Industrial Technology Research Institute v. LG Electronics Inc. et al

Filing 195

ORDER denying ITRI's 162 Motion for Sanctions; denying as moot LGE's 189 Motion for Leave to File Sur-Reply. The hearing set for 4/3/2015 is vacated. Signed by Judge Gonzalo P. Curiel on 4/1/2015. (jah)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 INDUSTRIAL TECHNOLOGY RESEARCH INSTITUTE, Plaintiff/Counterclaim Defendant, v. 18 19 20 21 (1) DENYING ITRI’S MOTION FOR SANCTIONS; (2) DENYING AS MOOT LGE’S MOTION FOR LEAVE TO FILE SUR-REPLY; 15 17 ORDER: [ECF No. 162] 14 16 CASE NO. 3:13-cv-2016-GPC-WVG LG ELECTRONICS, INC., and LG ELECTRONICS U.S.A., INC., Defendants/Counterclaim Plaintiffs. [ECF No. 189] (3) VACATING HEARING DATE and LG DISPLAY CO., LTD., Intervenor. 22 23 24 I. INTRODUCTION Before the Court is Plaintiff Industrial Technology Research Institute’s (“ITRI”) 25 Motion for Sanctions. (ECF No. 162.) Defendants LG Electronics, Inc. and LG 26 Electronics U.S.A., Inc. (collectively, “LGE”) oppose. (ECF No. 182.) The parties have 27 fully briefed the motion. (ECF Nos. 162, 182, 185.) The Court finds the motions 28 suitable for disposition without oral argument pursuant to Civil Local Rule 7.1(d)(1). -1- 3:13-cv-2016-GPC-WVG 1 Upon review of the moving papers, admissible evidence, and applicable law, the Court 2 DENIES ITRI’s Motion for Sanctions.1 3 4 II. BACKGROUND On August 29, 2013, ITRI filed a complaint against LGE alleging patent 5 infringement. (ECF No. 1.) On October 16, 2014, ITRI filed a motion for summary 6 judgment on LGE’s licensing defense. (ECF No. 98.) On October 24, 2014, LGE filed 7 a motion for summary judgment on LGE’s licensing defense and LGE’s counterclaim 8 for a declaratory judgment of non-infringement. (ECF No. 112.) On December 9, 2014, 9 the Court granted ITRI’s motion and denied LGE’s motion. (ECF No. 158.) The facts 10 of this case are set forth in full in that December 9, 2014, order. (Id.) 11 III. LEGAL STANDARD 12 A. 28 U.S.C. § 1927 13 28 U.S.C. § 1927 specifically bars an attorney from unreasonably “multipl[ying] 14 the proceedings.” 28 U.S.C. § 1927. Under § 1927, sanctions “must be supported by 15 a finding of subjective bad faith.” New Alaska Dev. Corp. v. Guetschow, 869 F.2d 16 1298, 1306 (9th Cir. 1989). Subjective bad faith is defined as “an attorney knowingly 17 or recklessly rais[ing] a frivolous argument, or argu[ing] a meritorious claim for the 18 purpose of harassing an opponent.” Estate of Blas v. Winkler, 792 F.2d 858, 860 (9th 19 Cir. 1986). Thus “reckless nonfrivolous filings, without more, may not be sanctioned.” 20 In re Keegan Mgmt. Co. Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996). Frivolous is 21 defined as “lacking a legal basis or legal merit.” BLACK’S LAW DICTIONARY (10th ed. 22 2014). 23 B. Inherent Powers 24 Under the Court’s inherent powers, the Court may assess attorneys fees when a 25 party “has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” 26 Roadway Express, Inc. v. Piper, 447 U.S. 752, 766 (1980). However, “inherent powers 27 28 1 As the Court is denying ITRI’s motion, the Court also denies LGE’s Motion for Leave to File a Sur-Reply as moot. (ECF No. 189.) -2- 3:13-cv-2016-GPC-WVG 1 must be exercised with restraint and discretion.” Chambers v. Nasco, 501 U.S. 32, 44 2 (1991). A specific finding of bad faith is required for inherent power sanctions while 3 recklessness, without more, does not justify inherent power sanctions. Fink v. Gomez, 4 239 F.3d 989, 993 (9th Cir. 2001). 5 IV. DISCUSSION 6 A. 28 U.S.C. § 1927 7 1. Frivolousness 8 ITRI alleges that LGE’s arguments were legally frivolous for several reasons, 9 including: (1) LGE’s failure to cite Rhone Poulenc, (2) LGE’s mischaracterization of 10 Int’l Nutrition Co., (3) LGE’s claim that CPT could unilaterally license the ’355 patent 11 was contrary to Taiwanese law and the text of the Sharing Agreement, (4) LGE’s claim 12 that the recorded assignment was governed by federal common law was at odds with 13 Federal Circuit Precedent, and (5) LGE’s incorrect claim that ITRI was committing 14 fraud. (ECF No. 164-1, at 8.) 15 Contrary to ITRI’s contentions, LGE’s arguments were not frivolous. First, the 16 arguments that the Court rejected were at least plausible and thus not baseless. For 17 example, though the Court found that 35 U.S.C. § 261 does not apply to this case, (ECF 18 No. 158, at 7–8), LGE was not arguing for a strict application of the statute. Rather, 19 LGE argued that this case was factually similar to CMS Industries and distinguishable 20 from Rhone Poulenc which justified applying the former and not the latter to this case. 21 (Id. at 8–9.) Second, the arguments that the Court did not address were also plausible 22 and may even be correct. For instance, ITRI contended that Taiwan law governed the 23 assignment of the ’355 patent and that Taiwan law added additional requirements to 24 the licensing of the ’355 patent, both of which LGE disputed. Contrary to ITRI’s 25 assertions, the Federal Circuit has indicated that federal common law can govern the 26 assignment of U.S. patents in place of foreign law. See Sky Techs. LLC v. SAP AG, 576 27 F.3d 1374, 1379 (Fed. Cir. 2009) (“Usually, federal law is used to determine the 28 validity and terms of an assignment, but state law controls any transfer of patent -3- 3:13-cv-2016-GPC-WVG 1 ownership by operation of law not deemed an assignment.”). Additionally, it is unclear 2 whether Taiwan law actually adds additional requirements since the Taiwanese Patent 3 Act’s use of the term “patent” may mean only “Taiwanese patent”, (see ECF No. 112-9, 4 at 6 (noting that, under the TPA, a patent’s application “be filed with the Specific 5 Patent Agency,” not the USPTO)), and Taiwan’s choice of law provisions may also 6 indicate that the Taiwan Civil Code does not apply to the license of a U.S. patent, (see 7 ECF No. 121-1, Ex. A (noting that, under Taiwan law, “[a] property right in a right is 8 governed by the law of the place where the right is formed”)). Accordingly, the Court 9 finds that LGE’s legal arguments had a legal basis and thus LGE’s filings were not 10 frivolous.2 11 2. Recklessness 12 Though a finding of nonfrivolousness is generally sufficient to deny a motion 13 for sanctions, In re Keegan, 78 F.3d at 436 (“reckless nonfrivolous filings, without 14 more, may not be sanctioned”), the Court also rejects ITRI’s argument that LGE’s 15 filings were reckless. ITRI argues that LGE’s filings were reckless because LGE 16 allegedly knew that: (1) the LPL-CPT Agreement did not cover the ’355 patent, (2) 17 Taiwan law required ITRI’s or MOEA’s consent and neither had consented, (3) the 18 Federal Circuit has applied foreign law to patent ownership rights, and (4) § 271 did 19 not apply and failure to cite Rhone Poulenc. (ECF No. 164-1, at 7.) ITRI essentially 20 contends that, because ITRI showed LGE evidence and precedent that allegedly 21 showed that LGE’s arguments were legally baseless, LGE’s filings were reckless. 22 However, that evidence and precedent is the same that ITRI proffers in this motion and 23 they, as discussed above, do not make LGE’s arguments legally baseless. Accordingly, 24 the Court finds that LGE’s filings were not reckless. 25 3. Harassment 26 27 2 ITRI also makes much of certain rhetorical flourishes in this Court’s order granting ITRI’s motion for summary judgment. (See, e.g., ECF No. 164-1, at 6, 9 28 (quoting ECF No. 158, at 7–9 (“makes clear” and “nonsensical”).) ITRI’s interpretation of this as “deri[sion]” reads far too much into that language. (Id. at 9.) -4- 3:13-cv-2016-GPC-WVG 1 Though the Court has found that LGE’s filings were neither reckless nor 2 frivolous, meritious filings can still justify sanctions where those filings are made “for 3 the purpose of harassing an opponent.” Estate of Blas, 792 F.2d at 860. Indeed, ITRI 4 argues that LGE “intended to harass and intimidate.” (ECF No. 164-1, at 10.) However, 5 ITRI does not provide any basis to merit such a finding. Thus the Court finds that 6 LGE’s filings were not intended to harass or intimidate and that ITRI has failed to 7 show that sanctions under the Court’s inherent powers are appropriate. Accordingly, 8 the Court DENIES ITRI’s motion for sanctions under 28 U.S.C. § 1927.. 9 B. Inherent Powers 10 As the Court has found that LGE’s arguments had legal bases, there is no 11 indication of bad faith on the part of LGE and thus no basis for inherent powers 12 sanctions. See Fink, 239 F.3d at 993. Accordingly, the Court DENIES ITRI’s motion 13 for sanctions under the Court’s inherent powers. 14 V. CONCLUSION AND ORDER 15 For the reasons stated above, IT IS HEREBY ORDERED that: 16 1. ITRI’s Motion for Sanctions, (ECF No. 162), is DENIED; 17 2. LGE’s Motion for Leave to File a Sur-Reply, (ECF No. 189), is DENIED as 18 moot; and 19 2. The hearing set for April 3, 2015, is VACATED. 20 DATED: April 1, 2015 21 22 23 HON. GONZALO P. CURIEL United States District Judge 24 25 26 27 28 -5- 3:13-cv-2016-GPC-WVG

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