Monday, July 28, 2014

Stay Against a "Peripheral" Defendant?

Not if the defendant is a direct competitor.  The Andersons, Inc. has sued Harrell's, LLC and three other defendants for infringement of U.S. Patent Nos. 6,884,756; 8,435,321; and 8,574,631 relating to water-dispersible pellet fertilizer.  Harrell's asked the Court to stay the case against it, arguing that it was a "peripheral" defendant in that it merely bought the accused products from the other defendants and resold them.

The Court outlined the law for such a stay:
A district court has inherent discretionary authority to stay proceedings to control its docket and further the interests of justice. CTI-Container Leasing Corp. v. Uiterwyk Corp., 685 F.2d 1284, 1288 (11th Cir. 1982). The applicant for a stay “must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one else.” Landis v. N. Am. Co., 299 U.S. 248, 255, 57 S.Ct. 163, 166 (1936).  
When a patent-holder sues both the manufacturer of an allegedly infringing device and a customer of the manufacturer--who merely resells the device to the public--district courts frequently stay the claims against the customer-retailer while the suit against the manufacturer proceeds. See generally Heinz Kettler GMBH & Co. v. Indian Indus., Inc., 575 F. Supp. 2d 728, 730 (E.D. Va. 2008); Ricoh Co., Ltd. v. Aeroflex Inc., 279 F. Supp. 2d 554, 557 (D. Del. 2003); Oplus Techs., Ltd. v. Sears Holding Corp., No. 11-cv-8539, 2012 WL 2280696, at *4 (N.D. Ill. Jun. 15, 2012). In such cases, the manufacturer of the allegedly-infringing device is considered to be the real-party interest and in a better position to contest validity and infringement. See id
Notwithstanding these frequent stays, the situation is different when the "peripheral" defendant is one of plaintiff's competitors:
Plaintiff alleges that Harrell's is Plaintiff's direct competitor, that Harrell's previously approached Plaintiff about buying its product, that Plaintiff refused, and that Harrell's then sought out the accused product from [another defendant].  Plaintiff thus maintains that discovery from Harrell's will be relevant to validity, particularly non-obviousness, as well as the issue of willful infringement.
Harrell's desire to avoid the expense and time to participate in discovery did not present an undue hardship or inequity.

Motion to stay, denied.
The Andersons, Inc. v. Enviro Granulation, LLC., Case No. 8:13-CV-3004 (M.D. Fla. July 21, 2014) (J. Covington)

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