Alcohol Monitoring Systems, Inc. v. Actsoft, Inc. et al

Filing 381

ORDER. Defendants' Renewed Motion to Declare Case Exceptional and for an Award of Attorneys' Fees 347 is DENIED. By Judge Philip A. Brimmer on 3/30/13.(pabsec)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 07-cv-02261-PAB-MJW
(Consolidated with 08-cv-01226)
ALCOHOL MONITORING SYSTEMS, INC.,
Plaintiff,
v.
ACTSOFT, INC.,
OHIO HOUSE MONITORING SYSTEMS, INC., and
U.S. HOME DETENTION SYSTEMS AND EQUIPMENT, INC.,
Defendants.

ORDER

This matter is before the Court on the Renewed Motion to Declare Case
Exceptional and for an Award of Attorneys’ Fees [Docket No. 347] filed by defendants
ActSoft, Inc., Ohio House Monitoring Systems, Inc., and U.S. Home Detention Systems
and Equipment, Inc.
Plaintiff Alcohol Monitoring Systems Inc. is the owner of U.S. Patent No.
5,220,919 (“’919 patent”). Docket No. 85 at 3-4. On October 25, 2007, plaintiff filed
this case alleging that defendants’ House Arrest Solution device infringed the ’919
patent. See Docket No. 1. On April 27, 2009, the Court issued an Order Regarding
Claim Construction [Docket No. 196], which construed the claim at issue here – Claim
14. Based on the claim construction, the Court granted summary judgment and
entered final judgment in favor of defendants [Docket No. 342]. Plaintiff appealed the
Court’s ruling on summary judgment [Docket No. 241].

On January 24, 2011, the Federal Circuit affirmed in part and reversed in part
the Court’s construction of Claim 14. See Alcohol Monitoring Sys., Inc. v. Actsoft, Inc.,
414 F. App’x 294, 299-300 (Fed. Cir. 2011). After remand, the case was set for an
eight-day jury trial beginning October 31, 2011. See Docket No. 269. On September
27, 2011, defendants requested leave to file a supplemental renewed motion for
summary judgment. Docket No. 305. The Court granted defendants permission to file
such motion. Docket No. 331. In their supplemental renewed motion for summary
judgment, defendants argued that plaintiff should be estopped from presenting a
construction of Claim 14(e) of the ’919 patent that was inconsistent with statements
plaintiff made to the Patent and Trademark Office (“PTO”) during the prosecution of
Application No. 10/441,940 (“’940 Application”).1 Defendants requested that the Court
limit plaintiff’s construction of Claim 14(e) based on prosecution history estoppel and
judicial estoppel. Docket No. 332 at 2-7.
The Court granted defendants’ supplemental renewed motion for summary
judgment in part and denied the motion in part. Docket No. 335. The Court found that
prosecution history estoppel did not apply to the statements plaintiff made to the PTO
during the prosecution of the ’149 patent. Id. at 8. The Court, however, found that
plaintiff was “judicially estopped from asserting a construction or interpretation of Claim
14(e) of the ’919 patent that is inconsistent with the position that plaintiff took in front of
the PTO regarding the ’149 patent.” Id. at 11.

1

On December 9, 2008, the ’940 Application was issued as U.S. Patent No.
7,462,149 (“’149 patent”). Docket No. 305-2
2

Based on the Court’s ruling, on October 27, 2011, plaintiff and defendants
stipulated to final judgment in favor of defendants [Docket No. 337]. On November 3,
2011, plaintiff appealed the Court’s decision [Docket No. 343] and the Federal Circuit
affirmed the Court’s ruling without issuing a written opinion. See Alcohol Monitoring
Sys., Inc. v. Actsoft, Inc., --- F. App’x ----, 2013 WL 765094, at *1 (Fed. Cir. March 1,
2013).
Defendants move for an award of attorneys’ fees and costs pursuant to 35
U.S.C. § 285, 28 U.S.C. § 1927, and the Court’s inherent powers. Docket No. 347 at
13. Defendants argue that such an award is justified because plaintiff did not (1) fully
respond to discovery requests, (2) disclose the arguments it made to the PTO when
prosecuting the ’149 patent, (3) fully respond to the interrogatory requests, and (4)
disclose attorney Stanley Gradisar’s pre-litigation opinion letters.
Section 285 of Title 35 provides that “[t]he court in exceptional cases may award
reasonable attorney fees to the prevailing party.” To award attorney fees under § 285,
a court must undertake a two-step process: first, determine whether the case is
exceptional and, second, determine whether attorney fees are appropriate. Wedgetail,
Ltd. v. Huddleston Deluxe, Inc., 576 F.3d 1302, 1304 (Fed. Cir. 2009). To determine
whether a case is exceptional, the movant must establish both that (1) the litigation was
brought in subjective bad faith and (2) the claims asserted in the litigation were
objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378,
1381 (Fed. Cir. 2005). In addition, litigation conduct can make a case exceptional if the
nonmoving party engaged in fraud, inequitable conduct, misconduct during litigation,

3

vexatious or unjustified litigation, or conduct that violates Fed. R. Civ. P. 11. iLOR, LLC
v. Google, Inc., 631 F.3d 1372, 1376 (Fed. Cir. 2011). Generally, there is a
presumption that a claim brought for infringement of a duly granted patent is made in
good faith. Medtronic Navigation, Inc. v. BrainLAB Medizinische Computersysteme
GmbH, 603 F.3d 943, 954 (Fed. Cir. 2010). The movant can overcome this
presumption by presenting clear and convincing evidence that the patentee’s
infringement claim was vexatious, unjustified, or frivolous. Id.
For a claim of infringement to be objectively baseless, the infringement
allegations must be such that no litigant could reasonably expect success on the merits.
iLOR, 631 F.3d at 1378. To determine whether a claim is objectively baseless, courts
make an objective assessment of the merits of a claim, which does “not depend on the
plaintiff’s state of mind at the time the action was commenced, but rather requires an
objective assessment of the merits.” Id. at 1377 (citation omitted). Whether a claim is
objectively baseless is determined on the record ultimately made in the infringement
proceedings. Id. Here, the Court finds that plaintiff’s claim of infringement was not
objectively baseless.
Although plaintiff was ultimately unsuccessful, defendants have not shown by
clear and convincing evidence that plaintiff’s suit was baseless. First, because the ’149
patent and the ’919 patent are not familial patents, it was not unreasonable for plaintiff
to believe that the arguments it made in connection with the ’149 patent would not
affect the construction of Claim 14(e) in this case. See Pfizer, Inc. v. Ranbaxy Labs.
Ltd., 457 F.3d 1284, 1290 (Fed. Cir. 2006) (noting that statements made during

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prosecution of a later, unrelated patent, cannot be used to interpret claims of a
previously issued patent); see also Abbott Labs. v. Dey L.P., 287 F.3d 1097, 1104-05
(Fed. Cir. 2002) (finding that arguments made during the prosecution of a commonlyowned but unrelated patent did not create prosecution history estoppel). Second, prior
to the Tenth Circuit’s opinion in Mathews v. Denver Newspaper Agency LLP, 649 F.3d
1199 (10th Cir. 2011), it was still an open question in this Circuit whether judicial
estoppel applied to statements a plaintiff made before an agency, rather than a court.
As a result, the Court finds that defendants have not clearly and convincingly
established that plaintiff’s claim was objectively baseless at its initiation. There is
therefore no need to consider subjective bad faith. iLOR, 631 F.3d at 1378.
Defendants argue that plaintiff’s failure to disclose the prosecution history of the
’149 patent shows that plaintiff’s conduct in this case was vexatious and unnecessarily
multiplied proceedings. Docket No. 347 at 5-12. As noted above, the ’149 patent was
not issued until December 9, 2008. See Docket No. 305-2. The majority of the
discovery prior to the Court’s summary judgment order [Docket 196] occurred during
2008. Because plaintiff was prosecuting a non-issued patent during discovery in this
case, it is not clear that plaintiff was required to disclose the contemporaneous
arguments it made to the PTO regarding the ’149 patent. And, in fact, defendants have
provided no case law in support of the proposition that an inventor, while prosecuting a
pending patent application, has a duty to disclose his arguments in support of the new
patent because those arguments might bear on the infringement proceedings of an
unrelated patent. Given that plaintiff had yet to secure the ’149 patent during 2008, the
Court finds that plaintiff had no duty to reveal these documents during that time period.
5

Defendants also argue that plaintiff should have made the prosecution history of
the ’149 patent available while this case was on appeal between February 26, 2010 and
March 7, 2011.2 However, defendants did not propose a construction of Claim 14(e)
that sought to construe the phrase “transmitting each of said measurement results.”
’919 patent col. 14. l. 11; see Docket No. 104 at 24-31. It also does not appear
defendants raised this argument on appeal. See Alcohol Monitoring, 414 F. App’x at
299. There is nothing about the appeal process itself that made it improper for plaintiff
not to produce the prosecution history of the ’149 patent.
Next, defendants argue that plaintiff should have included its PTO arguments in
response to defendants’ request for “[a]ll documents and things relating to the ’919
Patent.” Docket No. 347 at 5. However, it was not vexatious to construe this request in
such a way that it did not include references to the ’919 patent made in connection with
the ’149 patent’s prosecution history and, as indicated above, the Mathews decision
regarding judicial estoppel had not been issued.
Finally, defendants argue that plaintiff’s intentional concealment of attorney
Stanley Gradisar proves that plaintiff acted in bad faith. Docket No. 347 at 6.
Defendants claim that Mr. Gradisar prepared pre-litigation opinion letters, which plaintiff
did not disclose in this litigation until February 18, 2010.3 See Docket No. 239-1 at 2,

2

On May 4, 2009, plaintiff filed a Motion for Certification pursuant to Fed. R. Civ.
P. 54(b). On July 20, 2009, plaintiff filed a status report [Docket No. 217-1] noting that
the Court’s claim construction resolved all issues in the case and requesting that the
case be stayed pending an appeal.
3

Plaintiff claims that it inadvertently omitted a reference to Mr. Gradisar’s opinion
letters on its privilege logs. Docket No. 246 at 4 n.1.
6

¶¶ 8-10. Defendants claim that plaintiff’s failure to disclose Mr. Gradisar’s opinion
letters constitutes sanctionable conduct. Docket No. 357 at 6-7. The Court is not
persuaded.
Mr. Gradisar’s pre-litigation opinion letters were privileged communications until
plaintiff waived the attorney-client privilege by referring to them in the Jeffrey Hawthorne
affidavit. Docket No. 239-1. Defendants have not shown that, during discovery in
2008, they could have successfully secured Mr. Gradisar’s opinions on Claim 14(e) that
did not fall within the scope of the attorney-client privilege. Moreover, defendants do
not allege that they were unaware of the prosecution of the ’149 patent or the fact that
the patent issued in December 2008.4 Thus, although plaintiff’s failure to include Mr.
Gradisar’s opinion letters on the privilege log is curious, it falls short of exceptional
conduct. Accordingly, the Court finds that defendants have not presented clear and
convincing evidence that plaintiff’s litigation conduct was vexatious or that it
unnecessarily multiplied proceedings. Wedgetail, 576 F.3d at 1304.
Defendants also request that the Court award attorneys’ fees under 28 U.S.C.
§ 1927. Section 1927 of Title 28 provides that:
Any attorney or other person admitted to conduct cases in any court of the
United States or any Territory thereof who so multiplies the proceedings in
any case unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and attorneys’ fees
reasonably incurred because of such conduct.

4

When the ’149 patent issued on December 9, 2008, information about the
prosecution history of the ’149 patent and Mr. Gradisar’s involvement on behalf of
plaintiff was publicly available.
7

28 U.S.C. § 1927. Sanctions under § 1927 are appropriate when an attorney acts
“recklessly or with indifference to the law.” Dominion Video Satellite, Inc. v. Echostar
Satellite, LLC, 430 F.3d 1269, 1278 (10th Cir. 2005). Sanctions are also appropriate
when “an attorney is cavalier or bent on misleading the court; intentionally acts without
a plausible basis; [or] when the entire course of proceedings was unwarranted.” Miera
v. Dairyland Ins. Co., 143 F.3d 1337, 1342 (10th Cir. 1998) (internal quotations and
citations omitted). However, § 1927 only applies to the multiplication of proceedings
and not to the initiation of litigation. Steinert v. Winn Group, Inc., 440 F.3d 1214, 1224
(10th Cir. 2006). Moreover, if a claimant acquiesces in the first attempt to have a claim
dismissed, § 1927 sanctions are not appropriate. Id. at 1225.
As noted above, the Court does not find that plaintiff acted recklessly or
vexatiously or unnecessarily multiplied the proceedings. This finding applies equally to
plaintiff’s counsel. The Court will therefore deny defendants’ request for attorneys’ fees
under § 1927. For the same reason, the Court denies an award of attorneys’ fees
pursuant to the Court’s inherent power.
For the foregoing reasons, it is
ORDERED that Defendants’ Renewed Motion to Declare Case Exceptional and
for an Award of Attorneys’ Fees [Docket No. 347] is DENIED.

DATED March 30, 2013.
BY THE COURT:
s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge
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