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Canfield Scientific, Inc. v. Drugge

United States District Court, D. New Jersey

June 13, 2018

CANFIELD SCIENTIFIC, INC., Plaintiff,
v.
DR. RHETT DRUGGE, et al., Defendants.

          OPINION AND ORDER

          JAMES B. CLARK, III UNITED STATES MAGISTRATE JUDGE.

         THIS MATTER comes before the Court on a motion by Plaintiff Canfield Scientific, Inc. (“Canfield” or “Plaintiff”) to stay this action pending inter partes review before the Patent Trial and Appeal Board (“PTAB”) [Dkt. No. 34]. Defendants Dr. Rhett Drugge and Melanoscan LLC (collectively “Defendants” or “Melanoscan”) oppose Plaintiff's motion [Dkt. No. 36]. For the reasons set forth below, Plaintiff's motion to stay [Dkt. No. 34] is GRANTED.

         I. BACKGROUND

         Defendant Melanoscan is the owner of U.S. Patent No. 7, 359, 748 (“the ‘748 patent”), titled “Apparatus for Total Immersion Photography.” Compl. at ¶ 11. Dr. Drugge is the inventor of the ‘748 patent and the founder of Melanoscan. Id. at ¶ 4. The ‘748 patent relates to the detection, diagnosis and treatment of skin cancer. Canfield is “a global leader in imaging systems, services, and products for scientific research and healthcare applications.” Id. at ¶ 2. Among the products sold by Canfield is an imaging system called the Vectra WB360 (the “Vectra”). Id. at ¶ 13. Dr. Drugge believes that the Vectra violates the ‘748 patent. According to Canfield, when Dr. Drugge learned that certain Canfield customers had purchased the Vectra, Dr. Drugge emailed one of Canfield's customers along with other doctors and institutions in the dermatological field on June 18, 2016, stating his belief that the Vectra violated the ‘748 patent and encouraging the recipients of the email to cease all use of the device. Id. at ¶¶ 15-17. Subsequently, on July 15, 2016, an attorney for Melanoscan sent a letter to Canfield accusing Canfield of infringing on the ‘748 patent and a letter to another of Canfield's clients requesting that the client refrain for purchasing any additional systems from Canfield. Id. at ¶¶ 21-22.

         Plaintiff filed its Complaint on August 1, 2016. Dkt. No. 1. The Complaint alleges five causes of action: (1) declaratory judgment of non-infringement of the ‘748 patent; (2) tortious interference with contractual and prospective business advantage; (3) unfair competition under the Lanham Act § 43(a) - 15 U.S.C. § 1125(a); (4) commercial disparagement under New Jersey common law; and (5) unfair competition under New Jersey common law. In response, Defendants filed a motion to dismiss Counts Two through Five of Plaintiff's Complaint. See Dkt. No. 15. The Court granted Defendants' motion without prejudice as to Counts Two and Four and as to the allegations related to the two July 15, 2016 letters in Counts Three and Five. Dkt. No. 21. Defendants' motion was denied as to the allegations concerning the June 18, 2016 email in Counts Three and Five. Id. Although the Court granted Plaintiff leave to file an amended complaint within thirty days, Plaintiff did not do so. Accordingly, all that remains of Plaintiff's Complaint is Plaintiff's claim for declaratory judgment of non-infringement and Plaintiff's claims for unfair competition related to the June 18, 2016 email. On June 9, 2017, Defendants filed their Answer along with a Counterclaim stating a single cause of action for infringement of the ‘748 patent. See Dkt. No. 23. On June 30, 2017, Plaintiff asserted an additional claim for declaratory judgment of invalidity. See Dkt. No. 25.

         II. DISCUSSION

         It is well-settled that “the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for litigants.” Depomed Inc. v. Purdue Pharma L.P., C.A. No. 13-0571 (JAP), 2014 WL 3729349, at *2 (D.N.J. July 25, 2014) (quoting Landis v. North Am. Co., 299 U.S. 248, 254 (1936)). In particular, “[t]he decision to stay a patent case in which a reexamination by the PTO has been requested is within the discretion of the district court.” Thermolife Int'l, LLC v. Prosource Performance Prod., C.A. No. 15-2037 (FLW/LHG), 2015 WL 9480023, at *6 (D.N.J. Dec. 29, 2015) (citing cases from the Federal Circuit and the District of New Jersey).

         Because staying a case pending IPR proceedings offers both costs and benefits, courts traditionally balance the following three factors in determining whether to grant a stay: “(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 a trial date has been set.” Depomed, 2014 WL 3729349, at *2 (citations omitted); see also Thermolife, 2015 WL 9480023, at *6 (quoting Mondis Tech. Ltd. v. LG Elecs., Inc., C.A. No. 15-4431 (SRC/CLW), 2015 WL 7012747, at *6 (D.N.J. Nov. 12, 2015)). While courts in this District have noted a “generally liberal policy toward granting stays pending patent reexamination by the PTO, ” Mondis Tech., 2015 WL 7012747, at *5 (citations omitted), a stay is not automatic as a “stay in litigation inevitably causes further delay in an already lengthy process, and could potentially harm [the opposing party].” Id. (quoting Brass Smith, LLC v. RPI Indus., Inc., C.A. No. 09-06344 (NLH/JS), 2010 WL 4444717, at *2 (D.N.J. Nov. 1, 2010)). “The party seeking a stay of civil litigation bears the burden to show that the stay would be appropriate.” Id. (citing Landis, 299 U.S. at 255).

         Prior to addressing the individual factors, the Court notes that the parties' briefing on Plaintiff's present motion was submitted prior to the PTAB's institution of inter partes review. Accordingly, the large portion of Defendants' opposition to Plaintiff's motion arguing that Plaintiff's petition was somehow barred or would be unlikely to succeed is no longer applicable.

         A. Prejudice to the Non-Moving Party

         In determining whether a stay will likely result in undue prejudice to the non-moving party or place them at a clear tactical disadvantage, the Court considers a number of factors including “the timing of the request for reexamination, the timing of the request for [a] stay, the status of the reexamination proceedings and the relationship of the parties.” Depomed, 2014 WL 3729349, at *2 (quoting Boston Scientific Corp. v. Cordis Corp., 777 F.Supp.2d 783, 789 (D. Del. 2011)).

         As to the timing of Plaintiff's petition and the present motion to stay, Defendants assert that Plaintiff's delay in moving for inter partes review evidences Plaintiff's “dilatory motive” in the filing of its petition. Dkt. No. 36 at p. 25. Plaintiff's claim for invalidity was first asserted in this action on June 30, 2017. See Dkt. No. 25. Plaintiff filed its petition for inter partes review on September 21, 2017. The Court held an initial scheduling conference with the parties and entered a Pretrial Scheduling Order in this matter on September 29, 2017. See Dkt. No. 33. Pursuant to Plaintiff's statements during the initial scheduling conference notifying Defendants and the Court of its intention to move for the presently sought stay, the Court included a deadline in the Pretrial Scheduling Order of November 9, 2017 for Plaintiff to file the present motion. See Id. at ¶ 32. Plaintiff filed its motion to stay on the November 9, 2017 deadline. Despite Defendants' contentions to the contrary, the Court does not find that the approximately three-month delay between Plaintiff's assertion of its invalidity claim and the filing of its IPR petition or the less than two-month delay between the filing of the petition and the present motion demonstrates a dilatory motive on Plaintiff's part. Accordingly, the Court finds this sub-factor to be neutral.

         Turning to the status of the IRP proceedings, the Court find that this sub-factor favors Defendants. On March 30, 2018, the PTAB instituted review as to the claims challenged by Plaintiff. Under the governing statute, the presently instituted IRP proceedings are not expected to be fully resolved until March 2019, with a possibility of a six-month extension for “good cause.” 35 U.S.C. 316(a)(11); see also Toshiba Samsung Storage Tech. Korea Corp. v. LG Elecs., Inc., C.A. No. 15-691 (LPS), 2016 WL 3437605, at *5 (D. Del. June 17, 2016) (finding the “status of IPR” sub-factor weighed against a stay because the recently instituted IPR and the possibility of a six-month extension for good cause and/or two or more years of IPR appellate proceedings would be prejudicial to the non-movant).

         Under the final sub-factor, the Court considers the relationship between the parties. Courts are generally reluctant to grant a stay in a matter where the parties are direct competitors on the rationale that a stay would likely cause the non-movant to lose substantial profits and goodwill on the market. See, e.g., Depomed, 2014 WL 3729349, at *4 (quoting Neste Oil OYJ v. Dynamic Fuels, LLC, C.A. No. 12-1744 (GMS), 2013 WL 3353984, at *3 (D. Del. July 2, 2013)); Thermolife, 2015 WL 9480023, at *6 (finding because the parties are direct competitors, a stay of the litigation would result in prejudice to the non-movant). The presence of multiple active firms in the relevant market, ...


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