KIPB LLC v. Samsung Electronics Co., Ltd.

          MEMORANDUM ORDER

          ROY S. PAYNE UNITED STATES MAGISTRATE JUDGE.

         Before the Court is the Motion to Stay Case Pending Ex Parte Reexamination (“Motion to Stay”) (Dkt. No. 37), which was filed by Defendants Qualcomm Global Trading Pte. Ltd., Samsung Austin Semiconductor LLC, Samsung Electronics America, Inc., Samsung Electronics Co., Ltd., Samsung Semiconductor, Inc. (collectively “Defendants”). After consideration, the Court DENIES Defendants' Motion to Stay.

         “The Supreme Court has long recognized that district courts have broad discretion to manage their dockets, including the power to grant a stay of proceedings.” Murata Mach. USA v. Daifuku Co., 830 F.3d 1357, 1362 (Fed. Cir. 2016) (quoting Procter & Gamble Co. v. Kraft Foods Glob., Inc., 549 F.3d 842, 848-49 (Fed. Cir. 2008) (citing Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936))). In deciding whether to grant a stay pending inter partes review, this Court typically considers: “(1) whether the stay will unduly prejudice the nonmoving party; (2) whether the proceedings before the court have reached an advanced stage, including whether discovery is complete and a trial date has been set; and (3) whether the stay will likely result in simplifying the case before the court.” Intellectual Ventures II LLC v. BITCO Gen. Ins. Corp., No. 6:15-CV-59, 2016 WL 4394485, at *2 (E.D. Tex. May 12, 2016) (quoting NFC Techs. LLC v. HTC Am., Inc., No. 2:13-cv-1058-WCB, 2015 WL 1069111, at *2 (E.D. Tex. Mar. 11, 2015) (Bryson, J.)). While these factors pertain to stays pending inter partes review, the analysis is substantially the same for ex parte reexamination proceedings.

         I. SIMPLIFICATION OF THE ISSUES

         Defendants argue that “[s]taying this case would substantially simplify issues and foster judicial economy” because “cancellation of the asserted claims would be binding and dispositive to the entire case and resolve all issues raised in Plaintiff's complaint.” (Dkt. No. 37 at 7.) Defendants argue that “the PTO has issued a final office action rejecting all asserted claims in this case, ” increasing the likelihood that a stay would result in a simplification of issues. (Id.) Defendants argue that the rejection of the claims was a thorough rejection by three experienced Examiners. (Id.) Defendants argue that, in the event the final rejection is maintained after appeal, this would result in an elimination of validity, infringement, and damages issues. (Id. at 8.)

         KIPB argues that “collateral estoppel precludes Defendants from challenging invalidity (or infringement).” (Dkt. No. 42 at 6.) KIPB therefore argues that the invalidity issues will eventually be resolved through collateral estoppel.^[1] (Id.) KIPB cites to cases from this district, arguing that the cases suggest that this factor does not weigh in favor of a stay (the Court will address these cases further below). (Id. at 7.) KIPB also argues that the Court should not weigh the chance of success for the PTAB proceedings in determining whether to grant a stay. (Id. at 7-8 (citing VirtualAgility, Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1313 (Fed. Cir. 2014) (“[D]istrict courts have no role in reviewing the PTAB's determinations regarding the patentability of claims[.]”)).) KIPB argues that ex parte reexamination proceedings do not have an estoppel effect, limiting the amount of simplification that would result from a stay. (Id. at 8.)

         The “simplification of the issues” factor is typically the most important of the three factors. BITCO, 2016 WL 4394485, at *3 (quoting NFC, 2015 WL 1069111, at *2) (“[T]he most important factor bearing on whether to grant a stay in this case is the prospect that the inter partes review proceeding will result in simplification of issues before the Court.”). In analyzing whether a stay is appropriate due to parallel proceedings before the PTAB, “district courts have no role in reviewing the PTAB's determinations regarding the patentability of claims . . . .” See VirtualAgility, 759 F.3d at 1313.

         As discussed by KIPB, courts within this district have previously addressed the simplification of the issues factor in the ex parte reexamination context. In Eon Corp.IP Holdings, LLC v. Sensus USA Inc., Magistrate Judge Love concluded that a stay was unlikely to simplify the issues in the case or create any judicial efficiencies. No. 6:09-CV-116, 2009 WL 9506927, at *3 (E.D. Tex. Dec. 18, 2009). Judge Love explained that “[i]t is not uncommon for claims to be initially rejected in the re-examination process.” Id. He also stated that, in a final action as of 2008, “all claims of a patent have been cancelled in only 11 % of ex parte reexaminations; it is more than twice as likely that all claims will be confirmed.” Id. Those percentages still are approximately the same today, with the most recent ex parte reexamination statistics showing that all claims were confirmed in 21% of reexamination certificates, all claims were cancelled in 12 % of reexamination certificates, and claims were changed in 67 % of reexamination certificates. Ex Parte Reexamination Filing Data, September 30, 2018, https://www.uspto.gov/learning-and-resources/statistics/reexamination-information.

         In MacroSolve, Inc. v. Antenna Software, Inc., Magistrate Judge Mitchell addressed a situation where only a request for ex parte reexamination had been filed. No. 6:11-CV-00287-MHS-KNM, 2013 WL 7760889, at *2 (E.D. Tex. Aug. 30, 2013). Judge Mitchell stated that:

the reexamination is far from complete. The ultimate outcome is unpredictable. While it is possible “some of the claims may change in this case, the interests of justice will be better served by dealing with that contingency when and if it occurs, rather than putting this case indefinitely on hold.” Thus, this factor weighs against granting a stay.

Id. (quoting EMG Tech., LLC v. Apple, Inc., 2010 U.S. Dist. LEXIS 144656, at *8-9 (E.D. Tex. Nov. 15, 2010)).

         KIPB also points out that ex parte reexamination proceedings do not have an estoppel effect, making those proceedings distinguishable from inter partes review proceedings, which do have an estoppel effect in certain situations pursuant to 35 U.S.C. § 315. (Dkt. No. 42 at 8 (citing Eon Corp IP Holdings, 2009 WL 9506927 at *2 (“[E]x parte reexamination proceedings have no estoppel effect.”)).) Without any estoppel provision in place for ex parte reexamination proceedings, those proceedings are even less likely to result in simplification of the issues.

         Here, the Court concludes that the outcome of any PTAB appeal is far from clear at this time and that it would be improper for the Court to speculate as to the result of that appeal at this stage. This conclusion falls in line with the Federal Circuit's instruction that “district courts have no role in reviewing the PTAB's determinations regarding the patentability of claims.” VirtualAgility, Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1313 (Fed. Cir. 2014). This conclusion is also consistent with the decisions reached by other courts within this district that were discussed above. See MacroSolve, 2013 WL 7760889, at *2; Eon Corp, 2009 WL 9506927, at *3. The Court also finds KIPB's argument regarding the lack of any estoppel effect for ex parte reexamination proceedings to be persuasive. Weighing all of this together, the Court concludes that this factor weighs against a stay. Id.

         II. WHETHER THE STAY WILL UNDULY PREJUDICE ...