Sonix Technology Co., Ltd. v. Publications International, Ltd. et al

Filing 255

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 4/19/2016:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SONIX TECHNOLOGY CO., LTD.,
Plaintiff,

v.
PUBLICATIONS INTERNATIONAL,
LTD., et al.,
Defendants.

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Case No. 13 C 2082

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, United States District Judge
On December 8, 2015, the Court granted summary judgment in favor of Defendants
Publications International, Ltd. (“PIL”), SD-X Interactive, Inc. (“SD-X”), Encyclopaedia
Britannica, Inc. (“Britannica”), and Herff Jones, Inc. (“Herff Jones”) (collectively,
“Defendants”) against Plaintiff Sonix Technology Co. (“Sonix”) on the basis that the patent-insuit was invalid for indefiniteness. Before the Court is Defendants’ motion to declare this case
exceptional for purposes of awarding attorneys’ fees. See 35 U.S.C. § 285. For the following
reasons, the Court, in its discretion, denies Defendants’ motion. See Oplus Techs., Ltd. v. Vizio,
Inc., 782 F.3d 1371, 1374 (Fed. Cir. 2015) (“We review all aspects of a district court’s
determination under 35 U.S.C. § 285 for abuse of discretion.”).
BACKGROUND
On March 8, 2013, PIL and SD-X filed a lawsuit seeking declaratory judgment of noninfringement and invalidity of United States Patent No. 7,328,845 (“the ‘845 patent”), against
Sonix, the owner of the ‘845 patent. (See 13 C 1847, R. 1, Compl. ¶¶ 1-11.) On March 18,

2013, Sonix, a Taiwanese company that designs and develops integrated circuits and related
products, filed the present lawsuit involving the same occurrence. Rather than pursue service of
a Taiwanese defendant, PIL and SD-X moved to voluntarily dismiss their action, which the
district court granted on May 9, 2013. PIL and SD-X filed an answer in the present lawsuit on
April 25, 2013. On September 17, 2013, Sonix filed a First Amended Complaint adding Herff
Jones and Britannica as named Defendants. On October 11, 2013, Defendants answered Sonix’s
First Amended Complaint.
The ‘845 patent, entitled “Method for Producing Indicators and Processing Apparatus
and System Utilizing the Indicators,” issued on February 12, 2008 and is directed to the use of
graphical indicators affixed to the surface of an object and negligible to the human eye that
provide information, beyond the visual text and images on the object’s surface, that is retrievable
through an electronic system. The ‘845 patent describes a method for producing visually
negligible dot patterns – referred to as “graphical indicators” – affixed to a surface (e.g., the page
of a book), that overlap and co-exist, but do not interfere, with the main information on the
surface of the object (e.g., visual text and images). By the time Sonix filed this lawsuit in March
2013, the ‘845 patent had undergone two ex parte reexaminations before the United States Patent
and Trademark Office (“PTO”) – both resulting in the issuance of Ex Parte Reexamination
Certificates on December 27, 2011 and December 26, 2012.1 The ‘845 patent was also subject to
litigation that the parties in that lawsuit settled and voluntarily dismissed in June 2011. See
Sonix Tech. Co., Ltd. v. VTech Elecs. N. Am., LLC, 10 C 8291 (N.D. Ill. June 25, 2011).

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The Court’s claim construction ruling contains a detailed discussion of the PTO’s ex
parte reexaminations and the prosecution history of the ‘845 patent. (See R. 123, 10/30/14 Mem.
Op. & Order, at 5-15.)
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Relevant to Defendants’ arguments in the present motion, in November 2013, Defendants
disclosed to Sonix that they were marketing dot pattern technology products pursuant to a license
from GeneralPlus Technology, Inc., a Taiwanese-based corporation. During fact discovery in
February 2014, when asked to identify the persons most knowledgeable about how the accused
products operated, Defendants advised Sonix that “the persons most knowledgeable to the topics
identified in this Interrogatory are employed by GeneralPlus.” Again, in October 2014,
Defendants informed Sonix that GeneralPlus possessed the information regarding the
functionality of the technology at issue. Shortly before the fact discovery deadline, Defendants
disclosed that they expected to elicit testimony from GeneralPlus employees to support their
defenses because such employees had knowledge concerning the function and operation of PIL
and SD-X electronic products. Despite these disclosures, Sonix did not seek discovery from
GeneralPlus, including “any non-public information about the operation of GeneralPlus’
products with a dotbased system.”
Following the close of fact and expert discovery, Defendants filed a motion for summary
judgment arguing that the ‘845 patent was invalid and non-infringed. The Court granted
Defendants’ summary judgment motion on the ground that the ‘845 patent was invalid for
indefiniteness. Because the Court concluded that the ‘845 patent was invalid as indefinite, it did
not address Defendants’ argument based on non-infringement of the patent. The Court presumes
familiarity with its prior rulings in this matter, including the December 8, 2015 summary
judgment order, the August 10, 2015 ruling granting in part Defendants’ motion for leave to
amend their final non-infringement and invalidity contentions, and the October 30, 2014 claim
construction ruling.

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LEGAL STANDARD
Under 35 U.S.C. § 285, “[t]he court in exceptional cases may award reasonable attorney
fees to the prevailing party.”2 A case is “exceptional” if it “stands out from others with respect
to the substantive strength of a party’s litigation 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); see also Gaymar
Indus., Inc. v. Cincinnati Sub-Zero Prods., Inc., 790 F.3d 1369, 1372 (Fed. Cir. 2015). “District
courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their
discretion, considering the totality of the circumstances.” Octane Fitness, 134 S. Ct. at 1756.
Prior to the Supreme Court’s 2014 decision in Octane Fitness, the Federal Circuit’s “rigid”
standard for exceptional cases limited the award of fees under § 285 to situations involving
litigation-related conduct that was sanctionable or where the litigation was brought in bad faith
and was objectively baseless. See id. at 1754 (abrogating Brooks Furniture Mfg., Inc. v.
Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005)). Also, the Octane Fitness Court
rejected “the Federal Circuit’s requirement that patent litigants establish their entitlement to fees
under § 285 by ‘clear and convincing evidence,’” requiring the lesser evidentiary standard of
preponderance of the evidence. Id. at 1758.
ANALYSIS
I.

Sonix’s Pre-Filing Conduct
In support of their § 285 motion, Defendants first argue that Sonix did not engage in a

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The parties do not dispute that Defendants are prevailing parties for purposes of 35
U.S.C. § 285. See SSL Servs., LLC v. Citrix Sys., Inc., 769 F.3d 1073, 1086 (Fed. Cir. 2014).
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reasonable and meaningful investigation before filing suit and did not have an adequate basis for
its claims. See Source Vagabond Sys. Ltd. v. Hydrapak, Inc., 753 F.3d 1291, 1298 (Fed. Cir.
2014); Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1300 (Fed. Cir. 2004); see also
Fed.R.Civ.P. 11. In response, Sonix’s patent counsel avers that he performed a pre-filing
investigation into the VTech lawsuit, briefly discussed above. See Sonix Tech. Co., Ltd. v.
VTech Elecs. N. Am., LLC, 10 C 8291 (N.D. Ill.) (R. 230, Hangartner Decl. ¶ 7.) Counsel
explained that GeneralPlus supplied dot pattern technology used in VTech’s products, and that
based on his review of those products, including the optical pen and the dot patterns, observation
of various functions, and comparison with the requirements of the claims of the ‘845 patent, he
determined that Sonix had a good-faith basis to assert an infringement claim against VTech.
(Id.) As discussed, the parties settled the VTech lawsuit in June 2011. (Id. ¶ 24.)
In addition, after the first ex parte reexamination before the PTO that resulted in the
issuance of an Ex Parte Reexamination Certificate, counsel avers that he investigated two of
PIL’s interactive book products similar to Sonix’s educational books and related products,
namely, (1) My Interactive Point-and-Play 5-Book Library, and (2) Ready to Read Complete
System. (Id. ¶ 25.) According to Sonix’s counsel, each product included an optical pen and
books with text and images, as well as dot patterns printed on their pages. (Id.) Counsel, who
has a degree in engineering physics, stated that he examined the optical pens by disassembling
them to examine the circuit boards and internal components. (Id.) Based on his investigation
and applying reasonable claim constructions, counsel determined that PIL’s products using the
dot pattern technology satisfied all of the claim elements of the relevant claims. (Id. ¶¶ 26, 28.)
After the PTO issued the second Ex Parte Reexamination Certificate and Sonix engaged in

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limited discussions with PIL and SD-X, Defendants initiated the lawsuit against Sonix on March
8, 2013 in case number 13 C 1847. (Id. ¶ 32.) Thereafter, Defendants voluntarily dismissed
their lawsuit and filed an answer in this case.
Based on the presumption of validity of the ‘845 patent under 35 U.S.C. § 282, along
with the PTO’s reexaminations decided in Sonix’s favor, and counsel’s averments regarding his
investigation in into the accused products, Defendants have not established – by a preponderance
of the evidence – that Sonix failed to engage in a reasonable and meaningful investigation before
filing this lawsuit or that Sonix did not have an adequate basis to bring its claims. See Octane
Fitness, 134 S. Ct. at 1758. In particular, Sonix has presented evidence that counsel investigated
the accused products in the context of the earlier VTech lawsuit involving GeneralPlus’s
technology, as well as specifically investigating the accused products in this lawsuit. Counsel
interpreted the asserted patents claims and compared the accused products, including
disassembling the optical pens. Under the Federal Circuit’s teachings, counsel’s efforts fulfilled
Rule 11’s pre-filing requirements. See Q-Pharma, 360 F.3d at 1300-01. Based on the record
before the Court, Sonix conducted a sufficient pre-filing investigation.
Nevertheless, Defendants assert that Sonix “asserted infringement without any specific
evidence of the internal software functionality of Defendants’ products.” In essence, Defendants
are arguing that Sonix cannot prove infringement without source code from the accused
products, yet the Court’s summary judgment ruling did not address the parties’ infringement
arguments nor will the Court make any such determinations here. As such, the Court, in its
discretion, rejects Defendants’ argument that Sonix’s pre-filing conduct makes this case
“exceptional” pursuant to § 285 and Octane Fitness.

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II.

Prosecution and Expansion of Litigation
Similarly, Defendants question Sonix’s litigation strategies arguing that “Sonix engaged

in bad-faith litigation by refusing to prosecute its case” and “expanded the scope of the litigation
without a legal or factual basis.” Defendants first explain that “after filing its complaint, Sonix
sought discovery from Defendants in an attempt to fill the evidentiary gap in its pre-filing
investigation, seeking documents that describe the ‘operation’ of [the] accused products.”
Defendants highlight Sonix’s motion to compel “documents to show how the Defendants’
electronic reader pens actually capture the printed codes on the pages of books and how those
codes are processed for their intended audio output mechanism.” In doing so, Defendants argue
that in filing its motion to compel documents establishing how Defendants’ electronic books and
readers operated, Sonix essentially admitted it needed information on the operation of the
devices, including software functionality, to prove its case. Defendants’ argument is misplaced,
especially under the liberal federal discovery standards that governed Sonix’s discovery requests
in 2013. See Bond v. Utreras, 585 F.3d 1061, 1075 (7th Cir. 2009) (“[l]iberal discovery is
provided for the sole purpose of assisting in the preparation and trial, or the settlement, of
litigated disputes.”) (citation omitted). As discussed, Sonix had investigated its infringement
claims prior to filing this lawsuit and Defendants’ argument that it was inappropriate for Sonix to
engage in discovery to further support its claims, narrow the issues, or establish a basis for
summary judgment is contrary to standard litigation practice and the federal discovery rules.
Next, Defendants take issue with the fact that Sonix did not obtain direct discovery from
GeneralPlus regarding source code. In its response, Sonix maintains that it decided to forego
expensive, and perhaps futile, discovery from GeneralPlus, and that it pursued any such

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discovery from Defendants and domestic third-parties. (R. 231, 1/11/16, Pang Decl. ¶¶ 29-30.)
Although the Court criticized Sonix for its failure to more fully explore information from
GeneralPlus, at the same time, the Court also acknowledged that Defendants could have been
more compliant with procedural rules. (R. 169, 8/10/15 Minute Entry.) Under these particular
circumstances, Sonix’s litigation strategy is not “exceptional” for purposes of § 285, as
Defendants argue. See Octane Fitness, 134 S.Ct. at 1756; see, e.g., Lumen View Tech. LLC v.
Findthebest.com, Inc., 811 F.3d 479, 482 (Fed. Cir. 2016) (predatory strategy in baseless
litigation made case “exceptional” under 35 U.S.C. § 285).
In further support of their argument that attorney’s fees are warranted in this matter,
Defendants contend that Sonix improperly and unreasonably expanded this litigation by adding
Defendants Herff Jones and Britannica in their First Amendment Complaint on September 17,
2013. The parties did not object to Sonix amending its allegations to add these Defendants to the
lawsuit until the present motion. In any event, in response, Sonix explains that after PIL and SDX filed their declaratory judgment lawsuit and the parties agreed to litigate their claims in the
present lawsuit, Sonix gained additional information regarding PIL’s and SD-X’s relationship
with Herff Jones and Britannica, namely, that these Defendants were PIL’s and SD-X’s
customers. Sonix also maintains that it added Herff Jones and Britannica as named Defendants
to this action because it was seeking injunctive relief to prevent Herff Jones and Britannica from
practicing the patented invention and there was a possibility that Sonix could not recover full
monetary relief without naming them as Defendants due to Sonix’s concerns about its ability to
prove direct infringement. (Pang Decl. ¶¶ 26-27.) Under the circumstances, Defendants’
argument that Sonix’s addition of Defendants Herff Jones and Britannica is unreasonable under

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Octane Fitness is misplaced, especially because Defendants were aware that Sonix would add
these customers/retailers as named Defendants as early as July 2013, but did not object to the
addition of these Defendants to the lawsuit until two and a half years later when they filed this §
285 motion. (R. 41, 7/26/13 Joint Status Stmt.)
Moreover, despite the fact that Defendants never filed a motion to clarify Sonix’s
infringement contentions, Defendants now argue that Sonix’s conduct “stands out” for § 285
purposes because Sonix failed to provide clear infringement and validity contentions in its
efforts either to expand this litigation or fail to prosecute it. Without any substantiation or a
developed argument, Defendants contend that “Sonix’s infringement contentions offered the
same factless and conclusory statements of infringement as to all asserted claims.” Defendants’
perfunctory and undeveloped arguments do little to support their assertion that Sonix’s conduct
“stands out” from the general practices in patent litigation in relation to the strength of Sonix’s
case, especially because it is well-settled in both the Seventh and Federal Circuits that
undeveloped and unsubstantiated arguments are waived. See Packer v. Trustees of Ind. Univ.
Sch. of Med., 800 F.3d 843, 852 (7th Cir. 2015); Fresenius USA, Inc. v. Baxter Int’l, Inc., 582
F.3d 1288, 1296 (Fed. Cir. 2009). Thus, the Court, in its discretion, denies this aspect of
Defendants’ motion.
III.

Local Patent Rule Violations
Last, Defendants argue that Sonix refused to provide its positions during fact discovery in

violation of the Northern District of Illinois’ Local Patent Rules. The Court discussed the
parties’ infringement contentions and other discovery issues in detail in its August 10, 2015,
Memorandum Opinion and Order granting in part Defendants’ motion for leave to amend their

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final non-infringement and invalidity contentions. (R. 170, 8/10/15 Mem. Op & Order, at 3-4.)
In the present motion, Defendants rehash many of the same arguments they made in support of
their motion for leave to amend.
That being said, Defendants contend that Sonix violated the Local Patent Rules because,
as part of its litigation strategy, Sonix deliberately refused to provide specifics regarding its
litigation positions. In particular, Defendants argue that Sonix “refused” to supplement its initial
responses to Defendants’ initial invalidity contentions in October 2014. Turning to the
correspondence Defendants rely upon for this assertion, Sonix’s counsel explained that
Defendants’ request to “immediately supplement” the initial responses was not reasonable in
light of the fact that the Court had just held the Markman hearing on September 11, 2014, thus
the claim construction ruling was imminent, and that the Defendants’ request was inconsistent
with the Court’s scheduling order. (R. 153-10, 10/9/14, Fallon Letter, at 1.) Sonix’s conduct –
in this context – is hardly unreasonable as Defendants maintain. Defendants also take issue with
Sonix’s March 2015 response to Defendants’ second set of interrogatories regarding Sonix’s
explanation for a contention. Defendants, however, did not file a motion to compel in relation to
this interrogatory, and the Court would be hard-pressed to conclude that this conduct amounts to
“obfuscation” as Defendants argue.3
In further support of their argument regarding the Local Patent Rules, Defendants assert
that Sonix’s final contentions were essentially the same as their initial contentions. Again,
Defendants fail to develop this argument in the present motion, and it is not the Court’s role to

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Defendants also point to Sonix’s liability expert’s July 2015 deposition to underscore
Sonix’s unreasonable conduct in this matter. The Court considered this argument – in
Defendants’ favor – when granting Defendants’ motion for leave to amend its final contentions.
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scour the record and piece together their argument for them. See D.Z. v. Buell, 796 F.3d 749,
756 (7th Cir. 2015).
As Octane Fitness instructs, district courts must determine whether a case is exceptional
by considering the totality of the circumstances. After presiding over this lawsuit since March
2013, and considering the totality of the particular circumstances of this case, Defendants have
not set forth a basis for the Court to conclude that this hard-fought lawsuit “stands out” with
respect to the strength of Sonix’s litigation position or that Sonix’s conduct was unreasonable
under the parameters set forth in Octane Fitness. In other words, Sonix’s ligation position “was
not so merit-less as to ‘stand out’ from the norm.” SFA Sys. LLC, v. Newegg, Inc., 793 F.3d
1344, 1348 (Fed. Cir. 2014) (citing Octane Fitness, 134 S.Ct. at 1756). Because this case is not
exceptional, the Court, in its discretion, declines to award of attorneys’ fees under § 285.
CONCLUSION
For these reasons, the Court, in its discretion, denies Defendants’ motion for attorneys’
fees brought pursuant to 35 U.S.C. § 285.
Dated: April 19, 2016
ENTERED

______________________________
AMY J. ST. EVE
United States District Court Judge

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