FotoNation Limited et al v. Samsung Electronics Co., Ltd. et al

RESPONSE in Opposition re Opposed MOTION to Stay Samsung's Motion to Stay Pending Determination of Inter Partes Review of Patents-In-Suit

E.D. Tex.October 26, 2018

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION FOTONATION LIMITED and DIGITALOPTICS CORP. MEMS Plaintiffs vs. SAMSUNG ELECTRONICS CO., LTD, et al. Defendants. § § § § § CASE NO. 2:17-CV-669-RWS § § § § § § RESPONSE TO SAMSUNG’S MOTION TO STAY PENDING IPR PETITIONS Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 1 of 13 PageID #: 9438 ii TABLE OF CONTENTS I. Factual Background ................................................................................................................ 1 A. Stage Of The Litigation .................................................................................................... 1 B. Samsung’s IPR Petitions .................................................................................................. 2 II. Legal Standard ........................................................................................................................ 3 III. The Court Should Deny Samsung’s Motion To Delay This Litigation .................................. 3 A. This Court’s Universal Practice Is To Deny Pre-Institution Stays Because Any Simplification Of The Issues Is Speculative At Best .................................................................. 3 B. A Stay Would Be Prejudicial To FotoNation ................................................................... 5 C. The Stage Of The Case Weighs Against A Stay .............................................................. 6 D. Samsung’s Request For Alternative Relief Is Premature And Should Be Denied........... 8 IV. Conclusion .............................................................................................................................. 9 Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 2 of 13 PageID #: 9439 iii TABLE OF AUTHORITIES Cases Allure Energy, Inc. v. Nest Labs, Inc., No. 9-13-CV-102, 2015 WL 11110606 (E.D. Tex. Apr. 2, 2015) ........................................................................................................................................... 6 EchoStar Techs. Corp. v. TiVo, Inc., No. 5:05-CV-00081, 2006 WL 2501494 (E.D. Tex. July 14, 2006) ........................................................................................................................................... 3 Freeny v. Apple Inc., No. 2:13-cv-00361-WCB, 2014 WL 3611948 (E.D. Tex. July 22, 2014) 4, 5 Lennon Image Techs., LLC v. Macy’s Retail Holdings, Inc., No. 2:13-CV-00235-JRG, 2014 WL 4652117 (E.D. Tex. Sept. 18, 2014) ....................................................................................... 3, 5 Realtime Data LLC v. Actian Corp., No. 6:15-CV-463-RWS-JDL, 2016 WL 3277259 (E.D. Tex. June 14, 2016) ..................................................................................................................... 6, 7, 9 Tessera Advanced Techs., Inc. v. Samsung Elecs. Co., Ltd., No. 2:17-CV-00671-JRG, Dkt. 91 (E.D. Tex. June 29, 2018) .................................................................................................. passim Trover Grp., Inc. v. Dedicated Micros USA, No. 2:13-CV-1047-WCB, 2015 WL 1069179 (E.D. Tex. Mar. 11, 2015) ........................................................................................................... passim Statutes 35 U.S.C. § 311(b) .......................................................................................................................... 6 35 U.S.C. § 316(a)(11) .................................................................................................................... 5 Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 3 of 13 PageID #: 9440 1 Samsung’s motion to stay filed IPRs that the PTAB has not instituted should be denied. Samsung filed a nearly–identical version of this motion more than three months ago in a case involving FotoNation’s affiliate Tessera, Tessera Advanced Techs., Inc. v. Samsung Elecs. Co., Ltd., No. 2:17-CV-00671-JRG, Dkt. 91 (E.D. Tex. June 29, 2018). Judge Gilstrap denied Samsung’s motion even before Samsung filed a reply. Dkt. 98. Samsung also sought identical relief in another case involving Tessera’s affiliate Invensas, Invensas Corporation v. Samsung Electronics Co., Ltd. et al, No. 2:17-cv-00670-RWS-RSP, Dkt. 44 (E.D. Tex. August 16, 2018), making this the third time Samsung has asked for relief that no Eastern District court has yet granted: a stay pending inter partes review (“IPR”) petitions on which the PTAB is yet to act (indeed, in petitions as to which FotoNation has yet to respond). The Court should likewise deny Samsung’s motion here. Ignoring its own delay in waiting to file its IPR petitions on the cusp of the one-year deadline, and this District’s “universal practice” of denying motions to stay prior to institution of an IPR petition, Samsung resorts to grossly overstating the balance of the factors this Court considers for stay motions. Here, as with every other case this Court has encountered in similar procedural postures, the factors uniformly disfavor a stay. I. FACTUAL BACKGROUND A. Stage Of The Litigation Samsung’s Overview of this Litigation starts with FotoNation’s Third Amended Complaint. But this lawsuit started more than a year ago, on September 28, 2017, when FotoNation sued Samsung Electronics Co., Ltd. and Samsung Electronics America, Inc. (collectively, “Samsung”). Dkt. 1. FotoNation’s Original Complaint asserted each of the same eight patents currently asserted and challenged by Samsung in its IPR petitions. FotoNation served its complaint on Samsung by October 4, 2017. The Court held a scheduling conference on January 11, 2018. Dkt. 21. FotoNation served its infringement contentions on February 5, 2018, almost Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 4 of 13 PageID #: 9441 2 nine months ago. And Samsung served its invalidity contentions on April 23, 2018. Pursuant to the Amended Docket Control Order (Dkt. 90), and before Samsung filed its IPR petitions, the parties engaged in claim construction disclosures, filed the P.R. 4-3 Joint Claim Construction Statement with the Court on August 4, 2018 (Dkt. 112), and filed their claim construction briefs. Dkts. 121, 130, 134, and 137. The Court also held a claim construction hearing on October 3, 2018. Samsung characterizes this case as “in the early stages of discovery,” (Mot. at 3), but that is wrong. Fact discovery closes in six weeks, and trial is scheduled for June 2019. Dkt. 90. The parties have exchanged thousands of pages of documents, have responded to email discovery requests, have each produced and reviewed source code, and are scheduling depositions. B. Samsung’s IPR Petitions Samsung filed half of its IPR petitions on September 27, 2018, 364 days after FotoNation filed the complaint in this case. See Mot. at 3. Samsung filed the remaining five IPR petitions the next week on October 3, 2018, one day before its one-year statutory deadline. See id. The Patent Office has so far only set the filing date for four of Samsung’s ten IPR petitions. For two of those petitions, the filing dates are October 12, 2018, so the institution decision is due April 15, 2019. For the other two petitions, the filing dates are October 24, 2018 and October 26, 2018. The earliest the PTAB will provide institution decisions on the other six IPRs is late April 2019. Mot. at 3; see Dkt. 90. Contrary to Samsung’s claim, what Samsung requests would not be “relatively short,” nor would the case “continue with minimal delay.” Mot. at 6. It would be at least six months, waiting just for a decision on institution. And, for any IPRs that are instituted, the earliest the PTAB would likely issue a final written decision is April 2020—nearly a full year after trial in this action. Dkt. 90. Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 5 of 13 PageID #: 9442 3 II. LEGAL STANDARD In this District, “the courts have uniformly denied motions for a stay” before the PTAB has acted on a petition for IPR. Trover Grp., Inc. v. Dedicated Micros USA, No. 2:13-CV-1047-WCB, 2015 WL 1069179, at *6 (E.D. Tex. Mar. 11, 2015). “[T]hat is not just the majority rule; it is the universal practice.” Id.; see also Tessera Advanced Techs., Dkt. 98, slip op. at 6 (“It is now well established that this Court will not, barring exceptional circumstances, grant a stay of proceedings for the mere filing of an IPR.”). When considering motions to stay pending an IPR, courts in this district consider three factors: (1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) whether a stay will simplify issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set. Lennon Image Techs., LLC v. Macy’s Retail Holdings, Inc., No. 2:13-CV-00235-JRG, 2014 WL 4652117, at *2 (E.D. Tex. Sept. 18, 2014). “Essentially, courts determine whether the benefits of a stay outweigh the inherent costs based on those factors.” EchoStar Techs. Corp. v. TiVo, Inc., No. 5:05-CV-00081, 2006 WL 2501494, at *1 (E.D. Tex. July 14, 2006). III. THE COURT SHOULD DENY SAMSUNG’S MOTION TO DELAY THIS LITIGATION Samsung’s motion to stay pending IPR institution should be denied because it is both too early and too late. It is too early because the PTAB has not even decided whether to institute the IPRs. And it is too late because Samsung took nearly a year to file its IPRs, all the while litigating this case, such that it would be too prejudicial to stay the case at this point. A proper analysis of the factors shows that a stay is unwarranted. A. This Court’s Universal Practice Is To Deny Pre-Institution Stays Because Any Simplification Of The Issues Is Speculative At Best It is “the universal practice” in this District to deny a motion to stay pending IPR Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 6 of 13 PageID #: 9443 4 proceedings before the PTAB has decided to institute the review. Trover, 2015 WL 1069179, at *6; see also Tessera Advanced Techs., Dkt. 98, slip op. at 6 (“It is now well established that this Court will not, barring exceptional circumstances, grant a stay of proceedings for the mere filing of an IPR.”). And the statistics Samsung cites explain why. According to those statistics, petitions have been instituted in just over 50% of all filed petitions. See Mot. Ex. B at 11 (4,549 of 8,747 petitions instituted). As this Court has previously recognized, “it would be speculative for the Court to extrapolate from the statistics and conclude that it is likely that the PTAB will institute inter partes review in this case and invalidate some or all of the claims” of the Asserted Patents. Trover, 2015 WL 1069179, at *4. Ignoring this Court’s practice, Samsung instead relies on cases from outside the District to support its motion. See Mot. at 5-6, 9-10. But none of these cases solves Samsung’s problem that its argument is entirely speculative. See Trover, 2015 WL 1069179, at *4. Samsung’s argument for simplification requires that at least one IPR be instituted—something no one will know until at least April 2019. “If the petition is denied, the stay would contribute not at all to simplifying the issues before the Court,” and would have only resulted in delay and prejudice to FotoNation. Freeny v. Apple Inc., No. 2:13-CV-00361-WCB, 2014 WL 3611948, at *2 (E.D. Tex. July 22, 2014) (emphasis added). Even then, simplification would not necessarily be the result. Indeed, Judge Gilstrap recently found, on nearly identical facts, “that the ‘simplification of the issues’ factor cuts against a stay.” Tessera Advanced Techs., Dkt. 98, slip op. at 7.1 This factor, perhaps more so than the others, weighs heavily against a stay. 1 Samsung also argues that this case is of a “complex nature.” Mot. at 9; see also id. at 11-12. As are most patent cases, and in any event this argument fails because the scope and nature of the accused products will remain unless every challenged claim of the patents-in-suit is found unpatentable in IPR. Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 7 of 13 PageID #: 9444 5 B. A Stay Would Be Prejudicial To FotoNation To support its attempt at unprecedented relief in this Court, Samsung resorts to mischaracterizing the relationship between the parties. FotoNation used to supply the software to Samsung to perform the claimed inventions. When Samsung’s license expired, instead of renewing, Samsung decided to continue to use FotoNation’s inventions. Every day that Samsung infringes is more than simply infringement. It is Samsung taking sales from FotoNation. This Court has repeatedly recognized that “a patent holder has an interest in the timely enforcement of its patent rights.” Lennon Image Techs., 2014 WL 4652117, at *2 (quotation omitted); accord Trover, 2015 WL 1069179, at *2 (“[T]he plaintiffs’ claim of prejudice is entitled to consideration, as is the general right of patent owners to timely enforcement of their patent rights.”); 3rd Eye, 2015 WL 179000, at *2 (“[Plaintiff] has a well-established interest in the timely enforcement of its patent rights.”). While that may not be sufficient to deny a motion to stay standing alone or in the face of factors weighing in favor of a stay, it is certainly prejudice to be considered. Here, Samsung waited until nearly the very last day to file its IPR petitions. Samsung’s inexplicable delay has allowed Samsung to fully discover FotoNation’s infringement theories, claim construction positions, and obtain other discovery from FotoNation. Most importantly, Samsung’s choice to delay until after FotoNation had to narrow to its preliminary election allowed Samsung to have a narrower set of claims to challenge in its IPR petitions. Samsung made the tactical decision to delay filing its IPRs until it had this information. Although Samsung’s IPR petitions’ timing may be permissible under the statute, Samsung is not permitted to have both the tactical advantage of delay in filing its IPR petitions and a stay of the district court proceedings, to FotoNation’s prejudice. To allow this presents FotoNation with a tactical disadvantage of having expended resources in the district court, only to have it halted and be forced to “expend Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 8 of 13 PageID #: 9445 6 considerable financial resources on IPR proceedings, prior to its day in court.” Allure Energy, Inc. v. Nest Labs, Inc., No. 9-13-CV-102, 2015 WL 11110606, at *1 (E.D. Tex. Apr. 2, 2015). This prejudice weighs against a stay. Moreover, the length of the stay requested by Samsung weighs against Samsung’s motion. Samsung asks for a stay until the PTAB’s “determinations on Samsung’s IPR Petitions and any resulting proceedings.” Mot. at 1. That would mean that the stay would be in place until at least April 2019 (when the first of the decisions on institution are due), and potentially April 2020 (when a decision on the IPRs is due) if instituted, almost a year after the trial date in this case.2 Dkt. 90; see Realtime Data LLC v. Actian Corp., No. 6:15-CV-463-RWS-JDL, 2016 WL 3277259, at *2 (E.D. Tex. June 14, 2016) (citing 35 U.S.C. § 316(a)(11)). And “[t]he delay could be further exacerbated if Defendants invoke their right to appeal the PTAB’s decision to the Federal Circuit. 35 U.S.C. § 141(c).” Id. There can be no question that “[s]uch a lengthy delay will result in significant prejudice to [FotoNation] and, therefore, this factor weighs against a stay.” Id. C. The Stage Of The Case Weighs Against A Stay In an attempt to appear diligent, Samsung points to the two months that passed between FotoNation’s preliminary election of asserted claims and Samsung’s IPR petitions. Neither the statute’s filing deadline nor Samsung’s diligence is impacted by FotoNation’s preliminary election. That the statutory deadline runs from the date of service of the complaint demonstrates that the preliminary election—something that does not even occur in every case—is not needed for a defendant to file IPR petitions. IPR proceedings are designed to determine whether the challenged claims are patentable under 35 U.S.C. §§ 102 or 103. See 35 U.S.C. § 311(b). That 2 By statute, the deadline for an IPR decision could be extended by six months for good cause, which could extend the delay to October 2020. 35 U.S.C. § 316(a)(11). Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 9 of 13 PageID #: 9446 7 analysis compares the claim language to the prior art. Indeed, Samsung was able to serve invalidity contentions six month ago, in April 2018, and assert many of the same prior art references that it asserts in its IPR petitions. While Samsung chose to wait until it had the preliminary election, that alone does not show that Samsung diligently sought review at an early stage of the proceedings. This Court “is not sympathetic” to defendants who “could have filed their motion for a stay at a time when the case could truly be said to have been in its infancy.” Trover, 2015 WL 1069179, at *4. The Trover case is instructive. The defendants in Trover filed an IPR nearly a year after the complaints were filed and months after serving their invalidity contentions. Trover, 2015 WL 1069179, at *3. In denying the defendants’ motion to stay, the court stated that “[b]y the time the stay motion was filed . . . the parties had engaged in substantial discovery and had initiated the claim construction process[]” and that “[t]he pattern of delay on the defendants’ part cuts against granting a stay.” Id. The Court determined that the case had already “progress[ed] to a point at which the proceedings have become more active, and thus more expensive, for the parties.” Trover, 2015 WL 1069179, at *4 (denying stay pending IPR where claim construction briefing was completed during the briefing the motion to stay). So too here. FotoNation filed this case more than a year ago. Samsung waited almost six months after serving its invalidity contentions to file its IPRs. And the Court held its claim construction hearing before Samsung filed its motion to stay (indeed before many of Samsung’s IPR petitions were even filed). Just as in Trover, Samsung “could have filed [its] motion for a stay at a time when the case could truly be said to have been in its infancy.” Id. at *4. “But by delaying in filing [its] petition and then further delaying in filing [its] motion to stay, [Samsung has] allowed the case to progress to a point at which the proceedings have become more active, and thus more Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 10 of 13 PageID #: 9447 8 expensive, for the parties.” Id. As in Trover, “this factor cuts strongly against a stay.” Id.3 Because Samsung delayed filing its IPRs and motion to stay until now, after the claim construction briefing and hearing and weeks before the close of fact discovery, this factor weighs against granting a stay. D. Samsung’s Request For Alternative Relief Is Premature And Should Be Denied Recognizing that its motion is premature without an institution decision, Samsung asks for alternative relief in the form of an expedited briefing schedule should the PTAB institute Samsung’s IPRs. See Mot. at 13. First, even after institution, it is far from uniform practice to simply enter a stay. See, e.g., Realtime Data, 2016 WL 9340796, at *5 (denying motion to stay post-institution and recognizing that “if the PTAB’s institution of IPRs created a per se rule obligating district courts to stay their proceedings, there would be no need for courts to consider a three-factor test or any other circumstances that might be relevant to a stay”). In fact, given that the proceedings in this Court will have advanced even further in the next six (or more) months, and trial will be imminent, the factors then will balance even further against entering a stay. Second, Samsung presents no compelling reason for this Court to depart from the briefing schedule dictated by the Local Rules. The delay here is Samsung’s own making. As Judge Gilstrap noted in the Tessera case, “the choice of when to bring such IPRs is still at Samsung’s discretion.” Tessera Advanced Techs., Dkt. 98, slip op. at 5. Like in Tessera, here, “Samsung waited [ten] months from the initiation of these proceedings and [six] months after service of infringement contentions to move for a stay,” 3 Indeed, in the Tessera case on similar facts, Judge Gilstrap found “Trover to be on point.” Tessera Advanced Techs., Dkt. 98, slip op. at 5. There, claim construction briefing had not even started. See id. That claim construction briefing here is complete (and a Markman hearing held) further highlights Samsung’s unreasonable delay in filing its IPRs and stay motion in this case. Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 11 of 13 PageID #: 9448 9 and there is no reason to reward that delay. Id. There could be any number of developments over the next six months, and the Court likely will benefit from full briefing on the issues in the unlikely event that the PTAB institutes Samsung’s IPRs. Deciding now whether to expedite briefing in six months is unnecessary and Samsung’s request for “alternative relief” should be denied. IV. CONCLUSION As the PTAB has yet to issue an institution decision, Samsung’s motion is premature and runs afoul of this Court’s universal practice of denying such pre-institution stays for IPRs. Moreover, Samsung’s motion overstates the balance of the stay factors. As set forth above, each factor weighs against a stay. Thus, the Court should deny Samsung’s motion and its request for alternative relief. Dated: October 26, 2018 /s/ Julie Holloway w/permission Andrea L. Fair Matthew J. Moore matthew.moore@lw.com LATHAM & WATKINS LLP 555 Eleventh Street, NW Suite 1000 Washington, DC 20004-1304 Tel: 202-637-2200 Fax: 202-637-2201 Julie M. Holloway (pro hac vice) julie.holloway@lw.com Kyle A. Virgien kyle.virgien@lw.com Blake Richard Davis blake.davis@lw.com Allison K Harms (pro hac vice) allison.harms@lw.com LATHAM & WATKINS LLP 505 Montgomery Street, Suite 2000 San Francisco, CA 94111-2562 Tel: 415-391-0600 Fax: 415-395-8095 David K. Callahan david.callahan@lw.com LATHAM & WATKINS LLP Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 12 of 13 PageID #: 9449 10 330 North Wabash Avenue, Suite 2800 Chicago, IL 60611 Tel: 312-876-7700 Fax: 312-993-9767 T. John Ward State Bar No. 20848000 tjw@wsfirm.com Claire Abernathy Henry State Bar No. 24053063 claire@wsfirm.com Andrea L. Fair State Bar No. 24078488 andrea@wsfirm.com WARD, SMITH & HILL, PLLC 1507 Bill Owens Parkway Longview, TX 75604 Tel: 903-757-6400 Fax: 903-757-2323 Attorneys for Plaintiffs FotoNation Limited and DigitalOptics Corp. MEMS CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing document was filed electronically in compliance with Local Rule CV-5(a). Therefore, this document was served on all counsel who are deemed to have consented to electronic service on October 26, 2018. /s/ Andrea L Fair Andrea L. Fair Case 2:17-cv-00669-RWS Document 179 Filed 10/26/18 Page 13 of 13 PageID #: 9450