Court Opinion

ID: 2911958
Source: CourtListenerOpinion
Date Created: 2015-09-10 14:00:37.82052+00
Date Added: 2024-06-11T15:21:19.722254
License: Public Domain

14-3035
         LG Electronics v. Wi-LAN USA

                               UNITED STATES COURT OF APPEALS
                                   FOR THE SECOND CIRCUIT

                                         SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
     FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY
     ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1               At a stated term of the United States Court of Appeals for the Second Circuit, held at the
 2       Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
 3       10th day of September, two thousand fifteen.
 4
 5       PRESENT:
 6                   GERARD E. LYNCH,
 7                   RAYMOND J. LOHIER, JR.,
 8                   SUSAN L. CARNEY,
 9                         Circuit Judges.
10       _____________________________________
11
12       LG ELECTRONICS, INC., LG ELECTRONICS U.S.A., INC.,
13
14                                Plaintiffs-Appellants,
15
16                        v.                                                   No. 14-3035
17
18       WI-LAN USA, INC., WI-LAN, INC.,
19
20                         Defendants-Appellees.
21       _____________________________________
22
23
24       FOR APPELLANTS:                                   JAMES J. LUKAS (Richard D. Harris, Mathew
25                                                         J. Levinstein, on the brief), Greenberg Traurig,
26                                                         LLP, Chicago, IL.
27
28       FOR APPELLEES:                                    MONTE M. BOND (Patrick J. Conroy, Daniel
29                                                         F. Olejko, on the brief), Bragalone Conroy PC,
30                                                         Dallas, TX.
 1          Appeal from a judgment of the United States District Court for the Southern

 2   District of New York (Ronnie Abrams, J.).

 3          UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

 4   AND DECREED that the judgment is AFFIRMED.

 5          Plaintiffs LG Electronics, Inc. and LG Electronics U.S.A., Inc. (collectively,

 6   “LG”) appeal from a judgment of the district court denying their request for declaratory

 7   and injunctive relief and granting the motion of defendants Wi-LAN, Inc. and Wi-LAN

 8   USA, Inc. (collectively, “Wi-LAN”) to compel arbitration of whether the parties’ patent

 9   license agreement (“PLA”) covers certain LG products that are the subject of Wi-LAN’s

10   patent infringement claims.1 LG argues that the district court erred in holding that Wi-

11   LAN has not waived its right to arbitration and that the “claim splitting” doctrine does not

12   bar Wi-LAN from litigating its patent infringement claims in federal court while

13   arbitrating the interpretation of the PLA. We assume the parties’ familiarity with the facts

14   and procedural history.

15          1.     Waiver of Arbitration

16          In determining whether a party through its litigation conduct has waived its right to

17   arbitration of a dispute, we consider: “(1) the time elapsed from when litigation was

18   commenced until the request for arbitration; (2) the amount of litigation to date, including

            1
              The parties agreed to arbitrate any disputes “in connection with the
     interpretation” of the PLA. J.A. 99.

                                                  2
 1   motion practice and discovery; and (3) proof of prejudice.” La. Stadium & Exposition

 2   Dist. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 626 F.3d 156, 159 (2d Cir. 2010)

 3   (internal quotation marks omitted). “The key to a waiver analysis is prejudice,” and

 4   waiver “may be found only when prejudice to the other party is demonstrated.” Thyssen,

 5   Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002) (internal quotation

 6   marks omitted). “We have recognized two types of prejudice: substantive prejudice and

 7   prejudice due to excessive cost and time delay.” La. Stadium, 626 F.3d at 159. Because

 8   of our “strong presumption in favor of arbitration,” such a waiver “is not to be lightly

 9   inferred,” Thyssen, 310 F.3d at 104-05 (internal quotation marks omitted), and any doubts

10   “are resolved in favor of arbitration,” Leadertex, Inc. v. Morganton Dyeing & Finishing

11   Corp., 67 F.3d 20, 25 (2d Cir. 1995).

12          LG’s waiver argument fails because LG has not demonstrated either form of

13   prejudice. At the time of the arbitration demand, no rulings on LG’s substantive motions

14   had been issued or foreshadowed, nor has LG shown that the demand compromised its

15   legal position in any way. Thus, Wi-LAN was not attempting “to relitigate [an] issue by

16   invoking arbitration,” Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir. 1997)

17   (internal quotation marks omitted), or to “obtain the benefit of the analysis contained in

18   [LG’s motions],” La. Stadium, 626 F.3d at 160. And because LG has produced no

19   discovery, Wi-LAN did not “obtain[] information through discovery procedures not

20   available in arbitration.” Doctor’s Assocs., 107 F.3d at 131.

                                                  3
 1          Nor did Wi-LAN, by bringing suit in federal court, “act[] inconsistently with its

 2   contractual right to arbitration,” La. Stadium, 626 F.3d at 160 (internal quotation marks

 3   omitted), or unduly delay asserting that right. Wi-LAN has colorably maintained that its

 4   claims do not implicate the PLA, and it demanded arbitration only two weeks after that

 5   position was first disputed. A party does not waive its right to arbitration under an

 6   agreement it contends is inapplicable merely by not raising that agreement as an

 7   anticipatory defense.2

 8          In any event, LG has not shown prejudice from delay or expense even were we to

 9   start the clock from the filing of the lawsuit. We have found periods longer than the four-

10   month gap at issue here to be insufficient, without more, to establish prejudice. See, e.g.,

11   PPG Indus., Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 108 (2d Cir. 1997) (five

12   months); Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985) (eight months).

13   And while LG asserts that it has incurred significant expenses, no discovery took place

14   and only a few motions were filed. “Incurring legal expenses inherent in litigation,

15   without more, is insufficient evidence of prejudice to justify a finding of waiver.” PPG,

16 128 F.3d at 107; accord Leadertex, 67 F.3d at 26 (ordinary “pretrial expense and delay”

17   alone are insufficient). Moreover, the bulk of litigation activity occurred after Wi-LAN’s

18   arbitration demand, and much of that activity is attributable to LG’s opposition to

            2
               We do not address whether a party bringing suit waives its right to arbitrate the
     interpretation of an agreement where the relevance of the agreement to the party’s claims
     is facially obvious.

                                                  4
 1   arbitration. That portion of the delay and expense of course cannot weigh in favor of a

 2   waiver finding.

 3          2.     “Claim Splitting” Doctrine

 4          “Th[e] rule against claim splitting is based on the belief that it is fairer to require a

 5   plaintiff to present in one action all of his theories of recovery relating to a transaction,

 6   and all of the evidence relating to those theories, than to permit him to prosecute

 7   overlapping or repetitive actions in different courts or at different times.” AmBase Corp.

 8   v. City Investing Co. Liquidating Trust, 326 F.3d 63, 73 (2d Cir. 2003) (internal quotation

 9   marks omitted).

10          LG contends that Wi-LAN impermissibly seeks to split its infringement claims in

11   two respects. First, Wi-LAN seeks to arbitrate LG’s assertion that the PLA provides a

12   defense with respect to its 6200 series television, while litigating in federal court the

13   underlying infringement dispute with respect to the 6200 series. Second, Wi-LAN seeks

14   to arbitrate applicability of the PLA with respect to the 6200 series, while litigating in

15   federal court whether other (to date unspecified) LG products – for which LG has not

16   asserted a defense under the PLA and therefore for which there is no agreement to

17   arbitrate disputes – also infringe on its patents.

18          The claim splitting doctrine does not bar arbitration of claims or defenses that the

19   parties have agreed to arbitrate, while litigating overlapping claims or defenses that the

20   parties have not agreed to arbitrate. LG cites no case applying the claim splitting doctrine

                                                    5
 1   – which is typically confined to “situations where the second suit is duplicative of another

 2   federal court suit,” Kanciper v. Suffolk County Soc. for the Prevention of Cruelty to

 3   Animals, Inc., 722 F.3d 88, 93 (2d Cir. 2013) (emphasis in original) – in the arbitration

 4   context. To the contrary, the Supreme Court has explained that the Federal Arbitration

 5   Act “requires piecemeal resolution when necessary to give effect to an arbitration

 6   agreement.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985). In such

 7   circumstances, a court must “compel arbitration of pendent arbitrable claims . . . , even

 8   where the result would be the possibly inefficient maintenance of separate proceedings in

 9   different forums.” Id. at 217. Because the parties agreed to arbitrate the interpretation of

10   the PLA, but did not agree to arbitrate the entirety of future infringement claims, the

11   district court was correct to compel arbitration of the PLA defense, while allowing the

12   underlying suit to proceed in federal court pending resolution of that arbitrable issue. To

13   the extent LG protests arbitrating a defense that might apply to certain of its allegedly

14   infringing products but not others, that “splitting” likewise is not barred by the doctrine.

15   “When a dispute consists of several claims, the court must determine on an issue-by-issue

16   basis whether a party bears a duty to arbitrate,” compelling arbitration of arbitrable

17   claims, and permitting litigation of non-arbitrable claims. In re Am. Express Fin.

18   Advisors Sec. Litig., 672 F.3d 113, 142 (2d Cir. 2011), citing Trippe Mfg. Co. v. Niles

19   Audio Corp., 401 F.3d 529, 532 (3d Cir.2005).

20

                                                   6
1         We have considered all of LG’s remaining arguments and find them to be without

2   merit. Accordingly, the judgment of the district court is AFFIRMED.

3                                          FOR THE COURT:
4                                          Catherine O’Hagan Wolfe, Clerk
5
6

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