Drink Tanks Corp. v. Growlerwerks, Inc.

DRINK TANKS CORPORATION, Plaintiff, v. GROWLERWERKS, INC., Defendant.

Case No. 3:16-cv-410-SI

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

June 19, 2017

OPINION AND ORDER

Timothy S. DeJong and Jacob S. Gill, STOLL BERNE LOKTING & SHLACHTER PC, 209 SW Oak Street, Fifth Floor, Portland, OR 97204; Craig R. Smith, Eric P. Carnevale, and William J. Seymour, LANDO & ANASTASI LLP, Riverfront Office Park, One Main Street, 11th Floor, Cambridge, MA 02142. Of Attorneys for Plaintiff.

Sean D. O'Brien, Kevin S. Ross, and Alex C. Johnson, MARGER JOHNSON, 888 SW Fifth Avenue, Suite 1050, Portland, OR 97204. Of Attorneys for Defendant.

Michael H. Simon, District Judge.

Plaintiff Drink Tanks Corporation ("Drink Tanks") brings this lawsuit against Defendant GrowlerWerks, Inc. ("GrowlerWerks") for patent infringement. Drink Tanks alleges that GrowlerWerks manufacturers, uses, sells, offers to sell, or imports beverage containers that infringe Drink Tanks's United States Patent No. 9,156,670 ("the '670 patent"). Before the Court is GrowlerWerks' Renewed Motion to Stay Litigation Pending Completion of Inter Partes Review ("IPR") of sixteen out of the nineteen claims of the '670 patent, instituted on February 22, 2017 by the United States Patent and Trials Appeal Board ("PTAB"). For the following reasons, the Court grants GrowlerWerks's motion.

STANDARDS

A. Inter Partes Review

The Leahy-Smith America Invents Act ("AIA"), Pub. L. No. 112-29, 125 Stat. 284 (2011) (codified in various sections of Title 35 of the United States Code), was enacted to improve and replace, among other things, the former inter partes reexamination proceeding with a new IPR proceeding and post-grant review. One of the goals of the new IPR proceeding is "to minimize duplicative efforts by increasing coordination between district court litigation and inter partes review." Wonderland Nursery Goods Co. v. Baby Trend, Inc., 2015 WL 1809309, at *1 (C.D. Cal. Apr. 20, 2015).

Under the AIA, any "person who is not the owner of a patent may file with the [PTAB] a petition to institute an inter partes review of the patent." 35 U.S.C. § 311(a). Petitioners "may request to cancel as unpatentable 1 or more claims of a patent only on a ground that could be raised under section 102 or 103 [relating to invalidity of the patent or any claim on the basis of prior art]." Id. § 311(b). Before it may institute IPR, the PTAB must determine that the petition presents "a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." Id. § 314(a). If IPR is instituted, the petitioner has the burden of proving lack of patentability by a preponderance of the evidence. Id. § 316(e).

The current IPR timeline is more compressed than the timeline under its predecessor inter partes reexamination procedure.¹ After an IPR petition is filed, the patent owner may, withinthree months, file a preliminary response "setting forth the reasons why no inter partes review should be instituted." 37 C.F.R. § 42.107(a). Alternatively, the patent owner may expedite the proceeding by waiving the preliminary response. Id. § 42.107(b). The PTAB must decide whether to institute IPR within three months from when the patent owner's preliminary response is due. 35 U.S.C. § 314(b). The PTAB must issue a final decision within one year from granting IPR, with the possibility of one six-month extension following a showing of good cause. Id. § 316(a)(11); Id. § 318(a). A dissatisfied party may appeal the PTAB's decision to the Court of Appeals for the Federal Circuit. Id. § 141(c). If the PTAB issues a final written decision and the time for appeal has expired or any appeal has terminated, the PTAB "shall issue and publish a certificate canceling any claim of the patent finally determined to be unpatentable [and] confirming any claim of the patent determined to be patentable." Id. § 318(b).

Although IPR "may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent[,]" a petitioner's "counterclaim challenging the validity of a claim of a patent does not constitute [such an action]." Id. § 315(a)(1), (3). After IPR concludes with a final written decision, the petitioner is estopped from asserting that a patent claim is invalid "on any ground that the petitioner raised or reasonably could have raised during that inter partes review." Id. § 315(e).

B. Motion to Stay

A court's "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." Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). In deciding how best to exercise this inherent power, the court "must weigh competing interests and maintain an even balance." Id. at 254-55. In deciding whether to stay litigation pending IPR, district courtstypically consider the following three factors: "(i) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (ii) whether a stay will simplify the issues in question and trial of the case; and (iii) whether discovery is complete and whether a trial date has been set." Murata Mach. USA v. Daifuku Co., Ltd., 830 F.3d 1357, 1361 (Fed. Cir. 2016) (citation and quotation marks omitted). Courts also look to whether "the outcome of the reexamination [or IPR] would be likely to assist the court in determining patent validity and, if the claims were cancelled in the reexamination [or IPR], would eliminate the need to try the infringement issue." Wonderland Nursery Goods, 2015 WL 1809309, at *2 (quoting In re Cygnus Telecomms. Tech., LLC, Patent Litig., 385 F. Supp. 2d 1022, 1023 (N.D. Cal. 2005)).

Courts apply a "liberal policy in favor of granting motions to stay proceedings pending the outcome of . . . IPR proceedings." Semiconductor Energy Lab. Co. v. Chimei Innolux Corp., 2012 WL 7170593, at *4 (C.D. Cal. Dec. 19, 2012). Nonetheless, "the totality of the circumstances governs," Wonderland Nursery Goods, 2015 WL 1809309, at *2 (quoting Universal Elecs., Inc. v. Universal Remote Control, Inc., 943 F. Supp. 2d 1028, 1031 (C.D. Cal. May 2, 2013)), and "a stay is never required." Wonderland Nursery Goods, 2015 WL 1809309, at *2. Whether "to grant a stay falls within the court's sound discretion." CANVS Corp. v. United States, 118 Fed. Cl. 587, 591 (2014). The moving party has the burden to persuade the court that a stay is appropriate. Netlist, Inc. v. Smart Storage Sys., Inc., 2014 WL 4145412, at *1 (N.D. Cal. Aug. 21, 2014).²

BACKGROUND

The '670 patent, titled "System for Storing Beverages," issued on October 13, 2015. Drink Tanks is the owner by assignment of that patent. On November 16, 2015, Drink Tanks sued GrowlerWerks, alleging that the reusable beer containers that GrowlerWerks sells infringe the '670 patent.³ GrowlerWerks denies infringement and asserts a counterclaim contending that the '670 patent is invalid.

GrowlerWerks filed the first of two IPR petitions on June 2, 2016. Both petitions seek to invalidate all 19 claims of the '670 patent based on prior art. According to GrowlerWerks, the patent examiner did not examine the closest prior art, including beer growlers, during the prosecution of the '670 patent application. On June 15, 2016, GrowlerWerks moved the Court for a stay, pending the PTAB's decision on GrowlerWerks' first petition. ECF 42.

On June 17, 2016, the Court granted the parties' joint motion to set a case schedule. Under that schedule, claim construction briefs were due by November 11, 2016, and a claim construction (Markman) hearing was set for February 27, 2017. Fact discovery was scheduled to close on May 12, 2017, with expert discovery set to conclude on August 25, 2017. Dispositive motions were due on September 8, 2017, and a five-day jury trial was scheduled for February 12, 2018. ECF 46. On July 15, 2016, the Court denied GrowlerWerks' motion to stay without prejudice. ECF 56. Assessing the relevant three factors, the Court concluded that the totality of the circumstances at that time militated against granting a stay.

The Court noted, however, that if the PTAB were to grant IPR (which likely would result in the PTAB finding invalid at least some of the claims in the '670 patent), a stay could help conserve resources, as well as give the Court the benefit of the PTAB's expert opinion. But, the Court explained, "[u]ntil the PT[AB] institutes IPR, the Court cannot say that a stay will lead to simplification of the issues." Id. at 10. Therefore, "in light of the pending petition and uncertainty regarding how the PT[AB] will resolve the matter," the Court concluded that, "at least at this time, the simplification factor weighs in favor of denying the stay." Id. The Court also found that because the parties directly compete against each other in a relatively small industry, a stay might cause Drink Tanks to lose customers that it would not have lost had the case proceeded. The Court explained that Drink Tanks would be forced to compete against what might ultimately be found to be its own patented technology. Id. at 12.

Several months later, on October 14, 2016, the parties notified the Court that there were no disputed claim construction issues and that all terms of the asserted claims of the '670 patent should be construed to have their ordinary and customary meaning to a person of ordinary skill in the art at the time of the invention. ECF 61 at 2. The Court then cancelled the claim construction hearing. ECF 62.

On October 24, 2016, the PTAB advised the parties that, based on the effective filing date of the '670 patent, GrowlerWerks' first petition might be premature. GrowlerWerks, Inc. v. Drink Tanks Corp., No. IPR2016-01125, *5-7 (P.T.A.B. Nov. 22, 2016) (ECF 63-1 at 7-9). On November 14, 2016, GrowlerWerks...