Case 1:11-cv-00326-GMS Document 125 Filed 01/28/13 Page 1 of 4 PageID #: 2132

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

) ) ) ) ) ) ) ) ) )

WALKER DIGITAL, LLC, Plaintiff,

v.
CANON U.S.A., INC, et al., Defendants.

Civil Action No. 11-326-GMS

ORDER WHEREAS, on January 30, 2012, the defendants filed a Joint Motion to Stay Pending Reexamination (DJ. 99); WHEREAS, on September 19, 2012, the court granted the Joint Motion to Stay Pending Reexamination; WHEREAS, on October 10, 2012, the U.S. Patent and Trademark Office (the "PTO") completed its reexamination (D.I. 118 at 1); WHEREAS, on October 25,2012, the PTO granted a second request for reexamination of the two remaining claims of the patent-in-suit (D.I. 121 at 3); WHEREAS presently before the court is the plaintiffs Motion to Lift Stay (D.I. 117); and WHEREAS the court has considered the parties' papers as well as the applicable law; IT IS HEREBY ORDERED THAT:

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The plaintiffs Motion to Lift Stay (D.I. 117) is DENIED. 1

The decision to stay a case lies within the sound discretion of the court. See Cost Bros., Inc. v. Travelers Indent. Co., 760 F.2d 58, 60 (3d Cir. 1985); First Am. Title Ins. Co. v. MacLaren, L.L.C., No. 10-363-GMS, 2012 WL 769601, at *4 (D. Del. Mar. 9, 2012); Nokia Corp. v. Apple, Inc., No. 09-791-GMS, 2011 WL 2160904, at *1 (D. Del. June 1, 2011). This authority applies equally to patent cases in which a reexamination by the PTO has been requested. Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) ("Courts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO reexamination." (internal citation omitted)). In determining whether a stay is appropriate in the first instance, the court looks to the following factors: "(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." First Am. Title Ins. Co., 2012 WL 769601, at *4 (quoting Xerox Corp. v. 3 Comm. Corp., 69 F. Supp. 2d 404, 406 (W.D.N.Y. 1999)). In later determining whether to lift a stay, the court considers any new developments that might have altered the aforementioned stay calculus. The court has observed: When circumstances have changed such that the court's reasons for imposing the stay no longer exist or are inappropriate, the court may lift the stay. Indeed, the same court that imposes a stay of litigation has the inherent power and discretion to lift the stay. It follows that where there are no new circumstances that impose hardship on the plaintiff or that change the court's earlier disposition imposing the stay, the plaintiffs motion to lift the stay should be denied. Auto. Techs. Int'/, Inc. v. Am. Honda Motor Co., No. 06-187-GMS, 2009 WL 2969566, at *2 (D. Del. Sept. 15, 2009) (internal quotations and citations omitted). The court concludes that the stay in this matter should not be lifted. Circumstances have not changed so drastically as to have altered the court's earlier disposition. Both the second and third factors counseled the initial stay and continue to weigh against lifting the stay at this time. As for the first factor, there are several additional reasons to worry about prejudice at this stage. This increased concern, however, is outweighed by the remainder of the court's stay analysis. The court will address each of these factors below with an eye toward any any changed circumstances since it ordered the initial stay. As noted, one consideration is whether a stay might simplify the litigation. The court has previously listed several of the many ways in which a stay pending reexamination may serve to simplify the issues in a patent case: (1) all prior art presented to the court at trial will have been first considered by the PTO with its particular expertise, (2) many discovery problems relating to the prior art can be alleviated, (3) if patent is declared invalid, the suit will likely be dismissed, (4) the outcome of the reexamination may encourage a settlement without further involvement of the court, (5) the record of the reexamination would probably be entered at trial, reducing the complexity and the length of the litigation, (6) issues, defenses, and evidence will be more easily limited in pre-trial conferences and (7) the cost will likely be reduced both for the parties and the court. Gioel/o Enters. Ltd. v. Matte/, Inc., No. 99-375-GMS, 2001 WL 125340, at *1 (D. Del. Jan. 29, 2001). In this case, the PTO's first reexamination resulted in the rejection of twenty-seven of the twenty-nine original claims of the patent-in-suit. (D.I. 118 at 1.) The second reexamination now reconsiders the remaining two claims in light of newly submitted prior art. (!d. at 3-4.) The court's initial stay decision was premised on a belief-a belief confirmed by the PTO's eventual reexamination decision-that a stay might narrow the issues in dispute and otherwise simplify this litigation in the ways noted above. The court continues to believe that a stay pending the PTO's second reexamination will also serve to simplify this matter. While fewer claims remain and thus, in some sense, there is less opportunity for "narrowing," the small number of claims remaining before the PTO raises the possibility that this suit might be dismissed altogether. Additionally, no new circumstances have altered the court's impression of the third stay factor, which asks the court to consider the stage and progression of the litigation. In asking "whether discovery is complete and whether a trial date has been set," the court acknowledges that staying litigation in its infancy "can be said to advance judicial efficiency and maximize the likelihood that neither the Court nor the parties expend their assets addressing invalid claims." SenoRx, Inc. v. Hologic, Inc., No. 12-173-LPS-CJB, 2013 WL 144255, at *5 (D. Del.

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Jan. 11, 2013) (internal quotation omitted). On the other hand, when the court is faced with a stay decision in the later stages of a case, "the Court and the parties have already expended significant resources on the litigation, and the principle of maximizing the use of judicial and litigant resources is best served by seeing the case through to its conclusion." !d. Here, the case "remains at its earliest stage: the [c]ourt has not noticed an initial scheduling conference, the parties have not held a Rule 26(t) conference, no initial disclosures have been exchanged, no discovery requests have been served and no trial date has been set." {D.I. 121 at 5.) Allowing this matter to remain stayed might have significant judicial and litigant economy benefits. On the the final factor, the plaintiff, Walker Digital, LLC ("Walker"), does make a strong argument that declining to lift the stay at this juncture will result in undue prejudice. (D.I. 118 at 2.) Specifically, Walker contends that a continued stay would (1) prolong the resolution of this case and interfere with its ability to freely license its patent, (2) afford the defendants an unfair tactical advantage, and (3) increase the risk that evidence will become stale. (!d. at 6-9.) As an initial matter, the court recognizes that allowing this case to remain stayed pending the PTO's second reexamination might ultimately prolong the final resolution of the parties' dispute and thus result in some inherent prejudice to Walker. See Textron Innovations, Inc. v. Toro Co., No. 05-486-GMS, 2007 U.S. Dist. LEXIS 100102, at *8 (D. Del. Apr. 25, 2007). The court also notes, however, that the potential for delay does not, by itself, establish undue prejudice. See Enhanced Sec. Research, LLC v. Cisco Sys., Inc., No. 09-571-JJF, 2010 WL 2573925, at *3 (D. Del. June 25, 2010) ("[T]he Court recognizes that a stay may delay resolution of the litigation, but this alone does not warrant a finding that Plaintiffs will be unduly prejudiced."); Wall Corp. v. BondDesk Grp., LLC, No. 07-844-GMS, 2009 WL 528564, at *2 (D. Del. Feb. 24, 2009) ("The court finds that [the delay that might enure in the reexamination process] does not, by itself, amount to undue prejudice."). Rather, the court must look to other considerations including the timing of the reexamination request, the timing of the stay request, the status of the reexamination proceedings, the relationship between the parties, and the related question of whether the Walker's injuries may be compensated through future money damages. See, e.g., Boston Scientific Corp. v. Cordis Corp., 777 F. Supp. 2d 783, 789 (D. Del. 2011). Weighing these considerations together, the court believes that allowing the stay to remain in place pending the second reexamination will subject Walker to some added measure of prejudice. The court discusses each of these "sub-factors" below. First, with regard to the "timing" issues, the court appreciates Walker's arguments about the delay of defendant Sony Electronics Inc.'s ("Sony's") second reexamination request, but it will not weigh that delay heavily here. The PTO's second reexamination was made necessary, at least in part, by Sony's failure to include certain prior art in its initial reexamination request. The court, however, has recognized the difficulty a party faces in compiling an exhaustive catalogue of prior art and balancing its duty to file a prompt reexamination request with its desire to submit all relevant prior art to the PTO. Textron Innovations, Inc., 2007 U.S. Dist. LEXIS 100102, at *5 ("[A] party to a patent litigation will never know if it has all of the prior art that exists or it believes to exist. It will always come down to a judgment call, and one in which the litigants should know that the risk of delaying the reexamination request may result in a denial of a motion to stay."). Here, Sony's piecemeal reexamination efforts certainly raise the specter of unjust delay, but, at this time, the court will not infer that the defendants sought an inappropriate tactical advantage-the delay might just as easily represent the sort of innocent failure that one would expect to result from the balancing discussed above. The second "timing" issue-the timing of the stay request-is not applicable here, as the stay is already in place. The status of the reexamination proceeding also gives the court pause in considering the prejudice factor. PTO proceedings can result in lengthy delays, and, despite the defendant's unsupported assurances to the contrary, there is little reason to believe the pending reexamination will progress along an expedited schedule. Given that this second reexamination began only in October 2012, it is reasonable to presume that the process might last into 2015. While delay, by itself, does not establish prejudice, it certainly affects the court's broader analysis. Finally, the relationship between the parties and the adequacy of future money damages to redress any injury suggest that no undue prejudice will result from allowing the stay to continue. Where money damages will suffice to address a plaintiffs injury, the delay occasioned by a stay is less likely to result in undue prejudice. It is, of course, well-recognized that money damages are unlikely to be sufficient where the parties are direct competitors-in such cases, "there is a reasonable chance that delay in adjudicating the alleged infringement will have outsized consequences to the party asserting infringement has occurred, including the potential for loss of market share and an erosion of goodwill." SenoRx, Inc., 2013 WL 144255, at *7. On the other hand, a plaintiff that

Case 1:11-cv-00326-GMS Document 125 Filed 01/28/13 Page 4 of 4 PageID #: 2135

Dated: January

li_, 2013

merely licenses its patent rights, rather than actively dealing in good or services related to the patents-in-suit, can have its injuries adequately addressed through ordinary damages. See, e.g., Implicit Networks, Inc. v. Advanced Micro Devices, Inc., No. C08-184JLR, 2009 U.S. Dist. LEXIS 14467, at *9-10 (W.D. Wash. Feb. 9, 2009); Textron Innovations, 2007 U.S. Dist. LEXIS 100102, at *9; Gioello Enters. Ltd., 2001 WL 125340, at *2. Here, should Walker, a patent licensor, ultimately succeed on its infringement claim, it will be able to obtain adequate monetary redress for that infringement. This fact weighed in favor of granting the initial stay, and nothing has changed so as to affect the court's decision at this time. Though the court does perceive the changed circumstances-namely, the conclusion of the first PTO reexamination and commencement of a second-as increasing the risk of prejudice to Walker, these concerns remain outweighed within the larger stay analysis. Should new developments arise, another motion to lift the stay may be warranted, but the court must deny Walker's present motion.