Imax Corp. v. In-Three, Inc.
| Decision Date | 29 July 2005 |
| Docket Number | No. CV05-1795FMC(MCX).,CV05-1795FMC(MCX). |
| Citation | 385 F.Supp.2d 1030 |
| Court | U.S. District Court — Central District of California |
| Parties | IMAX CORPORATION, et al., Plaintiffs, v. IN-THREE, INC., Defendant. |
A. Stephens Clay, Geoffrey K. Gavin, Mitchell G. Stockwell, R. Charles Henn, Jr., Susan A. Cahoon, Kilpatrick Stockton, Atlanta, GA, Chad S. Hummel, Noel Scott Cohen, Manatt Phelps & Phillips, Los Angeles, CA, James J. Hefferan, Jr., Tonya Deem, Kilpatrick Stockton LLP, Winston-Salem, NC, for Plaintiffs.
Heidi L. Keefe, Mark R. Weinstein, Samuel C. O'Rourke, William Sloan Coats, White and Case, Palo Alto, CA, for Defendant.
This matter is before the Court on Defendant In-Three, Inc.'s Motion to Stay Proceedings Pending Completion of Reexamination of U.S. Patent. No. 4,925,294 (docket no. 54), filed June 10, 2005. The Court, having read and considered the moving, opposition and reply documents submitted in connection with this motion, hereby DENIES the motion for the reasons and in the manner set forth below.
This patent infringement action concerns a method and apparatus for converting two-dimensional films into three-dimensional media. On March 11, 2005, Plaintiffs IMAX Corporation ("IMAX") and Three-Dimensional Media Group, Ltd. ("3DMG") brought suit against Defendant In-Three, Inc. ("In-Three") for allegedly infringing U.S. Patent No. 4,925,294 ("294 Patent"). On July 21, 2005, In-Three amended its answer to assert counterclaims that IMAX is infringing three of its patents. In addition to these counterclaims, In-Three asserts affirmative defenses of (1) non-infringement; (2) invalidity of the 294 Patent on nine grounds, including prior art, failure to provide an adequate specification, failure to set forth the best mode contemplated by the alleged inventor, failure to conclude with one or more claims distinctly claiming the subject matter which the patentee regards as his invention; (3) misuse; (4) laches; (5) estoppel; (6) inequitable conduct; and counterclaims for (7) declaratory relief of non-infringement; (8) invalidity/unenforceability; (9) violation of California Business and Professions Code §§ 17200 and 17500, (10) False Designation of Origin under the Lanham Act, 15 U.S.C. § 1125(a)(1); (11) breach of contract; (12) intentional interference with prospective economic advantage; and (13) common law unfair competition.
On June 9, 2005, In-Three filed an ex parte request for reexamination of the 294 Patent with the United States Patent and Trademark Office ("PTO"). The request for reexamination cited approximately ten alleged prior art references that were not previously considered by the PTO. According to In-Three, the prior art rendered the claims of the 294 Patent obvious and therefore invalid.
The next day, In-Three filed the instant motion to stay these proceedings pending the reexamination by the PTO. In-Three claims that this case is at an early stage, that a stay will not cause prejudice to Plaintiffs, and that a stay will simplify the issues. Plaintiffs point to statistics to show that 91% of requests for reexaminations are granted, and of those 91%, 74% result in some change to the claims of the patent at issue, whether claims are cancelled or simply altered. Keefe Decl. at Ex. B. However, the reexamination process takes a long time. Martens Decl. at ¶ 27. The average pendency of reexaminations is 21.5 months. Id. at ¶ 28, Ex. B. The 294 Patent will expire on May 15, 2007. Id. at ¶ 31.
District courts have the power to stay proceedings pending the outcome of reexamination proceedings in the PTO. Ethicon v. Quigg, 849 F.2d 1422, 1426 (Fed.Cir.1988). Courts consider several factors in deciding whether to stay an action: (1) whether a stay will simplify the issues in the litigation; (2) whether discovery is completed and whether a trial date is set; (3) and whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party. Guthy-Renker Fitness L.L.C. v. Icon Health and Fitness, Inc., 48 U.S.P.Q.2d 1058 (C.D.Cal.1998). "The suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to someone else." Unidisco v. Schattner, 210 U.S.P.Q. 622, 629 (D.Md.1981) (citing Landis v. North Am. Co., 299 U.S. 248, 255, 57 S.Ct. 163, 81 L.Ed. 153 (1936)).
A stay will always simplify the issues in the litigation to some extent. In Guthy-Renker, the court noted that absent a stay, the parties
may end up conducting a significantly wider scope of discovery than necessary, and the court may waste time examining the validity of claims which are modified or eliminated altogether during reexamination. Moreover, since the Court will need to interpret the pertinent claims of the patent at some point during this case, waiting until after the reexamination will provide this Court with the expertise of the PTO.
Guthy-Renker, 1998 WL 670240, 48 U.S.P.Q. at 1058 (citation omitted). These risks of wasted effort are inherent when more than one tribunal considers the same questions, and in every case, the expertise of the PTO would be helpful. However, these inherent risks and benefits do not necessarily mean that in every case a stay will simplify the issues. As some courts have noted, when reexamination potentially will eliminate only one issue out of many, a stay is not warranted. In Cognex Corp. v. Nat'l Instruments Corp., No. Civ. A. 00-442-JJF, 2001 WL 34368283 (D. Del. June 29, 2001), for example, the court concluded that a stay would not simplify the issues because the complaint alleged "a variety of claims which are not linked to the patent infringement claim." Id. at *2. Similarly, in Gladish v. Tyco Toys Inc., 1993 WL 625509, 29 U.S.P.Q.2d 1718, 1720 (E.D.Cal.1993), the court noted that "[t]he reexamination proceeding will not finally resolve all the issues in the litigation." In that case, invalidity was asserted on more grounds than prior publications and patents, the only grounds the PTO considers during reexamination. The court concluded that it was "the only forum for complete consideration of ... evidence of invalidity." Id. Because even after the reexamination, invalidity would continue to be an issue (unless all claims were cancelled), a stay would not preserve many...
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