J. Crew filed a motion to dismiss the plaintiffs' claims for patent infringement pursuant to Federal Rule of Civil Procedure 12(b)(6), asserting that the patents-in-suit are drawn to patent-ineligible subject matter and therefore invalid under 35 U.S.C. § 101. J. Crew also filed a separate motion to stay all disclosures and discovery in the case until the district court ruled on the motion to dismiss.
J. Crew made two arguments to support its motion to stay. First, J. Crew made a novel and creative argument that Federal Rule of Civil Procedure 26(b)(1) "require[s] a stay of discovery proceedings pending resolution of a dispositive motion" as the discovery would be disproportionate to the needs of the case. The district court disagreed. "Rule 26 contains no such requirement. There is nothing inherently 'disproportionate,' as J. Crew contends, in allowing the parties to proceed with routine discovery at this juncture. Moreover, J. Crew's strained reading of Rule 26 is belied by the Fifth Circuit's longstanding guidance that '[a] trial court has broad discretion and inherent power to stay discovery until preliminary questions that may dispose of a case are determined.' Petrus v. Bowen, 833 F.2d 581, 583 (5th Cir. 1987) (emphasis added). The principle of proportionality does not mandate a stay of discovery under these circumstances, nor does it inhibit the Court's inherent power to control its docket.
Second, J. Crew asserted that there was good cause for the district court to exercise its inherent discretion to stay discovery. To argue its position, J. Crew relied on cases discussing a stay of discovery pending a review of an IPR by the PTAB. The district court also found this unconvincing. "Parallel proceedings before the PTAB are very different than motion practice before a district court. . . . J. Crew has failed to identify any compelling reason for the Court to stay discovery in this case. An early-filed motion to dismiss does not inherently necessitate a stay of all discovery. Moreover, J. Crew's contention that discovery in this case is particularly burdensome because Ventures has accused two unrelated instrumentalities of infringing three unrelated patents is likewise unpersuasive. Far from supporting its motion, the existence of multiple, unrelated patents lessens the likelihood that J. Crew's motion resolves this entire case, as J. Crew must show by clear and convincing evidence that all three patents are drawn to patent-ineligible subject matter. Alice Corp. Pty. Ltd. v. CLS Bank Intl'l, 134 S. Ct. 2347 (2014)."
The district court also found "both add and troubling" that J. Crew had not addressed Local Rule CV-26(a), which "specifically identifies motions to dismiss as not warranting a stay of discovery, regardless of the ground asserted therein. Either J. Crew has not made itself familiar with this District's local rules, or it chose to consciously ignore them; neither of which inspires confidence. Nearly every defendant seeking to postpose discovery pending the resolution of a motion to dismiss argues that the high cost of discovery warrants a stay. However, the costs associated with adhering to routine discovery obligations do not uniformly impose an undue burden on the parties. See Advanced Mktg. Sys., LLC v. CVS Pharmacy, Inc., No. 6:15-cv-134, Dkt. No. 61 at 1 n.1 (E.D. Tex. Sep. 3, 2015) ('A stay is not justified merely because a party desires to save money.'); GHJ Holdings, Inc. v. Plasticade Prods. Corp., No. 5:10-cv-220, Dkt. No. 29 (E.D. Tex. May 31, 2011) (denying a motion to stay where defendant argued it would be forced to "enter into the costly--and in the instant case, one sided--discovery ordeal"). Even though J. Crew was silent as to the local rule on point, the circumstances of this case do not justify a departure from Local Rule CV-26(a)."
Accordingly, the district court denied the motion to stay discovery pending the resolution of the motion to dismiss.
Intellectual Ventures I LLC v. J. Crew Group, Inc., Case No. 6:16-cv-196-JRG (E.D. Tex. May 2016)