Linex Technologies, Inc. v. Hewett-Packard Company et al

Filing 413

ORDER REGARDING BRIEFING SCHEDULE ( 345 , 346 ) MOTIONS FOR ATTORNEYS FEES. Signed by Judge Claudia Wilken on 9/15/2104. (ndr, COURT STAFF) (Filed on 9/15/2014)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 LINEX TECHNOLOGIES, INC., 5 Plaintiff, 6 7 8 9 United States District Court For the Northern District of California ORDER REGARDING BRIEFING SCHEDULE FOR MOTIONS FOR ATTORNEYS’ FEES v. HEWLETT-PACKARD COMPANY; APPLE COMPUTER INC.; ARUBA NETWORKS, INC.; MERU NETWORKS, INC.; and RUCKUS WIRELESS, INC., (Docket No. 345, 346) Defendants. 10 11 No. C 13-159 CW ________________________________/ 12 On May 20, 2014, the Court entered judgment in favor of 13 Defendants HP, Apple, Aruba, Meru, and Ruckus and against 14 Plaintiff Linex. Docket No. 334. On June 10, 2014, Aruba, Meru, 15 and Ruckus (collectively, the access point or AP manufacturers) 16 filed a motion seeking an award under 35 U.S.C. § 285 of all of 17 their attorneys’ fees. Docket No. 345. HP and Apple filed a 18 similar motion, but sought only attorneys’ fees associated with 19 the asserted claims that the Court found to be valid but not 20 infringed. Docket No. 346. Linex opposes both motions and argues 21 in the alternative that the issue of attorneys’ fees should be 22 deferred until the Federal Circuit decides the appeal of the 23 Court’s order. On July 31, 2014, the Court held a hearing. Based 24 on the papers and arguments of counsel, the Court GRANTS HP and 25 Apple’s motion and GRANTS the AP manufacturers’ motion in part. 26 / / 27 / / 28 BACKGROUND 1 2 In June 2007, Linex filed suit in the Eastern District of 3 Texas, asserting infringement of U.S. Patent No. 6,757,322 (the 4 ‘322 patent) against fifteen entities that were not sued here. 5 Linex Techs., Inc. v. Belkin Int’l, Case No. 2:07-cv-00222 JDL 6 (E.D. Tex. June 1, 2007) (the Texas case). In the Texas case, 7 Linex based its infringement claims on the same 802.11n standard 8 9 invoked here.1 The Texas court issued a claim construction order, United States District Court For the Northern District of California 10 construing “spread spectrum signals” as “signals processed with 11 one or more codes that distributes each signal across the 12 available bandwidth.” 13 thereafter, Linex settled its claims with each of the defendants 14 Docket No. 235-16 at 22. Shortly for lump sum payments. 15 After the Texas ruling, Linex went back to the United States 16 Patent and Trademark Office (USPTO) to seek reissues of some of 17 18 the continuation patents of the ‘322 patent. The USPTO can 19 reissue a patent in accordance with an amended application when a 20 patent was erroneously deemed wholly or partly inoperative or 21 invalid, or because a patentee claimed more or less than he had a 22 right to claim in the patent. 23 35 U.S.C. § 251. No new subject matter may be introduced in the reissue application. Id. In June 24 25 26 1 27 28 The Wi-Alliance introduced the 802.11n WiFi certification in 2007. Bratic Report ¶ 53. The standard was formally adopted in 2009. Id. 2 1 2008,2 Linex filed an application for RE 42,219 (the ‘219 patent), 2 a reissue patent for “Multiple-input and multiple-ouput (MIMO) 3 spread spectrum system and method.” 4 March 2011. 5 RE 43,812 (the ‘812 patent), which had the same title as the ‘219 6 The ‘219 patent was issued in Also in March 2011, Linex filed an application for patent and covered similar subject matter. The ‘812 patent issued 7 in November 2012. 8 9 In May 2011, Linex filed a petition at the International United States District Court For the Northern District of California 10 Trade Commission (ITC) requesting relief for Defendants’ 11 infringement of the ‘322 and ‘219 patents (the ITC Investigation). 12 The ITC can issue an exclusion order halting imports and exports 13 of an infringing product, but cannot award compensatory damages. 14 At around the same time, Linex filed this patent infringement case 15 against Defendants in Delaware, seeking compensatory damages. The 16 parties agreed to stay the litigation pending resolution of the 17 18 19 20 ITC Investigation. During the ITC Investigation, the staff attorney issued an opinion on claim construction, validity, infringement, and 21 22 23 24 25 26 27 2 Defendants point out that their products were on sale as of 2006. Bratic Report ¶ 40. The Wi-Alliance introduced the 802.11n standard in 2007 and it was formally adopted in 2009. Id. ¶ 53. By contrast, the ‘219 patent and ‘812 patent were issued in 2008 and 2011. 28 3 1 domestic industry regarding the ‘322 and ‘219 patents.3 The staff 2 attorney found that “spread spectrum signals” should be construed 3 to mean “signals corresponding to data which has been processed 4 with one or more codes that distributes each signal across a 5 bandwidth greater than the bandwidth required to carry the data.” 6 Docket No. 375, Ex. A at 17. In other words, like this Court did 7 later, the staff attorney found that spread spectrum signals 8 9 resulted from the processing of data with codes to increase the United States District Court For the Northern District of California 10 bandwidth of the data signal. 11 opined that he did “not expect the evidence to show infringement 12 of the asserted claims of the ‘322 and ‘219 patents.” 13 The staff attorney also determined that there was no domestic 14 industry. The staff attorney accordingly Id. at 32. Two business days after the staff attorney’s opinion 15 was published, Linex voluntarily dismissed the ITC action. 16 Upon the parties’ stipulation, the Delaware court lifted the 17 18 stay. Docket No. 28. The case was eventually transferred to this 19 district. Docket No. 96. After the ‘812 patent issued, Linex 20 added it to the suit. 21 withdrew a number of asserted claims, including all claims of the 22 ‘322 patent. After a settlement conference, Linex See Docket No. 327. 23 24 25 26 27 28 3 The staff attorney’s position may or may not be adopted by the ALJ in his or her initial determination. The initial determination would then be reviewed by the ITC Commission. ITC decisions are not necessarily binding on the district court. Texas Instruments Inc. v. U.S. Int’l Trade Comm’n, 851 F.2d 342, 343 (Fed. Cir. 1988). 4 1 On May 20, 2014, the Court construed the disputed claim terms 2 and entered summary judgment in favor of Defendants and against 3 Linex. 4 general categories: (a) “spread spectrum signals,” (b) “codes,” 5 (c) “combining” terms, and (d) “separating” terms. 6 The disputed claim terms could be grouped into four (MSJ Order), 5. Docket No. 333 The Court adopted constructions similar to 7 Linex’s proposals for “codes,” the “combining” terms, and the 8 9 “separating” terms, but adopted Defendants’ proposed construction United States District Court For the Northern District of California 10 for “spread spectrum signals.” 11 the asserted claims containing the term “spread spectrum signals” 12 –- claims 121 and 131-132 of the ‘219 patent and claims 101-102 of 13 the ‘812 patent –- the Court found the claims to be valid as 14 Id. at 6, 11, 15, 19. Regarding distinct from the prior art, but not infringed by Defendants’ 15 accused orthogonal frequency division multiplexing (OFDM) 16 products. Id. at 29-33. As for the remaining asserted claims not 17 18 containing “spread spectrum signals” but referring generally to 19 “codes” and “signals” -– claims 97 and 107-108 of the ‘219 patent 20 and claims 97-98 of the ‘812 patent -– the Court found that these 21 claims lacked the spread spectrum limitation distinguishing them 22 from the prior art, and so these claims were invalid. 23 Id. at 35. The Court therefore entered judgment in favor of Defendants on all 24 asserted claims. 25 26 Defendants now seek an award of attorneys’ fees under 35 27 U.S.C. § 285. HP and Apple argue that the case is exceptional 28 because this is the third time Linex has pressed the claims the 5 1 Court found to be valid but not infringed, despite indications of 2 their substantive weakness against the 802.11n standard. 3 manufacturers, who collectively incurred almost four million 4 dollars defending against Linex, seek reimbursement for all of 5 their attorneys’ fees. 6 The AP LEGAL STANDARDS 7 Under 35 U.S.C. § 285, the court “in exceptional cases may 8 9 award reasonable attorney fees to the prevailing party.” In United States District Court For the Northern District of California 10 several cases leading up to this year, the Federal Circuit 11 admonished that a district court should not award fees unless it 12 finds litigation-related misconduct that would independently be 13 sanctionable, or litigation that was both “brought in subjective 14 bad faith” and “objectively baseless.” Brooks Furniture Mfg., 15 Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 16 2005). Examples of litigation-related misconduct include “fraud 17 18 or inequitable conduct in procuring the patent”; “vexatious or 19 unjustified litigation”; and “objectively baseless” arguments that 20 “no reasonable litigant could believe would succeed.” 21 LLC v. Google, Inc., 631 F.3d 1372, 1378 (2011). 22 23 Id.; iLOR, This year, however, the United States Supreme Court reviewed two fee claims and altered the standard for the determination 24 substantially. The Supreme Court found the Brooks Furniture test 25 26 to be unnecessarily rigid and instead opted for a more “holistic, 27 equitable approach.” Octane Fitness, LLC v. ICON Health & 28 Fitness, Inc., 134 S. Ct. 1749, 1754 (2014). 6 The Court held that 1 an “‘exceptional’ case is simply one that stands out from others 2 with respect to the substantive strength of a party's litigating 3 position (considering both the governing law and the facts of the 4 case) or the unreasonable manner in which the case was litigated.” 5 Id. at 1756. 6 There is “no precise rule or formula” for this determination and so the district court should consider the 7 totality of the circumstances. Id. Because the exceptional case 8 9 determination may be informed by the district court’s unique United States District Court For the Northern District of California 10 insight into the manner in which the case was litigated, it is 11 within the sound discretion of the district court. 12 v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1748 (2014). 13 14 Highmark Inc. DISCUSSION As a preliminary matter, Linex’s request that the Court defer 15 consideration of the fees issue is without merit. If this Court 16 decides the fees issue now, the Federal Circuit may consider the 17 18 overlapping summary judgment and fees issues together, saving 19 judicial resources. 20 (Fed. Cir. 2003) (opposing piecemeal appeals). 21 22 23 See Nystrom v. TREX Co., 339 F.3d 1347, 1350 Defendants contend that this case is exceptional based on Linex’s assertion of the claims containing the “spread spectrum” term against the OFDM technology practiced by Defendants. Two 24 other fora, the Eastern District of Texas and the ITC, previously 25 26 decided against Linex, construing “spread spectrum” as requiring 27 “spreading” of the bandwidth of the data. 28 have known that it could not use the patent claims limited to 7 Linex therefore should 1 “spread spectrum” to capture devices practicing the distinct and 2 more complex OFDM technology. 3 press those patent claims against Defendants in the present suit. 4 5 6 Linex nevertheless continued to Linex responds that Defendants overemphasize the strength and importance of the two prior decisions. Although the Texas court’s construction of “spread spectrum signals” was almost identical to 7 this Court’s construction, Linex argues that the Texas court did 8 9 not emphasize the “unknown” quality of the data as this Court did. United States District Court For the Northern District of California 10 Regarding the ITC action, the staff attorney’s opinion was not 11 final. 12 Texas defendants soon after that court’s claim construction, and 13 withdrew its ITC claims immediately after the staff attorney’s 14 Nevertheless, the fact that Linex settled with all of the opinion was published, indicates that these opinions were more 15 important than Linex now argues. 16 Even though neither forum’s determination was binding on this 17 18 Court’s determination as res judicata, Linex was not free to 19 pursue another case targeting the same technology with impunity. 20 Patent litigation is a burdensome venture for all parties 21 involved. 22 before bringing suit. 23 Thus, plaintiffs must conduct careful investigation See Lumen View Tech., LLC v., Inc., 2014 WL 2440867, at *6 (S.D.N.Y.) (finding 24 the case to be “exceptional” because “the most basic pre-suit 25 26 27 28 8 1 2 3 investigation would have revealed” that the infringement allegations had no merit).4 Linex should have known that its spread spectrum claims would 4 not succeed against OFDM technology. 5 patents, Donald Schilling, himself characterized spread spectrum 6 The inventor of Linex’s in his publication as: 7 8 9 United States District Court For the Northern District of California 10 a means of transmission in which the signal occupies a bandwidth in excess of the minimum necessary to send the information; the band spread is accomplished by means of a code which is independent of the data, and a synchronized reception with the code at the receiver is used for despreading and subsequent data recovery. 11 Docket No. 235-17 (Schilling Tutorial) at 2. If Linex did not 12 13 know initially that its spread spectrum claims could not be 14 stretched to cover OFDM technology, it should have known after it 15 litigated those claims in Texas and in the ITC. 16 fora to adopt its overbroad definition of “spread spectrum 17 signals,” to no avail. 18 19 Linex urged two Although Linex argues that it still did not know that those claims were frivolous, its actions suggest otherwise. In 2008, 20 after an unfavorable claim construction decision in Texas, Linex 21 22 23 24 25 26 27 28 returned to the USPTO to broaden the scope of its patents. 4 Linex See also Fed. R. Civ. P. 11; cf. Molski v. Evergreen Dynasty Corp., 500 F.3d 1047, 1051 (9th Cir. 2007) (listing factors of Ninth Circuit’s vexatious litigant standard, including whether litigant had a history of bringing harassing and duplicative suits, litigant’s motive for pursuing the litigation, whether litigant had a good faith expectation of prevailing, whether litigant caused unnecessary expense to the parties or placed needless burden on the courts, and whether sanctions would be necessary to protect the parties). 9 1 deleted the term “spread spectrum signals” from several of the 2 claims in the ‘219 patent. 3 patentee’s intent “broadly to cover spread spectrum processing of 4 all types within the conventional meaning of ‘spread spectrum’”). 5 In 2011, Linex did the same with the ‘812 patent. 6 See Docket No. 235-22 (stating That Linex chose to broaden certain claims of the ‘219 and ‘812 patents 7 suggests that it knew about the substantive weakness of its spread 8 9 spectrum claims. Moreover, Schilling admitted that, in drafting United States District Court For the Northern District of California 10 the reissue patents, he intended to cover systems that he did not 11 invent. 12 chance” and drafted claims that might cover “any spread spectrum 13 system,” including some he might not know about). 14 Schilling Depo., 257:6-21 (stating that he “took a Because the context of a spread spectrum system was integral to patentability, 15 this was improper. MSJ Order at 22-29 (holding that the claims 16 lacking the “spread spectrum signals” limitation were invalid 17 18 19 20 because every limitation was disclosed by the Paulraj prior art reference). Linex next argues that, in spite of the three fora’s narrow 21 interpretation of spread spectrum technology, it had a reasonable 22 case for infringement. 23 In this case, Linex argued that the HT- LTF, a preordained training field sent before the data signal, was 24 the “data” required by the Court’s construction to create a spread 25 26 spectrum signal. Linex’s argument was contradicted by its own 27 infringement expert, who characterized the HT-LTF as “test and 28 control data” more analogous to a code, rather than “message 10 1 data.” MSJ Order at 33. Although Linex hypothesized that even 2 test and control data could be “data” under the patents-in-suit, 3 the Court rejected this theory because the specification makes 4 clear that “data” is what is intended to be communicated to the 5 recipient. 6 Id. Further, even if the Texas court did not emphasize that “data” is the content or message and is distinct 7 from a “code,” it did not need to do so because those are the 8 9 generally accepted meanings of the terms within the art, and United States District Court For the Northern District of California 10 nothing in the patent suggests another meaning. 11 7-8; Schilling Tutorial at 2 (discussing a code as “independent of 12 the data”). 13 Court’s construction was weak. 14 See MSJ Order at Accordingly, Linex’s infringement position under the The AP manufacturers contend that Linex’s unreasonable expert 15 damages report is an alternative ground for finding the case 16 exceptional. They argue that the unreasonableness of Linex’s 17 18 damages demand is an example of its allegedly abusive litigation 19 strategies. 20 26 (Fed. Cir. 2011) (district court’s finding that patentee’s bad 21 faith settlement tactics supported ruling that the case was 22 exceptional). 23 Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1324- Because the record upon which a decision on damages would be made was never fully developed, the Court cannot 24 determine whether Linex’s damages demand was unreasonable. For 25 26 27 example, the Court cannot determine on this record whether the patented feature drove demand of the entire product. 28 11 1 In sum, Linex knew or should have known that its spread 2 spectrum claims were meritless as asserted against OFDM 3 technology. 4 several fora’s decisions rejecting its litigation arguments, show 5 that Linex knew the limits of the spread spectrum technology that 6 Linex’s actions and admissions, considered alongside was crucial to the novelty of its patents. Linex exhibited “an 7 overall vexatious litigation strategy” by continuing to hold these 8 9 groundless claims over Defendants’ heads to increase potential United States District Court For the Northern District of California 10 settlement amounts. 11 Ltd., 726 F.3d 1359, 1367 (Fed. Cir. 2013) cert. denied, 134 S. 12 Ct. 1546 (2014) (affirming district court’s award of attorney’s 13 fees). 14 Monolithic Power Sys., Inc. v. O2 Micro Int'l But “the appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably 15 based in law and fact and to litigate those cases in good faith.” 16 Eon-Net LP, 653 F.3d at 1328. Because Linex repeatedly attempted 17 18 to broaden the reach of its patents to capture technology it knew 19 it did not invent, this case is exceptional. 20 attorneys’ fees on the spread spectrum claims is warranted. 21 22 23 An award of Defendants concede that they have not provided detailed descriptions of the billed time and tasks that can properly be attributed to the spread spectrum claims. Nor do they justify the 24 rates at which the attorneys billed. Both are required under 25 26 Ninth Circuit case law. Welch v. Metro Life Ins. Co., 480 F.3d 27 942, 948 (9th Cir. 2007). Because the Court has now determined 28 that only the fees fairly attributable to the spread spectrum 12 1 claims can be recovered, each Defendant is directed to compile an 2 accounting of fees limited to work on these claims, in sufficient 3 detail to satisfy the Ninth Circuit’s standard for fee awards. 4 Defendants’ counsel’s hourly rates must also be disclosed and 5 justified. 6 Defendants’ accounting of fees must be submitted no later than fourteen days from the issuance of this order. 7 Plaintiff may respond seven days thereafter, addressing only the 8 9 United States District Court For the Northern District of California 10 11 12 13 amount of fees claimed. that. Defendants may reply seven days after The matter will be decided on the papers. IT IS SO ORDERED. Dated: 9/15/2014 CLAUDIA WILKEN United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13

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