Clouding IP LLC v. EMC Corporation et al.

Filing 94

MEMORANDUM ORDER re 82 MOTION for Attorney Fees filed by EMC International US Holdings Inc., VMware Inc., EMC Corporation is DENIED. Signed by Judge Leonard P. Stark on 9/30/15. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CLOUDING IP, LLC,
·Plaintiff,
C.A. No. 13-1455-LPS

v.
EMC CORPORATION, EMC ·
INTERNATIONAL US HOLDINGS,
INC., and VMWARE, INC.,
Defendants.

MEMORANDUM ORDER
At Wilmington this 30th day of September, 2015:
Having reviewed the parties' briefing and other materials filed with respect to Defendants
EMC Corp., EMC International U.S. Holdings, Inc., and VMware, Inc. 's ("Defendants") motion
"for an award of their attorney's fees under 35 U.S.C. § 285 and the Court's inherent power to
assess attorney's fees" (D.I. 82, 83, 87, 92), IT IS HEREBY ORDERED that Defendants'
motion (D.I. 82) is DENIED, for the reasons stated below.
1.

Plaintiff Clouding IP, LLC ("Plaintiff') sued Defendants for patent infringement

on August 17, 2013. (D.I. 1) ("Complaint") On December 20, 2013, Defendants moved to
dismiss Plaintiffs Complaint based on lack of standing. (D.I. 32) The Court granted
Defendants' motion to.dismiss on July 28, 2014. (D.I.69) Plaintiff moved for reargument and
reconsideration ofthe Court's July 28, 2014 Order on August 11, 2014. (D.I. 75) The Court
denied Plaintiffs motion for reargument on November 17, 2014. (D.I. 81) On December 8,
2014, Defendants moved for attorney fees. (D.I. 82)
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2.

Defendants list a series of factual allegations in support of their request for

attorney fees, including allegations that Plaintiff (1) filed "massive patent litigation" in seriatim,
placing "substantial burdens on the Court and a broad group of defendants" (see D.I. 83 at 2-3);
(2) was ''on notice" as to doubts about its "standing to sue" early in the litigation,.but made no
attempt to demonstrate that it possessed "all substantial rights" in the asserted patents (see id. at
3-4); (3) continued litigating after the Court dismissed Plaintiffs Complaint for lack of standing

(see generally D.I. 68) and even after the Court denied Plaintiffs motion for reargument oil the
standing issue (see D.I. 83 at 4-6); and (4) caused Defendants to incur over three million dollars
in "attorneys' fees and costs" (see id. at 7-8).
3.

hi patent cases that are deemed "exceptional," a Court may award "reasonable

attorney fees" to the "prevailing party." 35 U.S.C. § 285. Federal Circuit law applies when
interpreting and applying§ 285. See Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1032
(Fed. Cir. 2006). The Supreme Court has held that an "exceptional" case is "one that stands out
from others with respect to the substaptive 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). Ultimately, the Court must make a discretionary decision based on the totality of
circumstances. See id. A party moving for attorney fees must demonstrate, by a preponderance
. of the evidence, that a case is "exceptional." Id. at 1758.
4.

To be a "prevailing party" under§ 285, a court must award "relief on the merits,

either through a judgment on the merits or through a settlement agreement en~orced through a
consent decree" in favor of the prevailing party. See Highway Equip., 469 F.3d at 1033. ·It is not

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enough that a defendant voluntarily changes its conduct as a result of the litigation, even if the
plaintiff "achieve[s] its desired result." Buckhannon Bd. and Care Home, Inc. v. W Va. Dep 't of
Health and Human Res., 532 U.S. 598 (2001). "The dispositive issue is thus whether [relief on
the merits] had sufficient judicial imprimatur to constitute a 'judicially sanctioned change in the
legal relationship of the parties."' Highway Equip., 469 F.3d at 1034 (quoting Buckhannon, 532
U.S. at 605).
5.

Awards of attorney fees must be "reasonable." 1 In Parallel Iron LLC v. NetApp,

Inc., 84 F. Supp. 3d 352, 356 (D. Del. 2015), the Court discussed the"lodestar" approach, "which
has been held ... to be the method to be used to determine a reasonable attorney fee in all the
federal courts." Id. (quoting In re Nicholas, 496 B.R. 69, 74 (Banlcr. E.D.N.Y. 2011) (internal
quotation marks omitted)).
The lodestar amount results from multiplying the amount of
time reasonably expended by reasonable hourly rates. The
prevailing community market rates assist the court in determining a
reasonable hourly rate. The court should exclude all hours that
were not reasonably expended. The party seeking fees bears the
burden of establishing the reasonableness of both the time
expended and the hourly rates. Once the amount of time has been
multiplied by a reas01;iable hourly rate, there are several factors a
court may consider to adjust the award upwards or downwards.
Parallel Iron, 84 F. Supp. 3d at 356 (internal citations, quotation marks, and ellipsis omitted).
6.

At the broadest level, following Octane Fitness, the Court may appropriately ask

(as part of the totality of the circumstances inquiry) whether it believes this is a case that should
not have been filed or, once filed, should have been litigated differently by the non-prevailing

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Because the Court determines that the instant case is not "exceptional," the Court need
not decide whether Defendants' requested attorney fees are reasonable.
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party. Even assuming that Defendants are the "prevailing" parties in this case - a conclusion the
Court need not and does not reach, because Defendants' motions fail on the basis that the instant
case is not "exceptional" - the Court finds no basis to conclude that this case should not have
been brought. Plaintiff, even if it is a non-practicing entity (see D.I. 83 at 2), has a right to
vindicate its patent rights. Plaintiff put forward undisputed evidence (see D.I. 87 at 7 n.2) that
the settlements it reached with other defendants were not "nuisance settlements" that were
merely "worth a fraction of what the case would cost to litigate." See Summit Data Sys., LLC v.
EMC Corp., 2014 WL 4955689 at *4 (D. Del. Sept. 25, 2014).
7.

Defendants' main arguments are that (1) Plaintiff did not perform an "adequate

pre-suit investigation" into its standing before suing (see D.I. 83 at 15) and (2) Plaintiff continued
litigating and failed to "acknowledge its standing problems" after it knew or should have known
about the problems (see id. at 14). The Court finds that Plaintiff had a good faith, though
ultimately incorrect, belief that it had standing to sue throughout the litigation. In particular, the
Court agrees with Plaintiffs statement that "[i]t is illogical to believe that Clouding IP would
incur the significant time and expenses associated with patent litigation all the while believing
that it lacked standing, especially because a party can challenge standing until the last moments
of a case, even after a successful judgment." (D.I. 87 at 4) Plaintiff presented a good faith
reading of the Patent Purchase Agreement ("PP A"), which purported to grant the "entire right,
title, and interest" in the patents-in-suit to Plaintiff. (See id. at 6) In addition, the Court finds it
plausible that Plaintiff and Symantec Corp. ("Symantec") intended for the PP A to grant all "right,
title, and interest" in light of the subsequent "Restated PP A" entered into by Plaintiff and
Symantec, which "sought to address all of the issues identified in the Court's ruling" that had

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dismissed the case for lack of standing. (Id. at 7)
8.

As long as the test for awarding attorney fees turns on whether the case is

"exceptional," the Court is obligated to consider the instant case in comparison to the full
panoply of patent cases with which it has been involved, and needs to assess if the instant case is
in some meaningful sense "uncommon," "rare," or "not ordinary." Octane Fitness, 134 S. Ct. at
1756. Having undertaken this analysis, the Court concludes that nothing about the instant case
stands out as "exceptional" in any respect, including the substantive strength of Plaintiffs
unsuccessful positions or the manner in which Plaintiff litigated the case. AccordingJy, the Court
exercises its discretion to deny Defendants' request for attorney fees. 2

HON. EONARD P. STARK
UNITED STATES DISTRICT JUDGE

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Defendants also request attorney fees under the Court's "inherent power and discretion."
(D.I. 83 at 16) For the same reasons discussed above with respect to Defendants' request under
§ 285, and further because the Court finds that Plaintiff has not "acted in bad faith, vexatiously,
wantonly, or for oppressive reasons," the Court denies Defendants' request for fees under the
Court's inherent power.

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