Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 1 of 10
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`X
`MOLO DESIGN, LTD.,
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`Defendant.
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`X
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`CHANEL, INC.,
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`Plaintiff,
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`-against-
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`USDC SDNY
`DOCUMENT
`ELECTRONICALLY FILED
`DOC #:
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`(cid:24)(cid:18)(cid:21)(cid:18)(cid:21)(cid:21)
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`DATE FILED:
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`21-CV-01578 (VEC)
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`OPINION & ORDER
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`VALERIE CAPRONI, United States District Judge:
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`Plaintiff Molo Design, Ltd. (“Molo”) is a Vancouver-based company that designs and
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`produces furniture and other products, including flexible space partitions. Compl., Dkt 1 ¶¶ 7–8.
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`Chanel, Inc. (“Chanel”) is a New York fashion corporation with its principal place of business in
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`New York City. Id. ¶ 2. Molo brought this action against Chanel for patent infringement,
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`alleging, inter alia, that Chanel infringed the patent for the design of Molo’s flexible space
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`partitions. Id. ¶¶ 19–20, 22. On February 4, 2022, Chanel filed a petition for inter partes review
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`before the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark
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`Office (“PTO”). See Pets. for IPR, Dkt. 48-1–4, Exs. A–D. Chanel has moved to stay this case
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`pending resolution of inter partes review by the PTAB. Not. of Mot. to Stay, Dkt. 46. Molo
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`opposes the motion. Pl. Opp., Dkt. 49. For the reasons that follow, Chanel’s motion is
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`GRANTED.
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`BACKGROUND
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`Molo is a Canadian design and production studio that makes, among other things, flexible
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`space partitions — also known as softwall + softblock products. Compl. ¶¶ 7–8. Molo has sold
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`Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 2 of 10
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`its partitions to various retailers and design companies for use in their stores, showrooms,
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`commercial spaces, and offices. Id. ¶ 11. Molo holds four patents that purport to cover the
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`designs of their partitions: U.S. Patent Nos. 7,866,366 (the “’366” patent), 8,561,666 (the “’666”
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`patent), 9,689,161 (the “’161” patent), and 9,797,134 (the “’134” patent). See Pets. for IPR, Dkt.
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`48-1–4, Exs. A–D.
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`In October 2020, two companies contacted Molo to inquire about using its partitions in
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`an upcoming retail rollout for Chanel in the United States and Europe. Compl. ¶¶ 14, 17. In
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`response, Molo provided information to the companies regarding its partitions, including
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`technical specifications, certifications, and use guides for its products. Id. ¶ 15. The technical
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`specifications included a notation that Molo’s products were protected by “one or more patents.”
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`Id.
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`Eventually, in November and December 2020, discussions with both companies fell
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`through. Id. ¶¶ 16, 18. Despite that, in February 2021, Molo learned that Chanel stores in
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`Europe and the United States had installed displays using materials that appeared to be copies of
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`Molo’s patented flexible space partitions. Id. ¶ 19. Molo subsequently brought suit against
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`Chanel for infringement of its ’366, ’666, ’161, and ’134 patents. See Compl., Dkt. 1. Chanel
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`denied the allegations and counterclaimed against Molo; Chanel’s counterclaims allege non-
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`infringement and invalidity of Molo’s patents. Def. Ans., Dkt. 24 at 10, 13–17.
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`The parties subsequently developed a case management plan and agreed that all fact
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`discovery would be completed by March 11, 2022, or 60 days after the Court’s Claim
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`Construction Order, whichever was later. Case Mgmt. Plan, Dkt. 27 ¶ 4(a). Molo and Chanel
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`then embarked upon discovery.
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`Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 3 of 10
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`Months later, on February 4, 2022, Chanel filed a petition with the PTAB for inter partes
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`review (“IPR”) claiming invalidity of Molo’s ’366, ’666, ’161, and ’134 patents. See Pets. for
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`IPR, Dkt. 48-1–4, Exs. A–D. That same day, Chanel moved to stay the proceedings in this Court
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`pending the resolution of IPR before the PTAB. See Not. of Mot. to Stay, Dkt. 46. Molo
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`opposes the motion. See Pl. Opp., Dkt. 49. The PTAB is expected to issue its decision whether
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`to institute IPR proceedings in August 2022. Id. at 4.
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`I. Legal Standard
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`DISCUSSION
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`“[T]he power to stay proceedings is incidental to the power inherent in every court to
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`control the disposition of the cases on its docket,” Landis v. N. Am., Co., 299 U.S. 248, 254
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`(1936), a power which “includes issuing a stay pending the conclusion of review proceedings
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`before the [PTAB],” CDX Diagnostics, Inc. v U.S. Endoscopy Grp., Inc., No. 13-CV-05669,
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`2014 WL 2854656 at *2 (S.D.N.Y. June 20, 2014) (citation omitted). Courts generally consider
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`three factors in deciding whether to stay a case pending IPR: “(1) whether a stay will simplify
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`the issues in question and trial of the case; (2) the stage of the proceedings; and (3) whether a
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`stay will prejudice the nonmoving party.” TouchTunes Music Corp. v. Rowe Int’l Corp. et al.,
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`676 F. Supp. 2d 169, 177 (S.D.N.Y. 2009) (citation omitted). The Court finds that application of
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`these factors weighs in favor of granting a stay.
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`II.
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`Simplification of the Issues
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`The first factor the Court must consider is whether a stay will simplify the issues in this
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`litigation. The PTAB has yet to decide whether to institute IPR. Some courts have concluded
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`that “the factors relevant to a stay analysis cannot be meaningfully addressed until the PTO
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`determines whether to institute an IPR.” Rensselaer Polytechnic Inst. et al. v. Apple Inc., No.
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`3
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`Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 4 of 10
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`13-CV-0633, 2014 WL 201965, at *3 (N.D.N.Y. Jan. 15, 2014). On the other hand, several
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`courts recognize that the delay in waiting for the initial PTAB decision is “on balance, prudent in
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`light of the prospect of benefiting from the PTO’s unique expertise on a highly complex topic.”
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`Id. at *5 (citing Evolutionary Intelligence LLC v. Yelp Inc., No. 13-CV-03587, 2013 WL
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`6672451, at *7 (N.D. Cal. Dec. 18, 2013); Capriola Corp. v. LaRose Indus., No. 12-CV-2346,
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`2013 WL 1868344, at *3 (M.D. Fla. Mar. 11, 2013)).
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`Chanel filed its petitions on February 4, 2022, see Pets. for IPR, Dkt. 48-1–4, Exs. A–D,
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`and, therefore, the PTAB’s initial decision whether to grant review is due by August 4, 2022 —
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`about three months from the issuance of this opinion. Pl. Mem. at 4; 435 U.S.C. § 314(b). If the
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`PTAB were to reject Chanel’s requests for IPR, the stay would be relatively short, and litigation
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`in this case would resume in August. On the other hand, if the PTAB were to accept some or all
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`of Chanel’s requests for review, a final PTAB decision would not be due until August 2023 or, at
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`the latest, February 2024, if good cause were to exist for an extension. 37 C.F.R. § 42.100.
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`While such a delay would not be insignificant, the potential for the PTAB’s decision to simplify
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`the issues in this litigation outweighs the attendant costs of postponed litigation.
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`Chanel’s petitions for IPR challenge the validity of each patent at issue in this case,
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`asserting, inter alia, that the designs are obvious and not novel. Review by the PTAB “could
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`eliminate the need for trial if [Molo’s patent] claims are cancelled or, if the claims survive,
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`facilitate trial by providing the court with expert opinion of the PTO and clarifying the scope of
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`the claims.” CDX Diagnostics, 2014 WL 2854656, at *3 (internal quotation marks and citation
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`omitted). If the PTAB were to cancel Molo’s patent claims, it would render Molo’s claims in
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`this case moot. If the PTAB were to cancel some, but not all, of Molo’s patent claims, “it would
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`at least narrow the issues before the Court regarding those claims.” Kannuu Pty Ltd. v Samsung
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`Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 5 of 10
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`Elecs. Co., Ltd., No. 19-CV-4297, 2021 WL 195163 at *9 (S.D.N.Y. Jan. 19, 2021), aff’d, 15
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`F.4th 1101 (Fed. Cir. 2021). Moreover, even if the PTAB were to uphold all of Molo’s patent
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`claims, the Court would still benefit from the expert guidance contained in the PTAB’s decision,
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`and Chanel would be estopped from arguing that Molo’s claims in this case are invalid “on any
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`ground that [Chanel] raised or reasonably could have raised during” IPR. 35 U.S.C. § 315(e)(1).
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`Thus, a stay either will result in a minor delay or, if the PTAB grants Chanel’s request for
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`review, will simplify the issues in this case and provide the Court with expert guidance in a
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`complex area of law. This factor, therefore, weighs in favor of granting a stay.
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`III. Undue Prejudice
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`Second, the Court must determine whether Molo will suffer undue prejudice as a result of
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`a stay. In this District, “the question of undue prejudice or clear tactical advantage is informed
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`by four sub-factors, including (1) the timing of the review request; (2) the timing of the request
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`for stay; (3) the status of the review proceedings; and (4) the relationship of the parties.” Rovi
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`Guides, Inc. v. Comcast Corp., No. 16-CV-9278, 2017 WL 4876305, at *4 (S.D.N.Y. Oct. 27,
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`2017) (cleaned up). Mere delay does not constitute prejudice. CDX Diagnostics, 2014 WL
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`2854656, at *4 (citation omitted).
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`A. Timing of the Request for Review and Request for a Stay
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`Chanel filed its request for IPR on February 4, 2022, a little less than one year after Molo
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`served its Complaint on February 26, 2021. See Def. Mem., Dkt. 47 at 3. Chanel filed its
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`motion to stay on the same day. See Not. of Mot. to Stay, Dkt. 46. By statute, Chanel had one
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`year from the date of service of the Complaint to file its petition for IPR. See Affidavit of Serv.,
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`Dkt. 12; 35 U.S.C. § 315(b). Chanel filed its petitions approximately three weeks before the
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`deadline.
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`Courts in this District vary in their analyses of the timing of a party’s request for review.
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`On the one hand, “the fact that an accused infringer waits until one year after being served with a
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`complaint in an infringement action to submit its IPR petition at least raises the possibility that it
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`was a dilatory tactic.” Rensselaer, 2014 WL 201965, at *5 (cleaned up). At the same time,
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`courts in this District and other circuits “have regularly concluded that this sub-factor weighs in
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`favor of granting a stay where a party files its IPR proceedings within the one-year statutory
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`deadline set forth under 35 U.S.C. § 315(b).” Kannuu Pty Ltd., 2021 WL 195163, at *10.
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`The justification offered by Chanel for waiting nearly a year before requesting IPR is not
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`especially persuasive. Chanel argues that it did not file its IPR request earlier because this action
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`“appeared likely to resolve early given the modest amount in dispute,” and that it began
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`preparing its IPR petitions after settlement discussions fell through. Def. Mem. at 5–6. The
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`Court has to wonder why settlement discussions failed if the amount in dispute is truly as
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`“modest” as Chanel claims. Nevertheless, the weight of the decisions in this Circuit counsels in
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`favor of granting a stay where a party files its IPR proceedings within the one-year statutory
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`deadline, as Chanel did here. See, e.g., Kannuu Pty Ltd., 2021 WL 195163, at *10 (issuing stay
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`after delay of 10 months); Rovi Guides, 2017 WL 4876305, at *4 (issuing stay after delay of one
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`year). Chanel filed its motion to stay on the same day it filed for IPR. Thus, the first two sub-
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`factors weigh in favor of granting a stay.
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`B. Status of the Review Proceedings
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`The status of the review proceedings before the PTAB counsels in favor of granting a
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`stay in this case. Molo makes much of the fact that the PTAB has not yet decided whether it will
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`grant Chanel’s petitions for IPR. See Pl. Mem. at 4, 7–10. As Molo acknowledges, however, the
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`PTAB must issue its decision whether to grant IPR by early August 2022 — approximately three
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`Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 7 of 10
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`months from now. Id. at 4; 35 U.S.C. § 314(b). Courts are divided as to whether to grant a stay
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`before the PTAB has formally instituted IPR proceedings. See Rensselaer, 2014 WL 201965, at
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`*5 (collecting cases). While some courts have concluded that plaintiffs should be permitted to
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`prosecute their claims until the PTAB has decided it will grant IPR, see id., others have reasoned
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`that the modest delay imposed by waiting for the PTAB’s initial decision is outweighed by the
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`potential benefit of obtaining the PTAB’s expertise on a complex topic, see, e.g., Evolutionary
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`Intelligence, 2013 WL 6672451, at *7.
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`Because the PTAB must decide whether to institute IPR no later than early August 2022,
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`the Court finds that this sub-factor weighs in favor of granting a stay. Three months of delay
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`will not unduly prejudice Plaintiff, and if the PTAB were to grant IPR, there will be a substantial
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`chance that its eventual decision will simplify the issues in this litigation.
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`C. Relationship of the Parties
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`Finally, the Court must consider the relationship between the parties. If the parties are
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`direct competitors, the delay associated with the review is more likely to have “outsized
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`consequences” to the party asserting infringement. CDX Diagnostics, 2014 WL 2854656, at *4
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`(internal quotation marks and citation omitted). Even where a defendant continues to engage in
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`allegedly infringing behavior, courts have held that parties that are not competitors can be fully
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`restored with monetary relief. See, e.g., Rensselaer, 2014 WL 201965, at *6 (collecting cases).
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`Here, not only are Chanel and Molo not direct competitors, but Chanel has also completely
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`ceased all allegedly infringing activity. Def. Mem. at 8–9. There is little risk that Molo will
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`suffer irreparable harm from a short delay in litigation with a non-competitor who has ceased
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`using the allegedly infringing products. Thus, this sub-factor counsels in favor of a stay.
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`On balance, the four sub-factors comprising the larger prejudice inquiry demonstrate that
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`Molo will not be unduly prejudiced by a stay pending IPR. The PTAB will either deny Chanel’s
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`petitions in August 2022 or it will grant Chanel’s petitions and undertake a review of Molo’s
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`patents. The former circumstance would cause a de minimus delay and the latter, although
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`associated with a lengthier delay, would likely simplify the issues in this case. Either way, it is
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`clear that Molo will not suffer undue prejudice by a stay in these proceedings.
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`IV.
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`Stage of the Proceedings
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`Finally, the Court must consider whether the stage of the proceedings counsels against a
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`stay. Courts typically find that this factor weighs against granting a stay where the case is past
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`the early stages of proceedings and substantial discovery has occurred. TouchTunes Music
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`Corp., 676 F. Supp. 2d at 177–78 (denying stay where discovery was substantially completed,
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`including the depositions of witnesses and the completion of claim construction briefing); Xerox
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`Corp. v. 3Com Corp., 69 F. Supp. 2d 404, 407 (N.D.N.Y. 1999) (denying stay two months
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`before close of discovery). Although what qualifies as an early stage is relative, “there is a
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`general consensus that where the parties have fully briefed the issue of claim construction,
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`attended a Markman hearing, and received a claim construction order, and discovery is well
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`underway, this [] factor counsels against granting a stay.” Rovi Guides, 2017 WL 4876305, at *3
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`(cleaned up).
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`Here, discovery is certainly well underway. As Molo notes, the parties have completed
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`numerous requirements set forth in the Court’s scheduling order and the Local Patent Rules,
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`including serving their respective infringement and invalidity contentions and exchanging certain
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`extrinsic evidence. Pl. Opp. at 3. At the same time, no depositions have been taken, expert
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`reports have not been served, and the parties have yet to engage in related expert discovery. Def.
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`Mem. at 2–3. While the parties have fully briefed the issue of claim construction, a Markman
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`hearing has not been held, and the Court has not issued a claim construction order; nor has a trial
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`date been scheduled. Id.; Pl. Opp. at 3. In short, discovery is not substantially complete.
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`Kannuu Pty Ltd., 2021 WL 195163, at *10 (granting stay where parties had yet to engage in
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`expert discovery and neither a claim construction hearing nor a trial had been scheduled).
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`Although this factor presents a closer call, on balance, the current posture of this case weighs in
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`favor of granting Chanel’s motion.1
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`After considering the factors, the Court finds that the totality of the circumstances
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`warrant issuing a stay pending review by the PTAB.
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`CONCLUSION
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`For the foregoing reasons, Chanel’s motion to stay the proceedings pending inter partes
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`review is GRANTED. This matter is hereby stayed for the duration of the proceedings before
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`Molo asserts that there are additional circumstances establishing that a stay is not warranted, chiefly, that
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`Chanel has engaged in gamesmanship by advancing conflicting arguments before the PTAB and this Court. Pl.
`Opp. at 19–21. For instance, Molo argues that Chanel has alleged to this Court that the term “flaccid” is indefinite,
`while alleging to the PTAB that the meaning of the term “flaccid” is readily apparent. Id. at 5, 20. Additionally,
`Molo highlights the fact that Chanel asserted that this Court would commit legal error if it failed to construe certain
`terms in the patents, while arguing before the PTAB that it need not construe any terms in the asserted patents. Id.
`Molo contends that Chanel, by adopting these contradictory positions, has created a risk of inconsistent findings
`which it claims supports denying a stay. Id. at 5, 21.
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`Petitioners before the PTAB may only seek to cancel patent claims “on a ground that could be raised under
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`section 102 [novelty] or 103 [non-obvious subject matter] and only on the basis of prior art consisting of patents or
`printed publications.” 35 U.S.C. § 311(b). All other claims relating to the validity of a patent are outside the scope
`of inter partes review, including claims of indefiniteness. Even if Chanel’s claims are contradictory, and it is not
`entirely clear that they are, see Def. Reply, Dkt. 52 at 9–10, the PTAB is explicitly prohibited from making a
`determination as to a term’s indefiniteness. Moreover, it is neither uncommon nor impermissible for a party to
`advance different arguments before a District Court and the PTAB. See, e.g., Target Corp. v. Proxicom Wireless,
`LLC, IPR2020-00904, Institution Decision at 12 (P.T.A.B. Nov. 10, 2020) (“[A]lternative pleading before a district
`court is common practice, especially where it concerns issues outside the scope of inter partes review.”). Finally,
`when the PTAB finishes its review of this case, Chanel will be estopped from re-raising any arguments that it raised
`or reasonably could have raised during IPR. 35 U.S.C. § 315(e). In sum, these additional concerns do not provide a
`reason to deny Chanel’s motion to stay.
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`Case 1:21-cv-01578-VEC Document 70 Filed 05/02/22 Page 10 of 10
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`the PTAB regarding the ’366, ’666, ’161, and ’134 patents. The parties are directed to file a joint
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`status report within 48 hours of the PTAB's decision whether to institute inter partes review.
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`The Clerk of Court is respectfully directed to close the open motion at Docket 46 and to
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`stay the case.
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`SO ORDERED.
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`Date: May 2, 2022
`New York, New York
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` ___________________________________________________________ ____
` ________________________
`VALERIE CAPRONOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO I
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`VALERIE CAPRONI
` United States District Judge
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