Ultratec, Inc. v. Sorenson Commc'ns, Inc.

ULTRATEC, INC. and CAPTEL, INC., Plaintiffs, v. SORENSON COMMUNICATIONS, INC.and CAPTIONCALL, LLC, Defendants.

13-cv-346-bbc

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN

May 13, 2015

OPINION AND ORDER

Following a nine-day trial in October 2014, a jury awarded plaintiffs Ultratec, Inc. and CapTel, Inc. more than $44 million on their claims that defendants Sorenson Communications, Inc. and CaptionCall, LLC infringed 13 claims in eight of plaintiffs' patents related to a telephone relay system between deaf and hearing users. Over the next several months, the parties filed a number of post-verdict motions that are now before the court. Dkts. ##700, 713, 744, 746, 748, 750, 752, 754, 763-64, 768, 822, 825, 835 and 854. Among those motions are defendants' motions for judgment as a matter of law with respect to anticipation, dkt. #746, and obviousness, dkt. #752, of all the patents in suit.

While litigation was pending in this case, defendants petitioned for inter partes review of all the claims at issue in this case. The Patent Trial and Appeal Board granted review and issued a final written decision on March 3, 2015, invalidating as anticipated or obvious all but one of the claims asserted by plaintiffs. Dkt. #825. The statutory deadline for theboard's final written decision on the remaining claim is December 4, 2015. Id. In light of these facts, I asked the parties to brief the effect, if any, of the board's final written decisions on the judgment in this case and on the parties' post-trial motions. Dkt. #827. In response, defendants argue that the board's final decisions undermine the existing judgment in this case, support entry of judgment of invalidity as a matter of law on all of the asserted claims and prevent enforcement of the judgment and issuance of a permanent injunction. Dkt. #842. Further, because the decisions are appealable, defendants have requested a stay of all further proceedings pending plaintiffs' anticipated appeal of the inter partes review decisions. Id. Plaintiffs contend that the non-final decisions are not entitled to deference and are not grounds for a stay, dkt. #858, and that the court should strike arguments raised by defendants for the first time in their reply brief. Dkt. #873.

Although this case is in a very late stage of litigation, I conclude that a stay is warranted pending appeal of the inter partes review decisions because final cancellation of the asserted claims would moot all of plaintiffs' infringement claims and avoid wasting judicial resources needlessly in resolving the post-trial motions and any resulting appeals. Even if not all of the board's decisions are upheld on appeal, the decision of the court of appeals will provide important guidance on the validity of the patents, simplify the case and prevent inconsistent results between the inter partes review and the litigation. Because I am issuing a stay, it is unnecessary to address the parties' remaining arguments concerning the effect of the non-final decisions on this court's judgment and the post-trial motions.

Further, plaintiffs' motion to strike the allegedly new arguments raised by defendants will be denied as unnecessary. Plaintiffs say that defendants raise the following arguments for the first time in their reply brief: (1) application of a four-part stay analysis discussed in VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1309 (Fed. Cir. 2014), regarding stays pending reviews of covered business method patents; and (2) plaintiffs' alleged admission in another lawsuit that they experience no irreparable harm from defendants' continued infringement. Although I refer in this opinion to the four-part test described in VirtualAgility for background purposes, I have not based my decision on the test identified in that case or considered defendants' assertions that it controls in this case. I have considered defendants' other arguments to the extent that they are responsive to plaintiffs' stay analysis. I find plaintiffs' alleged admission with respect to irreparable harm irrelevant and have not considered it.

BACKGROUND

On May 17, 2013, plaintiffs filed their complaint in this court. Sometime in August or September 2013 (the exact date is disputed), defendants petitioned for inter partes review of plaintiffs' patents: U.S. Patents Nos. 5,909,482; 6,233,314; 6,594,346; 6,603,835; 7,003,082; 7,319,740; 7,555,104; and 8,213,578. On September 9, 2013, defendants moved to stay all proceedings pending the resolution of the review proceedings. Dkt. #42. This motion was denied on November 14, 2013, after I found that the benefits of a stay were speculative and that granting the stay would unduly prejudice plaintiffs. Dkt. #48.After the Patent Trial and Appeal Board initiated inter partes review proceedings on all but two claims in the patents in suit on March 5, 2014, defendants moved to continue the trial date pending the board's final written decisions, which were due in March 2015. Dkt. #196. Although the board declined to institute inter partes review with respect to claims 6 and 8 of the '835 patent, defendants filed a petition for a separate inter partes review proceeding with respect to those claims on other grounds on May 19, 2014. Dkt. #196 at n. 1. (Shortly before trial, plaintiffs decided to withdraw their assertions in this case with respect to claim 6 of the '835 patent.) I denied defendants' second motion to stay on the ground that trial was only four months away and it might take several years for the inter partes review proceeding to come to a final decision. Dkt. #269.

The case proceeded to trial on October 14, 2014. The jury found in favor of plaintiffs on all of their claims and awarded damages of more than $44,000.000. Afterwards, the parties filed numerous post-verdict motions, including motions for renewed judgment as a matter of law, new trial and relief from judgment (defendants) and motions to amend the damages award and for permanent injunction (plaintiffs). On March 3, 2015, before the court had ruled on any of the pending motions, defendants notified the court that the Patent Trial and Appeal Board had issued final written decisions invalidating all of the asserted claims except claim 8 of the '835 patent. Dkt. #825. By statute, the board must issue its final written decision on claim 8 of the '835 patent on or before December 4, 2015. Id.

Under 35 U.S.C. § 42.71(d), plaintiffs had 30 days, or until April 3, 2015, to request a rehearing with the Patent Trial and Appeal Board. (The parties have not informed thecourt whether plaintiffs elected to request a rehearing.) Under 35 U.S.C. § 141, they also have the right to appeal the final decisions to the Court of Appeals for the Federal Circuit. The deadline for filing a notice of appeal is either 63 days after the date of the final decisions or 63 days after "action" on any request for a rehearing. 37 C.F.R. § 90.3. Plaintiffs cite a sampling of cases in which it took the Patent Trial and Appeal Board between three to five months to resolve a request for rehearing and approximately 10 months for the Federal Circuit to resolve an appeal from a patent office proceeding.

OPINION

Defendants want the court to stay its ruling on the post-trial motions pending the exhaustion of plaintiff's appellate remedies with respect to the inter partes review proceedings. Plaintiffs oppose a stay, arguing that they will suffer undue prejudice and that defendants will gain a tactical advantage during the years it will take for the decisions to become final.

Because inter partes review is a relatively new process, the Court of Appeals for the Federal Circuit has not yet identified the appropriate standard for evaluating motions to stay related litigation while inter partes review of the same patents is pending. SurfCast, Inc. v. Microsoft Corp., 2014 WL 6388489, at *1 (D. Me. Nov. 14, 2014). However, federal courts have analyzed the stay question using the framework they would apply to similar situations, such as motions to stay pending inter partes reexamination or the review of an alleged covered business method patent. Universal Electronics, Inc. v. Universal RemoteControl, Inc., 943 F. Supp. 2d 1028, 1030-31 (C.D. Cal. 2013); NFC Technology LLC v. HTC America, Inc., 2015 WL 1069111 (E.D. Tex. Mar. 11, 2015); Procter & Gamble Co. v. Team Technologies, Inc., 2013 WL 4830950, at *2 (S.D. Ohio Sept. 10, 2013); Semiconductor Energy Laboratory Co., Ltd. v. Chimei Innolux Corp., 2012 WL 7170593, at *1, n.1 (C.D. Cal. Dec. 19, 2012). Courts typically consider three factors in determining whether to grant a stay pending reexamination: (1) the stage of the litigation, including whether discovery is complete and a trial date has been set; (2) whether a stay will simplify the issues in question and the trial of the case; and (3) whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party. Universal Electronics, 943 F. Supp. 2d at 1030-31. Section 18(b)(1) of the America Invents Act requires courts deciding whether to stay litigation pending a covered business method patent review to consider a fourth factor: whether a stay will reduce the burden of litigation on the parties and on the court. VirtualAgility, 759 F.3d at 1309 (discussing statutory test set forth in § 18(b)(1) of America Invents Act).

Nevertheless, the analysis is not limited to these factors; rather, the totality of the circumstances governs. Universal Electronics, 943 F. Supp. 2d at 1031; Pi-Net International, Inc., v. Hertz Corp., 2013 WL 7158011, *1 (C.D. Cal. June 5, 2013) (citing Allergan Inc. v. Cayman Chem. Co., 2009 WL 8591844, at *2 (C.D. Cal. Apr. 9, 2009)). The inquiry is largely case specific, TPK Touch Solutions, Inc. v. Wintek ElectroOptics Corp., 2013 WL 6021324, 1 (N.D. Cal. Apr. 28, 2014), and "calls for the exercise of judgment, which must weigh competing interests and maintain an even balance." Landis v.North...