United States District Court, W.D. Tennessee, Western Division
ORDER GRANTING DEFENDANT VALUEPART, INC.'S MOTION TO STAY THE CASE
JON P. McCALLA, District Judge.
Before the Court is Defendant ValuePart, Inc.'s Motion to Stay the Case, filed June 18, 2015. (ECF No. 89.) Plaintiff filed a response in opposition to the motion on July 2, 2015. (ECF No. 95.) Defendant ValuePart, Inc. replied to Plaintiff's response on July 8, 2015. (ECF No. 96.)
For the reasons that follow, the motion to stay the instant case is GRANTED.
This case concerns allegations of infringement of U.S. Patent No. 6, 412, 267 (the "'267 patent") asserted by Plaintiff USCO S.p.A. ("USCO") against Defendants ValuePart, Inc. ("VPI"), ACE Track Co., Ltd. ("ACE Track"), and REONE Track Co., Ltd. ("REONE Track") (collectively "the named Defendants").
A. Factual Background
"Plaintiff USCO is a joint stock company established under the laws of Italy with its principal place of business in Modena, Italy." (Compl. ¶ 5, ECF No. 1.) USCO sells and uses split master links and lubricated track assemblies that incorporate split master links, and is the owner of the '267 patent. ( Id. ¶¶ 2, 5.)
The '267 patent protects a "method of manufacturing an openable link of a track." ('267 patent at 1, ECF No. 1-3 at PageID 44.) USCO alleges that Defendant VPI has infringed and continues to infringe the '267 patent by "import[ing], offer[ing] to sell, sell[ing], or us[ing] products which are made by the claimed methods of the '267 Patent within the United States, the State of Tennessee, and this district, thereby causing USCO to continue to suffer severe and irreparable harm." (Compl. ¶ 21.)
Relevant to the instant Motion, ACE Track filed a Chapter 15 petition for recognition of a foreign proceeding in the Bankruptcy Court for the Northern District of Illinois ("the Bankruptcy Court"). (See ECF No. 82-1.) The Bankruptcy Court preliminarily enjoined the instant case on May 7, 2015. ( Id. ¶ 3.) On June 4, 2015, the Bankruptcy Court formally recognized ACE Track's Korean bankruptcy proceeding as a "foreign main proceeding under chapter 15 of the United States Bankruptcy Code." (ECF No. 86-1 ¶ 1.) Additionally, the Bankruptcy Court terminated the preliminary injunction staying proceedings in the instant case. ( Id. ¶ 4.) An automatic stay of proceedings as to ACE Track, however, remained in effect. See 11 U.S.C. § 362(a)(1).
B. Procedural Background
On July 30, 2014, Plaintiff USCO filed a Complaint against the named Defendants for patent infringement. (Compl., ECF No. 1.) On October 1, 2014, Defendant VPI filed its Answer, Affirmative Defenses, Counterclaims, Cross-Claims and Jury Demand to USCO S.p.A.'s Complaint. (ECF No. 19.) USCO filed an Answer to Defendant ValuePart, Inc.'s Counterclaims on October 27, 2015. (ECF No. 30.) On January 27, 2015, VPI filed an Answer, Amended Affirmative Defenses, Counterclaims, Cross-Claims and Jury Demand to USCO S.p.A.'s Complaint. (ECF No. 49.)
On October 1, 2014, VPI filed a Motion to Transfer Venue. (ECF No. 21.) USCO responded in opposition to VPI's Motion on October 20, 2014. (ECF No. 28.) VPI filed a Reply to USCO's Response on October 28, 2014. (ECF No. 33.) On November 14, 2014, the Court denied VPI's Motion to Transfer Venue. (ECF No. 41.)
On March 16, 2015, USCO filed a Motion to Exclude the Declaration of Roger Kern Regarding Claim Construction for U.S. Patent No. 6, 412, 267. (ECF No. 56.) On March 18, 2015, USCO filed a Notice of Clarification revising certain assertions made in the Motion to Exclude. (ECF No. 59.) On March 18, 2015, USCO also filed a Consent Motion for Expedited Briefing Schedule (ECF No. 60), which the Court granted on March 19, 2015 (ECF No. 61). On March 20, 2015, VPI filed a Response in Opposition to USCO's Motion to Exclude. (ECF No. 62.) USCO filed a reply to VPI's response on March 26, 2015. (ECF No. 67.) The Court granted USCO's motion to exclude the declaration of Roger Kern on April 27, 2015. (ECF No. 78.) Pursuant to the Court's order, the Court subsequently entered a revised declaration of Roger Kern on May 6, 2015. (ECF No. 79.)
On June 18, 2015, VPI filed the instant motion to stay proceedings. (ECF No. 89.) USCO filed a response in opposition to the motion on July 2, 2015. (ECF No. 95.) VPI replied to USCO's response on July 8, 2015. (ECF No. 96.)
II. LEGAL STANDARD
"The decision whether to grant a stay of a particular action is within the inherent power of the Court and is discretionary." Ellis v. Merck & Co., Inc., No. 06-1005-T/AN, 2006 WL 448694, at *1 (W.D. Tenn. Feb. 19, 2006) (citation omitted). "[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." Gray v. Bush, 628 F.3d 779, 785 (6th Cir. 2010) (alteration in original) (quoting Landis v. North American Co., 299 U.S. 248, 254 (1936)) (internal quotation marks omitted).
A. Stay Pending Patent Reexamination
"Courts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO reexamination." Ethicon Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) (citation omitted). In determining whether to stay litigation pending patent reexamination by the United States Patent and Trademark Office ("PTO"), courts generally consider the following three factors: "(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) whether discovery is complete and whether a trial date has been set.'" Procter & Gamble Co. v. Team Techs., Inc., No. 1:12-cv-552, 2013 WL 4830950, at *2 (S.D. Ohio Sept. 10, 2013) (quoting Tdata Inc. v. Aircraft Technical Publishers, Nos. 2:03-cv-264, 2:04-cv-1072 (S.D. Ohio Jan. 4, 2008)).
B. Stay Pending Bankruptcy Proceedings
Pursuant to 11 U.S.C. § 362(a)(1), the filing of a petition for protection in Bankruptcy Court operates as an automatic stay as to the bankruptcy petitioner for "the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title." See also In re Delta Air Lines, 310 F.3d 953, 956 (6th Cir. 2002). The automatic stay "facially stays proceedings against the debtor' and fails to intimate, even tangentially, that the stay could be interpreted as including any defendant other than the debtor...." Lynch v. Johns-Manville Sales Corp., 710 F.2d 1194, 1196 (6th Cir. 1983).
The automatic stay under 11 U.S.C. § 362(a)(1) may, however, be extended to solvent codefendants in "unusual circumstances.'" Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 314 (6th Cir. 2000) (quoting In re Eagle-Picher Indus., Inc., 963 F.2d 855, 861 (6th Cir. 1992)); see also In re Delta Air Lines, 310 F.3d at 956 ("In the absence of unusual circumstances, the automatic stay does not halt proceedings against solvent codefendants."). In order to extend the automatic stay to solvent defendants, the movant must show "[s]omething more than the mere fact that one of the parties to the lawsuit has filed a Chapter 11 bankruptcy...." A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986) (internal quotation marks and citations omitted). "[U]nusual circumstances have been found (1) when an indemnification or contribution relationship creates an identity of interests between the debtor and the non-debtor defendant; (2) when the proceeding imposes a substantial burden of discovery on the debtor; or (3) when the proceeding would have a potential preclusive effect that forces the debtor to participate in the proceeding as if the debtor were a party." In re Jefferson Cnty., Ala., 491 B.R. 277, 284 (Bankr. N.D. Ala. 2013) (citing A.H. Robins, 788 F.2d at 999; Queenie, Ltd., 321 F.3d at 287; Johns-Manville Corp. v. Asbestos Litig. Grp. (In re Johns-Manville Corp.) (Johns-Manville I), 40 B.R. 219, 223-26 (S.D.N.Y. 1984); Lesser v. A-Z Assocs. (In re Lion Capital Grp.), 44 B.R. 690, 702-04 (Bankr.S.D.N.Y.1984)). Courts have issued a stay of proceedings under these circumstances
in a variety of procedural ways. Some courts have simply determined the 11 U.S.C. § 362(a) stay applies to non-debtors based on the considerations outlined above, see, e.g., In re QA3 Fin. Corp., No. BK11-80297-TJM, 2011 WL 2678591 (Bankr. D. Neb. July 7, 2011); Maaco Enters., Inc. v. Corrao, No. 91-3325, 1991 WL 255132 (E.D. Pa. Nov. 25, 1991), while other courts have extended the § 362 stay using 11 U.S.C. § 105, which allows a bankruptcy court "to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Code]." See, e.g., Sudbury, Inc. v. Escott (In re Sudbury, Inc.), 140 B.R. 461, 464 (Bankr.N.D.Ohio 1992); Johns-Manville I, 40 B.R. at 226. Still other courts have held that a movant seeking relief pursuant to § 105 must do so through an adversary proceeding. See, e.g., In re Cincom iOutsource, Inc., 398 B.R. 223, 227 (Bankr. S.D. Ohio 2008).
In re Jefferson Cnty., Ala., 491 B.R. at 284 n.1.
A. Stay of Proceedings Pending Reexamination of the '267 Patent
USCO argues that it will suffer prejudice as a result of a stay of proceedings "because the average pendency of an ex parte reexamination would leave little or no life of the '267 Patent for injunctive relief." (ECF No. 95 at 5.) USCO asserts that the average time for this type of reexamination ranges from 19.70 months to 27.8 months with a median of 20.1 months. (See Id. at 6.) USCO further asserts that the '267 patent is set to expire "no later than February 11, ...." (Id.) USCO contends that it is seeking a permanent injunction in the instant case, which would also expire with the expiration of the '267 patent. ( Id. at 8.) As a result, USCO argues, a stay of proceedings "would likely exhaust the life of the 267 Patent and leave USCO without this valuable and expressly requested remedy." (Id.)
USCO also argues that it will be put at a tactical disadvantage if these proceedings are stayed because "ACE is presently going through a bankruptcy proceeding in the Republic of Korea with no guarantee of survival." (Id.) "Should ACE not survive bankruptcy or lose employees and/or executives during the pendency of the ex parte reexamination, evidence from ACE concerning shipments of accused instrumentalities to the United States and its manufacturing process(es) could be lost or difficult to obtain." ( Id. at 8-9.) USCO asserts that "the Bankruptcy Code provides a mechanism for obtaining discovery from a ...