Case 2:09-cv-00257-DF-CMC Document 246

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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION

TIVO INC., a Delaware corporation, Plaintiff, v. VERIZON COMMUNICATIONS, INC., a Delaware corporation, et al., Civil Action No. 2:09-cv-257-DF

Defendants.

RESPONSE TO TIVOS OPPOSED MOTION FOR A STATUS CONFERENCE TiVo seeks a status conference to discuss lifting the stay and entering a schedule in this matter. TiVo Mot. at 1. This request is premature. It makes no sense to lift the stay for three reasons. First, a key basis for the stay the absence of a Markman ruling, which has been delayed due to TiVos insistence on construing a large number of terms (forty five) has not changed. Second, half of the patents in suit (two of the three TiVo patents and two of the five Verizon counterclaim patents) are now in reexamination before the U.S. Patent and Trademark Office (PTO), and awaiting the PTOs ruling will promote efficient and expeditious disposition of the claims, conserve judicial resources, and allow the Court to benefit from the PTOs analysis. Third, this case should follow the Motorola Mobility v. TiVo case (Case No. 5:11-CV-53), because Motorola is Verizons supplier of the accused devices and, if Motorola prevails, it could greatly simplify the issues in this case. Because the stay should remain in place, a status conference at this juncture would needlessly consume the resources of the Court and the parties. TiVos motion should therefore be denied.

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1.

This case was stayed [d]ue to the Courts schedule. Order (Nov. 10, 2011),

ECF No. 237. At the November 10, 2011 hearing at which the Court announced its intention to stay this case, the Court cited the considerable amount of work that remained to be done to construe the claim terms as a basis for the stay. See Nov. 10, 2011 Tr. at 3-4. That has not changed. The Court is in the same position with respect to a Markman ruling as it was when the stay was imposed sua sponte. Unless and until the Markman ruling is issued, it makes little sense and would be inefficient to proceed with discovery in this case. Indeed, that is why this Courts docket control order originally linked future deadlines in this case, including the exchange of revised infringement and invalidity contentions and all stages of expert discovery (which has not begun), to the issuance of a Markman ruling. See Joint Agreed Docket Control Order (May 18, 2010), ECF No. 88. Even remaining fact discovery would be more productive post-Markman, as the parties will be able to focus on a narrower set of disputes. TiVo has no basis to complain that maintaining the stay until a Markman ruling would cause undue delay. At the Markman hearing on June 2, 2011, this Court encouraged TiVo to reduce the number of terms it was seeking to have construed, see Markman Hrg, Tr. at 31-33 (June 2 2011); when TiVo refused, the Court made note of the delay that would likely result, see id. at 120. Over the next five months, TiVo took no steps to reduce the number of terms for construction. And in the more than two months since the November 10, 2011 hearing, TiVo still has not reduced the number of terms it seeks to construe. 2. The stay should be maintained for an additional, independent reason: Half of the

patents-in-suit are currently undergoing reexamination at the PTO. On June 2 & 3, 2011, TiVo filed reexamination requests for four of the five asserted Verizon patents. On July 22, 2011, Verizon moved for reexamination of two of the three asserted TiVo patents. The PTO has issued

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final office actions reaffirming the validity of two of the four patents that TiVo challenged (the 748 and 684), and proceedings on the other two patents (the 979 and 078) are ongoing. In the inter partes reexamination proceedings on the TiVo patents (the 465 and 015), the PTO also has issued office actions rejecting all subject claims of the two patents as invalid, and TiVo has recently filed responses. Verizons responses in these reexaminations are due in February. In deciding whether litigation should be stayed pending the outcome of a reexamination proceeding, this Court considers three factors: (1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set. Datatreasury Corp. v. Wells Fargo & Co., 490 F. Supp. 2d 749, 754 (E.D. Tex. 2006) (Folsom, J.) (quoting Soverain Software LLC v. Amazon.Com, 356 F. Supp. 2d 660, 662 (E.D. Tex. 2005)). These factors, both individually and collectively, strongly weigh in favor of maintaining the stay. See Constellation IP, LLC v. Allstate Corp., No. 5:07-CV-132, 2008 WL 4787625, at *1 (E.D. Tex May 12, 2008) (Essentially, courts determine whether the benefits of a stay outweigh the inherent costs based on these factors); see also ASCII Corp. v. STD Entmt USA, Inc., 844 F. Supp. 1378, 1381 (N.D. Cal. 1994) (There is a liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO reexamination or reissuance proceedings.). First, a stay will not unduly prejudice TiVo or give it a tactical disadvantage. TiVo has no basis to claim otherwise given that it was the party who first filed for reexamination of Verizons counterclaim patents, more than 16 months after Verizon asserted those patents. Moreover, TiVo waited four years to file this suit against Verizon from the time when Verizon

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first deployed the accused Motorola DVRs.1 And nearly two years after filing suit, TiVo sought to expand the case by amending its infringement contentions to include DVRs from a new manufacturer, Cisco, the motion for which is still pending. These circumstances weigh in favor of retaining the stay. See Allied Erecting & Dismantling Co. v. Genesis Equip. & Mfg., Inc., No. 4:08CV589, 2010 U.S. Dist. LEXIS 92851, at *7 (N.D. Ohio Aug. 16, 2010) (finding that this factor weighs in favor of stay where, as here, Plaintiffs have not sought a preliminary injunction and have sought or at least acquiesced in . . . extensions of the discovery schedule); see also Photoflex Prods., Inc. v. Circa 3 LLC, No. C04-03715, 2006 U.S. Dist. LEXIS 37743, at *5 (N.D. Cal. May 24, 1996) (any delay inherent to the reexamination process does not constitute, by itself, undue prejudice weighing against a stay, as such delay is always present in the case of a reexamination). Second, awaiting the results of the reexamination which involves the same claims and prior art that have been asserted here will simplify the issues in question and trial of the case. As this Court has recognized: [M]ost reexaminations result in claim amendments or cancellations. Claim cancellations will certainly simplify the issues that need to be litigated because these claims will be removed entirely from consideration in the litigation. Amended claims also have the potential for simplifying the issues that need to be litigated. Narrowing claims would commensurately simplify the issues at trial. Datatreasury, 490 F. Supp. 2d at 755 (holding that, as a result of these considerations, this factor weighs in favor of a stay); see also TiVo made just this point in arguing why this factor favored a stay in the related Motorola case. See TiVos Oppn to Pls Obj. to Magistrate Judge Cravens Order Granting TiVos Mot. to Stay at 6, No. 5:11-cv-53 (E.D. Tex. Aug. 8, 2011), ECF No. 38 (But allegations of irreparable harm do not preclude stays of litigation and Motorolas feigned concern is contradicted by its own delay in pursuing its infringement claim. Pac. Bioscience Labs., Inc. v. Pretika Corp., No. 10CV-0231, 2011 U.S. Dist. LEXIS 3565, at *16 (W.D. Wash. Jan. 9, 2011). Motorola had been aware of TiVos products and patents for many years, but never once alleged any potential infringement until after TiVo initiated the Verizon lawsuit in August in 2009.).
1

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Slip Track Sys., Inc. v. Metal Lite, Inc., 159 F.3d 1337, 1341 (Fed. Cir. 1998) (stay pending reexamination may be justified if the reexamination will likely assist the court in determining patent validity or, if the claims are canceled, eliminate the need to consider issues of infringement); see also Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1428 (Fed. Cir. 1988) (even if the reexamination [does] not lead to claim amendment or cancellation, it could still provide valuable analysis to the district court, which would warrant stay); Premier Intl Assocs. LLC v. Hewlett-Packard Co., 554 F. Supp. 2d 717, 720 (E.D. Tex. 2008) (Folsom, J.) (this factor does not require that issues be resolved elsewhere, but considers whether issues be narrowed or simplified and whether the technical expertise provided by the reexamination proceeding will be helpful to the Court on any issues that remain.). Third, this case is far from complete considerable fact discovery remains, there is no Markman order, expert discovery has not commenced, there is no summary judgment schedule, and there is no trial date and the burden of litigation will therefore be reduced by continuing the stay pending reexamination. In Datatreasury, this Court found that this factor weighed in favor of a stay even where the case had been scheduled for trial and the discovery deadline is approximately months away. Datatreasury, 490 F. Supp. 2d at 755. The Court held that [m]uch remains to be done before this case is ready for trial. Neither the Court nor the parties have invested such resources as to make a stay pending completion of reexamination inefficient and inappropriate. Id. That finding applies with even greater force here, where there is no trial date or discovery deadline, and expert discovery has not begun. See, e.g., Southwire Co. v. Cerro Wire, Inc., 750 F. Supp. 2d 775, 780 (E.D. Tex. 2010) (finding stay warranted where a trial date was set and discovery had begun); Microlinc, LLC v. Intel Corp., No. 2:07-CV-488, 2010 WL 3766655, at *3 (E.D. Tex. Sept. 20, 2010) (granting stay even though discovery was

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nearly complete and trial date was set). Thus, most of the usual landmarks on the road to trial in a patent case . . . a claim construction decision from the Court, expert discovery, and summary judgment briefing all still lie ahead. Firepass IP Holdings, Inc. v. Airbus Ams., Inc., No. 09CV-4234, 2011 U.S. Dist. LEXIS 72409, at *6 (E.D.N.Y. July 1, 2011); see also Gryphon Networks Corp. v. Contact Ctr. Compliance Corp., 792 F. Supp. 2d 87, 92 (D. Mass. 2011) (holding that this factor favors a stay where, as here [a]lthough the parties have engaged in substantial written discovery, they are only beginning the process of conducting depositions. The parties completed claim construction briefing and this court held a Markman hearing. This court, however, has not constructed the claims and issued a Markman ruling. Fact discovery is not complete and expert discovery has yet to begin. The parties have not filed summary judgment motions. Notably, there is no trial date.); Allied Erecting & Dismantling, 2010 U.S. Dist. LEXIS 92851, at *10. (finding that this factor favors a stay where [e]xpert discovery has not yet commenced and no trial date has been set). 3. The stay also should be retained in light of the schedule recently adopted in the

related Motorola litigation. Motorola is the supplier of the accused DVRs in this case. Motorola filed a declaratory judgment of non-infringement against TiVo, and also has sought a declaratory judgment that two of the three patents (the 389 and 465) that TiVo has asserted against Verizons Motorola DVRs are invalid. As this Court found in granting TiVos motion for a stay in the Motorola case, there is overlap of the legal issues and substantial overlap of some factual issues between the two cases. Order at 8, No. 5:11-CV-53 (E.D. Tex. July 6, 2011), ECF No. 34. Thus, resolution of the Motorola case which, unlike this one, has a schedule that includes a date for a Markman ruling and a trial date will greatly simplify the issues in this case. Cf. id. at 9; see also TiVos Mot. to Stay at 7, No. 5:11-cv-53 (E.D. Tex. June. 10, 2011),

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ECF No. 22 (Here, there is substantial indeed, complete overlap between Motorolas declaratory judgment claims and those asserted by Verizon in the Verizon lawsuit, and thus the two actions are so duplicative that a stay is warranted and necessary.). Although TiVo filed its suit against Verizon before Motorola filed its suit against TiVo, this Court has recognized that [h]ere, the first-to-file rule does not come into play as both the Verizon lawsuit and [the Motorola] case are pending before the same district judge, eliminating the concern over comity and minimizing the concerns of inconsistent and duplicative rulings. Order at 5, No. 5:11-CV-53 (E.D. Tex. July 6, 2011), ECF No. 34. Moreover, courts recognize that, where, as here, the second suit involves the manufacturer of the goods accused of infringement in the prior suit, it makes sense to allow the manufacturer suit to proceed first where it has the potential to resolve major issues concerning the claims against the customer. See Spread Spectrum Screening v. Eastman Kodak Co., 657 F.3d 1349, 1358 (Fed. Cir. 2011) (The customer suit exception [providing that manufacturer suit should be heard first] typically arises when the first-filed case is an infringement action against a customer and the manufacturer subsequently files a declaratory judgment action against the patent holder in a different forum.); Ricoh Co., Ltd. v. Aeroflex, Inc., 279 F. Supp. 2d 554, 557 (D. Del. 2003) ([A] manufacturers declaratory judgment suit should be given preference over a patentees suit against the manufacturers customers when those customers are being sued for their ordinary use of the manufacturers products.); Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464 (Fed. Cir. 1990) ([L]itigation against or brought by the manufacturer of infringing goods takes precedence over a suit by the patent owner against customers of the manufacturer.). Under these circumstances, staying the claims against Verizon will simplify issues and preserve judicial economy. See Honeywell Intl, Inc. v. Audiovox Commcns Corp., Nos. Civ. A 04-1337 et al., 2005 WL

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2465898, at *3 (D. Del. May 18, 2005) ([F]rom the perspective of the host of defendants [Plaintiff] has chosen to sue, and in the interest of judicial economy, dealing with the manufacturers first is the fairest and most efficient way to proceed. It is not a complication to be resisted.). For these reasons, Verizon opposes TiVos motion for a status conference.

Dated: January 24, 2012

Respectfully submitted, /s/ Clyde M. Siebman Clyde M. Siebman (#18341600) SIEBMAN, REYNOLDS, BURG, PHILLIPS & SMITH LLP Federal Courthouse Square 300 N. Travis Street Sherman, TX 75090 Tel: (903) 870-0070 Fax: (903) 870-0066 Email: siebman@siebman.com Mark C. Hansen, pro hac vice Michael K. Kellogg, pro hac vice John Christopher Rozendaal, pro hac vice KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C. 1615 M Street, NW, Suite 400 Washington, DC 20036 Tel: (202) 326-7900 Fax: (202) 326-7999 Email: mhansen@khhte.com mkellogg@khhte.com jrozendaal@khhte.com

Melissa Richards Smith (#24001351) GILLAM & SMITH, L.L.P. 303 South Washington Avenue Marshall, TX 75670 Tel: (903) 934-8450 Fax: (903) 934-9257 Email: melissa@gillamsmithlaw.com John Thorne, pro hac vice John P. Frantz, pro hac vice Caren K. Khoo, pro hac vice VERIZON CORPORATE RESOURCES GROUP LLC 1320 N. Court House Road Arlington, VA 22201 Tel: (703) 351-3900 Fax: (703) 351-3670

Counsel for Verizon Communications Inc., Verizon Services Corp., Verizon Corporate Resources Group LLC, Verizon Corporate Services Group Inc., and Verizon Data Services LLC

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CERTIFICATE OF SERVICE The undersigned hereby certifies that all counsel of record who are deemed to have consented to electronic service are being served with a copy of this document via the Courts CM/ECF system on January 24, 2012. Any other counsel of record will be served via electronic and first-class mail. /s/ Clyde M. Siebman Clyde M. Siebman (#18341600) SIEBMAN, REYNOLDS, BURG, PHILLIPS & SMITH LLP Federal Courthouse Square 300 N. Travis Street Sherman, TX 75090 Tel: (903) 870-0070 Fax: (903) 870-0066 Email: siebman@siebman.com Counsel for Verizon Communications Inc., Verizon Services Corp., Verizon Corporate Resources Group LLC, Verizon Corporate Services Group Inc., and Verizon Data Services LLC

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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION

TIVO INC., a Delaware corporation, Plaintiff, v. VERIZON COMMUNICATIONS, INC., a Delaware corporation, et al., Civil Action No. 2:09-cv-257-DF

Defendants.

ORDER

Before the Court is Plaintiff, TiVo Inc.s, Opposed Motion for a Status Conference. Having considered the motion and response thereto, the Court finds that the Motion for a Status Conference should be, and hereby is, DENIED.