Commonwealth Research Group LLC v. Microchip Technology Incorporated et al

Filing 135

MEMORANDUM OPINION re 114 MOTION for Attorney Fees pursuant to 35 USC sec 285, and 108 Motion to Dismiss. Signed by Judge Richard G. Andrews on 6/28/2012. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

COMMONWEALTH RESEARCH
GROUPLLC,
Plaintiff,

v.

Civil Action No. 11-655-RGA

LATTICE SEMICONDUCTOR
CORPORATION, et al.,
Defendants.

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MEMORANDUM OPINION
Richard K. Herrmann, Esq., Morris James LLP, Wilmington, Delaware; Attorney for
Plaintiff.
Thomas L. Halkowski, Esq., Fish & Richardson, P.C.; Attorney for Defendant.

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June
2012
Wilmington, Delaware

~4S~UDGE:
Before the Court is Defendant Cypress Semiconductor's Motion for Attorney Fees. (D.I.
114). The motion is premised upon the claim that this is an exceptional case. 35 U.S.C. § 285.
The Plaintiff, Commonwealth Research Group, owns a patent which is captioned,
"System for Conserving Energy among Electrical Components." Plaintiff sued about 22
companies (some of which were related to each other) in the District of Delaware in
Commonwealth Research Group v. NXP Semiconductors USA Inc., No. 10-206-PD, alleging

infringement of that patent. There was little litigation in that case, as the parties quickly settled,
with the Plaintiff obtaining modest payments from the defendants. (D.I. 122, Exh. A). As the
last of those defendants settled, the Plaintiff filed the instant suit on July 26, 2011, against 13
defendants, alleging infringement of the same patent. Most defendants in this case quickly
settled too, but four defendants (including Zilog and Cypress) did not. The Court considered an
early motion for summary judgment by Zilog, on the basis of indefiniteness, which was argued,
mostly by Zilog rather than Cypress, on March 2, 2012, and denied on March 8, 2012. (D.I. 91).
In mid-March there were discussions between Cypress and the Plaintiff about resolving the case.
(D.I. 122, ~ 13). At about the same time, on March 16, 2012, the Plaintiff, Zilog, and Cypress
filed a Joint Claim Construction Chart. On April 2, the parties filed Opening Claim Construction
Briefs. (D.I. 99, 100).

Plaintiffs opening brief might be charitably described as a very modest

effort. On an unspecified date in early April, Plaintiffs counsel left a voice mail for Cypress'
counsel, the response to which, on April 9, 2012, was, "Cypress would be willing to accept a
dismissal with prejudice." (D.I. 122, Exh. B). The case was not dismissed, however, as
discussion continued on important collateral issues. On April 24, Plaintiff and Zilog stipulated
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to a dismissal. 1 On May 1, Plaintiff filed a motion to dismiss with prejudice (D .I. 108), and the
next day Cypress filed an Answering Brief on Claim Construction. (D.I. 112).
Cypress consistently asserted to the Plaintiffthat: (1) the patent had some serious validity
issues relating to prior art; (2) Cypress did not infringe the patent; and (3) Cypress would pay
nothing unless it thought it was possible that it would have some liability. (See generally D.l.
118, 131). Cypress did not, however, provide the prior art to the Plaintiff(D.I. 122, ~ 11), and
has not provided it in this motion. Cypress also did not provide its non-infringement theory to
Plaintiff (!d.,

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20), but has set it forth in the briefing on the motion. Cypress relies upon an

infringement chart that Plaintiffs counsel provided to Cypress' General Counsel in about August
2011. (!d.,

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8-9). According to Cypress, a reasonable investigation into its accused infringing

product would have shown that it did not meet one (or more) of the claim limitations of the
patent.
Plaintiff describes its pre-suit investigation, including its analyses of the patent and
Cypress' accused products. This investigation included having a "detailed infringement
analysis" performed by Commonwealth's in-house attorney, a former Patent Examiner with some
previous semiconductor experience. (D.I. 123). His analysis included consulting with another
former Patent Examiner with experience in computer chip design. Plaintiff submitted another
declaration from a technical expert with a master of science in electrical engineering, and,
although his declaration says he was retained before any suit was filed, he does not say when he

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Cypress asserts in its briefthat the settlement was for $5,000 (D.I. 129, at p.1), but does
not cite to the record for that figure. Zilog's counsel submitted a declaration that described the
settlement as "a small nuisance payment," but without providing an actual dollar value. (D.I.
133, ~ 8),
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performed the analysis that is in his declaration. (D.I. 124). Plaintiff does not concede that its
infringement theory is without merit.
Plaintiff explains its conduct as being based on a belief that it had a viable case until the
summary judgment argument on March 2, 2012. Essentially, even though I was not convinced
by the indefiniteness argument, it apparently made a much bigger impact on Plaintiffs counsel.
There was thus a period of at most two weeks between Plaintiffs realization that its case was in
serious trouble and the start of the discussion with Cypress' outside counsel, initiated by
Plaintiff, 2 of resolving the case against Cypress, which quickly involved, at a minimum,
dismissing it with prejudice. (D.I. 122, ~~ 13-14). That the case was not then quickly resolved
was due, at least in part, to Cypress' requests that it receive some compensation for the defense
ofthe suit.
Thus, the overall picture that is presented is that the Plaintiffs strategy was to file suits
against a large number of defendants, and, due to the huge expenses inherent in patent litigation,3
force nuisance value settlements. Against this backdrop, though, Cypress' argument is much
narrower. Cypress argues that the case is exceptional for two reasons: (1) Plaintiffs
infringement investigation was insufficient; and (2) Plaintiff should not have made Cypress do
any claim construction in the March!April period.
The parties agree that the relevant standard for this motion is that the Defendant's motion

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Cypress' General Counsel states that on March 14, Plaintiffs counsel implied to her that
the case could be resolved for between $35,000 and $50,000. (D.I. 118, ~ 14).
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Cypress asserts that its attorney's fees as of the end of April were "less than $250,000."
(D.I. 115, at 18 n.14). I would interpret this to mean at that point in time the attorney's fees
were just under $250,000. And the meter did not stop running then.
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should only be granted ifthe Defendant shows that "(1) the litigation is brought in subjective bad
faith, and (2) the litigation is objectively baseless." Old Reliable Wholesale, Inc. v. Cornell

Corp., 635 F.3d 539, 543-44 (Fed. Cir. 2011). The showing needs to be by clear and convincing
evidence. See Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1327 (Fed. Cir. 2003). While I
suspect that the litigation may be objectively baseless, I cannot so conclude, at least in part due to
the termination of this case before a deposition was taken, before the completion of claim
construction briefing, before the holding of a Markman hearing, and before any actual claim
construction by me. 4 At one point, Cypress wanted to hold the Markman hearing
notwithstanding that Plaintiff had moved to dismiss its claims with prejudice. (D.I. Ill:
"Cypress remains prepared to participate in the claim construction hearing on May 29th, present
expert testimony from Professor Dean Neikirk, and explain the lack of merit regarding
[Commonwealth's] claim construction positions as well as its patent generally."). I postponed
the Markman hearing, and the request to have that hearing has not been renewed, although, to be
fair, Cypress certainly indicated its willingness to have one. (See D.I. 119). I do not think having
such a hearing would make sense. See Am. Tech. Inc. v. Am. Future Tech. Corp., 2012 WL
859345, *4 (M.D. Fla. Mar. 14, 2012).
In my opinion, Cypress has not proved that the litigation was brought in subjective bad
faith. Cypress went through the steps that a reasonable company contemplating bringing a
patent suit would go through. It had qualified people examine the patent, the defendant's

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There was also virtually no other discovery done in the case. (See D.I. 76, 89, 90, 96,
107). Thus, the record before me on this motion (other than Plaintiffs Opening Claim
Construction Brief) is not so much the record in this case, but rather the record created for this
motion.
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product, and produce an infringement chart. 5 What it did not do was to "reverse engineer" the

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accused product. I am not sure whether such reverse engineering would have made its suit any
more or less meritorious in its eyes.6 I do not think that doing reverse engineering is required,
even if, as Cypress asserts, its product could have easily been purchased for $100. See QPharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1302 (Fed. Cir. 2004) (Rule 11)("our case

law makes clear that the key factor in determining whether a patentee performed a reasonable
pre-filing inquiry is the presence of an infringement analysis.").
What seems to have dealt the "death blow" to the Plaintiffs case was the indefiniteness
argument, which seems to have come into focus for the Plaintiff (if not for me) at the oral
argument on March 2, 2012. Fairly promptly after that, Plaintiff wanted to "walk away" from the
lawsuit. As Plaintiff points out, one might easily interpret that as a sign of good faith, and I think
it undercuts Cypress' argument for bad faith. The Plaintiffs claim construction briefing, while
substandard, was filed at about the same time as it was indicating its willingness to have its case
dismissed with prejudice, and it is understandable, if not excusable, that the brief shows little
effort. Under the circumstances, I do not think the briefing is a basis for finding "subjective bad
faith."
Thus, I do not find that Cypress has shown, by either of its arguments, "subjective bad
faith," and I will deny Cypress' motion.

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Outside counsel's role in the pre-suit investigation is cursorily described. "Along with
other members of my law firm, I consulted with [inside counsel] in conducting infringement
analysis ofthe [patent]." (D.I. 122, ~ 7).
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I say this because, assuming reverse engineering would have revealed exactly what
Cypress says it would have revealed, Plaintiffs arguments as to why Cypress' products infringed
would remain.

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