Thought, Inc. v. Oracle Corporation et al

Filing 264

ORDER DENYING 243 MOTION FOR ATTORNEY'S FEES by Judge William H. Orrick. Thought was required to file a declaration in support of its 242 sealing motion. If Thought wants to keep Exhibit G sealed, within four days of the date of this Order, Thought must submit a declaration establishing good cause for the continued sealing. (jmdS, COURT STAFF) (Filed on 8/22/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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THOUGHT, INC.,

Case No. 12-cv-05601-WHO

Plaintiff,
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v.

ORDER DENYING MOTION FOR
ATTORNEY'S FEES

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ORACLE CORPORATION, et al.,

Re: Dkt. Nos. 242, 243

Defendants.

United States District Court
Northern District of California

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Thought sued Oracle for patent infringement. Having won on summary judgment, Oracle

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moves for an award of attorney’s fees arguing that this case is exceptional under 35 U.S.C. § 285

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in light of Thought’s litigation conduct, namely Thought’s reliance at summary judgment on

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“tardy, improper infringement theories” that Oracle spent $163,907.25 in moving to strike and

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contesting on the merits. In light of Thought’s questionable financial situation, Oracle also seeks

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to have those fees assessed against plaintiff’s counsel under the vexatious litigation statute, 28

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U.S.C. §1927. As explained below, because Thought’s conduct in this case was not

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“exceptional,” I DENY Oracle’s motion for attorney’s fee.

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BACKGROUND

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At the time the parties moved for summary judgment, the main issue remaining was

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whether Oracle’s products – TopLink 10, TopLink Essentials, TopLink 11, TopLink 12, and

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EclipseLink – infringed Claims 1, 3, 5, 7 and 8 of Thought’s ’197 Patent. Oracle moved for

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summary judgment on non-infringement and in conjunction moved to strike portions of Thought’s

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expert’s declaration on the grounds that Thought failed to disclose three of its infringement

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theories as required under my orders and the Local Patent Rules and in contravention my October

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7, 2015 Order striking infringement contentions. Dkt. Nos. 202, 205. Thought also moved for

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partial summary judgment on Oracle’s obviousness/combination defense, and relatedly moved to

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strike certain prior art combinations it contended Oracle impermissibly relied on in violation of

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my October 7 Order and the Local Patent Rules.
On Oracle’s motions, I agreed that Thought was attempting to defeat Oracle’s showing of

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non-infringement by relying on expert-supported infringement theories that were either (i)

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prohibited by my October 7th Order striking non-JPA infringement theories, or (ii) not adequately

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disclosed by Thought. Reviewing Thought’s one remaining, properly disclosed infringement

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theory, I granted summary judgment of non-infringement to Oracle.1 Oracle now moves to

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recover its attorney’s fees incurred in order to defend against those stricken non-infringement

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theories.
LEGAL STANDARD

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United States District Court
Northern District of California

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I.

35 U.S.C. § 285
Under the Patent Act, “[t]he court in exceptional cases may award reasonable attorney fees

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to the prevailing party.” 35 U.S.C. § 285. An “exceptional” case is “simply one that stands out

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from others with respect to the substantive strength of a party’s litigating position (considering

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both the governing law and the facts of the case) or the unreasonable manner in which the case

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was litigated.” Octane Fitness, LLC v. ICON Health Fitness, Inc., 134 S.Ct. 1749, 1756 (2014).

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“[D]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of

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their discretion, considering the totality of the circumstances.” Id. While there is no precise rule or

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formula for finding a case exceptional, the Supreme Court has identified a non-exclusive list of

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factors a district court may consider in evaluating whether a case is exceptional, including

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“frivolousness, motivation, objective unreasonableness (both in the factual and legal components

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of the case) and the need in particular circumstances to advance considerations of compensation

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and deterrence.” Id. at 1756 n.6.

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II.

28 U.S.C. § 1927

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Under 28 U.S.C. § 1927, “Any attorney or other person admitted to conduct cases in any

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court of the United States or any Territory thereof who so multiplies the proceedings in any case

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I did not, therefore, reach Thought’s motion for summary judgment on Oracle’s
invalidity/obviousness defense and Thought’s related motion to strike.
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unreasonably and vexatiously may be required by the court to satisfy personally the excess costs,

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expenses, and attorneys’ fees reasonably incurred because of such conduct.” “[S]ection 1927

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sanctions ‘must be supported by a finding of subjective bad faith.’. . . ‘Bad faith is present when

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an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for

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the purpose of harassing an opponent.’” In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436

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(9th Cir. 1996) (quoting New Alaska Development Corp. v. Guetschow, 869 F.2d 1298, 1306 (9th

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Cir.1989) and Estate of Blas v. Winkler, 792 F.2d 858, 860 (9th Cir.1986)); see also, Blixseth v.

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Yellowstone Mountain Club, LLC, 796 F.3d 1004, 1007 (9th Cir. 2015) (a finding of subjective

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bad faith required for sanctions under § 1927, which could be met with a showing of: (i) a reckless
and frivolous argument; or (ii) a meritorious claim made with the purpose of harassing the

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United States District Court
Northern District of California

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opponent).

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DISCUSSION

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Oracle’s motion does not challenge the strength of Thought’s litigation position, but

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instead the manner of litigation based on Thought’s last-minute reliance on new infringement

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theories in its expert report that I struck on summary judgment. Oracle argues that “but for”

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Thought’s “misconduct,” Oracle’s expert report, expert discovery, and motion for summary

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judgment would have been much more focused, “as Thought had asserted only one properly

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disclosed JPA-based infringement theory.” Mot. 2. Instead, Oracle was required to address the

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new infringement theories and spend “significant expert and attorney resources analyzing and

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moving to strike the improper theories.” Id.

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Oracle argues that Thought’s justifications for relying on the three new theories – that they

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were all JPA-based and adequately disclosed and, if not, were nonetheless allowed by the parties’

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stipulation – were not in good faith as shown by my description of Thought’s conduct in the

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summary judgment Order as “gamesmanship” and its infringement theories as “continuously

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shifting.” June 13, 2016 Summary Judgment Order (Dkt. No. 234) at 9, 22. Oracle also points out

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that the June 2016 Summary Judgment Order was the second time Thought had had infringement

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theories stricken for belated disclosure, the first being in the October 2015 Order. Oracle contends

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that in light of the October Order, Thought was on notice of its obligations to adhere to the Patent
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Local Rules and my orders regarding its infringement theories.
Under Octane Fitness “a district court may award fees in the rare case in which a party’s

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unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so

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‘exceptional’ as to justify an award of fees.” Octane Fitness, 134 S.Ct. at 1756–57; see also Old

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Reliable Wholesale, Inc. v. Cornell Corp., 635 F.3d 539, 549 (Fed.Cir.2011) (“litigation

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misconduct generally requires proof of “unethical or unprofessional conduct by a party or his

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attorneys during the course of adjudicative proceedings”).

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This is not such an exceptional case. I disagree with Oracle’s argument that the facts of
this case are similar to those in Kilopass Tech. Inc. v. Sidense Corp., No. C 10-02066 SI, 2014 WL
3956703 (N.D. Cal. Aug. 12, 2014). There, the plaintiff asserted an undisclosed infringement

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United States District Court
Northern District of California

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theory in its expert report and in reviewing plaintiff’s conduct, the court concluded that the case

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was exceptional because “Kilopass litigated the present action in an unreasonable manner by

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failing to conduct an adequate pre-filing investigation, shifting its theories of infringement late in

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the litigation and without following the proper procedures for amendment of contentions, and

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engaging in conduct that at times amounted to gamesmanship.” Id. at *14.

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The totality of the circumstances in that case were more egregious than this one because

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there plaintiff failed to conduct an adequate pre-filing investigation, its theories of infringement

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were objectively baseless, and its claims for literal infringement were “exceptionally meritless.”

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Id.; see also Kinglite Holdings, Inc. v. Micro-Star Int’l Co. Ltd.14-3009-JVS(PJWx), Dkt. No.

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235, *12 (C.D. Cal. June 23, 2016) (exceptional case finding under totality of circumstances

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where plaintiff failed to perform adequate pre-suit investigation, failed to dismiss unsupportable

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direct infringement claims once litigation commenced forcing opponent to incur costs on a theory

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plaintiff implicitly acknowledged was baseless, included expert opinions on excluded

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infringement contentions, included expert opinions relying on claim constructions contrary to ones

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issued by the court, and failed to provide infringement contentions for accused products).

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The allegedly improper conduct in this case is closer to conduct that did not merit an

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“exceptional” case determination in France Telecom S.A. v. Marvell Semiconductor Inc., No. 12-

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CV-04967-WHO, 2015 WL 4396201, at *3 (N.D. Cal. July 17, 2015), where I declined to find a
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case exceptional even though the plaintiff attempted to present evidence that was prohibited by my

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prior rulings. I explained that “the excluded evidence that France Telecom sought to present or

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improperly presented was important to its case and it argued in good faith that the evidence was

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outside the scope of my prior rulings. I ultimately disagreed, but France Telecom's attempts to

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introduce the evidence do not make this matter exceptional.” Cf. JS Products, Inc. v. Kabo Tool

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Co., 2014 WL 7336063, at *5 (D. Nev. Dec. 22, 2014) (“ill-advised litigation tactics,” including

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weak discovery motions, “do not justify the award of attorney’s fees”).
Here, I ultimately agreed with Oracle that Thought could not rely on the belatedly

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disclosed or barred infringement theories. But Thought’s conduct does not, in absence of other
circumstances, make this case an exceptional one justifying a fee award.2
CONCLUSION

United States District Court
Northern District of California

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For the foregoing reasons, Oracle’s’s motion for an award of attorney’s fees is DENIED.

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IT IS SO ORDERED.

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Dated: August 22, 2016
______________________________________
WILLIAM H. ORRICK
United States District Judge

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In conjunction with its motion seeking an award of attorney’s fees, Oracle filed an administrative
motion to seal Exhibit G to the Declaration of James Gilliland. Dkt. No. 242. Exhibit G contains
financial data that Thought designated “confidential – attorney’s eyes only” under the parties’
Protective Order. Under this Court’s Civil Local Rules, Thought was required to file a declaration
in support of that sealing request. Civ. L.R. 79-5(e)(1). Thought has not filed the required
declaration. If Thought wants to keep Exhibit G sealed, within four days of the date of this Order,
Thought must submit a declaration establishing good cause for the continued sealing. If Thought
does not file a declaration in support within four days of the date of this Order, Exhibit G will be
unsealed.
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