Lumen View Technology LLC v. Findthebest.com, Inc

Filing 83

OPINION & ORDER. FTB's December 10, 2013 Motion for Declaration of Exceptional Case and Award of Fees and Nontaxable Expenses is granted. An Order will follow with a schedule for briefing with respect to the amount of fees and expenses to be awarded. (Signed by Judge Denise L. Cote on 5/30/2014) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
Lumen View Technology, LLC,
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:
Plaintiff,
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:
-v:
:
Findthebest.com, Inc.,
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:
Defendant.
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:
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13 CIV. 3599 (DLC)
OPINION & ORDER

APPERANCES
For the plaintiff:
Damian Wasserbauer
Aeton Law Partners, LLP
101 Centerpoint Drive, Suite 105
Middletown, CT 06457
For the defendant:
Joseph Leventhal
Leventhal Law, LLP
600 West Broadway, Suite 700
San Diego, CA 92101
DENISE COTE, District Judge:
Findthebest.com, Inc. (“FTB”) moves for award of attorneys’
fees and other expenses from Lumen View Technology, LLC (“Lumen
View”), on the ground that this case is exceptional under 35
U.S.C. § 285 (“Section 285”).
exceptional case.

This is a prototypical

FTB’s motion is granted.

BACKGROUND
FTB is a corporation that operates a website which matches
users with goods or services according to criteria that the
users enter, at times using FTB’s proprietary “AssistMe”
program.

Lumen is a patent holding “Non Practicing Entity” that

acquires patents and instigates patent infringement lawsuits.
Lumen appears to be a shell company that is one of a number of
related companies involved in litigating patent infringement
suits.

This motion arises out of a lawsuit brought by Lumen

against FTB alleging infringement of United States Patent No.
8,069,073 (“′073 Patent”).

I. The ‘073 Patent
Lumen became the exclusive licensee of ‘073 Patent on March
1, 2012, which was approximately a week after Lumen was formed.
The ‘073 Patent was issued on November 29, 2011, and is entitled
a “System and Method For Facilitating Bilateral And Multilateral
Decision-Making.”

The single independent claim of the ′073

Patent states in full:
We claim: A computer-implemented method for
facilitating evaluation, in connection with the
procurement or delivery of products or services, in
a context of at least one of (i) a financial
transaction and (ii) operation of an enterprise,
such context involving a first class of parties in a
first role and a second class of counterparties in a
second role, the method comprising:

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In a first computer process, retrieving first
preference data from a first digital storage medium,
the first preference data including attribute levels
derived from choices made by at least one of the
parties in the first class;
In a second computer process, retrieving second
preference data from a second digital storage
medium, the second preference data including
attribute levels derived from choices made by at
least one of the counterparties in the second class;
In a third computer process, for a selected party,
performing multilateral analyses of the selected
party's preference data and the preference data of
each of the counterparties, and computing a
closeness-of-fit value based thereon; and
In a fourth computer process, using the computed
closeness-of-fit values to derive and provide a list
matching the selected party and at least one of the
counterparties.
The “summary of the invention” provision of the ‘073 Patent
elaborates that:
The method involves supplying to at least one of the
parties a series of forced choice questions so as to
elicit party responses; supplying to at least one of
the counterparties a series of forced choice
questions so as to elicit counterparty responses;
and delivering a list matching the at least one
party and the at least one counterparty according to
analysis of preference profiles determined using
conjoint analysis of the party responses and the
counterparty responses. In alternative embodiments
the list may be ranked according to closeness of
fit.
In sum, the purported invention disclosed by the ‘073
Patent is a method of matchmaking whereby one or more parties on
each side input attribute preferences and intensity of
preference data and then a computer matches the parties on each

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side by a “closeness-of-fit” process and produces a list.

On

November 22, 2013, this Court held that the ‘073 Patent claimed
an abstract idea, which was patent ineligible subject matter
under the codified Patent Act, 35 U.S.C. § 101.

Lumen View

Tech. LLC v. Findthebest.com, Inc., 13 CIV. 3599 (DLC), 2013 WL
6164341, at *16 (S.D.N.Y. Nov. 22, 2013).

II.

Prosecution History of Lumen’s Lawsuit Against FTB

Lumen filed its complaint (the “Complaint”) against FTB on
May 29, 2013, alleging that FTB infringed the ‘073 Patent.

The

Complaint was one of at least twenty substantially similar
patent infringement complaints filed by Lumen against various
companies in 2012 and 2013.

The Complaint against FTB alleges a

single claim of infringement of the ‘073 Patent’s independent
claim, and consists of conclusory allegations that mirror the
language of the ‘073 Patent.

The Complaint alleges that FTB had

infringed and continues to infringe one or more claims
of the '073 Patent by making, using, providing,
offering to sell, and selling (directly or through
intermediaries), in this district and elsewhere in the
United States, a computer implemented method for
facilitating evaluation, in connection with the
procurement or delivery of products or services, in a
context of at least one of a financial transaction and
operation of an enterprise, such context involving a
first class of parties in a first role and a second
class of counterparties in a second role.
Specifically, Lumen alleges in the Complaint that FTB’s
website’s “AssistMe” feature utilizes a computer implemented

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method to match the preference data inputted by at least two
parties who input preference data into the website:
The Defendant Website retrieves first preference data
from a digital storage medium, the first preference
data received from the individual(s) registering on
and/or using the Defendant Website, and assigns
attribute levels based on the choices made by the
individuals (first class of parties). The Defendant
Website retrieves the second preference data from a
digital storage medium, the second preference data
received from the individuals registering on and/or
using the Defendant Website, and assigns attribute
levels based on the choices made by the individuals
(counterparties).
(emphasis added).

Despite these allegations, it is undisputed

that FTB’s website does not match preference data inputted on
its website by multiple parties.1
On May 30, Lumen sent a demand letter to FTB, and enclosed
the Complaint.

Lumen alleged that FTB’s website “meets one or

more claims of the ‘073 Patent.”

Lumen invited FTB to “discuss

license terms” if FTB wanted to “avoid[] the need for filing
responsive pleadings.”

Lumen’s letter contained a number of

threats suggesting that expensive litigation would follow if FTB
did not quickly agree to a settlement.

Lumen stated that

“[w]hile it is Plaintiff’s desire that the parties amicably
resolve this matter, please be advised that Plaintiff is

Lumen’s Preliminary Infringement Contention made a reference to
the ability of users of the FTB website to add, and edit for
accuracy, listings containing factual information about products
and services. But this does not constitute “preference” data.
Lumen does not argue otherwise here.
1

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prepared for full-scale litigation to enforce its rights.

This

includes all motion practice as well as protracted discovery.”
Lumen threatened to increase its settlement demand every time
FTB filed a responsive pleading.

Lumen warned that

[s]hould [FTB] engage in early motion practice,
however, we must advise that it will force us to
reevaluate and likely increase Plaintiff’s settlement
demand. Please be advised that for each
nondispositive motion filed by Company, Plaintiff will
incorporate an escalator into its settlement demand to
cover the costs of its opposition papers and argument.
Lumen also demanded immediate preservation of electronically
stored information (“ESI”) from FTB, which, it contended “should
be afforded the broadest possible definition.”

Lumen advised

FTB that it had an obligation to act to preserve ESI “in areas
you may deem not reasonably accessible.”

Lumen also suggested

that FTB remove and sequester any devices potentially containing
ESI from certain employees.

Lumen stated that it would “not

hesitate to seek sanctions, court costs, or an independent
action for spoliation where appropriate.”
Shortly after the Complaint was filed, FTB’s attorney
contacted Lumen’s attorney.

Lumen’s attorney represented that

Lumen would settle the case for an $85,000 “licensing fee.”
On June 19, FTB CEO Kevin O’Connor and FTB Director of
Operations Danny Seigle telephoned Lumen’s attorney.

Seigle and

O’Connor explained that FTB’s website did not use a bilateral or
multilateral preference matching process.

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Lumen’s attorney

stated that FTB “should trust that [Lumen] had done due
diligence,” but failed to provide any facts supporting the claim
of FTB’s infringement.

Lumen now contends that it “had no

obligation to explain its infringement analysis.”
On June 26, FTB’s attorney sent Lumen’s attorney a letter
recounting the contents of a telephone call of the same day
between the two.

FTB’s attorney explained, inter alia, that

Lumen’s attorney was unable to describe the alleged second class
of preference profiles used in FTB’s “AssistMe” program, and
that FTB consequently could not be infringing the ‘073 Patent.
FTB’s attorney demanded a more specific description of the
alleged infringement.
detail.

Lumen’s attorney declined to provide any

FTB’s attorney advised Lumen’s attorney that Lumen’s

conduct may “result in an ‘exceptional case’ determination under
35 U.S.C. § 285 entitling [his] clients to an award of
attorneys’ fees.”
In “late June or early July” O’Connor telephoned Eileen
Shapiro, one of the inventors of the ‘073 Patent.

Following a

conversation between Shapiro and O’Connor, Lumen’s attorney
represented to FTB’s attorney that O’Connor had committed a hate
crime under Ninth Circuit law by using the term “patent troll.”
FTB’s attorney contends that Lumen’s attorney threatened to
pursue criminal charges unless FTB apologized, financially
compensated Shapiro and Lumen’s attorney, and settled the

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litigation by paying Lumen a licensing fee in connection with
the ‘073 Patent.

FTB’s attorney claims that Lumen’s attorney

stated that the offer was only good until the close of business
that day and that FTB should “act quickly.”
On July 7, the day prior to the due date for the filing of
FTB’s answer, Lumen offered FTB a “one-day only offer” to settle
the litigation for a reduced licensing fee of $55,000.

Lumen

advised that the offer would expire if Lumen filed an answer.
FTB answered the Complaint on July 8.

Lumen did not follow

through with the settlement demand escalator that it had
threatened on May 30 in response to FTB’s responsive pleading.
On August 30, Lumen served on FTB Preliminary Infringement
Contentions (“PICs”), as required by SDNY Local Patent Rule 6.
On September 19, FTB complained to the Court that the PICs were
inadequately detailed and should be stricken or ordered
modified.

Following a telephone conference, the Court denied

FTB’s application on September 24.
On October 11, Lumen filed its claim construction
statement.

Lumen’s proposed claim construction construed the

independent claim of the ‘073 Patent (which Lumen alleged that
FTB infringed) as requiring matching of preference data inputted
by at least two parties.

Lumen’s proposed claim construction

construed, inter alia, the following relevant portion of the
independent claim:

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in a first computer process, retrieving first
preference data from a first digital storage medium,
the first preference data including attribute levels
derived from choices made by at least one of the
parties in the first class;
[2] in a second computer process, retrieving
second preference data from a second digital
storage medium, the second preference data
including attribute levels derived from choices
made by at least one of the counterparties in
the second class
Lumen stated that the term “preference data” should be
construed “in conjunction with its plain and ordinary meaning.”
Lumen stated that “[t]he Court can simply let the ‘plain
meaning’ of [the] term [preference data] speak for itself.”
Lumen’s proposed construction of “preference data” was that “the
term ‘Preference data’ is data generated for each party based on
the party's choices or selections made by the party or counter
party to a set of questions.” (Emphasis added.)

Lumen also

provided in its claim construction brief that “[t]he term
‘first’ modifies ‘preference data’ and . . . first class of
parties in a first role is numerical succession designating a
distinct set . . . .”

Lumen further stated that “the term

‘second’ modifies ‘preference data’ and . . . second class of
counterparties in a second role is numerical succession
designating a distinct set . . . .”
On October 22, Lumen complained to the Court that persons
associated with FTB were disclosing information about the

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litigation and painting Lumen in a bad light.

Lumen moved for a

gag order prohibiting FTB from discussing settlement
negotiations publicly.

Lumen’s application was denied in an

Opinion of November 12.

Lumen View Tech. LLC v.

Findthebest.com, Inc., 13 CIV. 3599 (DLC), 2013 WL 6003734
(S.D.N.Y. Nov. 12, 2013).

Lumen’s patent infringement lawsuit

against FTB was dismissed in an Opinion of November 22, 2013.
Lumen View Tech, 2013 WL 6164341, at *16.
FTB moved for a declaration that this was an “exceptional
case” under Section 285 on December 10.
submitted on January 17, 2014.

The motion was fully

On April 29, the Supreme Court

of the United States issued an opinion in Octane Fitness, LLC v.
ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), which
addressed the definition of an “exceptional” case under Section
285.

The Court gave the parties an opportunity to make

supplemental submissions regarding the significance of the
Octane Fitness decision to this motion.

The parties made those

submissions on May 16.
DISCUSSION
The Patent Act’s fee shifting provision provides that a
“court in exceptional cases may award reasonable attorney fees
to the prevailing party.”

35 U.S.C. § 285.

“[U]nder § 285 the

interest of the patentee in protecting his statutory rights is

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balanced by the interest of the public in confining such rights
to their legal limits.”

Eltech Sys. Corp. v. PPG Indus., Inc.,

903 F.2d 805, 810 (Fed. Cir. 1990).

Recently, in Octane

Fitness, 134 S. Ct. at 1749, the Supreme Court addressed the
definition of an “exceptional” case.
[A]n “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.
District courts may determine whether a case is
“exceptional” in the case-by-case exercise of their
discretion, considering the totality of the
circumstances.
Id. at 1756.
Octane Fitness abrogated the Federal Circuit’s more rigid
test, articulated in Brooks Furniture Mfg., Inc. v. Dutailier
Int'l, Inc., 393 F.3d 1378, 1381-82 (Fed. Cir. 2005).

Under the

Brooks Furniture standard, a case was “exceptional” only upon a
finding of litigation-related misconduct of an independently
sanctionable magnitude, or a determination that the litigation
was both brought in subjective bad faith and objectively
baseless.

Id.

Such a finding had to be made by “clear and

convincing evidence.”

Id. at 1382.

The Octane Fitness Court

articulated a more flexible, totality of the circumstances
inquiry.

It also replaced the “clear and convincing” evidence

standard, with a “preponderance of the evidence” standard.
Octane Fitness, 134 S. Ct. at 1758.

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In directing courts to consider the totality of the
circumstances, the Octane Fitness Court provided guidance as to
the factors to be applied.

The Court pointed to a similar fee

shifting provision of the Copyright Act, 17 U.S.C. § 505, and
explained that under that provision, courts consider a
“nonexclusive” list of factors, including “‘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 (quoting Fogerty v. Fantasy,

Inc., 510 U.S. 517, 534 n.19 (1994)).

This articulation of a

non-exclusive list of factors does not displace other factors
relevant to the inquiry, including “a determination of what prefiling preparation, if any, was done by” the plaintiff.
Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358,
1378 (Fed. Cir. 2001).

If a court finds a case “exceptional,”

it has discretion whether to award attorneys' fees.

Octane

Fitness, 134 S. Ct. at 1756.
This case is “exceptional” under the totality of the
circumstances test articulated in Octane Fitness.

First,

Lumen’s lawsuit against FTB was “frivolous” and “objectively
unreasonable.”

“To be objectively baseless, the infringement

allegations must be such that no reasonable litigant could
reasonably expect success on the merits.”

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Dominant

Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260
(Fed. Cir. 2008) (citation omitted).

No reasonable litigant

could have expected success on the merits in Lumen’s patent
infringement lawsuit against FTB because the ‘073 Patent claimed
a bilateral matchmaking process requiring multiple parties to
input preference information, while FTB’s “AssistMe” feature
utilizes the preference data of only one party.

Lumen’s own

claim construction brief construed the independent claim of the
‘073 Patent as requiring two or more parties to input preference
data.

That submission urged the term “preference data” to be

construed “in conjunction with its plain and ordinary meaning.”
And Lumen’s Complaint alleged that FTB’s infringement was
predicated on the alleged use of bilateral preference matching.
But FTB does not employ bilateral preference matching.
And the most basic pre-suit investigation would have
revealed this fact.2
1378.

See Superior Fireplace Co., 270 F.3d at

FTB’s website contains no opportunity for bilateral

preference matching or any suggestion that it is employed.

And

if there were any confusion on this score -– and Lumen has
provided no basis to find it was confused by the website -Lumen was certainly on notice of this fact from the outset of

Lumen claims to have conducted “weeks” of infringement analysis
with respect to the FTB website, but offers no facts to support
this conclusory claim.
2

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the litigation.

FTB’s Seigle and O’Connor informed Lumen that

FTB’s AssistMe feature did not use the bilateral or multilateral
preference matching process in a telephone conversation of June
19.

And FTB’s attorney again informed Lumen by telephone and by

letter of June 26.

Yet Lumen proceeded with an obviously

baseless lawsuit, failing to point to any specific way in which
FTB infringed the patent.

“Where . . . the patentee is

manifestly unreasonable in assessing infringement, while
continuing to assert infringement in court, an inference is
proper of bad faith, whether grounded in or denominated wrongful
intent, recklessness, or gross negligence.”

Eltech Sys., 903

F.2d at 811.
The “motivation” prong of the Octane Fitness test counsels
as well in favor of a finding of an exceptional case.

Lumen’s

motivation in this litigation was to extract a nuisance
settlement from FTB on the theory that FTB would rather pay an
unjustified license fee than bear the costs of the threatened
expensive litigation.

Lumen never sought to enjoin FTB from the

allegedly infringing conduct in its prayer for relief.

Lumen’s

threats of “full-scale litigation,” “protracted discovery,” and
a settlement demand escalator should FTB file responsive papers,
were aimed at convincing FTB that a pay-off was the lesser
injustice.

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The “deterrence” prong of the Octane Fitness test also
weighs in favor of an exceptional case finding.

The boilerplate

nature of Lumen’s complaint, the absence of any reasonable presuit investigation, and the number of substantially similar
lawsuits filed within a short time frame, suggests that Lumen’s
instigation of baseless litigation is not isolated to this
instance, but is instead part of a predatory strategy aimed at
reaping financial advantage from the inability or unwillingness
of defendants to engage in litigation against even frivolous
patent lawsuits.

The need “to advance considerations of . . .

deterrence” of this type of litigation behavior is evident.
Octane Fitness, 134 S. Ct. at 1756 n.6 (quoting Fogerty, 510
U.S. at 534 n.19).3
Lumen contends that the abbreviated nature of this
litigation provides an inadequate record to find that the case
is exceptional.

Lumen points specifically to the lack of a

claim construction opinion by the Court, and contends that there
is not sufficient evidence to find that its infringement claim
against FTB was unreasonable.

This argument is unavailing.

FTB also contends that Lumen’s “offensive litigation tactics”
provide an additional reason to find that this is an exceptional
case. FTB points to Lumen’s threat of prosecution of FTB for
allegedly using the term “patent troll,” Lumen’s attempt to
obtain a gag order, and Lumen’s (or those people behind Lumen’s)
use of a number of shell entities to avoid complying with
discovery requests. Because this case is “exceptional” even
absent these considerations, it is unnecessary to address their
merits.
3

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There is no question that FTB does not employ the matching of
multiple parties’ preference data.

And Lumen’s own claim

construction brief construes the ‘073 Patent’s independent claim
as requiring the input of multiple parties’ preference data.
(Indeed, the ‘073 Patent is entitled “System and Method for
Facilitating Bilateral and Multilateral Decision-Making.”).
Even under Lumen’s proffered claim construction, no reasonable
litigant could have expected success on the merits.

The fact

that the Court adopted a schedule to reach the merits as
expeditiously as was reasonable and to avoid imposing additional
litigation costs on the parties does not counsel against a
finding that this is an exceptional case.
Lumen also asserts that FTB’s request for fees is
“ultimately based upon the Court’s recent determination of
invalidity under Section 101 [of the ‘073 Patent].”

Lumen

contends that it was entitled to rely on a duly issued patent.
The invalidity of the ‘073 Patent plays no role in the reasoning
underlying this Opinion.

The question addressed here is whether

Lumen could properly assert infringement based on the ‘073
Patent.

As such, Lumen’s objection is misplaced.

Having found this case to be exceptional, this Court
exercises its discretion to award attorneys’ fees and costs to
FTB.

The question of whether this cased is exceptional is not

close, and fee shifting in this case will “serve as an

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instrument of justice.”

Superior Fireplace Co., 270 F.3d at

1378 (citation omitted).

CONCLUSION
FTB’s December 10, 2013 Motion for Declaration of
Exceptional Case and Award of Fees and Nontaxable Expenses is
granted.

An Order will follow with a schedule for briefing with

respect to the amount of fees and expenses to be awarded.

SO ORDERED:
Dated:

New York, New York
May 30, 2014
__________________________________
DENISE COTE
United States District Judge

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