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Peloton Interactive, Inc. v. Flywheel Sports, Inc.

United States District Court, E.D. Texas, Marshall Division

August 14, 2019

PELOTON INTERACTIVE, INC., Plaintiff,
v.
FLYWHEEL SPORTS, INC., Defendant.

          MEMORANDUM ORDER

          ROY S. PAYNE UNITED STATES MAGISTRATE JUDGE.

         Before the Court is Defendant Flywheel Sports, Inc.'s (“Flywheel”) Motion to Stay Pending Inter Partes Review Proceedings (“Motion to Stay”) (Dkt. No. 62). The Court concludes that Flywheel has not sufficiently shown that a stay would simplify the issues within the case, and the Court concludes that a stay would result in significant prejudice for Plaintiff Peloton Interactive, Inc. (“Peloton”) based on the facts in this case. Accordingly, the Court DENIES Flywheel's Motion to Stay.

         I. BACKGROUND

         Peloton asserts claims of patent infringement against Flywheel, asserting U.S. Patent Nos. 9, 174, 085 (“'085 Patent”), 9, 233, 276 (“'276 Patent”), 9, 861, 855 (“'855 Patent”), and 10, 322, 315 (“'315 Patent”). The Patent Trial and Appeal Board (“PTAB”) instituted Inter Partes Review (“IPR”) proceedings for the '085, '276, and '855 Patents. (Dkt. Nos. 62-3, 62-4, 62-5). The '315 Patent issued on June 18, 2019. '315 Patent at [45]. Peloton represents that the '315 Patent is part of the same patent family as the '085, '276, and '855 Patents and that the '315 Patent is a direct continuation of those patents. (Dkt. No. 64 at ¶ 108.) Additionally, Flywheel represented at the August 12, 2019 hearing that it filed an IPR petition for the '315 Patent on Friday, August 9, 2019.

         II. APPLICABLE LAW

         “The party seeking a stay bears the burden of showing that such a course is appropriate.” Realtime Data, LLC v. Hewlett Packard Enter. Co., No. 6:16-cv-00086-RWS-JDL, 2017 WL 3712916, at *3 (E.D. Tex. Feb. 3, 2017). “The decision of whether to extend a stay falls solely within the court's inherent power to control its docket.” Pers. Audio LLC v. Google, Inc., No. 1:15-cv-350-RHC, 230 F.Supp.3d 623, 626 (E.D. Tex. 2017) (citing ThinkOptics, Inc. v. Nintendo, No. 6:11-cv-455-LED, 2014 WL 4477400, at *1 (E.D. Tex. Feb. 27, 2014)); accord Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (“Courts have inherent power to manage their dockets and stay proceedings including the authority to order a stay pending conclusion of a PTO reexamination.”); Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). In determining whether to stay litigation pending IPR, courts within this district have considered three factors: (1) “whether the stay will simplify issues in question in the litigation, ” (2) “whether the stay will unduly prejudice the nonmoving party or present a clear tactical disadvantage to the nonmoving party, ” and (3) “whether the proceedings before the court have reached an advanced stage, including whether discovery is complete and a trial date has been set. . . .” Id. (citing Trover Grp., Inc. v. Dedicated Micros USA, No. 2:13-CV-1047-WCB, 2015 WL 1069179, at *2 (E.D. Tex. Mar. 11, 2015)). Whether a stay “will result in simplification of the issues before a court is viewed as the most important factor when evaluating a motion to stay.” Uniloc USA, Inc. v. Acronis, Inc., No. 6:15-CV-01001-RWS-KNM, 2017 WL 2899690, at *3 (E.D. Tex. Feb. 9, 2017) (citing Intellectual Ventures II LLC v. Kemper Corp., No. 6:16-cv-0081-JRG, 2016 WL 7634422, at *2 (E.D. Tex. Nov. 7, 2016) (citing NFC Tech. LLC v. HTC Am., Inc., No. 2:13-CV-1058-WCB, 2015 WL 1069111, at *4 (E.D. Tex. Mar. 11, 2015))).

         III. ANALYSIS

         Based on the facts of this case, the Court concludes that a stay would not be appropriate. The Court will address each of the three stay factors-simplification, prejudice, and the stage of the case-below.

         a. A stay would not significantly simplify the issues of the present litigation, suggesting that a stay is not appropriate.

         This factor weighs against a stay in the present case for several reasons. First, no institution decision has been made for the '315 Patent. Second, SAS Inst., Inc. v. Iancu, 138 S.Ct. 1348 (2018) (hereinafter “SAS”) precluded the PTAB from instituting IPRs for only a portion of the patent claims, so any institution decision occurring after SAS provides a weaker inference that the PTAB will determine that all challenged claims are unpatentable. Thus, institution decisions for the '085, '276, and '855 Patents are less helpful in indicating that IPRs will result in a simplification of issues than they would have been before SAS. Third, Flywheel indicated at the August 12, 2019 hearing that it intended to present several additional invalidity theories if the instituted IPR proceedings are not fully successful, so the scope of the invalidity contentions is significantly broader than the invalidity theories presented for IPR proceedings. Each of these reasons suggest that this factor weighs against a stay.

         First, the PTAB has not yet instituted review for the '315 Patent. Courts in this district have often concluded that the simplification factor weighed against a stay where the PTAB had not instituted IPR proceedings for all asserted patents. See, e.g., Cellular Commc'ns Equip. LLC v. HTC Corp., No. 6:16-CV-475-KNM, 2018 WL 4261194, at *3 (E.D. Tex. May 8, 2018) (concluding that simplification factor weighed against a stay where IPR had been instituted for only two of the three patents-in-suit). The PTAB has not instituted IPR proceedings for all asserted patents, this suggests that a stay is not appropriate.

         For the second reason provided above, the Court concludes that the Supreme Court's decision in SAS alters the Motion to Stay analysis and makes institution decisions less indicative that all claims will be found unpatentable. “If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner. . . .” 35 U.S.C. § 318. In SAS, the Supreme Court interpreted this language to mean that the PTAB “must address every claim the petitioner has challenged.” 138 S.Ct. at 1354. Before SAS, the PTAB could partially institute IPR proceedings, instituting review of some challenged claims but not others. After SAS, the PTAB cannot partially institute IPR proceedings-the PTAB must now institute IPR proceedings as to all challenged claims.

         Since the PTAB can no longer partially institute IPR proceedings, institution decisions are not as useful as they were in the past for providing an indication of whether all claims would be found unpatentable. Because the PTAB could partially institute review before SAS, their institution decisions provided a much stronger indication that all claims for which review was instituted would be found unpatentable. This is because the PTAB could decline institution for certain challenged claims if the PTAB concluded that the petitioner had not shown a reasonable likelihood of prevailing for those claims. When the PTAB decides to institute review after SAS, it must institute review for all challenged claims even if the PTAB concludes at the petition stage that the petitioner did not show a reasonable likelihood that it would prevail for some challenged claims. Flywheel argues that the PTAB may still decline institution of IPR proceedings even if it concludes that the petition has shown a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition. However, the Court still concludes that an institution decision is less effective as a barometer for the issue of whether the PTAB will eventually determine that the challenged claims are unpatentable after SAS.

         With respect to this case, the fact that the PTAB has instituted IPR proceedings for three of the four asserted patents still permits an inference that a stay would simplify the case to ...


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