Sasco v. Weber Electric Manufacturing Company, No. 8:2013cv00022 - Document 89 (C.D. Cal. 2015)
Court Description: ORDER Denying Defendant's Motion for an Exceptional Case Determination and Attorneys' Fees 80 by Judge Cormac J. Carney. (dgo)
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Sasco v. Weber Electric Manufacturing Company Doc. 89 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 SOUTHERN DIVISION 11 12 13 SASCO, a California Corporation, 14 Plaintiff, 15 16 17 18 19 20 v. WEBER ELECTRIC MANUFACTURING COMPANY, a Michigan Corporation, Defendant. 21 22 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: SACV 13-0022-CJC(JPRx) ORDER DENYING DEFENDANT’S MOTION FOR AN EXCEPTIONAL CASE DETERMINATION AND ATTORNEYS’ FEES [80] 23 24 I. INTRODUCTION 25 26 27 Plaintiff SASCO brought this patent infringement action against Defendant Weber Electric Manufacturing Company (“WEMCO”). Before the Court is WEMCO’s motion 28 -1Dockets.Justia.com 1 for an exceptional case determination and for attorneys’ fees. (Dkt. 80.) For the 2 following reasons, the motion is DENIED.1 3 4 II. BACKGROUND 5 SASCO is an electrical contracting services provider who owns U.S. Patent No. 6 7 6,435,450 (“the ‘450 Patent”). The ‘450 Patent, which is entitled “Multi-Compartment 8 Paralleling Reel Having Independent Compartments,” claims an apparatus and method 9 for reeling different sets of wire from a multi-compartment device (the “Multi-Reel”). 10 (Dkt. 30-1 [“Patent”.) As the Patent explains, the Multi-Reel is composed of independent 11 compartments, each aligned on a central shaft and capable of holding a reel of wire. (Id. 12 at 1:66–2:20.) Because the compartments are not attached to one another, they can rotate 13 independently, thereby allowing the operator of the Multi-Reel to unspool wires having 14 different diameter sizes in unison. (Id.) The Multi-Reel also discloses a reel-securing 15 bar, which can be inserted through each of the independent compartments, thereby 16 causing them to rotate in unison. (Id.) The device is meant to increase efficiency in 17 contracting jobs by allowing different-sized wires to be unreeled at the same rate of 18 speed. (Id. at 2:39–41.) 19 SASCO believed that two of WEMCO’s products—the MCR-PTS-2 and MCR- 20 21 PTS-3 payout/transport stands (the “Accused Products”)—infringed on the ‘450 Patent. 22 It filed a complaint against WEMCO for patent infringement in this Court in January 23 2013, and an amended complaint in April 2013. (Dkt. 1; Dkt. 15.) Shortly after SASCO 24 served WEMCO with its original complaint, WEMCO began research into the prior art to 25 determine whether or not the ‘450 Patent was anticipated by a prior patent. That research 26 27 28 1 Having read and considered the papers presented by the parties, the Court finds this matter appropriate for disposition without a hearing. See Fed. R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing set for January 4, 2016 at 1:30 p.m. is hereby vacated and off calendar. -2- 1 revealed U.S. Patent No. 4,741,493 (“the ‘493 Patent”). The ‘493 Patent is a design 2 patent for a locking system for spools holding display jewelry chains. (Dkt. 30-5 [“the 3 ‘493 Patent”].) It provides for a mechanism that can lock individual spools together so as 4 to prevent the chains held on them from being unspooled. (See Dkt. 38-1 ¶ 4.) Believing 5 that the ‘493 Patent anticipated the ‘450 Patent, WEMCO moved for summary judgment 6 of invalidity in August 2013. The Court denied WEMCO’s motion, explaining that 7 WEMCO had “fail[ed] to show by clear and convincing evidence” that the ‘493 Patent 8 contained every limitation of the ‘450 Patent, and that SASCO had “present[ed] evidence 9 of structural differences between the two devices that at the very least create[d] a triable 10 issue as to whether the jewelry display in the ‘493 Patent [anticipated] the ‘450 Patent.” 11 (Dkt. 45 at 13.) 12 Litigation proceeded. In July 2014, after the parties had engaged in significant 13 14 discovery and additional motion practice, the Patent and Trademark Office (“PTO”) 15 granted a request for reexamination of the ‘450 Patent. The parties filed a stipulation to 16 stay the case pending reexamination, and the Court entered a stay on July 16. 17 On December 17, 2014, the PTO issued a Final Patent Office Action rejecting 18 19 Claims 1-11 and 13-15 of the ‘450 Patent (based on anticipation by the ‘493 Patent) and 20 confirming the patentability of Claim 12 of the ‘450 Patent. Since the PTO’s 21 determination meant that SASCO could no longer plausibly allege infringement against 22 WEMCO, the parties stipulated to dismiss the case with prejudice, and SASCO 23 covenanted not to sue WEMCO under the ‘450 Patent. (Dkt. 78.) WEMCO 24 subsequently filed its motion for attorneys’ fees. 25 26 // 27 // 28 // -3- 1 III. LEGAL STANDARD 2 3 Congress has provided, in 35 U.S.C. § 285, that in patent infringement disputes 4 “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing 5 party.” “As the statutory language suggests, the award of attorneys’ fees is discretionary, 6 and a district court may decide not to award fees even in an exceptional case.” Kilopass 7 Tech., Inc. v. Sidense Corp., 82 F. Supp. 3d 1154, 1165 (N.D. Cal. 2015) (citing Modine 8 Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990) (“The decision whether 9 or not to award fees is still committed to the discretion of the trial judge, and even an 10 exceptional case does not require in all circumstances the award of attorney fees.”). 11 12 The Supreme Court has recently considered the scope of § 285. In Octane Fitness, 13 LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014), it rejected the Federal 14 Circuit’s rule that a case was only “exceptional” under the meaning of § 285 “when there 15 has been some material inappropriate conduct related to the matter in litigation” or when 16 “(1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively 17 baseless,” see Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 18 (Fed. Cir. 2005). Noting that this formulation was “overly rigid,” the Supreme Court 19 instead held that “an ‘exceptional’ case is simply one that stands out from others with 20 respect to the substantive strength of a party’s litigating position (considering both the 21 governing law and the facts of the case) or the unreasonable manner in which the case 22 was litigated.” Octane Fitness, 134 S. Ct. at 1756. The Court also confirmed that 23 “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case 24 exercise of their discretion, considering the totality of the circumstances.” Id. In that 25 exercise, courts may consider such factors as “frivolousness, motivation, objective 26 unreasonableness (both in the factual and legal components of the case) and the need in 27 particular circumstances to advance considerations of compensation and deterrence.” Id. 28 at 1756 n.6. -4- 1 Octane Fitness was handed down less than two years ago, and lower courts are still 2 coalescing around a uniform approach to motions for an exceptional case determination 3 under § 285. The Federal Circuit has, consistent with Octane Fitness, undertaken a two- 4 pronged approach that considers the substantive strength—not ultimate success—of a 5 party’s litigation position, and whether a party litigated a case in an unreasonable manner. 6 See, e.g., SFA Systems, LLC v. Newegg Inc., 793 F.3d 1344, 1347–1352 (Fed. Cir. 2015). 7 The Federal Circuit noted that although courts ultimately undertake a “totality of the 8 circumstances” analysis, it is useful to “parse” a party’s arguments by categorizing them 9 into either the “substantive strength” bucket or the “litigation conduct” bucket. Id. 10 11 IV. ANALYSIS 12 13 WEMCO essentially makes four arguments as to why this case qualifies as 14 “exceptional.” First, it argues, SASCO should have realized that the ‘493 Patent 15 anticipated the ‘450 Patent and called off the lawsuit when WEMCO alerted it to the ‘493 16 Patent. Second, SASCO’s claims were barred by evidence of “on-sale invalidity”—i.e., 17 the Multi-Reel was unpatentable because it had already been sold more than one year 18 before the filing date of the patent application. Both of these arguments go to the 19 substantive strength of SASCO’s litigation position. 20 21 Third, WEMCO argues that SASCO engaged in bad faith litigation conduct, 22 including instructing deponents not to respond to questions for which WEMCO believes 23 there was no basis for a non-response, and editing deposition transcripts before 24 submitting them to the Court. Finally, WEMCO claims that SASCO has engaged in 25 inappropriate litigation conduct in unrelated, non-patent cases, and that the Court should 26 deem this case exceptional in order to deter further bad faith litigation conduct by 27 SASCO. Both of these arguments go to the reasonableness of SASCO’s litigation 28 conduct. -5- 1 A. Substantive Strength 2 3 1. The ‘493 Patent 4 5 As explained above, WEMCO successfully persuaded the PTO examiner that the 6 ‘493 Patent anticipated the ‘450 Patent, and that most of the ‘450 Patent’s claims were 7 therefore invalid. WEMCO argues that SASCO’s litigation position on this issue was so 8 weak that a fee award is merited. The Court disagrees. As an initial matter, WEMCO 9 lost its summary judgment motion on whether the ‘493 Patent anticipated the ‘450 Patent, 10 raising significant doubt as to whether SASCO’s litigation position was so weak as to 11 merit an exceptional case determination. “In the pre-Octane Fitness patent law 12 jurisprudence, ‘a lawsuit which survives a motion for summary judgment is not 13 objectively baseless’” so as to justify an exceptional case finding under § 285. Apple, 14 Inc. v. Samsung Elec. Co., Ltd., Case No. 11-CV-01846-LHK, 2014 WL 4145499, at *9 15 (N.D. Cal. Aug. 20, 2014) (citing Synthes USA, LLC v. Spinal Kinetics, Inc., No. 09-cv- 16 01201 RMW, 2012 WL 4483158, at *13 (N.D. Cal. Sept. 27, 2012), aff’d, 734 F.3d 1332, 17 1345 (Fed. Cir. 2013)). And even post-Octane Fitness, a denial of a defendant’s 18 summary judgment motion bears significant weight in the determination whether a case is 19 exceptional. See Apple, 2014 WL 4145499, at *9 (noting that the fact that a claim 20 survived summary judgment “strongly suggests that [a case] is not[] ‘exceptional’” under 21 § 285); see also Angioscore, Inc. v. Trireme Medical, Inc., Case No. 12-cv-03393-YGR, 22 2015 WL 8293455, at *2 (N.D. Cal. Dec. 9, 2015) (the fact that plaintiff’s claims 23 survived summary judgment “evidenced” that they were not “exceptionally weak”). 24 25 Indeed, SASCO raised a number of good faith arguments before this Court as to 26 why the ‘493 Patent did not anticipate the ‘450 Patent. It pointed out that the “locking 27 rod” at issue in the ‘493 Patent actually locks the compartments together to prevent them 28 from rotating at all, whereas the ‘450 Patent’s “reel-securing bar” ensures that the -6- 1 compartments in the Multi-Reel can all rotate together, in unison—that is, SASCO points 2 out, the whole point of the reel-securing bar. Additionally, SASCO argued that the ‘493 3 Patent discloses a jewelry chain display case that cannot be said to relate in any 4 meaningful way to the electrical wiring application of the Multi-Reel. The device 5 described in the ‘493 Patent is much smaller than the Multi-Reel, and SASCO pointed 6 out that the dimensions of heavy-duty electrical wire would in fact preclude a device like 7 the one in the ‘493 Patent from being used to spool that wire—the spools are simply too 8 small. Finally, SASCO specifically argued that the ‘450 Patent contains the limitation 9 “different sets of wire,” which does not appear in the ‘493 Patent. 10 11 To be sure, the PTO ended up not buying any of these arguments when it found 12 that most of the ‘450 Patent’s claims were anticipated by the ‘493 Patent. But “the 13 Supreme Court made clear that it is the substantive strength of the party’s litigating 14 position that is relevant to an exceptional case determination, not the correctness or 15 eventual success of that position.” SFA Systems, 793 F.3d at 1348 (emphasis in original). 16 Although SASCO did not ultimately succeed in persuading the PTO examiner that its 17 position was correct, it is quite clear that that position was not an “exceptionally meritless 18 claim[],” Octane Fitness, 134 S. Ct. at 1757. As a result, SASCO’s litigation position 19 with regard to the ‘493 Patent is not grounds for an exceptional case determination. 20 21 2. On-Sale Bar 22 23 WEMCO’s other argument as to the substantive strength of SASCO’s position 24 concerns the on-sale bar. A patent is invalid under 35 U.S.C. §102(b) if the patented 25 invention was “(1) the subject of a commercial offer for sale before the critical date (of 26 one year prior to the filing of the patent application); and (2) ready for patenting before 27 the critical date.” Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 66–67 (1998). WEMCO 28 argues that deposition testimony from a Mr. Manthey demonstrates that the Multi-Reel -7- 1 was on sale more than one year before SASCO filed its patent application. But in fact, 2 the deposition testimony WEMCO references is deliberately equivocal: when presented 3 with alleged invoices, Mr. Manthey repeatedly testified that he didn’t know or remember 4 when particular reels were sold, and that he did not know if particular reels he was shown 5 were sold before a particular date or if they were even the reels that SASCO ultimately 6 patented. (See Dkt. 87-1 Exh. 9 at 97–101.) WEMCO attempts to stretch this scant 7 deposition testimony to argue that SASCO knew its claims were barred by the on-sale bar 8 before it even filed its patent application. This argument is without merit. Application of 9 the on-sale bar must be proved by “clear and convincing evidence.” Abbott Laboratories 10 v. Geneva Pharmaceuticals, Inc., 182 F. 3d 1315, 1318 (Fed. Cir. 1999). WEMCO’s 11 evidence does not meet this standard, much less show that SASCO’s arguments 12 concerning the on-sale bar were so weak that the Court should deem this case 13 “exceptional” under § 285. 14 15 B. Reasonableness of SASCO’s Litigation Conduct 16 17 1. Specific Examples of Bad Faith Conduct 18 19 Next, WEMCO argues that SASCO engaged in bad faith litigation conduct. It 20 offers two examples. The first is that an attorney for SASCO repeatedly instructed a 21 deponent not to answer questions from WEMCO about whether a multi-compartment reel 22 without a reel-securing bar (like the one specified in the ‘450 Patent) would infringe the 23 ‘450 Patent. SASCO objected to the questions on the basis that they required a legal 24 conclusion. WEMCO argues that this objection was improper, that the questions were 25 calling for a factual, not legal, conclusion, and the objections were “representative of the 26 bad faith in which SASCO and its counsel have litigated this case.” (Dkt. 81 at 14.) 27 SASCO, for its part, points out that it was perfectly clear, in its briefing on summary 28 judgment and in responses to interrogatories, that it was not contending that products -8- 1 without a reel-securing bar were infringing the ‘450 Patent. The Court is not persuaded 2 that SASCO’s objections to the deposition questions were improper and in any event, a 3 dispute over a single set of deposition objections is not the sort of thing that justifies a 4 several hundred thousand dollar fee award under § 285. Both parties alleged discovery 5 violations in this case, and in fact SASCO successfully managed to compel production of 6 certain documents WEMCO refused to even look for. (See Dkt. 62 (granting motion to 7 compel production of ESI material)). There is no reason to find this case exceptional 8 simply on the basis of SASCO’s objections to the deposition questions. 9 10 WEMCO’s second example concerns changes made to a deposition transcript 11 attached to SASCO’s briefing on this motion. This too is unremarkable and not grounds 12 for an exceptional case determination. Deponents regularly make changes to their 13 deposition testimony after the fact. Although WEMCO insists that SASCO did not 14 follow the proper procedures in making changes to the transcript, there is no reason to 15 believe that any failure on SASCO’s part materially prejudiced WEMCO in any way. 16 Even were the Court to disregard the changes, which pertain to the parties’ dispute over 17 the application of the on-sale bar, it would not come to a different conclusion as to the 18 strength of SASCO’s position on that issue. Accordingly, the deposition changes are not 19 grounds for an exceptional case determination. 20 21 2. Deterrence 22 23 Finally, WEMCO asserts that SASCO is a repeat bad-faith actor, pointing to 24 sanctions against SASCO in unrelated cases. It argues that SASCO need be deterred 25 from future litigation misconduct. The Court disagrees. It would be one thing if SASCO 26 were bringing multiple frivolous actions based on the patent at issue in this case. But 27 instead, WEMCO attempts to aggregate any litigation misconduct SASCO has ever 28 engaged in, in cases of widely varying subject matter, in an effort to have this particular -9- 1 case declared exceptional. This Court refuses to go down that road. Nothing that SASCo 2 did in those other cases occurred before this Court and this Court has no intention of 3 spending countless hours reviewing and critiquing sanction orders issued by other courts. 4 5 IV. CONCLUSION 6 7 The Court recognizes that since the Supreme Court broadened the standard for fee 8 awards under § 285, prevailing parties in patent actions have little to lose by bringing 9 motions like this one. Nonetheless, here it appears that WEMCO has simply cobbled 10 together any argument it could possibly think of as to why SASCO’s litigation positions 11 were weak or its litigation conduct unsavory. The Court questions the utility of this 12 exercise. From the Court’s review of the record, SASCO brought a colorable, though 13 ultimately unsuccessful, patent infringement case, and litigated it appropriately and in 14 good faith. WEMCO has neither shown that SASCO advanced exceptionally weak 15 litigation positions nor that it engaged in unreasonable litigation conduct. This is not an 16 exceptional case under 35 U.S.C. § 285, and WEMCO’s motion is DENIED. 17 18 __________________________________ CORMAC J. CARNEY UNITED STATES DISTRICT JUDGE 19 20 21 Dated: December 23, 2015 22 23 24 25 26 27 28 -10-
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