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VocalTag Ltd. v. Agis Automatisering B.V.

United States District Court, W.D. Wisconsin

September 27, 2016

VOCALTAG LTD. and SCR ENGINEERS LTD., Plaintiffs,
v.
AGIS AUTOMATISERING B.V., Defendant.

          OPINION & ORDER

          JAMES D. PETERSON DISTRICT JUDGE

         This is a patent infringement case involving electronic cattle monitoring systems. The court granted summary judgment of non-infringement of both patents-in-suit to defendant Agis Automatisering B.V. Dkt. 289, at 1. The court also granted summary judgment against plaintiffs on their allegation of willful infringement. Id. On September 1, 2016, the Federal Circuit affirmed. Dkt. 336-1.

         Before the case went up on appeal, defendant moved for attorney fees pursuant to 35 U.S.C. § 285. Dkt. 304. Defendant contends that plaintiffs' infringement claims relied on baseless claim constructions, and that the suit was motivated by plaintiffs' desire to impede competition rather than a sincere interest in its intellectual property rights. The question is a close one, but the court is not convinced the case is “exceptional” under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014), or that fee shifting is warranted. The court will deny the motion.

         ANALYSIS

         Under § 285 of the Patent Act, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. For nearly a decade, under Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378 (Fed. Cir. 2005), an “exceptional” case was one that involved some actionable misconduct. But now, under Octane, an “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, 134 S.Ct. at 1756; see also Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S.Ct. 1744, 1748 (2014). District courts determine whether a case is exceptional on a case-by-case basis, considering the totality of the circumstances. Octane, 134 S.Ct. at 1756. The moving party must demonstrate that the case is exceptional by a preponderance of the evidence. Id. at 1758. The determination is a discretionary one for the court.

         The question is not governed by clear-cut rules, but the court's discretion is guided by the purpose of fee-shifting under § 285, which is to dissuade unreasonable lawsuits and litigation tactics by compensating the prevailing party for enduring them. See, e.g., Commil USA, LLC v. Cisco Sys., Inc., 135 S.Ct. 1920, 1930-31 (2015). The court should not award fees to punish a patent holder simply for failing to prove infringement. Gaymar Indus., Inc. v. Cincinnati Sub-Zero Products, Inc., 790 F.3d 1369, 1373 (Fed. Cir. 2015) (citing Octane, 134 S.Ct. at 1753). A litigation position that seems obviously wrong after a decision on the merits might have seemed reasonable when judged without the benefit of hindsight. And fee-shifting in routine cases would deter legitimate efforts to enforce patent rights. So the court will award fees only if there has been some unreasonable conduct that warrants imposing on the losing party the additional burden of paying the other side's attorney fees. See Intellect Wireless, Inc. v. Sharp Corp., 45 F.Supp.3d 839, 848 (N.D. Ill. 2014). The court need not find that the losing case was frivolous, or that it was brought in bad faith for an illegitimate purpose (although that would clearly warrant fee-shifting). See Lumen View Tech., LLC v. Findthebest.com, Inc., 24 F.Supp.3d 329, 335 (S.D.N.Y. 2014), aff'd, 811 F.3d 479 (Fed. Cir. 2016). Such clearly inappropriate cases and tactics would be sanctionable pursuant to Rule 11 or the court's inherent powers even without § 285.

         Because the purpose of § 285 is to compensate parties forced to defend against unreasonable litigation and to deter improper conduct, a good way to think of the question is this: was the losing party's case so unusually weak on the merits that it suggests an improper purpose or demonstrates irresponsible conduct that should be deterred? Or, is there other evidence, besides substantive weakness on the merits, that suggests an improper purpose? With these questions in mind, the court turns to the parties' arguments.

         A. Evidence of copying by defendant

         The court begins with plaintiffs' contention that they received important evidence of copying by defendant only after the parties had briefed the motion for summary judgment. The purported evidence of copying and its allegedly late disclosure are immaterial. At best, the information would have informed the parties' validity positions, not their infringement positions. See Allen Eng'g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1351 (Fed. Cir. 2002) (“[C]opying may have relevance not on infringement but on validity as one of a number of ‘indicia of obviousness or nonobviousness.'” (citations and internal quotation marks omitted)). The court did not reach the issue of validity in its summary judgment decision.

         Plaintiffs do not adequately explain how the “late” discovery would have had any bearing on claim construction, plaintiffs' knowledge of the accused system, or plaintiffs' infringement positions. As defendant aptly phrases it, “plaintiffs' scattershot allegations of copying cannot be used as a proxy for establishing infringement.” Dkt. 330, at 28. The court concludes that the copying evidence has no bearing on whether this case is exceptional.

         B. Bad faith by plaintiffs

         Defendant contends that plaintiffs litigated this case in bad faith to prevent competition. In support, defendant cites two actions by plaintiffs: a press release that plaintiffs circulated a few months after filing suit; and a meeting that plaintiffs had with one of SCR's U.S. distributors, who had indicated that it would begin distributing defendant's products. Defendant's showing is not persuasive.

         Plaintiffs' press release was a simple announcement that they had sued defendant for infringing their patents and that they were committed to vigorously protecting their intellectual property rights. See Dkt. 305-6. The statements about the litigation were accurate, and plaintiffs were within their rights to publicly proclaim their intent to enforce their patents. Defendant surmises that the press release was calculated to discourage customers from dealing with defendant. But any proclamation by a patent owner that it will enforce its patent rights, or that it has sued a competitor, carries that implication. Factually accurate press releases about litigation, such as the one issued by plaintiffs here, do not suggest any bad faith or illegitimate anti-competitive motive on the patent owner's part.

         The distributor meeting does not demonstrate bad faith on plaintiffs' part either. Based on the record before the court, sometime during the litigation, defendant reached an exclusive marketing agreement with Select Sires, a major U.S. distributor. But Select Sires was already distributing plaintiffs' products, and under its agreement with plaintiffs, Select Sires was required to inform plaintiffs before dealing in competitive products. After being so notified, plaintiffs requested a meeting with Select Sires, at which plaintiffs asked Select Sires to forestall distributing defendant's products until the patent litigation was resolved. Defendant does not address the issue in its ...


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