaminations, because such a rule “would invite

parties to unilaterally derail” litigation. Soverain Software LLC v. Amazon.Com, Inc., 356 F. Supp.

2d 660, 662 (E.D. Tex. 2005).

In determining whether to grant a stay pending re-examination, courts consider: (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. See Telemac, 450 F. Supp. 2d at 1110; KLATencor Corp. v. Nanometrics, Inc., 2006 WL 708661, at *2 (N.D. Cal. 2006); IMAX Corp. v. InThree, Inc., 385 F. Supp. 2d 1030, 1032 (C.D. Cal. 2005). A trial court’s order staying an

infringement suit pending the completion of re-examination proceedings is not appealable. See

Gould v. Control Laser Corp., 705 F.2d 1340, 1341 (Fed. Cir. 1983), cert. denied, 464 U.S. 935

(1983).

ANALYSIS

I. Discovery has not begun and no trial date has been set.

The first factor examines “whether discovery is complete and whether a trial date has been

set.” Here, the parties have not yet appeared at a scheduling conference under Federal Rule of Civil

Procedure 16. They have not conducted any discovery, nor filed any dispositive motions. Likewise,

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the Court has not set a briefing schedule for claim construction nor a trial date. Courts have noted

“there is ‘a liberal policy in favor of granting motions to stay proceedings pending the outcome’ of

reexamination, especially in cases that are still in the initial stages of litigation and where there has

been little or no discovery.” Telemac at 1111 (quoting ASCII Corp. v. STD Entm’t USA, Inc., 844

F.Supp. 1378, 1381 (N.D. Cal. 1994)). In fact, many courts have granted stays well beyond

discovery’s completion, well into litigation, and very close to trial. See eSoft at 788 (discussing

cases). 

On the other hand, the parties have a significant pre-litigation history that involves time and

expense invested in the dispute over the alleged infringement and invalidity of the patent. They

began communicating about the alleged infringement of the ‘017 patent over a year and a half ago.

[Shimoda Decl. ¶2]. Vision Dynamics was apparently aware of the prior art references on which it

principally relies in reexamination at that time, but did not request reexamination in the PTO until

after this action was filed by Tokuyama. Moreover, the request for reexamination has not even been

granted yet. 

Yet, in terms of the instant proceedings rather than any pre-litigation history, this case is in

its initial stages and this factor weighs in favor of issuing a stay.

II. The pending reexamination will not resolve all the issues in the litigation.

The second factor examines “whether a stay will simplify the issues in question and trial of

the case.” 

The Federal Circuit has explained that a major “purpose of the reexamination

procedure is to eliminate trial of that issue (when the claim is canceled) or facilitate

trial of that issue by providing the district court with the expert view of the PTO

(when a claim survives the reexamination proceedings).”

eSoft at 787 (quoting Gould, 705 F.2d at 1342). 

Statistically, the defendant is correct that the PTO is likely to grant its request for an ex parte

reexamination. The PTO grants 92% of all requests. [Pl.’s Opp’n, Shimoda Decl., Ex. C]. Of the

claims that are reexamined, the PTO confirms all claims in approximately 25% of all

reexaminations, cancels all claims in approximately 11% of them, and changes at least some claims

in approximately 64% of them. U.S. Pat. & Trademark Office, Quarterly Ex Parte Reexamination

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The average reexamination pendency is two years. [Shimoda Decl., Ex. C].

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Filing Data Rep. (June 30, 2008); see also Telemac at 1110 (discussing data through 1992). The

odds favor at least some of the claims in dispute being cancelled by reexamination. While the Court

is not bound by the PTO’s determination, its expertise is persuasive, and would likely save the

parties and the Court considerable time, effort, and expenditure in resolving this matter. 

If the Court stopped here in its analysis, then the second factor appears to weigh in favor of

staying this matter. But a stay pending reexamination does not simplify the issues and reduce the

complexity of the trial in every case. To do so, the outcome of the reexamination must “finally

resolve all issues in the litigation.” Gladish v. Tyco Toys Inc., 1993 WL 625509 *2 (E. D.Cal.1993);

see also IMAX Corp. v. In-Three, Inc. 385 F.Supp.2d 1030, 1032 -1033 (C.D.2005)(denying motion

to stay in part because the court must still address defendant’s counterclaims, some of which are

completely unrelated to patent infringement); Enprotech Corp. v. Autotech Corp., 1990 WL 37217,

(N.D.Ill.1990) (denying motion to stay in part because PTO would not resolve claims of inequitable

conduct).

Here, Vision Dynamics has alleged a counterclaim for various antitrust violations. Although

one allegation refers specifically to the invalidity of the patent, and so is “related to the patent in

reexamination” (Reply, p. 11), the remainder of the claim alleges “bad faith,” “illegal” and

“predatory and anticompetitive conduct,” none of which is within the scope of the PTO. Regardless

of the result of the reexamination, issues related to Vision Dynamics’ antitrust counterclaim will still

need to be resolved by the Court. Reexamination, therefore, will not “finally resolve all issues in the

litigation.” Gladish at *2. The second factor, on the balance, weighs more in favor of proceeding

with the litigation. 

III. A stay would neither unduly prejudice nor advantage the parties.

The third factor examines “whether a stay would unduly prejudice or present a clear tactical

disadvantage to the nonmoving party.” Here, Tokuyama argues that by staying the action, the Court

would reward Vision Dynamics for “unexcused delay in seeking reexamination.” [Opp’n, p. 5]. 

Though true that the reexamination process is lengthy,1

 “[m]ere delay, without more though, does

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not demonstrate undue prejudice.” Ho Keung Tse v. Apple Inc., 2007 WL 2904279, 4

(N.D.Cal.2007) (citing Nanometrics, 2007 WL 627920 *3). There is no evidence that Defendant has

requested reexamination as a dilatory tactic. Vision Dynamics filed for reexamination of the patent

21 days after the Complaint was filed. This is not a case where, for example, a party requested

reexamination only after either an unfavorable ruling by the court or a favorable ruling by the PTO.

See, e.g., Fresenius Medical Care Holdings, Inc. v. Baxter Intern., Inc., 2007 WL 1655625, *6

(N.D.Cal.2007) (denying stay where party waited until it had had a trial, had litigated motions for

judgment as a matter of law and for a new trial on the merits, and then had a favorable PTO action to

request a stay).

This factor does not tilt the scales in favor of either staying the action or proceeding. Thus,

taking all of the factors into consideration, the Court concludes that a stay of the proceedings

pending the reexamination of the patent is not warranted.

CONCLUSION

Defendant’s Motion to Stay the Litigation for the Reexamination of the ‘017 Patent is

DENIED.

 IT IS SO ORDERED.

Dated: 10/2/08 

SAUNDRA BROWN ARMSTRONG 

United States District Judge

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