Opinion
03 Civ. 6496 (RJH) (FM)
December 29, 2003
Memorandum Opinion and Order
Plaintiffs Aerotel, Ltd., Aerotel U.S.A., Inc., and Aerotel U.S.A., LLC (collectively "Aerotel") filed this patent infringement action against defendants IDT Corporation and Union Telecard Alliance, LLC (collectively "DOT"). IDT has moved for a stay of the action pending the outcome of a re-examination by the United States Patent and Trademark Office ("PTO") of Aerotel's patent. For the reasons stated below, IDT's motion is granted. This case shall be stayed pending a decision by the PTO.
Background
This case was originally before the Honorable Shira B. Scheindlin, United States District Court for the Southern District of New York. Pursuant to her Individual Rules and Practices, IDT submitted a letter brief, dated November 6, 2003, seeking a stay of the action until the PTO concluded its re-examination of the Aerotel patent. The case was transferred to this Court on November 12, 2003. That same day, Aerotel submitted a letter brief in opposition to IDT's motion. On November 18, 2003, DOT submitted a letter reply brief to this Court.
On Friday, December 05, 2003, this Court heard oral argument on IDT's motion seeking to stay this litigation. The Court reserved decision on the motion to stay and allowed the parties until December 12, 2003, to make further submissions. Both sides submitted additional letter briefs, dated December 10, 2003 (IDT), and December 12, 2003 (Aerotel).
Discussion
A decision to stay litigation during an ongoing PTO re-examination is within the sound discretion of the district court. See GPAC, Inc. v. D. W. W. Enters., Inc., 144 F.R.D. 60, 62 (D.N.J. 1992). In making its determination, a court should consider: (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) how far the litigation has already progressed. See Xerox Corp. v. 3Com Corp., 69 F. Supp.2d 404, 406-07 (W.D.N.Y. 1999).
IDT argues that all three factors weigh in favor of staying the litigation. IDT points out that the litigation is at a nascent stage. IDT further argues that the PTO re-examination may change the scope of the patent claims, thereby possibly forcing the parties to re-do discovery that had taken place prior to the decision. Finally, IDT argues that a stay would not prejudice Aerotel because the action is principally one for damages.
Aerotel argues that a stay would, in fact, result in prejudice. Aerotel explains that it is presently engaged in licensing negotiations and that the inability to move forward on the litigation and confirm the value of the patent prejudices Aerotel in the negotiations. Aerotel also notes that the patent in question has already undergone three re-examinations, none of which altered any of the patent claims. Aerotel is confident that the current re-examination will similarly not alter the patent claims and, thus, a stay will not simplify the issues in question and trial of the case.
This Court finds that the factors weigh in favor of granting the stay. First, the prejudice of which Aerotel complains — the inability to move forward and confirm the value of a patent — is an inevitable result of any stay. Such result is not unduly prejudicial, particularly in a case where, as here, plaintiffs rights under the patent are close to expiration and the suit is largely one for damages. Second, as IDT correctly notes, the litigation has just begun. Third, while Aerotel may believe that the re-examination will leave the patent claims untouched, there is a substantial risk of wasting the resources of this Court and the parties should Aerotel's belief prove faulty. Conversely, there are significant gains to be realized in staying the action until the PTO has concluded its evaluation of the patent. See GPAC, 144 F.R.D. at 63.
Aerotel relies on Hoechst Celanese Corp. v. BP Chems. Ltd., 78 F.3d 1575 (Fed. Cir. 1996) as a basis for rejecting IDT's motion. However, in that case, defendant did not even seek a PTO re-examination until six months before trial. See Hoechst, 78 F.3d at 1584. The district court declined to stay the trial and decided to allow the re-examination and the trial to proceed concurrently. See id. The Federal Circuit noted that decision "was fully within the court's discretion, lest the trial schedule be manipulated or unduly delayed." Id. In the present case, discovery has not yet begun, a trial date has not been set, and no showing of manipulation has been made. Indeed, Aerotel filed suit after the PTO re-examination was already underway. Thus, this Court does not have reason to find that IDT is attempting to unduly delay or manipulate the trial schedule in this case.
Conclusion
For the foregoing reasons, IDT's motion to stay the litigation pending the resolution of the PTO's re-examination of Aerotel's patent is GRANTED. The parties are directed to this Court's order of December 5, 2003, regarding the schedule for limited discovery, including initial disclosures, a proposed protective order, and a settlement conference before Magistrate Judge Frank Maas.SO ORDERED