Kreative Power, LLC v. Monoprice, Inc.

Filing 68

ORDER DENYING DEFENDANT'S MOTIONS FOR SANCTIONS AND ATTORNEY FEES 50 53 (Illston, Susan) (Filed on 4/30/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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KREATIVE POWER, LLC,

Case No. 14-cv-02991-SI

Plaintiff,
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v.
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MONOPRICE, INC.,
Defendant.

ORDER DENYING DEFENDANT'S
MOTIONS FOR SANCTIONS AND
ATTORNEY FEES
Re: Dkt. Nos. 51, 53

United States District Court
Northern District of California

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Currently before the Court are motions by defendant Monoprice, Inc. for sanctions and

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attorney fees. Dkt. Nos. 51, 53. Pursuant to Civil Local Rule 7-1(b), the Court determines that

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these matters are appropriate for resolution without oral argument and hereby VACATES the May

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1, 2015, hearing on these motions.

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defendant’s motions.

For the reasons set forth below, the Court DENIES

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BACKGROUND

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I.

The Parties
Plaintiff Kreative Power, LLC and defendant Monoprice are both in the consumer

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electronics industry, offering electrical power outlet and surge protector devices.

Dkt. 1

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(Complaint) at ¶¶ 15-16. Around December 2004, Khanh Lam, future President of Kreative,

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conceived of a compact conical electrical power outlet and surge protector that featured six

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widely-spaced electrical outlets, a centralized on/off switch with safety cover, and an ergonomic

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hold-down knob. Id. at ¶ 12. On July 12, 2005, Mr. Lam filed a utility patent application for a

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conical-shaped surge protector that would later issue as U.S. Patent No. 7,112,097 (“the ’097

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utility patent”). Id. at ¶ 13; Dkt. 1-1, Exhibit A (the ’097 utility patent). Six years later, on April

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19, 2011, Mr. Lam filed a design patent application for the surge protector’s ornamental design

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that issued as U.S. Patent No. D653,215 (“the D’215 design patent”). Dkt. 1 (Complaint) at ¶ 14;

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Dkt. 1-1, Exhibit C (the D’215 design patent). And three years after that, on June 4, 2014, Mr.

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Lam registered a copyright for the sculptural work consisting of the packaging design that

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contains the conical surge protector with the U.S. Copyright Office and secured Registration No.

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VA 0001908609 (“Kreative’s copyright”).

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copyright).

Id. at ¶¶ 17-18; Dkt. 1-1, Exhibit E (Kreative’s

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II.

Kreative’s Pre-Filing Investigation
Prior to filing this action, Kreative discovered that Monoprice was selling a surge protector

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similar to the Kreative conical-shaped design. Dkt. 52-1 (Sgagna Decl.), Ex. A at 1. Kreative

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believed that the Monoprice product contained the sole claim of the ’097 patent and was

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substantially similar to the ornamental design claimed in the D’215 patent. Id. On April 8, 2014,

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counsel for Kreative, Mr. Otto Lee, sent a cease and desist letter to Monoprice. Id. The letter

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alleged that Monoprice offered for sale surge protectors that infringed the ’097 and D’215 patents

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and demanded that Monoprice immediately cease and desist all advertisement, distribution, offer,

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sale, and delivery of the alleged infringing surge protectors. Id. at 2. Mr. Lee’s letter also stated

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that if Kreative did not respond to the letter in a timely manner, the only alternative would be

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formal legal action to protect Kreative’s intellectual property rights. Id.

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On April 29, 2014, Monoprice’s counsel, Ms. Linda Liu, responded to Kreative’s letter.

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Dkt. 52-1 (Sgagna Decl.), Ex. B at 15. Ms. Liu’s letter disagreed with Kreative’s infringement

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claims and outlined why Kreative’s intellectual property rights were not applicable to the

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Monoprice product. Id. Specifically, Ms. Liu indicated that the accused Monoprice device did not

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contain “a circular ground conductor, a circular neutral conductor, and a circular hot conductor” as

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required by the sole claim of the ’097 utility patent and that prosecution history estoppel precluded

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Kreative from alleging infringement of any equivalents to the “circular conductors” limitation. Id.

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The letter also denied infringement of the D’215 design patent, asserting that there were

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substantial differences between the ornamental aspects of the Monoprice device and the Kreative
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design claimed in the D’215 patent. Id.
Following this disagreement between the parties, Kreative filed its complaint in the current

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action on June 27, 2014, alleging infringement of the ’097 and D’215 patents and the Kreative

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copyright. Dkt. 1 (Complaint). Prior to filing the complaint, Mr. Lee, counsel for Kreative, along

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with attorneys from his firm Intellectual Property Law Group LLP (“IPLG”), reviewed Kreative’s

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intellectual property rights and allegations.

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investigation totaled 90 hours and included a comprehensive analysis of Kreative’s patent claims

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and a comparison against the Monoprice device. Id. According to Mr. Lee, IPLG reviewed the

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prosecution histories for the ’097 utility patent and D’215 design patent. Id. at¶ 6. IPLG then

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conducted a visual analysis of the Monoprice device by disassembling the device, inspecting the

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United States District Court
Northern District of California

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internal elements, and comparing the accused device to the ’097 utility patent claim. Id. at ¶ 6.

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IPLG also compared the patentable features of the D’215 design patent to the exterior of the

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Monoprice device and conducted an analysis of Kreative’s copyright infringement claim under the

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relevant standards. Id. at ¶ 6. In addition, Mr. Lee personally reviewed and analyzed a claim chart

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comparing the claims of the Kreative patents against the Monoprice device, and IPLG attorneys

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met with Mr. Lam extensively prior to filing this suit. Id. at ¶ 7. Based on this pre-filing

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investigation, Kreative and IPLG determined that they reasonably could expect to succeed on the

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asserted claims on the merits and had a plausible basis for instituting this case. Id. at ¶ 8.

Dkt. 63 (Lee Decl.) at ¶ 4.

IPLG’s pre-filing

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III.

Procedural History

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Kreative filed this action on June 27, 2014, asserting claims for direct and indirect

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infringement of the ’097 and D’215 patents, infringement of Kreative’s copyright, and unfair

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competition. Dkt. 1 at ¶¶ 25-59. Monoprice answered on July 23, 2014, denying all material

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allegations and seeking declaratory relief on Kreative’s allegations. Dkt. 11. Monoprice also

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requested declaratory judgment that the D’215 patent was invalid as anticipated by prior art. Id. at

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¶¶ 10-12. In the Joint Case Management Statement filed on October 10, 2014, Monoprice stated

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that several of the disputed issues were legal, not factual, in nature and appropriate for early

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determination without significant fact discovery. Dkt 24 at 8:21-24. Monoprice also proposed an
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early dispositive motion for summary judgment limited to the legal issues regarding Kreative’s

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asserted intellectual property rights. Id. at 9:6-9. Monoprice indicated that such a motion would

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not require significant discovery and would be filed by January 30, 2015. Id.

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In accordance with Patent Local Rule 3-1, Kreative provided Monoprice with its

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preliminary infringement contentions on October 31, 2014. Dkt. 31, Ex. E. In its contentions,

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Kreative accused Monoprice of infringing the sole claim of the ’097 utility patent and the

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ornamental design as shown in the D’215 design patent. Id. at 95. Regarding the ’097 utility

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patent, Kreative alleged both literal infringement and infringement under the doctrine of

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equivalents. Id. at 96-97.
With respect to literal infringement of the ’097 patent’s “circular conductors” limitation,

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Northern District of California

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Kreative alleged “that this claim element is literally embodied in the [Monoprice device]” because

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“the [Monoprice] electrical system is adapted to provide the electricity to each receptacle, via a

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common three ground, neutral and hot conductors . . . .” Id. at 96:17-23. Alternatively, Kreative

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asserted that the electrical conductors in the accused device were equivalent to the “circular

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conductors” limitation because “the [Monoprice] conductors are substantially circular, and they

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are shaped so as to achieve the same result of fitting into a conical base and providing power to the

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electrical receptacles.” Id. at 96:22-97:4.

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Regarding the “hingedly attached” cover limitation of the ’097 patent, Kreative’s
contentions alleged:

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[T]his claim element is equivalently met because any difference
between the claim element or limitation and the Accused
Instrumentalities is not a substantial difference. . . . [A]n unhinged
cover and a hinged cover perform exactly the same function, serve
exactly the same purpose in exactly the same way. Kreative
acknowledges the limitation of having a movable cover ‘hingedly
attached to the base’ was added by amendment, but contends that
amendment to this limitation only has tangential relation to the
patentability.

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Id. at 97:5-16.

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Kreative’s contentions did not explicitly state its theory for literal infringement of the

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“hingedly attached” cover limitation; however, it was clear that Kreative was alleging

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infringement under the doctrine of equivalents.
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On December 30, 2014, Monoprice moved for summary judgment of noninfringement

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regarding the ’097 and D’215 patents and Kreative’s copyright; Monoprice also moved for

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summary judgment of invalidity of the D’215 design patent. Dkt. 31. In its motion, Monoprice

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argued that the claim terms “circular” and “hingedly attached” were not explicitly defined by the

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’097 utility patent as having any definition other than their plain and ordinary meaning. Dkt. 31 at

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13-16. In addition, Monoprice argued that the use of the terms “circular” and “hingedly attached”

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in the ’097 utility patent was consistent with the plain and ordinary meaning of the terms. Id. In

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its opposition, Kreative maintained that it “should not be forced to offer its claim construction

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prematurely,” because “Kreative has not yet engaged any expert to assist with its claim

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construction and has thus not completed its claim construction fully.” Dkt. 37 (Opposition) at

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United States District Court
Northern District of California

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7:24-8:2; Dkt. 40 (Wolf Decl.) at ¶ 5. The parties’ claims relating to unfair competition were

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dismissed by stipulated order on January 5, 2015. Dkt. 35.

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On February 13, 2015, the Court held a hearing on Monoprice’s motion for summary

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judgment. Dkt. 47 (Hr’g Tr.). During the hearing, counsel for Kreative provided its proposed

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claim constructions for the ’097 utility patent terms, construing the term “circular” to mean “like a

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circle, round” and construing the term “hingedly attached” to mean “where one member is utilized

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to join two other members.”1 Dkt. 47 at 9:22-3 (“hingedly attached”), 12:21-22 (“circular”).

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On March 3, 2015, the Court granted Monoprice’s motion for summary judgment in its

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entirety, and judgment was entered in favor of defendant. Dkt. Nos. 48 (Order), 49 (Judgment).

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In the order, the Court held that the Monoprice device did not literally infringe each and every

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element in Claim 1 of the ’097 utility patent, specifically the “circular conductors” and “hingedly

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At the summary judgment hearing Kreative argued that the motion was premature, but provided
an approximation of its claim construction for both disputed terms. See Dkt. 47 at 4:13-23
(“‘Hingedly.’ So it's not just a hinge and it's not just hinged. It's hingedly. ‘ly.’”), 5:2-25 (“[O]ur
understanding is that a hinge need not be a classic hinge like you would see in a door. There's
something called a living hinge, which is if you say, like, a sport bottle that has a cap that has, like,
a rubber or plastic flexible hinge. And then there's something called a virtual hinge, which means
there's hinge-like motion.”), 8:23-9:6 (“I can tell you our literal construction now, if you like. I
can approximate it now. . . . But we basically say a system that required -- where one member is
utilized to join two other members. Something like that.”), 12:21-23 (“We contend that ‘circular’
means, once again, like a circle, round. And the conductors in the infringing device, the accused
device, are necessarily circle-like, round.”).
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attached” limitations. See Dkt. 48 at 5:19-6:7. In addition, the Court rejected Kreative’s theory of

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infringement under the doctrine of equivalents, finding that the “circular conductors” and

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“hingedly attached” limitations were added as a narrowing amendment to avoid prior art during

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prosecution of the ’097 patent. Id. at 6:9-10:19. Because Kreative failed to rebut the presumption

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of prosecution history estoppel, the Court held that Kreative was prevented from alleging

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infringement of equivalents and, as a result, there was no genuine issue as to whether the

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Monoprice device equivalently infringed the ’097 utility patent. Id. at 10:15-19.
Regarding the D’215 design patent, the Court found that it was not infringed by Monoprice

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and, in addition, the Court declared the patent invalid as anticipated by prior art. Id. at 10:27-18:8.

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While the D’215 patent claimed the conical surge protector design in its entirety, the scope of the

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Northern District of California

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claim was limited because several aspects of the design were functional, not ornamental, and

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therefore ineligible for design patent protection. Id. at 10:27-14:17. Due to the narrow scope of

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the D’215 design patent claim, the Court found that an ordinary observer, familiar with the prior

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art, could not find any ornamental similarity between the overall design claimed in the D’215

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design patent and the Monoprice device. Id. at 14:19-17:3. Addressing invalidity, the Court held

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that an ordinary observer, familiar with the prior art, would believe the overall design claimed by

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the D’215 patent to be the same as the prior art after the claim is properly construed to factor out

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its functional features. Id. at 17:5-18:8.

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Finally, with respect to the copyright infringement claim, the Court found Monoprice did

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not infringe because there were differences between the objective details in overall appearance

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when the protectable elements of the Kreative copyright were compared to the Monoprice

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packaging. See Dkt. 48 at 20:20-21:10. The Court disagreed with Kreative’s alternative theory

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that selected portions of its product packaging were eligible for copyright, concluding that these

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portions were dictated by their function to contain and display the Kreative surge protector. See

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id. at 21:11-27.

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After the Court granted summary judgment, Monoprice filed motions for sanctions

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pursuant to Fed. R. Civ. P. 11 and attorney fees pursuant to 35 U.S.C. § 285 and 17 U.S.C. § 505.

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Dkt. Nos. 50 (Sanctions), 53 (Fees).
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DISCUSSION

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I.

Attorney Fees Under 35 U.S.C. § 285

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Monoprice moves for an award of attorney fees under 35 U.S.C. § 285 based on the

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substantive lack of strength of Kreative’s litigating position. In light of the standards discussed in

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the Supreme Court’s decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.

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1749 (2014), the Court finds that this case is not “exceptional” when considering the totality of the

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circumstances, and that Monoprice’s motion for an award of attorney fees should be denied.

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A.

Legal Standard for Exceptional Cases Under Octane Fitness

“The court in exceptional cases may award reasonable attorney fees to the prevailing

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party.” 35 U. S. C. § 285. “When deciding whether to award attorney fees under § 285, a district

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court engages in a two-step inquiry.” MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915

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(Fed. Cir. 2012). First, the court must determine whether the prevailing party has proven that the

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case is exceptional. Id. “If the district court finds that the case is exceptional, it must then

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determine whether an award of attorney fees is justified.” Id. at 916 (citing Cybor Corp. v. Fas

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Techs. Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc)).

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In Octane Fitness, the Supreme Court held that “an ‘exceptional’ case is simply one that

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stands out from others with respect to the substantive strength of a party’s litigating position

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

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which the case was litigated.” Octane Fitness, 134 S. Ct. at 1756 (stating that “exceptional”

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means “uncommon,” “rare,” or “not ordinary”). The Court elaborated that “[d]istrict courts may

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determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion,

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considering the totality of the circumstances.” Id. In determining whether to award fees, district

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courts may consider a “nonexclusive” list of factors, including “frivolousness, motivation,

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objective 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. at 1756,

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n.6 (quoting Forgerty v. Fantasy, 510 U.S. 517, 534, n.19 (1994)). There is no precise rule or

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formula for determining whether to award attorney fees, but instead equitable discretion should be
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exercised in light of the above considerations. Id. at 1756.

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The standard of proof for entitlement to fees under § 285 must be shown by a

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preponderance of the evidence, rather than clear and convincing evidence as before. See Octane

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Fitness, 134 S. Ct. at 1758. Finally, a district court’s determination of whether to award attorney

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fees under 35 U.S.C. § 285 is reviewed for abuse of discretion. Highmark Inc. v. Allcare Health

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Mgmt. Sys., 134 S. Ct. 1744, 1749 (2014).

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Literal and Equivalent Infringement of the ’097 Utility Patent

B.

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To show that the case is “exceptional” under § 285, Monoprice must show that it “stands

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out from others.” Octane Fitness, 134 S. Ct. at 1756. Monoprice’s motion is primarily based on

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Northern District of California

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the fact that Kreative made losing arguments that the Court disagreed with; however, Octane made

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clear that attorney fees are not to be used as a penalty for failure to win. See id. at 1753.

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Monoprice asserts that Kreative did not present reasonable claim constructions under which there

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was a plausible infringement allegation and that Kreative advanced a frivolous argument to

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attempt to rebut the presumption of prosecution history estoppel. See Dkt. 31 (Motion) at 9:15-28,

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10:14-24.

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With regard to the ’097 patent, the parties disputed whether the accused Monoprice device

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literally or equivalently embodied two limitations in Claim 1: “a circular ground conductor, a

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circular neutral conductor, a circular hot conductor” and “hingedly attached.” Dkt. 1-1, Ex. A (the

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’097 patent) at col. 4:55-6:7. The Court first reviews Kreative’s allegations regarding literal

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infringement. In alleging literal infringement, Kreative proposed that the Court construe the term

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“circular” to mean “like a circle, round” and the term “hingedly attached” to mean “where one

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member is utilized to join two other members.”

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attached”), 12:21-22 (“circular”). Monoprice disagreed, arguing that both terms should be given

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their plain and ordinary meaning. Dkt. 31 (Motion) at 13-16. Monoprice now alleges that this

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case is exceptional because Kreative’s constructions “did not establish any reasonable argument

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for infringement” and that “[Kreative] should have been prepared to present reasonable claim

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constructions under which there was a plausible infringement allegation.” Id. at 9:15-27.
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Dkt. 47 (Hr’g Tr.) at 9:22-3 (“hingedly

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In response, with respect to the “circular conductors” limitation, Kreative argues that its

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construction of the term “circular” was a reasonable infringement allegation because “the

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conducting wires in the accused device are connected to the electrical receptacles in a circular

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fashion because the receptacles are arranged circularly about the conical surface of the accused

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device.” Dkt. 62 (Opposition) at 5:17-6:2. And with respect to the “hingedly attached” limitation,

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Kreative explains that its proposed construction “did not require the cover in the patented

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invention to be physically attached to the hub of the device; the idea that of ‘hinged-like’ rotation

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of the cover off the hub was a reasonable construction even if the Court found it unpersuasive.”

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Id. at 6:3-17. Thus, Kreative argues its constructions of the terms supported a rational theory of

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literal infringement. Id.

United States District Court
Northern District of California

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Monoprice’s motion is based primarily on the fact that Kreative made losing arguments.

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Kreative’s theories that the accused product embodied a “virtual hinge” and electrical conductors

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arranged in a “circular fashion” may have been weak, but the Court does not find them to be

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frivolous. While the Court ultimately disagreed with Kreative’s literal infringement allegations,

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the Court concludes that Kreative’s proposed constructions were objectively reasonable and that

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Kreative put forth a plausible, albeit losing infringement allegation. See Octane Fitness, 134 S.

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Ct. at 1753 (fee awards are not to be used “as a penalty for failure to win a patent infringement

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suit,” but are appropriate only “in exceptional circumstances.”).

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The Court now addresses the objective reasonableness of Kreative’s infringement claim

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under the doctrine of equivalents. As an alternative to literal infringement, Kreative stated in its

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infringement contentions and at summary judgment that Monoprice equivalently infringed the

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“circular conductors” and “hingedly attached” limitations because the accused device has

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electrical conductors and a cover that meet the standard for equivalency. Dkt. 48 (Order Granting

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Summary Judgment) at 9:9-10:19; Dkt. 31, Ex. E (Infringement Contentions) at 96-97. Kreative

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did not ignore prosecution history estoppel, as Monoprice alleges. Rather Kreative acknowledged

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upfront in its infringement contentions that the “hingedly attached” limitation was added by

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amendment, but argued that the amendment “only has a tangential relation to the patentability”

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and therefore should fall under an exception to estoppel. Id. at 97:5-16. Now, in response to the
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present motion, Kreative again argues that the amendment to add “circular conductors” and

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“hingedly attached” met an exception to the presumption because “the rationale underlying the

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amendment had no more than a tangential relation to the equivalent in question.”2 Dkt. 62

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(Opposition) at 8:9-15.
With the benefit of hindsight, Monoprice claims that Kreative’s argument in rebuttal to

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prosecution history estoppel was frivolous, thereby making this case stand out as exceptional.

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Dkt. 53 (Motion) at 10:14-24. The Court disagrees. The Court devoted nearly five pages of the

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Summary Judgment Order to analyze Kreative’s infringement claim under the doctrine of

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equivalents and the materiality of prosecution history estoppel. See Dkt. 48 (Order Granting

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Summary Judgment) at 6-10. Again, though the Court was unpersuaded by Kreative’s arguments

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Northern District of California

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at summary judgment, the Court finds that Kreative’s allegation of infringement under the

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doctrine of equivalents and rebuttal to prosecution history estoppel were plausible and not

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objectively baseless.

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Infringement and Validity of the D’215 Design Patent

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C.

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Monoprice alleges that this case is “exceptional” because Kreative’s design patent

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infringement claim included shifting theories and flawed arguments related to validity of the

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D’215 design patent. Dkt. 53 (Motion) at 10:25-13:2. In support, Monoprice points to the fact

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that Kreative’s infringement contentions alleged infringement based on the whole surge protector

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design as shown in the D’215 patent. Id.; see also Dkt. 31-6 at 105-109. Later, in summary

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judgment briefing, Kreative narrowed the scope of the D’215 patent claim from the whole design

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to solely the USB port location. Dkt. 53 at 12:7-13:2. Monoprice also notes that the D’215 patent

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was invalidated based on Kreative’s own public display at a 2008 trade show. Since the evidence

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of the public display was produced by Kreative at the time it served the infringement contentions,

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Monoprice argues, Kreative should have known there was a serious issue as to invalidity. Id. at

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Kreative cites Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 734 (2002),
in support of its position that when a narrowing amendment is adopted to preserve a claim, the
presumption of estoppel can be overcome if the patentee establishes that “the rationale underlying
the amendment bears no more than a tangential relation to the equivalent in question.”
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12:9-16; see also Dkt. 31-6, Exhibit F (Kreative Production).
Kreative asserted a design patent claim that was presumably valid; therefore its
infringement claim was plausible and cannot be considered wholly frivolous.

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granted the D’215 design patent, even though the ’097 utility patent disclosed a similar design and

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was cited as prior art in the design patent application. However, because the prior art ’097 utility

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patent and 2008 public display disclosed similar designs, there was a dispute between the parties

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over the scope of the D’215 design patent. Id. at 15:21-16:2. In response to Monoprice’s

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arguments at summary judgment that the prior art disclosed similar designs, Kreative narrowed the

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scope of the D’215 design patent claim in an effort to protect the validity of the patent. See Dkt.

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37 at 14:15-15:7. Kreative argued that in light of the prior art designs, “the clearly patented design

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Northern District of California

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Kreative was

feature of the D’215 patent was the ornamental placement of the USB port.” Id.; see also Dkt. 62

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at 9:10-28. Although the Court ultimately disagreed with Kreative, finding the USB port and its

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location to be dictated by their function and not protected by the D’215 design patent, Kreative’s

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position was not objectively baseless. Dkt. 48 at 16:10-17:3. After factoring out the USB port,

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the Court held the D’215 patent was invalid in view of the prior art 2008 public display. Id. at

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17:20-18:8. There is no reason to expect that Kreative, as the owner of an issued design patent,

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would conclude at the outset of the case that the patent was invalid, especially when Kreative’s

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attorneys performed a pre-suit investigation and prepared a claim chart. Dkt. 63 (Lee Decl.) at ¶ 6.

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The Court finds that Kreative asserted a presumably valid D’215 design patent, the parties

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disputed the scope of the design patent in light of the prior art, and Kreative honed its theory to

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protect the validity of its patent. The fact that Kreative put forth a losing argument regarding the

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ornamental aspects of the USB port location, and that the D’215 patent was ultimately invalidated

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does not convince the Court that Kreative’s position was objectively unreasonable or baseless.

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D.

Conclusion

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After consideration of the totality of the circumstances in this action, the Court concludes

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that this case does not “stand out from others” with respect to the substantive strength of

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Kreative’s litigating position considering both the governing law and the facts of the case. Thus,
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the Court, exercising its sound discretion, finds that the present action is not an “exceptional” case

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warranting an award of attorney fees under 35 U.S.C. § 285. See Octane Fitness, 134 S. Ct. at

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1756. The motion is DENIED.

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II.

Attorney Fees Under 17 U.S.C. § 505

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Monoprice argues that it is entitled to attorney fees under 17 U.S.C. § 505 for successfully

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defending itself against Kreatives’s copyright infringement claim. Dkt. 53 (Motion) at 13:5-6.

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After considering the relevant factors, the Court finds Kreative’s copyright claim to be objectively

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reasonable and declines to award attorney fees.

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Northern District of California

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A.

Legal Standard for Costs and Attorney Fees in Copyright Cases

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Attorney fees are not awarded in copyright cases as a matter of course.

Fogerty v.

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Fantasy, Inc., 510 U.S. 517, 533-34 (1994). “[A]ttorney’s fees are to be awarded to prevailing

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parties only as a matter of the court’s discretion.” Id. at 534. Specifically, “[s]ection 505 of the

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Copyright Act gives discretion to district courts to grant to the prevailing party a ‘reasonable

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attorney’s fee.’” SOFA Entm’t, Inc. v. Dodger Prods., Inc., 709 F.3d 1273, 1280 (9th Cir. 2013)

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(quoting 17 U.S.C. § 505). The most important factor for the Court to consider in deciding

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whether a fee award is appropriate “is whether an award will further the purposes of the

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[Copyright] Act.” Id.

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The primary purpose of the Copyright Act is to “encourage the production of original

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literary, artistic, and musical expression for the good of the public.” Id. (quoting Fogerty, 510

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U.S. at 524); see also Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349-50 (1991)

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(“The primary objective of copyright is not to reward the labor of authors, but ‘[t]o promote the

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Progress of Science and useful Arts.’” (alteration in original)); Twentieth Century Music Corp. v.

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Aiken, 422 U.S. 151, 156 (1975) (“But the ultimate aim is, by this incentive, to stimulate artistic

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creativity for the general public good.”). The Court’s discretion in this matter can be guided by

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“five non-exclusive factors: (1) the degree of success obtained; (2) frivolousness; (3) motivation;

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(4) the objective unreasonableness of the losing party’s factual and legal arguments; and (5) the
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need, in particular circumstances, to advance considerations of compensation and deterrence.”

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Seltzer v. Green Day, Inc., 725 F.3d 1170, 1180-81 (9th Cir. 2013).

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Kreative’s Claim for Copyright Infringement

B.

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The Court cannot say that awarding attorney fees and costs in this case furthers the

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purposes of the Copyright Act. Although the Court granted summary judgment on the copyright

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infringement claim, “the mere fact that [the plaintiff] lost cannot establish [its] objective

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unreasonability.” Seltzer, 725 F.3d at 1181. Moreover, awarding attorney fees in this action

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would not “encourage the production of original literary, artistic, and musical expression for the

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good of the public.” SOFA Entm’t, 709 F.3d at 1280. The Court finds that Kreative’s copyright

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United States District Court
Northern District of California

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infringement allegation was objectively reasonable and raised a genuine dispute between the

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parties regarding the scope of Kreative’s copyright.

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On June 4, 2014, Kreative registered its product packaging as a sculptural work and

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secured Registration No. VA 0001908609. Dkt. 1 (Complaint) at ¶¶ 17-18. Kreative submitted to

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the Copyright Office a deposit specimen which comprised photographs of the complete packaging

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for Kreative’s surge protector. See Dkt. 31-1 (Sganga Decl.) at ¶ 4; Dkt. 31-5, Ex. D at 85-93.

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Kreative obtained a valid registration for its sculptural work and enlisted IPLG as legal counsel to

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conduct an analysis of Kreative’s copyright and the accused Monoprice device. Dkt. 63 (Lee

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Decl.) at ¶¶ 8-9. Prior to filing suit and after conducting a review and analysis of the Monoprice

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device packaging as compared with Kreative’s copyright registration under the relevant standards

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for copyright infringement, Kreative determined that it reasonably could expect to succeed on the

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asserted claim on the merits. Id.

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Monoprice argues that it is entitled to attorney fees because Kreative “did not rely on

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sound legal principles or facts that could support its allegation” and the case “was legally and

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factually unreasonable under any theory it advanced.” Dkt. 53 (Motion) at 14:7-12, 14:21-27.

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Monoprice also asserts that Kreative’s claims were baseless because no reasonable litigant could

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realistically expect success on the merits.

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registered its product packaging as a lawful sculptural work and was granted copyright protection.

Id.

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The Court disagrees.

Kreative successfully

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Moreover, Kreative’s counsel engaged in a factual and legal pre-filing investigation to conclude

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that it “reasonably could expect to succeed on the asserted claims on the merits,” and at the

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summary judgment stage, Kreative argued that certain elements of its product packaging were

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eligible for copyright protection, citing two cases in support of its argument. Dkt. 63 (Lee Decl.)

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at ¶ 8; Dkt. 62 (Opposition) at 12:4-14:4.
While the Court did not find Kreative’s arguments or cited case law persuasive, the Court’s

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decision required a detailed analysis of the protectable elements and scope of Kreative’s registered

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copyright. Dkt. 48 (Order) at 21:7-10. Although Kreative was unsuccessful on its copyright

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infringement claim, “[t]here is simply no reason to believe that [plaintiff] ‘should have known

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from the outset that [its] chances of success in this case were slim to none.’” Seltzer, 725 F.3d at

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United States District Court
Northern District of California

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1181. Accordingly, after a review of the relevant factors, the Court finds Kreative’s copyright

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claim to be objectively reasonable and declines to exercise its discretion and award defendant

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attorney fees under 17 U.S.C. § 505. The motion is DENIED.

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III.

Sanctions Pursuant to Fed. R. Civ. P. 11
Monoprice also moves for sanctions under Rule 11 of the Federal Rules of Civil

Procedure. Dkt. 51. The motion is DENIED.

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The Merits of Monoprice’s Rule 11 Claim

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A.

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Under Federal Rule of Civil Procedure 11, a court may impose sanctions against an

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attorney, law firm, or party when a complaint is filed for an improper purpose such as harassment

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or delay, when the claims in the complaint are unwarranted under existing law or a nonfrivolous

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argument for extension of the law, or when the allegations in the complaint are without evidentiary

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support and unlikely to have evidentiary support after further investigation and discovery. See

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Fed. R. Civ. P. 11(b)-(c). In the Ninth Circuit, a frivolous argument is one that is “legally or

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factually baseless” under an objective standard and made “without a reasonable and competent

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inquiry.” Q–Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1299 (Fed. Cir. 2004) (citing

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Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002)).
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Monoprice argues that Kreative had no basis to bring this suit, and despite being presented

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with evidence of flaws in its allegations, Kreative continued to assert meritless claims making

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Rule 11 sanctions appropriate. Monoprice’s arguments are substantively identical to those raised

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in its motion for attorney fees pursuant to 35 U.S.C. § 285 and 17 U.S.C. § 505. In ruling on that

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motion, the Court found that Kreative’s positions were not frivolous or objectively baseless. The

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Court reaches the same conclusion with respect to sanctions under Rule 11, and for the same

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reasons. Accordingly, the Court rejects Monoprice’s argument that Kreative’s claims were so

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baseless as to violate Rule 11.3 The Motion is DENIED.

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CONCLUSION

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United States District Court
Northern District of California

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For the foregoing reasons, the Court DENIES Monoprice’s motions for attorney fees under

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35 U.S.C. § 285 and 17 U.S.C. § 505 and sanctions under Rule 11. Dkt. Nos. 51, 53.

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IT IS SO ORDERED.

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Dated: April 30, 2015

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________________________
SUSAN ILLSTON
United States District Judge

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Because the Court denied Monoprice’s Rule 11 claim based on the merits, the Court need not
address the parties’ arguments regarding the timeliness of filing the motion and service.
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