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Tile Tech Inc. v. Appian Way Sales Inc.

United States District Court, W.D. Washington, Seattle

May 8, 2018

TILE TECH, INC., Plaintiff,
v.
APPIAN WAY SALES, INC., et al., Defendants.

          ORDER ON MOTION TO STAY PROCEEDINGS

          JAMES L. ROBART, United States District Judge

         I. INTRODUCTION

         Before the court is Appian Way Sales, Inc. (“Appian”) and Puget Lite-Pavers, Inc.'s (“Puget”) (collectively, “Defendants”) motion to stay proceedings against Puget. (Mot. (Dkt. # 35).) In addition, Plaintiff Tile Tech, Inc. (“Tile Tech”) filed a surreply in which it asks the court to strike certain material in Defendants' reply. (Surreply (Dkt. # 45).) The court has reviewed the motion and the surreply, all of the parties' submissions related to each document, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court GRANTS Defendants' motion to stay the proceedings against Puget and GRANTS in part and DENIES in part Tile Tech's request to strike.

         II. BACKGROUND

         Tile Tech, a California corporation, manufactures and sells various “apparatuses related to paving subsurfaces.” (Am. Compl. (Dkt. # 13) ¶ 13.) Ramin Tabibnia, the inventor of U.S. Patent No. 9, 410, 296 (“the '296 Patent”), grants an exclusive license to Tile Tech, entitling Tile Tech to “make, use, sell, and offer to sell the patented components.” (Id. ¶¶ 14-17.) The exclusive license also grants Tile Tech “the right to sue under the '296 Patent.” (Id. ¶ 17.) The '296 Patent “discloses an apparatus and methods for elevating a flat durable walking surface above a sometimes uneven sub-surface.” (Pl. Resp. at 5.)

         On November 3, 2017, Tile Tech filed a patent infringement suit against Defendants. (See generally Compl. (Dkt. # 1).) On December 6, 2017, Tile Tech filed an amended complaint asserting three separate patent infringement claims-direct, induced, and contributory-against Defendants. (Am. Compl. ¶¶ 14-17.) Tile Tech contends that both Appian and Puget make, use, sell, and offer to sell pave pedestal products that infringe upon the asserted claims of the '296 Patent. (Id. ¶¶ 19-37.)

         Appian, a Washington corporation, makes and sells “pedestal apparatuses used in connection with the paving of subsurfaces.” (Ans. (Dkt. # 15) ¶ 1.) Puget is a Washington corporation and a nationwide distributor of “Appian's paver pedestal products.” (Id. ¶ 2.) On December 21, 2017, Defendants filed an answer denying any infringement and asserting various counterclaims against Tile Tech. (See generally id.) The court now considers Defendants' motion to stay the proceedings against Puget. (See Mot.)

         III. ANALYSIS

         A. The Legal Standard

         Defendants move to stay this matter against Puget based on the “customer suit” doctrine. (See generally Mot.) Under this doctrine, district courts have the authority to stay certain patent infringement claims. See Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464 (Fed. Cir. 1990). The “customer suit” doctrine acts as an exception “to the general rule that favors the forum of the first-filed action.” Tegic Commc'ns Corp. v. Bd. of Regents of Univ. of Tex. Sys., 458 F.3d 1335, 1343 (Fed. Cir. 2006). Traditionally, “[w]hen a patent owner files an infringement suit against a manufacturer's customer and the manufacturer then files an action of noninfringement or patent invalidity, the suit by the manufacturer generally take precedence.” In re Nintendo of Am., Inc., 756 F.3d 1363, 1365 (Fed. Cir. 2014); see also Spread Spectrum Screening LLC v. Eastman Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011); Katz, 909 F.2d at 1464. The justification for this exception “is based on the manufacturer's presumed greater interest in defending its actions against charges of patent infringement; and to guard against [the] possibility of abuse.” Kahn v. Gen. Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989). Furthermore, the manufacturer is often considered “the true defendant . . . [and] must protect its customers, either as a matter of contract, or good business, or in order to avoid the damaging impact of an adverse ruling against its products.” Katz, 909 F.2d at 1464 (quoting Codex Corp. v. Milgo Elec. Corp., 553 F.2d 735, 738 (1st Cir. 1977)). A stay is appropriate when the litigation against the manufacturer alone will “resolve the ‘major issues' concerning the claims against the customer.” Spread Spectrum Screening, 657 F.3d at 1358 (quoting Katz, 909 F.2d at 1464). The stay “facilitate[s] [a] just, convenient, efficient, and less expensive determination, ” and does not burden the customer with unnecessary litigation. Nintendo, 756 F.3d at 1365.

         Traditionally, district courts limited the “customer suit” doctrine to cases in which a plaintiff brought suit against the customer and the manufacturer in different districts. See, e.g., Privasys, Inc. v. Visa Int'l, No. C 07-03257SI, 2007 WL 3461761, at *3 (N.D. Cal. Nov. 14, 2007) (citing Lifelink Pharm., Inc. v. NDA Consulting, Inc., No. 5:07-CV-785, 2007 WL 2459879, at *3 (N.D. Ohio Aug. 24, 2007)) (explaining that a stay against the customer “would run counter to the goal of fostering judicial economy without enhancing the product source defendant's ability to litigate the issue of patent infringement”); Naxon Telesign Corp. v. GTE Info. Sys., Inc., 89 F.R.D. 333, 339 (N.D. Ill. 1980) (“In this action, where the suit against the manufacturer and customer would take place simultaneously . . . the problem addressed in [the ‘customer suit doctrine'] is not presented.”).

         However, in Nintendo, the Federal Circuit held that the principles underlying the “customer suit” doctrine-facilitating a “just, convenient, efficient, and less expensive determination”-included cases in which both the manufacturer and the customer were joined in a single action. 756 F.3d at 1365. In Nintendo, the manufacturer and the customer were named in the same proceeding, and the district court denied Nintendo's motion to sever and stay the claims against the customers. Id. at 1364. The Federal Circuit, however, held that “[w]hile the circumstances of this case differ from those of the customer-suit exception, we agree . . . that the same general principles govern in that Nintendo is the true defendant.” Id. at 1365. The issues of infringement and validity were common to Nintendo and the customers. Thus, if the plaintiff recovered from Nintendo, they could not recover from the customers. Id. at 1366. Because “Nintendo's liability is predicate to recovery from any of the defendants, ” the Federal Circuit held that “the case against Nintendo must proceed first, in any forum.” Id.

         Several district courts have followed Nintendo and similarly extended the principles underlying the “customer suit” doctrine to cases in which the manufacturer and the customer are joined in the same action for the same infringement claims. See, e.g., WP Banquet, LLC v. Target Corp., No. LACV1602082JAKJPRX, 2016 WL 9450448, at *4-6 (C.D. Cal. Dec. 15, 2016); Opticurrent, LLC v. Power Integrations, Inc., No. 2:16-CV-325-JRG, 2016 WL 9275395, at *4-5 (E.D. Tex. Oct. 19, 2016); Werteks Closed Joint Stock Co. v. GNC Corp., No. 6-60688-CIV, 2016 WL 8739846, at *4-6 (S.D. Fla. Aug. 4, 2016), report and recommendation adopted as modified, No. 16-60688-CIV, 2016 WL 8809716 (S.D. Fla. Aug. 23, 2016); Capital Sec. Sys., Inc. v. NCR Corp., No. 1:14-CV-1516-WSD, 2015 WL 3819336, at *2-3 (N.D.Ga. June 18, 2015).

         Even though Nintendo broadened the application of the “customer suit” doctrine, an important limitation remains: the manufacturer and the customer must be accused of the same infringement claim(s) for the exception to apply. See Nintendo, 756 F.3d at 1366. If the suit against the manufacturer does not resolve all infringement claims against the customer, the “customer suit” doctrine is inapplicable because “the issues of infringement as to the manufacturer and the customer are ‘not entirely common.'” InfoGation Corp. v. ZTE Corp., No. 16-CV-01901-H-JLB, 2016 WL 9525235, at *3 (S.D. Cal. Dec. 21, 2016) (quoting Erfindergemeinschaft Uropep GbR v. Eli Lilly & Co., No. 2:15-CV-1202-WCB, 2016 WL 1659924, at *3 (E.D. Tex. Apr. 26, 2016)); see, e.g., Carucel Investments, L.P. v. Novatel Wireless, Inc., No. 16-CV-118-H-KSC, 2016 WL 8738221, at *3 (S.D. Cal. May 13, 2016) (explaining that the “customer suit” exception cannot apply when the action against the manufacturer would not resolve all charges against the retailers); Erfindergemeinschaft Uropep, 2016 WL 1659924, at *3 (“Therefore, unlike Nintendo and other cases involving the customer-suit exception, the issue of infringement is not entirely common to Brookshire and Lilly, as proof of infringement by Lilly would not necessarily establish infringement by Brookshire.”). Thus, the ...


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