LG Electronics, Inc. et al v. Wi-LAN USA, Inc. et al

Filing 66

OPINION AND ORDER re: 52 MOTION to Stay Execution of Judgment Compelling Arbitration Pending Appeal. filed by LG Electronics, Inc., LG Electronics U.S.A., Inc. LG has not shown a strong likelihood of success on the merits of its appeal, nor any irreparable harm absent a stay. LG has also not shown that a stay would be sufficiently protective of Wi-LAN's interests or those of the public. For these reasons, LG's motion for a stay of this Court's judgment pending appeal is denied. The Clerk of this Court is respectfully requested to close the motion pending at docket entry 52. SO ORDERED. (As further set forth within this Order.) (Signed by Judge Ronnie Abrams on 7/29/2015) (ajs)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

USDC-SDNY
DOCUMENT
ELECTRO NI CALLY FILED
DOC#:
DATE FILED: July 29, 2015

LG ELECTRONICS, INC. and LG
ELECTRONICS U.S.A., INC.,
Plaintiffs,

No. 13-CV-2237 (RA)
OPINION AND ORDER

V.

WI-LAN USA, INC. and WI-LAN INC.,
Defendants.

RONNIE ABRAMS, United States District Judge:
Plaintiffs LG Electronics, Inc. and LG Electronics U.S.A., Inc. (collectively, "LG") seek a
stay, pending appeal, of the execution of this Court's judgment compelling arbitration of LG's
patent dispute with Defendants Wi-LAN USA, Inc. and Wi-LAN, Inc. (collectively, "Wi-LAN").
For the reasons that follow, LG's motion is denied.
A full account of the underlying dispute and procedural history is detailed in the Court's
Opinion and Order of July 21, 2014 ("Opinion"), Op. (Dkt. 50) at 1--4, and the Court assumes the
parties' familiarity with the record.

LEGAL STANDARD
In determining whether to issue a stay pending appeal, courts consider four factors: "( 1)
whether the stay applicant has made a strong showing that he is likely to succeed on the merits;
(2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay
will substantially injure the other parties interested in the proceeding; and (4) where the public
interest lies." Nken v. Holder, 556 U.S. 418, 434 (2009) (quotation omitted). See also In re World

Trade Ctr. Disaster Site Litig., 503 F .3d 167, 170 (2d Cir. 2007). "The party requesting a stay

bears the burden of showing that the circumstances justify an exercise of [this] discretion." Nken,
556 U.S. at 433-34.
"The first two factors of [this] standard are the most critical," id, and bear an inversely
proportional relationship to one another, Thapa v. Gonzales, 460 F.3d 323, 334 (2d Cir. 2006).
Where the likelihood of success on the merits is significant, less irreparable harm must be shown,
and vice versa. Id. In no case, however, is it "enough that the chance of success be better than
negligible," or that there be a mere "possibility of irreparable injury." Nken, 556 U.S. at 434.
(quotations omitted). Indeed, at least one court has suggested that a motion for a stay pending
appeal must raise "serious questions" where, as here, a district court is asked to review its own
order. In re A2P SMSAntitrust Litig., No. 12-CV-2656 (AJN), 2014 WL 4247744, at *2 (S.D.N.Y.
Aug. 27, 2014).
DISCUSSION
I.

Likelihood of Success on the Merits

LG raises two arguments in its motion for a stay pending appeal. First, it argues that the
Court misapplied Second Circuit precedent, improperly considered cases in which defendantsnot plaintiffs-sought arbitration after first pursuing litigation, and, as a result, erroneously
concluded that Wi-LAN had not waived its right to arbitration under the parties' patent license
agreement ("PLA"). Pls.' Mem. 4-6. Second, it argues that the Court erroneously found the socalled "claim splitting" doctrine inapplicable and impermissibly compelled arbitration even though
purportedly identical claims are pending before the District of New Jersey (the "New Jersey
Court"). Id at 7-8. The Court is not persuaded by either argument.

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A.

Waiver

As discussed in the Opinion, courts in this Circuit look to a three-part test to determine
whether a party has waived its right to arbitration. Op. 7. This test considers: "(l) the time elapsed
from the commencement of litigation to the request for arbitration, (2) the amount of litigation
(including any substantive motions and discovery), and (3) proof of prejudice." PPG Indus., Inc.
v. Webster Auto Parts, Inc., 128 F.3d 103, 107 (2d Cir. 1997). In its motion, LG principally argues

that the Court improperly analyzed the first and third prongs of this test. Pls.' Mem. 4-6.
As to the first prong, "the time elapsed from the commencement of litigation to the request
for arbitration," LG argues that the Court should have considered the four month period of time
between the filing of Wi-LAN's complaint and its arbitration demand, and not the shorter, twoweek period between LG's motion for summary judgment in the Southern District of Florida (the
"Florida Court") and Wi-LAN's demand for arbitration in New York. Pis.' Mem. 4-5. But the
Court did consider this four month period. It expressly held, relying on clear Second Circuit
precedent, that a four month delay in seeking arbitration is, by itself, insufficient to establish
waiver. See Op. 9 (citing Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985) and PPG
Indus., 128 F.3d at 108).

The two week period between LG's motion for summary judgment and Wi-LAN's arbitral
demand is, moreover, relevant to the question of prejudice, the third prong of the Second Circuit's
waiver test, which the Court addresses in more detail below. See Satcom Int'/ Grp. PLC v.
Orbcomm Int'! Partners, L.P., 49 F. Supp. 2d 331, 340 (S.D.N.Y.) ajj'd, 205 F.3d 1324 (2d Cir.

1999) ("Sufficient prejudice exists where a party against whom waiver is asserted ... delays
invoking arbitration rights while the adversary incurs unnecessary delay or expense."). In light of
Wi-LAN's assumption that its patent infringement claims fell outside the scope of the PLA, see

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Op. 10, the relevant delay for the purpose of assessing prejudice is the two-week period between
LG's filing of its dispositive motions (which first placed the interpretation of the PLA in dispute)
and Wi-LAN's invocation of its arbitral rights, not the four months that "elapsed from the
commencement of litigation to the request for arbitration." PPG Indus., 128 F.3d at 107. It was
thus appropriate for the Court to consider this shorter period in its Opinion, and to conclude that
this two-week delay did not prejudice LG. See Op. 10.
LG displays a fundamental misunderstanding of the Court's discussion of prejudice and
waiver in its Opinion. There are two points worth bearing in this respect. First, although courts
within this Circuit employ a three-part test to determine waiver, the most important part of this test
is its third prong: prejudice. See Thyssen, Inc. v. Calypso Shipping Corp., SA., 310 F.3d 102, 105
(2d Cir. 2002) ("The key to a waiver analysis is prejudice."). Second, this test is not an exercise in
arid formalism. Instead, it is addressed to the broader question of whether a party has acted
inconsistently with its contractual right to arbitrate. See Satcom, 49 F. Supp. 2d at 341 ("The
touchstone of waiver is the taking of action inconsistent with the right to arbitrate."). These two
questions-of prejudice and conduct inconsistent with arbitral rights-are those to which the
Court's Opinion was principally addressed. See Op. 8-10.
As the Court found in its Opinion, LG suffered no prejudice from Wi-LAN's delayed
invocation of its arbitral rights, and Wi-LAN did not act in a manner inconsistent with these rights.
Id. at 10. None of LG's arguments, Pls.' Mem. 4-6, persuade the Court otherwise such that LG is

likely to succeed on the merits of its appeal.
LG argues that the Court's Opinion will unfairly require defendants like LG to apprise
plaintiffs like Wi-LAN of their arbitral rights. Id. at 4. If Wi-LAN's delayed invocation of its
arbitral rights does not amount to waiver, LG contends, future plaintiffs may attempt to evade

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arbitration by first filing in federal court. Id. Defendants, meanwhile, will be left with two equally
unsatisfying options: litigate in federal court knowing that a plaintiff could, at any time, invoke its
arbitral rights, or engage in costly motion practice to compel arbitration. Id.
This argument is belied by the facts of this case. At all relevant times, Wi-LAN has taken
the position that the infringing products named in its complaint fall within the PLA. See Op. 10.
That this was Wi-LAN's understanding is bolstered by the nature of its arbitral demand, namely,
for an interpretation of the PLA and not for adjudication of the underlying infringement dispute.
There was thus no reason for Wi-LAN to seek arbitration until LG's motion for summary judgment
made it clear that coverage of the allegedly infringing products by the PLA was in dispute. See
Rush, 779 F.2d at 888-89 (no waiver where defendants "reasonably perceived" some of the claims

to be nonarbitrable). Accordingly, the Court's finding that Wi-LAN did not waive its arbitral rights
in no way rewards forum shopping or incentivizes unscrupulous litigation strategy.
Nor did Wi-LAN otherwise engage in the sort of extensive litigation that might have
prejudiced LG. See S & R Co. of Kingston v. Latona Trucking, Inc., 159 F.3d 80, 83 (2d Cir. 1998)
("A party is deemed to have waived its right to arbitration if it engages in protracted litigation that
results in prejudice to the opposing party.") (quotation omitted). It filed no dispositive motions,
did not delay in seeking arbitration, and did not undertake any other prejudicial conduct. Cf La.
Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F.3d 156, 160 (2d

Cir. 2010) (finding waiver where plaintiff pursued litigation for more than a year before seeking
arbitration, and where defendant had already won "several key procedural victories"); Satcom, 49
F. Supp. 2d at 340 (finding waiver where defendant "generally prevailed in [the] action to date and
would be forced to start over in arbitration").

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Indeed, the only action Wi-LAN took that was potentially prejudicial to LG was to seek
discovery in the Florida Court-discovery not provided for, at least not explicitly, by the JAMS
Comprehensive Arbitration Procedures and Rules. See Satcom, 49 F. Supp. 2d at 340 ("Sufficient
prejudice exists where a party against whom waiver is asserted ... engages in discovery procedures
not available in arbitration."); PPG Indus., Inc., 128 F.3d at 109. LG, however, never responded
to these discovery requests, and was thus not prejudiced as a result.
Contrary to LG's urging, a different result is not compelled by the Second Circuit cases
finding waiver where a plaintiff, and not a defendant, pursued litigation prior to seeking arbitration.

See Pis.' Mem. 5. As an initial matter, the Second Circuit has explicitly noted that district courts
must apply its three-part waiver test to the "specific context of each particular case," la. Stadium,
626 F.3d at 159, which the Court did here. Furthermore, the cases relied on by LG, such as La.

Stadium or Satcom, are distinguishable from the case at hand.
Unlike in La. Stadium, far instance, where "[e]leven months elapsed between [plaintiffs]
initial filings in state and federal court and its motion to compel arbitration," and in those eleven
months, defendant won "several key procedural victories," 626 F.3d at 159-160, here only four
months elapsed and the only procedural "victory" of LG's during this time was the transfer of the
action to New Jersey-with Wi-LAN's consent. The plaintiff in La. Stadium, moreover, sought to
compel arbitration on the merits and only after receiving a "detailed deficiency letter" from
defendants that "plainly foreshadowed" a motion for judgment on the pleadings. Id. at 160. Here,
Wi-LAN is not seeking arbitration on the merits-only on a narrow interpretive question. Its
arbitral demand is thus not "a means of aborting a suit that did not proceed as planned in the
District Court." Id. at 161. Only if Wi-LAN loses in arbitration-with a determination that the

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PLA does cover the wireless televisions-would the case stay before JAMS and not return to
federal court in New Jersey for adjudication on the merits.

Satcom is similarly distinguishable. The parties here have not taken "extensive discovery
under the Federal Rules of Civil Procedure," LG has not ''generally prevailed in this action to date"
and thus would not be "forced to start over in arbitration," all substantive issues have not "already
been litigated extensively," and Wi-LAN (the "party against whom waiver is urged") did not make
"motions going to the merits" of LG's arguments. 49 F. Supp. 2d at 340-41. See also Zwitserse

Maatschappij Van Levensverzekering En Lijfrente v. ABN Int'! Capital Markets Corp., 996 F.2d
1478, 1480 (2d Cir. 1993).
Accordingly, LG's arguments regarding waiver fall short of demonstrating a substantial
likelihood of success on appeal. Indeed, La. Stadium itself recognized that "a plaintiffs initiation
of a lawsuit does not, by itself, result in a waiver of arbitration." 626 F.3d at 160. In any event,
"[a]ny doubt as to whether there has been waiver should be resolved in favor of arbitration,"

Satcom, 49 F. Supp. 2d at 339-precisely what the Court ordered in its Opinion.
B.

Claim Splitting

LG is no more likely to prevail on its argument that Wi-LAN has impermissibly split its
claims between federal court and arbitration. Pis.' Mem. 7-8.
As an initial matter, LG has not identified a single case suggesting that the claim splitting
doctrine applies where a party splits its theories of recovery between federal court and arbitration.
Indeed, this argument runs afoul of the Federal Arbitration Act's ("FAA") strong preference for
arbitration, even where this preference might result in the piecemeal resolution of an action. See

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985) (explaining that the FAA "requires
piecemeal resolution when necessary to give effect to an arbitration agreement") (emphasis in

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original). The argument also runs contrary to existing Second Circuit case law. See Op. 14-15. Cf
Kanciper v. Suffolk Cnty. Soc. for the Prevention of Cruelty to Animals, Inc., 722 F.3d 88, 92 (2d

Cir. 2013) (finding that the claim splitting doctrine applies "where [a] plaintiff had previously filed
related claims that were pending in the same.federal court against the same defendants") (quotation
omitted) (emphasis added).
Even if the claim splitting doctrine were to apply as between federal court and arbitration,
it would still fail to preclude arbitration here. Wi-LAN is not presenting multiple theories of
recovery-or even the same theory-across multiple forums. Cf Waldman v. Vil!. of Kiryas Joel,
207 F.3d 105, 110 (2d Cir. 2000) ("[A] plaintiff cannot avoid the effects of res judicata by
'splitting' his claim into various suits, based on different legal theories."); Am. Stock Exch., LLC
v. Mopex, Inc., 215 F.R.D. 87, 91 (S.D.N.Y. 2002). Wi-LAN brought two patent infringement

claims as part of a single action in federal court and then-in response to LG's motion for summary
judgment, and as required by the PLA-sought for an arbitrator to determine whether or not its
claims fall within the PLA's scope.
LG argues that this amounts to impermissible splitting, because Wi-LAN is seeking
adjudication of one element of its patent infringement claims before JAMS, while pursuing the
remaining merits of its claims in federal court in New Jersey. See Pls.' Mem. 7 ('"Wi-LAN, the
original plaintiff, is attempting to resolve a portion of its own affirmative patent infringement

claim through arbitration.") (emphasis in original). But such conduct is not barred by the claim
splitting doctrine, because it does not trigger the res judicata concerns that motivate this doctrine.
See Curtis w. Citibank, NA., 226 F.3d 133, 138 (2d Cir. 2002) ("The rule against duplicative

litigation is distinct from but related to the doctrine of claim preclusion or res judicata."); 18
Charles Alan Wright et al., Fed. Prac. & Proc. § 4406 (2d ed. 2002) ("[C]ourts at times express

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principles of 'claim splitting' that are similar to claim preclusion, but that do not require a prior
judgment."). The outcome of the JAMS arbitration will not preclude the New Jersey action,
because Wi-LAN is not seeking adjudication of the merits of its claims, only of a narrow
interpretive question.
If anything, it is in Wi-LAN's interest for the JAMS arbitrator to conclude that its claims

are not covered by the PLA such that the merits must be litigated before the Federal court in New
Jersey and not arbitrated. If, however, Wi-LAN were to lose in arbitration, with a decision that
some or all of its claims were arbitrable, then any such claims would be adjudicated by JAMS or
withdrawn by Wi-LAN. That Wi-LAN would, potentially, still have claims pending in federal
court regarding purportedly infringing non-wireless products does not alter this conclusion, and
would be perfectly consistent with the piecemeal approach to claim adjudication endorsed by
Congress in the FAA. See Dean Witter Reynolds, 470 U.S. at 221.
Thus, even if the claim splitting doctrine did apply as between federal court and arbitration,
the doctrine would only preclude arbitration if Wi-LAN were to somehow press on in New Jersey
with the merits of any arbitrable claims at the same time it was adjudicating the merits of these
same claims in arbitration. This is not yet the case, nor is it likely to be. Any claim splitting
concerns are thus premature at best.
II.

Irreparable Harm

In any event, LG has not shown irreparable harm, and surely not that any such harm
outweighs the chance it has of succeeding on the merits of its appeal. LG has pointed to only one
case, Woodlawn Cemetery v. Local 365, Cemetery Workers & Greens Attendants Union, 930 F.2d
154 (2d Cir. 1991 ), suggesting that the harm it faces absent a stay-the need to re litigate issues
already raised in LG' s dispositive motions before the Florida Court-is irreparable. See Pls.' Mem.

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8. But here, unlike in Woodlawn Cemetery, the parties have not fully litigated the issue that will
be sent to arbitration.
Although LG argued in its motion for summary judgment that its use ofWi-LAN's patentsin-suit was authorized under the PLA, Wi-LAN had not yet briefed or otherwise responded to the
merits of this claim prior to this Court compelling arbitration. At best, LG faces the sort of
circumstances the Woodlawn Cemetery court found do not amount to irreparable harm: the mere
"spectre and cost of arbitration and the pendency of identical issues before" the New Jersey Court.
Woodlawn Cemetery, 930 F.2d at 157.
Otherwise, LG merely argues that it suffers irreparable harm as a consequence of the time
and money it invested in litigating this action. Pls.' Mem. 8-9. Expense alone, however, does not
amount to irreparable harm. See Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 975
(2d Cir. 1989).

III.

The Remaining Nken Factors
Lastly, the remaining two Nken factors also weigh against a stay.
LG has failed to demonstrate that a stay pending the outcome of its appeal would not

prejudice Wi-LAN. Because LG bears the burden of showing that a stay is merited, Nken, 556 U.S.
at 433-34, its argument that Wi-LAN has not identified the prejudice it would face were the Court
to issue a stay, see Pis.' Mem. 9, is unpersuasive. LG's argument that any prejudice faced by WiLAN would be mitigated by LG's continued royalty payments during the pendency of its appeal,
id., is also of little merit. Wi-LAN's suit goes to whether the televisions in question are even
covered by the PLA, pursuant to which these payments are made. If the televisions are indeed
infringing products, they are not encompassed by the PLA, and any injury to Wi-LAN would not
be mitigated by LG's royalty payments. Finally, LG's suggestion that a stay would preserve the

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status quo, id. at 10, is flatly wrong: the status quo is this Court's considered judgment compelling
arbitration, not the circumstances as they existed previously.
As to where the public interest lies, Wi-LAN is correct in noting that there is a strong public
interest in favor of arbitration. See Defs.' Opp. 15 (quoting Lefkowitz v. Reissman, No. 12 Civ.
8703 (RA), 2014 WL 925410 at *8 (S.D.N.Y. Mar. 7, 2014)). LG has not identified any
considerations to the contrary, noting only an interest in "preventing duplicative proceedings."
Pis.' Mem. 9-10. As noted, however, the proceedings in this action are not duplicative. The
remaining Nken factors thus militate against a stay.

CONCLUSION
LG has not shown a strong likelihood of success on the merits of its appeal, nor any
irreparable harm absent a stay. LG has also not shown that a stay would be sufficiently protective
of Wi-LAN's interests or those of the public. For these reasons, LG's motion for a stay of this
Court's judgment pending appeal is denied.
The Clerk of this Court is respectfully requested to close the motion pending at docket
entry 52.
SO ORDERED.
Dated:

July 29, 2015
New York, New York

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