A Second Circuit 3-judge panel affirmed a district court decision denying a request for declaratory and injunctive relief while subsequently compelling arbitration in a licensing infringement suit. On appeal, LG Electronics, Inc. and its US affiliate (together “LG”) alleged that Wi-LAN, Inc. and its US affiliate (together “Wi-LAN”) waived their right to arbitrate and further alleged that Wi-LAN should not be allowed to arbitrate the parties’ patent licensing agreement (“PLA”) while also litigating the infringement suit.
The panel considered three factors to determine whether Wi-LAN waived its right to arbitrate the PLA agreement, specifically: “(1) the time elapsed from when litigation was commenced until the request for arbitration; (2) the amount of litigation to date, including motion practice and discovery; and (3) proof of prejudice.” Considering these factors, the panel determined that LG did not suffer from either substantive prejudice or prejudice based on cost or delay. The panel noted that LG had not yet produced discovery and the litigation’s limited motion practice mostly occurred after Wi-LAN’s arbitration demand. Additionally, Wi-LAN’s two week demand for arbitration was not sufficient to cause delay.
Finally, the court considered LG’s claim splitting argument noting that the “doctrine does not bar arbitration of claims or defenses that the parties have agreed to arbitrate, while litigating overlapping claims or defenses that the parties have not agreed to arbitrate.” Citing Supreme Court precedent, the court found that because the parties had agreed to arbitrate the PLA, arbitration is appropriate to determine whether the agreement is effective. LG Electronics, Inc. v. Wi-LAN USA, No. 14-3035 (2nd Cir. Sept. 10, 2015).