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Judge Caproni Shelves Infringement Action Concerning Store Partitions Before IPR Institution

On May 2, 2022, Judge Valerie Caproni (S.D.N.Y) granted a motion by international fashion company Chanel Inc. to stay proceedings in a patent infringement action brought by Molo Design, Ltd. pending an inter partes review proceeding that had just been filed. See Molo Design Ltd. v. Chanel, Inc., 21-CV-01578 (S.D.N.Y. May 2, 2022).

Molo designs and produces furniture and other products, including soft partitions which can be used in stores.  It holds four patents alleged to cover its partitions.  In October 2020, two companies contacted Molo about using its partitions in defendant Chanel’s stores.  Molo provided specifications about the partitions 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 all four of its patents. Chanel denied Molo’s allegations, and counterclaimed for non-infringement and invalidity. 

On February 4, 2022, Chanel filed an inter partes review (IPR) petition with the PTAB, claiming invalidity of Molo’s patents. The PTAB is expected to issue a decision on whether to institute IPR proceedings in August 2022.  Chanel moved for a stay of proceedings until any potential IPR proceeding is resolved, and Molo opposed. 

Judge Caproni granted Chanel’s motion, even though the PTAB had not yet decided whether to institute 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 trial of the case; (2) the stage of the proceedings; and (3) whether a stay will prejudice the nonmoving party.” See TouchTunes Music Corp. v. Rowe Int’l Corp. et al., 676 F. Supp.2d 169, 177 (S.D.N.Y. 2009).  Courts are divided on whether it is appropriate to stay proceedings pending IPR when the PTAB has not yet decided whether to institute IPR proceedings.  See Op. at 3 (citing cases).  Despite authority to the contrary, Judge Caproni found that the three-month delay that would ensue if the PTAB were to decline to institute IPR in August 2022 was outweighed by the IPR’s potential to streamline and clarify issues in the case were the PTAB to grant Chanel’s petition. Id.

Judge Caproni also found that all three of the factors cited in TouchTunes favored a stay.  She concluded that a stay would likely simplify the issues at trial, because all four of Molo’s patents were implicated in Chanel’s IPR petition.  She noted that if the PTAB were to cancel all of Molo’s patent claims, Molo’s litigation claims would become moot. Moreover, the issues would be simplified at trial even if some, but not all, claims were cancelled.  She also found that Molo would not suffer undue prejudice if proceedings were stayed in part because “the modest delay imposed by waiting for the PTAB’s initial decision is outweighed by the potential benefit of obtaining the PTAB’s expertise on a complex topic.” See Op. at 5.  And she found that, although “discovery is certainly well underway” in the underlying proceeding, the stage of the proceedings did not weigh against granting Chanel’s motion because depositions and expert discovery had not yet begun.  Op. at 6.  After considering the factors, Judge Caproni found that the totality of the circumstances warranted a stay until resolution of any potential IPR proceeding.