Sorensen v. Lexar Media, Inc.

Reply Memorandum re MOTION to Stay Litigation Pending Outcome of Reexamination Proceedings

N.D. Cal.April 21, 2008

1 JARD BOBROW (Bar No. 133712) jared.bobrowêwei1.com 2 JOSEPH H. LEE (Bar No. 248046) joseph.leeêwei1.com 3 WElL, GOTSHAL & MANGES LLP 201 Redwood Shores Parkway 4 Redwood Shores, CA 94065 Telephone: (650) 802-3000 5 Facsimile: (650) 802-3100 6 Attorneys for Defendant LEXAR MEDIA, INC. 7 8 9 10 11 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION 12 JENS ERI SORENSEN, as Trustee of SORENSEN RESEARCH AN 13 DEVELOPMENT TRUST, Case No. C08-00095 JW RS 14 Plaintiff, 15 v. DEFENDANT LEXAR MEDIA'S REPLY IN SUPPORT OF ITS MOTION TO STAY THIS LITIGATION PENDING THE OUTCOME OF REEXAMINATION PROCEEDINGS 16 17 18 19 / / / LEXAR MEDIA, INC., a Delaware corporation; and DOES I - 100, Defendants. Date: Time: Courroom: Judge: May 5, 2008 9:00 a.m. 8, 4th Floor Hon. James Ware 20 / / / 21 / / / 22 / / / 23 / / / 24 / / / 25 / / / 26 / / / 27 / / / 28 / / / REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS Case No. C08-00095 JW RS SVI :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 1 of 9 1 I. ISSUE TO BE DECIDED 2 Whether a stay of the above-captioned proceeding should be granted pending the 3 outcome of the multiple ongoing U.S. Patent and Trademark Office ("PTO") reexaminations of 4 expired U.S. Patent No. 4,935,184 ("the ' 184 patent"), given that plaintiff has not shown undue 5 prejudice, discovery on this case has not yet begun, and a trial date has not been set. 6 II. INTRODUCTION 7 Plaintiff Sorensen Trustee has presented no valid reason for denying Lexar's stay 8 motion. The' 184 patent has expired. There is no prospect of injunctive relief. Sorensen and 9 Lexar do not compete in the market. And multiple courts-four of them-already have stayed 10 litigation on this patent-including in this District. These undisputed facts strongly favor a stay. II Moreover, Sorensen has failed to show that any of the Guthy-Renker factors favor 12 proceeding with this litigation. Sorensen cannot and does not dispute that a stay would simplify 13 the issues in question and the tral of the case. Nor does Sorensen dispute that discovery has not 14 yet begun and that no trial date has been set. 15 The only factor that Sorensen addresses is prejudice, and there the Trustee makes 16 no showing whatsoever. Because Sorensen cannot secure an injunction, the only relief the 17 Trustee can claim is money damages. Yet, Sorensen makes no showing that Lexar is at risk of 18 insolvency or financial hardship. Nor does Sorensen explain why the interest rate statutes do not 19 provide adequate protection for any delay that may result from the reexamination proceedings. 20 Sorensen Trustee's assertion that he will be prejudiced by the loss of relevant 21 evidence during the stay is groundless. The argument is based on the premise that Sorensen can 22 and will conduct discovery from Lexar's suppliers. Yet, at the same time that Sorensen makes 23 this argument, the Trustee also argues in a pending Motion for Application of 35 U.S.C. § 295 24 Presumption of Infrngement ("Motion for § 295 Presumption") that he canot obtain discovery 25 regarding the accused process. The argument also ignores the fact that Lexar has agreed to 26 provide the names of its suppliers (so the Trustee can conduct his own investigation) under 27 appropriate confidentiality. 28 REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS S 2 Case No. C08-00095 JW RS SVI :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 2 of 9 I To deny a stay would unnecessarily require investment, by both parties, of 2 substantial resources in a case that otherwise might be easily and effciently resolved via the 3 reexamination process. As the purose behind a stay pending the outcome of reexamination 4 proceedings is to avoid this very outcome, a stay should be granted. 5 III. PLAINTIFF HAS FAILED TO SHOW UNDUE PREJUDICE 6 Sorensen canot show that a stay is unwarranted under the Guthy-Renker factors. 7 Two ofthe factors-whether a stay will simplify the issues in question and the tral of the case, and 8 whether discovery is completed and a tral date is set-are not even addressed by Sorensen. This 9 is not surprising, as both factors strongly favor a stay. The third factor-whether a stay would 10 unduly prejudice or present a clear tactical disadvantage to the nonmoving party-weighs in favor II ofa stay. 12 A. Sorensen Wil Not Suffer Any Undue Prejudice From Loss Of Evidence 13 Sorensen's assertion that he wil suffer undue prejudice from loss of evidence is 14 unfounded. First, Lexar has complied and wil comply with its obligations under the Federal 15 Rules regarding the preservation of documents durng the stay. Lexar already has taken steps to 16 preserve documents. (Ashmore Dec1.I ~ 5.) There is no reason to believe that these steps will be 17 insufficient.2 18 Second, to the extent that Sorensen is concerned about discovering information 19 from Lexar's suppliers, Sorensen is free to contact them directly. Lexar is willing to provide 20 Sorensen with the identities of its suppliers. All Lexar asks in return is that Sorensen agree in a 21 written stipulation that it will protect that information under terms similar to a protective order 22 23 24 25 26 27 28 i All references to Ashmore Decl. are to the Declaration of David Ashmore in Support of Defendant's Reply in Support of Its Motion to Stay This Litigation Pending the Outcome of Reexamination Proceedings. 2 Sorensen points to Telemac Corp. v. Teledigital, Inc., 450 F. Supp. 2d 1107 (N.D. CaL. 2006), to support his point, but the facts of the case undermine his position. In Telemac, unlike the present case, the pary requesting a stay had already failed to preserve documents. Id. at 1111. The court made the point that "the likely length of reexamination is not, in itself, evidence of undue prejudice" and only found a clear tactical disadvantage for the plaintiff after concluding that, among other things, defendants had failed to preserve records. Id. Here, of course, no such allegations have been made and Lexar has no intention of destroying preserved documents durng the stay. REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 3 Case No. C08-00095 JW RS SVI :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 3 of 9 1 that may be entered into durng litigation. The Trustee can then take whatever steps he deems 2 necessary with respect to Lexar's suppliers. Sorensen could have had this information prior to 3 fiing suit, but refused to agree to those reasonable terms. (Ashmore Decl. ~~ 2-4.) The Trustee 4 should not be heard to argue prejudice from lack of information about Lexar's suppliers when he 5 was responsible for this lack of knowledge in the first place. 6 Additionally, Sorensen's assertion that a stay will harm his ability to collect 7 evidence from Lexar's suppliers is contradicted by his own words. In his Motion for § 295 8 Presumption, the Trustee bases his claim for a presumption of infrngement almost entirely on his 9 purorted inability in this case to obtain discovery from Lexar's suppliers and a claim that any 10 information obtained from them is inherently untrustworthy. If Sorensen trly believes this to be 11 so, he canot then turn around and argue against a stay on the basis that it would lead to a delay in 12 obtaining discovery from the manufacturers, since a delay would not affect his ability to obtain 13 discovery. 14 Finally, Sorensen's purported concern about possible loss of evidence is not 15 reflected in his pre-suit conduct. As he admits, Sorensen first contacted Lexar on April 16, 2005. 16 He did not fie suit, however, until almost three years later, on January 7, 2008. Other courts have 17 found that delay by the patent holder in initiating litigation weighed in favor of a stay. In Ingro v. 18 Tyco Indus. Inc., 227 US.P.Q. 69 (N.D. IlL. 1985), the court granted a motion to stay litigation 19 pending the completion of a reexamination proceeding, based in par on the plaintiffs own delay 20 in initiating litigation. !d. at 71. See also Hewlett-Packard Co. v. Acuson Corp., No. C-93-0808, 21 1993 U.S. Dist. LEXIS 6449, at *5 (N.D. CaL. May 5, 1993) (granting motion for stay and noting 22 that plaintiffs delay weighed heavily in favor of motion). If Sorensen were truly concerned 23 about the risk of evidence lost to time, he could have filed suit in 2005. Instead, he delayed 24 almost three years and only now raises the issue of preservation. 25 Sorensen raised the purported loss of evidence as a reason against granting a stay 26 II three other cases involving the '184 patent. (Supp. Lee Dec1.3, Exhs. A, B, and C.) 27 28 3 Citations to Supp. Lee Decl. are to the Supplemental Declaration of Joseph H. Lee Supporting Lexar's Reply in Support of Its Motion to Stay This Litigation Pending the Outcome of Reexamination Proceedings. REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 4 Case No. C08-00095 JW RS SVi :\2923 I 6\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 4 of 9 1 Nevertheless, in each case, the motion for stay was granted. (Lee Dec1.4, Exhs. H, I, and J.) The 2 circumstances here are no different than in those other cases and Lexar's Motion for Stay should 3 be granted. 4 B. Sorensen Wil Not Suffer Undue Prejudice From The Duration Of A Stay 5 Whether a stay in this case lasts 18 to 24 months or five years, Sorensen will not 6 be unduly prejudiced by its duration. Sorensen spends much of his Opposition attempting to 7 establish that a stay may last five years. But Sorensen does not show why the additional three 8 years would create any undue prejudice where none exists after a possible two year delay. 9 Instead, Sorensen uses the purorted additional delay as an excuse to justify his rejection of the 10 liberal policy in favor of granting motions to stay pending the outcome of reexamination II proceedings. None of Sorensen's arguments in that regard matters because the purported 12 possibility of a five year delay does not change the rationale for granting stays pending the 13 outcome of reexamination proceedings. 14 Sorensen first argues that Congress's intent behind the reexamination process is 15 undermined if the reexamination takes five years. In making this argument, Sorensen misses the 16 point of reexamination. Reexamination was intended to be "a useful and necessary alternative for 17 challengers and for patent owners to test the validity of United States patents in an effcient and 18 relatively inexpensive manner." H.R. Rep. No. 1307 Par I, 96th Cong., 2d Sess. 4, reprinted in 19 1980 U.S. Code Congo & Ad. News 6460, 6463. Congress specifically contrasted this with 20 "costly pre-trial maneuvering." !d. The emphasis is on efficiency and cost, not just speed. 21 Sorensen does not deny that reexamination can be a much more cost-effective and effcient way 22 of resolving an infringement dispute than costly litigation. It is not surprising that defendants in 23 patent infrngement suits would want to make use of the reexamination process, as it provides an 24 effcient way to resolve the dispute at a lower cost to both paries compared to patent litigation. 25 Congress explicitly acknowledged such use. !d. (acknowledging that patent challengers, as well 26 as owners, would find reexamination useful and necessar). A stay pending the outcome of a 27 28 4 Citations to Lee Decl. are to the Declaration of Joseph H. Lee Supporting Lexar's Motion to Stay This Litigation Pending the Outcome of Reexamination Proceedings. REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 5 Case No. C08-00095 JW RS SVi :\29231 6\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 5 of 9 1 2 reexamination proceeding benefits both parties, as expensive litigation is potentially avoided and issues regarding patent validity are potentially resolved. An additional three years to wait for the 3 4 5 6 outcome of a reexamination proceeding does not change the benefits received. Sorensen's arguments based on the Patent Local Rules are similarly flawed. First, the Patent Local Rules are only intended to govern the course of litigation. As a reexamination is an extra-judicial activity, the Patent Local Rules do not address its use. Second, as Sorensen admits, the purose of the Patent Local Rules is to reduce costs for all paries involved. A reexamination is intended to do just that. To use the Patent Local Rules to argue against the use 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of reexamination as an efficient and less costly means of dispute resolution-thus furthering one of the purposes of the Patent Local rules-is therefore a perversion of the very purpose behind the rules. Finally, Sorensen attempts to avoid the body of case law that supports liberal application of stays pending reexamination by citing to a few cases where a stay has not been granted. But the very cases on which Sorensen relies actually support Lexar's position. Sorensen cites to MercExchange, L.L.c. v. eBay, Inc., 500 F. Supp. 2d 556 (B.D. Va. 2007), NTP, Inc. v. Research in Motion, Ltd., 397 F. Supp. 2d 785 (2005), and Blackboard, Inc. v. Desire2Learn, Inc.5, CA No. 9:06-CV-155 (E.D. Tex. 2008), as cases in which a stay was denied.6 But, unlike in the present case, in every case cited by Sorensen, discovery and the litigation were well advanced. In NTP, not only had a trial been conducted and a verdict reached before Research in Motion moved for a stay, the case had gone up on appeal, was briefed, argued, and remanded. NTP, 397 F. Supp. 2d at 786-87. The NTP court relied heavily on the history of the litigation, including that a trial had occurred and an appeal had been taken and decided, in determining that a stay was inappropriate. Id. at 788. There is no indication that, without this Guthy-Renker factor 5 Sorensen does not provide a citation for this case. Lexar, after reviewing the docket for this case, has identified an order from it denying a motion to stay and will assume that Sorensen intended to refer to this order. 6 Sorensen also cites to Telemac, but not for the proposition that the length of a reexamination is determinative in evaluating whether a stay is waranted. Nevertheless, in Telemac, discovery was well advanced when a stay was requested. 450 F. Supp. 2d at 1111. REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 6 Case No. C08-00095 JW RS SVi :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 6 of 9 I weighing heavily against a stay, the court still would have decided that a stay was inappropriate. 2 Even assuming that NTP is unclear on how much weight should be given to the 3 potential duration of a reexamination, MercExchange is clear-virtally no weight at alL. In 4 MercExchange, eBay moved for a stay based on reexamination of two patents, the '265 patent 5 and the '051 patent. MercExchange, 500 F. Supp. 2d at 562. Both patents were at the same stage 6 of the reexamination process. Id. at 562-63. The only difference between the two was that a trial 7 was held and a verdict reached on the '265 patent, while a tral had not been held on the '051 8 patent. !d. at 563. Based solely on that difference, the MercExchange cour denied a stay as to 9 proceedings involving the '265 patent, but granted a stay as to proceedings involving the '051 10 patent. Id. II Finally, Sorensen cites to Blackboard as another case where, despite a 12 reexamination in progress, a motion to stay was denied and the case proceeded to a verdict. In 13 that case, the cour orally denied a motion to stay on December 8, 2006, and denied via written 14 order a motion to reconsider its decision on the motion to stay on March 10, 2007. Blackboard, 15 Inc. v. Desire2Learn, Inc., CA No. 9:06-CV-155, Docket No. 62 (B.D. Tex. Mar. 10, 2008) 16 (Supp. Decl. Lee, Exh. D.). In denying the motion for reconsideration, the court emphasized that 17 substantial discovery had been conducted in the case and a Markman hearing set, thus increasing 18 the weight of the factors against a stay that was first discussed at the hearng on the earlier motion 19 for stay. !d. Thus, as with the other cases cited by Sorensen, the Blackboard court based its 20 decision on the advanced procedural posture of the case. 21 As Sorensen has failed to show any reason why a five year stay is any more 22 prejudicial than an 18 to 24 month stay, and as the bases for his argument actually support a stay 23 regardless of duration, Lexar respectfully asserts that, even if the stay lasts five years, Sorensen 24 will not suffer undue prejudice as a result. 25 c. Sorensen Can Be Fully Compensated For Any Stay 26 There is no dispute that the ' 184 patent has expired. Sorensen can therefore only 27 seek monetary relief in this case. As such, even if the claims of the ' 184 are not invalidated by 28 the reexaminations and Sorensen ultimately prevails in this suit, any delay due to a stay can be REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 7 Case No. C08-00095 JW RS SVI :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 7 of 9 1 fully accounted for by the statutes on interest. Furthermore, Sorensen has not and canot point to 2 anything which might raise a concern that Lexar would be unable to satisfy any judgment in favor 3 of Sorensen. Accordingly, Sorensen wil not be unduly prejudiced by a stay in obtaining relief, 4 even if the reexaminations of the' 184 patent last five years, instead of less than two. 5 6 iv. PLAINTIFF'S ANALYSIS OF THE PENDENCY OF REEXAINATION PROCEEDINGS is FLAWED 7 While the length of a reexamination proceeding is irrelevant to whether a stay 8 should be granted (given the absence of prejudice from delay under the circumstances here), even 9 if it were relevant, Sorensen's arguments based on it are plainly flawed because of his suspect 10 analysis. At a minimum, Sorensen fails to consider both the special circumstances inherent in a 11 reexamination of an expired patent that would tend to shorten the duration of reexamination 12 compared to a typical reexamination and the recent changes to the reexamination process at the 13 PTO. The credibility of Sorensen's argument also is suspect. The data on which Sorensen relies 14 was publicly available long before the stay motions in the other cases involving the ' 184 patent 15 were fied, yet only now, for the first time, does Sorensen make the argument. 16 There is every reason to believe that the reexamination proceedings of the ' 184 17 patent wil be much shorter than a typical reexamination. Unlike the typical reexamination, 18 Sorensen wil be prohibited from amending the claims of the '184 patent. 37 C.F.R. § 1.530 19 (Sept. 8, 2000); Manual of Patent Examining Procedure (Eight Edition, rev. 6, Sept. 2007) § 20 2250 (III) (section last revised Aug. 2006) (Lee Decl., Exh. K.). As a result, the additional time 21 that might normally be taken by the examiner to consider whether an amendment might change 22 any grounds for rejection will not occur during reexamination of the '184 patent. This is likely to 23 lead to a shorter reexamination than in the typical case. 24 Sorensen's analysis also fails to consider the recent changes that the PTO has 25 made to the reexamination process in order to ensure that the PTO continues to meet its 26 obligations under law that any reexamination proceedings be "conducted with special dispatch." 27 35 U.S.c. § 305. Plaintiff notes that the PTO acknowledged in 2004 that it was having problems 28 meeting its obligations under the law to complete reexaminations with special dispatch. REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 8 Case No. C08-00095 JW RS SVI :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 8 of 9 1 (Opposition to Stay at 9-10.) But Sorensen fails to mention that, in order to ensure compliance 2 with the law, the PTO took steps shortly thereafter to improve the processing of reexaminations. 3 Press Release, United States Patent and Trademark Offce, USPTO Improves Process for 4 Reviewing Patents (July 29, 2005), http://ww.uspto.gov/web/offces/com/speeches/05-38.htm 5 (Supp. Lee Decl., Exh. E.). The PTO has assigned dedicated examiners specifically for 6 reexaminations and has resolved to complete all future reexamination proceedings within two 7 years. Id. The success of this increased focus on reexaminations is reflected in the number of 8 reexamination certificates issued. The number of reexamination certificates issued in 2003 was 9 193, 138 in 2004,223 in 2005,329 in 2006, and 367 in 2007. (Declaration of Melody A. Kramer 10 in Support of Plaintiffs Opposition to Motion for Stay Pending Reexamination, Ex. A, p. 8.) The 11 number of reexamination certificates jumped signficantly beginning in 2005, and the number has 12 increased substantially every year since. Furthermore, this trend of increasing numbers of 13 reexamination certificates continues in 2008. Based on the 130 reexamination certificates issued 14 in the first sixteen weeks of2008, the total number of reexamination certificates for 2008 projects 15 to be 422. (Lee Supp. Decl. at ~ 2.) This continual increase lends further weight to the PTO's 16 promise that all reexaminations will be completed within two years. 17 VI. CONCLUSION 18 Because all the Guthy-Renker factors favor a stay and because Sorensen has made 19 no showing of undue prejudice, Lexar respectfully requests that the Cour order this case stayed 20 pending completion of the PTO's ongoing reexaminations of the '184 patent. 21 22 23 24 25 26 27 28 Dated: April 21, 2008 WElL, GOTSHAL & MANGES LLP BY: lsI JARD BOBROW jared.bobrowêweil.com Attorneys for Defendant, LEXAR MEDIA, INC. REPLY BRIEF iso LEXAR'S MOTION TO STAY PROCEEDINGS 9 Case No. C08-00095 JW RS SVi :\292316\04\69jw04!.DOC\59204.0014 Case 5:08-cv-00095-JW Document 21 Filed 04/21/2008 Page 9 of 9