`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`Plaintiff,
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`V.
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`Civil Action No. 17-585-CFC-SRF
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`UNIVERSAL SECURE REGISTRY, LLC,)
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`APPLE INC., VISA INC., and VISA
`U.S.A., INC.,
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`Defendants.
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`MEMORANDUM OPINION
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`I.
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`INTRODUCTION
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`Presently before the court in this patent infringement action is Defendant Apple Inc.' s
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`("Apple") motion to stay this litigation pending the resolution of its petitions for inter partes
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`review ("IPR") and covered business method review ("CBM"). (D.I. 90) For the following
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`reasons, Apple's motion to stay is denied without prejudice. 1
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`II.
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`BACKGROUND
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`On May 21, 2017, Plaintiff Universal Secure Registry, LLC ("USR") filed a complaint
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`against Visa Inc., Visa U.S.A., Inc. (together, "Visa"), and Apple (together with Visa,
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`"Defendants") asserting infringement of United States Patent Nos. 8,577,813 ("the '813 patent"),
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`8,856,539 ("the '539 patent"), 9,100,826 ("the '826 patent"), and 9,530,137 ("the '137 patent")
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`(collectively, the "patents-in-suit"). (D.1. 1) USR is the owner by assignment of the patents-in-
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`suit. The patents-in-suit relate to systems, methods, and apparatus "for authenticating ... the
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`identity of individuals ... seeking access to certain privileges ... and for selectively granting
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`1 Defendants Visa Inc. and Visa U.S.A., Inc. (together, "Visa") did not file a formal joinder to
`Apple's motion to stay. USR did not object to Visa's oral application for leave to provide
`argument in support of Apple's motion to stay, at the hearing on September 17, 2018.
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 2 of 10 PageID #: 4722
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`privileges ... in response to such identifications." ('813 patent, col. 1 :37-42; '539 patent, col.
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`1:16-19; '826 patent, col. 1:36-42; '137 patent, col. 1:45-50)
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`On August 25, 2017, Defendants filed a motion to dismiss USR's complaint asserting
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`that USR failed to state a claim upon which relief could be granted under Fed. R. Civ. P.
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`12(b)(6). (D.I. 16) On September 19, 2017, Defendants filed a motion to transfer the case
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`arguing that USR's allegations do not have a "material connection to the District of Delaware."
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`(D.I. 21; D.I. 22) The court denied both motions on September 19, 2018.
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`On April 10, 2018, the court issued a scheduling order requiring that all discovery be
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`completed on or before July 2, 2019. (D.I. 57 at 1) The Joint Claim Construction Chart is due
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`on December 14, 2018, and the claim construction hearing is set for March 6, 2019. (Id. at 9) A
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`jury trial is scheduled to begin on July 20, 2020. (Id. at 12)
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`Apple filed eleven IPR and CBM petitions with the Patent Trial and Appeal Board
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`("PTAB") regarding the patents-in-suit in April and May of 2018. (D.1. 92, Exs. B-K; D.I. 93,
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`Ex. L) Apple's IPR and CBM petitions challenge all of the independent claims of the patents-in(cid:173)
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`suit, every claim of the' 137, '539, and '813 patents, and all of the pertinent claims of the '826
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`patent. (D.I. 92, Ex. A) The PTAB will determine whether to institute proceedings regarding
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`Apple's IPR and CBM petitions2 in October and November of 2018. 77 Fed. Reg. 48,756,
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`48,757 (Aug. 14, 2012). If the PTAB institutes proceedings on Apple's petitions, final decisions
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`on the merits of the petitions would issue by November of 2019. 35 U.S.C. §§ 316(a)(ll),
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`326(a)(l l). Visa filed its own IPR petitions against the '539 patent on July 3, 2018. (D.I. 106 at
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`1 n.1)
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`2 On September 12 and 13, respectively, the PTAB denied institution of Apple's CBM petitions
`relating to the '137 and '539 patents. (D.I. 134, Exs. A-B)
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`2
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 3 of 10 PageID #: 4723
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`On May 2, 2018, the PTAB instituted an IPR proceeding on claim 1 of the '813 patent
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`based on a petition filed on October 16, 2017 by Unified Patents, Inc., a nonparty to this suit.
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`(D.I. 77, Ex. A) On August 24, 2018, USR filed a contingent motion to amend all challenged
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`claims of the '813 patent pursuant to 3 7 C .F .R. § 41.121 in the IPR proceeding instituted on May
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`2, 2018. (9/17/18 Apple Presentation, Slides 3, 12-13) The PTAB is expected to deliver a
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`decision on the merits of the IPR proceeding regarding the '813 patent in May of 2019.
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`On August 10, 2018, USR served its initial infringement contentions against Defendants,
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`asserting infringement of sixty-two claims across the four patents-in-suit. (D.I. 122) In USR's
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`preliminary response to Apple's CBM petition regarding the '539 patent, USR indicated that it
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`had filed statutory disclaimers with respect to sixteen claims, thirteen of which were asserted in
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`the present litigation. (D.I. 129, Ex.Bat 18) Of the forty-nine asserted claims remaining, the
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`PT AB has instituted IPR proceedings on 19 claims of the '813 patent based on Unified Patents'
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`petition. Apple's nine pending petitions cover forty-three asserted claims, and Visa's pending
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`petitions cover an additional three asserted claims. Consequently, forty-six of the forty-nine
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`remaining asserted claims are covered by pending IPR and CBM petitions.
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`In June 2018, USR indicated its intention to amend the complaint to add two new patents
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`and one pending patent application from the same patent family to the instant litigation. (D.I.
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`119, Ex. G) United States Patent Application No. 14/814,740 is not expected to issue until mid(cid:173)
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`November 2018. The operative scheduling order in the present case sets a deadline ofNovember
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`30, 2018 for amendment of pleadings. (D.I. 57 at ,-r 1) The parties are to exchange a list of
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`disputed claim terms on November 9, 2018, and a Markman hearing is scheduled for March 6,
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`2019. (Id. at ,-r 9)
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`3
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 4 of 10 PageID #: 4724
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`III.
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`LEGAL STANDARD
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`A court has discretionary authority to grant a motion to stay. 454 Life Scis. Corp. v. Ion
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`Torrent Sys., Inc., C.A. No. 15-595-LPS, 2016 WL 6594083, at *2 (D. Del. Nov. 7, 2016) (citing
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`Cost Bros., Inc. v. Travelers Indem. Co., 760 F .2d 58, 60 (3d Cir. 1985)). Courts consider three
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`factors in deciding how to exercise this discretion: (1) whether a stay will simplify the issues for
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`trial; (2) the status of the litigation, particularly whether discovery is complete and a trial date
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`has been set; and (3) whether a stay would cause the non-movant to suffer undue prejudice from
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`any delay or allow the movant to gain a clear tactical advantage. Id. ( citing Advanced
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`Microscopy Inc. v. Carl Zeiss Microscopy, LLC, C.A. No. 15-516-LPS-CJB, 2016 WL 558615,
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`at *1 (D. Del. Feb. 11, 2016)). The court considers an additional factor, "whether a stay ... will
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`reduce the burden of litigation on the parties and on the court," when considering a motion to
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`stay pending a CBM review. Benefit Funding Sys. LLC v. Advance Am. Cash Advance Ctrs.,
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`Inc., 767 F.3d 1383, 1384 (Fed. Cir. 2014) (quoting America Invents Act, Pub. L. No. 112-29, §
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`18(b)(l)(D), 125 Stat. 284, 32-31 (2011) ("AIA")).
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`IV.
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`DISCUSSION
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`After considering the four stay-related factors, the court denies Apple's motion to stay
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`without prejudice to renew the motion following the PT AB' s determination regarding whether to
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`institute IPR and CBM proceedings in response to Apple's petitions.
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`A.
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`Simplification of Issues for Trial
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`The first factor regarding the simplification of issues for trial weighs against a stay in this
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`litigation. Unless and until the PT AB institutes IPR and CBM proceedings based on the
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`petitions, any expected simplification rests on speculation that such institution will occur. See
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`Advanced Microscopy Inc., 2016 WL 5 5 8615, at * 1 ("If no review is instituted, the asserted basis
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`4
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 5 of 10 PageID #: 4725
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`for a stay will fall away."). Before the PTAB decides whether to institute Apple's petitions, this
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`factor does not favor granting a stay. Copy Prat. LLC v. Netflix, Inc., C.A. No. 14-365-LPS,
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`2015 WL 3799363, at* 1 (D. Del. June 17, 2015) (quoting Freeny v. Apple Inc., 2014 WL
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`3611948, at *2 (E.D. Tex. July 22, 2014)). "[T]he ideal time" to file a motion to stay is "shortly
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`after the PTAB issue[s] its decision to proceed with a validity trial on all of the Asserted
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`Claims." 454 Life Scis. Corp., 2016 WL 6594083, at *4. If the PTAB institutes Apple's
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`petitions, Apple "may renew its [ m]otion ... and the simplification factor may be evaluated
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`differently at that time."3 Copy Prat., 2015 WL 3799363, at *I.
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`The Supreme Court's recent decision in SAS Institute, Inc. v. lancu supports the court's
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`conclusion on this factor because it guarantees that the PTAB's decision to institute Apple's
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`petitions will be a "binary choice." 138 S. Ct. 1348, 1355 (2018). The PTAB, in deciding
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`whether to institute an IPR, "cannot curate the claims at issue but must decide them all." Id. at
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`1353. With respect to each of Apple's petitions, the PTAB will either issue a written decision
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`addressing every challenged patent claim, or it will deny the petition. Id. at 1354 (quoting 35
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`U.S.C. § 318(a) ("If an inter partes review is instituted and not dismissed" the PTAB "shall issue
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`a final written decision with respect to the patentability of any patent claim challenged by the
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`petitioner.") (internal quotations and alterations omitted)). Therefore, issue simplification
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`depends on whether the PTAB institutes or dismisses Apple's petitions, which will occur by
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`November of 2018.
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`3 On August 30, 2018, Apple submitted a notice of subsequent authority, citing the Southern
`District of California's decision in Qualcomm Inc. v. Apple Inc. in support of the proposition that
`the entry of a stay prior to the PT AB' s determination on whether to institute proceedings is
`warranted to simplify the issues for trial. (D.I. 129, Ex. 1) This unpublished decision is not
`binding on this court, and is inconsistent with the weight of authority in this district.
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`5
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 6 of 10 PageID #: 4726
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`Without any certainty as to whether the PTAB will institute review, the extent to which
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`the issues before the court might be simplified remains unknown. As a practical matter, putting
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`the case on hold until the decision to institute is made is likely less efficient than continuing on
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`track through discovery. Delay is not favored in litigation. There is nothing in this record to
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`suggest that engaging in fact discovery and preparation for claim construction for an additional
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`few months pending action by the PT AB, will unusually tax or waste the resources of the parties.
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`In its August 30, 2018 notice of subsequent authority, Apple directs the court to USR's
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`preliminary response to Apple's CBM petition regarding the '539 patent in support of its
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`contention that the PTAB proceedings will simplify the issues for trial. 4 (D.I. 129, Ex. 2)
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`Specifically, USR filed a statutory disclaimer in accordance with 35 U.S.C. § 253, thereby
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`disclaiming asserted claims, i.e., dependent claims 5-8, 17-20, and 26-30 of the '539 patent. (Id
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`at 18-19) According to Apple, the statutory disclaimer supports its position that the PT AB
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`proceedings simplify the issues for trial. (D.1. 129 at 1)
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`Following the filing of a statutory disclaimer, the patent owner records a notice of
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`disclaimer with the U.S. Patent and Trademark Office ("USPTO"). 35 U.S.C. § 253(a). In this
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`regard, the filing of a statutory disclaimer, and the resultant narrowing of the case, occur outside
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`the scope of proceedings before the PTAB. See Liqwd, Inc. v. L 'Orea/ USA, Inc., C.A. No. 17-
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`14-JFB-SRF, D.I. 388 at ,r 6 (D. Del. Aug. 30, 2018). Federal Circuit precedent dictates that the
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`PTAB must treat statutorily disclaimed claims as though they never existed. In re Yamazaki, 702
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`F.3d 1327, 1332 (Fed. Cir. 2012). Consequently, the filing of a statutory disclaimer does not
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`substantively affect the PTAB's institution analysis with respect to the remaining claims of the
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`4 As a procedural matter, the court notes that a responsive brief filed by a patent owner in a
`PTAB proceeding does not constitute "subsequent authority."
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`6
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 7 of 10 PageID #: 4727
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`challenged patent. Under these circumstances, the court is not persuaded that the recordation of
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`a statutory disclaimer with the US PTO supports a stay of litigation pending resolution of
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`proceedings before the PT AB.
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`B.
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`Stage of Proceedings
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`The second factor regarding the status of the case also weighs against a stay at this time
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`because the PT AB' s institution decisions, expected by November 2018, will likely precede
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`intensive claim construction activity set to begin a month later. (D.I. 57 at 1, 9, 12; D.I. 91 at 4)
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`Although the parties have engaged in some preliminary discovery, the docket does not show that
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`a significant amount of discovery has been conducted. Advanced Microscopy Inc. v. Carl Zeiss
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`Microscopy, LLC, C.A. No. 15-516-LPS-CJB, 2016 WL 558615, at* 1 (D. Del. Feb. 11, 2016)
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`( denying motion to stay prior to PT AB' s decision whether to institute proceedings); see also
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`Toshiba Samsung Storage Tech. Korea Corp. v. LG Elecs., Inc., C.A. No. 15-691-LPS-CJB,
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`2015 WL 7824098, at *1 (D. Del. Dec. 3, 2015); NuVasive, Inc. v. Neurovision Med Prods.,
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`Inc., C.A. No. 15-286-LPS-CJB, 2015 WL 3918866, at *2 (D. Del. June 23, 2015). It remains
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`likely that the PT AB' s institution decisions will precede large-scale and expensive discovery
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`efforts related to document production or claim construction. Id Therefore, it is more practical
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`to allow preliminary claim construction activity to proceed while awaiting the PT AB' s decision
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`on whether to institute proceedings on Apple's petitions. 5
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`C.
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`Undue Prejudice or Tactical Advantage
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`The third factor also supports the court's denial of Apple's motion because a stay in the
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`instant litigation would prejudice USR. Specifically, Dr. Kenneth Weiss ("Dr. Weiss"), the sole
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`5 The parties are not without recourse to seek extension of the claim construction deadlines in the
`scheduling order, should it become necessary based upon the actions taken in the parallel
`proceedings before the PT AB.
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`7
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 8 of 10 PageID #: 4728
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`inventor of the patents-in-suit and an important trial witness, is in poor health at age 76. (D.1.
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`106 at 18) Apple cites case authorities outside of this district in support of its contention that Dr.
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`Weiss's heath concerns are not, without more, enough to reach a conclusion of undue prejudice
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`to USR as a result of granting the stay. (D.I. 118 at 9)6 However, USR argues that the age and
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`poor health of a witness are relevant to a finding of prejudice.
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`In VirtualAgility Inc. v. Salesforce.com, Inc., the Federal Circuit rejected the argument
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`that undue prejudice existed because of the "risk of witness loss" where "potentially relevant"
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`witnesses were over the ages of60 and 70. 759 F.3d 1307, 1319 (Fed. Cir. 2014). The court
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`specifically noted that there was "no evidence that any of these [witnesses were] in ill health."
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`Id. Conversely, the facts presently before the court establish that Dr. Weiss suffers from
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`congestive heart failure and atrial fibrillation. (D.1. 108 at ,r 7) Dr. Weiss is the sole inventor of
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`all of the patents-in-suit and is likely to be an important witness at trial. (D.1. 106 at 18) For
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`these reasons, the health and age of Dr. Weiss weigh against a stay of the litigation at this stage
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`of the proceedings. 7
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`6 See, e.g., Nichia Corp. v. VIZIO, Inc., 2017 WL 3485767, at *7 (C.D. Cal. Feb. 2, 2017) (five
`month delay as a result of a stay was not enough to cause undue prejudice despite the lead
`inventor being "not in good health"); Larson Archery Co. v. Mathews, Inc., 2013 WL 139472, at
`*2 (D. Utah 2013) (product innovator and CEO's "health, advanced age, and personal
`difficulties" did not amount to a finding of undue prejudice).
`7 In assessing undue prejudice to the non-movant, the court may also consider: (1) the timing of
`the request for review; (2) the timing of the request for a stay; (3) the status of the review
`proceeding; and (4) the relationship of the parties. 454 Life Scis., 2016 WL 6594083, at *4
`(citing Neste Oil OYJ v. Dynamic Fuels, LLC, C.A. No. 12-1744-GMS, 2013 WL 3353984, at *2
`(D. Del. July 2, 2013)). USR did not address these factors in its opposition to Apple's motion to
`stay. (D .I. 106 at 18-19) The court may revisit these factors if Apple chooses to renew its
`motion to stay following the issuance of the PTAB's institution decisions.
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`8
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`D.
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`Burden of Litigation8
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`The final factor in the stay analysis, regarding the burden of litigation on the court and on
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`the parties, also weighs against a stay. Apple argues that the stay would ease the burden on the
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`court and the parties by preventing the potential need for dual claim construction proceedings in
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`light ofUSR's plan to add three more patents to the case.9 (D.I. 118 at 8) However, USR's
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`deadline to respond to Apple's petitions passed on September 12, 2018, ahead of the joint claim
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`construction chart due date of December 14, 2018. (D.1. 106 at 14; D.I. 57 at 8-10) In addition,
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`motions to amend or supplement pleadings are due on or before November 30, 2018. (D.I. 57 at
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`1) Because any potential amended pleadings and filings in response to Apple's petitions made
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`by USR will be on the record before claim construction, this factor weighs against granting a
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`stay.
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`In Benefit Funding Systems LLC v. Advance America Cash Advance Centers Inc., 767
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`F.3d 1383, 1384-85 (Fed. Cir. 2014), the district court originally denied a motion to stay after
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`petitions were filed with the PTAB, but before institution decisions were made. Later, the PTAB
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`8 The court considers an additional factor, the burden of litigation on the parties and on the court,
`when determining whether to grant a stay pending CBM review. Market-Alerts Pty. Ltd v.
`Bloomberg Finance L.P., 922 F. Supp. 2d 486,489 (D. Del. 2013). Apple filed CBM petitions
`for three out of the four patents-in-suit: the' 137 patent, the '539 patent, and the '813 patent. On
`September 12 and 13, respectively, the PTAB declined to institute proceedings on Apple's
`petitions regarding the '13 7 and '539 patents. The '826 patent is also excluded from this burden
`analysis because it is only subject to IPR petitions. However, Apple's CBM petition regarding
`the '813 patent remains pending.
`9 Apple contends that the issuance of United States Patent Application No. 14/814,740 has been
`delayed by USR's dilatory conduct. Specifically, Apple alleges that the USPTO mailed a notice
`of allowance regarding the application on April 5, 2018, but USR submitted an information
`disclosure statement (" IDS") on June 11, 2018 identifying Unified Patents' October 16, 2017
`IPR petition to the PTAB. (9/17 /18 Apple Presentation, Slides 17-18) On August 16, 2018,
`USR filed a request to withdraw the application from issuance, along with a request for
`continued examination with a corrected IDS. (Id) USR submitted an additional IDS on August
`28, 2018. (Id)
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`9
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`Case 1:17-cv-00585-CFC-SRF Document 138 Filed 09/19/18 Page 10 of 10 PageID #: 4730
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`instituted a CBM review based on subject matter eligibility challenges. Id. at 1384. The district
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`court then granted a renewed motion to stay the litigation because "the burden on the court
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`would be reduced due to the likely and substantial simplification resulting from the CBM
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`review." Id. at 1385. The Federal Circuit affirmed the district court's grant of the motion to
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`stay. Id. at 1384. Applying the procedures followed in Benefit Funding to the circumstances of
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`the present case, the court concludes that a stay is not warranted at this stage. If the PTAB
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`institutes Apple's CBM petitions and Defendants file a renewed motion to stay, the court will
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`reevaluate the merits of the renewed motion in light of those circumstances.
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`V.
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`CONCLUSION
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`For the foregoing reasons, Apple's motion to stay proceedings is denied. (D.1. 90) This
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`order is without prejudice to renew an application to stay the case if warranted by institution of
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`any subsequent IPR or CBM proceeding. An Order consistent with this Memorandum Opinion
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`shall issue.
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`This Memorandum Opinion is filed pursuant to 28 U.S.C. § 636(b)(l)(A), Fed. R. Civ. P.
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`72(a), and D. Del. LR 72.l(a)(2). The parties may serve and file specific written objections
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`within fourteen (14) days after being served with a copy of this Memorandum Opinion. Fed. R.
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`Civ. P. 72(a). The objections and responses to the objections are limited to ten (10) pages each.
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`The parties are directed to the court's Standing Order For Objections Filed Under Fed. R. Civ. P.
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`72, dated October 9, 2013, a copy of which is available on the court's website,
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`www.ded.uscourts.gov.
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`Dated: September 19, 2018
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`10
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