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