Wi-Lan Inc. v. Sharp Corporation et al

Filing 565

MEMORANDUM ORDER re (545 in 1:15-cv-00379-LPS)(470 in 1:15-cv-00788-LPS) Renewed Motion to Declare Case Exceptional Pursuant to 35 U.S.C. § 285 and Award Attorneys' Fees and Costs filed by Sharp Electronics Corporation, Vizio, Inc., is GRANTED IN PART and DENIED IN PART. Signed by Judge Leonard P. Stark on 2/3/22. Associated Cases: 1:15-cv-00379-LPS, 1:15-cv-00788-LPS (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
WI-LAN INC.,
Plaintiff,
C.A. No. 15-379-LPS

V.

SHARP ELECTRONICS CORPORATION,
Defendant.
WI-LAN INC.,
Plaintiff,
C.A. No. 15-788-LPS

V.

VIZIO, INC. ,
Defendant.

MEMORANDUM ORDER
At Wilmington this 3rd day of February, 2022:
WHEREAS , Defendants Sharp Electronics Corporation ("Sharp") and VIZIO, Inc.
("VIZIO," and, together with Sharp, "Defendants") moved for a determination that this case is
exceptional and for attorneys ' fees and related costs under 35 U.S.C. § 285 (see C.A. No. 15-788
D.I. 470; C.A. No. 15-379 D.I. 545);
WHEREAS , Defendants and Plaintiff Wi-LAN Inc. ("Wi-LAN") submitted full briefing
and related materials regarding Defendants' fee motions (see, e. g. , D.I. 546,555, 557); 1
WHEREAS, having carefully considered the briefing and related materials, the Court
heard argument on Defendants' fee motions by teleconference on January 26, 2022;

1

Docket citations are made to C.A. No. 15-379 and apply equally to corresponding filings in
C.A. No. 15-788.

1

NOW, THEREFORE, IT IS HEREBY ORDERED that Defendants' motions for

attorneys' fees (C.A. No. 15-788 D.I. 470; C.A. No. 15-379 D.I. 545) are GRANTED IN PART
and DENIED IN PART .
The Court's Order is consistent with the bench ruling announced at the conclusion of the
hearing, excerpts of which are reproduced below.2
Under 35 U.S.C. § 285, in exceptional cases, the Court may award reasonable
attorney fees to the prevailing party. Here, there is no dispute that the defendants
are the prevailing parties, so I will not address that requirement any further.
An exceptional case is 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 is
litigated. [3]
The movant, here the defendants, bears the burden of proving exceptionality by a
preponderance of the evidence.
Ultimately, the determination of whether a case is exceptional lies within the
Court's discretion based on the totality of the circumstances. And once the Court
has determined that a case is exceptional, it still retains the discretion to deny an
award of attorneys ' fees.[ 4]
Important to my analysis ... in this case is that, as the Federal Circuit explained in
IV v. Trend Micro,[5] the Court must make the exceptionality determination at the
level of the overall case; that is, the Court must decide whether the case as a whole
is exceptional.

It is possible for a case to be overall exceptional based on just one or a few isolated
events, but the key is that the finding must be as to the case overall considering the
totality of circumstances. Thus, a framework for the analysis that I will undertake
is as follows:

2

The Court adopts the full bench ruling. For clarity, the excerpt of the transcript contains some
minor stylistic adjustments beyond those explicitly called out below.

3

Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014).

4

ICON Health & Fitness, Inc. v. Octane Fitness, LLC, 576 F. App 'x 1002, 1005 (Fed. Cir.
2014).
5

Intel!. Ventures I LLC v. Trend Micro Inc., 944 F.3d 1380, 1384 (Fed. Cir. 2019).
2

First, I will decide, up or down, whether this case as a whole is exceptional.
Second, I will then determine whether, even if it is exceptional, [I] should ... award
fees.
Third, ifl decide to award fees , I then have to decide how much to award. And this
third step in turn requires me to consider two subsidiary considerations: (a) is there
a reason to tailor the amount awarded to only that conduct which made the case
exceptional overall; that is, is there a need to calibrate the amount the moving party
must pay to reflect only the fees incurred by the prevailing party that were in some
way caused by the losing party's conduct that makes the case exceptional overall?
And, (b ), the fees must be reasonable in terms of hours expended and rates charged.
So with that background, let me turn to the analysis. Defendants here seek
attorneys' fees and costs on the basis that Wi-LAN' s assertion of three patents, what
I'll refer to as the '654, ' 250, and '774 patents[, 6] ... throughout the litigation was
exceptional within the meaning of Section 285 .
Before I turn to the arguments with respect to each patent specifically, I want to
make some high-level observations about this case as they demonstrate why, in my
view, determining the right resolution to the pending motions has been very
challenging.
First, as I will explain, I disagree with a lot of the broad accusations defendants
have made in their characterization of this case as akin to a nuisance suit and a case
that was frivolous and doomed from the start....
Second and relatedly, I cannot say that this is [a] case I believe plaintiff should have
been deterred from ever filing.
Third, I agree with the plaintiff that this case did involve routine disputes and that
plaintiff prevailed on some of them.
But fourth, and very importantly, this case consisted of more than just mere routine
disputes in a run-of-the-mill patent case. In particular, how the plaintiff handled
the issues relating to the source code and the other evidence necessary to prove
infringement of the '654 patent does make this case stand out and makes it
overall exceptional.
In relation to this evidence, plaintiff did not act with the diligence it should have,
and it never attained reliable and admissible evidence that was crucial to its
case. Yet, plaintiff continued to assert the ' 654 patent long after it knew or, at
minimum, should have known, it could not prevail on its claims of infringement of

6

The full citations for the patents are: U.S. Patent Nos. 6,359,654, 6,490,250, and 5,847,774.
3

that patent.
So let me start by analyzing the '654 patent issues. As to the '654 patent, defendants
first argued Wi-LAN advocated an exceptionally weak position by asserting a direct
infringement theory based on . . . SiRF Technology.[7]

In granting defendants' motion for summary judgment, this Court found Wi-LAN's
reliance on SiRF "unavailing. " 8

While this Court ultimately rejected plaintiffs theory ... at the summary judgment
stage, it is not persuaded that Wi-LAN' s theory was so far-fetched as to make this
case exceptional. [And, a]lthough this case is distinguishable from SiRF, WiLAN' s reliance on SiRF did not constitute such a weak litigation [position] that it
makes this case, as a whole, exceptional.

Next, defendants [argue] ... that Wi-LAN ' s decision to continue litigating the ' 654
patent after failing to obtain admissible evidence renders this case exceptional.
As the Court will explain, it does agree in part with defendants' position. From the
beginning of this case, it's important to point out[,] Wi-LAN knew that to prove its
direct infringement case, it would need source code from third party SoC
manufacturers for the period of 2009 to 2017. And when I say "the beginning of
this case," I mean no later than the initial case management conference.
Defendants explained that reality at the initial case management conference in
February 2016 and reiterated it during the July 2016 discovery teleconference.
During discovery, Wi-LAN requested several extensions to serve its infringement
contentions. And the Court expressed skepticism that plaintiff had been diligently
pursuing this discovery.
For example, in September 2017, the Court stated: "I really am not persuaded that
through reasonable diligence, plaintiff could not have met the deadline that I
already set or possibly even one of the earlier deadlines that I had set."[9]

7

SiRFTech. , Inc. v. Int '! Trade Comm 'n, 601 F.3d 1319 (Fed. Cir. 2010).

8

D.I. 487 at 12.

9

D.I. 182 at 26.
4

At that same conference, I said that already at that time, "a really strong case" could
be made that I should deny plaintiff any further time to obtain the evidence it had
still yet to obtain.[10 ]
On appeal, the Federal Circuit also addressed Wi-LAN' s diligence. And I think it
agreed with me that Wi-LAN should have done better. For that, I point specifically
to . .. the opirrion issued by the Federal Circuit:
Wi-LAN had ample time to obtain the source code and to find
custodial witnesses to authenticate the source code over the course
of discovery but failed to do so.
Wi-LAN had been on notice since early 2016 that it was going to
need the system-on-chip source code from third parties to prove its
direct infringement case. Throughout the litigation, Wi-LAN
repeatedly requested extensions of time to obtain the source code
from the third-party manufacturers. Ultimately, however, Wi-LAN
only procured a single printout version of the source code with
declarations after suing the third party manufacturers.[ 11 ]
Wi-LAN maintains now that it diligently pursued such discovery, including by
issuing subpoenas and engaging in negotiations with third parties. The process, it
contends, was substantially hampered by much of the relevant source code residing
out[ side] of the United States and resistance from third party production of this
highly confidential information. And Wi-LAN's correspondence with some of the
third party SoC manufacturers reflects this resistance.
Ultimately, unable to obtain the source code it needed, Wi-LAN sued the SoC
manufacturers for patent infringement. And although Wi-LAN appears to admit
that these lawsuits were aimed at securing the discovery it could not obtain in this
case, Wi-LAN, nonetheless, maintains that it has legitimate claims against these
SoC manufacturers as inducing and/or contributory infringers.
The fact that Wi-LAN procured this evidence by filing these suits does not ...
amount to harassment, as defendants allege, or make this case exceptional.
. . . The Court doesn't agree with the defendants, as I noted, that this was
harassment, but I also don't agree with Wi-LAN.
Wi-LAN contends this evidence is irrelevant and that I must focus just on the two
cases before me; that is, the suits against Sharp and VIZIO, which are related and

10

Id at 25-26.

11

D.I. 539-1 at 18.

5

are both the subject of today' s hearing and of my ruling. And that I shouldn't look
at any other cases. Under the circumstances here, I disagree with Wi-LAN. The
other suits are the very mechanism by which Wi-LAN obtained evidence that it
interjected into this case. Evidence on which my summary judgment decision
largely turned.
Where that evidence came from and the circumstances under which it was acquired
and produced into this case was pertinent to my summary judgment analysis.
Specifically, the application of the various rules of evidence. And [it] is a relevant
and fair consideration on a 285 motion.
On that point, I would add that the whole set of circumstances relating to how the
plaintiff obtained the third party [declarations,] and tried to use [them] in this case,
and failed to justify [their] admissibility, and did not act with the thorough diligence
[with] which it should have, together make this case overall stand out from the rest
and make it exceptional.
But in saying that, I do want to emphasize I disagree with defendants' nefarious
interpretation of plaintiffs efforts to acquire the source code. They have not proven
by the required preponderance of the evidence that plaintiff all along really
preferred not to even obtain the source code as part of a strategy to drive up
defendants' costs without ever genuinely intending to resolve this case on the
merits.
I'm not persuaded that plaintiffs lawsuits were designed to and/or yielded false
evidence ... from the third parties or that these third parties were induced to supply
false evidence as part of a sweetheart deal to avoid expensive patent litigation.
As I said in the summary judgment opinion, the circumstances by which plaintiff
came to acquire the SoC manufacturers' evidence undermine the reliability and
credibility of the evidence, which supported the Court' s conclusion on nonadmissibility. But none of that means that I'm buying into the alleged nefarious
scheme that defendants accused plaintiff [of] having engaged in with respect to that
evidence.
While I do not find that Wi-LAN ' s assertion of the ' 654 patent against the two
defendants was frivolous or in bad faith from the start, there did come a point at
which, based on the developments of the litigation and particularly all those
surrounding circumstances related to the source code and the related evidence, ...
it was no longer reasonable, in my opinion, for Wi-LAN to continue to press its
'654 [patent] infringement claims against these defendants.
At some point, Wi-LAN should have realized, and I think did realize, that the
lawsuits against the third party manufacturers and the other efforts to obtain the
evidence would ultimately yield nothing more than a single version of RTL source
code from 2017, and the accompanying declarations stating that there are no
6

material differences between the version of the code produced and any versions
used through 2009.
At some point, Wi-LAN should have realized that this was the best it was going to
get and that it would not be enough - not enough to persuade a factfinder on the
merits by a preponderance of the evidence and not enough, even, to survive a
summary judgment motion for noninfringement.
Wi-LAN should have realized its evidence would not be viewed as reliable or
admissible and should have, and I think did, know that its declarants would not
show up at trial. So, again, from all of that, [it] should have realized it did not have
sufficient admissible evidence to sustain its burden on infringement.
The ... admissible evidence that was missing, Wi-LAN had to know, was crucial
to its effort to prove infringement of the claims of the ' 654 patent. It was absolutely
critical that Wi-LAN have sufficient admissible evidence on these points to press
its case to a successful conclusion.
Wi-LAN should have, and I think did, realize this at some point. And after that
point, Wi-LAN should not have continued to litigate its claim that defendants
infringed the '654 patent. That Wi-LAN nonetheless continued to do so makes this
case overall stand out from the rest and makes it exceptional.
So among the many difficult questions implicated by th[ese] motions [is:] what is
that point? When is that date after which Wi-LAN should have turned back and
not continued to assert the ' 654 patent against these defendants?
It's difficult to identify with precision, but I need to make some finding. And I'm
sure multiple dates could be justified based on the evidence, but the date that I have
determined is most fair to use is April 26, 2018. That is the day that Wi-LAN
obtained the last of the foreign third party SoC manufacturers' declarations from
MStar.... By no later than that date, Wi-LAN had to have known it could not
survive the defense motion for summary judgment of noninfringement because of
its lack of critical, admissible evidence.
With the declarations in hand and knowing that was all it was going to be able to
get from these third parties, by no later than that date, Wi-LAN had to have known
it lacked sufficient admissible evidence to prove its infringement contentions. It
had to have known [about] the many issues relating to the reliability of the
declarations on the crucial point of whether the source code [had] materially
changed, [and about] the related issues with admissibility.
Among the problems, and they're detailed in the record, including my opinion and
the Federal Circuit's opinion, . . . is that almost all of the declarations were obtained
before the Court issued its claim construction order in this case, raising the question
of just how could the declarants [have known] what distinctions were material as it
7

pertains to this case.
Further, MediaTek had suggested earlier in the case that it could not produce
anyone who could state under oath that there are no material differences between
the chips over the nearly eight years.
Wi-LAN seems to have [had] no real strategy with respect to how it was going to
admit the evidence necessary to prove its case on the ' 654 patent. It had no helpful
answer to the Court' s questions on this issue at the summary judgment hearing.
Later, it did cite to various Federal Rules of Evidence, but both this Court and the
Federal Circuit found that they did not, any of those rules, come close to supporting
admissibility here.
[W]e heard ... some back and forth from both sides on the Federal Circuit opinion
and that [it]'s a precedential opinion and fairly detailed . . ..
One could speculate, as the plaintiff has, that this means the Federal Circuit thought
these are difficult, substantive issues, and that should affect or incline me to think
that the case is not exceptional. The defendants alternatively speculate that some
of the plaintiffs arguments, particularly on the evidentiary point, are so weak that
the Federal Circuit thought it important to deal with that on a precedential opinion
because it [has] never seen them before and never wanted to see them again. I don't
know, and none of us know.
[T]he exceptional nature of the case was not an issue before the Federal Circuit at
that time, and ... I see no reason to credit anybody' s speculation on that point
for today's disputes.
But for the reasons that I have tried to give relating to the handling by Wi-LAN of
the issues, relating to obtaining crucial admissible evidence necessary to prove
its claims of infringement of the ' 654 patent, for those reasons, I do find that this
case stands out from others and is overall, as a case in the totality, exceptional. And
that's why I've granted the defendants' motion[s] in part.
It's notable, too, in this regard, that in connection with this whole set of issues
relating to source code, infringement contentions, and the ultimate admissibility of
the evidence, these issues which arose multiple times, as detailed in the record,
including in the briefing and in argument on today ' s motion[s], it' s notable that I
advised the parties way back in December 2016,[12] that defendants at the
conclusion of the case may cite their experience with plaintiffs infringement
contentions as a basis for arguing that this case is exceptional for purposes of
Section 285.

12

D.I. 137.

8

This is not the only case in which I have said similar things well before the end of
the case, but it doesn' t happen very often. And that's further evidence that this case
does stand out from the many, many other patent cases that I have handled.
So the Court will be requiring Wi-LAN to pay defendants' reasonable attorneys'
fees incurred in connection with defending against assertion of the ' 654 patent
claims from the date Wi-LAN obtained the last of the third party declarations, that
is April 26, 2018, through this Court' s entry of final judgment as to the ' 654 patent,
which occurred on September 12, 2019.
The Court's fee award reflects the unnecessary effort defendants had to expend to
continue defending claims that Wi-LAN knew or should have known by no later
than the date I identified, rested on unreliable, insufficient, and inadmissible
evidence.
This type of analysis and the award that I'm granting is, I believe, fully consistent
with IV v. Trend Micro, [in which the Federal Circuit stated:] " [C]ourts frequently
award attorney fees under § 285 in an amount related to particular conduct and
circumstances that stood out and made a case exceptional, even when the entirety
of the conduct in the case was not exceptional from start to finish."[ 13 ]
And I would just emphasize that my decision does not signify, in my view, that the
case was only exceptional from April 2018. Rather, as the law requires, I find that
overall, making a singular assessment of this case from start to finish based on the
totality of circumstances, . .. Wi-LAN' s continued litigation of the '654 patent
from that date - despite the lack of reliable, admissible, sufficient evidence - when
considered as part of the totality of the circumstances, rendered the entire case ...
exceptional.
That' s all I have to say on the ' 654 patent. Let me briefly touch on the other two
patents. There's much less to say on those.
With respect to the ' 250 patent, ... I do not find that anything about the plaintiff's
handling of the . .. patent makes this case exceptional. It adds no further weight to
what I have already said about the '654 [patent].
The non-exceptionality of issues with respect to the '250 [patent] does not
undermine the overall finding [that this is an] exceptional case, for the reasons I've
given.

[Similarly,] I find nothing exceptional in how the plaintiff handled the '774
[patent]. . .. [This finding, too,] does not detract from the overall finding . . . that

13

Intel!. Ventures I, 944 F.3d at 1384.
9

the case, as a whole, is exceptional.

[The parties' disputes with respect to the ' 774 patent were] routine for patent
litigation. This is not the only case in which I've seen parties unable to agree on
the terms by which a patent will be dismissed, even when they agree that it will be
dismissed and they have nothing further to fight about on that patent.

Let me say a few things in conclusion.
[F]irst, about the appeal. It' s not entirely clear to me, [but] I think defendants are
asking for me to award their fees that they incurred in relation to defending against
plaintiffs appeal of my judgment in favor of defendants. I am not granting that
portion of the defendants ' motion[ s].
Defendants have pointed to no aspect of the appeal that constituted either an
objectively unreasonable litigating position or any other unreasonable manner of
litigating.
I realize that I could allow defendants to recover additional attorneys' fees incurred
in defending against the unsuccessful appeal by Wi-LAN to the Federal Circuit,
even without finding that the appeal itself was in any way exceptional, but I see no
meritorious basis for doing so here. Not only was the plaintiff well within its rights
to take the appeal, it raised reasonable appellate issues. And I see nothing in the
appellate record to indicate that it was anything other than a routine appeal.

[Second,] to the extent ... defendants [seek] "other costs" beyond attorneys ' fees,
I don't have much detail in the briefing as to what other costs the defendants may
be seeking to have awarded to them, but I also don' t see any persuasive basis to do
that.
So, in conclusion, as I have said, defendants ' renewed motions for attorneys' fees
and costs will be granted in part and denied in part.

To summarize the analysis in terms of the framework that I outlined at the start:
[First], I find by a preponderance of the evidence that this case, as a whole, stands
out from the rest and is exceptional. This finding is based on Wi-LAN's handling
of the source code and related evidence necessary to prove infringement of the
10

claims of the '654 patent. On all other parts of the case on which defendants rest
their motion[ s], defendants have failed to persuade me by a preponderance of the
evidence that any of those other parts were individually or collectively exceptional.
Still, again, however, the case, as a whole, I find, is exceptional.
Second, I find that fees should be awarded in this exceptional case. An award of
fees will serve the important interest of deterrence . . . . I believe that plaintiff
should have been deterred from continuing to press its infringement claims under
the ' 654 patent after April 26, 2018.
This plaintiff, as well as others, should be deterred from doing in a future case what
was done here. It was also appropriate to compensate defendants for the portion of
their fees incurred in defending against the '654 [patent] after April 26, 2018
through the entry of final judgment on September 12, 2019.
Third, on the issue of how much plaintiff should pay defendants, I have already
addressed what I labeled subpart (a) in the framework, and I have tailored the
amount that plaintiff will have to pay to the amount that defendants incurred in fees
in defending against infringement of the ' 654 patent after the date that I have found
plaintiff should have no longer asserted that patent through the date of the entry of
judgment.
With respect to what I call subpart (b ), I do not yet have detailed records on the
amount of hours and the billing rates that were charged and expended. Here, I will
need to get some additional assistance from the parties to assess the reasonableness
of the hours and the fees expended on the '654 patent in the time frame I identified.

HONO
LE LEONARD P. STARK
UNITED STATES DISTRICT JUDGE

11