Deckers Outdoor Corporation v. Next Step Group, Inc.

Background

Deckers Outdoor Corporation brought this patent-infringement action against Next Step Group, Inc. Deckers alleged that Next Step’s design, manufacture, importation, distribution, advertising, marketing, and sale of certain footwear products infringed four Deckers patents: U.S. Patent Nos. D790,186, D774,736, D927,161, and D927,160.

On January 30, 2024, Next Step filed a petition with the Patent Trial and Appeal Board (PTAB) seeking inter partes review of the D927,161 patent, one of the four patents involved in the case. Next Step moved to stay discovery while the PTAB considered the petition and any resulting review. Deckers separately asked for a discovery conference concerning Next Step’s failure to produce a witness for a deposition.

Legal standard

The court explained that federal district courts have authority to stay a case while the PTAB conducts inter partes review. Courts in the Southern District of New York generally consider whether a stay would simplify the issues, the stage of the litigation, and whether the stay would prejudice the nonmoving party. The party requesting the stay bears the burden of showing that it is warranted.

Court’s analysis

The court concluded that all three factors favored a stay. First, PTAB review could simplify the case. If the PTAB invalidated the D927,161 patent based on anticipation or obviousness, some issues concerning that patent could become unnecessary. If the patent survived, Next Step could be barred from later challenging the validity of the claims on grounds that it raised or reasonably could have raised during the review. The court also stated that the PTAB’s guidance on patent claim meaning and validity could assist the court.

The court rejected Deckers’s argument that a stay should not be granted before the PTAB decided whether to institute review. The court stated that courts in the district had granted stays before institution and that the PTAB would decide whether to institute review within three months of the petition. The court also noted that the D927,161 patent supported approximately half of Deckers’s claimed damages, even though the petition addressed only one of the four patents and one of nine claims at issue.

Second, the case was at a relatively early stage. The parties had engaged only in limited first-phase discovery for settlement discussions. Deckers had recently served written discovery requests, no fact depositions had been noticed as of February 14, 2024, no claim-construction hearing had been scheduled, and a motion to dismiss had been filed but not fully briefed. The parties had not taken depositions or begun expert discovery.

Third, the court found that a stay would not unduly prejudice Deckers. The court relied in part on Deckers’s delay in filing suit after the accused products were introduced and the patents were issued, Deckers’s decision not to seek a preliminary injunction, and Next Step’s filing of the review petition within the statutory deadline. The court also noted that every accused product had been discontinued or redesigned, so the products were no longer competing with Deckers’s products.

Disposition

The court granted Next Step’s motion to stay discovery and stayed the action. The parties were directed to file a joint status letter within ten days after the PTAB decided whether to institute inter partes review. The court denied Deckers’s request for a discovery conference as moot because discovery was stayed. The Clerk of Court was directed to terminate the letter motions at ECF Nos. 52 and 54 and the motion at ECF No. 55.