United States District Court, D. New Hampshire
STEVEN J. McAULIFFE, District Judge.
Plaintiff, Emseal Joint Systems, Ltd., brings this consolidated action for patent infringement against Schul International Co., LLC, Willseal, LLC, Ion Management, LLC, and their principals, Brian Iske and Steven Robinson. The patent at issue - U.S. Patent No. 8, 739, 495 ("the '495 patent") - teaches a "fire and water resistant expansion joint system." It contains three independent claims and 34 dependent claims. See Consolidated Complaint, Exhibit A, The '495 Patent (document no. 32-1).
Defendants move the court to stay all proceedings in this action, pending resolution of an ongoing reexamination of the 495 patent by the United States Patent and Trademark Office (USPTO). Plaintiff objects. For the reasons discussed, defendants' motion to stay is granted, subject to plaintiff's right to move the court to lift that stay if the USPTO has not completed its review within six months.
The '495 patent issued on June 3, 2014. In August of 2014, Emseal brought suit against Willseal, Ion Management, Brian Iske, and Steven Robinson alleging that they infringed the '495 patent, engaged in unfair and deceptive trade practices in violation of state law, and were unjustly enriched at Emseal's expense. Civil Action No. 14-cv-359-PB. Subsequently, that action was consolidated with this one, which involves substantially similar claims against Schul International and Steven Robinson. On November 25, 2014, Emseal filed a Consolidated Complaint (document no. 32), essentially restating its claims that defendants: infringed the '495 patent (count one); engaged in unfair and deceptive trade practices by selling products that infringe the '495 patent (count two); and were unjustly enriched by such unlawful conduct (count three). The validity of the '495 patent is, therefore, critical to all three claims.
On November 10, 2014, Schul submitted a Request for Ex Parte Reexamination of the '495 patent to the USPTO. See 37 C.F.R. § 1.510. In December, the USPTO granted that request, concluding that it raises ten "substantial new questions of patentability" affecting all 37 claims of the '495 patent. Order Granting Request for Ex Parte Reexamination (document no. 41-1) at 2. Defendants' move the court to stay this litigation pending resolution of the USPTO's reexamination of the '495 patent. Emseal objects.
Standard of Review
The commencement of a reexamination proceeding does not automatically stay pending patent litigation. See, e.g., Soverain Software LLC v. Amazon.com, Inc., 356 F.Supp.2d 660, 662-63 (E.D. Tex. 2005) (noting that there is no "per se rule that patent cases should be stayed during reexamination because some of the relevant claims may be affected. To do so would not promote the efficient and timely resolution of patent cases, but would invite parties to unilaterally derail timely patent case resolution by seeking reexamination."). Nevertheless, district court's have the inherent authority to manage their dockets, including the power to stay proceedings when, in the court's exercise of its discretion, it deems such a stay appropriate. See, e.g., Clinton v. Jones, 520 U.S. 681, 706 (1997) ("The District Court has broad discretion to stay proceedings as an incident to its power to control its own docket."). See also Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). As the moving parties, defendants bear the burden of showing that a stay is appropriate.
When, as here, the USPTO has determined that a request for reexamination raises one or more substantial new questions of patentability, the argument in favor of a stay becomes more compelling. See, e.g., VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1316 (Fed. Cir. 2014) ("no doubt the case for a stay is stronger after post-grant review has been instituted"). See also Advanced Micro Devices, Inc. v. LG Electronics, Inc., 2015 WL 545534, *2 (N.D. Cal. 2015) ("There is a liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO reexamination or reissuance proceedings. This policy stems from recognition that granting a stay can avoid inconsistent results, narrow the issues, obtain guidance from the PTO, or simply avoid the needless waste of judicial resources, especially if the evidence suggests that the patents-in-suit will not survive reexamination.") (citations and internal punctuation omitted).
In determining whether it is appropriate to stay litigation pending patent reexamination, courts typically consider three factors: (1) whether a stay will unduly prejudice or tactically disadvantage the nonmoving party; (2) whether a stay will simplify the issues in question and streamline trial of the case; and (3) whether the case is at an early stage, including whether discovery is complete and whether a trial date has been set. See CANVS Corp. v. United States, 118 Fed.Cl. 587, 591-92 (2014) (collecting cases).
In support of its argument that the court should not stay these proceedings, Emseal asserts that any delay in litigating its claims would put it at a substantial tactical disadvantage. Specifically, it says a stay would: (1) delay its ability to exclude defendants from producing and marketing (allegedly) infringing products; (2) delay discovery in this matter, leading to the potential loss of essential materials and/or testimony; (3) "avoid" a hearing on its motion to dismiss various counterclaims asserted by defendants and "deprive" it the opportunity to defend itself against defendants' counterclaims; and (4) afford defendants the benefit of a "lower standard of proof (preponderance of evidence) before the USPTO than the higher standard of proof (clear and convincing) before the Court." Plaintiff's Memorandum (document no. 34-1) at 3. None of those arguments is persuasive.
First, while there may well be some delay in Emseal's ability to preclude defendants from selling infringing products (assuming, of course, that the '495 patent is valid and defendants' products actually infringe), Emseal has not sought a temporary restraining order, nor has it moved for preliminary injunctive relief. Such choices imply that Emseal has been content to let this litigation proceed to its conclusion and, should it prevail, that monetary damages will be sufficient to make it whole. See generally Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 850 (Fed. Cir. 2008) (counseling against issuance of a stay if the court has already granted a party's request for preliminary injunctive relief).
Second, while a stay will obviously delay discovery, Emseal fails to show how it will be prejudiced by such a delay. Moreover, Emseal is incorrect in asserting that a stay will prevent the court from addressing its pending motions to dismiss various counterclaims advanced by defendants. It will not. Assuming the '495 patent ...