IP Law Daily Trial court erroneously found suit against pop stars ‘exceptional’; fee award vacated
Thursday, October 20, 2016

Trial court erroneously found suit against pop stars ‘exceptional’; fee award vacated

By Thomas Long, J.D.

The federal district court in Los Angeles abused its discretion in finding that, due to its unreasonable litigation tactics, Texas-based patent-assertion entity Large Audience Display Systems LLC (LADS) should pay $733,414 in attorney fees and $22,511 in costs and expenses to pop stars Justin Timberlake and Britney Spears and two production companies, Spears King Pole Inc. and Tennman Productions, LLC, for successfully defending against infringement claims, the U.S. Court of Appeals for the Federal Circuit has held. Certain of the factors relied on by the district court to find that the case was "exceptional" for purposes of the fee-shifting provision of 35 U.S.C. §285 were entitled to no weight. The fee award was vacated and the case was remanded for reconsideration of the issue of exceptionality (Large Audience Display Systems, LLC v. Tennman Productions, LLC, October 20, 2016, per curiam).

LADS owned U.S. Patent No. 6,669,346 ("the ’346 patent"), entitled "Large-Audience, Positionable Imaging and Display System for Exhibiting Panoramic Imagery, and Multimedia Content Featuring a Circularity of Action." The patent was directed to a large screen positional imaging display system. In 2009, LADS filed suit against the defendants for infringing the ’346 patent during concert performances and other events. The suit was initially filed in the Eastern District of Texas but was later transferred to the Central District of California. The district court stayed the case after the USPTO granted the defendants’ request for inter partes reexamination of the ’346 patent. A USPTO examiner found that the asserted claims were invalid as obvious. The Patent Trial and Appeal Board affirmed the examiner’s findings. The district court issued an order lifting the stay and granting the defendants’ motion to dismiss the case with prejudice. The defendants moved for an award of attorney fees, and the court granted the motion. LADS appealed to the Federal Circuit.

In support of its determination that the case was exceptional under Section 285, the district court found that LADS was "an apparent shell corporation," which seemed to have been formed with the sole intent to create jurisdiction in the Eastern District of Texas. In the district court’s view, the constructions LADS proposed to the USPTO during reexamination were "disingenuous at the very least," and LADS prolonged the reexamination and the civil litigation by refusing to present additional prior art that, eventually, was dispositive of the claims at issue. After reexamination, LADS "sought to reopen [this] litigation to engage in discovery to attempt to assert additional claims, despite having had multiple previous opportunities to assert such claims," the district court said. In opposing the fees motion, LADS "violated clear, important canons of professionalism in proffering clearly privileged information in support of its argument to mitigate or minimize its liability for attorneys’ fees." The district court deemed it clear that LADS "was the driving force behind keeping this litigation and reexamination process alive." Finally, the district court opined that the lawsuit was "frivolous."

First, the finding that LADS was formed in the Eastern District of Texas in order to create jurisdiction there was clearly erroneous, the appellate court said. Specific jurisdiction is based on the defendant’s contacts with the forum state, not the plaintiff’s contacts. Second, the district court clearly erred in finding that the infringement suit was frivolous. The fact that the asserted claims were invalidated by the USPTO after LADS filed its complaint did not, by itself, support a finding of frivolousness. In a reexamination proceeding, the PTAB gives claims their broadest reasonable construction, making claims more susceptible to an obviousness rejection than they would be in district court. The PTAB also applied a "preponderance of the evidence" standard, whereas a district court presumes that issued claims are valid, applying a "clear and convincing evidence" standard to assertions of invalidity. Third, the record did not support the district court’s view that the withheld prior art was dispositive in the reexamination. There was no indication that the examiner or the PTAB relied on that reference to reject any of the claims. Accordingly, the Federal Circuit vacated the district court’s finding of exceptionality and award of fees under Section 285.

The appellate court also stated that, if the district court found on remand that the case was exceptional, after a proper analysis of the totality of the circumstances, the district court was to use the lodestar method to calculate the amount of fees to award. In the Federal Circuit’s view, the district court did not sufficiently articulate its basis for the amount it awarded.

The case is No. 2015-2040.

Attorneys: Michael G. Burk (The Burk Law Firm, P.C.) for Large Audience Display Systems, LLC. Andrew Sol Langsam (Pryor Cashman LLP) for Justin Timberlake, Tennman Productions, LLC, Britney Spears, and Spears King Pole, Inc.

Companies: Large Audience Display Systems, LLC; Tennman Productions, LLC; Spears King Pole, Inc.

MainStory: TopStory Patent FedCirNews

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