UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Transcription

1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 0 EDWIN LYDA, Plaintiff, v. CBS INTERACTIVE, INC., Defendant. Case No. -cv-0-jsw ORDER GRANTING, IN PART, MOTION FOR ATTORNEYS FEES AND COSTS AND ORDERING SUPPLEMENTAL BRIEFING Re: Dkt. No. 0 0 Now before the Court for consideration is the motion for attorneys fees and costs filed by Defendant CBS Interactive, Inc. ( Defendant ). The Court has considered the parties papers, relevant legal authority, and the record in this case, and for the reasons set forth herein, the Court GRANTS Defendant s motion on the basis that this is an exceptional case, and it shall require additional briefing from the parties regarding the amount of the fees and costs Defendant has requested. BACKGROUND Plaintiff, Edwin Lyda ( Plaintiff ), brought the present action against Defendant for indirect infringement of U.S. Patent Nos.,, and,0,0 ( the patent and the 0 patent ) related to the voting system on CBS television show Big Brother. (Dkt. No., Compl., -.) According to the patents, audience members of game shows or reality programs often use input devices to electronically vote in response to cues during the shows. In Defendant has also moved for sanctions against Plaintiff s counsel under U.S.C. section and against Plaintiff and his counsel under the Court s inherent authority. Although the Court cannot condone Plaintiff s counsel s conduct, it also concludes that his conduct does not give rise to sanctions under U.S.C. section or the Court s inherent authority. Accordingly, the Court DENIES, IN PART, Defendant s motion.

2 0 0 particular, the and 0 patents cover methods and systems for obtaining real time responses to remote programming by allowing persons viewing or listening to a broadcast to respond to the broadcast in real time without requiring a personal computer. Lyda v. CBS Corporation, F.d, (Fed. Cir. 0) ( Lyda II ) (internal quotations, brackets and citations omitted). Plaintiff previously sued Defendant and CBS Corporation ( CBS ) in the United States District Court for the Southern District of New York for direct infringement of the same two patents. See Lyda v. CBS Interactive, Inc., -CV- (VEC), 0 WL 0 (S.D.N.Y. July, 0) ( Lyda I ); Lyda II, F.d at. (See also Compl. ; Dkt. No. -, Declaration of Ehsun Forghany ( Forghany Decl. ), -, Ex. (Lyda I Complaint), Ex. (Lyda I Amended Complaint).) On July, 0, the Lyda I court dismissed the amended complaint for failure to state a claim, and it denied Plaintiff leave to file a second amended complaint. Lyda I, 0 WL 0, at. The United States Court of Appeals for the Federal Circuit affirmed. See Lyda II, F.d at -. On November, 0, a few days after the Federal Circuit decision, Plaintiff sent Defendant a letter, in which he stated: Congratulations on the win! You know, of course, that the Federal Circuit in denying my arguments taught me (and others) what must be include [sic] in a Complaint to avoid having a Motion to Dismiss based Twombly and Iqbal [sic]. But, I am not writing to you to threaten CBS Corp. I am wondering if CBS Corp. would like to take a license under Lyda s two patents. I am certain that reasonable terms can be negotiated. I would appreciate a response by November, 0. In absence of any response, I will assume that CBS Corp. does not want a license. (Dkt. No. 0-, Declaration of Ehsun Forghany in Support of Motion for Fees ( Forghany Fee Decl. ),, Ex..) On November, 0, before the November th deadline passed, Plaintiff filed this case. On November, 0, Defendant sent Plaintiff a letter, in which it took the position that Plaintiff sent the letter through counsel, David M. Fink, Esq., who also represents Plaintiff in this case.

3 0 0 Plaintiff s claim for indirect infringement was barred by res judicata and explained its purported reasoning. (Forghany Fee Decl.,, Ex..) On November, 0, Plaintiff replied and denied that he asserted, or could have asserted, indirect infringement claims in the previous action. On March, 0, this Court granted Defendant s motion to dismiss, with prejudice, on the basis that Plaintiff s claims were barred by res judicata. Lyda v. CBS Interactive, Inc., No. - cv--jsw, 0 WL 0 (N.D. Cal. Mar., 0) ( Lyda III ). The only issue was whether Plaintiff raised or could have raised the indirect infringement claims in Lyda I. Id., 0 WL 0, at *. Plaintiff argued that he could not have asserted the claims, because Defendant was unaware of the patents-in-suit, and [Defendant] was incapable of knowingly inducing infringement without such knowledge. Id. (quoting Plaintiff s Opp. Br. at :-). Plaintiff did not provide the Court with any authority to support his argument. Id. Ultimately, the Court found that other courts in this District have permitted claims based on induced infringement to go forward without pre-suit knowledge of a patent. Id. Given the lack of Federal Circuit authority, and a split in authority among district courts on the issue, the Court noted that Plaintiff had at least a colorable basis to allege the knowledge element of a claim for induced infringement based on the filing of the complaint. Id. The Court also found Plaintiff s argument contrary to the record: In Lyda I, in order to support an allegation of willful infringement, Plaintiff alleged that [o]n or about July, 0, Defendant CBS Interactive was provided with the notice sent to Defendant CBS pointing out the patents-in-suit and informed that its activities were infringing the and 0 Patents. Plaintiff also alleged that Defendant was a willful infringer because it continued its infringing activities after being informed that those activities were infringing the patents-in-suit. Plaintiff reasserted those allegations in his amended complaint. Defendant has also submitted the letter referenced in the Lyda I Complaint as an exhibit.... Defendant acknowledged that it received the letter on July, 0, and stated that it had obtained copies of the patents and reviewed each of the claims of both patents-in-suit. Id., 0 WL 0, at * (citations omitted). // //

4 0 0 A. Legal Standard. ANALYSIS Defendant now moves for attorneys fees pursuant to U.S.C. section, which provides that [t]he court in exceptional cases may award reasonable attorney fees to the prevailing party. U.S.C.. The Court granted Defendant s motion to dismiss, with prejudice. The Court concludes that Defendant is a prevailing party. See Inland Steel Co. v. LTV Steel Co., F.d, 0 (Fed. Cir. 00) ( to be a prevailing party, one must receive at least some relief on the merits, which alters... the legal relationship of the parties ) (internal quotations and citations omitted). [A]n exceptional case is simply one that stands out from others with respect to the substantive strength of a party s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. Octane Fitness LLC v. Icon Health & Fitness, Inc., S. Ct., (0). In Octane Fitness, the Supreme Court explicitly rejected sanctionable conduct as the benchmark for fees, finding that a district court may award fees in the rare case in which a party s unreasonable conduct while not necessarily independently sanctionable is nonetheless so exceptional as to justify an award of fees. Id. at -. Further, in contrast to the previous, more rigid standard set forth in Brooks Furniture Mfg., Inc. v. Dutailier Int l Inc., F.d (Fed. Cir. 00), the Supreme Court also found that a case presenting either subjective bad faith or exceptionally meritless claims could qualify for fees under Section. Id. at. Ultimately, courts must determine whether a case is exceptional in the case-by-case exercise of their discretion, considering the totality of the circumstances, and may consider such nonexclusive factors as frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence. Id. at & n. (quoting Fogerty v. Fantasy, The Supreme Court also has held that a district court s decision on a request for fees should be reviewed for abuse of discretion. Highmark Inc. v. Allcare Health Management System, Inc., S. Ct., (0).

5 0 0 Inc., 0 U.S., n. ()) B. The Court Concludes This Case is an Exceptional Case.. The Strength of Plaintiff s Litigating Position. In Octane Fitness, the Supreme Court made clear that it is the substantive strength of the party s litigating position that is relevant to an exceptional case determination, not the correctness or eventual success of that position. SFA Sys., LLC v. Newegg Inc., F.d, (Fed. Cir. 0). The Federal Circuit has held that when no reasonable factfinder could conclude that a defendant s products infringe, the plaintiff s litigation position was baseless, and the case qualified as exceptional. See AdjustaCam, LLC v. Newegg, Inc., F.d, (Fed. Cir. 0) (finding the district court s decision not to award fees a clearly erroneous assessment of the evidence ). In contrast, it may not be objectively unreasonable for a party to assert an argument likely barred by res judicata when it had at least some support for its legal theory. See Highmark, Inc. v. Allcare Health Mgmt. System, Inc., F.d 00, (Fed. Cir. 0), rev d on other grounds, S. Ct. at -. The Court finds that Plaintiff had an exceptionally weak case. Plaintiff s only argument that his infringement claim was not barred by res judicata was based on the theory that he could not have raised the claim in Lyda I because Defendant was unaware of the patents-in-suit, and Defendant was incapable of knowingly inducing infringement without such knowledge. See Lyda III, 0 WL 0, at * (brackets and quotation marks omitted). This Court noted that because of the uncertain state of the law, Plaintiff had at least a colorable basis to allege the knowledge element of a claim for induced infringement based on the filing of the complaint. Id. Moreover, the record negated Plaintiff s argument that Defendant was not aware of the patents-insuit prior to Lyda I. See id., 0 WL 0 at *- (citing Dkt. No. -, Supplemental Declaration of Ehsun Forghany,, Ex., and noting that Defendant responded to a letter sent by Plaintiff and stated it had obtained copies of the patents and reviewed each of the claims of both patents-in-suit ). Therefore, the Court concludes that the weakness of Plaintiff s litigation position, which borders on frivolous, demonstrates that this is an exceptional case.

6 0 0. The Case Was Litigated in An Unreasonable Manner. The Federal Circuit has held that district courts may continue to rely on pre-octane Fitness decisions to determine whether a case has been litigated in an unreasonable manner. SFA Systems, F.d at. Prior to Octane Fitness, the Federal Circuit found that fees could be awarded based on overall vexatious litigation strategy and numerous instances of litigation misconduct. Monolithic Power Sys., Inc. v. O Micro Int l, Ltd., F.d, (Fed. Cir. 0). The Federal Circuit has reiterated that a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one s claims, is relevant to a district court s exceptional case determination under. SFA Systems, F.d at 0. Likewise, a motivation to harass or burden an opponent may indicate an exceptional case. Checkpoint Sys. v. All-Tag Sec. S.A., F.d, (Fed. Cir. 0). Recently, the Federal Circuit made clear that pre-suit diligence is also a factor in the Section totality of the circumstances analysis. See Bayer CropScience AG v. Dow AgroSciences LLC, F.d 0, 0 (Fed. Cir. 0) (citing Lumen View Tech. LLC v. Findthebest.com, Inc., F.d, - (Fed. Cir. 0)). In Bayer, the Federal Circuit affirmed the district court s exceptional case determination, based in part on Bayer CropScience AG s ( Bayer s ) failure to perform a diligent pre-suit investigation of its claims. The court was particularly persuaded by the fact that Bayer s own witness testified against its contract interpretation, which supported the district court s reasoning that had Bayer conducted a more searching pre-suit investigation at least of its own easily obtainable evidence it would have not filed suit. Id. (emphasis added). Numerous courts in this District have conducted similar analyses of a party s pre-suit diligence to determine whether fees are warranted under Section. In Max Sound Corp. v. Google, Inc., the court found the case exceptional, because Max Sound Corp., prior to suit, either knew it did not own the patent-in-suit, or failed to take reasonable measures to confirm it was an exclusive licensee with all substantial rights to the patent, where a cursory review of its licensing agreement would have shown it had no rights to the patent. No. -cv-0-ejd, 0

7 0 0 WL, at * (N.D. Cal. Sept., 0). In contrast, in In re Protegrity Corp., the court rejected the defendants argument that Protegrity Corp. ( Protegrity ) had failed to perform adequate pre-suit investigations, based on the record that showed the claims against each defendant were reviewed, prior to litigation, by both Protegrity s former CTO and its external patent counsel. No. :-md-000-jd, 0 WL, at * (N.D. Cal. Feb., 0). The two-step review process included claim charts and the evaluation of dozens of related documents. Id. The Court finds that this case is exceptional based on Plaintiff s lack of pre-suit diligence. As in the Bayer case, had Plaintiff conducted an investigation of his own easily obtainable evidence, most notably the July 0 correspondence between Plaintiff s counsel and Defendant, it would have been clear that Defendant did know of the patents-in-suit, rendering a claim for indirect infringement in this case barred by the prior litigation. The Court also notes that the Lyda I court noted that Plaintiff had failed to allege that a key element of his patent claim had been infringed, and that a case asserting the same patents against a different defendant had been dismissed for that same reason. Lyda I, 0 WL 0, at * n. (citing Lyda v. FremantleMedia, No. 0 Civ. (DAB), 0 WL, at * (S.D.N.Y Mar., 0)). Further, there is some evidence in the record that Plaintiff was motivated by the prospect of leveraging a settlement. (Forghany Fee Decl.,, Ex..) Accordingly, the Court also concludes that Plaintiff litigated this case in an unreasonable manner. As set forth in Octane Fitness, another factor for the Court to consider is the need to advance considerations of compensation and deterrence. S.Ct. at n.. Thus, the Court also takes into consideration the fact that Plaintiff has sued other entities on these patents-in-suit, without success. See FremantleMedia, 0 WL. In the Freemantle case, the court dismissed Plaintiff s second amended complaint, with prejudice, reasoning that Plaintiff s assertion that [t]here is no requirement in the [ ] Patent that [the defendant] provide the user input devices such as telephones or cell phones to the audience members... runs contrary to the plain language of the claim, which explicitly requires that user input devices be provided by the accused infringer[.] 0 WL, at *. The court concluded that [b]ecause Plaintiff

8 0 concedes that a necessary element of the patents claimed method or system is not met, the Complaint fails to make a prima facie showing of direct or indirect patent infringement. Id. Thatt court subsequently denied Plaintiff s motion for reconsideration and granted the defendant s motion for fees under Section, finding that [t]he question of infringement was not even a close one. Lyda v. Fremantle Media North America, Inc., No. 0 Civ. (DAB), 0 WL 00, at * (S.D.N.Y. Aug., 0). Accordingly, having consideredd the totalityy of the circumstances, the Court finds that the case is exceptional, and it finds that Defendant hass shown by a preponderance of the evidence thatt it is entitled to its reasonable attorneys fees. CONCLUSION For the foregoing reasons, the Court GRANTS, IN PART, Defendant s motion for attorneys fees and costs. The Court HEREBY ORDERS Plaintiff and Defendant to meet and confer as that term is defined in the Northern District Civil Local Rules regarding the amount of fees and costs at issue. If the meet and confer process does nott resolve this issue, Defendant shall submit a supplemental brief and declarations, not to exceed ten (0) pages supporting the amount of fees and costs it has requested. Defendant shall file its supplemental brief by February, 0. Plaintiff may file a supplemental opposition by March, 0, and Defendant may file a supplemental reply by 0 March, 0. The Court will resolvee the matter on the papers and will issue a further order addressing the amount of fees and costs to be awarded to Defendant. IT IS SO ORDERED. Dated: January, 0 JEFFREY S. WHITE United States District Judge