Parallel Networks Licensing LLC v. International Business Machines Corporation

Filing 448

MEMORANDUM OPINION denying Defendant's Motion for Attorney's Fees and Costs 415 . Signed by Judge Kent A. Jordan on 7/31/17. (gvw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
PARALLEL NETWORKS LICENSING,
LLC,
Plaintiff,

v.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
Defendants.

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Civil Action No. 13-2072 (KAJ)

MEMORANDUM OPINION

Adam W. Poff, Esq., Pilar G. Kraman, Esq., Young Conaway Stargatt & Taylor, I 000 N. King
Street, Wilmington, DE 19801, Counselfor Plaintiffs
Of Counsel: Douglas A. Cawley, Esq., Christopher T. Bovenkamp, Esq., Eric S.
Hansen, Esq., Avery R. Williams, Esq., Justin W. Allen, Esq., McKool
Smith, PC, 300 Crescent Court- Ste. 1500, Dallas, TX 75201
Angela M. Vorpahl, Esq., McKool Smith, PC, I Bryant Park- 47th Fl.,
New York, NY I 0036
John B. Campbell, Esq., Leah Bhimani Buratti, Esq., Kevin P. Hess, Esq.,
McKool Smith, PC, 300 W. 6th Street- Ste. 1700, Austin, TX 78701
Jack B. Blumenfeld, Esq., Rodger D. Smith, II, Esq., Jeremy A. Tigan, Esq., Morris, Nichols,
Arsht & Tunnell, LLP, 1201 North Market Street, P.O .. Box 1347, Wilmington, DE 19899,
Counsel for Defendants
Of Counsel: John M. Desmarais, Esq., Jon T. Hohenthaner, Esq., Andrew G. Heinz,
Esq., JeffreyS. Seddon, II, Esq., William D. Findlay, Esq., Desmarais
LLP, 230 Park Avenue, New York, NY 10169

July31,2017
Wilmington, Delaware

y designation

I.

Introduction
On April27, 2017, I entered final judgment of non-infringement for IBM in this

patent infringement case. (Docket Item ("D.I.") 413.) I had previously entered a partial
summary judgment order, ruling that Parallel Networks could not prevail on its theory of
indirect infringement. (D.I. 367.) I also granted a motion in limine excluding Parallel
Networks' damages theory as it pertained to direct infringement. (D.I. 406.) In the face
of those rulings, the parties filed a joint stipulation seeking entry of final judgment. (D.I.
411.)
Currently before me is IBM's motion for attorneys' fees and costs under 35 U.S.C.
§ 285. (D.I. 415.) Having reviewed the briefing on this motion, and considering the
parties' conduct during the course oflitigation, I I conclude that this is not a case to be
called "exceptional" and does not warrant the imposition of fees. I will therefore deny
IBM's motion.

II.

Legal Standards
Pursuant to 35 U.S.C. § 285, a court "may award reasonable attorney fees to the

prevailing party" in "exceptional cases[.]" In Octane Fitness, LLC v. ICON Health &

Fitness, Inc., the Supreme Court articulated the standards that courts should use to
determine whether a case qualifies as "exceptional." 134 S. Ct. 1749, 1756 (2014). It

For much of this case, including a period of contentious discovery, the matter
was assigned to a different judge, so I was not directly involved, but I have considered
the record.
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held that "an 'exceptional' case is simply one that stands out from others with respect to
the substantive strength of a party's litigating position ... or the unreasonable manner in
which the case was litigated." !d. Whether a case qualifies as "exceptional" is a question
of judicial discretion. !d. When deciding whether a case is "exceptional," courts should
consider the totality of the circumstances. !d. (recognizing that "there is no precise rule
or formula for making these determinations" and that district courts should exercise
"equitable discretion" (quotation marks and alteration omitted)).
Following Octane Fitness, the Federal Circuit has instructed that "[t]he ... purpose
behind§ 285 is to prevent a party from suffering a 'gross injustice"' and that "[t]he
exercise of discretion in favor of awarding attorney fees should be bottomed upon a
finding of unfairness or bad faith in the conduct of the losing party, or some other
equitable consideration ... which makes it grossly unjust that the winner ... be left to bear
the burden ofhis own counsel fees." Checkpoint Sys., Inc. v. All-Tag Security S.A., 858
F.3d 1371, 1376 (Fed. Cir. 2017) (alterations and quotations omitted). In other words,
"fee awards are not to be used 'as a penalty for failure to win a patent infringement suit."'
!d. (quoting Octane Fitness, 134 S. Ct. at 1753).

III.

Discussion
Viewed in its totality, Parallel Networks' conduct over the course of this case does

not qualify as exceptional. Based on the record, it appears that Parallel Networks
succeeded in obtaining discovery that it demanded, worked to narrow the issues in the
case, and presented at least one claim that withstood summary judgment. (D.I. 366.)
Despite that, IBM presents four reasons why it believes this case is exceptional and
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Parallel Networks should pay IBM's attorney fees. While I am not wholly unsympathetic
to IBM's position, I am, in the end, unpersuaded.
First, IBM contends that "Parallel Networks' claims ... were frivolous and
objectively baseless." (D.I. 416 at 14 (title capitalization removed).) I disagree. While it
is true that the case did not proceed to trial, Parallel Networks' claims were not entirely
and objectively baseless. Indeed, Parallel Networks defeated a motion for summary
judgment on direct infringement, though it would have been limited to nominal damages
had it won. (See D.I. 406 (rejecting Parallel Networks' damages theory on direct
infringement).) Moreover, while IBM prevailed on summary judgment with respect to
Parallel Networks' claims of indirect infringement (D.I. 366 at 14), and with respect to
some of Parallel Networks' claims of direct infringement (see id. at 9), I do not think that
Parallel Networks' position was so weak as to make this case qualify as exceptional
under§ 285.
Second, IBM argues that Parallel Networks "failed to conduct an adequate pre-suit
investigation" before it filed suit. (D.I. 416 at 16 (title capitalization removed).) That
assertion is countered by Parallel Networks' representation that five of its attorneys
"conducted a pre-suit investigation that spanned 200 hours over nearly eleven months."
(D.I. 429 at 4; D.I. 430 at 1-2.) Parallel Networks says that, over the course of its
investigation, it reviewed previous litigation, drafted and evaluated claim charts for
several IBM products, interviewed the inventor, and spoke with former litigation counsel.

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(D.I. 430 at 2-4i I accept those representations and believe they are sufficient to show
that the pre-suit investigation was enough to avoid the imposition of fees.
Third, IBM argues that "Parallel Networks pursued this case in a manner
calculated to drive up IBM's costs" by "maintaining the suit after it became clear that it
had no factual basis for its allegations." (D.I. 416 at 18.) But the support IBM provides
for that contention is the assertion that Parallel Networks "did not withdraw its
allegations" or remedy deficiencies IBM says were identified in its Answer, noninfringement contentions, and correspondence. (ld.) That argument is rebutted by the
record, which shows that Parallel Networks did reduce the number of accused products
and disputed claim terms, though not as quickly as IBM wanted. (See D.I. 431 Ex. 49
(Parallel Networks agreeing to drop several accused products from the case); D.I. 431 Ex.
48 (Parallel Networks agreeing to adopt IBM's construction of"dispatcher").) See

Callaway Golf Co. v. Slazenger, 384 F. Supp. 2d 735, 747 (D. Del. 2005) (recognizing
that "voluntary dismissal is generally deemed 'an indication of good faith."' (quoting

Kastar v. K Mart Enterprises, 1976 WL 21021, at *555 (E.D.N.Y. 1976)).

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In its reply brief, IBM cries foul and suggests that Parallel Networks' description
of its pre-suit investigation "is at odds with" an interrogatory response and "is contrary to
the sworn testimony of [Parallel Networks'] CEO[.]" (D.I. 435 at 3.) Parallel Networks
attempted to justify its limited and incomplete interrogatory response by pointing out that
it objected to the interrogatory "based on relevance, work product privilege, and attorneyclient privilege." (D.l. 429 at 5 n.l.) While Parallel Networks' conduct may not have
been exemplary, I do not think it justifies ignoring Parallel Networks' current account of
its pre-suit investigation, nor do I think it provides an independent justification for
awarding attorneys fees to IBM.
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Finally, IBM maintains that it is entitled to fees because "Parallel Networks ...
unreasonably ... pursu[ed] discovery that had no purpose other than to drive up IBM's
costs of!itigation." (D.I. 416 at 19.) To support that claim, IBM points to several
discovery disputes, but Parallel Networks notes that several of those were resolved in its
favor. (Compare id. at 19-20 (characterizing Parallel Networks' requests as unreasonable
as they pertained to IBM's "SoftLayer," "Cloud Marketplace," and "Nationwide"
products) with D.I. 431 Ex. 15 at 19-20, 38-42, 55-58 (Parallel Networks prevailing on its
request to obtain discovery with respect to SoftLayer, Cloud Marketplace, and
Nationwide products).) While Parallel Networks did not prevail on all of its discovery
claims, IBM has not identified any reason to think that Parallel Networks' losses show
that it operated in bad faith. Moreover, the fact that IBM was on the losing side of some
of those discovery disputes cuts against its argument that Parallel Networks was
unreasonable. See Power Mosfet Techs., L.L.C. v. Siemens AG, 378 F.3d 1396, 1415
(Fed. Cir. 2004) (explaining that misconduct from the prevailing party can preclude that
party from recovering fees under§ 285); cf Gaymar Indus., Inc. v. Cincinnati Sub-Zero
Prods., Inc., 790 F.3d 1369, 1373 ("[T]he conduct of the parties is a relevant factor under
Octane's totality-of-the-circumstances inquiry[.]").

In sum, I do not think IBM is entitled to fees and costs in this case. While Parallel
Networks did not prevail, neither its conduct nor its positions were, in my view,
"exceptional" under § 285.

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IV.

Conclusion
For the reasons noted, IBM's motion for attorneys' fees and expenses is denied.

An appropriate order follows.

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