Molo Design, Ltd. v. Chanel, Inc.

Background

Molo Design, Ltd. designs and produces furniture and other products, including flexible space partitions. Molo alleged that Chanel, Inc. infringed four Molo patents: U.S. Patent Nos. 7,866,366, 8,561,666, 9,689,161, and 9,797,134. Chanel denied the allegations and counterclaimed for non-infringement and invalidity.

On February 4, 2022, Chanel petitioned the Patent Trial and Appeal Board (PTAB) for inter partes review of all four patents. Inter partes review is a proceeding in which the PTAB evaluates certain patent-validity challenges based on patents and printed publications. Chanel moved to stay the federal case until the PTAB proceedings were resolved, and Molo opposed the motion.

Court’s Analysis

The court applied three factors commonly used when deciding whether to stay a patent case during PTAB review: whether the stay would simplify the issues, the stage of the federal case, and whether the stay would unduly prejudice Molo.

The court found that the simplification factor favored a stay. The PTAB’s decision could cancel some or all of Molo’s patent claims, narrow the issues, or provide expert guidance about the patents. If the PTAB upheld the claims, Chanel could be barred from later raising invalidity arguments that it raised or reasonably could have raised during inter partes review.

The court also found that Molo would not suffer undue prejudice. Chanel filed its PTAB petitions and its stay motion on the same day, approximately three weeks before the one-year statutory deadline. Although the court found Chanel’s explanation for waiting nearly a year “not especially persuasive,” it concluded that the timing still favored a stay under decisions from the Southern District of New York. The PTAB’s decision whether to institute review was expected by early August 2022, and the court found that the possible short delay would not unduly harm Molo. The court further found that Molo and Chanel were not direct competitors and that Chanel had ceased the allegedly infringing activity.

The stage of the case presented a closer question. Discovery was well underway, but no depositions had been taken, expert reports had not been served, expert discovery had not begun, no claim-construction hearing had occurred, no claim-construction order had issued, and no trial date had been set. The court concluded that discovery was not substantially complete and that this factor also favored a stay.

Molo additionally argued that Chanel had taken inconsistent positions in the federal case and before the PTAB. The court rejected that argument as a reason to deny a stay. It explained that indefiniteness issues were outside the PTAB’s inter partes review authority, that alternative arguments before the district court and PTAB were not impermissible, and that Chanel would be subject to statutory limits on later invalidity arguments.

Disposition

The court granted Chanel’s motion to stay the proceedings pending inter partes review. The case was stayed for the duration of the PTAB proceedings concerning the four patents. The parties were directed to file a joint status report within 48 hours of the PTAB’s decision on whether to institute review. The Clerk of Court was directed to close the motion at Docket 46 and stay the case. The order did not decide whether Chanel infringed Molo’s patents or whether the patents were valid.