Chalumeau Power Systems LLC v. Alcatel-Lucent et al

Filing 178

MEMORANDUM OPINION re 158 MOTION for Attorney Fees and Costs. Signed by Judge Richard G. Andrews on 9/12/2014. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

Chalumeau Power Systems LLC,
Plaintiff,
V.

Civil Action No. 11-1175-RGA

Alcatel-Lucent, Alcatel-Lucent USA Inc.,
and Alcatel-Lucent Holdings Inc.,
Defendants.

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MEMORANDUM

Pending before this Court is Defendants' Motion for Attorneys' Fees and Costs (D.I. 158)
and related briefing. (D.1. 159, 163, 167). The Court heard oral argument on this motion on June
30, 2014. (D.I. 175). Alcatel-Lucent asks that this case be declared "exceptional" so that it may
be awarded attorneys' fees spent defending Chalumeau's frivolous claims. Chalumeau responds
that its infringement contentions and claim construction positions were not frivolous, and that it
did the responsible thing by dismissing the case when the "economics of the case" changed due
to Alcatel's licensing defense.
The Patent Act provides that "in exceptional cases [the court] may award reasonable
attorney fees to the prevailing party." 35 U.S.C. § 285. Thus, under the statute there are two
basic requirements: (1) that the case is "exceptional" and (2) that the party seeking fees is a
"prevailing party." The Supreme Court recently defined an "exceptional" case as "simply one
that stands out from others with respect to the substantive strength of a party's litigating position
(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, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.
1749, 1756 (2014).
That a case be "exceptional" is the only limitation imposed by the text of Section 285.
The word "exceptional" is not defined in the Patent Act. The Supreme Court thus attributed to
the word its ordinary meaning: "uncommon," "rare," "not ordinary," "unusual," or "special."

Id District judges are free to exercise their discretion on a case-by-case basis, considering the
totality of the circumstances, when determining whether attorney's fees are appropriate. Id
The applicable burden of proof that a litigant must carry in order to be awarded attorney's fees is
a preponderance of the evidence. Id at 1758.
Chalumeau does not dispute that Alcatel is the prevailing party. Therefore the only
question is whether the case is "exceptional." Alcatel points to two main categories of conduct
which it claims warrant finding this case exceptional. The first is Chalumeau' s infringement
theories and claim construction positions. The second is Chalumeau's overall litigation
misconduct, including opposing Alcatel's motion to amend its answer to add a license defense
and its late appointment of an expert.
I agree with Alcatel that Chalumeau's infringement theories and claim construction
positions were frivolous. Alcatel claims that Chalumeau's infringement theories were based
entirely on public documents, and that Chalumeau did not even have their expert look at
Alcatel's core technical documents until after November 8, 2013. Chalumeau does not contest
this, but maintains that its infringement theories were reasonable. I disagree. Chalumeau's
infringement contentions identified an RJ-45 connector as the claimed "adapter." (D.I. 160-2 at
11). Yet even a cursory review of the patent identifies RJ-45 connectors as separate from

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adapters. '885 patent at 5:26-28 ("In one embodiment of the present invention, the user interface
connectors 204 are conventional RJ45 connectors."). The patent repeatedly references user
interface connectors as being distinct from infrared adapters, which are given the number 206.
See '885 patent at 5:3-6:23 (referencing "user interface connectors 204" approximately seven

times and "infrared adapter 206" approximately sixteen times). No person reasonably reading the
'885 patent would equate an RJ45 connector with the claimed adapter.
Even under Chalumeau's proposed claim construction, an RJ45 connector could not be
an adapter. Chalumeau proposed that an "adapter" be construed as "a network interface device
that is capable ofreceiving electrical power and data from the network hub." (DJ. 136 at 11).
Yet there was never any argument that an RJ45 connector was capable of receiving power. In its
answering brief, Chalumeau defended its infringement contentions, claiming that "[a] thorough
pre-filing investigation for each of the accused products occurred and each family of product was
separately charted with relevant supporting technical documentation." (D.I. 163 at p. 8 n.3).
Noticing that this sentence did not contain a citation, I asked for documents supporting this
claim. (D.I. 175 at 36:8-37:24).
In response, Chalumeau admitted that not every accused product family was vetted
before filing suit. (D.I. 176 at 1). However, Chalumeau provided the Court with a document
detailing the pre-suit investigation of the OmniSwitch 6850 series and how it might infringe
claim 8 of the patent. The document is 5 pages long, one of which is a cover page. (letter
submitted on July 9, 2014 for in camera review). The cover page states that the references used
were the OmniSwitch 6850 Users Guide, the OmniSwitch 6850 Data Sheet, and the IEEE Std
802.3af. The remaining four pages contain the claim language broken down into four limitations,

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snippets from the references outlined in colors corresponding to the claim limitations, and nine
bulleted sentences.

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Thus, Chalumeau did in fact engage in some semblance of a pre-suit investigation.

the suit. The pre-suit document breaks down the claim into the following four limitations: 1)

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"network system," 2) "a plurality of user interface connectors each adapted for coupling to a," 3)

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"remote device," 4) "network hub coupled to the plurality of user interface connectors for

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However, it seems that it was consistent with the meager effort Chalumeau put forth in the rest of

communicating data between remote terminals coupled thereto, for identifying the operational
protocol of a coupled device that indicates the type of device." These limitation groupings are far
too broad, encompassing multiple disputed terms in each group. For example, the Court
separately construed "user interface connector," "network hub," "for identifying the operational
protocol of a coupled device that indicates the type of device," "type of device," and "operational
protocol/operational protocol of a coupled device." (See DJ. 136). These five terms are dealt
with as one in the pre-suit document. A pre-suit investigation which lumps so many limitations
together does not demonstrate an adequate investigation into whether the accused device
infringes each and every claim limitation.

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some of Chalumeau's proposed constructions, taken as a whole its positions were frivolous. For

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instance, Chalumeau proposed that an "adapter of a first type" be construed as an "adapter of a

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Chalumeau's claim construction positions were similarly flawed. While I did agree with

particular type." (D.1. 136 at 7). In the claim construction opinion, I noted that such a
construction would read out adapters of a "second" and "third" type, and that the specification

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itself teaches away from powering a wired adapter. (D.1. 136 at 8). As I stated during oral

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argument concerning this motion, "that was one of the wors[t] proposed constructions I've ever
seen so far." 1 (D.I. 175 at 9:25-10:1).
Another of Chalumeau' s proposed claim constructions merits attention. That is the "user
interface connector," which was described throughout Chalumeau's pre-suit investigation and
infringement contentions as RJ-45 ports, present on the network hub. (D.1. 160-2 at 8).
Chalumeau's proposed claim construction allowed for the user interface connector to be part of
the network hub. (D.1. 136 at 4) (Compare "a multi-pin connector through which both data and

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electrical power can be transmitted," with "connector that is separate from the network hub for
connecting to remote devices."). Yet even a cursory inspection of the specification would have
shown that it is the "hub user connectors," and not the "user interface connectors," that are part
of the network hub. '885 patent at 5:12-13 ("The network hub 202 includes a plurality of hub
user connectors 208."); '885 patent at 5:29-33 ("The computers 212-2 and 212-3 may be
physically connected to the network 201 via the hub user connectors 208 by physical wire
connections, such as twisted-pair wires, between the respective second computer interfaces 216

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and the user interface connectors 204."). As can clearly be seen from Figure 2 of the '885 patent,

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reproduced below, the user interface connectors 204 are not part of the network hub 202, but are

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attached via twisted-pair wires 205, which connect to the hub user connectors 208. See also '885
patent at 5:4 (referencing "twisted pair cables 205"); 2:9-10 ("In a twisted-pair cable, the

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medium dependent interface MDI 144 is an RJ45 connector.").

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At the time, I had presided over forty Markman hearings.

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NETWORK
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FIGURE

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(Figure 2 of '885 patent). The fact that Chalumeau's infringement contentions relied on the user
interface connectors being part of the network hub demonstrates the frivolity of Chalumeau's
position on the construction of "user interface connector."
Chalumeau argues that the changed "economics of the case," and not its failed claim
construction theories, was the reason that it dropped this suit. Specifically, Chalumeau asserts
that because of Alcatel' s late assertion of its license defense, the suit was no longer economically
feasible. (D.I. 163 at p. 3). Chalumeau blames Alcatel for failing to bring the license defense
earlier, but Chalumeau was the one who executed the license, before this lawsuit was filed. (D.I.
127-1 at 30) (license executed on September 30, 2011). If any party is at fault for neglecting to
take the potential license defense into account, it is Chalumeau. Alcatel could only learn of it
through (expensive) discovery; Chalumeau had it from day one. In fact, Chalumeau opposed
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Alcatel's motion to add the license defense because it would be futile. (D.I. 134 at 8). If that
were the case (and it appears to be simply an argument made without any factual basis), then the
legitimate "economics of the case" would not have changed. Alcatel has a different theory about
the economics of the case, which I find is supported by the record. Simply put, Alcatel failed to
fold before Chalumeau lost its leverage.
Chalumeau filed a frivolous lawsuit with the sole purpose of extorting a settlement fee.
When it realized that was not going to happen, it dropped the case. Chalumeau' s entire litigation
strategy was devoted to stringing out the case in the hopes that Alcatel would incur fees while
Chalumeau would not. Chalumeau did not even disclose an expert until November 8, 2013, days
before fact discovery ended. (D.I. 175 at 26:4-6). This allowed Chalumeau to keep its costs low
while forcing Alcatel to spend considerable sums defending a frivolous lawsuit. Such behavior is
exceptional.
For the reasons stated above, Defendants' Motion for Attorneys' Fees and Costs (D.I.
158) is granted.

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