On January 31, 2024, Judge Jessica G. L. Clarke granted an intervenor’s motion to stay pending the conclusion of a U.S. Patent and Trademark Office inter partes review of the asserted patent that was filed by a third party. In the litigation, plaintiff True Return Systems LLC alleged that defendant Compound Protocol infringed a patent related to blockchain technologies like those used in cryptocurrencies. Shortly after the case was filed, third-party Compound Labs, Inc. moved to intervene, arguing that the named defendant was merely a collection of open-source software, not a person or company amenable to being sued. The intervenor then moved to stay the case pending an inter partes review of the asserted patent filed by another third party, DeFi Education Fund.

Judge Clarke granted the motion, finding that each of the three relevant factors favored a stay. Under the first factor, the court found that a stay “will streamline the issues in this case” because all twenty patent claims were being reviewed, such that the inter partes review will either render the lawsuit “moot” (if the patent claims are canceled) or provide “expert guidance” to the court (if they are not). Under the second factor, the court found that the litigation was “in its early stages, prior to any substantive motions or active discovery.” Finally, under the third factor, the court found that a stay “will not unduly prejudice Plaintiff” because Compound Labs proposed filing its motion to stay only “four days after it was granted leave to intervene” when “the PTAB ha[d] already granted review on [the asserted patent],” and there was no evidence that the intervenor was “trying to use the stay to gain an unfair advantage in the market.”

True Return Sys. LLC v. Compound Protocol, No. 22-CV-8483 (JGLC) (S.D.N.Y. Jan. 31, 2024)