Parsons Xtreme Golf LLC v. Taylor Made Golf Co. Inc.

          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 ...