ChromaDex's Opposition to Staying the DE Patent Infringement Case
Two weeks ago Elysium asked the Court in Delaware to put a hold on ChromaDex's patent infringement action. I said that Elysium's arguments were mostly weak, and ChromaDex's opposition brief succinctly explains why. You can read ChromaDex's opposition brief here:
The general thrust of the argument is that the PTAB and California actions will not, even if Elysium prevailed, obviate the need to resolve ChromaDex's patent infringement claims, and the proposed delay would unjustly allow Elysium to continue infringing.
These arguments are legally and factually correct, so I doubt the stay will be granted.
Here is how ChromaDex puts it:
Elysium’s motion to stay should be denied. The factors this Court considers in evaluating such a request weigh heavily against a stay here. First, a stay will not resolve the entire dispute between the parties, nor will it materially simplify the issues to be resolved in this case. Although Elysium bases its requested stay on the pending IPR proceedings involving the ’086 patent (“the ’086 IPR”), those proceedings only impact one of the patents asserted in this case. The ’807 patent is not subject to IPR proceedings, and indeed Elysium’s petition to institute such proceedings was denied. As a result, whatever the outcome of the ’086 IPR may be, it will do nothing to resolve the issues raised by Elysium’s infringement of the ’807 patent. Elysium also bases its requested stay on a “patent misuse” counterclaim pending in the California Litigation. That counterclaim, however, even if Elysium is successful, can only serve to limit the time period for which ChromaDex can recover damages for Elysium’s infringement. Resolution of that counterclaim cannot dispose of the issues that must be decided in this case as a result of Plaintiffs’ infringement claims.
Second, a stay would severely prejudice Plaintiffs and provide a tactical advantage to Elysium. ChromaDex and Elysium are direct competitors, and Elysium’s infringing sales continue to erode ChromaDex’s sales and the goodwill that ChromaDex has built through substantial investments. This Court has recognized that stays are generally improper under such circumstances, given the potential for any stay to have outsized consequences to the nonmoving party.
Finally, the early stage of this case, and the advanced stages of the ’086 IPR and California Litigation, weigh against a stay. The ’086 IPR will be decided in January and the California counterclaim will be resolved no later than July. Given that no schedule has yet been entered in this case, any schedule that is likely to be entered will place the Markman hearing well after the ’086 IPR and counterclaim have been resolved. As a result, any impact the resolution of these issues could have will not impose a burden on the Court. Moreover, because the ’086 IPR and California Litigation cannot resolve the issues raised in this case by Elysium’s infringement, there is no justification for delaying discovery on those issues.
ChromaDex also forcefully rebuts Elysium's weird claim that if the PTAB decides to reconsider the definition of "isolated" in Claim 2, then somehow that could potentially invalidate the '807 patent, also.
Elysium remarkably contends, without support, that if the PTAB “finds that claim 2 of the ’086 patent is invalid over the prior art, it is also likely to conclude that the prior art invalidates all claims of the ’807 patent as well.” Def.’s Br., D.I. 14 at 9. It is unclear how Elysium expects the PTAB to invalidate the claims of the ’807 patent, however, when that patent is not being adjudicated in any pending proceeding at the Patent Office. Indeed, the ’807 patent was the subject of a different petition for IPR that the PTAB specifically declined to institute. Elysium did not request reconsideration of the PTAB’s decision not to institute an IPR on the ’807 patent, and the deadline for doing so has long since passed....The mere possibility that the claims of the ’807 patent could be invalidated in a new and yet-to-be-filed IPR that will not be resolved for nearly two years does not support Elysium’s requested stay. But more fundamentally, there is no reason to believe that Elysium will even receive a favorable decision in the ’086 IPR, particularly with respect to claim 2...Although the PTAB was required to add claim 2 into the ’086 IPR following the Supreme Court’s decision in SAS, Elysium’s speculation about what could happen if the PTAB changes its mind about the construction of “isolated” is wishful thinking at best.
As for the California proceedings, I am always surprised when Elysium acts like there might be some merit to its Patent Misuse claim just because the Court hasn't dismissed it. That kind of thing might fool non-lawyer bystanders, but it's irresponsible discourse from lawyers. Here is what ChromaDex says:
Elysium repeatedly emphasizes that the California court has not dismissed the patent-misuse counterclaim on the pleadings, as if to suggest that the California court has found some merit in the claim. As this Court is well-aware, the fact that Elysium’s counterclaim has survived dismissal on the pleadings does not say anything about whether it will ultimately be successful.
And as for Elysium's argument that a patent misuse finding might "entirely dispose of this case," which is also just plain untrue, ChromaDex says,
Although Elysium speculates that “the outcome of [the patent misuse] counterclaim may entirely dispose of this case,” this is not correct. Def.’s Br. at 16. Patent misuse is an equitable defense to infringement meant to “restrain practices that [do] not in themselves violate any law, but that [draw] anticompetitive strength from the patent right.” B. Braun Med., Inc. v. Abbott Labs., 124 F.3d 1419, 1427 (Fed. Cir. 1997). This limitation to asserting infringement is not intended to extend ad infinitum; rather, it lasts only until the underlying misuse has been purged...even assuming for the sake of argument that Elysium prevailed, that determination will only affect the time period during which ChromaDex may not recover damages...That proceeding will not result in a finding of permanent unenforceability as Elysium hopes, nor could it in light of the well-established law discussed above.
The fact that ChromaDex is articulating the same arguments that I made here without any research two weeks ago doesn't mean that I'm a brilliant lawyer who ought to be working for Cooley; it means that the legal arguments Elysium is putting forth are so plainly wrong in such an unsubtle way that any lawyer can see the problems.
Why Elysium might be making theatrical-but-wrong arguments is a subject worthy of future consideration.
ChromaDex also does a good job "demolishing" -- to use an Elysium-favored term -- Elysium's weird invocation of the "first filed" rule. ChromaDex not only explains why the first-filed rule is inapplicable, but points out that Elysium's own behavior in the litigation shows that Elysium knows that, too:
In light of the lack of relatedness, per D. Del. LR 3.1(b), ChromaDex did not identify the California Litigation as a “related case” in the civil cover sheet. If Elysium believed the civil cover sheet was inaccurate, it was obligated to bring “such missing or inaccurate information to the attention of the Clerk, all parties, and the Court.” D. Del. LR 3.1(a). Elysium never did so, and for good reason; the California Litigation is a separate proceeding between the parties that does not arise from “the same or substantially identical transactions, happenings, or events” as this case. Id.
This is, again, legally obvious, and I continue to question the quality and purpose of Elysium's lawyering. Obviously Foley Hoag partners are smart and they get paid enough, but what are they trying to accomplish with this legal nonsense?
ChromaDex's arguments on prejudice are especially strong:
“It is well established that ‘[c]ourts are generally reluctant to stay proceedings where the parties are direct competitors.’...Elysium’s motion to stay should be denied because ChromaDex will suffer significant prejudice if a stay is granted. As detailed in ChromaDex’s pleadings in the California Litigation, Elysium purchased extraordinarily large quantities of ChromaDex’s NR—which it never paid for—to give it runway to develop an alternative source for NR, all with the assistance of confidential and proprietary sales information gleaned from misappropriated ChromaDex documents and former ChromaDex employees that Elysium hired away shortly after it made the massive purchases...ChromaDex is an exclusive licensee of the ’086 and ’807 patents covering formulations containing isolated NR, and currently derives a large portion of its income from sales of such products. Prior to Elysium’s development of an alternative source of isolated NR, ChromaDex was the only supplier of that product in the U.S. Ex. 1 (Fourth Amended Complaint, D.I. 109 ¶ 20). Elysium became an infringer when it developed its own, competing supply of NR and sold it as an ingredient in its consumer product BASIS®. A stay delaying the ultimate resolution of ChromaDex’s patent-infringement claims will only serve to allow Elysium to further erode ChromaDex’s sales to, and goodwill with, existing and potential customers....“Staying a case while such harm is ongoing usually prejudices the patentee that seeks timely enforcement of its right to exclude.”
I think what's most interesting to me is not the possibility that Elysium will achieve a delay here. It's highly doubtful. What's interesting is that Elysium wants so much to delay the proceedings at all, rather than to vindicate their alleged legal right to sell Basis. Why would that be?