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Digital Ally, Inc. v. Taser International, Inc.

United States District Court, D. Kansas

November 17, 2017

DIGITAL ALLY, INC., Plaintiff,
v.
TASER INTERNATIONAL, INC., Defendant.

          MEMORANDUM AND ORDER

          Teresa J. James U.S. Magistrate Judge.

         This matter is before the Court for a determination regarding whether to continue the stay previously granted in this case now that the Patent Trial and Appeal Board (“PTAB”) has issued its initial decisions on Defendant's four petitions for inter partes review (“IPR”) of the two patents in suit (the ‘292 and ‘452 patents). For the reasons discussed below, the Court denies Defendant's request to continue the stay of this case with respect to the ‘452 patent.[1]

         I. RELEVANT BACKGROUND FACTS

         On March 20, 2017, the Court granted in part Defendant's Motion to Stay Litigation Pending Inter Partes Review of the Asserted Patents.[2] The Court temporarily stayed the case and all deadlines set forth in the September 16, 2016 Second Patent Scheduling Order “until the PTAB issues its initial decision(s) whether to institute an inter partes review of the ‘292 and ‘452 patents.”[3] In addition, the Court ordered the parties to file a joint report advising the Court of the PTAB's decisions on Defendant's IPR petitions, as well as the parties' respective positions regarding further proceedings in this case, within fourteen days of the PTAB's initial decision on each of Defendant's pending IPR petitions.

         On August 31, 2017, Plaintiff filed a motion which, among other things, requested leave to amend its complaint to dismiss its ‘292 patent allegations with prejudice and to dismiss Defendant's ‘292 patent counterclaim for lack of jurisdiction (ECF No. 132). Defendant does not object to dismissal of Plaintiff's ‘292 patent infringement count, but does oppose dismissal of its inequitable conduct counterclaim related to the ‘292 patent.

         Also on August 31, 2017, the parties filed their Joint Report Regarding the Asserted Patents' IPR Status and the Parties' Respective Positions Regarding Stay (ECF No. 134). The report advised that the PTAB instituted review of a number of claims as to the ‘292 patent petition (IPR2017-00375), but declined to institute inter partes review of the second ‘292 patent petition (IPR2017-00376) and both ‘452 patent IPR petitions (IPR2017-00515 & IPR2017-00775). The report also indicated that the parties disagree regarding whether the litigation should remain stayed, as Defendant contends, or should resume for the ‘452 patent, as Plaintiff contends.

         After a telephone conference with the parties on September 20, 2017, the Court entered an order setting a briefing schedule on the stay issue (ECF No. 138). The matter is now fully briefed[4]and the Court is prepared to rule.

         II. FACTORS THE COURT WILL CONSIDER IN DETERMINING WHETHER TO CONTINUE THE STAY OF THE ‘452 PATENT LITIGATION DURING THE INTER PARTES REVIEW OF THE ‘292 PATENT

         Courts consider the following three factors significant in deciding whether to stay judicial proceedings pending either a ruling on a petition for inter partes review or the review itself: (1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party.[5] The Court considered these three factors when it granted the stay currently in effect in this case, and the parties are in agreement that these same factors should be applied in determining whether the stay should continue in light of the PTAB's recent rulings. Based on these factors, courts determine whether the benefits of a stay outweigh the inherent costs of postponing resolution of the litigation.[6] Courts in the District of Kansas have previously recognized a “liberal policy in favor of granting motions to stay proceedings pending the outcome of [PTAB's] reexamination or reissuance proceedings.”[7] However, the party requesting the stay bears the burden of showing that a stay is appropriate, and such showing must be based on more than the mere fact that an IPR petition was filed.[8]

         A. Stage of the Litigation

         The first factor the Court considers in determining whether to stay the case is the stage of the proceedings, including whether discovery is complete and whether a trial date has been set. One consideration relevant to this factor is whether the parties have fully briefed the issue of claim construction, attended a Markman hearing, and received a claim construction order.[9] The expenditure of judicial resources can also be an important consideration in evaluating the stage of the proceedings.[10]

         As the Court noted in its earlier order staying the case, the parties had been vigorously litigating this case prior to the stay, conducting significant discovery, exchanging infringement and invalidity contentions, and filing claim construction statements. The parties had also fully briefed the issues for claim construction in anticipation of a claim construction hearing. The Court's March 20, 2017 order stayed all case deadlines, including the March 28, 2017 Markman claim construction hearing. At the time of the stay, the remaining case deadlines, including the fact discovery deadline, had not expired as they were calculated from the Court's claim construction ruling.[11] The Pretrial Conference, a deadline for submission of the Pretrial Order, and the trial date for the patent claims were deferred to be set after the Court's claim construction ruling.[12] The Court previously found this factor favored temporarily staying the case until the PTAB made its initial decisions on Defendant's petitions for inter partes review of the two patents-in-suit.

         This case has not progressed since the Court granted the stay in March 2017 and thus remains at the same stage of litigation (pre-claim construction hearing). That the PTAB has since declined to institute inter partes review of the ‘452 patent and Plaintiff has moved to dismiss its allegations and infringement count related to the ‘292 patent (Count I) does not dictate a different outcome relative to this factor. The claim construction hearing will need to be reset, the deadline for fact discovery still has not expired, and neither a Pretrial Conference, nor a trial date has yet been set. Accordingly, the Court finds this factor remains in favor of staying the case, but is outweighed by the second and third factors discussed below.

         B. Simplification or Elimination of the Issues

         The second factor the Court considers is whether a stay of the ‘452 patent litigation during the ‘292 IPR proceedings will result in the simplification or elimination of any matters that will be at issue in the ‘452 patent litigation. The “issue simplification” factor does not require a complete invalidation of all asserted claims by the IPR proceedings; simplification can occur even where “some or all of the claims are found not invalid.”[13] Issue simplification can also occur where the number of asserted claims and patents are reduced due to invalidation or the estoppel effect of the IPR proceedings.[14] “A stay is favored where the outcome of the IPR “would be likely to assist the court in determining patent validity and, if the claims were canceled ... would eliminate the need to try the infringement issue.”[15] However, the more the scope of the litigation exceeds the scope of the IPR proceedings, the less likely the IPR proceedings and requested stay will simplify the issues.[16]

         Defendant contends this factor favors continuing the stay because the PTAB's decision and findings in the ‘292 IPR, Plaintiff's statements made during the IPR, and the full intrinsic record in the ‘292 IPR will streamline the litigation on the closely related ‘452 patent. Defendant points out that the ‘292 patent is a continuation of the ‘452 patent. They are part of the same patent family, claim the same invention, share the same patent specification, and have much of the same prosecution history. The Patent Office found the ‘292 and ‘452 patents were “patentably indistinct” and required Plaintiff to file a terminal disclaimer. Finally, Defendant asserts that several key claim terms are common to both patents, including “recording device, ” “recording device manager, ” and “metadata.” These common claim terms are at issue in the ‘292 IPR. Defendant points out that the PTAB is proceeding through the IPR process expeditiously and the ‘292 review will test the validity of nearly every asserted claim of the ‘292 patent. Plaintiff has filed a motion to cancel and substitute the ‘292 claims to add a limitation from the ‘452 patent. Defendant also states it has sought rehearing of the PTAB's denial of one of its IPR petitions for the ‘452 patent. Finally, Defendant states the prior art at issue in the ‘292 patent is the same prior art forming the basis for Defendant's inequitable conduct counterclaims against both the ‘292 and ‘452 patents.

         Conversely, Plaintiff contends the ‘292 IPR proceedings will not simplify the litigation on the ‘452 patent. It argues that regardless of the outcome of the claim amendment process and the meaning of any new claim language that may be added to the '292 patent claims, the ‘292 IPR proceedings are entirely irrelevant to claim construction in the ‘452 litigation, where only the original claim language is at issue. Claim construction, discovery, and expert reports therefore must still be accomplished regardless of the outcome of the '292 IPR. Plaintiff maintains those tasks can move forward wholly without impact from the ‘292 IPR. To the extent the PTAB's decision and findings from the ‘292 IPR have any relevance to Defendant's counterclaim on the ‘292 patent, Plaintiff suggests that it will only be on one minor issue (i.e., materiality) and this can be easily accommodated with an expert report supplementation. Plaintiff also characterizes Defendant as going to great lengths to demonstrate overlap between the '292 and '452 patents in order to justify its argument that this favors a stay because any statements made by Plaintiff in the '292 IPR will influence this litigation. Plaintiff disputes this, arguing that the record is now effectively closed with respect to Plaintiff in the '292 IPR and no new evidence or argument relevant to claim construction can be entered in the IPR process. Thus, according to Plaintiff, the claim construction process on the ‘452 patent can proceed in this litigation with no need to re-address any claim construction issues and no duplication of efforts after the ‘292 IPR concludes.

         The factual scenario in which the stay issue arises in this case is unique. Since the Court's prior order granting a stay, the PTAB declined to institute an IPR for either of Defendant's petitions for the ‘452 patent claims. The PTAB has instituted a review of only one of Defendant's IPR petitions on the ‘292 patent claims, but Plaintiff has moved to dismiss with prejudice its ‘292 patent infringement count and Defendant does not oppose the dismissal.[17]Thus, it appears Plaintiff's ‘292 patent infringement count will likely be dismissed, thereby leaving no asserted patent at issue in this case under review before the PTAB.

         Plaintiff cites cases in support of its argument that courts routinely deny requests to stay litigation where less than all asserted claims in a case are under review by the Patent Office because such proceedings cannot possibly resolve the issue before the court.[18] Plaintiff argues the rationale for a stay is even less compelling here than in the cases it cites because, after the dismissal of the ‘292 patent, the PTAB will not be reviewing a single asserted patent claim in this case. On the other hand, Defendant cites cases in support of its argument that courts routinely maintain litigation stays, even where less than all asserted patents are subject to review.[19] But, none of these cases cited by Defendant involves the factual scenario in which a stay was granted when no asserted patent was under PTAB review. The Court finds that the authority cited by Defendant does not support ...


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