Case Number: 1:13-cv-03599-DLC (Dkt. 83)
Judge Cote used Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (April 29, 2014) to justify concluding that attorneys’ fees and expenses will be awarded in this case. Lumen sued Fitndthebest.com (“FTB”) for infringement of U.S. Patent No. 8,069,073 (“System and method for facilitating bilateral and multilateral decision-making”). The patent’s only independent claim requires receiving and then matching “preference data” from a party and from a counterparty to a transaction. After the court found the patent invalid for claiming an abstract idea under 35 USC § 101, FTB moved for fees and expenses.
The new Octane standard provides a standard for determining that a case is exceptional pursuant to USC § 285:
[A]n “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.
The Court identified a “nonexclusive” list of factors, to be considered in evaluating the totality of the circumstances, under the preponderance of the evidence standard. These are frivolousness, objective unreasonableness (both in the factual and legal components of the case), motivation, and the need in particular circumstances to advance considerations of compensation and deterrence. Judge Cote provided an extensive discussion of these factors to the facts of the Lumen case, and she added in “a determination of what pre-filing preparation, if any, was done by the plaintiff,” citing Superior Fireplace, 270 F.3d 1358, 1378 (Fed. Cir. 2001). The facts of the case provided her with rich fodder.
Concerning frivolousness and objective unreasonableness, the court looked to whether any reasonable litigant could reasonably expect success on the merits. Here, non-infringement was apparent: “No reasonable litigant could have expected success on the merits in Lumen’s patent infringement lawsuit against FTB because the ‘073 Patent claimed a bilateral matchmaking process requiring multiple parties to input preference information, while FTB’s [accused product] utilizes the preference data of only one party.” The non-infringing nature of the accused product was not a mystery, according to the court, as “the most basic pre-suit investigation would have revealed this fact.” Lumen persevered in its litigation, even after defendant’s counsel explained the lack of bilateral preference matching, and the court said that Lumen’s failure to counter that explanation of non-infringement with “any specific way FTB infringed the patent” was evidence of bad faith.
With respect to the motivation prong, the court concluded that “Lumen’s motivation in this litigation was to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation.” The court cited to what it called “threats of ‘full-scale litigation,’ ‘protracted discovery,’” and a settlement demand escalator should FTB file responsive papers.” Lumen’s demand letter stated that “[w]hile it is Plaintiff’s desire that the parties amicably resolve this matter, please be advised that Plaintiff is prepared for full-scale litigation to enforce its rights. This includes all motion practice as well as protracted discovery.” The demand letter also raised the specter of spoliation sanctions related to ESI, which, it contended “should be afforded the broadest possible definition,” and even advised FTB that “it had an obligation to act to preserve ESI ‘in areas you may deem not reasonably accessible.’”
The deterrence prong also pointed to finding the case exceptional. The court pointed to what it called the boilerplate nature of the complaint, the absence of any reasonable pre-suit investigation, and the fact that Lumen had filed approximately 20 substantially similar suits in a short time frame, saying that these facts “suggest that Lumen’s instigation of baseless litigation is not isolated to this instance, but is instead part of a predatory strategy aimed at reaping financial advantage from the inability or unwillingness of defendants to engage in litigation against even frivolous patent lawsuits.”
In a footnote, the court quoted a further list of misdeeds alleged by FTB. One of these was plaintiff’s request for a gag order, prohibiting FTB from discussing settlement negotiations publicly. The court said that it did not need to address the merits of these allegations, because the evidence already considered was sufficient to find the case exceptional. The court noted, but did not discuss, Lumen’s statement, made to an FTB attorney, that one of FTB’s counsel had committed a hate crime under Ninth Circuit law by using the term “patent troll” in a conversation with one of the inventors of the patent-in-suit. The court also did also discuss FTB’s allegation that Lumen threatened to pursue criminal charges unless FTB apologized, financially compensated the inventor and Lumen’s attorney, and settled the litigation by paying Lumen a licensing fee.
Claims Without Merit Are the Problem, Not Trolls (Related Article)
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