Generac Power Sys., Inc. v. Kohler Co.

• Decision Date: 05 July 2011
• Docket Number: Case No. 10–C–0947.
• Citation: 807 F.Supp.2d 791
• Parties: GENERAC POWER SYSTEMS INC., Plaintiff–Counter–Claim Defendant, v. KOHLER CO., Defendant–Counterclaimant.
• Court: U.S. District Court — Eastern District of Wisconsin

807 F.Supp.2d 791

GENERAC POWER SYSTEMS INC., Plaintiff–Counter–Claim Defendant,

v.KOHLER CO., Defendant–Counterclaimant.

Case No. 10–C–0947.

United States District Court, E.D. Wisconsin.

July 5, 2011.

Adam L. Brookman, Michael T. Griggs, Boyle Fredrickson SC, Milwaukee, WI, Colleen Jones, David C. Richards, Generac Power Systems Inc., Waukesha, WI, for Plaintiff–Counter–Claim Defendant.

Jonathan H. Margolies, Melanie J. Reichenberger, Richard H. Marschall, Michael Best & Friedrich LLP, Milwaukee, WI, for Defendant–Counterclaimant.

DECISION AND ORDER

RUDOLPH T. RANDA, District Judge.

This matter comes before the Court on two separate motions. In commencing this action, Plaintiff Generac Power Systems Inc. (“Generac”) alleges that Defendant Kohler Co. (“Kohler”), a competitor with Generac in the engine-driven electrical generator market, has infringed Generac's United States Patent No. 7,230,345 (“the '345 patent”). Generac claims that Kohler has been engaging in unfair competition with Generac by selling a line of generators that incorporates the exercise method created by Generac and used in the '345 patent. (Pl.'s Supp. Prelim. Inj., 20.) Kohler counterclaims that the '345 patent is invalid and unenforceable, and has submitted two reexamination requests to the United States Patent and Trademark Office (“PTO”) to reexamine the '345 patent's validity.

Kohler now moves to stay litigation pending the reexamination of the '345 patent by the PTO. Generac moves for a preliminary injunction preventing Kohler from “making, using, selling, and offering to sell generators that feature the method of exercising a generator protected by Generac's ['345 patent].” (Pl.'s Mot. Prelim. Inj., 1.) Generac has requested oral argument. Kohler does not believe further argument is necessary.

The motions are well-briefed and after providing a bit more background about the claims in this action, the Court addresses the issues. On October 20, 2010, Generac filed a complaint for patent infringement, under the patent laws of the United States, 35 U.S.C. §§ 271, 281, 283–285, against Kohler. Generac alleges that Kohler “has used, sold or offered to sell ... generators that infringe each of the elements of one or more claims of the ' 345 patent....” (Pl.'s Compl. ¶ 14.) Generac also claims that Kohler “directly and contributorily” infringed one or more claims of the '345 patent and induced infringement of one or more claims of the '345 patent. ( Id. ¶¶ 15–16.) Kohler answered on November 24, 2010, raising multiple affirmative defenses, including that it had not infringed the '345 patent, that one or more claims of the '345 patent are invalid for failing to meet the conditions for patentability, and that the '345 patent is unenforceable due to Generac's inequitable conduct during the prosecution of the '345 patent. (Def.'s Answer 3, ¶¶ 1–4.) Kohler counterclaimed seeking declaratory judgment that it had not infringed, that one or more claims of the '345 patent is invalid, and that the '345 patent is unenforceable due to Generac's inequitable conduct. ( Id. at 5, ¶¶ 5–10.)

I. STAY LITIGATION PENDING REEXAMINATION

The Court first addresses Kohler's motion to stay litigation pending reexamination of the '345 patent. On December 23, 2010, Kohler filed an ex parte reexamination request, and submitted seven prior art references, asking that the PTO reexamine and cancel “all asserted claims of the patent-in-suit.” (Def.'s Mot. Stay, 2.) On February 28, 2011, Kohler filed an inter partes reexamination request,¹ and submitted a “more extensive body of prior art obtained from various sources.” (Def.'s Reply Stay, 2.) The PTO granted both Kohler's ex parte reexamination request, (Def.'s Mot. Stay, 2), and the inter partes reexamination request (Doc. 43.) Kohler now moves the Court to stay litigation pending the PTO's reexamination of the ' 345 patent.

“The 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.” JAB Distribs., LLC v. London Luxury, LLC, No. 09 C 5831, 2010 WL 1882010, at *2 (N.D.Ill. May 11, 2010) (citing Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936)). The Court's power to control its docket includes “ ‘the authority to order a stay pending conclusion of a PTO reexamination.’ ” Id.

Congress intended PTO reexamination to be a “useful and necessary alternative for challengers and for patent owners to test the validity” of patents in an “ ‘efficient and relatively inexpensive manner.’ ” Seaquist Closures LLC v. Rexam Plastics, No. 08C0106, 2008 WL 4691792, at *1 (E.D.Wis. Oct. 22, 2008) (quoting H.R.Rep. No. 96–1307, Pt. I, at 4 (1980), reprinted in 1980 U.S.C.C.A.N. 6460, 6463). Reexamination allows courts to avoid “expending unnecessary judicial resources by attempting to resolve claims” which may be amended or narrowed by the reexamination process and the expertise of the PTO. Id. (citing Hewlett–Packard Co. v. Acuson Corp., No. C–93–0808 MHP, 1993 WL 149994, at *2 (N.D.Cal. May 5, 1993)).

In determining whether to stay litigation pending reexamination, the Court weighs three factors: (1) whether litigation is at an early stage; (2) whether a stay will simplify the issues in question; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party. Id. at *1 (citing EchoStar Techs. Corp. v. TiVo, Inc., No. 5:05 CV 81 DF, 2006 WL 2501494, at *1 (E.D.Tex. July 14, 2006)).

A. Stage of the Proceedings

The first factor, whether or not the litigation is at an early stage, weighs in favor of granting a stay. Generac concedes that the litigation is at an early stage, but asserts that this does not weigh in favor of a stay. (Pl.'s Opp'n Stay, 10.) But see Enprotech Corp. v. Autotech Corp., No. 88 C 4853, 1990 WL 37217, at *1 (N.D.Ill. Mar. 16, 1990) (denying motion for a stay where “[m]ost compelling, however, is the fact that discovery here is almost completed and the case is set for trial”); Oracle Corp. v. Parallel Networks, LLP, No. 06–414–SLR, 2010 WL 3613851, at *2 (D.Del. Sept. 8, 2010) (denying a stay where “[t]he motion [for a stay] comes ... years into the present litigation ... Defendant moved for a stay only after ‘test[ing] the waters' ”).

Generac cites Wyeth v. Abbott Laboratories, No. 09–4850(JAP), 2011 WL 380902, at *3 (D.N.J. Feb. 1, 2011), which states that although the advanced nature of a case approaching trial may weigh against granting a stay, the opposite inference, “that a suit in the early stages should weigh heavily in favor of a stay,” is not true. (Citations omitted). However, in Wyeth, the parties had already engaged in fact discovery, exchanged preliminary claim constructions, and filed their joint claim construction and pre-hearing statements when the motion to stay the litigation arose. Id.

In the instant case, the parties have not engaged in discovery, the Rule 16 scheduling conference has not been held, and no dates for discovery, claim construction proceedings, or the trial have been established. Additionally, Kohler filed its reexamination request and its motion to stay in a timely manner. “Neither the parties, nor the court, have invested the kind of resources that would render a stay pending reexamination untenable.” Pac. Biosci. Labs., Inc., 760 F.Supp.2d at 1066; see also Progressive Cas. Ins. Co. v. Safeco Ins. Co., No. 1:10 CV 1370, 2010 WL 4699870, at *4 (N.D.Ohio Nov. 12, 2010) (“[T]he Court finds that this factor weighs heavily in favor of granting a stay ... This case is in a very early stage, and discovery has barely begun ... [B]ecause the case is at such an early stage, a stay of the entire case ... is appropriate.”); JAB Distribs., LLC, 2010 WL 1882010, at *4 (“ ‘[T]he litigation is in its infancy,’ which militates in favor of granting a stay), Pass & Seymour, Inc. v. Hubbell Inc., 532 F.Supp.2d 418, 435 (N.D.N.Y.2007) (granting a stay where “[the] case is plainly in its infancy, the court not yet having conducted a Rule 16 conference or issued a case management schedule order”). Given the early stage of the proceedings, a stay pending the reexamination proceedings is appropriate.

B. Simplification of the Issues

The second factor to be considered is whether the stay will simplify the issues. One purpose of reexamination is to eliminate or facilitate trial of a claim by providing the district court with the PTO's expert view. Seaquist Closures LLC, 2008 WL 4691792, at *1 (citing Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed.Cir.1983)). Generac argues that reexamination will not resolve all of the issues, nor is it likely that all the reexamined claims will be cancelled. (Pl.'s Opp'n Stay, 7–9.)

Kohler cites PTO statistics indicating that although only 13% of ex parte reexamination certificates issuing in cases requested by third parties are cancelled, 63% of these claims reexamined by the PTO are amended or limited. Therefore, 76% of third party reexamination requests that the PTO reexamines are modified, amended, or affected in some way. (Def.'s Mot. Stay, 3.); See also United States Patent and Trademark Office, Ex Parte Reexamination Filing Data (March 31, 2011), http:// www. uspto. gov/ patents/ EP_ quarterly_ report_ March_ 2011. pdf. (last visited June 28, 2011.)

“Stays have been granted in numerous cases where reexamination would likely simplify, but not eliminate, all issues in the litigation.” Pac. Biosci. Labs., 760 F.Supp.2d at 1064. See also Progressive Cas. Ins. Co., 2010 WL 4699870, at *4 (stating “it is also likely at least some of the patent's claims will be changed upon reexamination ... If claims are cancelled or changed ... it would simplify the issues pertaining to defendants' arguments on invalidity based on prior art.”) Reexamination may not resolve all issues in the case, however, it is statistically likely that one...