Masimo Corp. v. Sotera Wireless

• Decision Date: 29 January 2021
• Docket Number: Case No. 19-cv-01100-BAS-NLS
• Parties: MASIMO CORPORATION, Plaintiff, v. SOTERA WIRELESS; HON HAI PRECISION INDUSTRY CO., LTD., Defendants.
• Court: U.S. District Court — Southern District of California

MASIMO CORPORATION, Plaintiff, v. SOTERA WIRELESS; HON HAI PRECISION INDUSTRY CO., LTD., Defendants.

Case No. 19-cv-01100-BAS-NLS

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA

January 29, 2021

ORDER GRANTING DEFENDANT SOTERA WIRELESS'S MOTION TO STAY

(ECF No. 48)

Before the Court is Defendant Sotera Wireless's ("Sotera") Motion to Stay Proceedings ("Stay Motion" or "Motion"). (ECF No. 48.) Sotera seeks a stay in light of its filings of nine petitions for inter partes review ("IPR") with the Patent and Trial Appeal Board ("PTAB") for each of the nine patents asserted by Masimo in this litigation. Masimo opposes and Sotera replies. (ECF Nos. 51, 58.) The Court finds the Motion suitable for determination without oral argument. See CivL.R. 7.1(d)(1). For the foregoing reasons, the Court GRANTS Sotera's Motion.

I. BACKGROUND

A. History of This Action

Plaintiff Masimo Corporation ("Masimo") filed this patent infringement action on June 12, 2019 against Defendants Sotera and Hon Hai Precision Industry Co. Ltd. ("Hon Hai") (collectively, "Defendants"). (ECF No. 1.) The suit involves nine patents and 94 asserted claims, of which 80 claim terms are in dispute. (Stay Mot. at 7.)

Sotera filed the instant Motion to Stay on May 20, 2020. (ECF Nos. 48.)¹ Between May 8, 2020 and June 13, 2020, Sotera filed petitions for IPR on all nine asserted patents with the PTAB. (Stay Mot. at 9.) As of the date of this Order, the PTAB has instituted IPR on eight of the patents asserted in this litigation and denied IPR as to one. (See ECF No. 102; see also ECF Nos. 91, 92, 94-96, 98.) The last IPR institution was granted on December 7, 2020. (ECF No. 102.)

B. Overview of IPR

The IPR procedure was created "to create a timely, cost-effective alternative to litigation." Changes to Implement IPR 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.); see also 35 U.S.C. §§ 311-319. The procedure is designed, in part, "to minimize duplicative efforts by increasing coordination between district court litigation and inter partes review." 77 Fed. Reg. at 48,721.

IPR allows a party other than the patentee to bring an adversarial proceeding in the PTO to establish that the patent claims are invalid under 35 U.S.C. §§ 102 or 103. 35 U.S.C. § 311. IPR is adjudicative and conducted before a panel of three technically trained Administrative Patent Judges of the PTAB. 35 U.S.C. § 6. The parties can conduct discovery and have the right to an oral hearing. 35 U.S.C. § 316(a)(5), (8), (10), and (13). The petitioner need only prove invalidity by a preponderance of the evidence. 35 U.S.C. § 316(e). The parties may also settle. 35 U.S.C. § 317. PTAB decisions are appealed directly to the Federal Circuit. 35 U.S.C. § 319; 35 U.S.C. § 141(c).

The PTO will grant a request for IPR if "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). If the PTO grants review, a final determination must beissued "not later than 1 year" after the petition is granted. 35 U.S.C. § 316(a)(11). "If the PTAB finds that a claim is unpatentable, and the patent holder fails to file a timely appeal or the appeal is unsuccessful, then the PTO is required to issue a certificate cancelling the claim, and the patent holder may no longer assert that claim in litigation or otherwise." In re Papst Licensing GmbH & Co. KG Patent Litig., 320 F. Supp. 3d 132, 134 (D.D.C. 2018) (citing 35 U.S.C. § 318(b)). But if the claim survives IPR in a final written decision, the petitioner is estopped from asserting that a claim is invalid "on any ground that the petitioner raised or reasonably could have raised during that inter partes review." 35 U.S.C. § 315(e)(2).

II. LEGAL STANDARD

"Courts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO reexamination." Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (citations omitted). Courts apply the same framework to motions to stay pending IPR used for motions to stay pending patent reexamination, which includes consideration of the following 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 nonmoving party." Universal Elecs., Inc. v. Universal Remote Control, Inc., 943 F. Supp. 2d 1028, 1030-31 (C.D. Cal. 2013) (quotations omitted). However, "[t]he inquiry is not limited to these three factors" because "the totality of the circumstances governs." Id. (quotations omitted).

"There is a liberal policy in favor of granting motions to stay proceedings pending the outcome of re-examination, especially in cases that are still in the initial stages of litigation and where there has been little or no discovery." Aten Int'l Co., Ltd v. Emine Tech. Co., Ltd., No. SACV 09-0843 AG (MLGx), 2010 WL 1462110, at *6 (C.D. Cal. Apr. 12, 2010) (quotations omitted). But "[c]ourts are not required to stay judicial proceedings pending re-examination of a patent." Id. at *6 (quoting Nanometrics, Inc. v. Nova Measuring Instruments, Ltd., No. C 06-2252 SBA, 2007 WL 627920, at *1 (N.D.Cal. Feb. 26, 2007)). Nevertheless, courts have "recognized a liberal policy in favor of granting motions to stay pending IPR." Zomm, LLC v. Apple Inc., 391 F. Supp. 3d 946, 956 (N.D. Cal. 2019) (internal citation and quotation marks omitted).

III. ANALYSIS

A. Stage of Proceedings

Regarding the first factor, the facts of this case cut both ways. While discovery is ongoing—indeed, the parties have had several discovery disputes over electronically-stored information—the fact discovery deadline is next month. (ECF No. 84.) The deadline for substantial completion of document discovery was December 11, 2020, and trial has been set for November 30, 2021. (Id.)

However, although the parties have submitted claim construction briefs, the Court vacated the Markman hearing due to the pending Stay Motion (ECF No. 81) and, consequently, no disputed claim terms have been construed by this Court. Moreover, the case has not fully progressed past the pleadings stage due to several motions to dismiss filed by Sotera's parent company and co-defendant, Hon Hai. (ECF Nos. 17, 62, 111.) There is also an ongoing dispute over the number of claims at issue in this case. (ECF No. 71.)

Considering these circumstances, the Court finds that this case is still "early" enough in its stages to militate in favor of a stay. First, the fact that the Markman hearing has not yet occurred weighs in favor of a stay. See SCA Hygiene Prod. Aktiebolag ("AB") v. Tarzana Enterprises, LLC, No. CV 17-04395 AB (JPRx), 2017 WL 5952166, at *4 (C.D. Cal. Sept. 27, 2017) ("Although both parties have likely already spent significant time on their claim construction briefs, 'further resources are yet to be expended by the parties and the Court in preparing for and conducting the hearing.'"); Wonderland Nurserygoods Co., Ltd. v. Baby Trend, Inc., No. No. EDCV 14-01153-VAP (SPx), 2015 WL 1809309, at *3 (C.D. Cal. Apr. 20, 2015) (finding a stay appropriate where fact discovery was not yet complete and the parties had submitted claim construction briefs, but the Markman hearinghad not yet occurred); see also Universal Elecs., 943 F. Supp. 2d at 1032 ("The Court's expenditure of resources is an important factor in evaluating the stage of the proceedings.").

Second, considering that the PTAB has granted IPR, discovery has not yet concluded, and this case has not yet entered the summary judgment stage, the case has not surpassed a point at which a stay would be inexpedient. See TAS Energy, Inc. v. San Diego Gas & Elec. Co., No. 12CV2777-GPC BGS, 2014 WL 794215, at *3 (S.D. Cal. Feb. 26, 2014) (granting stay pending IPR although "the case [was] not in its early stages," parties were "in the midst of discovery," and claim construction briefs were filed, because a "significant amount of work still remains such as expert discovery, summary judgment motions and trial").

Lastly, the Court cannot disregard the continued impact of the COVID-19 pandemic on the ability of counsel and this Court to pursue an expeditious resolution of this case. (See ECF Nos. 43, 76.) Even after regular court proceedings resume, trial in this and other civil cases may be further postponed because of the priority that will necessarily be given to criminal trials. See DivX, LLC v. Netflix, Inc., No. CV 19-1602 PSG (DFMx), 2020 WL 3026034, at *3 (C.D. Cal. May 11, 2020) ("The coronavirus pandemic is also a relevant consideration under this factor.")

Thus, the Court finds that the stage of the proceedings weighs in favor of a stay.

B. Simplification of Issues in Question

"A stay will always simplify the issues in the litigation to some extent." IMAX Corp. v. In-Three, Inc., 385 F. Supp. 2d 1030, 1032 (C.D. Cal. 2005). "Some of the advantages of a stay include the fact that the record of the reexamination may be entered at trial[;] that the PTO's expertise will govern[,] thus simplifying the case; that evidentiary and other issues will be further narrowed following a reexamination; and that costs will be reduced." Spellbound Dev. Grp., Inc. v. Pac. Handy Cutter, Inc., No. SACV 09-951 DOC (ANx), 2011 WL 1810961, at * 2 (C.D. Cal. May 12, 2011). The possibility of simplification "is particularly true where . . . a party has requested reexamination of each of the patents-in-suit." Semiconductor Energy Lab. Co. v. Chimei Innolux Corp., No. SACV 12-21-JST(JPRx), 2012 WL 7170593, at *2 (C.D. Cal. Dec. 19, 2012). "[T]he question is merely whether the issues will be simplified, and not whether the entire case will be resolved." Milwaukee Elec. Tool Corp. v...