Stay Pending Reexamination Granted in K.G. Motors, Inc. v. Specialized Bicycle Components, Inc. (WDNY)

August 25th, 2009

[July 22, 2009] Judge Marian W. Payson granted a motion to stay proceedings pending reexamination of the patents-in-suit in the District Court for the Western District of New York in the matter of K.G. Motors, Inc. dba NoTubes v. Specialized Bicycle Components, Inc. The case involves U.S. Patent No. 7,334,846 (’846 Patent).  The PTO had granted Specialized’s request for reexamination of the ‘846 Patent, and preliminarily rejected all of the ‘846 Patent claims. The Court identified the factors to determine whether to grant a stay pending reexamination as (1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party.   (Read the Court’s Order Granting the Stay:  K.G. Motors v. Specialized Bicycle Components (pdf))

The Court determined that the first factor “plainly weighs in favor of the issuance of a stay.”  The Court noted that while document discovery had been undertaken, no other fact discovery had occurred, no Markman hearing had been scheduled, and no trial date had been set.

With regards to the second factor, the Court stated that “[n]or do I find that the disadvantages of the delay that invariably will be occasioned by the requested stay outweigh the advantages to this litigation that will result from the PTO’s ultimate determination.”  The Court further reasoned that “[s]hould the PTO determine that all or some of the patent claims at issue are invalid, that determination will conserve the resources of this Court and the litigants and simplify the issues before the Court.  Conversely, should the PTO reaffirm the patent claims, the Court will benefit from its expert analysis of those claims and the prior art.”   Thus, the Court concluded that the second factor also favored a stay.

The Court spent the most time explaining its reasoning with respect to the third factor.  The Court found that NoTubes argument that a stay would result in undue prejudice to its business was “too speculative to credit on the record before the Court.”  Specifically, NoTubes contended that Specialized was a much larger company and that continued infringement by Specialized threatened NoTubes ability to remain in business.  The Court discounted this argument because NoTubes placed no specific factual allegations to support the argument before the Court, except for the fact that NoTubes had ten employees.  The Court also observed that NoTubes had not petitioned the court for injunctive relief, thus Specialized would be free to produce the challenged product during the pendency of the litigation.  Furthermore, the Court emphasized that Specialized represented that it had ceased production of the challenged product.  Thus, the Court concluded that consideration of the third factor also weighed in favor of granting the stay.

The Court thereby granted the stay, conditioned on Specialized’s agreement to discontinue manufacturing and producing the accused product during the pendency of the reexamination proceedings and to refrain from selling any remaining inventory after December 31, 2009.

The Case is K.G. Motors, Inc. doing business as NOTUBES v. Specialized Bicycle Components, Inc., case number 08-CV-6422T in the United States District Court of the Western District of New York.