OPTOLUM INC. v. CREE INC.

Filing 384

MEMORANDUM OPINION AND ORDER that Defendant's Motion for Attorneys' Fees, (Doc. 368 ), is DENIED. Signed by JUDGE WILLIAM L. OSTEEN, JR on 08/19/2022. (Taylor, Abby)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
OPTOLUM, INC.
Plaintiff,
v.
CREE, INC.,
Defendant.

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1:17CV687

MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Before this court is a Motion for Attorneys’ Fees filed by
Defendant Cree, Inc. (Doc. 368.) For the reasons that follow,
this court will deny Defendant’s motion.
I.

BACKGROUND
After a jury returned a verdict in favor of Defendant, (see

Docs. 342, 367), Defendant moved for attorneys’ fees,
(Doc. 368), and filed a brief in support, (Def.’s Br. in Supp.
of its Mot. for Attorneys’ Fees (“Def.’s Br.”) (Doc. 369)).
Plaintiff OptoLum, Inc. responded in opposition, (Pl.’s Opp’n to
Def.’s Mot. for Attorneys’ Fees (“Pl.’s Br.”) (Doc. 373)), and
Defendant replied, (Doc. 374).
Defendant argues that this is an exceptional case
warranting attorneys’ fees because Plaintiff “pursued legal

theories regarding brand value and willfulness having no basis
in law or fact.” (Def.’s Br. (Doc. 369) at 3.)
II.

STANDARD OF REVIEW
Under the Patent Act, “[t]he court in exceptional cases may

award reasonable attorney fees to the prevailing party.” 35
U.S.C. § 285. “[A]n ‘exceptional’ case is simply one that stands
out from others with respect to the substantive strength of a
party’s litigating positions (considering both the governing law
and the facts of the case) or the unreasonable manner in which
the case was litigated.” Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 572 U.S. 545, 554 (2014). The Supreme Court in
Octane Fitness overruled the Federal Circuit’s previous test for
when to award attorneys’ fees, which required finding “that the
litigation was both ‘brought in subjective bad faith’ and
‘objectively baseless’” because that test was “overly rigid.”
Id. (quoting Brooks Furniture Mfg., Inc. v. Dutailier Int’l,
Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005)). The Octane Fitness
court explained that “a case presenting either subjective bad
faith or exceptionally meritless claims may sufficiently set
itself apart from mine-run cases to warrant a fee award.” Id. at
555 (emphasis added).
“[A] ‘nonexclusive list’ of ‘factors’” a court could
consider in determining whether to award fees “includ[es]
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‘frivolousness, motivation, objective unreasonableness (both in
the factual and legal components of the case) and the need in
particular circumstances to advance considerations of
compensation and deterrence.” Id. at 554 n.6 (quoting Fogerty v.
Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). “There is no
precise rule or formula for making these determinations, but
instead equitable discretion should be exercised in light of the
considerations . . . identified.” Fogerty, 510 U.S. at 534
(internal quotation marks omitted) (quoting Hensley v.
Eckerhart, 461 U.S. 424, 436–37 (1983)). The prevailing party
must establish entitlement to attorneys’ fees by a preponderance
of the evidence. Octane Fitness, 572 U.S. at 557–58.
III. ANALYSIS
Neither party disputes that Defendant is the prevailing
party in this case. (Compare Def.’s Br. (Doc. 369) at 15, with
Pl.’s Br. (Doc. 373) at 1.) What the parties do dispute is
whether this is an “exceptional case[]” such that this court
should award Defendant “reasonable attorney fees.” § 285.
“[A] central aim of § 285 . . . is to prevent an alleged
infringer from suffering a ‘gross injustice.’” Kilopass Tech.,
Inc. v. Sidense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013). The
aim is not to punish a plaintiff for bringing claims, but “to

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compensate a defendant for attorneys’ fees it should not have
been forced to incur.” Id.
Defendant argues Plaintiff asserted objectively
unreasonable theories related to brand value and willfulness.
(Def.’s Br. (Doc. 369) at 16.) Regarding brand value, Defendant
argues Plaintiff’s brand value allegations “were based on . . .
assertions that Cree misled consumers and thus misappropriated
reputation or brand value that otherwise belonged to OptoLum,”
and “[t]hose claims were dismissed as a matter of law.” (Id.)
Essentially, Defendant argues Plaintiff’s brand value
allegations were tied to Plaintiff’s Lanham Act and unjust
enrichment claims which were dismissed at the motion to dismiss
stage, so Plaintiff should not have continued to pursue damages
for brand value after those claims were dismissed. (Id. at 5.)
Defendant points to this court striking portions of Plaintiff’s
expert report concerning an additional five percent royalty for
brand value as further evidence of the unreasonableness of
Plaintiff’s claim. (Id. at 6–9.) Regarding willfulness,
Defendant argues Plaintiff unreasonably maintained its willful
infringement claim “[d]espite lacking any basis to support
willful infringement.” (Id. at 18.) According to Defendant,
because the only evidence offered that could potentially suggest
willful infringement was testimony that the inventor of
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Plaintiff’s asserted patents may have mentioned he had a patent
to one of Cree’s founders, it was unreasonable for Plaintiff to
pursue a willful infringement claim. (Id. at 12.)
Plaintiff, on the other hand, contends its introduction of
brand value evidence and willfulness evidence was not
unreasonable. (Pl.’s Br. (Doc. 373) at 10–14.) Regarding brand
value, Plaintiff argues that the Lanham Act and unjust
enrichment claims were related to allegations of “false
statements in Cree’s advertising campaigns,” whereas the
“evidence concerning Cree’s desire to use the accused products
to build its brand and the effect of that strategy on Cree’s
state of mind” were related to the hypothetical negotiation
analysis conducted to determine a reasonable royalty. ( Id. at
10–11.) Regarding willfulness, Plaintiff argues the fact that
Defendant did not move to dismiss or for summary judgment on
Plaintiff’s willful infringement claim supports Plaintiff’s
argument that its claim was not unreasonable. (Id. at 13.)
A.

Brand Value

Plaintiff’s First Amended Complaint brought a claim for a
violation of Section 43(a) of the Lanham Act for false
advertising and an unjust enrichment claim. (Compl. (Doc. 32)
¶¶ 171–97.) Those claims were dismissed at the motion to dismiss
stage. (Doc. 49 at 9, 13.) Plaintiff maintained, including
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during trial, that under a reasonable royalty analysis, it was
entitled to damages for the alleged increase in value to
Defendant’s brand value due to its use of Plaintiff’s patents.
(See, e.g., Doc. 377 at 207–13.)
Upon a showing of infringement, a patentee is entitled to
“damages adequate to compensate for the infringement, but in no
event less than a reasonable royalty for the use made of the
invention by the infringer.” 35 U.S.C. § 284. “A ‘reasonable
royalty’ derives from a hypothetical negotiation between the
patentee and the infringer when the infringement began. A
comprehensive . . . list of relevant factors for a reasonable
royalty calculation appears in Georgia-Pacific Corp. v. United
States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).”
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 868–69 (Fed.
Cir. 2010).
In considering Georgia-Pacific factor eleven, the extent to
which the infringer has made use of the invention and any
evidence probative of the value of that use, Plaintiff’s damages
expert, William Scally, opined that the technology enabled Cree
to build its brand, which would have put increased pressure on
the hypothetically negotiated royalty rate. (See Doc. 299 at 61–
62.) He concluded that a five percent rate represented the

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increased value of the Asserted Patents on building Cree’s
brand. (Id. at 62.)
This court granted Cree’s motion to exclude as to that
portion of Scally’s opinion. (See Doc. 315 at 2.) This court
found that Scally had not sufficiently tied his methodology to
the facts of this case to be able to testify about incremental
value to a reasonable royalty. (See id.) Although this court did
exclude that portion of Scally’s opinion, brand value remained
relevant to other Georgia-Pacific factors, and according to
Scally, brand value reflected Defendant’s frame of mind
regarding what royalty rate they would have paid to use the
Asserted Patents. (E.g., Doc. 378 at 60.)
That this court excluded a portion of Plaintiff’s damages
expert’s opinion does not mean Defendant is entitled to
attorneys’ fees. “[A] finding of exceptionality requires more
than the mere fact that a party’s arguments were unsuccessful;
that this Court ruled against the plaintiffs on [portions of
their expert’s opinion] . . . is not sufficient by itself to
merit an award of attorney’s fees.” Duke Univ. v. Sandoz, Inc.,
1:14-CV-1034, 2016 WL 11540567, at *1 (M.D.N.C. Feb. 10, 2016)
(citing Gaymar Indus., Inc. v. Cincinnati Sub-Zero Prods., Inc.,
790 F.3d 1369, 1373 (Fed. Cir. 2015) (“[F]ees are not awarded
solely because one party’s position did not prevail.”)); Raylon,
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LLC v. Complus Data Innovations, Inc., 700 F.3d 1361, 1368 (Fed.
Cir. 2012) (“Reasonable minds can differ as to claim
construction positions and losing constructions can n evertheless
be nonfrivolous.”).
Here, Plaintiff did not litigate its incremental brand
value theory in an unreasonable or vexatious manner. See SFA
Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1349 (Fed. Cir. 2015)
(“[U]nder Octane Fitness, the district court must consider
whether the case was litigated in an unreasonable manner as part
of its exceptional case determination, and . . . district courts
can turn to our pre-Octane Fitness case law for guidance.”). Nor
did Plaintiff engage in misconduct or misrepresentations to any
degree sufficient to find this case exceptional. Cf. MarcTec,
LLC v. Johnson & Johnson, 664 F.3d 907, 919-20 (Fed. Cir. 2012)
(“MarcTec engaged in litigation misconduct when it:
(1) misrepresented both the law of claim construction and th e
constructions ultimately adopted by the court; and
(2) introduced and relied on expert testimony that failed to
meet even minimal standards of reliability, thereby prolonging
the litigation and the expenses attendant thereto.”). Finally,
while Plaintiff’s incremental brand value theory was weak, it
was not frivolous. See Octane Fitness, 572 U.S. at 554 n.6; see
also GoDaddy.com LLC v. RPost Commc’ns Ltd., No. CV-14-00126- 8 -

PHX-JAT, 2016 WL 4569122, at *8 (D. Az. Sept. 1, 2016) (finding
the exclusion of a damages expert’s “report falls within the
realm of ‘most cases’ that do not ‘trigger a finding of
litigation misconduct’” (quoting MarcTec, 664 F.3d at 920)). Had
Scally tied a five percent “increase in brand value” to the
relevant facts and data, his opinion on Georgia-Pacific factor
eleven very well may not have been excluded.
Additionally, this court notes that it is not exceptional
for portions of an expert’s report to be excluded. In fact,
portions of Defendant’s infringement expert’s opinion were also
excluded. (See Doc. 315 at 4–10.) Thus, the fact that portions
of Plaintiff’s expert’s opinion were excluded does not “stand[]
out from other[]” cases because Defendant faced the same issue.
See Octane Fitness, 572 U.S. at 554.
Finally, contrary to Defendant’s contention that brand
value was related to Plaintiff’s Lanham Act and unjust
enrichment claims, this court finds, for the reasons discussed
above, that even if brand value was relevant to those claims, it
was also relevant to Plaintiff’s damages theory of a reasonable
royalty.
The totality of circumstances does not reflect Defendant
suffered “a ‘gross injustice.’” Kilopass Tech., 738 F.3d at
1313. This court is not satisfied by a preponderance of the
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evidence that Plaintiff’s conduct regarding incremental brand
value was exceptional. Defendant’s motion for attorneys’ fees
will be denied as to brand value.
B.

Willful Infringement
Plaintiff’s willful infringement claim was dismissed at the

close of Plaintiff’s case-in-chief. (See Oral Order 11/03/2021;
Doc. 323.) Defendant argues that “[d]espite wielding its
assertion of willful infringement as a basis for extensive
discovery and trial testimony, OptoLum never articulated any
facts that would even remotely rise to willful infringement
under the law.” (Def.’s Br. (Doc. 369) at 17–18.)
“Willful infringement is a question of fact.” Bayer
Healthcare LLC v. Baxalta Inc., 989 F.3d 964, 987 (Fed. Cir.
2021). “To establish willfulness, the patentee must show the
accused infringer had a specific intent to infringe at the time
of the challenged conduct.” Id. (citing Halo Elecs., Inc. v.
Pulse Elecs., Inc., 579 U.S. 93 (2016)). “As the Supreme Court
stated in Halo, ‘[t]he sort of conduct warranting enhanced
damages has been variously described in our cases as willful,
wanton, malicious, bad-faith, deliberate, consciously wrongful,
flagrant, or—indeed—characteristic of a pirate.’” Id. (quoting
Halo Elecs., 579 U.S. at 103–04). However, “the concept of
‘willfulness’ requires a jury to find no more than deliberate or
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intentional infringement.” Eko Brands, LLC v. Adrian Rivera
Maynez Enters., Inc., 946 F.3d 1367, 1378 (Fed. Cir. 2020). In
short, willful infringement requires that the defendant (1) know
of the asserted patents; and (2) know that the defendant’s
actions constitute infringement. See Bench Walk Lighting LLC v.
LG Innotek Co., 530 F. Supp. 3d 468, 491 (D. Del. 2021).
This court finds Plaintiff was motivated by a genuine
belief that Defendant had knowledge of the Asserted Patents.
This is evidenced by testimony from OptoLum’s founder, Joel Dry,
who testified that he had spoken at a conference that Cree
executives attended, but when pressed on cross-examination, was
not certain he would have mentioned the Asserted Patents by name
such that Cree would have had notice. (See Doc. 375 at 55–58,
116.) Although this court found, in granting Defendant’s motion
for judgment as a matter of law on willful infringement, that
OptoLum presented no evidence that anyone at Cree was aware of
the asserted patents at the time of the creation of the accused
products, (see Doc. 345 at 7), that does not negate Plaintiff’s
good faith belief it did have some evidence.
Moreover, the cases cited by Defendant do not persuade this
court that Plaintiff acted objectively unreasonably in pursuing
willful infringement at trial. In Finjan, Inc. v. Juniper
Network, Inc., the plaintiff continued pursuing claims that were
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unwinnable after claim construction and summary judgment. See
No. C 17-05659 WHA, 2021 WL 75735, at *2 (N.D. Cal. Jan. 9,
2021) (reasoning that “Finjan should have dropped the ‘780
patent after that first round patent showdown, which granted
Juniper summary judgment of noninfringement on claim 1 on the
construction of the phrase ‘performing a hashing function[,]’
[but] [u]ndeterred, Finjan kept the ‘substantially
overlap[ping]’ claim 9, which included the same ‘performing a
hashing function’ limitation”). Unlike in Finjan, where the
plaintiff had an adverse ruling on a substantially identical
issue already litigated to guide its litigation strategy, no
such adverse ruling existed regarding willful infringement. As
pointed out by Plaintiff, Defendant never moved to dismiss or
for summary judgment on Plaintiff’s willful infringement claim.
The other case cited by Defendant is equally unpersuasive.
In that case, the court found the plaintiff had engaged in
litigation misconduct during the trial. See Medtronic
Navigation, Inc. v. BrainLAB Medizinische Computersystems Gmbh,
Civil Action No. 98–cv–01072–RPM, 2008 WL 410413, at *6 (D. Col.
Feb. 12, 2008). This court has made no such finding regarding
Plaintiff’s conduct at trial. Even assuming, as Defendant
argues, that Plaintiff had an obligation to continually
reevaluate the merits of its claim during the course of this
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litigation, this court cannot find that Plaintiff had any notice
from this court’s prior rulings that Plaintiff had no basis in
law or in fact to pursue its willful infringement claim.
Therefore, this court will deny Defendant’s motion for
attorneys’ fees as to willful infringement.
In conclusion, Defendant has failed to show by a
preponderance of the evidence that Plaintiff’s theories on brand
value and willful infringement were frivolous or objectively
unreasonable. Therefore, this court will deny Defendant’s motion
for attorneys’ fees.
IV.

CONCLUSION
For the foregoing reasons, this court will deny Defendant’s

Motion for Attorneys’ Fees, (Doc. 368).
IT IS THEREFORE ORDERED that Defendant’s Motion for
Attorneys’ Fees, (Doc. 368), is DENIED.
This the 19th day of August, 2022.

__________________________________
United States District Judge

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