OV Loop, Inc. v. Mastercard Inc.

• Docket Number: 23-CV-1773 (CS)
• Decision Date: 16 November 2023
• Parties: OV LOOP, INC., Plaintiff, v. MASTERCARD INCORPORATED, and MASTERCARD INTERNATIONAL INCORPORATED, Defendants.
• Court: U.S. District Court — Southern District of New York

1

OV LOOP, INC., Plaintiff, v. MASTERCARD INCORPORATED, and MASTERCARD INTERNATIONAL INCORPORATED, Defendants.

No. 23-CV-1773 (CS)

United States District Court, S.D. New York

November 16, 2023

Spencer Hosie Diane S. Rice Darrell R. Atkinson Hosie Rice LLP San Francisco, California Counsel for Plaintiff

Robert C. Scheinfeld Jennifer C. Tempesta Baker Botts L.L.P New York, New York Eliot D. Williams Baker Botts L.L.P Washington, DC Counsel for Defendants

OPINION & ORDER

CATHY SEIBEL, U.S.D.J.

On March 1, 2023, Plaintiff OV Loop, Inc. (“OV Loop”) commenced this action alleging that Defendants Mastercard Incorporated and Mastercard International Incorporated (collectively, “Mastercard”) - through use of Mastercard's cloud-based payments systems and associated instrumentalities - infringed a patent owned by OV Loop: U.S. Patent No. 10,032,171 (“the ‘171 Patent”). (See ECF No. 1 (“Compl.”) at ¶¶ 75-89.) The ‘171 Patent claims a method and system for using a mobile device, and a remotely hosted digital credential rather than a physical chip, to securely authorize point-of-sale transactions. (See ECF No. 29-1 at 28-29, 52-55.)^[1] As far as the Court understands, the patent claims innovations regarding secure authorization of a person's identity when making a retail or online purchase, utilizing different methods of electronic encryption in mobile wallets. (See id.)

On June 26, 2023, the Court held a conference with the parties and directed them to confer to determine a motion schedule for Mastercard's proposed motion to dismiss and motion to stay pending inter partes review (“IPR”). (See Minute Entry dated June 28, 2023). The Court adopted the parties' proposed schedule, which called for the motion to stay to be litigated first, (see ECF Nos. 39, 41), and Mastercard filed two IPR petitions with the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office (“PTO”) on September 6, 2023 (ECF No. 44 (“Tempesta Decl.”) ¶¶ 2-3). That same day, Mastercard filed a motion to stay this action pending its two IPR petitions, (ECF No. 42), which OV Loop opposes, (ECF No. 45 (“OV's Opp.”)). For the reasons discussed below, Mastercard's motion is GRANTED and this action is stayed for the duration of any IPR proceedings before the PTAB involving the ‘171 Patent.

I. LEGAL STANDARD

By implementing the Leahy-Smith America Invents Act (“AIA”), “‘Congress sought to establish a more efficient and streamlined patent system . . . and limit unnecessary and counterproductive litigation costs and to create a timely, cost-effective alternative to litigation.'” Synkloud Techs., LLC v. Cartessa Aesthetics, LLC, No. 21-CV-4423, 2022 WL 1046261, at *1 (E.D.N.Y. Apr. 6, 2022) (quoting CDX Diagnostics, Inc. v. U.S. Endoscopy Grp., Inc., No. 13-CV-5669, 2014 WL 2854656, at *2 (S.D.N.Y. June 20, 2014)).^[2] Under the AIA, IPR petitions must be filed within one year of the petitioner being served with a complaint that alleges patent infringement. 35 U.S.C. § 315(b). The PTAB may institute IPR if there is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” 35 U.S.C. § 314(a); see Synkloud, 2022 WL 1046261, at *1. A decision whether to institute IPR “must be made within 3 months of the patent holder's response to an IPR petition or 3 months from the last day the patent holder could respond to the petition.” Synkloud, 2022 WL 1046261, at *1 (citing 35 U.S.C. § 314(b)). Additionally, the “final decision must be made within 1 year of the decision to commence IPR,” which can be extended for an additional 6 months if good cause is shown. Id. (citing 35 U.S.C. § 316(a)(11)).

“The ability to stay cases is an exercise of a court's inherent power to manage its own docket.” Murata Mach. USA v. Daifuku Co., 830 F.3d 1357, 1361 (Fed. Cir. 2016); see, e.g., Nike, Inc. v. Lululemon USA Inc., No. 22-CV-82, 2023 WL 2214884, at *1 (S.D.N.Y. Feb. 24, 2023) (“A federal district court has inherent power to stay an action pending inter partes review.”); Molo Design, Ltd. V. Chanel, Inc., No. 21-CV-1578, 2022 WL 2135628, at *2 (S.D.N.Y. May 2, 2022) (“The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the cases on its docket.”).

Courts consider three factors when evaluating whether to grant a stay 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.” Nike, 2023 WL 2214884, at *1; see, e.g., Murata, 830 F.3d at 1361; Grecia v. MasterCard, Inc., No. 15-CV-9059, 2017 WL 11566955, at *2 (S.D.N.Y. Apr. 3, 2017); CDX Diagnostics, 2014 WL 2854656, at *2. While various district courts debate which of the three factors is the most important, “there can be little doubt that simplification of the issues and prejudice to the opposing party are more important than the case's state of completion.” Novartis Pharma AG v. Regeneron Pharms., Inc., 582 F.Supp.3d 26, 46-47 (N.D.N.Y. 2022). These three factors are nonexclusive, and ultimately “the overarching consideration of the circumstances in their totality governs.” Nike, 2023 WL 2214884, at *1 (citing Grecia, 2017 WL 11566955, at *2); see Wiesel v. Apple Inc., No. 19-CV-7261, 2021 WL 5038764, at *1 (E.D.N.Y. Oct. 29, 2021). The movant bears the burden to show that a stay is warranted. See Nike, 2023 WL 2214884, at *1 (citing Goodman v. Samsung Elecs. Am, Inc., No. 17-CV-5539, 2017 WL 5636286, at *2 (S.D.N.Y. Nov. 22, 2017)).

II. DISCUSSION

A. The Totality of the Circumstances Supports a Stay Pending IPR

OV Loop concedes that the case's status weighs in favor of granting a stay, given the early stage of the proceedings. (See OV's Opp. at 3 (citing Kannuu Pty. Ltd. v. Samsung Elecs. Co., No. 19-CV-4297, 2021 WL 195163, at *10 (S.D.N.Y. Jan. 19, 2021), aff'd 15 F.4th 1101 (Fed. Cir. 2021).) Considering the two remaining factors under the totality of the circumstances, as discussed below, the Court concludes that an IPR proceeding, if instituted by the PTAB, will simplify the issues and that a stay pending IPR will not unduly prejudice OV Loop. Thus, the Court finds that all three factors weigh in favor of granting a stay.

1. The IPR Proceedings May Simplify the Issues

IPR may simplify patent litigation. See, e.g., Nike, 2023 WL 2214884, at *1; Synkloud, 2022 WL 1046261, at *2; see also Wiesel, 2021 WL 5038764, at *2 (noting benefit to district court from PTO's reexamination whether claim is canceled (and eliminated from trial) or survives (with PTO's expert view on claim)). Even if all claims survive, the petitioner “will be estopped from challenging the validity of the claims on any ground that was raised or reasonably could have been raised during the IPR proceedings.” Rovi Guides, Inc. v. Comcast Corp., No. 16-CV-9278, 2017 WL 4876305, at *3 (S.D.N.Y. Oct. 27, 2017).

If the PTAB institutes IPR for either of Mastercard's two IPR petitions, the issues will be simplified under all potential outcomes. See, e.g., Molo Design, 2022 WL 2135628, at *2 (PTAB's review could either eliminate need for trial by canceling claims, or at least provide expert opinion and clarify scope of any upheld claims); Synkloud, 2022 WL 1046261, at *2 (IPR would either “rend[er] claims moot or narrow[] the issues”); Rovi Guides, 2017 WL 4876305, at *3 (“[C]laims at issue will be simplified, regardless of the outcome of IPR, because the PTAB's decisions will be binding on this Court” (first citing 35 U.S.C. § 315(e); then citing Fresenius USA, Inc. v. Baxter Int'l, Inc., 721 F.3d 1330, 1340 (Fed. Cir. 2013))).

Here, Mastercard's petitions challenge all 33 claims of the ‘171 Patent, contending that they are invalid on the grounds of either anticipation, see 35 U.S.C. § 102, or obviousness, see Id. § 103, based on the submitted prior art. (See ECF No. 44-1 at 36-84; ECF No. 44-2 at 30-86.) If the PTAB agrees in whole or in part, IPR could moot the entire action, or at least narrow the issues by invalidating certain claims. See Unicorn Global, Inc. v. DGL Grp., Ltd., No. 21-CV-1443, 2023 WL 2019092, at *1 (E.D.N.Y. Feb. 15, 2023) (“[A] stay will invariably simplify the issues in this case. Because [defendant] is challenging all of the claims in the sole patent in the case, a PTAB cancellation would moot the entire case. And even if the PTAB canceled some of the claims in the patent, the scope of the litigation would be narrowed.”); Synkloud, 2022 WL 1046261, at *3 (factor favored pre-institution stay where defendant “filed petitions on all five of the asserted claims in [the] action”); Karl Storz Endoscopy-Am., Inc. v. Synaptive Med., Inc., No. 17-CV-5607, 2018 WL 11220832, at *1 (S.D.N.Y. Aug. 8, 2018) (IPR proceedings “highly likely to simplify the issues in question” and “may moot [the case] altogether” where PTAB instituted IPR of every claim of challenged patent); Goodman, 2017 WL 5636286, at *2 (factor weighed in favor of stay when IPR could potentially moot entire case or limit claims at issue). And even if the PTAB upholds all of the ‘171 Patent's claims, this Court would still benefit from the PTO's expert guidance, and Mastercard would be estopped from arguing that the claims are invalid on any ground that Mastercard raised or could have raised during IPR. See, e.g., Molo Design, 2022 WL 2135628, at *2; Synkloud, 2022 WL 1046261, at *2; Rovi Guides, 2017 WL 4876305, at *3.

Additionally the PTAB's published end of year statistics suggest that it is more likely than not that IPR will be instituted here. See generally PTAB Trial Statistics FY23 End of Year Outcome Roundup IPR, PGR, at 6 (PTAB instituted 66% and 67% of petitions filed in fiscal years 2022 and 2023,...