Milwaukee Elec. Tool Corp. v. HILTI, Inc.

138 F.Supp.3d 1032

MILWAUKEE ELECTRIC TOOL CORPORATION, Metco Battery Technologies LLC, AC (Macao Commercial Offshore) Limited, and Techtronic Industries Co. Ltd., Plaintiffs,

v.HILTI, INC., Defendant.

Milwaukee Electric Tool Corporation, Metco Battery Technologies LLC, AC (Macao Commercial Offshore) Limited, and Techtronic Industries Co. Ltd., Plaintiffs,

v.Chervon North America, Inc., Defendant.

Milwaukee Electric Tool Corporation, Metco Battery Technologies LLC, AC (Macao Commercial Offshore) Limited, and Techtronic Industries Co. Ltd., Plaintiffs,

v.Positec Tool Corporation and Positec USA, Inc., Defendant.

Milwaukee Electric Tool Corporation, Metco Battery Technologies LLC, AC (Macao Commercial Offshore) Limited, and Techtronic Industries Co. Ltd., Plaintiffs,

v.Snap–On Incorporated, Defendant.

Case Nos. 14–CV–1288–JPS

14–CV–1296–JPS

14–CV–1289–JPS

14–CV–1295–JPS.

United States District Court, E.D. Wisconsin.

Signed Oct. 2, 2015.

Erin Gibson, Sean C. Cunningham, Tiffany Miller, DLA Piper LLP, San Diego, CA, Jason C. White, Morgan Lewis & Bockius LLP, Chicago, IL, Jessica Hutson Polakowski, Reinhart Boerner Van Deuren SC, Madison, WI, Paul J. Stockhausen, James N. Law, Scott W. Hansen, Reinhart Boerner Van Deuren SC, Milwaukee, WI, for Plaintiffs.

David M. Schnorrenberg, Emily S. Parsons, Mark H. Neblett, Scott L. Bittman, Crowell & Moring LLP, Washington, DC, Jeffrey N. Costakos, Stephanie A. Quick, Foley & Lardner LLP, Milwaukee, WI, for Defendant.

ORDER

J.P. STADTMUELLER, District Judge.

On August 5, 2015, in the above-captioned cases, the defendants filed motions to stay¹ pending completion of the U.S. Patent and Trademark Office's ("USPTO") inter partes review ("IPR").² The motions are now fully briefed and ready for disposition. After careful consideration, the Court will grant the defendants' motions to stay.

1. BACKGROUND

The Court finds it helpful to begin its discussion with a general overview of the relatively new IPR process, followed by factual background specific to the above-captioned cases.

1.1 IPR Procedure

IPR is a relatively new procedure introduced by the Leahy–Smith America Invents Act ("AIA") through which the USPTO's Patent Trial and Appeal Board ("PTAB") may review the patentability of one or more claims in a patent. See Pub.L. No. 112–29, § 6(a), 125 Stat. 284, 299–304 (2011), codified at 35 U.S.C. §§ 311 –319 (2013). This mechanism replaces the previous inter partes reexamination procedure and converts the process from an examinational to an adjudicative one. See Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1326 (Fed.Cir.2013) (quoting H.R.Rep. No. 112–98, pt. 1, at 46–47 (2011)). Under this new procedure, any party other than the patent owner may file a petition to institute IPR in order to establish that the identified claims are invalid under 35 U.S.C. §§ 102 and/or 103. 35 U.S.C. §§ 311(a) -(b).

The petitioner must rely "only on ... prior art consisting of patents or printed publications." 35 U.S.C. § 311(b). The patent owner may file a preliminary response, "setting forth the reasons why no inter partes review should be instituted" within three months of the petition, or may expedite the proceeding by waiving the preliminary response. 37 C.F.R. § 42.107(a) -(b). The USPTO must decide whether to institute IPR within three months of the patent owner's preliminary response, or, in the event no response is filed, by the last date on which the response could have been filed. 35 U.S.C. § 314(b).

If the USPTO institutes IPR, the proceeding is conducted before a panel of three technically-trained Administrative Patent Judges of the newly-formed PTAB. See 35 U.S.C. §§ 6(a) -(c), 311. The parties are permitted to take limited discovery and respond to each other's arguments; they also have the right to an oral hearing. 35 U.S.C. §§ 316(a). The PTAB must, under most circumstances, issue its final determination within one year of the institution date. 37 C.F.R. § 42.100(c). After receiving a final determination from the PTAB, the parties have the option to appeal to the Federal Circuit. 35 U.S.C. §§ 141(c), 319.

In enacting the AIA, Congress sought "to establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs" and "to create a timely, cost-effective alternative to litigation." Changes to Implement Inter Partes Review Proceedings, Post–Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 Fed.Reg. 48680–01 (Aug. 12, 2012) (codified at 37 C.F.R. §§ 42.100 et seq. ). To that end, IPR affords at least three advantages to the parties and the district court in any corollary civil action. First, IPR provides a path to receive expert guidance from the PTO under a more accelerated timeline than the previous inter partes reexamination procedure: petitioners must file for IPR within one year of being served with a patent infringement complaint (35 U.S.C. § 315(b) ) and IPR, if instituted, will typically conclude within 18 months of the filing date. In contrast, the average time from filing to conclusion of the previous IPR procedure ranged from 28.9 to 41.7 months. See77 Fed.Reg. 48680–01 at 48721. Second, the decision to institute IPR signals that at least one of the subject claims may be modified or cancelled. See 35 U.S.C. § 314(a) (requiring "a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition" in order for IPR to be instituted). This new threshold requirement presents a more stringent standard than the previous "substantial new question of patentability" and thus provides some assurance that the delay suffered as a result of IPR will be worthwhile. Third, IPR imposes an estoppel requirement that precludes the petitioner from asserting invalidity during a later civil action "on any ground that the petitioner raised or reasonably could have raised during that inter partes review." 35 U.S.C. § 315(e)(2). This critical limitation results in more streamlined litigation and reduces the likelihood of inconsistent judgments.

1.2 Case History

The plaintiffs filed eight separate cases in this Court on October 14, 2014, alleging patent infringement against several defendants; at the time of the filing of the present motion, only four cases remained. The remaining defendants are: Hilti, Inc. ("Hilti") (Case No. 14–CV–1288), Chervon North America, Inc. ("Chervon") (Case No. 14–CV–1289), Positec Tool Corporation and Positec USA, Inc. ("Positec") (Case No. 14–CV–1295), and Snap–On Incorporated ("Snap–On") (Case No. 14–CV–1296) (collectively the "Related Cases").³ The plaintiffs allege that all the defendants infringed the following patents: the '290 patent, the '173 patent, and the '510 patent. The plaintiffs also allege infringement of two additional patents—the '257 patent and '167 patent—in their cases against defendants Chervon and Positec. All of the patents-in-suit relate to alleged inventions in the area of Lithium-ion ("Li–Ion") powered handheld cordless power tools and related technologies for controlling and charging battery packs for such tools.

On January 21, 2015, Chervon, Positec and Hilti filed three petitions for IPR with the USPTO seeking to invalidate the three patents asserted in each of the Related Cases: patent '290; '173; and '510. (Defs' Exs. 12–14). Plaintiffs filed responses to these petitions on May 3, 2015. On July 31, 2015, the USPTO granted all three of the petitions. The IPRs have been instituted with respect to all claims of all remaining Patents–in–Suit in the Related Cases. In its decisions, the USPTO found that there was a "reasonable likelihood" that every claim of the '290, '173, and '510 Patents is invalid and unpatentable. (Defs' Exs. 1–3, USPTO Institution Decisions). Under the USPTO's statutory schedule, final written decisions on the IPRs are expected by July 31, 2016. 35 U.S.C. § 316(a)(11). Ultimately, when the USPTO issues final written decisions in these IPRs, Chervon, Hilti, and Positec will be bound by the estoppel provision 35 U.S.C. § 315(e)(2) that precludes them from challenging the validity of the patents on any ground that could have been reasonably raised in the IPRs.⁴

Additionally, on May 6 and May 22, 2015, Hilti and Snap–On, respectively, filed five more IPR petitions against Milwaukee Tool's patents. The USPTO will issue decisions on the institution of these IPRs by November 18, 2015, and December 5, 2015, respectively. 35 U.S.C. § 314(b) ; 37 C.F.R. § 42.107(b).

2. LEGAL STANDARD

A district court's power to stay a proceeding 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.’ " Texas Indep. Producers & Royalty Owners Assoc. v. EPA, 410 F.3d 964, 980 (7th Cir.2005) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936) ). This authority extends to patent cases in which review by the USPTO has been requested. See Black & Decker Inc. v. Positec USA, Inc., No. 13–3075, 2013 WL 5718460, *3 (N.D.Ill. Oct. 1, 2013) (citing Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1427 (Fed.Cir.1988) ). A stay is particularly justified when "the outcome of a PTO proceeding is likely to assist the court in determining patent validity or eliminate the need to try infringement issues." Evolutionary Intelligence, LLC v. Millenial Media, Inc., No. 5:13–CV–4206, 2014 WL 2738501, at *2 (N.D.Cal. June 11, 2014).

Because IPR is a relatively new process, the Federal Circuit has not yet spoken on the appropriate standard for evaluating motions to stay a related district court action while IPR involving the same patent or patents is pending. District courts have continued to apply the framework governing stays with respect to the administrative process that preceded IPR, inter partes reexamination. SurfCast, Inc. v. Microsoft Corp., No. 2:12–CV–333–JDL...