Rothschild Digital Confirmation, LLC. v. CompanyCam, Inc.
MEMORANDUM OPINION. Signed by Judge Maryellen Noreika on 10/13/2020. (dlw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
C.A. No. 19-1109 (MN)
Stamatios Stamoulis, Stamoulis & Weinblatt, LLP, Wilmington, DE; David A. Chavous, Chavous
Intellectual Property Law LLC, North Andover, MA – Attorneys for Plaintiff
John W. Shaw, Karen E. Keller, Andrew E. Russell, Nathan R. Hoeschen, SHAW KELLER LLP,
Wilmington, DE; Rachael D. Lamkin, LAMKIN IP DEFENSE, San Francisco, CA – Attorneys for
October 13, 2020
NOREIKA, U.S. DISTRICT JUDGE
Presently before the Court is the motion of Defendant CompanyCam, Inc. (“Defendant”)
to declare this case exceptional under 35 U.S.C. § 285 and for an award of attorneys’ fees.
(D.I. 31). The motion has been fully briefed. (See D.I. 32, 33, 34, 36 & 38), For the reasons set
forth below, Defendant’s motion is GRANTED.
On June 15, 2019, Plaintiff Rothschild Digital Confirmation, LLC (“Plaintiff”) filed this
case against Defendant 1 and another case against a different defendant (C.A. No. 19-1108)
asserting U.S. Patent No. 7,456,872 (“the ’872 Patent”). Within the next two months, Plaintiff
filed an additional six cases asserting infringement of that patent. (See C.A. Nos. 19-1472 (MN);
19-1473 (MN); 19-1474 (MN); 19-1601 (MN); 19-1602 (MN); 19-1603 (MN)). The following
year, Plaintiff filed three more. (See C.A. Nos. 20-167 (MN); 20-168 (MN); 20-169 (MN)).
On August 19, 2019, Defendant move to dismiss, alleging that the claims of the ’872 Patent
were ineligible under 35 U.S.C. § 101. (See D.I. 10 & 11). On March 11, 2020, the Court held
oral argument on the motion and, at the end of the argument, the Court stated that it would grant
Defendant’s motion and explained its reasoning in holding the claims ineligible. (See D.I. 50 in
C.A. No. 19-1108 (hereinafter “Tr.”) at 37:15-48:12). 2 The Court also noted that not all of the
defendants in the related cases had moved to dismiss and requested a “status report addressing all
of the cases [filed in Delaware] and [explaining] what, if anything, we need to do with respect to
Plaintiff originally asserted claim 27 of the ’872 Patent. That claim, however, had been
invalidated by the Patent Trial and Appeal Board and thus, on August 5, 2019, Plaintiff
filed an amended complaint asserting claim 1 of the ’872 Patent. (D.I. 8 ¶ 26; see also
C.A. No. 19-1108 was the lead case for all consolidated actions involving allegations of
infringement of the ’872 Patent.
each of those cases.” (Tr. at 48:13-21). Thereafter, on March 19, 2020, Plaintiff unilaterally
dismissed the case with prejudice as to Defendant. (D.I. 48 in C.A. 19-1108). Plaintiff later
submitted a status report stating that the cases against the other defendants – i.e., those who had
not moved to dismiss – should proceed notwithstanding the Court’s ruling. (See D.I. 55 in
C.A. No. 19-1108). Plaintiff stated that it intended to produce its initial infringement contentions,
that the defendants’ invalidity contentions remained due, and that it “intend[ed] to move to amend
the complaints filed in the remaining cases here pursuant to Rule 15.” (Id. ¶ 3-5 & 7). The Court
then scheduled a teleconference for April 8, 2020 to discuss Plaintiff’s proposal. During that
conference, Plaintiff reversed course and stated that it would either stipulate to dismissal of the
other cases or move to dismiss if defendants in those cases would not agree to a stipulation. The
remaining cases were later dismissed. 3 On April 16, 2020, Defendant filed the present motion and
supporting papers. (See D.I. 31, 32, 33 & 34).
Section 285 of the Patent Act provides that a “court in exceptional cases may award
reasonable attorney fees to the prevailing party.” 4 35 U.S.C. § 285. An exceptional case within
the meaning of the statute 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 was litigated.” Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U.S. 545, 554 (2014). Whether a case is exceptional is a question
committed to the Court’s discretion, and the Court must consider the totality of the circumstances
At least two of the cases were dismissed pursuant to settlement agreement shortly after the
Court’s ruling at the oral argument. (See D.I. 33, Exs. C & D).
There is no dispute in this case that Defendant is the prevailing party.
in reaching its conclusion. Id. In assessing the totality of the circumstances, the Court may
consider, inter alia, “frivolousness, motivation, objective unreasonableness (both in the factual
and legal components of the case) and the need in particular circumstances to advance
considerations of compensation and deterrence.” Id. at 554 n.6. A party seeking attorneys’ fees
must show the case is exceptional by a preponderance of the evidence. Id. at 557-58. The Court
may award attorneys’ fees in “the rare case in which a party’s unreasonable conduct – while not
necessarily independently sanctionable – is nonetheless so ‘exceptional’ as to justify an award of
fees.” Id. at 555.
Defendant argues that the present case is exceptional within the meaning of § 285 and that
attorneys’ fees should be awarded based on three grounds. (See, e.g., D.I. 32 at 4-7). The Court
will address each of these in turn.
Section 101 Issues
Defendant asserts that “[t]he claims of the ’872 Patent are clearly not eligible for patent
protection” and that no reasonable litigant would believe that the ’872 Patent is drawn to patenteligible subject matter. (D.I. 32 at 4). The Court agrees that Plaintiff’s case was relatively weak.
Indeed, the Court concluded that the claims of the ’872 Patent are ineligible under § 101 during
the oral argument on Defendant’s motion to dismiss. (Tr. at 37:15-48:12). Yet whether that
conclusion was “clear” is a closer question.
On the one hand, suggesting that the ineligibility of the ’872 Patent was clear, Plaintiff did
not seek reconsideration or an appeal of the Court’s determination of ineligibility. Nor did Plaintiff
even request leave to amend its complaint to attempt to include plausible factual allegations
relating to patent eligibility, which might have changed the § 101 analysis. Instead, Plaintiff
quickly dismissed the case, ensuring the determination would not be reviewed – and indeed would
not be noted on the docket. Additionally, the California court that also addressed the eligibility of
the ’872 Patent claims found the claims directed to ineligible subject matter. See Rothschild
Digital Confirmation, LLC v. Skedulo Holdings Inc., No. 3:19- 02659-JD, 2020 WL 1307016, at
*6 (N.D. Cal. Mar. 19, 2020).
On the other hand, suggesting less clarity, the California court allowed Plaintiff the
opportunity to amend its complaint because the court (although expressing doubts) could not
conclusively say that amendment would be futile. This leave to amend suggests that Plaintiff may
have been able to raise a factual question as to the patent eligibility of the ’872 Patent – i.e., it was
not so “clear” that the claims are ineligible. 5
Moreover, § 101 jurisprudence is hardly
straightforward and rarely lends itself to easily predicted outcomes. “Neither the Supreme Court
nor the Federal Circuit has ventured a single, comprehensive definition of what constitutes an
abstract idea.” Epic IP LLC v. Backblaze, Inc., 351 F.Supp.3d 733, 737 (D. Del. 2018) (Bryson,
J., by designation) (citations omitted). Lacking a single definition, courts must “look to similar
cases, see Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016), and their guiding
‘principles’ to determine whether claims are directed to an abstract idea.” AlexSam, Inc. v.
HealthEquity, Inc., No. 2:19-00445, 2020 WL 4569276, at *3 (D. Utah Aug. 7, 2020) (citing Epic,
351 F. Supp. 3d at 737). This task is not always easy, and this Court has at times struggled in its
attempts to navigate and reconcile the case law to discern well-defined and consistent principles
to apply in a given case. This further suggests that it is a rare case when it is clear – at the outset
or otherwise – that a patent will fall under § 101.
Similarly, that some of the defendants in the related cases did not file motions to dismiss
or join those already filed may suggest that the issue was not as clear as Defendant
Vexatious Litigation Involving the ’872 Patent and Other Patents
Defendant argues that Plaintiff has engaged in vexatious litigation related to the ’872 Patent
and other patents. According to Defendant, Plaintiff has filed eight hundred and twenty (820)
patent-litigation suits but has not prevailed on the merits of any of them. (D.I. 38 at 5 (citing
D.I. 33 ¶¶ 4-6). “The ’872 Patent has been asserted forty-six (46) times but has never made it past
the pleadings stage.” (D.I. 38 at 6 (citing D.I. 33 ¶ 6 & Ex. A)). Further, Defendant asserts that
Plaintiff tends to settle its cases for nuisance value and Defendant has provided the Court with
several examples. (D.I. 32 at 6 (citing D.I. 33 ¶¶ 9-10)). 6
Such vexatious litigation may form a basis for a finding of exceptional case. Indeed, as the
Federal Circuit held in another case involving a similar plaintiff and similar circumstances, “in the
absence of evidence demonstrating that Rothschild engaged in reasonable conduct before the
District Court, the undisputed evidence regarding Rothschild’s vexatious litigation warrants an
affirmative exceptional case finding here.” Rothschild Connected Devices Innovations, LLC v.
Guardian Prot. Servs., 858 F.3d 1383, 1390 (Fed. Cir. 2017). In reaching that conclusion, the
Federal Circuit cited two cases worth noting here. First, SFA Systems, LLC v. Newegg Inc., where
the Federal Circuit explained that “a pattern of litigation abuses characterized by the repeated filing
of patent infringement actions for the sole purpose of forcing settlements, with no intention of
testing the merits of one’s claims, is relevant to a district court’s exceptional case determination
under § 285.” 793 F.3d 1344, 1350 (Fed. Cir. 2015). And second, Eon-Net LP v. Flagstar
Bancorp, where the Federal Circuit noted that settlement offers that were “less than ten percent of
Notwithstanding the terms of the settlement agreements, Plaintiff disputes that the
agreements were for nuisance value and argues that it “was simply seeking to end the
litigation after the Court’s indication of its position” at the hearing. (D.I. 36 at 3).
the cost that [a defendant] expended to defend suit—effectively ensured that [a plaintiff’s] baseless
infringement allegations remain unexposed.” 653 F.3d 1314, 1327 (Fed. Cir. 2011).
Here, the reasonableness of Plaintiff’s conduct before this Court is not without question.
During the hearing when the Court ruled that the ’872 Patent claims are ineligible under § 101, the
Court asked Plaintiff to submit a status report indicating how Plaintiff intended to proceed in
related cases against other defendants who had not moved to dismiss. In response, Plaintiff
dismissed the instant case (before the Court entered an order on the docket granting Defendant’s
motion) and submitted a status report stating that the cases against the other defendants should
proceed. (See D.I. 55 in C.A. 19-1108). In the status report, Plaintiff indicated that it intended to
produce its initial infringement contentions, that the defendants’ invalidity contentions remained
due, and that Plaintiff “intends to move to amend the complaints filed in the remaining cases here
pursuant to Rule 15.” (Id. ¶¶ 3-5 & 7). Then, after the Court scheduled a conference to discuss
Plaintiff’s position, Plaintiff reversed course, stating that it had asked the other defendants to agree
to dismiss, and that it would move to dismiss its own complaint under Rule 41(a)(2) if they refused.
Thus, knowing the Court’s position as to the ’872 Patent (and the California court’s position),
Plaintiff apparently attempted to exert pressure on other defendants to settle or be left to spend
money litigating a patent that had twice been found to cover ineligible subject matter. And only
when forced to explain its position to the Court did Plaintiff reverse course. 7 That is troubling.
Plaintiff’s initial refusal to drop its claims as to other defendants raises questions as to its
representation to the Court that its settlements with other defendants (TerraGo and Field
Agent) were “simply seeking to end the litigation after the Court’s indication of its
position” at the hearing. (D.I. 36 at 3). Indeed, it was after those settlements were signed
– in March of 2020 – that Plaintiff informed the Court that it intended to force defendants
in other cases to go forward with discovery. (See D.I. 55 in C.A. No. 19-1108).
Plaintiff’s Assertions of Infringement Against Defendant
Defendant asserts that “no reasonable litigant would think that CompanyCam’s smartphone
application infringes the ’872 Patent.” (D.I. 32 at 7). In support, Defendant asserts that claim 1
of the ’872 Patent requires any infringing device to have a user verification module that provides
an assignment to the user. (Id.). Relying on the PTAB’s findings, Defendant argues that this
means that claim 1 “does not require merely that an assignment be ‘provided,’ but specifically
requires the assignment to be provided ‘to the user’ by a user verification module[.]’” (D.I. 32 at
7). Defendant then makes various representations as to how its accused application works. (See
D.I. 32 at 7-8; see also D.I. 38 at 6-8).
Defendant, however, did not raise any infringement issues in its motion to dismiss. (See
D.I. 11). Nor did Defendant address the issue with Plaintiff before the current motion practice.
(D.I. 36 at 11). The Court is left with only attorney argument from Defendant that it does not
infringe juxtaposed with unexplained claim charts from Plaintiff attempting to show that
Defendant does infringe. The issue of potentially baseless infringement allegations, which was
raised for the first time in a motion for attorneys’ fees, is simply not an issue that the Court can
adequately address on the record before it.
Totality of the Circumstances
The Court must view all of the conduct set forth above, along with the conduct of
Defendant and any other relevant factors, in assessing the totality of the circumstances to determine
whether this case is exceptional. See Octane Fitness, 572 U.S. at 554 (“District courts may
determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion,
considering the totality of the circumstances.”); see also Gaymar Indus., Inc. v. Cincinnati SubZero Prod., Inc., 790 F.3d 1369, 1373 (Fed. Cir. 2015) (“[T]he conduct of the parties is a relevant
factor under Octane’s totality-of-the-circumstances inquiry, including the conduct of the movant
. . . .” (footnote omitted)). Here, as noted above, Plaintiff’s case with respect to the § 101 issues
was relatively weak. If that were the only basis for Defendant’s motion, for the reasons stated
above (supra § III(A)), the Court likely would not find this case to be exceptional. But that is not
the only basis asserted to find this case exceptional.
Here, in addition, there is a pattern of troubling litigation conduct. Plaintiff has asserted
the ’872 Patent (and apparently others) numerous times against a broad swathe of defendants.
Almost all of those cases failed to advance beyond the pleadings. 8 Moreover, here, after hearing
the Court’s ruling as to the ’872 Patent, Plaintiff unilaterally dismissed its case against Defendant
before the Court’s order was entered and then prolonged litigation against defendants in other cases
before giving up when called to face the Court. Thus, in light of the totality of the circumstances, 9
the Court finds this case to be exceptional
Having determined that this case is exceptional, the Court next considers whether an award
of fees is appropriate. The Court recognizes that, despite finding the present case to be exceptional,
the Court need not award any fees at all. See Icon Health & Fitness, Inc. v. Octane Fitness, LLC,
576 F. App’x 1002, 1005 (Fed. Cir. 2014) (“The Supreme Court’s decision in Octane did not,
however, revoke the discretion of a district court to deny fee awards even in exceptional cases.”).
The Court recognizes that Plaintiff is entitled to assert its intellectual property rights. That
entitlement, however, is not unbounded. It requires good-faith assertions of infringement
and reasonable behavior during litigation.
The Court has considered all factors advanced by Defendant to support a finding of
exceptionality, as well as those offered by Plaintiff in opposition, even if not explicitly
addressed in this opinion. See Univ. of Utah v. Max-Planck-Gesellschaft zur Foerderung
der Wissenschaften e.V., 851 F.3d 1317, 1323 (Fed. Cir. 2017) (noting that the trial judge
has “no obligation to write an opinion that reveals her assessment of every consideration”
when ruling on a motion for attorneys’ fees under § 285).
Here, however, the Court agrees that an award of at least some attorneys’ fees is merited in light
of the relatively weak merits of the case and the fact that the litigation conduct complained of does
not appear to be an isolated practice. See Elec. Commc’n Techs., LLC v. ShoppersChoice.com,
LLC, 963 F.3d 1371, 1378 (Fed. Cir. 2020).
Defendant has submitted an estimate of its attorneys’ fees with its motion and requests the
opportunity to submit further argument on the amount and reasonableness of its fees. Within
fourteen days, Defendant shall submit to the Court an accounting of the attorneys’ fees it seeks
with a brief explanation as to why those fees are reasonable. Plaintiff may then respond to
Defendant’s submission within fourteen days.
For the foregoing reasons, Defendant’s motion to declare this case exceptional and for an
award of fees is granted. An order will follow.
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