By Thomas Long, J.D.
In a dispute over a patent related to a portable camera convertible support device, a federal district court erred in denying the defendants’ an award of attorney fees for successfully defending against an objectively baseless infringement suit, the U.S. Court of Appeals for the Federal Circuit has held. The appellate court reversed the district court’s finding that the case was not "exceptional" for purposes of the fee-shifting provision of 35 U.S.C. §285. According to the Federal Circuit, the district court abused its discretion by failing to follow the appellate court’s mandate to evaluate the totality of the circumstances in the first instance, pursuant to intervening Supreme Court precedent. Moreover, patent owner AdjustaCam, LLC, filed a weak infringement case that became objectively baseless after the district court’s claim construction order. AdjustaCam also unreasonably litigated the case by repeatedly serving expert reports and declarations at the last minute. Finally, AdjustaCam’s pattern of low and erratic settlements reinforced a conclusion of unreasonableness, in the appellate court’s view (AdjustaCam, LLC v. Newegg, Inc., July 5, 2017, Reyna, J.).
AdjustaCam’s U.S. Patent No. 5,855,343 ("the ’343 patent") related to a convertible clip that attached to a flat surface for supporting portable cameras. AdjustaCam filed an infringement suit against 58 defendants, including the appellants in this case, Newegg, Inc., Newegg.com, Inc., and Rosewill, Inc. (collectively, "Newegg"). AdjustaCam settled with most of the defendants shortly after filing suit, but it continued to litigate against Newegg. After claim construction and extended expert discovery, just prior to summary judgment briefing, AdjustaCam voluntarily dismissed its infringement claims against Newegg with prejudice.
Newegg moved for an award of attorney fees under Section 285. Newegg contended that AdjustaCam brought an objectively baseless lawsuit in bad faith, for the sole purpose of extracting nuisance-value settlements. Newegg pointed out that, unlike the invention disclosed in the ’343 patent, its accused products used ball-and-socket joints, which facilitated rotation about multiple axes.
The district court denied the motion, reasoning that the accused products could have met a key claim limitation requiring that the camera clip be "rotatably attached" to a flat surface in a manner that allowed rotation over a single axis. Newegg appealed to the Federal Circuit. In September 2015, the Federal Circuit remanded to the district court for reconsideration in light of the U.S. Supreme Court’s decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014). The district court again denied Newegg’s motion for fees, and Newegg filed another appeal with the Federal Circuit.
Failure to follow mandate. In Octane Fitness, the Supreme Court adopted a totality-of-the-circumstances standard and lowered the burden of proof for establishing that a case was "exceptional" under Section 285. According to the Federal Circuit, the district court erred by ignoring the mandate to evaluate whether the case was "exceptional" under the totality of the circumstances and a lower burden of proof. Instead of engaging in an independent analysis, the district court adopted the previous judge’s factual findings wholesale. In particular, the Federal Circuit said, the district court conducted no analysis of AdjustaCam’s continued "dubious" decision to press on with litigation. The district court did not independently evaluate the evidence in view of the Supreme Court’s intervening precedent, which changed the standard by which Section 285 motions were to be evaluated. The appellate court noted that AdjustaCam had provided the district court with a supplemental report that raised new infringement arguments for the first time on remand—well after the merits phase of the case had ended—in an attempt to rebut Newegg’s argument that the infringement allegations were baseless. The district court erred in failing to take the supplemental report under consideration in its Section 285 analysis.
Clearly erroneous factual findings. In addition, the Federal Circuit held that reversal was warranted because of the district court’s clearly erroneous findings about the substantive strength of AdjustaCam’s case.
"The record developed over the past five years points to this case as standing out from others with respect to the substantive strength of AdjustaCam’s litigating position," the appellate court said. "Where AdjustaCam may have filed a weak infringement lawsuit, accusing Newegg’s products of infringing the ’343 patent, AdjustaCam’s suit became baseless after the district court’s Markman order, where the court found ‘that the claims of the ’343 patent describe "rotatably attached" objects as rotating over a single axis.’"
The evidence proffered by AdjustaCam showed that AdjustaCam’s lawsuit was baseless, the court said. The district court found that the case was not exceptional because Newegg’s ball-and-socket products were constrained in such a way that AdjustaCam could reasonably argue that they rotated on a single axis. However, AdjustaCam did not make that argument, instead contending that that the constraint on Newegg’s ball-and-socket joint limited the rotation to a single axis at a time. There was no dispute that Newegg’s cameras rotated about at least two axes. As such, there was no possible way for Newegg’s products to infringe the ’343 patent.
In addition, AdjustaCam litigated the case in an unreasonable manner through its repeated use of after-the-fact declarations, which prolonged the time during which it pressed frivolous arguments. Finally, although it would not warrant an exceptionality finding itself, the Federal Circuit stated that AdjustCam’s damages model—under which it asserted seemingly low damages claims against multiple defendants, apparently in an attempt to extract nuisance settlements—should have been taken under consideration as part of the totality of circumstances.
Accordingly, the court concluded that an award of Newegg’s fees were warranted.
The case is No. 2016-1882.
Attorneys: John J. Edmonds (Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC) for AdjustaCam, LLC. Mark A. Lemley (Durie Tangri LLP) for Newegg, Inc., Newegg.com, Inc., and Rosewill, Inc.
Companies: AdjustaCam, LLC; for Newegg, Inc.; Newegg.com, Inc.; Rosewill, Inc.; Sakar International, Inc.
MainStory: TopStory Patent FedCirNews
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