UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

American Medical Systems, et al., Civil No. 08-4798 (JNE/FLN)

Plaintiffs,

v. ORDER

Laser Peripherals, LLC,

Defendant.

___________________________________________________

Leland G. Hansen, Misti N. Okerlund for Plaintiffs.

Arne Olson, Steven C. Moore for Defendant.
___________________________________________________

THIS MATTER came before the undersigned United States Magistrate Judge on February

1, 2010 on Defendant’s Motion to Stay Litigation Pending Re-Examination of Patent [#210].

The United States Patent and Trademark Office granted a request for an ex parte re-

examination of the patent-in-suit (the “Pon Patent”) on May 1, 2009 and issued a Non-Final Office

Action on December 18, 2009. The Non-Final Office Action rejected multiple claims of the Pon

Patent as anticipated by prior art, including independent claims 1 and 25 asserted in this lawsuit.

(Kellam Decl. Exs. A, B.) At this stage in the re-examination proceeding, the Plaintiffs have not

participated in the Patent Office’s process. The deadline for Plaintiffs’ response to the Non-Final

Office Action is February 18, 2009, although the parties represented at the hearing that an extension

has been requested.

Courts have the discretion to stay judicial proceedings pending a patent reexamination, but

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are not required to do so. Timebase PTY Ltd. v. Thomson Corp., Case No. 07-1687, 2008 WL

1959061 at *1 (D. Minn. May 6, 2008) (Ericksen, J.); see also Fresenius Medical Care Holdings,

Inc. v. Baxter Int’l, Inc., Case No. 03-1431, 2007 WL 1655625 *2 (N.D. Cal. June 7, 2007). In

determining whether to stay litigation pending a reexamination, district courts generally consider

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; (3) whether discovery is complete

and a trial date is set.” Timebase, 2008 WL 1959061 at *1. The Court will address these factors in

reverse order.

The third factor, which takes the current stage of litigation into account, weighs most heavily

against a stay in this case. “Courts which have denied stays pending reexamination proceedings have

generally done so where the request for reexamination came late in the litigation, after extensive

discovery or trial preparation.” Vdata, LLC v. Aetna, Inc., Case No. 06-1701, 2006 WL 3392889 at

*8 (D. Minn. Nov. 21, 2006) (Ericksen, J.). Plaintiff initiated the lawsuit in July 2008, over a year

and a half ago. Since that time, the parties have completed an extensive discovery process. Fact

discovery closed on December 1, 2009, and expert reports have been drafted and exchanged.

Furthermore, the parties have engaged in considerable pre-trial motion practice largely focused on

discovery disputes. Accordingly, the Court has also invested significant judicial resources over the

course of this litigation. In addition to handling numerous minor pre-trial matters, the Court has held

five non-dispositive motion hearings and ruled on at least seven non-dispositive motions. (See, e.g.,

Order Denying Motion for Protective Order, Doc. No. 65; Order to Comply With Local Rule 7.1(f),

Doc. No. 143; Order Denying Motion to Compel, Doc. No. 144; Order Denying Motion to Compel,

Doc. No. 147, Order Denying Motion for Leave to File Second Amended Answer and Motion to

Extend Discovery Deadline, Doc. No. 190; Order Granting In Part And Denying In Part Motion to

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Compel, Doc. No. 226.) Perhaps more importantly, though, District Judge Joan N. Ericksen

conducted a Markman hearing on September 11, 2009 and has since issued a detailed 38-page order

construing disputed claim terms. (Doc. No. 166.) Finally, according to the pre-trial scheduling order,

the dispositive motion deadline is in less than one month, and the parties are to be trial-ready in less

than four months. Thus, as trial is only a few months away, and because both the parties and the

Court have invested significant time and resources into the progress of this litigation, the third factor

weighs heavily against a stay.

The second factor, simplification of the case, is less straightforward. Both parties rely on

statistical averages with respect to whether patent claims under re-examination will ultimately survive

the process. Of course, these statistics cannot reliably predict the outcome of this particular case.

Defendants submit that because independent claims 1 and 25 are key to Plaintiffs’ infringement

allegations, final rejection by the Patent Office would simplify the issues by gutting Plaintiffs’ case.

Plaintiffs, however, respond that even if independent claims 1 and 25 are rejected, the claims

dependent on 1 and 25 would remain because they are not implicated in the re-examination. As these

dependent claims necessarily include the elements of claims 1 and 25, Plaintiffs’ contend the case

would not be simplified. The Court finds that it is impossible to determine with any degree of

certainty whether the case will be simplified by the re-examination, especially in light of the fact that

the Patent Office has yet to hear from Plaintiffs. Fresenius, 2007 WL 1655625 at *2 (“... there

appears to be a growing concern among at least some judges in this district that, on balance, staying

a case even in its early stages pending reexamination has not led to the just, speedy, and efficient

management of the litigation, but instead has tended to prolong it without achieving sufficient

benefits in simplification to justify the delay. This concern stems in part from the unpredictable but

often lengthy duration of the stay due to the length of PTO reexamination proceedings ... in contrast

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to the salutary effect of firm deadlines on efficient case management.”). Therefore, the second factor

is neutral.

The first factor, prejudice or clear tactical disadvantage to Plaintiffs, tends to weigh somewhat

against a stay. The key consideration here is time. The parties once again engage in a statistical

battle with respect to how long the re-examination proceeding is likely to take, but a Federal Circuit

judge has recently commented on the issue, stating in a September 2009 concurring opinion:

I remain a strong supporter of the principle of reexamination. It can be a useful

and powerful tool for the benefit of both patentees and those interested in
restricting or eliminating adversely held patents. However, if routinely available
to delay the judicial resolution of disputes, the procedure is subject to inequity,
if not manipulation and abuse, through the delays that are inherent in PTO
activity. The statistical data of the Patent and Trademark Office place this aspect
in sharp relief, for the number of reexamination requests is increasing, as is the
time for completion of reexamination and appeal in the PTO, as well as the right
of judicial review. In its recent statistical summaries, the PTO reports a 54%
increase in filing of ex parte reexaminations since 2004 (from 441 in 2004 to 680
in 2008, and with 481 filings through June 2009). See USPTO, Reexamination
Operational Statistics (June 30, 2009), available at http:// www. uspto. gov/ web/
patents/ documents/ reexam_ operations_ 06-09. pdf. Of these filings 31% were
reported to be in litigation. Id. ...The PTO also reports that as of the third quarter
of 2009, the average pendency for ex parte reexamination is 36.1 months, an
increase from the 34.6 months at December 2008. Id.

Fresenius USA, Inc., v. Baxter Int’l, Inc., 582 F.3d 1288, 1305-06 (Fed. Cir. 2009) (Newman,

J., concurring). Courts have taken the position that the availability of monetary damages can

ameliorate potential undue prejudice or tactical disadvantage in some situations, especially where the

non-moving party has not explained why money damages are not an adequate remedy. Vdata, 2006

WL 3392889 at *5 (failure to explain why monetary damages would not provide adequate

compensation). However, Plaintiffs here have explained that monetary damages would not prevent

either the erosion of evidence during a lengthy stay or a potential permanent loss in market share.

An average re-examination proceeding would not conclude until near the end of 2011, and after that

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the findings will likely be appealed. During the intervening years, witnesses could become

unavailable and market share could be permanently lost – especially since the Pon Patent expires in

2013. Thus, this first factor tends to weigh against a stay.

In sum, the Court finds that a stay is not appropriate at this stage in the litigation. Therefore,

the motion must be denied.

Based on all the files, records and proceedings herein, IT IS HEREBY ORDERED that

Defendant’s Motion to Stay Litigation Pending Re-Examination of Patent [#210] is DENIED.

DATED: February 23, 2010 s/ Franklin L. Noel

FRANKLIN L. NOEL
United States Magistrate Judge

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