Telemac Corp. v. Teledigital, Inc.

• Decision Date: 13 September 2006
• Docket Number: No. C 04-1486 CW.,No. C 04-4696 CW.,C 04-1486 CW.,C 04-4696 CW.
• Citation: 450 F.Supp.2d 1107
• Court: U.S. District Court — Northern District of California
• Parties: TELEMAC CORPORATION, a Delaware corporation, Plaintiff, v. TELEDIGITAL, INC., a Delaware corporation; Teledigital Development, Inc., a Minnesota corporation; and Does 1 though 20, inclusive, Defendants. Telemac Corporation, a Delaware corporation, Plaintiff, v. Phonetec, LP, a Texas limited partnership; Phonetec PCS, LCC, a Texas limited liability corporation; and Does 1 though 20, inclusive, Defendants.

450 F.Supp.2d 1107

TELEMAC CORPORATION, a Delaware corporation, Plaintiff, v. TELEDIGITAL, INC., a Delaware corporation; Teledigital Development, Inc., a Minnesota corporation; and Does 1 though 20, inclusive, Defendants.

Telemac Corporation, a Delaware corporation, Plaintiff, v. Phonetec, LP, a Texas limited partnership; Phonetec PCS, LCC, a Texas limited liability corporation; and Does 1 though 20, inclusive, Defendants.

No. C 04-1486 CW.

No. C 04-4696 CW.

United States District Court, N.D. California.

September 13, 2006.

Edwin Ira Lasman, Edwin I. Lasman, P.C., Telemac Corporation, Los Angeles, CA, Guy W. Chambers, David Rosenberg, Townsend & Townsend and Crew LLP, San Francisco, CA, for Plaintiff.

Jeffery S. Lowenstein, Neal J. Suit, Tammy Sue Wood, Bell Nunnally & Martin LLP, Dallas, TX, Matthew T. Powers, Sidley Austin LLP, John T. Burnite, John C. Ferry, Margie R. Lariviere, Kelly Herlihy & Klein LLP, San Francisco, CA, David T. Schultz, Maslon Edelman Borman & Brand, LLP, Leeann K. Bell, Nicole J. Druckrey, Halleland Lewis Nilan & Johnson, PA, Minneapolis, MN, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO STAY PROCEEDINGS PENDING REEXAMINATION OF PATENTS

WILKEN, District Judge.

Defendants Teledigital, Inc., and Teledigital Development, Inc. (collectively, Teledigital) and Defendants Phonetec LP and Phonetec PCS, LLC (collectively, Phonetec) separately move for a stay of proceedings in Plaintiff Telemac Corporation's related lawsuits against them pending reexamination of Telemac's patents by the United States Patent and Trademark Office (PTO). Telemac opposes the motions. The matters were taken under submission on the papers. Having considered all of the papers filed by the parties, the Court denies Defendants' motions for a stay.

BACKGROUND

Telemac is the owner of five patents involving technology that enables customers to pre-pay for cellular phone service, U.S. Patent Nos. 5,577,100, 6,198,915B1, 6,650,887B2, 6,480,710B1 and 6,625,439B2 (collectively, the patents). Telemac filed a patent infringement lawsuit against Phonetec on April 15, 2004 and against Teledigital on November 5, 2004. In addition, Telemac alleges that Phonetec is liable as the successor to defendants who this Court found, in earlier, related action, had infringed Telemac's patents. See Telemac Corp. v. US/Intelicom, Inc., 185 F.Supp.2d 1084 (N.D.Cal.2001) (finding certain patents infringed).

Both of the cases have progressed slowly thus far. The Court denied Teledigital's and Phonetec's motions to dismiss on March 25, 2005. On October 5, 2005, the parties participated in court-ordered mediation. Prior to participating in the mediation, Teledigital informed Telemac that if the case did not settle, Teledigital would seek reexamination of Telemac's patents as well as a stay of the proceedings in this Court. Schultz Decl. ¶ 9. Based on the mediation, the parties agreed on October 18, 2005 not to engage in further discovery or other litigation activity, including reexamination of Telemac's patents. Settlement negotiations between Phonetec and Telemac lasted until Feburary, 2006, after which Phonetec changed counsel. Wood Decl. ¶ 3-4. Between Telemac and Teledigital, the mutual agreement to forbear from litigation activity was extended through mid-May, 2006, when settlement negotiations broke down. Schultz Decl. ¶ 10.

Telemac served its first sets of interrogatories and document requests on Teledigital on July 8, 2005, and its requests for admissions on September 2, 2005. Teledigital, in turn, served its first sets of interrogatories and document requests on September 9 and 13, 2005, and Telemac responded on May 30, 2006. So far, Telemac has produced over 3,000 documents to Teledigital.¹ Chambers Decl. ¶ 9. Telemac disclosed the identity of its infringement and damages experts on July 7, 2006, but did not disclose any expert reports. Telemac and Teledigital currently dispute the responsiveness and completeness of each other's discovery responses. In its September 9, 2005 answers to Telemac's first set of interrogatories, Teledigital disclosed that it has lost more than one million dollars per year since 2000. Chambers Decl., Ex. G, Resp. to Interrog. No. 5. Teledigital answered Telemac's first set of requests for admissions on June 21, 2006.

Telemac served its first sets of interrogatories and document requests on Phonetec on July 18, 2005. Phonetec served written responses to Telemac's written discovery requests on April 14, 2006, and provided supplemental interrogatory responses on June 16, 2006. Wood Decl. ¶ 5. Phonetec also disclosed that it has lost money during each year of sales of the allegedly infringing products. Chambers Decl., Ex. G. Phonetec served its first set of document requests on Telemac on May 15, 2006, and Telemac served written responses on June 19, 2006, but, according to Phonetec's counsel, "produced no responsive documents." Wood Decl. ¶ 6. The only deposition taken thus far has been the June 8, 2006 telephonic deposition of Phonetec. At that deposition, Phonetec Managing Member John Lowry testified that individual Phonetec sales records were lost in 2003 when it switched accounting systems, although balances and summaries were preserved. Chambers Decl., Ex. H, Lowry Dep. 32-37. Telemac and Phonetec currently dispute the responsiveness and completeness of each other's discovery responses.

Pursuant to the parties' stipulation, the current deadline for the cut-off of fact discovery is September 29, 2006; the deadline for hearing case-dispositive motions is February 16, 2007; and the trial is set for June 18, 2007. See February 23, 2006 Order Granting Stipulation Amending Case Management Dates.

Teledigital filed petitions for reexamination of the patents on June 26, 2006. Pursuant to the statute governing reexamination of patents, the PTO has up to three months following the filing of a request for reexamination to determine whether a substantial new question of patentability is raised by the request. 35 U.S.C. § 303(a). If the PTO decides that reexamination is warranted, Telemac will be given at least two months within which to file a statement on the question of patentability, and Teledigital will then have at least two months in which to file a reply. Id. § 304. "All reexamination proceedings under this section, including any appeal to the Board of Patent Appeals and Interferences, will be conducted with special dispatch within the Office." Id. § 305.

Although the PTO does not publish the current average time from filing to resolution of a request for reexamination, observers have noted that the process may be lengthy. See In re Cygnus Telecomm. Tech., LLC Patent Litig., 385 F.Supp.2d 1022, 1023 (N.D.Cal.2005) (finding that reexaminations generally take from six months to three years); Xerox Corp. v. 3Com Corp., 69 F.Supp.2d 404, 406 n. 1 (W.D.N.Y.1999) (noting statistics showing that the average pendency of reexamination before the PTO is 19.2 months, not including appeals). According to the PTO's statistics, the office granted approximately ninety-two percent of requests for reexamination in fiscal year 2004. See United States PTO, Performance and Accountability Rep. Fiscal Year 2004 (Table 13A), available at http://www.uspto.gov/ web/offices/com/annual/2004/060413a_tablel3a.html. "Statistical information regarding reexamination indicates that the PTO confirms all claims in approximately 24% of the cases, cancels all claims in approximately 12% of the cases, and changes some claims in approximately 64% of the cases." KLA-Tencor Corp. v. Nanometrics, Inc., 2006 WL 708661, *4 (N.D.Cal. Mar.16, 2006) (citing Rohm and Haas Co. v. Brotech Corp., 24 U.S.P.Q 2d 1369, 1372, 1992 WL 313099 (D.Del.1992)).

On July 24, 2006, the PTO notified Teledigital of its failure to comply with ex parte reexamination request filing requirements, set forth in 37 C.F.R. § 1.510(c), with respect to four of the five patents. The PTO found that Teledigital's requests were missing the necessary

statement point out each substantial new question of patentability based on the cited patents & printed publications, and a detailed explanation of the pertinency and manner of applying the patents &...