Court Halts Philips’s Attack on WAC Citing “Reasonable Likelihood” that Philips’s Asserted Patents Will Be Invalidated

EdisonReport can confirm that WAC had another victory in its battle against Philips, this time in the District Court.  Below is the Court’s decision staying Philips’s entire case against WAC while the Patent Office makes a final determination whether the asserted patents are invalid (recall that the Patent Office instituted invalidation inter partes proceedings in November 2015 with respect to six asserted patents because it found that WAC is “reasonably likely to succeed” in invalidating those patents.)

The following transaction was entered on 1/19/2016 at 2:13 PM EST and filed on 1/19/2016

Case Name: Koninklijke Philips N.V. et al v. Wangs Alliance Corporation
Case Number: 1:14-cv-12298-DJC
Document Number: 156(No document attached)

Docket Text:

Judge Denise J. Casper: ELECTRONIC ORDER entered re: [94] Motion to Stay. Plaintiffs Koninklijke Philips N.V. and Philips Lighting North America Corporation (collectively “Philips”) assert patent infringement claims alleging that Defendant Wangs Alliance Corporation (“WAC”) is engaged in activities that infringe eight light emitting diode related patents: United States Patents Nos. 6,013,988 (“‘988 patent”), 6,147,458 (“‘458 patent”), 6,250,774 (“‘774 patent”), 6,561,690 (“‘690 patent”), 6,586,890 (“‘890 patent”), 6,788,011 (“‘011 patent”), 7,038,399 (“‘399 patent”) and 7,352,138 (“‘138 patent”) (collectively, the “Patents-In-Suit”). D. 1, 30.

The parties filed claim construction briefs in March 2015 and a Markman hearing was held on May 20, 2015 and June 2, 2015. D. 80, 87. On May 28, 2015, WAC filed Inter Partes Review (“IPR”) petitions with the U.S. Patent and Trademark Office (“PTO”) regarding certain claims in seven of the eight Patents-In-Suit: IPR2015-01287 (‘988 patent), -01289 (‘458 patent), -01290 (‘774 patent), -01291 (‘690 patent), -01292 (‘890 patent), -01293 (‘138 patent), -01294 (‘399 patent) (collectively, the “Petitions”). D.85; D. 95 at 12. Shortly thereafter on June 16, 2015, WAC moved to stay this action pending the PTO’s final resolution of the Petitions, D. 94, and Philips opposed, D. 104.

On November 25, 2015, the PTO office granted six of the seven Petitions in whole or in part. D. 118. Specifically, the PTO office granted, in their entirety, the petitions regarding the ‘988 patent, D. 118-1, ‘774 patent, D. 118-3, ‘890 patent, D. 118-5, ‘138 patent, D. 118-6, and the ‘399 patent, D. 118-7. The PTO granted in part the petition regarding the ‘690 patent, D. 118-4, and denied the petition regarding the ‘458 patent, D. 118-2. On January 13, 2016, the Court heard oral argument on WAC’s motion to stay and the matter was taken under advisement. D. 153. For the reasons stated below, the Court ALLOWS WAC’s motion.

This Court has previously discussed the IPR process and standard of review in considering a motion to stay pending IPR. See SCVNGR, Inc. v. eCharge Licensing, LLC, 13-cv-12418-DJC, 2014 WL 4804738, at **8-10 (D. Mass. Sept. 25, 2014). Significantly, if a petitioner prevails in an IPR and the challenged claims are held invalid, “any pending litigation based on those invalid claims becomes moot.” Id. at *8 (citation omitted). In deciding whether to stay an action pending IPR, courts generally consider three 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. Id. (internal quotation marks and citation omitted). Given the circumstances here, the balance of the relevant factors weighs in favor of granting the motion to stay.

Regarding the first factor, while it is true this case is not necessarily at its “incipient” stage considering the parties have briefed and argued claim construction and that this matter remains under advisement by the Court, it is still the case that a trial date and the close of discovery have not been set. Discovery regarding damages is stayed until claim construction is resolved, D. 22, and all other discovery, including all forms of fact discovery and expert discovery, is not yet substantially underway. D. 95 at 7; D. 104 at 3; D. 131 at 5. Notably, courts in this district have granted motions to stay pending IPR in cases further along than this one. See, e.g., ACQIS, LLC v. EMC Corp., 14-cv-13560-ADB, 2015 WL 3617106, at *3 (D. Mass. June 10, 2015) (granting motion to stay where “substantial document and written document has already occurred and a claim construction opinion has been issued”). While it is true that the parties and the Court have expended substantial time and effort on claim construction briefing and the Markman hearing, like in ACQIS, “a significant amount of work still remains to be done” by the parties and the Court in this litigation. Id.; seeGryphon Networks Corp. v. Contact Ctr. Compliance Corp., 792 F. Supp. 2d 87, 92 (D. Mass. 2011) (staying case following Markman hearing and prior to claim construction opinion where parties engaged in substantial written discovery, but just began the deposition process); Finjan, Inc. v. Symantec Corp., No. 14-cv-02998-HSG, 2015 WL 5915369, at *2 (N.D. Cal. Oct. 9, 2015) (same, but parties had engaged in only some written discovery and document production). Accordingly, this factor weighs in favor of granting as stay.

As to the second factor, IPR will proceed for six of the eight Patents-In-Suit. This is a much higher proportion than that in SCVNGR where only three of the eight patents were subject to IPR and this Court, in turn, denied a motion to stay.See 2015 WL 4804738, at *10 (collecting cases denying a motion to stay with lower proportions of patents in IPR). Courts have repeatedly recognized the benefits of granting a stay pending IPR, see, e.g., In re Body Sci. LLC Patent Litig., No. 12-md-2375-FDS, 2012 WL 5449667, at *2 (D. Mass. Nov. 2, 2012) (listing the advantages); Gryphon Networks Corp., 792 F. Supp. 2d at 92 (recognizing that depositions taken in IPR can be used before a court after the stay is lifted), and those benefits appear to apply in this case. While this Court has expressed concern in allowing some patents to “languish” pending IPR, see SCVNGR, 2015 WL 4804738, at *10 (citation omitted), such a concern is outweighed here by having the vast majority of the Patents-In-Suit proceed in IPR. At the hearing, Philip’s counsel emphasized that, no matter what happens in IPR, at least thirteen claims will still go forward to trial. That may be true, however, as pointed out by WAC’s counsel, IPR might narrow the case by twenty-three claims, and many of these claims substantially overlap with the thirteen remaining claims. As such, any claim construction the PTO provides might be informative for the Court in rendering its claim construction opinion on the remaining claims and in addressing any dispositive motions. Considering that the PTO, in initially granting the Petitions, determined that they were “reasonably likely to succeed on the merits,” see, e.g., D. 118-4 at 2, IPR is likely to narrow this case in some way-saving time and effort in the long-run- and the parties and the Court can then proceed with this narrower scope through the remainder of the litigation. See Software Rights Archive, LLC v. Facebook, Inc., No. 12-cv-3970-RMW, 2013 WL 5225522, at *6 (N.D. Cal. Sept. 17, 2013) (noting that “[a] stay effectuates the intent of the AIA by allowing the agency with expertise to have the first crack at cancelling any claims that should not have issued in the patents-in suit before costly litigation continues”) (citing H.R. Rep. 11298 (part I), at 3940 (2011)). Thus, this factor also weighs in favor of granting a stay.

For the final factor, “while staying any case pending an IPR risks delaying the final resolution of the dispute” any such delay “does not, by itself, establish undue prejudice.” SCVNGR, 2015 WL 4804738, at *9 (emphasis in the original) (internal quotation mark and citation omitted). Although Philips is correct in arguing that courts have found that a stay may be prejudicial when parties are direct competitors, D. 104 at 24, even assuming WAC is a direct competitor, WAC appears to be a small one in comparison to Philips and its substantial number of licensees, D. 131 at 15-16. Regardless, Philips does not explain why money damages would not sufficiently compensate it for any harm experienced during the stay by WAC’s purported ongoing infringement, see D. 104 at 23-27, and the prevailing party in a patent case may recover prejudgment interest, SCVNGR, 2015 WL 4804738, at *9. This factor, like the two other factors, weighs in favor of granting a stay.

For the aforementioned reasons, WAC’s motion to stay the entire action pending final resolution in IPR, D. 94, is ALLOWED until November 15, 2016 or until the IPR decision is issued, whichever occurs. By November 15, 2016 or within one week of the IPR decision, whichever occurs first, the parties must file a joint status memorandum indicating the status of the IPR proceedings.

03 Feb