United States District Court, D. Arizona
ORDER
Dominic W. Lanza United States District Judge.
This
matter was reassigned to the Court on October 31, 2018. (Doc.
171.) At the time, three matters were fully briefed and
awaiting resolution: (1) Plaintiff Parsons Xtreme Golf
LLC's (“PXG”) motion for leave to amend its
invalidity and infringement contentions (Doc. 134), (2)
Defendant Taylor Made Golf Company, Inc.'s (“Taylor
Made”) motion for leave to amend its invalidity
contentions (Doc. 154), and (3) the parties' submission
of joint proposed letters rogatory (Doc. 163). Additionally,
two more motions have become fully briefed since the
reassignment: (1) Taylor Made's motion to stay pending
inter partes review (Doc. 164) and (2) PXG's
motion to de-designate materials (Doc. 169). Finally, Taylor
Made has also filed a motion to seal the exhibits to the
de-designation motion (Doc. 176).[1]
As
explained below, the Court will grant Taylor Made's
motion to stay. A stay is appropriate because the Patent and
Trademark Office has already agreed to conduct inter
partes review (“IPR”) of a substantial
majority of the claims at issue, Taylor Made exhibited
diligence (both in seeking IPR and in requesting a stay once
the IPR process began), the case was in its early stages at
the time the stay was requested, and the Court has not yet
held Markman hearings or set a trial date. Issuing a
stay is the norm, rather than the exception, under these
circumstances. Additionally, the recent reassignment of this
case undermines PXG's argument that a stay would squander
the Court's institutional knowledge. It is also relevant
that Congress's intent in creating the IPR system was to
create an improved process for evaluating patent claims, by
allowing subject matter experts to render binding decisions
on a relatively expedited and cost-efficient basis. Issuing a
stay here-rather than the alternative of requiring the
parties to engage in costly, parallel litigation of
overlapping issues in two different forums-will best
effectuate Congress's intent. See Fed. R. Civ.
P. 1 (the rules of civil procedure should be construed to
promote the “just, speedy, and inexpensive
determination of every action and proceeding”).
Before
entering the stay, however, the Court will grant PXG's
motion to de-designate. The dispute concerns Taylor
Made's effort to designate certain discovery materials as
“Confidential-For Counsel Only”-a designation
that prevents four of PXG's key principals from reviewing
these materials. PXG contends this designation is unjustified
and prejudicial (because its principals need to review the
documents to make informed decisions about settlement and
litigation strategy). As explained below, the Court agrees
that Taylor Made has failed to justify this heightened level
of restriction and therefore orders Taylor Made to
re-designate the materials as “Confidential, ”
which will allow PXG's principals to review them.
Finally,
because this matter will be stayed pending the outcome of the
IPR process, the Court finds it unnecessary to resolve the
parties' remaining pending motions. Specifically, there
is no need to decide, at this juncture, whether the parties
should be permitted to amend their invalidity and
infringement contentions because the scope of this litigation
is likely to be different once the IPR process is complete.
For similar reasons, the Court declines, at this juncture, to
issue the proposed letters rogatory. The issuance of those
letters is likely to cause government officials (both here
and in Japan) to expend substantial resources-an expenditure
that may prove unnecessary depending on the outcome of the
IPR proceedings.
A.
The Stay Request
I.
Background
a.
Inter Partes Review
In
2011, Congress enacted the Leahy-Smith America Invents Act,
which replaced the former inter partes reexamination
proceeding with the IPR process. See 35 U.S.C.
§§ 311-319; see generally Oil States Energy
Servs., LLC v. Greene's Energy Group, LLC, 138 S.Ct.
1365, 1370-71 (2018); Cuozzo Speed Techs., LLC v.
Lee, 136 S.Ct. 2131, 2137 (2016). To institute IPR of a
patent, a party other than the patent owner files a petition
with the Patent and Trademark Office (“PTO”).
See 35 U.S.C. § 311(a).[2] The petitioner “can
request cancellation of ‘1 or more claims of a
patent' on the grounds that the claim fails the novelty
or nonobviousness standards for patentability. The challenges
must be made ‘only on the basis of prior art consisting
of patents or printed publications.' If a petition is
filed, the patent owner has the right to file a preliminary
response explaining why inter partes review should not be
instituted.” Oil States Energy Servs., 138
S.Ct. at 1371 (citations omitted).
Congress's
intent in creating the IPR process was “‘to
establish a more efficient and streamlined patent system that
will improve patent quality and limit unnecessary and
counterproductive litigation costs' and ‘to create
a timely, cost-effective alternative to
litigation.'” PersonalWeb Techs., LLC v.
Facebook, Inc., 2014 WL 116340, *2 (N.D. Cal. 2014)
(quoting Changes to Implement Inter Partes Review
Proceedings, Post-Grant Review Proceedings, and Transitional
Program for Covered Business Method Patents, 77 Fed.
Reg. 48, 680 (Aug. 14, 2012), codified at 37 C.F.R.
§§ 42.100 et seq.). As the Supreme Court
has explained, “the purpose of the [IPR] proceeding is
not quite the same as the purpose of district court
litigation. . . . [I]n addition to helping resolve concrete
patent-related disputes among parties, inter partes
review helps protect the public's ‘paramount
interest in seeing that patent monopolies . . . are kept
within their legitimate scope.'” Cuozzo Speed
Techs., 136 S.Ct. at 2144 (citation omitted).
The IPR
process “affords at least three advantages to the
parties and the district court in any corollary civil
action.” PersonalWeb Techs., 2014 WL 116340 at
*2. The first advantage is that “IPR provides a path to
receive expert guidance from the PTO under a more accelerated
timeline than the previous . . . procedure: petitioners must
file for IPR within one year of being served with a patent
infringement complaint and IPR, if instituted, will typically
conclude within 18 months of the filing date. In contrast,
the average time from filing to conclusion of the previous .
. . procedure ranged from 28.9 to 41.7 months.”
Id. (citations omitted); see also Wonderland
Nursery Goods Co. v. Baby Trend, Inc., 2015 WL 1809309,
*1-2 (C.D. Cal. 2015) (noting that the IPR “procedure
is designed . . . to reduce to 12 months the time the PTO
spends reviewing validity, from the previous reexamination
average of 36 months”). The second advantage arises
from IPR's heightened standard for granting review. IPR
is available only if the PTO finds “there is a
reasonable likelihood that the petitioner would
prevail with respect to at least 1 of the claims challenged
in the petition.” 35 U.S.C. § 314(a) (emphasis
added). In contrast, under the previous system, a petitioner
merely needed to demonstrate a “substantial new
question of patentability.” The upshot of this new,
heightened standard is that the decision to institute IPR
reflects an implicit judgment by the PTO that at least one of
the subject claims is likely to be modified or cancelled.
This “provides some assurance that the delay suffered
as a result of IPR will be worthwhile.” PersonalWeb
Techs., 2014 WL 116340 at *2; see also Wonderland
Nursery, 2015 WL 1809309 at *1 (citation omitted) (the
new “standard for granting review is more stringent
than the previous ‘substantial new question of
patentability' standard”). The third advantage is
that “IPR imposes an estoppel requirement that
precludes the petitioner from asserting invalidity, during a
later civil action, ‘on any ground that the petitioner
raised or reasonably could have raised during that inter
partes review.' This critical limitation results in
a more streamlined litigation and reduces the likelihood of
inconsistent judgments.” PersonalWeb Techs.,
2014 WL 116340 at *2 (quoting 35 U.S.C. § 315(e)(2)).
b.
Relevant Facts Concerning the Stay Request
On
September 12, 2017, PXG filed a complaint alleging that
Taylor Made's P790 golf irons infringe eight patents held
by PXG (Nos. 8, 961, 336; 9, 199, 143; 9, 345, 938; 9, 346,
203; 9, 364, 727; 9, 533, 201; 9, 610, 481; and 9, 675, 853).
(Doc. 1.) Simultaneously, PXG moved for a temporary
restraining order (“TRO”). (Doc. 5.) The court
denied the TRO request on September 15, 2017. (Doc. 21.) On
September 28, 2017, PXG withdrew its motion for a preliminary
injunction. (Doc. 30.)
On
December 4, 2017, PXG amended its complaint to add three more
patents (Nos. 9, 764, 208; 9, 468, 821; and 9, 814, 952).
(Doc. 47.) PXG again amended its complaint on February 2,
2018, adding U.S. Patent No. 9, 878, 220 and withdrawing the
'208 patent, leaving eleven patents at issue. (Doc. 76.)
On February 9, 2018, PXG served Taylor Made with infringement
contentions identifying a total of 93 asserted claims. (Doc.
83; see Doc. 164 at 3.)
Taylor
Made petitioned for IPR on two of PXG's patents in
February 2018, three in March 2018, four in April 2018 (one
of these patents was also included in a September 2018
petition), one in August 2018, and one in October 2018. When
Taylor Made filed its stay request, the PTO had instituted
IPR on five patents, and by the time Taylor Made filed its
reply, the PTO had instituted IPR on another four patents. At
present, the instituted IPR proceedings cover 69 of PXG's
93 asserted claims. Additionally, Taylor Made contends that
it expects the PTO to decide whether to institute IPR on the
remaining two patents by early May 2019. (Doc. 177 at 1.)
At the
time the stay request was filed, discovery was underway but
in its early stages-only one fact deposition had been taken,
only some expert discovery had taken place, and only a
portion of documents had been produced. The parties had
completed Markman briefing, but the Markman
hearing had not been scheduled. The parties had not begun
summary judgment briefing, and a trial date had not been set.
The parties agreed to extend this briefing schedule on the
stay request, and by the time PXG filed its response, more
documents had been produced and four more fact witness
depositions had been taken.
II.
Legal Standard
“A
court's power to stay proceedings is incidental to the
power inherent in every court to control the disposition of
the causes on its docket with economy of time and effort for
itself, for counsel, and for litigants. In deciding how best
to exercise this inherent power, the court must weigh
competing interests and maintain an even balance.”
Drink Tanks Corp. v. GrowlerWerks, Inc., 2016 WL
3844209, *2 (D. Or. 2016) (citation and internal quotation
marks omitted).
“With
regard to deciding whether to stay litigation pending IPR,
courts generally consider the following three 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.” Id. (citation omitted).
Although courts generally “apply a liberal policy in
favor of granting motions to stay proceedings pending the
outcome of PTO IPR proceedings . . . the totality of the
circumstances governs . . . and a stay is never
required.” Id. (citations and internal
quotation marks omitted); cf. Medicis Pharmaceutical
Corp. v. Upsher-Smith Laboratories, Inc., 486 F.Supp.2d
990, 993 (D. Ariz. 2007) (citations omitted) (“Indeed,
district courts within this Circuit have noted that
‘there is a liberal policy in favor of granting motions
to stay proceedings pending the outcome of USPTO
reexamination . . . proceedings.'”).
III.
Analysis
a.
Stage ...