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Lmt Mercer Group, Inc v. Mcfarland Cascade Holdings

May 24, 2011

LMT MERCER GROUP, INC.,
PLAINTIFF,
v.
MCFARLAND CASCADE HOLDINGS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Arpert, U.S.M.J

NOT FOR PUBLICATION

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

This matter having come before the Court on a Motion by Defendants McFarland Cascade Holdings, Inc. and McFarland Cascade Pole & Lumber Company (collectively, "Defendants") to stay this matter pending completion of the U.S. Patent and Trademark Office's ex parte reexamination of the '637 patent [dkt. entry. no. 10], returnable June 6, 2011. Plaintiff LMT Mercer Group, Inc. ("Plaintiff") filed opposition on May 2, 2011. Defendants filed a reply brief on May 13, 2011. For the reasons stated herein, Defendants' Motion is granted.

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On January 31, 2011, Plaintiff filed a Complaint against Defendants ("McFarland Action") alleging infringement of U.S. Patent No. 6,722,637 ("'637 patent") entitled "Fence Post Accessory Apparatus". See Pl.'s Comp., dkt. entry no. 1 at 1, 3. In addition, Plaintiff filed two (2) separate actions in the District of New Jersey alleging infringement of the '637 patent against different defendants. Those matters are captioned LMT Mercer Group, Inc. v. Maine Ornamental, LLC, et al., Civ. Action No. 10-4615 (D.N.J. 2010) ("Maine Action") and LMT Mercer Group, Inc. v. Home Tops, LLC, Civ. Action No. 10-6699 (D.N.J. 2010) ("Home Tops Action"). Presently, all three (3) actions are assigned to District Judge Freda L. Wolfson and Magistrate Judge Douglas E. Arpert.

On February 1, 2011, Maine Ornamental, LLC, Universal Consumer Products, Inc., and Universal Forest Products, Inc. ("Maine Action Defendants") filed a request for ex parte reexamination of the '637 patent with the United States Patent & Trademark Office ("USPTO"). See Def.'s Decl. of Christopher H. Strate ("Strate"), dkt. entry no. 10-7, Ex. D. The Court notes that the Maine Action Defendants made this request based, in part, on a "continuation application" filed by Stallion Fence Accessories -- Plaintiff's predecessor in interest -- which was rejected by the USPTO with respect to "claims very similar to the claims issued in the '637 patent on the basis of" additional prior art. Id. The Court notes that on February 9, 2011, the USPTO "issued a Notice of Failure to Comply with Ex Parte Reexamination Request Filing Requirements under 37 C.F.R. § 1.510 and required Defendants to modify" their request within thirty (30) days. Id. On March 9, 2011, Maine Action Defendants filed a second request for ex parte reexamination of the '637 patent. Id. On March 29, 2011, the USPTO granted Defendants' request for ex parte reexamination. Id. Specifically, the USPTO concluded that "each of the references cited by the [Maine Action Defendants] raises a substantial new question of patentability with respect to the subject patent" and, "[a]ccordingly, claims 1-23 of the subject patent will be reexamined". Id.

On April 21, 2011, Defendants filed a Motion to stay this matter pending the USPTO's ex parte reexamination of the '637 patent. See dkt. entry no. 10. The Court notes that a similar motion to stay proceedings was filed in the Maine Action on April 4, 2011. See LMT Mercer Group, Inc. v. Maine Ornamental, LLC, et al., Civ. Action No. 10-4615 (D.N.J. 2010), dkt. entry no. 32. The Court also notes that a similar motion to stay proceedings was filed in the Home Tops Action on May 13, 2011. See LMT Mercer Group, Inc. v. Home Tops, LLC, Civ. Action No. 10-6699 (D.N.J. 2010), dkt. entry no. 18.

A. Defendants' Arguments in Support of the Motion to Stay

Initially, citing Softview Computer Products Corp. v. Haworth Inc., 2000 WL 1134471, at *1 (S.D.N.Y. 2000), Ethicon v. Quigg, 849 F.2d 1422, 1426 (Fed. Cir. 1988), Proctor & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 849 (Fed. Cir. 2008), Gould v. Control Laser Corp., 705 F.2d 1340, 1342 (Fed. Cir.), cert. denied, 464 U.S 935 (1983), Defendants maintain that "[t]his Court has the inherent power to stay proceedings pending a patent reexamination". See Def.'s Br., dkt. entry no. 10-1 at 2-3. Citing Gould, 705 F.2d at 1342, Defendants contend that the "objective of the reexamination procedure is to eliminate the need to try the issue of validity of a patent claim (when the claim is cancelled by the [US]PTO), or to facilitate trial of that issue by providing a district court with the expert view of the [US]PTO". Id. at 3. Citing ICI Uniqema, Inc. v. Kobo Prods., Inc., 2009 U.S. Dist. LEXIS 108421, at *3 (D.N.J. 2009), Defendants state that "some benefits provided by a stay include: (1) a review of all prior art presented to a court by the Patent Office with its particular expertise; (2) the potential alleviation of numerous discovery problems relating to prior art by Patent Office examination; (3) the potential dismissal of a civil action should invalidity of a patent be found by the Patent Office; (4) encouragement to settle based upon the outcome of the Patent Office; (5) an admissible record at trial from the Patent Office 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". Id. Further, Defendants acknowledge that, pursuant to ICI Uniqema, 2009 U.S. Dist. LEXIS 108421, at *3-4,

In deciding whether to stay a matter pending reexamination, courts have developed a three-part test. A court should consider (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.

Id.

1. A stay will not prejudice or disadvantage Plaintiff.

Citing Sabert Corp v. Waddington North America, Inc., 2007 U.S. Dist. LEXIS 68092, at *21 (D.N.J. 2007), Defendants maintain that "[c]courts in this district have recognized that when a request for stay is made in the early stages of discovery, the likelihood of prejudice to the patent owner is decreased". Id. at 3-4. Defendants note that in this matter, "the Court has not held an initial scheduling conference", "the parties have not exchanged infringement or validity contentions", and "the parties have not exchanged discovery requests or taken any depositions" and thus argue that "Plaintiff will not be significantly prejudiced by...a stay at this juncture". Id. at 4. Citing ICI Uniqema, 2009 U.S. Dist. LEXIS 108421, at *4, 35 U.S.C. § 305, and the MANUAL OF PATENT EXAMINING PROCEDURE § 2261 (2008), Defendants contend that "courts in this district recognize that the delay inherent in the reexamination process does not constitute, by itself, undue prejudice" and "such delay is considered relatively short as the [US]PTO is required to conduct all reexamination proceedings with special dispatch". Id. "Given the posture of this case, the benefits provided by a stay pending the outcome of reexamination" and "any delay will be minimized by the expedited handling of reexamination by the [US]PTO", such that any prejudice to Plaintiff will be minimal and does not outweigh the benefits of staying this action". Id.

2. A stay will simplify this litigation.

Citing ICI Uniqema, 2009 U.S. Dist. LEXIS 108421, at *5, Ethicon, 849 F.2d at 1428, and GPAC, Inc. v. D.W.W. Enters., Inc., 144 F.R.D. 60, 62-63 (D.N.J. 1992), Defendants argue that "reexamination proceedings will eliminate, narrow, or clarify key disputed issues in this litigation" because "[c]laims that may be rejected during the reexamination will not need to be litigated and...any claims surviving reexamination may be amended" such that "a stay would prevent resources from being expended on invalid or amended claims". Id. at 4-5. "Even if the reexamination did not lead to claim amendment or cancellation, it could still provide valuable analysis to the district court". Id. at 5. Defendants note that the USPTO "reports that 77% of ex parte reexaminations lead to canceled or amended claims" and, therefore, "[s]ince it is very likely that the claims of the patent-in-suit will be changed or cancelled, the issues of infringement and validity cannot be properly addressed at this time". Id. Defendants contend that "the posture of this action favors the conclusion that a stay in favor of ex parte reexamination" should be granted. Id.

3. A stay is warranted based upon the stage of this litigation.

Citing Sabert, 2007 U.S. Dist. LEXIS 68092, at *21 and GPAC, 144 F.R.D. at 64-65, Defendants maintain that "this action is in its infancy" such that "[g]ranting a stay will avoid a waste of time, money and resources by the Court, the parties and even a jury in adjudicating claims that ...


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