Crocs, Inc. v. Effervescent, Inc et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Boyd N. Boland
Civil Action No. 06-cv-00605-PAB-BNB
CROCS, INC.,
Plaintiff,
v.
CHENG’S ENTERPRISES, INC.,
EFFERVESCENT, INC.,
HOLEY SOLES HOLDINGS, LTD.,
DOUBLE DIAMOND DISTRIBUTION, LTD., and
U.S.A. DAWGS, INC.,
Defendants.
______________________________________________________________________________
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
AND ORDER
______________________________________________________________________________
This matter arises on Defendants . . . Motion to Stay the Proceedings Pending Inter
Partes Reexamination [Doc. # 118, filed 8/31/2012] (the “Motion to Stay”), which is
GRANTED. In addition, I respectfully RECOMMEND that the case be closed administratively
subject to reopening for good cause.
This case involves allegations of patent infringement. It was filed on April 3, 2006, but
was stayed and administratively closed in order to allow Crocs to pursue a complaint under
Section 337 of the Tariff Act of 1930 before the United States Trade Commission. Order [Doc.
# 31].
On April 27, 2012, Crocs moved to lift the stay, reporting:
5. On July 15, 2011, after a multi-year process including a
decision by the United States Court of Appeals for the Federal
Circuit in Crocs, Inc. v. United States Int’l Trade Comm’n, 598
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F.3d 1294, 1311 (Fed. Cir. 2010), the Commission issued a Final
Commission Determination of Violation. The Commission found
a violation of 19 U.S.C. § 1337 by respondents Double Diamond
Distribution Ltd. (“Double Diamond”), Effervescent and Holey
Soles. The violation was predicated on infringement of the ‘858
Patent by Double Diamond and Effervescent and on infringement
of the ‘789 Patent by all three respondents. . . . In the same Order,
the Commission terminated the Investigation.
6. The Commission also issued a General Exclusion Order barring
importation of articles that infringe Crocs’ ‘858 and ‘789 Patents. .
. .
Motion to Lift Stay [Doc. # 70]. The district judge lifted the stay and re-opened the case on
May 9, 2012. Order [Doc. # 75].
I. Stay of Proceedings
On August 3, 2012, Double Diamond filed in the United States Patent and Trademark
Office a request for inter partes reexamination. The PTO granted the request for reexamination
of the ‘858 Patent, and a similar request concerning the ‘789 Patent is pending.
I apply a four part test in deciding whether to stay proceedings pending inter partes
reexamination: “(1) whether a stay will simplify the issues in question and streamline the trial;
(2) whether discovery is complete and whether a trial date is set; (3) whether a stay would
unduly prejudice the nonmoving party; and (4) whether a stay will reduce the burden of
litigation on the parties and on the court.” Tru-Balance, LLC v. Alcoa, Inc., 2012 WL 619114
*1 (D. Colo. Feb. 27, 2012) (internal quotation and citations omitted).
Generally, reexamination simplifies the issues, streamlines district court proceedings, and
reduces the burdens of litigation on the parties and the court. For example, the defendants report
and Crocs does not dispute that “89% of all reexaminations result in cancelled or modified
claims (42% cancelled or disclaimed all claims, 47% changed the claims, and only 11%
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confirmed all claims).” Motion to Stay [Doc. # 118] at p. 6. The parties appear to agree that at
least some part of this case will survive the reexamination process. Consequently, it is apparent
that to proceed here, before the PTO has defined the precise nature of the claims to be reviewed,
is inefficient. Id. Crocs argues that most of the benefit resulting from reexamination already has
occurred as a result of the ITC action. However, as the defendants note, decisions of the ITC on
patent issues do not have preclusive effect. Texas Instruments Inc. v. Cypress Semiconductor
Corp., 90 F.3d 1558, 1568-69 (Fed. Cir. 2006). I agree with the defendants that “the ITC
proceedings and Federal Circuit review do not streamline this matter or have the same effect as
the current reexamination proceedings before the PTO.” Reply [Doc. # 134] at pp. 5-6.
Although discovery occurred in the ITC proceeding, the defendants argue, and I agree,
that there is additional discovery to be conducted here. That discovery has not yet been
undertaken, no scheduling order has been entered, and the case is not set for trial. In short,
although the case was filed more than six years ago, it remains in its initial stages due to the ITC
proceedings initiated by Crocs.
Finally, I find no undue prejudice to Crocs or clear tactical advantage to the defendants
resulting from a stay. Crocs argues that it will be prejudiced because “the long-term viability of
the Defendants is questionable.” I am presented with no proof on the issue. Moreover, if the
defendants lack assets, an award of substantial damages now similarly may prove incapable of
collection. Crocs also argues that the delay associated with reexamination may result in
evidentiary prejudice through lost documents and testimony, but it offers no specific concerns
such as an aged witness or a party’s historic failure to preserve records. Crocs’ arguments
concerning prejudice are pure speculation and do not compel the inefficiencies of proceeding
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1Pursuant to 28 U.S.C. § 636(b)(1)(C) and Fed. R. Civ. P. 72(b), the parties have 14 days
after service of this recommendation to serve and file specific, written objections. 	A party’s
failure to serve and file specific, written objections waives de novo review of the
recommendation by the district judge, Fed. R. Civ. P. 72(b); Thomas v. Arn, 474 U.S. 140, 147-
48 (1985), and also waives appellate review of both factual and legal questions. Makin v.
Colorado Dept. of Corrections, 183 F.3d 1205, 1210 (10th Cir. 1999); Talley v. Hesse, 91 F.3d
1411, 1412-13 (10th Cir. 1996). A party’s objections to this recommendation must be both
timely and specific to preserve an issue for de novo review by the district court or for appellate
review. United States v. One Parcel of Real Property, 73 F.3d 1057, 1060 (10th Cir. 1996).
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with this action at this time. Although Crocs is correct that the reexamination process can take
years, mere delay, without more, does not demonstrate undue prejudice. Tru-Balance 2012 WL
619114 at *1.
II. Administrative Closure
Local rule of practice 41.2, D.C.COLO.LCivR, provides that “[a] district judge or a
magistrate judge exercising consent jurisdiction may direct the clerk to close a civil action
administratively subject to reopening for good cause.” Administrative closure is appropriate
here in view of my order staying the proceedings and because of the time required to complete
the reexamination process.
IT IS ORDERED that the Motion to Stay [Doc. #118] is GRANTED, and the case is
STAYED pending reexamination.
I respectfully RECOMMEND that the case be closed administratively subject to
reopening for good cause.1
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Dated October 16, 2012.
BY THE COURT:
s/ Boyd N. Boland
United States Magistrate Judge
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