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Brass Smith, LLC v. RPI Industries

November 1, 2010

BRASS SMITH, LLC, PLAINTIFF,
v.
RPI INDUSTRIES, INC. DEFENDANT.



The opinion of the court was delivered by: Joel Schneider United States Magistrate Judge

[Doc. No. 44]

OPINION AND ORDER

This matter is before the Court on defendant/counterclaimant RPI Industries, Inc.'s (hereinafter "RPI") "Motion to Stay Pending Reexamination of U.S. Patent 6,588,863" [Doc. No. 44]. Plaintiff Brass Smith, LLC (hereinafter "BSI") opposed RPI's Motion to Stay [Doc. No. 46] and the Court received RPI's reply [Doc. No. 48]. The Court held oral argument on RPI's motion. For the reasons to be discussed, RPI's motion is GRANTED and this civil action shall be stayed pending the reexamination of U.S. Patent 6,588,863 (hereinafter "'863 patent") by the United States Patent and Trademark Office (hereinafter "PTO").

Background

BSI filed its complaint against RPI on December 16, 2009, alleging infringement of BSI's '863 patent, titled "Sneeze Guards and Methods for Their Construction and Use" (Complaint ¶ 4, Doc. No. 1). On March 24, 2010, RPI filed its answer and counterclaim, alleging that the '863 patent is invalid, void and unenforceable [Doc. No. 16]. According to RPI, "on June 9, 2010, a Request for Reexamination of the '863 patent claims was filed by the law firm of Jordan and Hamburg, LLP, on behalf of a third party not related to this litigation" (hereinafter "Third Party Request"). (Memo. of Law at 2). RPI further represents that the Third Party Request for reexamination was granted by the PTO on July 23, 2010. (Id. at 2, n.1).

RPI filed its own "Request for Reexamination" (hereinafter "RPI Request") on September 17, 2010, claiming that "as a result of its own independent searching, RPI discovered prior art that raises substantial additional grounds for invalidating the claims of the '863 patent." (Id.). Both the Third Party Request and RPI's reexamination request are currently pending before the PTO.*fn1 On October 18, 2010, counsel for BSI sent a letter to the Court and to counsel for RPI, indicating that it has agreed to participate in the PTO's "Pilot Program for Waiver of Patent Owner's Statement in Ex Parte Reexamination Proceedings," which is "designed to reduce the pendency time of reexamination proceedings." (Doc. No. 59, hereinafter "BSI Letter"). BSI's letter further asserts that BSI has contacted RPI and offered to resolve RPI's motion by stipulating to a stay of the case during the pendency of the reexamination proceedings, so long as RPI refrains from selling, referencing, or showing the allegedly infringing product during the same time period. (Id.). According to the letter, as of October 18, 2010, RPI has not responded to BSI's proposal. (Id.). Not having heard from the parties on the issue, the Court assumes this same situation exists as of the date of this Opinion and Order.

Discussion

RPI is moving to stay the case until the PTO issues its rulings on the outstanding reexamination requests regarding the '863 patent. The issue of whether to stay a patent case pending a reexamination has been addressed in a number of cases in this District and other jurisdictions. Courts have delineated the costs and benefits to staying proceedings pending a reexamination by the PTO.

[A]dvantages include: (1) a review of all prior art presented to a court by the PTO, with its particular expertise; (2) the potential alleviation of numerous discovery problems relating to prior art by PTO examination; (3) the potential dismissal of a civil action should invalidity of a patent be found by the PTO; (4) encouragement to settle based upon the outcome of the PTO reexamination; (5) an admissible record at trial from the PTO proceedings which would reduce the complexity and length of the litigation; (6) a reduction of issues, defenses and evidence during pre-trial conferences; and (7) a reduction of costs for the parties and a court.

Eberle v. Harris, C.A. No. 03-5809 (SRC), 2005 WL 6192865, at *2 (D.N.J. Dec. 8, 2005) (citing GPAC, Inc. v. D.W.W. Enterprises, Inc., 144 F.R.D. 60, 63 (D.N.J.1992) (internal citations omitted)). Courts have also pointed out the drawbacks of a stay: "a stay in litigation inevitably causes further delay in an already lengthy process, and could potentially harm [the opposing party]. [The opposing party] ha[s] a right to have their day in court, and more and more in American jurisprudence the goal is to have that day sooner rather than later." Id. While courts weigh the costs and benefits associated with granting a stay pending reexamination of a patent, "courts have noted that granting a stay pending reexamination is favored." ICI Uniqema, Inc. v. Kobo Prods., Inc., C.A. No. 06-2943 (JAP), 2009 WL 4034829, at *1 (D.N.J. Nov. 20, 2009) (citing Alltech, Inc. v. Cenzone Tech, Inc., C.A. No. 06-0153 (JM), 2007 WL 935516 (S.D. Cal. March 21, 2007) ("[t]here is a liberal policy in favor of granting motions to stay proceedings pending the outcome of reexamination proceedings"); Cross Atl. Capital Partners, Inc. v. Facebook, Inc., C.A. No. 07-2768 (JRP), 2008 WL 3889539, at *1 (E.D.Pa. Aug. 18, 2008) ("Stays are particularly appropriate when the reexamination result might assist the court in making a validity determination or would eliminate the need to make an infringement determination")).

Ultimately, the decision of whether or not to stay a patent case during reexamination is discretionary. Stryker Trauma S.A. v. Synthes (USA), C.A. No. 01-3879 (JLL), 2008 WL 877848, at *1 (D.N.J. Mar. 28, 2008) (citing Viskase Corp. v. American Nat'l Can Co., 261 F.3d 1316, 1328 (Fed.Cir.2001); Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed.Cir.1988)); see also ICI Uniqema, supra, at *2. In deciding whether to stay a matter pending reexamination courts have developed a three-part test (hereinafter referred to as the "Xerox factors"): "(1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set." Stryker Trauma, supra, at *1 (citing Xerox Corp. v. 3Com Corp., 69 F. Supp 2d 404, 406 (W.D.N.Y. Feb.18, 1999)). "Other courts have provided alternative phrasing for this standard, 'In deciding whether to grant a stay, the court must weight the benefits of the stay against the costs.'" Id. (citing Motson v. Franklin Covey Co., C.A. No. 03-067 (RBK), 2005 U.S. Dist. LEXIS 34067, at *1 (D.N.J. Dec. 16, 2005); Middleton, Inc. v. Minnesota Mining & Mfg. Co., C.A. No. 03-40493, 2004 WL 1968669, at *3 (S.D.Iowa Aug. 24, 2004)). The Court will now address the Xerox factors described above.

A. Prejudice

The first factor for consideration regarding RPI's request for a stay is "whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party." Xerox Corp., supra, at 406. In making this determination, the Court should consider whether any disadvantages of the inherent delay are outweighed by the advantages that come along with allowing the PTO to complete reexamination. See ICI Uniqema, supra, at *2.

RPI argues that BSI will not be unduly prejudiced if a stay is granted because "[BSI] stands to benefit from simplification of the issues, savings of time and money, and clarification of the rights afforded by the reexamination and the concurrent stay of this litigation." (Memo. of Law at 4). In addition to averring that it is not purposefully seeking to delay the proceedings in the case, RPI argues that instead of causing prejudice to BSI, RPI itself will be prejudiced if a stay is not granted, as there is a chance that the PTO will eventually invalidate the '863 patent as a result of the pending ...


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