Court Found Case Frivolous for Five-year Period, But $5.3M Attorney's Fee Request Will be Trimmed

Touchtunes Music Corp. v. Rowe International Corp., et al.

Case Number: 1:07-cv-11450-RWS (Dkt. 291)

Judge Sweet unsealed his decision of April 3, 2014 granting counterclaim defendant TouchTunes' motion for fees and expenses, but said that he would determine the amount to award based on shorter time periods than TouchTunes proposed.

In determining whether to award costs and fees, the court compared statements made by Arachnid during the reexamination of its jukebox advertising patents and during litigation, and it looked at the claim language and the court's claim construction rulings. Differences between Arachnid's statements to the USPTO and to the court, and Arachnid continuing litigation after claim construction led the court to find evidence of bad faith. For example, the court found that during reexamination, Arachnid preserved the validity of two patents' claims by identifying when the jukebox would play advertisements. But, the court said, after it adopted Arachnid's claim construction of several terms, "[s]imple operation of TouchTunes' jukeboxes would have demonstrated to Arachnid that advertisements were not displayed in the manner required by the claims." Further demonstrating bad faith, the court said that Arachnid "falsely maintained" that it had never suggested that its claims precluded certain behavior. The court also said that the claims required music to be stored in a separate location than advertisements, but that "[a]s early as 2009, Arachnid had full knowledge that TouchTunes' accused jukeboxes stored advertisements and songs in the same location." Concerning Arachnid's expert report, the court found fault with Arachnid for not disclosing prosecution history disclaimers to the expert, and further for mischaracterizing what the expert personally witnessed in plaintiffs accused products.

Summarizing its findings, the court said, "Arachnid continued to employ a dual strategy of presenting contradictory claim constructions to the PTO, to prevent disqualification in that forum, and to this court, to succeed on its infringement claims. This manipulative tactic is pointedly indicative of subject of bad faith." Further, "[t]aken together, Arachnid action - the 'tactics of counsel' in offering incomplete expert reports, and the 'conduct of the parties' in positing directly contradictory litigation theories depending on the forum – as well as the lack of 'closeness' of the case, subjected TouchTunes to severe reputational damage in defending what ultimately amounted to a frivolous lawsuit over a period of five years."

TouchTunes asked for $4.8M in attorney's fees, and $0.3M in expert witness and consulting fees. While the court found the fee amounts "not unreasonable," it said that the time periods used to calculate those amounts "over encompass the periods during which it was apparent that Arachnid's continued litigation was in bad faith or objectively baseless." Accordingly, Judge Sweet ordered TouchTunes to submit fees for revised time frames, and said that he would rule on the papers.

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