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Ignite USA, LLC v. Pacific Market International, LLC

United States District Court, N.D. Illinois, Eastern Division

May 29, 2014

IGNITE USA, LLC, Plaintiff,
v.
PACIFIC MARKET INTERNATIONAL, LLC, Defendant.

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, District Judge.

On February 7, 2014, Plaintiff Ignite USA, LLC ("Ignite") filed a one-count Complaint (Dkt. No. 1, "Compl." or "Complaint") against Pacific Market International, LLC ("PMI"), alleging infringement of Claims 16-19 of U.S. Patent No. 7, 997, 442 ("the '442 patent") in violation of Title 35, United States Code §§ 271 et seq. Before the court is PMI's "Motion to Stay Pending Inter Partes Review of U.S. Patent No. 7, 997, 442" (Dkt. No. 28, "Def's Mot." or "Stay Motion"). PMI seeks to stay this case, pending a written decision on its petition for inter partes review ("IPR"), filed with the United States Patent and Trademark Office (the "USPTO") on April 1, 2014. PMI's petition challenges the validity of the '442 patent. As described more fully below, this court grants PMI's Stay Motion.

BACKGROUND

Inter Partes Review

An IPR is an administrative proceeding conducted by the USPTO to determine the validity and scope of a patent. See 35 U.S.C. §§ 311-319, et seq. The new IPR procedure was designed to create "a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs." 77 Fed. Reg. 48, 680 (Aug. 14, 2012). Unlike the now-discontinued procedure, which was accomplished largely through submissions to a PTO examiner, an IPR is conducted before a panel of three technically-trained administrative judges from the Patent Trial and Appeal Board. 35 U.S.C. § 6(a), (c).

After a petition is filed for IPR, the patent owner may within three months, file a preliminary response "setting forth the reasons why no inter partes review should be instituted." 37 C.F.R. § 42.107(a)-(b). The USPTO must decide whether to institute IPR review in the following three months, or six months from the initial IPR petition. 35 U.S.C. § 314(b). A proceeding is instituted if the petitioner shows a reasonable likelihood of prevailing on at least one challenged patent claim. 35 U.S.C. 314(a). USPTO statistics indicate that 82% of petitions for IPR have been instituted since the process was introduced in September 2012. (Dkt. No. 29, "Hubbard Decl.", at Ex. 2.)

The new IPR process allows for limited discovery and an oral hearing. See 35 U.S.C. §§ 316(a). The USPTO must issue a final determination one year after the IPR is instituted or, eighteen months on a showing of good cause. 35 U.S.C. § 316(a)(11). A party dissatisfied with a final decision may appeal the determination to the U.S. Court of Appeals for the Federal Circuit. 35 U.S.C. § 141. If the validity of the claims is affirmed in a final USPTO decision, the petitioner is estopped from raising in civil litigation the same prior art raised or that reasonably could have been raised in IPR. 35 U.S.C. §§ 315(e)(2), 318(a).

The Parties' Dispute

The '442 patent claims a drinking container that permits the user to push a button and trigger a mechanism that operates as both a shutter for the drinking orifice and also a seal for a vent opening. (Dkt. No. 1, Ex. A.)

Ignite admits to having learned of PMI's alleged infringement of the '442 patent at the International Home and Housewares Show in Chicago on March 10-13, 2012, and to have immediately contacted PMI about the matter. (Dkt. No. 34, Bradley Decl., ¶¶ 7-8.) In April 2012, PMI provided Ignite's counsel confidential samples of PMI's products for analysis. ( Id. ¶ 9.) For the next twenty-one months, Ignite insisted that PMI was infringing on the '442 patent, while PMI offered invalidity arguments. ( Id. ¶ 11.) Again, Ignite waited almost two years to file the Complaint on February 7, 2014, (Dkt. No. 1), and formally serve PMI on February 25, 2014 (Dkt. No. 8).

On April 1, 2014, PMI promptly responded by filing and serving its IPR challenging the '442 patent with the USPTO. (Hubbard Decl., Ex. 1.) PMI's petition presents five prior art references and six proposed grounds for rejections, addressing all 19 claims of the '442 patent, including the four Claims (16-19) Ignite asserts in the Complaint. (Def's Mot. at 4.)

Because PMI did not delay filing its IPR, this litigation is in its initial stages. PMI filed its answer on April 4, 2014, denying the allegations. (Dkt. No. 25, "Answer".) However, a scheduling conference has not been set, and, accordingly, no scheduling order is in place. (Def's Mot. at 2-3.) The parties have not conferred about a joint scheduling report and no discovery has begun. ( Id. )

LEGAL STANDARD

This Court has the authority to stay, at its discretion, an action pending IPR review by the USPTO. Black & Decker Inc. v. Positec USA, Inc., No. 13-3075, 2013 WL 5718460, *3 (N.D. Ill. Oct. 1, 2013) (Gottschall, J.) (citing Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1427 (Fed. Cir. 1988)). There is no per se rule that patent cases be stayed pending actions before the USPTO because "such a rule would invite parties to derail litigation." Fujitsu Ltd. v. Tellabs Operations, Inc., Nos. 08-3379, 09-4530, 2012 WL 987272, ...


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