Judge Caproni suspends the infringement action concerning the store partitions before the IPR institution | Patterson Belknap Webb & Tyler LLP
On May 2, 2022, Judge Valerie Caproni (SDNY) granted a motion by international fashion company Chanel Inc. to stay proceedings in a patent infringement suit brought by Molo Design, Ltd. waiting for a inter partes revision proceedings which had just been filed. See Molo Design Ltd. vs. Chanel, Inc., 21-CV-01578 (SDNY May 2, 2022).
Molo designs and manufactures furniture and other products, including soft partitions that can be used in stores. She holds four patents that are supposed to cover her bulkheads. In October 2020, two companies contacted Molo about the use of its partitions in defendant Chanel’s stores. Molo provided sheet music specs in response. The companies’ deal fell through, but Molo later learned that Chanel had installed partitions in its stores that appeared to copy Molo’s partitions. Molo sued Chanel for infringement of its four patents. Chanel denied Molo’s allegations and filed a counterclaim for non-infringement and invalidity.
On February 4, 2022, Chanel filed a inter partes petition for review (IPR) with the PTAB, claiming the invalidity of Molo’s patents. The PTAB is expected to issue a decision on whether to initiate IPR proceedings in August 2022. Chanel requested a stay of proceedings until any potential IPR proceedings are resolved, and Molo opposed it.
Judge Caproni granted Chanel’s request, even though the PTAB had not yet decided whether or not to initiate IPR proceedings. New York courts consider three factors in determining whether to stay a case pending IPR: “(1) whether a stay will simplify the issues in question and the trial of the case; (2) the stage of the procedure; and (3) whether a suspension will prejudice the non-moving party. See TouchTunes Music Corp. vs. Rowe Int’l Corp. et al., 676 F. Supp.2d 169, 177 (SDNY 2009). The courts are divided on whether it is appropriate to stay proceedings pending IPR while the PTAB has not yet decided whether or not to initiate IPR proceedings. To see op. to 3 (citing cases). Despite authority to the contrary, Judge Caproni found that the three-month delay that would ensue if the PTAB refused to institute the IPR in August 2022 was outweighed by the IPR’s potential to streamline and clarify the business problems if the PTAB granted Chanel petition. ID.
Judge Caproni also concluded that the three factors cited in TouchTunes favored a stay. She concluded that a stay would likely simplify the issues at trial, as all four of Molo’s patents were implicated in Chanel’s IPR petition. She noted that if the PTAB were to revoke all of Molo’s patent claims, Molo’s litigation claims would become moot. In addition, issues would be simplified at trial even if some, but not all, claims were quashed. It also concluded that Molo would not be unduly prejudiced if the proceedings were stayed in part because “the modest delay imposed by awaiting the initial decision of the PTAB is outweighed by the potential benefit of obtaining the expertise of the PTAB on a complex subject”. To see op. at 5. And she concluded that while “discovery is certainly well underway” in the underlying proceeding, the stage of the proceeding did not weigh against granting Chanel’s motion because the depositions and discovery experts had not yet started. op. at 6. After reviewing the factors, Judge Caproni concluded that the totality of the circumstances warranted a stay pending resolution of any potential IPR proceedings.