Digitech Image Technologies LLC v. Newegg Inc et al, No. 8:2012cv01688 - Document 58 (C.D. Cal. 2013)
Court Description: ORDER DENYING DEFENDANTS MOTION FOR ATTORNEYS FEES 41 by Judge Otis D. Wright, II. (lc). Modified on 10/11/2013 (lc).
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Digitech Image Technologies LLC v. Newegg Inc et al Doc. 58 O 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 DIGITECH IMAGE TECHNOLOGIES., LLC, 13 14 15 v. Plaintiff, Case No. 8:12-cv-01688-ODW(MRWx) ORDER DENYING DEFENDANTS’ MOTION FOR ATTORNEYS’ FEES [41] NEWEGG, INC. and NEWEGG.COM, INC., Defendants. 16 I. 17 INTRODUCTION 18 Newegg moves for an award of attorneys’ fees and costs incurred defending 19 against Digitech’s patent-infringement suit. (ECF No. 41.) Newegg argues that 20 Digitech’s infringement allegations were objectively baseless and brought in bad faith 21 to obtain nuisance-value settlements. (Mot. 5.) Newegg styles itself a champion of 22 the bullied who “must take a stand against litigation-extortion [sic].” (Mot. 7.) But 23 despite Newegg’s gallant intentions, the Court DENIES Newegg’s Motion for 24 Attorneys’ Fees for the reasons discussed below.1 25 /// 26 /// 27 28 1 After carefully considered the papers filed in support of and in opposition to this Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. Dockets.Justia.com II. 1 FACTUAL BACKGROUND 2 On October 2, 2012, Digitech filed a patent-infringement suit against Newegg 3 and Newegg.com accusing them of infringing U.S. Patent No 6,128,415. (Opp’n 5.) 4 The ’415 Patent concerns a device profile and method of generating a device profile. 5 (’415 Patent 1:1–6; 1:10–15, 1:26–31.) 6 Newegg was one of numerous defendants in Digitech’s crosshairs. Digitech 7 originally sued 45 defendants, which included both retailers and manufacturers of 8 various digital cameras that allegedly infringed the ’415 Patent. Digitech Image 9 Techs., LLC v. Agfaphoto Holding, GMBH, Case No. 8:12-cv-01153-ODW (MRWx) 10 (C.D. Cal. closed October 1, 2012). The Court dismissed that action for misjoinder 11 under 35 U.S.C. § 299. 12 infringement suits the next day. In total, Digitech brought 32 lawsuits against 70 13 defendants—20 of which were ultimately litigated. Id. at ECF No. 190. Digitech then refiled individual 14 During the litigation, the Court stayed the actions against Newegg and the other 15 retailers under the “customer-suit exception.” Digitech Image Techs., LLC v. Elecs. 16 For Imaging, Inc., Case No. 8:12-cv-01324-ODW (MRWx), ECF No. 39 (C.D. Cal. 17 closed August 6, 2013). Thus, the action against Newegg was stayed for most of the 18 litigation while the Court resolved the manufacturer suits. 19 On July 31, 2013, some of the manufacturer-suit defendants—which did not 20 include Newegg—brought a Motion for Summary Judgment. The Court granted the 21 Motion, invalidating the ’415 Patent under 35 U.S.C. § 101. Digitech Image Techs., 22 LLC v. Elecs. For Imaging, Inc., Case No. 8:12-cv-01324-ODW (MRWx), ECF 23 No. 89 (C.D. Cal. closed August 6, 2013). The Court entered judgment in this action 24 for Newegg on August 6, 2013, as a result of the invalidation of the ’415 Patent. 25 (ECF No. 39.) 26 Newegg now seeks to recover $64,851.73 in attorneys’ fees under 35 U.S.C. 27 § 285 incurred defending Digitech’s suit. (Opp’n. 6.) Newegg is the sole defendant 28 out of the 20 litigated cases to file a motion for attorneys’ fees. 2 III. 1 LEGAL STANDARD 2 Meritless patent litigation places a particular strain on judicial and party 3 resources. In recognition of this strain, section 285 of the Patent Act gives district 4 courts discretion to award fees to prevailing parties in qualifying cases. 35 U.S.C. 5 § 285. 6 sanctions are necessary to deter parties from bringing clearly unwarranted suits. Id.; 7 Automated Bus. Cos. v. NEC Am., Inc., 202 F.3d 1353, 1354 (Fed. Cir. 2000); Eon– 8 Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011). Attorneys’-fees awards are appropriate in “exceptional cases” in which 9 When deciding whether to award attorneys’ fees, courts engage in a two-step 10 inquiry. First, the Court must determine whether the prevailing party has proved by 11 clear and convincing evidence that the case is “exceptional.” 12 Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012). If the Court finds that the 13 case is exceptional, it must then determine whether an award of attorneys’ fees is 14 justified. Id. at 916. MarcTec, LLC v. 15 Absent misconduct in the litigation or in securing the patent, a case is 16 exceptional under § 285 if (1) the litigation is brought in subjective bad faith, and 17 (2) the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailier Int’l, 18 Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). Litigation is objectively baseless if the 19 allegations are “such that no reasonable litigant could reasonably expect success on 20 the merits.” Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 21 1260 (Fed. Cir. 2008). 22 Once the Court determines that the challenged litigation is objectively baseless, 23 it may examine the litigant’s subjective motivation. Prof’l Real Estate Investors, Inc. 24 v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60–61(1993). The Court presumes 25 that a patent-infringement assertion is made in good faith. Brooks Furniture, 393 F.3d 26 at 1382. But if the record indicates by clear and convincing evidence that a patentee 27 was manifestly unreasonable in assessing and pressing its infringement allegations, 28 then a court may infer that the claims were brought in bad faith. Eltech Sys. Corp. v. 3 1 PPG Indus., Inc., 903 F.2d 805, 810–11 (Fed. Cir. 1990). A patent holder’s continued 2 pursuit of an infringement claim is manifestly unreasonable if based on “wrongful 3 intent, recklessness, or gross negligence.” Phonometrics, Inc. v. Westin Hotel Co., 4 350 F.3d 1242, 1246 (Fed. Cir. 2003) (quoting Eltech Sys., 903 F.2d at 811). 5 Even in exceptional cases the decision to award fees and the amount of the 6 award are within the Court’s discretion. Brooks Furniture, 393 F. 3d at 1382. The 7 decision is based on a retrospective look at the entire case and does not turn on 8 whether the patentee’s position would have been reasonable at the time of filing the 9 complaint or pleading. Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 701 F.3d 10 1351, 1355 (Fed. Cir. 2012), cert. granted, No. 12-1163, 2013 WL 1217353 (Oct. 1, 11 2013). IV. 12 DISCUSSION 13 Newegg asserts that Digitech’s numerous infringement suits are “exactly the 14 type of ‘shake-down’ litigation that warrants treatment as an exceptional case.” 15 (Mot. 5.) Newegg argues that Digitech’s suits reveal a pattern of “extortion-like 16 tactics,” which demonstrate that Digitech’s suit against Newegg was objectively 17 baseless and brought in bad faith. (Id.) Digitech counters that Newegg does not offer 18 any evidence—much less clear and convincing evidence—that this action is 19 exceptional. Digitech maintains that invalidation of the patent-in-suit and multiple 20 infringement suits, without other evidence of wrongdoing, are insufficient to support a 21 finding of baselessness or bad faith. 22 infringement suit against Newegg was neither objectively baseless nor brought in bad 23 faith—and therefore not exceptional—the Court DENIES Newegg’s Motion for fees. 24 Because the Court finds that Digitech’s A. Digitech’s infringement suit was not objectively baseless 25 Newegg contends that Digitech’s infringement claims were objectively baseless 26 because a prefiling investigation would have revealed that that the ’415 Patent was 27 invalid under § 101. 28 judgment of invalidity was a straightforward challenge, in which “detailed claim (Mot. 12.) Newegg argues that the motion for summary 4 1 construction, prior art review and the like were unnecessary to determine the patent’s 2 invalidity.” (Id.) Thus, Newegg asserts, Digitech knew or should have known it was 3 asserting an invalid patent. The Court does not agree. 4 Because of the high cost of a patent-infringement suit, “[p]erforming a pre- 5 filing assessment of the basis of each claim is . . . extremely important.” View Eng’g, 6 Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000). At a bare 7 minimum, the accused device must be compared to each and every claim at issue in 8 the suit, and “a reasonable basis for a finding of infringement of at least one claim” 9 must be found prior to the filing of an infringement suit. Id. But Newegg ignores the 10 patent-validity presumption under 35 U.S.C. § 282. Microsoft Corp. v. i4i Ltd. P’ship, 11 131 S.Ct. 2238, 2242 (2011). The ’415 Patent was issued by the United States Patent 12 and Trademark Office and therefore presumed to be valid and contain patentable 13 subject matter under 35 U.S.C. § 101. Digitech had no reason to suspect that the ’415 14 Patent was invalid. 15 Moreover, this Court invalidated the ’415 Patent because it related to 16 nonpatentable subject matter—something which would not have been revealed during 17 a prefiling investigation. And the Federal Circuit itself has had difficulty agreeing 18 upon the proper scope of § 101. See MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 19 1260 (Fed. Cir. 2012) (describing § 101 jurisprudence as a “murky morass”). 20 Digitech asserted presumptively valid claims that were ultimately invalidated under a 21 complex and evolving area of patent law. Without some additional evidence as to 22 why Digitech should have known the ’415 Patent would be invalidated, Newegg’s 23 naked baselessness accusations necessarily fail. 24 B. Digitech’s infringement claim was not brought in bad faith 25 Newegg also contends that Digitech brought and maintained this suit in bad 26 faith. (Mot. 12.) To support its bad-faith accusation, Newegg alleges that (1) the suit 27 was designed to extract nuisance-value settlements; (2) the retailer suits were brought 28 merely as leverage against the manufacturers; and (3) Digitech maintained the suit 5 1 knowing that the patent was invalid. (Id. 1213.) For the reasons discussed below, 2 these arguments all fail. 3 Newegg’s primary argument is that Digitech’s multi-suit litigation alone makes 4 this case exceptional. (Mot. 12.) Newegg claims that “Digitech has engaged in a 5 nationwide strategy to file lawsuits against many defendants with the goal of forcing 6 settlements from the named defendants.” (Id. at 8.) But Newegg offers nothing to 7 support its accusation of extortion-like litigation tactics other than the numerous suits 8 brought by Digitech. Mere evidence that Digitech has filed suit against many other 9 parties does not, by itself, prove that the suit is unjustified or brought in bad faith. 10 See, e.g., ArrivalStar v. Meitek, No. 2:12-cv-01225-JVS, ECF No. 55 (C.D. Cal. 11 Nov. 20, 2012). 12 Additionally, the multiplicity of suits in this action is a function of the stringent 13 joinder requirements of § 299 of the America Invents Act—something wholly 14 unrelated to the merits of the case. 35 U.S.C. § 299. Newegg improperly equates 15 Digitech’s maintenance of multiple severed infringement suits with the systematic 16 filing of bad-faith actions designed to collect small nuisance-value settlements. 17 Newegg provides no admissible evidence that any “shake-down” settlement 18 negotiations took place, or that other parties to this action were coerced into nuisance- 19 value settlements. See Fed. R. Evid. 408. 20 Certainly, the practice of bringing unmeritorious claims only to dismiss them 21 after inflicting substantial litigation costs is a blight on the patent system. But it has 22 not been shown that is the situation in this action. Digitech has not displayed a “lack 23 of regard for the judicial system” or a “cavalier attitude” to the patent-litigation 24 process as a whole. Eon–Net LP, 653 F.3d at 1314. While Newegg makes much of 25 the burden placed on the judicial system from baseless infringement claims, the Court 26 notes that motions lacking factual and legal support also unduly burden the judicial 27 system. All parties should be mindful of the limited resources of the Court and the 28 challenges it faces in preserving judicial resources. 6 1 Newegg next argues that Digitech’s real target was the manufacturers and that 2 the “retailers were only named for leverage.” (Mot. 12.) Newegg asserts that 3 “[n]aming retailers only to pressure their suppliers into settling is another facet of this 4 litigation that justifies the imposition of an attorneys’ fees award.” (Id.) But Newegg 5 points to no authority to support its theory that jointly suing retailers and 6 manufacturers of allegedly infringing products merits an exceptional-case finding. 7 Retailers are not immune from liability for sales of infringing products. Indeed, 8 “an accused infringer infringes an apparatus claim if it makes, uses, offers to sell, or 9 sells the claimed apparatus within the United States.” Vizio, Inc. v. Int’l Trade 10 Comm’n, 605 F.3d 1330, 1346 (Fed. Cir. 2010) (emphasis added); 35 U.S.C. § 271. 11 As a retailer, Newegg was offering to sell—and selling—devices that allegedly 12 infringed the ’415 Patent. 13 ’415 Patent, Newegg would be liable as an infringer. Suing retailers along with the 14 manufacturers is a normal, prudent part of patent litigation—not an improper 15 leveraging tactic as Newegg asserts. If the accused devices were found to infringe the 16 Finally, Newegg alleges that Digitech brought and maintained the infringement 17 action knowing that the claims of the ’415 Patent were not viable. (Mot. 12–13.) This 18 argument simply recycles Newegg’s assertion that Digitech should have known that 19 the ’415 Patent was invalid when Digitech brought the action. Newegg offers no 20 evidence or even theories to support its conclusory allegation that Digitech should 21 have known that the ’415 Patent related to nonpatentable subject matter. 22 In sum, Newegg fails to provide more than conclusory allegations that Digitech 23 brought an objectively baseless, bad-faith infringement action. The Court is not 24 persuaded by Newegg’s rote attempt to shift the burden of paying legal fees by hurling 25 Digitech into the crusade against “Patent Trolls.” A party seeking protection of 26 constitutionally granted patent rights is not automatically the villain simply because it 27 brings infringement allegations against multiple defendants. Of course, parties that 28 abuse the patent system exist—that is what § 285 is for. But without any evidence of 7 1 malfeasance, the Court cannot fault a patent holder for exercising its constitutional 2 rights. V. 3 4 5 CONCLUSION For the reasons discussed above, Defendants’ Motion for Attorneys’ Fees is DENIED. 6 7 IT IS SO ORDERED. 8 9 October 11, 2013 10 11 12 ______________ ____ __________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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