Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 1 of 8
`
`10TALES, INC.,
`
`
`
`
`
`TIKTOK INC., TIKTOK PTE. LTD.,
`BYTEDANCE LTD., and BYTEDANCE
`INC.,
`
`
`
`Plaintiff,
`
` v.
`
`Defendants.
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`WACO DIVISION
`
`
`
` CIVIL ACTION NO. 6:20-CV-810-ADA
`
`
`
`
`
` JURY TRIAL DEMANDED
`
`
`
`
`
`
`DEFENDANTS’ REPLY IN SUPPORT OF ITS MOTION TO STAY
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 2 of 8
`
`
`
`Defendants request a brief stay until the transfer motion is decided, which will prevent
`
`both current and future hardship while also conserving judicial resources. By contrast, Plaintiff
`
`fails to identify any prejudice it would endure during the brief stay. Instead, Plaintiff devises a
`
`purported future prejudice which is nothing more than a red herring. It is based on the potential
`
`fall-out from a transfer, and requires a long series of speculative events to occur that are wholly
`
`unrelated to the stay—all of the alleged events could occur regardless of the stay—and should be
`
`given no weight. Moreover, Plaintiff’s purported prejudice (even if taken in its best light)
`
`amounts to nothing more than a delay in receiving an ultimate liability determination. Where
`
`only damages are sought, as in this case, any alleged prejudice can be cured by pre-judgment
`
`interest. Thus, Plaintiff’s alleged prejudice does not and cannot outweigh Defendants’ showing
`
`that a stay is warranted.
`
`
`
`Plaintiff does not deny that if this case proceeds without a stay, both parties will continue
`
`to expend significant human and monetary resources litigating the merits (which could be
`
`avoided) while simultaneously participating in jurisdictional discovery. Such hardships include
`
`forcing Defendants to continue identifying prior art, preparing invalidity contentions, searching
`
`for and producing relevant technical documents for initial disclosures, and producing sales
`
`figures—all complicated by Plaintiff’s insufficiently plead claims. Furthermore, both parties
`
`will be forced to address claim construction briefing and oral argument, and proceed with very
`
`expansive and expensive general discovery, including producing source code that Plaintiff now
`
`demands. Plaintiff fails to address any of these hardships, and plainly ignores the judicial
`
`resources that would be conserved should the Court stay the case, by at least preventing
`
`duplicative claim construction proceedings. Therefore, all relevant factors favor a stay.
`
`
`
`
`
`-1-
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 3 of 8
`
`A.
`
`Plaintiff Acknowledges it Will Not Be Prejudiced by the Stay Requested
`
`Plaintiff fails to identify even a single potential burden or prejudice caused by a stay
`
`pending the transfer motion decision. Instead, Plaintiff focuses on alleged disadvantages it may
`
`encounter should the transfer be granted—this is not the same as being prejudiced by the stay.
`
`For example, Plaintiff argues Defendants will have a 3 year “free ride” (whatever that means),
`
`which allegedly compromises Plaintiff’s desire for an expeditious resolution of the case.
`
`However, neither argument is correct nor reasonable given the finite nature of the stay (the
`
`transfer motion should be fully briefed in four months), and Plaintiff waited two years to sue.
`
`First, a stay does not impact damages in this case—Plaintiff only seeks money. Second,
`
`there would be no alleged “free ride” for Defendants, unless Plaintiff waives its right to pre-
`
`judgment damages (highly unlikely). Third, the alleged “3 year” delay is based on a granted
`
`transfer, and the layers-deep speculation that this case will linger in the Northern District of
`
`California (“N.D. Cal.”) (1) if an IPR is instituted, (2) if Defendants move to stay pending that
`
`IPR, and (3) if an eventual IPR decision is appealed. However, “Plaintiffs’ conclusory
`
`allegations of prejudice resulting from speculation concerning the amount of time their claims
`
`will be pending before the [N.D. Cal.] do not suffice to show prejudice.” See Esquivel v. BP Co.
`
`N. Am., Inc., No. 10-cv-227, 2010 WL 4255911, at *5 (S.D. Tex. Oct. 14, 2010).
`
`Therefore, Plaintiff’s only remaining claim to prejudice is the purported delay in
`
`“obtaining an expeditious resolution of its case.” (ECF 52, 5.) “However, that factor is present
`
`in every case in which a patentee resists a stay, and it is therefore not sufficient, standing alone,
`
`to defeat a stay motion.” NFC Tech. LLC v. HTC Am., Inc., No. 2:13-CV-1058-WCB, 2015 WL
`
`1069111, at *2 (E.D. Tex. Mar. 11, 2015). Moreover, Plaintiff’s reliance on Neodron is
`
`misplaced, as there is a stark contrast between Defendants’ request for a 4-5 month stay when
`
`compared to the multi-year stay requested in Neodron. See Neodron Ltd. v. Dell Techs. Inc., No.
`
`
`
`
`
`
`-2-
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 4 of 8
`
`1-19-CV-00819-ADA, 2019 WL 9633629, at *2 (W.D. Tex. Dec. 16, 2019). An alleged
`
`prejudice based on a “mere lapse of time” is insignificant to the analysis. See E-Watch, Inc. v.
`
`Lorex Canada, Inc., No. CIV.A. H-12-3314, 2013 WL 5425298, at *2 (S.D. Tex. Sept. 26, 2013)
`
`(“mere fact of a delay alone does not constitute prejudice sufficient to deny a request for stay”).
`
`B.
`
`Defendants Will Face Hardship and Inequity Without a Stay
`
`Plaintiff is demanding that Defendants spend more money and expend more resources in
`
`order for Plaintiff to conjure up a sufficient pleading of infringement. Thus, the brunt of the
`
`burden and hardships in this case lays squarely on Defendants. This can be avoided with a stay.
`
`Current Hardship. Investigating a complex claim of infringement without an adequate
`
`roadmap exasperates Defendants’ hardship. Not to be re-briefed here, however, Defendants’
`
`Motion to Dismiss demonstrates why Plaintiff failed to provide adequate notice of its
`
`infringement allegations. As a result, Defendants are unable to narrow their investigation, and
`
`are being forced to prove a negative: That the highly complex TikTok system does not read on
`
`the asserted claim. This hunt, to prove the needle is not in the haystack, has already required an
`
`immense expenditure of resources, and to press forward without more is extremely burdensome.
`
`Further, Plaintiff’s position that technical document production will mitigate Defendants’
`
`hardship, is self-serving. Without any basis to assert the TikTok System reads on certain claim
`
`elements, Plaintiff now demands to first see Defendants proprietary technical documents, which
`
`it will use to conform its infringement allegations to the TikTok system. This is unacceptable.1
`
`Defendants are being forced to continue litigating the merits of this case, without an identified
`
`target. Defendants are forced to search for technical documents, interview a large number of
`
`witnesses, consider potential expert witnesses, select claim terms for construction, identify and
`
`
`1 See Judin v. United States, 110 F.3d 780, 785 (Fed. Cir. 1997)(Plaintiff’s “violation of Rule 11
`[is] not cured by the fact that, after filing the complaint” it adequately alleged infringement.).
`
`
`
`
`
`
`-3-
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 5 of 8
`
`analyze potential extrinsic evidence, propose constructions, and prepare briefing, in the dark.
`
`Plaintiff’s recent demand for source code is even more concerning. Although source
`
`code production is not required until fact discovery, it opens in four months, and may be nearly
`
`complete before the Court rules on the transfer motion. Thus, there is a real threat that
`
`Defendants’ will be forced to produce hundreds of thousands of highly proprietary source code
`
`modules so Plaintiff can maybe find what it needs to allege infringement. These current
`
`hardships undoubtedly favor a stay.
`
`Future Hardship. Without a stay of the current schedule, Defendants also face the very
`
`real possibility of having to relitigate claim construction should this case be transferred to the
`
`N.D. Cal. Plaintiff does not dispute that a transfer would require the parties to resubmit their
`
`respective claim construction briefs and joint claim construction statement in accordance with
`
`the N.D. Cal.’s local rules. See Synkloud v. Adobe, No. 3:20-cv-7760, Dkt. 81, ¶¶ 16-18, 21-22
`
`(N.D. Cal. Feb. 5, 2021).2 Instead, Plaintiff argues that any future harm is speculative. But
`
`anything in the future is by definition speculative. The difference between Defendants’
`
`“speculation” and Plaintiff’s is that Defendants’ is based only on one variable, whether or not a
`
`transfer will occur. Whereas Plaintiff layers multiple assumptions to arrive at a non-factor
`
`“prejudice” (mere lapse of time). Plaintiff must have little confidence in the validity of its
`
`
`2 There is a vast difference in process and substance for claim construction in this Court as
`compared with the N.D. Cal., resulting in numerous reasons why claim construction would need
`to be re-addressed if this case is transferred. (See ECF 52, 8 n.4.) Under the N.D. Cal. Patent
`Local Rules, the parties first submit full expert reports, then undergo extensive expert discovery,
`including depositions, and finally, 70 days after the expert reports are disclosed, opening claim
`construction briefing is filed. (See N.D. Cal. Patent Local Rules 4-2, 4-4, 4-5, available at
`https://cand.uscourts.gov/rules/patent-local-rules/.) Conversely, here, the process requires
`experts to be identified without reports, then just 14 days later, opening claim construction
`briefing is due, and finally expert reports are filed. (ECF 41.) As such, claim construction briefs
`in the N.D. Cal. have a myriad of additional expert testimony to consider, cite, and brief. Thus,
`the N.D. Cal. would not be able to “reuse” claim construction briefing from this Court.
`
`
`
`
`
`
`-4-
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 6 of 8
`
`patent, because it assumes the IPR will be instituted, the N.D. Cal. will grant another stay, the
`
`patent is invalidated, the Plaintiff would decide to appeal the decision, and somehow, the Federal
`
`Circuit would reverse the invalidity.3 Such speculation carries no weight in this analysis.
`
`Finally, Defendants promptly filed this motion under the circumstances, which does not
`
`affect the weight of Defendants’ hardships. Plaintiff took nearly three times the amount of time
`
`to file an amended complaint, to name three new Defendants that it was well aware of at the time
`
`it initiated this lawsuit, as Defendants took to file this stay. The Defendants filed their motion to
`
`stay less than a month from when the Scheduling Order was entered and only two weeks after
`
`the new Defendants joined the transfer motion (ECF 47).
`
`C.
`
`A Stay Will Conserve Judicial Resources
`
`If a transfer is granted, entering a stay conserves judicial resources in a number of ways.
`
`First, this Court will not have to conduct a Markman hearing, issue a claim construction order, or
`
`deal with discovery disputes when fact discovery opens. Although claim construction will be
`
`required regardless of a transfer, as noted above, the Markman hearing and claim constructions
`
`performed by this Court will be repeated in the N.D. Cal. Accordingly, it would be best for all
`
`involved (the parties, their experts, the courts) to avoid duplicate efforts. The short stay
`
`requested by Defendants serves this purpose, thereby preserving the parties’ and the Court’s
`
`resources.
`
`II.
`
`CONCLUSION
`
`For the foregoing reasons, Defendants request that this Court stay the current schedule
`
`pending resolution of the transfer motion.
`
`
`3 The Sipco case cited by Plaintiff is inapposite. (ECF 52, 8.) In Sipco, the case was being
`transferred under the first-to-file rule, which includes its own set of procedural nuances and
`efficiency considerations not relevant to the present case. See Sipco, LLC, et al. v. Emerson
`Electric Co., et al., No. 6:15-CV-907, Dkt. No. 103 (E.D. Tex. July 12, 2016).
`
`
`
`
`
`
`-5-
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 7 of 8
`
`Dated: February 25, 2021
`
`
`
`
`
`
`
`
`
`
`
`
`
`By: /s/ Stephen S. Korniczky
`Stephen S. Korniczky (admitted pro hac vice)
`Martin R. Bader (admitted pro hac vice)
`Ericka J. Schulz (admitted pro hac vice)
`SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
`12275 El Camino Real, Suite 200
`San Diego, CA. 92130
`T: 858.720.8900
`F: 858.509.3691
`skorniczky@sheppardmullin.com
`mbader@sheppardmullin.com
`eschulz@sheppardmullin.com
`
`Jason Mueller (State Bar No. 24047571)
`SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
`2200 Ross Avenue, 24th Floor
`Dallas, TX 75201
`T: 469.391.7402
`F: 469.391.7550
`jmueller@sheppardmullin.com
`
`Attorneys for Defendants Bytedance Ltd., Bytedance Inc.,
`TikTok Inc., and TikTok Pte. Ltd.
`
`
`
`-6-
`
`
`
`
`
`

`

`Case 6:20-cv-00810-ADA Document 55 Filed 02/25/21 Page 8 of 8
`
`CERTIFICATE OF SERVICE
`
`I hereby certify that on February 25, 2021, a true and correct copy of the foregoing
`
`DEFENDANTS’ REPLY IN SUPPORT OF ITS MOTION TO STAY was served on counsel of
`
`record in this case by electronic mail.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`/s/ Stephen S. Korniczky
`Stephen S. Korniczky
`
`
`
`
`
`
`
`-7-
`
`
`
`
`
`