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Surfcast, Inc. v. Microsoft Corporation

United States District Court, D. Maine

November 14, 2014

SURFCAST, INC., Plaintiff,
v.
MICROSOFT CORPORATION, Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO STAY

JON D. LEVY, District Judge.

I. PROCEDURAL BACKGROUND

SurfCast, Inc. ("SurfCast") brought this action against Microsoft Corporation ("Microsoft") alleging infringement of United States Patent No. 6, 724, 403 ("the 403 Patent") by a complaint filed October 30, 2012. ECF No. 1. Microsoft has counterclaimed against SurfCast, asserting both that the 403 Patent is invalid and that the patent is unenforceable under the doctrines of inequitable conduct and unclean hands. ECF No. 126.

In May 2013, Microsoft filed petitions with the United States Patent and Trademark Office ("PTO") requesting inter partes review ("IPR") of the 403 Patent. See ECF No. 146-1; ECF No. 150. The PTO issued a decision granting review in November 2013. Id. Soon thereafter, SurfCast moved to stay this litigation until the IPR reached a Final Written Decision. ECF No. 150. The Court (Woodcock, C.J.) denied the motion concluding, in part, that "waiting for the entire process to proceed through the PTO channels (including the likely appeals to the Federal Circuit) will likely add confusion and complexity." SurfCast, Inc. v. Microsoft Corp., 6 F.Supp. 3d 136, 143 (D. Me. 2014). The Court further observed that "[i]f the parties proceed briskly to dispositive motions and trial, the Federal Circuit will have the advantage of the outcome in this Court when considering the result of the IPR process." Id.

The current procedural posture of this case is that discovery has closed and a Markman order has been entered. Microsoft's motions for summary judgment on the issues of infringement and invalidity, SurfCast's motion to bifurcate Microsoft's inequitable conduct and unclean hands counterclaims, and the parties' respective Daubert motions have been fully briefed and were scheduled for hearing on November 5, 2014. A trial date has not been scheduled.

On October 14, the PTO issued its Final Written Decision in the IPR, finding that the 403 Patent is unpatentable as both obvious and anticipated by multiple prior art references. ECF No. 287-1. The PTO also denied SurfCast's request to amend the claims of the 403 Patent. Id. In response to the decision, Microsoft filed its Emergency Motion to Take the November 5, 2014 Hearing Off Calendar and its Motion to Stay the proceedings until any appeal of the PTO's decision to the Federal Circuit is completed. ECF No. 291; ECF No. 290. A hearing was held on the motions on November 5, 2014, in lieu of the hearing previously scheduled for that day, and it is these motions that are determined by this order.

II. DISCUSSION

Because inter partes review is a relatively new process, the Federal Circuit has not yet spoken on the appropriate standard for evaluating motions to stay a related District Court action while IPR involving the same patent or patents is pending. District Courts have continued to apply the framework governing stays with respect to the administrative process that preceded IPR, inter partes reexamination.[1] See, e.g., SurfCast, 6 F.Supp. 3d at 143; Universal Electronics, Inc. v. Universal Remote Control, Inc., 943 F.Supp.2d 1028, 1030-31 (C.D. Cal. 2013); Semiconductor Energy Lab. Co., Ltd. v. Chimei Innolux Corp., 2012 WL 7170593, 1 n.1 (C.D. Cal. Dec. 19, 2012) ("The Court sees no reason why the three factor assessment would not still be relevant."). Under this framework, I must consider: (1) the stage of the litigation, including whether discovery is complete and a trial date has been set; (2) whether a stay will simplify the issues in question and the trial of the case; and (3) whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party. Universal Electronics, 943 F.Supp.2d at 1030-31. The analysis looks to the totality of the circumstances, see Pi-Net Intern., Inc., v. Hertz Corp., 2013 WL 7158011, 1 (C.D. Cal. June 5, 2013), and while prior decisions may prove instructive, the inquiry is largely case specific, see TPK Touch Solutions, Inc. v. Wintek Electro-Optics Corp., 2013 WL 6021324, 1 (N.D. Cal. Apr. 28, 2014).

A. Stage of the Litigation

The timing factor "requires the court to consider the progress already made in the case." Personalweb Techs., LLC v. Google, Inc., 2014 WL 4100743, 4 (N.D. Cal. Aug. 20, 2014). The earlier the stage of proceedings, the greater the reason to grant a stay. See id. (finding the timing factor was "neutral" when discovery was closed and a Markman order had been issued, but before motions for summary judgment were briefed); Universal Electronics, 943 F.Supp.2d at 1031-32 (finding the facts "weigh[ed] against a stay" where a Markman order had been issued and discovery had begun but not yet closed).

Here, procedural circumstances press on both sides of the scale. On the one hand, a trial date has not been set and a large volume of work remains before trial including the resolution of the pending summary judgment, Daubert, and other motions, as well as likely motions in limine and other pre-trial proceedings. On the other hand, discovery is complete, a Markman order has been issued, see SurfCast, 6 F.Supp. 3d at 139, and briefing is complete on the pending summary judgment, Daubert, and related motions.

Ordinarily, the significant progress made to date would weigh against the grant of a stay. However, in the event this case is not stayed, I would grant Microsoft's request to reopen discovery and briefing on the outstanding motions in order for the parties to address the Final Written Decision's relevance to the motions. See ECF No. 291 at 6; Inventio AG v. Otis Elevator Co., 2011 WL 3359705, 2 (S.D.N.Y. June 23, 2011) (noting inter partes reexamination materials were "highly relevant" to issue of objective recklessness); Plumley v. Mockett, 836 F.Supp.2d 1053, 1075 (C.D. Cal. 2010) (noting relevance of PTO decision to grant inter partes reexamination request to issue of willful infringement in summary judgment analysis). Accordingly, I conclude that the timing factor is neutral as to whether a stay should be granted.

B. Simplification

Turning to the potential for a stay to simplify the issues, a "stay is particularly justified where the outcome [of PTO proceedings] would be likely to assist the court in determining patent validity and, if the claims were canceled... would eliminate the need to try the infringement issue." In re Cygnus Telecommunications Tech., LLC, 385 F.Supp.2d 1022, 1023 (N.D. Cal. 2006) (conducting stay analysis in the inter partes reexamination context). This is particularly true where all of the patent claims before the ...


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