CTP Innovations, LLC v. GEO Graphics Inc.
Filing
167
MEMORANDUM AND ORDER denying Defendants' Motion for Attorney Fees in case 1:14-md-02581-MJG in case 1:14-cv-03888-MJG in case 1:15-cv-01470-MJG in case 1:15-cv-01471-MJG in case 1:15-cv-01646-MJG in case 1:15-cv-01692-MJG; denying (385) Motion for Attorney Fees in case 1:14-md-02581-MJG; denying (146) Motion for Attorney Fees in case 1:14-cv-03888-MJG; denying (86) Motion for Attorney Fees in case 1:15-cv-01470-MJG; denying (90) Motion for Attorney Fees in case 1:15-cv-01471-MJG; denying (84) Motion for Attorney Fees in case 1:15-cv-01646-MJG; in case 1:15-cv-01692-MJG denying (91) Motion for Attorney Fees. Signed by Judge Marvin J. Garbis on 9/12/2017. Associated Cases: 1:14-md-02581-MJG et al.(bmhs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
________________________________
IN RE: CTP INNOVATIONS, LLC,
)
PATENT LITIGATION
)
________________________________)
CTP INNOVATIONS, LLC v.
GEO GRAPHICS INC.
)
)
)
CTP INNOVATIONS, LLC v.
)
COMMAND WEB OFFSET COMPANY, INC.)
)
CTP INNOVATIONS, LLC v.
)
SANDY ALEXANDER, INC.
)
)
CTP INNOVATIONS, LLC v.
)
WORZALLA PUBLISHING COMPANY
)
)
CTP INNOVATIONS, LLC v.
)
SPECIALTY PROMOTIONS, INC.
)
)
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MDL No. 14-MD-2581
14-cv-3888-MJG
15-cv-1470-MJG
15-cv-1471-MJG
15-cv-1646-MJG
15-cv-1692-MJG
*
*
*
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MEMORANDUM & ORDER RE: FEE MOTION
The Court has before it Defendants’ Motion for Attorney
Fees [ECF No. 385 in 14-md-25811] and the materials submitted
relating thereto.
I.
The Court finds a hearing unnecessary.
BACKGROUND2
Plaintiff, CTP Innovations, LLC (“CTP”) is a non-practicing
patent assertion entity that alleged ownership by assignment of
1
All ECF Nos. referenced herein are in the Multi-district
case 14-md-2581 unless otherwise noted.
2
For a more detailed background, see Memorandum & Order
Resolving Motions [ECF No. 381].
United States Patent Nos. 6,611,349 (“the ‘349 Patent”) and
6,738,155 (“the ‘155 Patent”) (collectively, “the Patents in
Suit”).3
Beginning in 2013, CTP sued more than 75 printing
companies for infringement of the Patents in Suit and contacted
many more companies and offered licenses to avoid being sued.
While many of these cases settled, on December 12, 2014,
the United States Judicial Panel on Multidistrict Litigation
(“MDL”) issued its Transfer Order [ECF No. 1] consolidating the
then-pending actions and transferring them for pretrial purposes
to this Court.
In 2015, more than 20 additional tag-a-long
cases were filed and subsequently transferred to this Court
under the MDL. In addition, CTP stated an intention to file as
many as 200 additional tag-a-long cases.4
On November 29, 2016, this Court issued its Memorandum &
Order Resolving Motions [ECF No. 381], holding that CTP did not
own the rights to sue for infringement of the Patents in Suit at
the time it commenced filing the lawsuits.
As a result, the
Court granted Defendants’ Joint Rule 12(b)(1) Motion to Dismiss
for Lack of Subject Matter Jurisdiction Due to Plaintiff’s Lack
of Standing [ECF No. 354].5
In its decision, the Court noted:
3
The Patents in Suit pertain to systems and methods relating
to the printing industry.
4
Tr. 33:23-24, Dec. 15, 2015, ECF No. 290 in MJG-14-2581.
5
“A court may exercise jurisdiction only if a plaintiff has
standing to sue on the date it files suit.” Abraxis Bioscience,
2
“If the matter were not moot, the Court would have held the
Patents in Suit invalid as not claiming patentable subject
matter.”
Mem. [ECF No 381] at 5, n.4.
On December 13, 2016, Defendants filed the instant joint
Motion for Attorneys’ Fees [ECF No. 385] seeking an award of
attorney fees and/or sanctions pursuant to one or all of 35
U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent power
to sanction.6
Since the filing of the instant motion, CTP has settled
with all but the five remaining defendants.7
Notice, ECF No.
537; Stipulation of Dismissal, ECF No. 540.
The Court herein
resolves the pending motion for attorney fees.
Inc. v. Navinta LLC, 625 F.3d 1359, 1364 (Fed. Cir. 2010).
“Standing is a constitutional requirement pursuant to Article
III and it is a threshold jurisdictional issue.” Id. at 1363.
6
CTP did not respond regarding sanctions pursuant to Local
Rule 105.8(b) (D. Md. 2016)(“Unless otherwise ordered by the
Court, a party need not respond to any motion filed under Fed.
R. Civ. P. 11 or 28 U.S.C. § 1927. The Court shall not grant any
motion without requesting a response.”).
7
The Court notes that after its decision dismissing the
instant case, CTP filed a new lawsuit in the Eastern District of
Texas alleging infringement of the Patents in Suit, having
purported to correct any deficiencies in its chain of title.
That lawsuit has subsequently been dismissed with prejudice
pursuant to a joint motion of the parties. Notice of Dismissal
in Related Case, ECF No. 556.
3
II.
LEGAL STANDARD
A.
Patent Act Fee-shifting Provision
The Patent Act’s fee-shifting provision provides that
“[t]he court in exceptional cases may award reasonable attorney
fees to the prevailing party.” 35 U.S.C. § 285.
To determine whether a party is a prevailing party in
patent litigation, courts apply the general principle that “to
be a prevailing party, one must ‘receive at least some relief on
the merits,’ which ‘alters ... the legal relationship of the
parties.’”
Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318,
1320 (Fed. Cir. 2004)(quoting Former Employees of Motorola
Ceramic Prods. v. United States, 336 F.3d 1360, 1364 (Fed. Cir.
2003)).
The Patent Act does not define “exceptional,” but the
United States Supreme Court has provided guidance in Octane
Fitness, LLC v. ICON Health & Fitness, Inc., ––– U.S. ––––, 134
S. Ct. 1749, 1751 (2014).
An exceptional case “is simply 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.” Id. at 1756.
“District
courts may determine whether a case is ‘exceptional’ in the
case-by-case exercise of their discretion, considering the
4
totality of the circumstances.” Id. at 1756; see also Highmark
Inc. v. Allcare Health Mgmt. Sys., Inc., ––– U.S. ––––, 134 S.
Ct. 1744, 1748 (2014) (“[T]he determination whether a case is
‘exceptional’ under § 285 is a matter of discretion.”).
The standard of proof for establishing entitlement to fees
is by a preponderance of the evidence.
Id. at 1758.
If the
district court finds the case exceptional by a preponderance of
the evidence, it must then determine whether it should exercise
its discretion to award attorneys’ fees.
See Icon Health &
Fitness, Inc. v. Octane Fitness, LLC, 576 F. App’x 1002, 1005
(Fed. Cir. 2014); Inland Steel, 364 F.3d at 1321; Digeo, Inc. v.
Audible, Inc., 505 F.3d 1362, 1366-67 (Fed. Cir. 2007); see also
Graco, Inc. v. Binks Mfg. Co., 60 F.3d 785, 794–95 (Fed. Cir.
1995)(“A finding by a court that a case is exceptional is a
factual determination, whereas the decision to award fees is
discretionary.”).
The amount to be awarded also lies within the sound
discretion of this Court. See Lumen View Tech. LLC v.
Findthebest.com, Inc., 811 F.3d 479, 483 (Fed. Cir. 2016);
Monolithic Power Sys., Inc. v. O2 Micro Int’l Ltd., 726 F.3d
1359, 1365 (Fed. Cir. 2013).
5
B.
Sanctions
28 U.S.C. § 1927 states:
Any attorney or other person admitted
to conduct cases in any court of the United
States or any Territory thereof who so
multiplies the proceedings in any case
unreasonably and vexatiously may be required
by the court to satisfy personally the
excess costs, expenses, and attorneys fees
reasonably incurred because of such conduct.
The purpose of § 1927 is to limit the abuse of court
processes.
DeBauche v. Trani, 191 F.3d 499, 511 (4th Cir. 1999)
(citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 762
(1980)).8
As such, a court considering the propriety of a § 1927
award must focus “on the conduct of the litigation and not on
its merits.”
Id.
The statute “does not distinguish between winners and
losers, or between plaintiffs and defendants. The statute is
indifferent to the equities of a dispute and to the values
advanced by the substantive law.” Id.
Thus, an attorney who
files a meritless claim may not be sanctioned under § 1927 if he
does not “multiply the proceedings.” Id.
The Fourth Circuit has noted that “a finding of counsel’s
bad faith [is] a precondition to the imposition of fees” under §
8
Review of a district court’s decision on a motion for
sanctions under § 1927 is conducted pursuant to the law of the
regional circuit. Nystrom v. TREX Co., 424 F.3d 1136, 1141 (Fed.
Cir. 2005).
6
1927.
Brubaker v. City of Richmond, 943 F.2d 1363, 1382 n.25
(4th Cir. 1991).
In addition to the authority granted under 28 U.S.C. §
1927, courts also possess the inherent authority in appropriate
cases to assess attorneys’ fees and impose other sanctions
against a litigant or a member of the bar who has “acted in bad
faith, vexatiously, wantonly, and for oppressive reasons.”
Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991).
Under both § 1927 and the court’s inherent power, the
burden of demonstrating an entitlement to attorneys’ fees rests
on the moving party.
Morris v. Wachovia Secs., Inc., 448 F.3d
268, 284 (4th Cir. 2006).
III. DISCUSSION
A.
Prevailing Party
Both parties cite Inland Steel as the standard for
determining “prevailing party” status, but they disagree on what
it means to “‘receive at least some relief on the merits,’ which
‘alters . . . the legal relationship of the parties.’”
365 F.3d
at 1320 (quoting Former Employees, 336 F.3d at 1364), defining
“prevailing party” in the context of the Equal Access to Justice
Act (“EAJA”), 28 U.S.C. § 2412).
CTP contends that Defendants
are not prevailing parties because dismissal without prejudice
7
for lack of standing is not an adjudication on the merits,
citing Fed. R. Civ. P. 41(b)9 and various cases holding same.
Certainly, in terms of having a substantive preclusive
effect, “a judgment must be a final adjudication of the rights
of the parties and must dispose of the litigation on the
merits.”
Media Techs. Licensing, LLC. v. Upper Deck Co., 334
F.3d 1366, 1369 (Fed. Cir. 2003)(citation omitted).
Plaintiff’s
lack of standing limits federal judicial power and precludes the
court’s ruling on the merits.
Id.
The Court agrees with CTP
that the dismissal without prejudice for lack of standing was
not a ruling on the merits.
Inland Steel defines the meaning of prevailing party in the
context of patent litigation under Federal Circuit law.
F.3d at 1320.
364
The Inland Steel court held that the defendant
was the prevailing party because the district court dismissed
the case with prejudice and entered a final judgment in the
defendant’s favor in response to the defendant’s successful
cancelation of the patent in suit in the United States Patent
and Trademark Office (“PTO”). Id. at 1321.
“[A] dismissal with
prejudice is tantamount to a judgment on the merits.”
9
Id.
“Unless the dismissal order states otherwise, a dismissal
under this subdivision (b) and any dismissal not under this
rule--except one for lack of jurisdiction, improper venue, or
failure to join a party under Rule 19--operates as an
adjudication on the merits.” Fed. R. Civ. P. 41(b)(emphasis
added).
8
(quoting Schwarz v. Folloder, 767 F.2d 125, 130 (5th Cir.
1985)).
The circumstances in Inland Steel do not parallel those
in the instant case, however, because the dismissal herein,
while in Defendants’ favor, was without prejudice to the
assertion by a proper plaintiff of the patent infringement claim
asserted.
In Former Employees, the case quoted by the Inland Steel
court, the Federal Circuit stated: “The Supreme Court has
interpreted the phrase ‘prevailing party’ consistently in all
federal fee-shifting statutes.”
336 F.3d at 1364.
More
recently, the Supreme Court, addressing the issue of attorneys’
fees, explained that “a favorable ruling on the merits is not a
necessary predicate to find that a defendant has prevailed.”
CRST Van Expedited Inc. v. E.E.O.C., ––– U.S. ––––, 136 S. Ct.
1642, 1646 (2016).
The Court reversed an Eighth Circuit
decision that declined to award attorneys’ fees because the
defendant had not won “on the merits.”
Id. at 1650, 1654.
The
Court elaborated regarding various non-meritorious reasons why a
defendant may still be deemed a “prevailing party,” including an
example where defendants prevailed for jurisdictional reasons.
Id. at 1651-54.
The Court also made clear that its reasoning
applied to other fee-shifting statutes.
9
Id. at 1646.
The Court declined to address whether a defendant must
obtain a preclusive judgment in order to qualify as a prevailing
party. Id. at 1653.10
The Court has not articulated a precise
test for when a defendant is a prevailing party.
Id. at 1646.
However, the Court stated that the “touchstone of the prevailing
party inquiry must be the material alteration of the legal
relationship of the parties.”
Id. at 1646 (citation omitted).
Further, the “change must be marked by ‘judicial imprimatur.’”
Id. (quoting Buckhannon Bd. & Care Home, Inc. v. W. Virginia
Dep’t of Health & Human Res., 532 U.S. 598, 605 (2001)). That
is, a “judicially sanctioned change in the legal relationship of
the parties.”
Id.
The Federal Circuit has not addressed a dispute about the
meaning of prevailing party since CRST was decided in May 2017,
although in June 2017, it briefly stated: “To be a ‘prevailing
party,’ our precedent requires that the party have received at
least some relief on the merits.”
Chaffin v. Braden, No. 2016-
2572, 2017 WL 2704474, at *6 (Fed. Cir. June 23, 2017)(citing
Shum v. Intel Corp., 629 F.3d 1360, 1367 (Fed. Cir. 2010)).
A defendant has “fulfilled its primary objective whenever
the plaintiff’s challenge is rebuffed, irrespective of the
10
The Court expressed concern that the plaintiff may have
waived the argument and that the parties contested whether the
judgment had been preclusive in nature. CRST, 136 S. Ct. at
1653.
10
precise reason for the court’s decision.” CRST, 136 S. Ct. at
1651.
In the instant case, the Court granted a final Judgment
“in favor of Defendants against Plaintiff dismissing all claims
for lack of subject matter jurisdiction . . . .”
No. 382].
Judgment [ECF
All other dismissal grounds became moot.
The
Defendants certainly won a significant victory, but CTP was able
to correct its assignments, establish ownership acceptable to
this Court, and immediately refile the lawsuits.11
The Court
finds that the Defendants’ victory should not be considered to
have accomplished a “material alteration of the legal
relationship of the parties.”
CRST, 136 S. Ct. at 1646
(citation omitted).
Accordingly, the Court holds that Defendants are not
prevailing parties for purposes of the Patent Act’s fee-shifting
provision and shall deny Defendants’ motion for attorneys’ fees.
11
Although CTP has declined to file new lawsuits against
these Defendants, within days of this Court’s dismissal, CTP,
represented by different counsel, voluntarily dismissed and then
re-filed its lawsuit against Quad/Graphics, Inc. in the Eastern
District of Texas, alleging infringement of the Patents in Suit,
having purported to correct any deficiencies in its chain of
title. CTP Innovations, Inc. v. Quad/Graphics, Inc., 2:16-cv01361-JRG-RSP (E.D. Tex). That lawsuit has subsequently been
dismissed with prejudice pursuant to a joint motion of the
parties. Notice of Dismissal in Related Case, ECF No. 556.
11
B.
Sanctions
Defendants contend that sanctions should be imposed on CTP
because it sued dozens of Defendants, and stated its intention
to sue hundreds more, for patent infringement without owning the
patent.
CTP asserts that it was not in a position to have known
that it did not have acceptable legal title because it took
specific steps to correct what it viewed as a technical
oversight, and it took those steps prior to filing any lawsuits.
The Court ultimately found that the steps taken were inadequate
to correct the technical issues with the assignments, but CTP
asserts it moved forward in good faith that it owned the Patents
in Suit.
Further, CTP asserts that it is illogical to believe
that it would have incurred the expenses associated with
litigation, in this Court as well as at the PTO,12 if it believed
it lacked standing.
CTP also cites a related Federal Circuit
decision13 that declined to dismiss an appeal for lack of
standing after reviewing the same assignment documents that this
Court found to be defective.
The Court does not find that CTP or its counsel acted
frivolously or with bad faith in its litigation of the instant
case, nor does the Court find that CTP pursued litigation
12
CTP defended against seven Inter Partes Reviews at the PTO.
See IPR Chart, Opp’n Ex. 6 [ECF No. 464-6].
13
CTP Innovations, LLC v. Eastman Kodak Company, case no. 161665. See Notice [ECF No. 393].
12
recklessly or knowing that its claims lacked merit.
CTP had a
reasonable basis to believe it owned the Patents in Suit.
While
it would have been preferable for CTP to appropriately correct
the issues with the assignments prior to commencing suit, and
thus have avoided the issue of standing altogether, the Court
finds that the actions taken by CTP were, at most, negligent.
Such action does not rise to bad faith and does not warrant the
imposition of sanctions.
Accordingly, the Court finds it unnecessary to request a
response from CTP related to sanctions because the Court finds
that sanctions are not warranted based on the record in this
case.
IV.
CONCLUSION
For the foregoing reasons, Defendants’ Motion for Attorney
Fees [ECF No. 385 in 14-md-2581] is DENIED.
Individual Case Nos.
14-cv-3888-MJG
15-cv-1470-MJG
15-cv-1471-MJG
15-cv-1646-MJG
15-cv-1692-MJG
ECF No.
146
86
90
84
91
SO ORDERED, on Tuesday, September 12, 2017.
/s/__________
Marvin J. Garbis
United States District Judge
13
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