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Oplus Technologies, Ltd v. Sears Holding Corporation and Vizio

June 15, 2012

OPLUS TECHNOLOGIES, LTD., PLAINTIFF,
v.
SEARS HOLDING CORPORATION AND VIZIO, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Oplus Technologies, Ltd. ("Oplus") filed suit against Defendants Sears Holding Corporation ("Sears") and Vizio, Inc., alleging patent infringement. Vizio moves [36] to sever the patent infringement claims against it from the claims alleged against Sears, transfer the claims against Vizio to the U.S. District Court for the Central District of California, and stay the case involving the remaining claims against Sears, pending the outcome of the Vizio case. For the reasons set forth below, the Court grants Vizio's motion to sever and transfer claims against Vizio and stay claims against Sears [36] in its entirety.

I. Background

Plaintiff Oplus is a foreign corporation organized under the laws of Israel. Defendant Vizio, Inc. is a California corporation with its principal place of business in Irvine, California, while Defendant Sears is a Delaware Corporation with its principal place of business in Hoffman Estates, Illinois. This dispute involves two patents owned by Oplus: U.S. Patent No. 6,239,842, entitled "Method of De-Interlacing Video Signals Using a Mixed Mode Spatial and Temporal Approximation Technique" (the '842 Patent), and U.S. Patent No. 7,271,840, entitled "Method for Determining Entropy of a Pixel of a Real Time Streaming Digital Video Image Signal, and Applications Thereof" (the '840 Patent). The '842 Patent was issued on May 29, 2001, while the '840 Patent was issued on September 18, 2007. Yosef Segman, the inventor of these patents, is a resident of Israel. Oplus alleges that Defendants have sold or offered to sell products that infringe these patents within the Northern District of Illinois and further alleges venue is proper pursuant to 28 U.S.C. § 1400(b), which provides: "Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business."

In its amended complaint, Oplus claims that Vizio infringed its patents by making, using, importing, selling or offering to sell, and/or by contributing to others' use of audio and video products which use methods that fall within the scope of its patents. Oplus also claims that Sears infringed its patents by importing, selling, and/or offering to sell infringing Vizio products. According to Vizio, Sears is a former Vizio customer, but has not been supplied with Vizio televisions since January 2010, approximately two years prior to the filing of Plaintiff's lawsuit. Vizio also maintains that its sales of the alleged infringing products to Sears constituted a very minor portion of Vizio's business during the relevant period. According to Vizio's declarations (and not rebutted by Plaintiff with evidence), Sears had no involvement in the design, development, manufacture or any other aspects of the accused Vizio products. Furthermore, Vizio accepted Sears's tender of defense and request for indemnity, and Sears is represented in this action by Vizio's counsel.

Vizio moves to sever the infringement claims against it from the claims against Sears, arguing that Sears is merely a "peripheral defendant" and that the claims alleged by Oplus against Sears were brought solely to establish venue in the Northern District of Illinois. Vizio further moves to transfer the claims against it to the Central District of California, where Vizio is located, and to stay the claims remaining in the Northern District of Illinois against Sears pending the resolution of the transferred claims against Vizio. Oplus opposes Vizio's requests.

II. Analysis

A. Motion to Sever and Stay

Federal Rule of Civil Procedure 21(a)(2) permits defendants to be joined in a single action if: "(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action." Beyond these two requirements, consideration is given as to whether joinder would result in prejudice against any parties or otherwise cause delay. First Time Videos, LLC v. Does 1-500, 276 F.R.D. 241, 252, (N.D. Ill. 2011). If parties have been improperly joined as defendants, the court may sever the claims pursuant to Rule 21. Rule 21 provides, "On motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party." The district court has "broad discretion whether to sever a claim under Rule 21." Rice v. Sunrise Express, Inc., 209 F.3d 1008, 1016 (7th Cir. 2000). Claims may be severed, and the severance may create two separate proceedings, provided that the claims are "discrete and separate." Gaffney v. Riverboat Services of Indiana, Inc., 451 F.3d 424, 442 (7th Cir. 2006) (quoting Rice, 209 F.3d at 1016).

As in deciding whether to sever claims, a court also has broad discretion in deciding whether to stay proceedings. "[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." See, e.g., Tex. Independent Producers & Royalty Owners Ass'n v. EPA, 410 F.3d 964, 980 (7th Cir. 2004) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254, (1936)). When ruling on a motion to stay proceedings, courts consider the following: "(1) whether a stay will unduly prejudice or tactically disadvantage the non-moving party, (2) whether a stay will simplify the issues in question and streamline the trial, and (3) whether a stay will reduce the burden of litigation on the parties and on the court." Tap Pharmaceutical Products, Inc. v. Atrix Laboratories, Inc., 2004 WL 422697, at *1 (N.D. Ill. March 3, 2004).

Vizio argues that the claims alleged against it should be severed from the claims alleged against Sears because the Sears claims are unnecessary to resolve the issue of infringement. Vizio asserts that Sears "has nothing substantive to offer this infringement action," but was named as a party by Oplus simply to establish venue in the Northern District of Illinois. "It is not uncommon for courts to sever claims by patent holders against peripheral defendants in order to transfer the litigation to a more appropriate forum." Calmedica, LLC v. Novoste Corp., 2004 WL 413296, at *1 (N.D. Ill., Jan. 30, 2004) (citing Safe Bed Technologies Co. v. KCI USA, Inc., 2002 WL 1769991 (N.D. Ill. July 31, 2002); Ambrose v. Steelcase, Inc., 2002 WL 1447871 (N.D. Ill. July 3, 2002)). Defendants are "peripheral" when they lack relevant and material information and were selected to procure venue. Spread Spectrum Screening, LLC v. Eastman Kodak Co., 2010 WL 3516106, at *2 (N.D. Ill. Sept. 1, 2010). Courts in this district repeatedly have held that "joinder of 'peripheral' defendants to prevent the transfer of an action to a more appropriate venue is improper." Id. As noted in Spread Spectrum, the remedy is to sever and stay the claims against the peripheral defendant pursuant to Fed. R. Civ. P. § 21:

Kodak's Customers will add nothing to plaintiff's infringement action against Kodak, and it is obvious that plaintiff has attempted to establish proper venue in the Northern District of Illinois by adding Kodak's customers to the instant action * * * * because Kodak's customers merely use a Kodak product, they have nothing substantive to offer during plaintiff's action against Kodak and likely do not even understand how the product software actually works and will not be helpful to determine whether Kodak's Staccato® product infringes the '623 patent. Consequently, they are merely peripheral in the litigation between plaintiff and Kodak. For these reasons, Kodak's motion to sever plaintiff's claims against Kodak from plaintiff's claims against Kodak's Customers is granted.

Id. at 3.

Sears appears to be such a peripheral defendant. According to Vizio and not disputed by Plaintiff, Vizio's sales of the accused televisions to Sears constituted a very minor portion of Vizio's business during the relevant period. Furthermore, Vizio attests (and Plaintiff does not present evidence to the contrary) that Sears had no involvement in the design, development, manufacture, or any other technical aspects of the accused Vizio products. Thus, it follows that Sears is not likely to have information bearing on Oplus's infringement claims or Vizio's defenses. Moreover, Sears is one customer of many and has not sold Vizio televisions since January 2010. When a plaintiff chooses only one reseller of the accused product out of many, the "inference here is irresistible that the principal reason [the customer defendant] has been sued is to establish venue in the Northern District of Illinois." Ambrose v. Steelcase, ...


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