GARFUM.COM CORPORATION v. REFLECTIONS BY RUTH

Filing 68

OPINION. Signed by Chief Judge Jerome B. Simandle on 12/16/2016. (TH, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

GARFUM.COM CORPORATION,

HONORABLE JEROME B. SIMANDLE

Plaintiff,
Civil Action
No. 14-5919 (JBS/KMW)

v.
REFLECTIONS BY RUTH D/B/A
BYTEPHOTO.COM,
Defendant.
APPEARANCES:
Lawrence C. Hersh, Esq.
17 Sylvan Street, Suite 102B
Rutherford, NJ 07070
and
Austin Hansley, Esq. (pro hac vice)
AUSTIN HANSLEY PLLC
5050 Quorum Drive, Suite 700
Dallas, Texas 75254
Attorneys for Plaintiff
Frank L. Corrado, Esq.
BARRY, CORRADO, GRASSI & GIBSON, P.C.
2700 Pacific Avenue
Wildwood, NJ 08620
and
Joseph C. Gratz, Esq. (pro hac vice)
DURIE TANGRI LLP
217 Leidesdorff Street
San Francisco, CA 94111
and
Daniel K. Nazer, Esq. (pro hac vice)
ELECTRONIC FRONTIER FOUNDATION
815 Eddy Street
San Francisco, CA 94109
Attorneys for Defendant
SIMANDLE, Chief Judge:

OPINION

I.

Introduction
Present before the Court is Plaintiff Garfum.com

Corporation’s (hereinafter, “Plaintiff”) Motion for
Reconsideration of this Court’s March 30, 2016 Opinion and Order
finding this case “exceptional” under 35 U.S.C. § 285 and
granting, in part, Defendant Reflections by Ruth d/b/a
Bytephoto.com’s (hereinafter, “Defendant”) Motion for Attorneys’
Fees. [Docket Item 56].

Plaintiff requests the Court to

reconsider its Opinion and Order in light of new evidence
indicating that the U.S. Patent and Trademark Office (“PTO”)
allowed claims nearly identical to the ones at issue in this
case, as well as new caselaw regarding 35 U.S.C. § 101. (Pl.’s
Br. at 1.)

For the reasons set forth below, the Court grants

Plaintiff’s motion for reconsideration and will not award
attorneys’ fees or costs because the circumstances are not
“exceptional” under 35 U.S.C. § 285.
II.

Factual Background and Procedural History

A. March 2016 Opinion Granting Fees
The Court discussed the factual background of this case in
detail in Garfum.com Corp. v. Reflections by Ruth d/b/a
Bytephoto.com, No. 14-5919, 2016 WL 1242762, at *1-*2 (D.N.J.
Mar. 30, 2016).

Defendant had originally filed a motion to

dismiss Plaintiff’s infringement action, alleging that the

2 

claims of Plaintiff’s ‘618 patent were directed towards
unpatentable subject matter under 35 U.S.C. § 101 as explained
by the Supreme Court in Alice Corp. Pty. Ltd. v. CLS Bank
International, 134 S. Ct. 2347 (2014).1 Id. at *4.

The day after

this Court set a hearing on Defendant’s motion to dismiss,
Plaintiff executed a covenant not to sue and filed a motion to
voluntarily dismiss the complaint and the counterclaims. Id. at
*2.

The Court granted Plaintiff’s motion to dismiss and closed

the case, but Defendant then filed a motion for attorneys’ fees
under 35 U.S.C. § 285. Id.

In seeking fees, Defendant argued

that (1) Plaintiff’s arguments in defending against Defendant’s
motion to dismiss were meritless under § 101 and contrary to the

1

In Alice, the Supreme Court set out a two-step framework for
distinguishing patents that claim so-called laws of nature,
natural phenomena, and abstract ideas from those that claim
patent-eligible applications of those concepts. Id. at 2355.
Under step one, the Court determines whether “the claims at
issue are directed one of those patent-ineligible concepts,” and
if so, the Court considers elements of each claim both
individually and “as an ordered combination” to determine
whether the additional elements “’transform the nature of the
claim’ into a patent-eligible application.” Id. (citation
omitted). Under step two, the court searches for an “inventive
concept,” i.e., an element or ordered combination of elements
that is “sufficient to ensure that the patent in practice
amounts to significantly more than a patent upon the [ineligible
concept] itself.” Id. (citation omitted). In recent months,
however, the Federal Circuit has reversed invalidations under
Alice in a series of cases involving software patents. See,
e.g., McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299
(Fed Cir. 2016); BASCOM Global Internet Servs. v. AT&T Mobility
LLC, 827 F.3d 1341 (Fed. Cir. 2016); Enfish, LLC v. Microsoft
Corp., 822 F.3d 1327 (Fed. Cir. 2016). These new precedents are
discussed in Part IV.A.I, below.
3 

text of the patent, and (2) that Plaintiff’s litigation conduct
was unreasonable. Id. at *4.
The Court found the case to be “exceptional” under § 285
because (1) Plaintiff’s case did not have substantive strength
since it “should have been obvious” that its claims did not have
an inventive concept in a post-Alice environment under 35 U.S.C.
§ 101, and (2) Plaintiff “propound[ed] unreasonable [litigation]
positions in support of validity under § 101, and then
dismiss[ed] the case to avoid a decision on the merits.” Id. at
*7, *9.

Notably, the Court dismissed Plaintiff’s argument that

the PTO’s allowance of the ‘615 application – a continuation of
the ‘618 patent, demonstrated that the case had substantive
strength and was litigated reasonably. Id. at *9.

Plaintiff had

obtained a Non-Final Office Action from the PTO regarding its
‘615 application on June 19, 2015, (see Am. Hansley Decl. ¶ 4),
a first Notice of Allowance for the ‘615 Application on
September 21, 2015 (Id. ¶ 5), and a Second Notice of Allowance
for the ‘615 application on January 14, 2016. (Id. ¶ 6.)
Because these notices of allowance occurred “well after the
commencement of litigation and the briefing of the original
motion to dismiss,” the Court held that “without any mention of
35 U.S.C. ¶ 101 in the notice of allowance, this Court cannot”
provide cover to Plaintiff’s positions taken in litigation. 2016
WL 1242762, at *9.

4 

As a result, the Court awarded fees to Defendants under §
285 in its discretion. Id.

However, the Court cabined the fee

award to work conducted on or after April 6, 2015, the date on
which Plaintiff opposed Defendant’s motion to dismiss, to
reflect that Plaintiff’s conduct was not “exceptional” from the
case’s inception until that date. Id.

The Court reasoned that

“by the time this date was reached, the handwriting on the wall
for this sort of patent became clear under Alice and its
progeny, such that the decision of Plaintiff to nonetheless
continue the suit and force Defendant to incur more counsel fees
became exceptional under 35 U.S.C. § 285.” Id.

The Court also

awarded Defendant one-half of the fees requested for the fee
motion itself. Id. at *10.
B. Proceedings Before The PTO After the Fees Briefing
On February 10, 2016, Plaintiff paid an additional $700 in
fees to reopen the prosecution of the ‘615 application and filed
a Second Request for Continued Examination and Information
Disclosure Statement, attaching all of the § 101 briefings filed
in this case. (Id. at ¶ 7-8.)

Plaintiff obtained a third Notice

of Allowance from the PTO on March 18, 2016, despite having been
provided with the § 101 briefing from the instant case. (Id. at
¶ 9.)

5 

III. Standard of Review
Local Civil Rule 7.1(i) governs the Court’s review of the
moving parties’ motions for reconsideration, as it permits a
party to seek reconsideration by the Court of matters which the
party “believes the Judge or Magistrate Judge has overlooked
when it ruled on the motion.” L. Civ. R. 7.1(i).

The movant has

the burden of demonstrating either “(1) an intervening change in
the controlling law; (2) the availability of new evidence that
was not available when the court [issued its order]; or (3) the
need to correct a clear error of law or fact or to prevent
manifest injustice.” Andreyko v. Sunrise Sr. Living, Inc., 993
F. Supp. 2d 475, 477-78 (D.N.J. 2014) (citations omitted);
Lazaridis v. Wehmer, 591 F.3d 666, 669 (3d Cir. 2010)(citations
omitted)(same).

More specifically, the moving party must set

forth the “‘dispositive factual matters or controlling decisions
of law’” it believes the Court overlooked when rendering its
initial decision.

Mitchell v. Twp. of Willingboro Mun. Gov’t,

913 F. Supp. 2d 62, 78 (D.N.J. 2012) (citation omitted).
In that way, a party seeking reconsideration must meet a
high burden.

See United States v. Jones, 158 F.R.D. 309, 314

(D.N.J. 1994); Maldonado v. Lucca, 636 F. Supp. 621, 629 (D.N.J.
1986).

Reconsideration does not provide “an opportunity for a

second bite at the apple,” Tishcio v. Bontex, Inc., 16 F. Supp.
2d 511, 532 (D.N.J. 1998), nor a vehicle “to relitigate old

6 

matters.”

NL Indus., Inc. v. Commercial Union Ins. Co., 935 F.

Supp. 513, 516 (D.N.J. 1996).

Indeed, mere disagreement with

the court’s decision – particularly its reasoning and
distillation of the applicable law and facts – should be aired
through the appellate process.

See Andreyko, 993 F. Supp. 2d at

478; see also Shevline v. Phoenix Life Ins., No. 09-6323, 2015
WL 348552, at *1 (D.N.J. Jan. 23, 2015) (same).

But where new

evidence that was previously unavailable despite due diligence
may materially alter the factual landscape, or when subsequent
persuasive caselaw comes into existence, the court should
exercise its discretion to reexamine the decision pursuant to L.
Civ. R. 7.1(i).
IV.

Discussion

Plaintiff asks this Court to reconsider its March 30, 2016
Opinion and Order finding the case “exceptional” pursuant to 35
U.S.C. § 285 and granting, in part, Defendant’s Motion for Fees
because new evidence from the PTO shows that the case does not
lack substantive strength, and that Plaintiff did in fact
litigate the case reasonably.

Defendant opposes the motion, as

it continues to argue that Plaintiff’s case was, from the
outset, intended to use the cost of defense as leverage to
secure an undeserved settlement. (Opp’n at 3.)

It argues that

“[a]ll that has changed is that [Defendant] submitted some of

7 

the Section 101 briefing from this case to the USPTO.” (Opp’n at
9.)

Thus, Defendant maintains that “[t]he details of an ex

parte proceeding in a different forum with different procedures
and standards is of little relevance.” (Opp’n at 10.)
As will be explained below, the Court will grant
Plaintiff’s motion for reconsideration under both the “evidence
not previously available” and “preventing manifest injustice”
grounds of relief.

Plaintiff’s motion is not a mere

disagreement with the Court’s initial decision, but a good faith
effort to present evidence to the Court that was either not
previously available or overlooked at the time of the March 2016
Opinion.
A. DETERMINATION OF WHETHER CASE IS EXCEPTIONAL
Section 285 of the Patent Act authorizes district courts to
award attorneys’ fees to prevailing parties in “exceptional
cases.” 35 U.S.C. § 285.

As the Supreme Court has explained, an

“exceptional” case is “one that stands out from others with
respect to the (1) substantive strength of a party's litigating
position (considering both the governing law and the facts of
the case) or (2) the unreasonable manner in which the case was
litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc.,
134 S. Ct. 1749, 1756 (2014). “District courts may determine
whether a case is exceptional in the case-by-case exercise of
their discretion, considering the totality of the

8 

circumstances.” Id. at 1751.

The court may consider

“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 1756 n. 6.

In conducting

its discretionary inquiry, the court makes its findings by a
preponderance of the evidence. Id. at 1758.

Generally, “where a

party has set forth some good faith argument in favor of its
position, it will generally not be found to have advanced
‘exceptionally meritless' claims.” Deckers Outdoor Corp. v.
Romeo & Juliette, Inc., No. 15-2812, 2016 WL 5842187, at *3
(C.D. Cal. Oct. 5, 2016) (citations omitted).

Fees are awarded

“not as a penalty for failure to win a patent infringement suit,
but as appropriate only in extraordinary circumstances.” Octane
Fitness, 134 S. Ct. at 1753 (internal quotation marks and
citation omitted); see also SFA Systems, LLC v. Newegg Inc.,
793. F.3d 1344 (Fed. Cir. 2015) (explaining that the focus is
the substantive strength of the party’s litigating position, and
not the “correctness” or “eventual success” of that position);
Western Falcon, Inc. v. Moore Rod & Pipe, LLC, No. 13-2963, 2015
WL 3823629, at *6 (S.D. Tex. June 18, 2015) (“[m]erely asserting
that a party’s arguments were without merit does not show that a
case is exceptional”).

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1. Substantive Strength of Plaintiff’s Litigation Position
First, the Court overlooked the substantive strength of
Plaintiff’s litigation position because of the uncertainty of
the state of the law regarding 35 U.S.C. § 101.

The basis of

Defendant’s initial challenge to the substantive strength of
Plaintiff’s position was that “any reasonable attorney would
have appreciated that the claims of the ‘618 patent would not
survive a challenge under 35 U.S.C. § 101.” Garfum, 2016 WL
1242762 at *4.

The Court, in its March 2016 Opinion, found that

at step one of the Alice test, the claims of the ‘618 Patent
were directed to an abstract idea, specifically the abstract
idea of ranking content by popularity and within a category. Id.
However, the Court then found that the claims of the ‘618 Patent
“do not appear to contain” an inventive concept under step two
of the Alice analysis because the “practice of ranking things in
categories based on popular vote was well known before the
advent of the internet, or even computers, and the requirement
to involve an online database does not make the claim
inventive.” Id. at *6.

As a result, the Court stated “[t]hat

the claims do not appear to have an inventive concept should
have been obvious to the Plaintiff in the post-Alice
environment.” Id.

Moreover, it added that “although the law on

patent eligible subject matter had been in flux, a sufficient
number of cases had been decided by the time of briefing that

10 

Plaintiff should have realized that its arguments under 35
U.S.C. § 101 were untenable.” Id. at 8.
Plaintiff argues that the PTO’s allowance of nearly
identical claims in this ‘615 application belies the Court’s
determination it “should have been obvious” to Plaintiff that
there was no inventive concept in the ‘618 patent.
agrees.

The Court

As Plaintiff explains, “[g]iven the USPTO’s repeated

allowance of nearly identical claims in the ‘615 Application,
Plaintiff believed the strength of its § 101 arguments to be
more than sufficient, and put those same arguments in its
Response to Defendant’s Motion to Dismiss.” (Am. Hansley Decl. ¶
11.)

The March 2016 Opinion stated:

The notice from the PTO also cannot provide cover to
Plaintiff’s positions taken in litigation. The notice of
allowance was transmitted on June 19, 2015 (See Office Action
at cover). This was well after the commencement of litigation
and the briefing of the original motion to dismiss. While it
may be evidence that reasonable minds could differ, without
any mention of 35 U.S.C. § 101 in the notice of allowance,
this Court cannot draw such a conclusion.
2016 WL 1242762 at *9.
Defendant argues that “[a]t no point anywhere in the
history of the ‘615 application did the [PTO] examiner discuss
this briefing, Section 101, or the Alice standard.” (Opp’n at
7.)

While the examiner may not have discussed § 101 explicitly

in any Notice of Allowance, Plaintiff has put forth sufficient
evidence demonstrating that it provided all of its § 101

11 

briefings filed in this case to the PTO, and that a month after
the PTO received the briefing, on March 18, 2016, the examiner
issued the Third Notice of Allowance for the ‘615 patent (Am.
Hansley Decl. ¶¶ 7-9).

Plaintiff cites Sciele Pharma Inc. v.

Lupin Ltd., 684 F.3d 1253, 1258 (Fed Cir. 2012) for the
proposition that prior references were previously before the
PTO, a defendant faces an “added burden of overcoming the
deference that is due to a qualified government agency presumed
to have done its job.”

Defendant argues that Lupin does not

apply because the Federal Circuit “expressly rejected” that
principle later in that same opinion. (Def. Br. at 11).
However, in Lupin, the Federal Circuit confirmed that there is a
“high burden of proof created by the necessary deference to the
PTO;” while it is not necessarily an “added” burden – it is
simply “reflected in the clear and convincing evidence burden
for proving invalidity.” Lupin, 684 F.3d at 1260.

Defendant

also attempts to distinguish Lupin since it did not discuss §
101, and under CyberSource Corp. v. Retail Decisions, Inc., 654
F.3d 1366, 1369 (Fed. Cir. 2011) eligibility under § 101 is a
question of law where the PTO is entitled to no deference.
However, while the courts are “the final arbiter of patent
validity” and are not bound by the PTO’s decision to issue a
patent, they may also “take cognizance of, and benefit from, the
proceedings before the patent examiner.” Evonik Degussa GmbH v.

12 

Materia Inc., No. 09-636, 2016 WL 337378, at *6 (D. Del. Jan.
26, 2016) (quoting Quad Envtl. Technologies Corp. v. Union
Sanitary Dist., 946 F.2d 870, 876 (Fed. Cir. 1991)); see also
Hyatt v. Kappos, 625 F.3d 1320, 1334 (Fed. Cir. 2010) (en banc)
(recognizing the deference owed to the PTO as “the knowledge
agency charged with assessing patentability”).

Thus,

Plaintiff’s litigating positions, while certainly imperfect,
were not lacking such substantive strength to justify shifting
fees under § 285.
Plaintiff has submitted several persuasive intervening
cases that support its motion for reconsideration, explaining
that courts should hesitate to grant fees in § 101 cases.
[Docket Items 64-65.]

In YYZ, LLC v. Pegasystems, Inc., No. 13-

581, 2016 WL 1761955, at *1 (D. Del. May 2, 2016), the court
held that “the § 101 analysis is an evolving state of the law
and a difficult exercise, which does not lend itself to, e.g.,
shifting fees pursuant to 35 U.S.C. § 285.” See also Papst
Licensing Gmbh & Co. KG v. Xilinx Inc., No. 16-925, 2016 WL
4398376, at *2-*4 (N.D. Cal. Aug. 18, 2016) (denying attorney’s
fees under § 285 to the accused infringer who obtained a
judgment on the pleadings that the asserted claims were invalid
under § 101, noting that “[b]ecause this is a complex and
developing area of the law,” although Plaintiff’s arguments were
unpersuasive, its position was “not so baseless as to make this

13 

case exceptional”); Device Enhancement LLC. v. Amazon.com.,
Inc., No. 15-762, 2016 WL 2899246, at *7 (D. Del. May 17, 2016)
(noting that “[g]iven the evolving state of the law, the § 101
analysis should be, and is, a difficult exercise”); Clarilogic,
Inc. v. FormFree Holdings Corp., No. 15-41 (S.D. Cal. Apr. 27,
2016)(ECF No. 74)(declining to find that “the substantive
weakness of Defendant’s position was so objectively apparent as
to render the case exceptional” under § 285 because “post-Alice,
the landscape of patent ineligibility under 25 U.S.C. § 101 is
unsettled and rapidly evolving”); Credit Card Fraud Control
Corp. v. Maxmind, Inc., No. 14-3262, 2016 WL 3355163 at *2 (N.D.
Tex. Apr. 7, 2016) (“The substantive law of Section 101 patenteligibility has evolved since Plaintiff initiated this lawsuit .
. . [t]he mere fact that Plaintiff had a losing litigation
position is not an automatic indicator that the case is
exceptional under Section 285.”); EON Corp. IP Holdings, LLC v.
FLO TV Inc., No. 10-812, 2014 WL 2196418, at *2 (D. Del. May 27,
2014) (denying attorney fees, noting patentee’s position “turned
on a complex and evolving area of [§ 101] law” and “the
[court’s] decision was not an easy one”).
Additionally, while the Court examined DDR Holdings, LLC v.
Hotels.com, L.P., 773 F.3d 1245 (Fed Cir. 2014) in its initial
Opinion, the Federal Circuit has opined in three additional
instances on § 101 since briefing was completed in this case,

14 

furthering the uncertainty in this area of jurisprudence.
First, in Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed.
Cir. 2016), the Court found a patent to a particular improvement
to a database system patent-eligible because the claims were not
directed to an abstract idea under step one of Alice; rather,
they were “directed to a specific improvement to the way
computers operate.” Id. at 1336.

Then, in BASCOM Global

Internet Services v. AT&T Mobility LLC, 827 F.3d 1341 (Fed. Cir.
2016), the Court held that the Plaintiff had properly alleged
than “an inventive concept can be found in the ordered
combination of claim limitations that transform the abstract
idea of filtering content into a particular, practical
application of that abstract idea.” Id. at 2352.

The Court

further explained that the “inventive concept inquiry requires
more than recognizing that each claim element, by itself, was
known in the art . . . an inventive concept can be found in the
non-conventional and non-generic arrangement of known,
conventional pieces.”

The claims of the patent in that case

generally recited a system for filtering Internet content, and
the Court found that the specific method of filtering Internet
content “cannot be said, as a matter of law, to have been
conventional or generic” since the claims “may be read to
‘improve[] an existing technological process.’” Id. at 1345,
1350-51.

Importantly, the Court reasoned that “[f]iltering

15 

content on the Internet was already a known concept, and the
patent describes how its particular arrangement of elements is a
technical improvement over prior art ways of filtering such
content.” Id. at 1350.

Furthermore, “[b]y taking a prior art

filter solution (one-size-fits-all filter at the ISP server) and
making it more dynamic and efficient (providing individualized
filtering at the ISP serve), the claimed invention represents a
‘software-based invention[] that improve[s] the performance of
the computer system itself.’” Id. a 1351.

Finally, in McRO,

Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299 (Fed Cir.
2016), the Court found that the patent claim at issue was not
directed to an abstract idea, and did not merely invoke generic
processes and machinery, therefore favoring patentability.
Mankes v. Vivid Seats Ltd., 822 F.3d 1302, 1312 (Fed. Cir.
2016) is also instructive.

Plaintiff sued Defendant, alleging

that their operation of Internet-based reservation systems, in
conjunction with the operation of local reservation systems by
movie theaters and other entertainment venues, infringed his
patent. Id. at 1303.

Plaintiff’s case had depended on

establishing “divided infringement,” because it was “undisputed
that no one person perform all of the steps of the method
claims.” Id.

When Plaintiff had initially filed his complaints,

“the law relating the divided infringement was in the midst of a
multi-year process of active judicial reconsideration.” Id.

16 

In

affirming the denial of fees for Defendant under § 285, the
Court explained that the district court “could readily view
[Plaintiff] as having reasonably, openly, and in good faith
pressed arguments for plausibly result-altering changes in
governing legal standards that were demonstrably under active
judicial reconsideration in this Court and the Supreme Court at
the time.

While [Plaintiff’s] case was pending before the

district court, the law on divided infringement remained
uncertain, with both our court and the Supreme Court weighing in
on possible changes, and [Plaintiff’s] litigation conduct
appropriately reflected that shifting legal landscape.”
Similarly, here, while this Court had stated that it should have
been obvious to Plaintiff that it did not have a § 101 case in a
post-Alice environment, the law has since sufficiently evolved
so that Plaintiff may have had an arguable or plausible
inventive concept under § 101.

That, combined with the PTO’s

approval of the ‘615 application after considering this case’s
§ 101 materials, leads the Court to reconsider its granting of
fees to Defendant under § 285.
2. Unreasonable Manner in Which the Case was Litigated
Plaintiff asserts that its litigation conduct was not
unreasonable because “[i]n light of the low potential for
damages in this case and Plaintiff’s strong belief in the
validity of the patent-in-suit, Plaintiff considered the offer

17 

of a dismissal of its infringement claims with prejudice to be
entire reasonable.” (Pl.’s Br. at 17-18).

The Court finds that

Plaintiff’s litigation tactics were not so unreasonable to
justify fees under the totality of the circumstances.
In its March 2016 Opinion, the Court found Plaintiff’s
conduct unreasonable because “this case was not litigated [by
Plaintiff] in a manner showing confidence in a strong litigation
position” as “the fact that the covenant not to sue was tendered
almost immediately after the Court set the motion hearing makes
it appear as though Plaintiff was running away from any decision
on the merits.” Garfum, 2016 WL 1242762 at *7-*8.

The Court

added that “[f]or Plaintiff to claim that it had no other option
but to provide a covenant not to sue to avoid the attendant
consequences of bringing a lawsuit is at odds with the facts
that Plaintiff is the one who filed the lawsuit. Id. at *8.

The

Court agreed with Defendant that “Plaintiff’s suit was dismissed
to avoid a decision on the merits, but Plaintiff continued to
litigate even when it realized it had an incredibly weak
litigation position.” Id. at *9.
After a thorough review and upon further reflection, the
Court concludes that Plaintiff’s conduct in this case was not
unreasonable - this is not one of the rare patent cases in which
attorneys' fees are warranted by the manner of litigation.
Defendant argues that Plaintiff counsel’s discovery about

18 

covenant-not-to-sue caselaw does not make its conduct reasonable
because Plaintiff waited forty days later to dismiss its claims.
(Def. Br. at 8.)

But Plaintiff explains that its counsel “had

been working on the covenant not to sue with the intention of
filing its motion to dismiss before the Court ordered the
hearing on Defendant’s Motion to Dismiss,” and that the Court’s
setting the hearing “merely spurred plaintiff to expedite what
it had already been working on.” (Pl.’s Br. at 18-19.)
Plaintiff further explains that it “dismissed its claims and
provided the covenant not to sue, in essence, as a Hobson’s
choice since there was no possibility of obtaining damages even
if it was meritorious in this case.” (Id. at 19.)

While a

forty-day gap between learning about the law and handing the
covenant not to sue is not ideal, it is not such an excessive
delay to find the litigation conduct unreasonable. See, e.g.,
Bovino v. Amazon.com, Inc., No. 13-2111, 2016 WL 943780, at *3
(D. Colo. Mar. 14, 2016) (noting that although Plaintiff’s
claims in the case were “sloppily drafted, overzealously
pursued, and ultimately unpersuasive,” the Court could not say
that they were “so frivolous, objectively unreasonable, or
otherwise ‘exceptional’ as to warrant an award of fees” in
Defendant’s favor).
Defendant points to the fact that Plaintiff's arguments
were contrary to the text of the patent, and that Plaintiff

19 

submitted a conclusory and irrelevant expert declaration, but
under the totality of the circumstances analysis, the Court is
not convinced that this case is “exceptional” under § 285.
Plaintiff’s conduct was not objectively unreasonable, as it put
forth good faith arguments in favor of its positions.
Pragmatus Telecom LLC v. Newegg Inc., No. 12-1533, 2016 WL
675529 (D. Del. Feb. 18, 2016) is an instructive case.

There,

Plaintiff sued Defendant in federal district court in
California, alleging that Defendant’s use of live chat
technology on its website infringed several of Plaintiff’s
patents. Id. at *1.

The case was transferred to the District of

Delaware, and after suppliers of the technology used by
Defendant subsequently filed declaratory judgment actions
against Plaintiff and reached settlements, Defendant filed an
unopposed motion to dismiss their action. Id. Defendant moved
for fees under § 285, among other reasons, Plaintiff’s “initial
opposition to [Defendant’s] motion to transfer the case to this
district, followed by its later stipulation to the transfer,
demonstrate [Plaintiff’s] intent to delay the case and force
Newegg to incur considerable litigation expense. Id. at *2.

The

Court, in declining to assess fees, “decline[d] to ascribe an
improper motive” from Plaintiff’s decision to change its mind
regarding transfer of venue, and noted that “[p]arties often
change their minds with regard to strategic maneuvering

20 

throughout litigation.” Id. at *3. Similarly, here, while
Defendants may question Plaintiff’s motives in delaying to
provide a covenant not to sue, the conduct does not rise of
unreasonable litigation conduct. See Blue Spike, LLC v. Adobe
Sys., Inc., No. 14-1647, 2015 WL 5542995, at *3 (N.D. Cal. Sept.
18, 2015) (“[w]hile Plaintiff’s conduct was less than ideal
throughout the litigation, and in particular, as it drew to a
close, the Court is not convinced that . . . counsel acted with
‘subjective bad faith.’”).
Additionally, decisions granting fees after Octane Fitness
have generally concerned egregious litigation conduct that does
not appear in the current matter.

For example, in Raniere v.

Microsoft Corp., No. 15-540, 2016 WL 4626584, at *5 (N.D. Tex.
Sept. 2, 2016), the Court awarded fees to Defendant given
Plaintiff’s “pattern of obfuscation and bad faith” throughout
the litigation, “culminating in his untruthful testimony at the
hearing on the motion to dismiss.”

Similarly, in Alzheimer’s

Inst. of Am., Inc., v. Avid Radiopharmaceuticals, No. 10-6908,
2015 WL 1422337, at *3 (E.D. Pa. Mar. 20, 2015), the court
assessed fees on plaintiff because plaintiff asserted that it
was the rightful owner of the patent and brought an infringement
action even though “it knew, when it brought [the] action, that
it was not the legal owner of the patent.”

The court

characterized the conduct there as “rare” and “beyond common

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decency,” while asserting that “[b]ringing this action was more
than a perpetuation of the conspiracy.” Id.
Finally, there is no need to award attorneys’ fees in the
interest of deterrence, compensation, or any other purpose
associated with the “inherently flexible” text of § 285. Octane
Fitness, 134 S. Ct. at 1756.

In finding this case to be

exceptional, this Court had stated that “[w]hile not presenting
‘indicia of extortion,’ the present case presents the type of
conduct of serial filings on a non-defensible patent that should
be deterred.” Garfum, 2016 WL 1242762, at *9.

Upon further

reflection, the Court believes that it overlooked how egregious
the conduct needs to be to award fees under § 285, even after
Octane Fitness.
In particular, courts should encourage litigants to
voluntarily dismiss actions when appropriate, instead of
assessing additional fees on top. See Visto Corp. v. Sproqit
Technologies, Inc., No. 04-0651, 2007 WL 160942, at *2 (N.D. Cal
Jan. 17, 2007) (“If fees are too readily awarded under § 285
when a patentholder extends a covenant not to sue resulting in
dismissal of the case, then such covenants and the beneficial
economies and finality attendant thereto might be unduly
discouraged.”); see also Vocaltag Ltd. v. B.V., No. 13-612, 2016
WL 5395878, at *2 (Sept. 27, 2016)(“Because the purpose of § 285
is to compensate parties forced to defend against unreasonable

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litigation and to deter improper conduct, a good way to think of
the question is this: was the losing party's case so unusually
weak on the merits that it suggests an improper purpose or
demonstrates irresponsible conduct that should be deterred? Or,
is there other evidence, besides substantive weakness on the
merits, that suggests an improper purpose?”).

Courts in non-

patent cases have refused to award fees after a party
voluntarily dismisses a case as well. See de Rothschild v.
Rothschild, No. 12-3884, 2013 WL 12125761, at *9 (C.D. Cal. Aug.
8, 2013)(declining to find plaintiff’s conduct to be exceptional
in a trademark matter and noting that “plaintiffs should be
encouraged voluntarily to dismiss cases, not punished”); Johnson
v. Bemis Co., Inc., No. 11-563, 2012 WL 3562025, at *1 (E.D.
Wis. Aug. 17, 2012) (refusing to require Plaintiff to pay
attorney’s fees after voluntary dismissing her ERISA action,
noting that “[t]his is the kind of thing that courts seek to
encourage” because “[a]warding fees after a voluntary dismissal
(with prejudice) would reduce any incentive for dismissals and
would instead encourage litigants to prolong matters and
increase costs”).
As a result, under the totality of the circumstances,
Plaintiff’s case was not “exceptional” under § 285.

In light of

the unsettled legal landscape regarding patentability under §
101 after Alice, coupled with the PTO’s allowance of nearly

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identical claims, “[t]his is one of the rare instances where
reconsideration is appropriate.” In Re Lord Abbett Mut. Funds
Fee Litig., 417 F. Supp. 2d 624, 630 (D.N.J. 2005).

The Order

entered on March 30, 2016 will be vacated and modified in
accordance with this decision.
V.

Conclusion
An accompanying Order will be entered.

December 16, 2016
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

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