Parallel Iron LLC v. NetApp Inc.
MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 9/12/2014. (ksr, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Parallel Iron LLC,
Civil Action No. 12-769-RGA
Stephen B. Brauerman, Esq. (argued), and Sara E. Bussiere, Esq., Bayard, PA, Wilmington, DE
attorneys for the Plaintiff.
Rodger D. Smith, II, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Natalie
Hanlon-Leh, Esq. (argued), Faegre, Baker, Daniels LLP, Denver, CO, attorneys for the Defendant.
Presently before this Court for disposition is Defendant NetApp Inc.'s motion for
attorney fees. (D.I. 58). This matter has been fully briefed (D.I. 59, 64, 72) and the Court heard
oral argument on June 25, 2014. (D.I. 82). The Court also reviewed the Plaintiffs pre-suit claim
charts and other supporting materials submitted by the Plaintiff for in camera review pursuant to
Court Order. (D.I. 81). Additionally, the Court reviewed copies of the infringement contentions
provided from the Plaintiffto the Defendant during litigation. (D.I. 83). The Court also
reviewed letters from the parties in response to the Court's Oral Orders. (D.I. 86, 89, 90). An
Amicus Curiae brief was filed by Dell Inc., Huawei Technologies Co., Ltd., Kaspersky Lab Zao,
Limelight networks, Inc., PNC Financial Services Group, Inc., SAS Institute Inc., Vizio, Inc.,
and Xilinx Inc. in support of the Defendant. (D.I. 80). For the reasons set forth herein, the
Defendant's motion is GRANTED.
Parallel Iron brought this suit against NetApp on June 18, 2012. (D.I. 1). Parallel Iron
alleged that NetApp infringes U.S. Patents No. 7,197,662, 7,958,388, and 7,543,177. !d. The
complaint identifies the accused products as "by way of example and without limitation, those
implementing" parallel Network File System (pNFS). E.g., !d.
13. On February 15, 2013
Parallel Iron served its 4(a) disclosures, which identified the Defendant's accused products only
in relation to their implementation ofpNFS. (D.I. 43-1 at 2-3 ("Parallel Iron is asserting the
patents-in-suit against all ofNetApp's products and/or services that implement the parallel
Network File System ... including but not limited to, the NetApp E-Series Platform products
and products using the Engenio external storage systems .... ")). Parallel Iron served its
"Amended Disclosures" on April23, 2013, only identifying products by their use ofpNFS. !d.
at 5 ("Parallel Iron is asserting the patents-in-suit against all ofNetApp's products and/or
services that implement the parallel Network File System ... including, but not limited to: (1)
the NetApp E-Series Platform products and products using the Engenio external storage systems
... ; and (2) the FAS 6200 Series Enterprise Storage Systems."). On May 7, 2013, Parallel Iron
served its second amended 4(a) disclosures, which additionally identified Hadoop related
products. !d. at 8. However, the products were still identified based upon the accused products
use ofpNFS. Id. 1 After receiving Parallel Iron's second amended disclosures, NetApp wrote
Parallel Iron on May 16, 2013 regarding "(1) the untimeliness of [Parallel Iron]' s purported
amendments to its disclosures; (2) the failure of [Parallel Iron] to sufficiently identify an accused
product other than its reference to pNFS; and (3) that theE-Series category of products
referenced in [Parallel Iron]'s disclosures did not practice pNFS." (D.I. 59 at 13 (citing D.I. 43-1
at 11-14)). Additionally, NetApp's letter requested the pre-suit basis for Parallel Iron's
allegations regarding pNFS. (D.I. 59 at 13; D.I. 43-1 at 16). On May 25,2013 Parallel Iron
served 2,600 pages of infringement contentions. (D.I. 59 at 14). The contentions listed specific
products, but did not mention pNFS. !d. The parties had a meet and confer call on August 22,
2013, during which Parallel Iron confirmed that it was no longer accusing pNFS. Id. at 15.
Based upon Parallel Iron's indication that it was no longer accusing pNFS, NetApp
requested a discovery dispute conference with the Court, and filed a discovery dispute letter as
per the scheduling order for this case. (D.I. 43). The Court held a discovery conference on
September 27, 2013. (D.I. 47). Based upon a joint stipulation (D.I. 49), the Court granted a stay
of this case on October 10, 2013 pending the final resolution of several related cases involving
"Parallel Iron is asserting the patents-in-suit against all ofNetApp's products and/or services that implement the
parallel Network File System ("the Accused Instrumentalities") including, but not limited to: (1) the NetApp ESeries Platform products and products using the Engenio external storage systems ... ; (2) the FAS6200 Series
Enterprise Storage Systems; and (3) Hadoop related products." (1: 12-cv-00769-RGA D.I. 43-1 at 8).
the same patents. (D.I. 50). The Court in part granted this stay as a remedy to NetApp for
Parallel Iron's altering its allegations from pNFS to Hadoop. Jd. at 1.
On January 22, 2014, Parallel Iron granted a license to the asserted patents to Unified
Patents, Inc. 2 (D.I. 59 at 16; D.I. 82 at 7). The Agreement granted a sublicense to NetApp, with
no requirement for NetApp to pay any money to Parallel Iron. !d.
NetApp seeks a fee award under 35 U.S.C. § 285 and the Court's inherent powers. The
Court will take these two bases for awarding fees in turn.
A. 35 U.S.C. § 285
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
which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.
1749, 1756 (2014). When determining whether a party is a prevailing party, the Federal Circuit
has followed the Supreme Court's definition of a prevailing party as used in other fee-shifting
statutes. Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, 1320 (Fed. Cir. 2004). In Inland
Steel, the Federal Circuit held that district courts are to "apply the general principle that to be a
The Court did not receive a copy of this license agreement.
prevailing party, one must receive at least some relief on the merits, which alters ... the legal
relationship of the parties." !d. (quotation marks omitted, ellipses in original).
The Federal Circuit's definition of a prevailing party derives from a series of Supreme
Court decisions. The term "prevailing party" is "a legal term of art." Buckhannon Bd. & Care
Home, Inc. v. W Virginia Dep 't of Health & Human Res., 532 U.S. 598, 603 (2001). The
Supreme Court defined a prevailing party, for the purpose of attorney's fees shifting, to be a
party which "succeed[ s] on any significant issue in litigation which achieves some of the benefit
the part[y] sought in bringing suit." Hensley v. Eckerhart, 461 U.S. 424,433 (1983) (defining a
prevailing party in the context of a 42 U.S.C. § 1988 attorney fee shifting claim). The Supreme
Court later held that, while is it "settled law ... that relief need not be judicially decreed in order
to justify a fee award," there must be at least the "settling of some dispute which affects the
behavior ofthe defendant towards the plaintiff." Hewitt v. Helms, 482 U.S. 755, 761 (1987)
(italics omitted). The Supreme Court then further refined its previous rulings by holding that the
relief must actually affect the parties' behavior. Farrar v. Hobby, 506 U.S. 103, Ill (1992).
Furthermore, the Court emphasized that "the touchstone of the prevailing party inquiry must be
the material alteration of the legal relationship ofthe parties." !d. (brackets omitted); see also
Lefemine v. Wideman, 133 S. Ct. 9, 11 (2012). Independent of what relief is received, it "must
directly benefit [the party] at the time of the judgment or the settlement." !d. Even "nominal
damages suffices under this test." Buckhannon Bd. & Care Home, Inc., 532 U.S. at 604 (citing
Farrar). Finally, the Supreme Court has made clear that:
We have only awarded attorney's fees where the plaintiffhas received a judgment
on the merits or obtained a court-ordered consent decree- we have not awarded
attorney's fees where the plaintiff has secured the reversal of a directed verdict or
acquired a judicial pronouncement that the defendant has violated the Constitution
unaccompanied by judicial relief. Never have we awarded attorney's fees for a
nonjudicial alteration of actual circumstances.
Buckhannon, 532 U.S. 598, 605-06 (2001). In sum, precedent from both the Supreme Court and
the Federal Circuit make clear that for a party to be a prevailing party, that party must win a
dispute within the case in favor of it that materially alters the legal relationship between the
parties at the time of the judgment.
The Defendant contends that it is a prevailing party as the "parties have filed a stipulated
motion to dismiss this case against NetApp with prejudice." (D.I. 59 at 17). The Defendant
emphasizes that the Plaintiff initially accused pNFS technology, only to later abandon this
argument. (D.I. 72 at 5). The Plaintiff argues that NetApp is not the prevailing party because the
"case was resolved by virtue of license agreements Parallel Iron entered into with two thirdparties that benefitted NetApp." (D.I. 64 at 12). 3 Furthermore, Parallel Iron argues that NetApp
cannot be a prevailing party as the "Court did not enter judgment on the merits, did not
incorporate the third-party license agreements into any judicial decree, and did not grant the
stipulation of dismissal based on the review of any settlement agreement between the parties."
The Federal Circuit has determined whether there is a prevailing party in several
instances. In Power Mosfet, the Court determined that when a party voluntarily dismisses its
case with prejudice against the defendant, after it had been determined that the patent-in-suit was
not infringed and had not been proven invalid or unenforceable, the defendant is the prevailing
party. Power Mosfet Technologies, L.L.C. v. Siemens AG, 378 F.3d 1396, 1406, 1416 (Fed. Cir.
2004). Similarly, in Highway Equipment, not only had the case progressed "through the final
The Plaintiff identifies a second license agreement with RPX as providing a license with NetApp. RPX paid
valuable consideration for the License. (D.I. 66 ~ 7). NetApp does not contest this assertion in its Reply Brief.
pretrial conference to the eve of trial," but the District Court had found that the patentee had
provided no explanation as to why it had decided to dismiss the case with prejudice on such a
late date. Highway Equip. Co., Inc. v. FECO, Ltd., 469 F.3d 1027, 1035 (Fed. Cir. 2006). The
Federal Circuit held that, "as a matter of patent law, the dismissal with prejudice, based on the
covenant [not to sue] and granted pursuant to the district court's discretion under Rule 41(a)(2),
has the necessary judicial imprimatur to constitute a judicially sanctioned change in the legal
relationship of the parties" sufficient to award fees under 35 U.S.C. § 285. !d.
This case is unlike Power Mosfet and Highway Equip. I have made no finding regarding
any substantive issue in the case. I have not construed any terms, resolved a contested motion to
dismiss, or resolved any motions for summary judgment. Discovery, while stayed, was
incomplete at the time the case with dismissed. Furthermore, unlike in Highway Equip., where
there was no reason given for the motion to dismiss, here it is clear that the Stipulation of
Dismissal was required as a result of a third-party licensing agreement. (D.I. 82 at 7).
Furthermore, no evidence has been provided to the Court that the third-party licenses were token
licenses. While the Defendant's attorney argued at the hearing that the Unified Patents license
did not involve a monetary payment, the Defendant's attorney conceded that it did involve other
consideration, such as agreeing to the dismissal of an inter partes review. !d. at 8-9. The Court
was not provided with copies of the licenses, but has been provided with an affidavit stating the
consideration for the two licenses. (D.I. 66 at ,-r,-r 7-8).
As I recently held in another decision, it cannot be the case that a party "can benefit from
a bona fide license agreement, obtained after the litigation began, and claim to be the prevailing
party, without a single substantial court decision that favors that party." Pragmatus Telecom
LLC v. Newegg Inc., 2014 WL 3724138 at *3 (D. Del. July 25, 2014), appeal pending, No. 14-
1777 (Fed. Cir). At oral argument the Court posed a question for the Defendant; "[I]f [the
Defendant] pay[s] a million dollars for a license and then dismiss[es] the case, [the Defendant] is
the prevailing party, but if [the Plaintiff] go[es] to trial and get[ s] a jury verdict for 500,000, [the
Plaintiff is] the prevailing party?" (Tr. at 7). The Defendant responded, in sum, yes. I cannot
agree. It makes no sense that the parties can receive effectively the same result, and in one
situation the Defendant can get fees under§ 285, but in the other, the Defendant cannot recover
The Supreme Court has made clear that there must be a dispute that was settled in favor
of the party seeking to be declared the prevailing party that materially alters the legal relationship
between the parties. Here, Parallel Iron licensed the patent, which led to downstream licensures
for the users, including NetApp. There was no settlement agreement, the Court made no findings
on the merits, and the case was not resolved via a consent decree. Therefore, under these
circumstances, NetApp is not a prevailing party under 35 U.S.C. § 285. Thus the Defendant's
motion for fees under § 285 is denied.
B. Court's Inherent Power
NetApp moves the Court to award it attorney's fees under its inherent powers. (D.I. 59 at
"It has long been understood that certain implied powers must necessarily result to our
Courts of justice from the nature of their institution, powers which cannot be dispensed with in a
Court, because they are necessary to the exercise of all others." Chambers v. NASCO, Inc., 501
U.S. 32,43 (1991) (internal quotation marks and brackets omitted). Therefore, courts are
"vested, by their very creation, with power to impose silence, respect, and decorum, in their
presence, and submission to their lawful mandates." !d. The court's "power reaches both
conduct before the court and that beyond the court's confines" as the underlying purpose of the
Court's power is to stem "disobedience to the orders of the Judiciary, regardless of whether such
disobedience interfered with the conduct of trial." !d. at 44 (internal brackets and quotation
marks omitted). Furthermore, a court "may assess attorney's fees when a party has acted in bad
faith, vexatiously, wantonly, or for oppressive reasons." Chambers, 501 U.S. at 45-46 (internal
quotation marks omitted). 4
The Third Circuit has held that:
Because of their very potency, inherent powers must be exercised with restraint and
discretion. A primary aspect of a district court's discretion is the ability to fashion
an appropriate sanction for conduct which abuses the judicial process. Thus, a
district court must ensure that there is an adequate factual predicate for flexing its
substantial muscle under its inherent powers, and must also ensure that the sanction
is tailored to address the harm identified. In exercising its discretion under its
inherent powers, the court should be guided by the same considerations that guide
it in the imposition of sanctions under the Federal Rules. First, the court must
consider the conduct at issue and explain why the conduct warrants sanction. If an
attorney, rather than a client, is at fault, the sanction should ordinarily target the
Republic of Philippines v. Westinghouse Elec. Corp., 43 F.3d 65,74 (3d Cir. 1994).
NetApp argues that the Court should exercise its discretion and award NetApp
compensation under its inherent powers. (D.I. 59 at 24). Conversely, Parallel Iron argues that
the Court should refrain from exercising its discretion as Parallel Iron did not act in bad faith,
vexatiously, wantonly, or for oppressive reasons. (D.I. 64 at 23). The Court disagrees with the
Plaintiff and finds that Parallel Iron did act in bad faith, vexatiously, and wantonly as it brought
Both parties agree that the Court has the requisite inherent power to address this issue, even at this stage. (See D.I.
82 at 25, 35 (Plaintiff's attorney stating, "I do believe your Honor has the power now[,] even at this stage of the
case[,] to address [this issue].") Additionally, Plaintiff's attorney agreed that the Court's inherent power is not
limited by a determination of who is the "prevailing party" in the case. /d. at 34-35.
this suit without a good faith basis and then continued to litigate the case via a misleading and
prejudicial litigation strategy. This issue was originally raised in front of me at a discovery
dispute held on September 27, 2013, during which I indicated that I understood why NetApp
might have a decent argument that it should be compensated for Parallel Iron's actions, but that I
felt that the issue was better put off until the entire case was resolved. (D.I. 47 at 27). That time
From the very beginning of this suit Parallel Iron accused Defendant's products by
reference to their implementation of the pNFS standard. (See D.I. 1). Parallel Iron then
continued to accuse the Defendant's implementation ofpNFS in its 4(a) disclosures.
Specifically, eight months after Parallel Iron's complaint, it identified the accused
instrumentalities as those that implement pNFS, "including, but not limited to, the NetApp ESeries Platform products and products using the Engenio external storage systems .... " (D.I 431 at 2). Then two months later, on April 23, 2013, Parallel Iron served amended 4(a) disclosures
that again solely identified the accused products as those that used pNFS. ld. at 5. On May 7,
2013, Parallel Iron again confirmed in its second amended 4(a) disclosures that it was accusing
NetApp's products or services that utilized pNFS. !d. at 8. Despite Parallel Iron's three 4(a)
disclosures and its complaint accusing pNFS, its infringement contentions served on May 25,
2013 did not mention pNFS. However, it was not until NetApp served an interrogatory on
Parallel Iron, asking, "For any asserted Claim that Parallel Iron contends are partially or fully
satisfied by compliance with an industry standard, please identify the specific standard, the
pertinent section, and state whether Parallel Iron, the named inventors, and/or any agent of
Parallel Iron took part in the standards process." ld. at 37. Parallel Iron responded on August 5,
2013, "Parallel Iron does not contend at this point that any Asserted Claim is satisfied by
compliance with an industry standard." In other words, Parallel Iron strung the Defendant along
for one year, one month, and eighteen days stating that they were accusing products that
implemented pNFS, 5 only to state, when directly asked in an interrogatory, that they had no
intention of accusing products implementing the pNFS standard.
In order to determine whether Parallel Iron had a good faith pre-suit belief that NetApp
infringed the patents-in-suit, at oral argument the Court ordered Parallel Iron to submit all
materials that it had gathered or created during its pre-suit investigation related to this issue.
Parallel Iron produced 1,040 pages of documents, including claim charts prepared by Parallel
Iron and its various counsel and advisors and samples of various public materials that Parallel
Iron relied upon in preparing the claim charts. Following this submission, the Court ordered
Parallel Iron to identify, with specificity, locations in the in camera documents where it
purported to have a reason to believe that NetApp used pNFS. Parallel Iron identified six
documents that purported to connect pNFS to NetApp's products. (D.I. 86). The Court is not
impressed with any of these citations.
As the initial complaint solely identified NetApp's implementation ofpNFS as the
accused product or service, for there to be a minimal pre-suit investigation, it would have been
necessary for Parallel Iron to have conducted some investigation as to whether (1) NetApp
implemented pNFS, and (2) did so in such a way as to infringe each of the patents-in-suit. Both
the specific documents cited to the Court in Parallel Iron's August 6, 2014 letter (D.I. 86) and the
Court's own review of the documents demonstrate that Parallel Iron initiated this suit without a
good-faith belief that the accused instrumentalities implemented pNFS in an infringing manner. 6
pNFS is an industry standard. Therefore, stating that one uses pNFS describes an overarching technology, not a
specific product, system, or method.
The Federal Circuit has made clear "that a district court may rely on an industry standard in analyzing
infringement. If a district court construes the claims and finds that the reach of the claims includes any device that
In fact, it is apparent to the Court, after reviewing the documents submitted for in camera
review, that the Plaintiff has provided no evidence that there was even a minimal investigation
into NetApp's actual implementation ofpNFS.
The Plaintiffs in camera documents indicate that the only NetApp product that the
Plaintiff charted pre-suit was FAS6200. (See in camera review document submitted July 22,
2014 bates stamped PI285MOT00019-33, PI285MOT00057-72, PI285MOT00073-110).
However, the Plaintiff identified no section of these claim charts in its August 6, 2014 letter as
connecting NetApp to pNFS, thus failing to show that FAS6200 used pNFS. (See D.I. 86).
Furthermore, upon the Court's own examination of the aforementioned claim charts, the Court is
unable to find any reference to pNFS. Thus, Parallel Iron's charting ofFAS6200 does not meet
even the most minimal requirements of a pre-suit investigation for a suit charging infringement
based on FAS6200's implementation ofpNFS. 7
Parallel Iron additionally charts the basic pNFS standard. (See in camera review
document submitted July 22, 2014 bates stamped PI285MOT000134-54 (claim chart for the' 177
patent and pNFS); PI285 MOT000155-75 (claim chart for the '388 patent and pNFS);
PI285MOT000176-195 (claim chart for the '662 patent and pNFS)). However, the Court is
unable to find any reference to NetApp anywhere in the charts. Furthermore, akin to Parallel
Iron's charting ofF AS6200, Parallel Iron does not cite to any location within these claim charts
that would connect pNFS with NetApp. (See D.I. 86). Thus, neither the charting of the pNFS
practices a standard, then this can be sufficient for a finding of infringement." Fujitsu Ltd. v. Netgear Inc., 620 F .3d
1321, 1327 (Fed. Cir. 201 0). However, this analysis is based on the presumption that "an accused product operates
in accordance with [the] standard" as "[o]nly in the situation where a patent covers every possible implementation of
a standard will it be enough to prove infringement by showing standard compliance." !d. at 1327-28. The Parallel
Iron's pre-suit investigation included no such evidence.
If the Plaintiff had accused FAS6200 in such a way as to not limit it to FAS6200's use ofpNFS, there might have
been a sufficient pre-suit basis for this suit. However, Parallel Iron accused NetApp's use ofpNFS.
standard nor ofFAS6200 satisfied the Plaintiffs burden to conduct a minimal pre-suit
investigation for the suit it actually filed and litigated.
In the Plaintiffs August 6, 2014 letter, the Plaintiff does cite to a white paper published
in January 2012 by NetApp suggesting that NetApp had used a form ofpNFS. (See in camera
review document submitted July 22,2014 bates stamped PI285MOT000113-20 ("[Netapp]
delivered a path to offer scalable storage based on the IETF pNFS standard that builds on the
capabilities [NetApp] ha[s] developed for the Data ONTAP operating systems.")). The Court
finds that the white paper does nothing more than discuss "the basic operation of pNFS and
describe the pros and cons of the available data layouts. Guidance is also provided for
implementation planning." !d. at PI285MOT00113. In fact, the one product/technology
discussed in the white paper that might utilize pNFS, "Data ONTAP 8.1 operating in ClusterMode," was not charted by Parallel Iron before instigating this suit. !d. at PI285MOT000120.
Furthermore, the white paper, by itself, does not provide sufficient detail regarding NetApp's
usage of pNFS to lead to any conclusion as to whether NetApp actually implemented pNFS in
any particular product, let alone in such a way that would infringe one of the patents-in-suit. This
is simply not sufficient for a pre-suit investigation.
The other documents cited by Parallel Iron as evidence that NetApp used pNFS simply
indicate that NetApp, or its employees, contributed to the creation of the pNFS standard, not that
pNFS was implemented by NetApp. For example Parallel Iron cites to the document "Internet
Engineering Task Force (IETF) Request for Comments: 5661 Category: Standards Track ISSN:
2070-1721 by S. Shepler, Ed., Storspeed, Inc, M. Eisler, Ed., D. Noveck, Ed., and NetApp."
(D.I. 86 at 2). However, this document simply shows that NetApp, along with two of its
employees, helped edit the NFSv4.1 standard, which included the pNFS standard as an option.
(D.I. 86 at 3; in camera review document submitted July 22, 2014 bates stamped
PI285MOT000242-858). The fact that NetApp and its employees participated in the creation of
a standard cannot by itself provide evidence suitable for a pre-suit investigation to conclude that
NetApp actually infringed each, or even one, of the patents-in-suit.
Parallel Iron argues that this case "was never limited to pNFS" as it had an "independent
basis to maintain this lawsuit based on NetApp's infringement of the Patents in Suit using, for
example, NetApp's FAS6200 Enterprise Storage System and Hadoop related products." (D.I. 64
at 15). 8 Even assuming that Parallel Iron's intention from the beginning of the case was not to
limit the case to pNFS, Parallel Iron stated time and time again to NetApp that it was accusing
only products that implemented pNFS. In fact, when Parallel Iron did identify specific products
such as FAS6200, it did so by stating, "Parallel Iron is asserting the patents-in-suit against all of
NetApp's products and/or services that implement the [pNFS] including, but not limited to: (1) ..
. FAS6200 .... " (D.I. 43-1 at 5-6). Each of Parallel Iron's 4(a) disclosures makes clear that
Parallel Iron was limiting its suit to pNFS. No reasonable person could interpret the quoted
sentence, or anything else in any of the 4(a) disclosures, as stating that Parallel Iron was accusing
NetApp systems that use pNFS and separately accusing the FAS6200 product or any other
products that did not use pNFS. Furthermore, despite having charted FAS6200 during the
Plaintiffs pre-suit investigation (in camera review document submitted July 22, 2014 bates
stamped PI285MOT000057 -11 0), Parallel Iron did not mention it as an accused product in its
4(a) disclosures ofFebruary 15, 2013.
Parallel Iron argues it conducted a proper pre-suit investigation as its investigation was
costly and extensive. (D.I. 64 at 8). Parallel Iron states that "Mr. Dodd, one of the named
In a way, if this were true, Plaintiff ought to be sanctioned for hiding the ball.
inventors, performed his own extensive analysis concerning NetApp's infringement." !d.
(citation omitted). Additionally, Parallel Iron states that it "enlisted a team of experts,
consultants and legal advisors to perform additional work and pre-suit analysis." !d. Parallel
Iron paid outside consultants a total of $32,000. !d. While the Court believes that some
investigation did occur, the Court finds no evidence that the Plaintiffs investigation ofNetApp
was "extensive," let alone minimally sufficient. When asked at the hearing about the $32,000,
the Plaintiffs counsel indicated that this amount was spent on the investigation for all second
round litigants and likely included costs spent on first round litigants. (D.I. 82 at 37-38). Even
assuming the cost only covered second round litigants, there are 26 related cases in this District
alone that this cost would have been split among.
For the reasons stated above the Court finds that the Plaintiff litigated this case in bad
faith, vexatiously, and wantonly. Therefore the Court finds it necessary to impose sanctions on
Parallel Iron, not only to compensate NetApp, but also to deter Parallel Iron from continuing to
litigate in such a manner in the future. 9
NetApp requested an award of sanctions in the amount of $480,000, which it states is the
portion of its fees that are attributable to the cost associated with Parallel Iron's accusation of
pNFS. (D.I. 59 at 25). Parallel Iron objected to this amount of fees in its Answering Brief. (D.I.
The Court notes that it previously gave Parallel Iron the benefit of the doubt. See Parallel Iron LLC v.
Adknowledge Inc., 2012 WL 5392251 (D. Del. Nov. 2, 2012) (denying exceptional case sanctions because the Court
thought that Parallel Iron was incompetent rather than acting in bad faith).
The Third Circuit has held that, "[It] will not adopt a broad rule ... that once a claim is held not to violate Rule
11, the court is prevented from imposing sanctions under its inherent power." Gillette Foods Inc. v. BayernwaldFruchteverwertung, GmbH, 977 F.2d 809, 813 (3d Cir. 1992). Here the Court is prevented from granting sanctions
pursuant to Rule II, not because the conduct did not violate Rule 11, but because of the procedural posture of the
case. Furthermore, parallel to the Third Circuit's reasoning regarding Rule 11, there is no logical reason that just
because the Plaintiff cannot be subject to 35 U.S.C. § 285, the Plaintiff cannot be subject to the Court's discretionary
powers. Here, again the only reason the Court does not grant the motion as to 35 U.S.C. § 285 is because the Court
found that the Defendant was not a "prevailing party," not because the Court determined that the case was not
64 at 23). The Court is not now in a position to judge whether NetApp's request for fees is
accurate, and therefore the Court will include in its order a briefing schedule to address the
amount of fees appropriate in this case.
For the reasons above, the Court will GRANT Defendant NetApp Inc.'s motion for
attorney fees. (D.I. 58). The parties are to provide supplemental briefing regarding the amount
of damages in accordance with the accompanying Order.
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