DietGoal Innovations LLC v. Chipotle Mexican Grill, Inc.

Filing 146

MEMORANDUM OPINION AND ORDER. Signed by Judge William C. Bryson on 03/20/2015. (nkl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION

DIETGOAL INNOVATIONS LLC,

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Plaintiff,
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v.
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CHIPOTLE MEXICAN GRILL, INC.,
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Defendant.
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______________________________________ §

CIVIL ACTION NO.
2:12-cv-00764-WCB

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Red Robin International, Inc.’s Motion Requesting that
this Case Be Found Exceptional Under 35 U.S.C. § 285 and for Award of Attorney’s Fees and
Costs, Dkt. No. 103. The motion is DENIED.
Section 285 of the Patent Act, 35 U.S.C. § 285, provides that “[t]he court in exceptional
cases may award reasonable attorney fees to the prevailing party.” The Supreme Court recently
clarified the scope of section 285, holding that an “exceptional” case is “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.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014).
The Court added that district courts “may determine whether a case is ‘exceptional’ in the caseby-case exercise of their discretion, considering the totality of the circumstances.” Id. While no
single element is dispositive of the question, “predominant factors to be considered, though not

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exclusive, are those identified in Brooks Furniture [Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d
1378 (Fed. Cir. 2005)]: bad faith litigation, objectively unreasonable positions, inequitable
conduct before the PTO, litigation misconduct, and (in the case of an accused infringer) willful
infringement.” Stragent, LLC v. Intel Corp., No. 6:11-CV-421, 2014 WL 6756304, at *3 (E.D.
Tex. Aug. 6, 2014) (Dyk, J.); see also Octane, 134 S. Ct. at 1756 n.6 (“[I]n determining whether
to award fees under a similar provision in the Copyright Act, district courts could 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.’”), quoting Fogerty v. Fantasy, Inc., 510
U.S. 517, 535 n.19 (1994). Ultimately, a party’s entitlement to attorney fees need only be proved
by a preponderance of the evidence. Octane, 134 S. Ct. at 1758.
Red Robin argues that this case should be found exceptional under section 285 for
multiple reasons. Red Robin accuses DietGoal of asserting a “clearly invalid” patent, litigating
an infringement position that Red Robin claims the court expressly forbade, and asserting a
baseless damages theory.
I.

The Validity of DietGoal’s Patent

Red Robin’s first argument is that the ’516 patent is clearly invalid in light of Mayo
Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), and Alice Corp.
Pty. v. CLS Bank International, 134 S. Ct. 2347 (2014). Based on this observation, Red Robin
claims that DietGoal advanced a meritless section 101 argument, warranting a finding that this is
an exceptional case within the meaning of section 285.

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Red Robin is correct that, in a related case, DietGoal Innovations LLC v. Bravo Media
LLC, 33 F. Supp. 3d 271 (S.D.N.Y. 2014), the United States District Court for the Southern
District of New York held that the ’516 patent was drawn to unpatentable subject matter and
therefore held the patent invalid under 35 U.S.C. § 101. Judgment in this case was entered based
on the collateral estoppel effect of the decision in the New York case. See Dkt. No. 95. But it
does not necessarily follow that the invalidation of the ’516 patent warrants an “exceptional
case” finding.
The fact that a party’s position does not prevail—or would not have prevailed if it had
been litigated to conclusion—is insufficient by itself to warrant an award of fees. See Octane,
134 S. Ct. at 1753 (fees are not “a penalty for failure to win a patent infringement suit,” but are
appropriate only “in extraordinary circumstances”); IP Innovation L.L.C. v. Red Hat, Inc., No.
2:07–cv–447 (E.D. Tex. Oct. 13, 2010), ECF No. 273, at 2. (Rader, J.) (“An award of attorneys’
fees . . . must be predicated upon something beyond the fact that a party has prevailed.”). Red
Robin must show that DietGoal’s positions (individually or taken as a whole) were frivolous or
objectively baseless.
Red Robin faces multiple obstacles in making such an argument as to the ’516 patent’s
invalidity.

First, the ’516 patent was entitled to a presumption of validity, see 35 U.S.C.

§ 282(a), and Red Robin makes no argument that directly undercuts this presumption. Second,
to the extent Red Robin relies on Judge Engelmayer’s statements in the Bravo case that the
claims of the ’516 patent are similar to those invalidated in Gottschalk v. Benson, 409 U.S. 63
(1972), and Parker v. Flook, 437 U.S. 584 (1978), in support of its contention that the ’516
patent was obviously invalid, the fact that the ’516 patent issued well after those decisions came

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down is prima facie evidence against such a position. So Red Robin must be arguing that a later
decision was so clear that it was objectively unreasonable for DietGoal to continue in its belief
that the ’516 patent was valid.
Pointing to Judge Engelmayer’s analysis in Bravo, Red Robin appears to argue that Mayo
is the clear case that shows the invalidity of the ’516 patent. The Court, however, is not
persuaded that DietGoal’s arguments in support of the validity of the ’516 patent were wholly
frivolous, particularly in light of the presumption of validity. While a sea change in patent law
could occur that might require patent holders to reevaluate the validity of their portfolios, none of
the cases on which Red Robin relies—Bilski v. Kappos, 561 U.S. 593 (2010), Mayo, or Alice—
can be characterized as such a tide-reversing case. Absent a case presenting such a clear
inflection point, the presumption of validity creates a high bar against arguing that assertion of a
properly issued patent merits an award of fees that Red Robin’s arguments simply cannot
overcome.
Significantly, the Supreme Court decided the Alice case on June 19, 2014, after this
action had been stayed pending the disposition of the parties’ summary judgment motions and
after almost all of the briefing on those motions had been completed. Therefore, in judging the
reasonableness of DietGoal’s position with respect to the section 101 issue, it is necessary to take
into consideration that throughout most of the time preceding the grant of judgment against
DietGoal on collateral estoppel grounds, DietGoal did not have the benefit of the Supreme
Court’s decision in Alice. Instead, during the time this case was being litigated, up to the
motions for summary judgment and the responses to those motions, the most recent word on
section 101 was in the form of the opinions of the closely divided en banc Federal Circuit in the

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Alice case. See CLS Bank Int’l v. Alice Corp. Pty., 717 F.3d 1269 (Fed. Cir. 2013) (en banc).
DietGoal’s decision to continue defending the validity of its patent after the Federal Circuit’s
decision in Alice, and while the Alice case was pending before the Supreme Court, cannot be
said to have been so unreasonable to render this case “exceptional.”
II.

DietGoal’s “Rejected” Infringement Theory

Red Robin’s second argument is that DietGoal’s infringement theory was wholly
foreclosed by the Court’s claim construction order. In construing the term “customized eating
goals,” the parties disputed what role mental processes played in the invention. Ultimately, the
Court rejected the parties’ proposals and adopted its own construction. Case No. 2:12-cv-761,
Dkt. No. 308, at 18-21. The Court construed the term “customized eating goals” to mean
“computer implemented user-specific dietary goals.”

The Court rejected the defendants’

argument that the dietary goals were required to be “stored” in a computer. It also rejected
DietGoal’s interpretation because that interpretation “encompassed mental processes that are
solely within a user’s mind.”
Red Robin reads that language from the Court’s claim construction order to specifically
reject DietGoal’s infringement theory and to foreclose any infringement theory that involves
mental processes.

The Court does not read the same language as broadly as Red Robin

advocates. Red Robin’s argument is the same one that the Court considered in ruling on Red
Robin’s Rule 11 Motion, Dkt. No. 96, and the Court reaches the same conclusion in deciding this
motion under section 285. While the Court is skeptical that DietGoal’s interpretation of the
Court’s claim construction order is correct, the Court is not prepared to say that DietGoal’s
infringement position was wholly frivolous.

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III.

DietGoal’s Damages Theory

Red Robin next points to DietGoal’s theory of damages, and contends that the flaws in
that theory justify an award of attorney fees. Red Robin argues that DietGoal’s expert’s theory
had myriad problems resulting in an unusually unreliable opinion. Red Robin cites no authority
that predicates an “exceptional case” finding on the quality of a plaintiff’s damages theory.
However, the Court will consider Red Robin’s arguments regarding DietGoal’s damages theory
as part of the totality of the circumstances bearing on the “exceptional case” determination, as
dictated by the Supreme Court in Octane Fitness.
Red Robin begins with an objection to the formula DietGoal’s expert used to calculate
the proper amount of the damages award. But Red Robin makes only perfunctory arguments as
to the formula itself. The objection appears to arise from the fact that “every single [settling]
party settled for well below the cost of the litigation.” Red Robin argues that the expert’s
reliance on such “below cost” settlements leads to absurd results and render the expert’s opinion
as to the proper damages in this case unreliable.
Licenses are not per se unreliable simply because they arose out of litigation.
ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872 (Fed. Cir. 2010); In re MSTG, Inc., 675
F.3d 1337, 1348 (Fed. Cir. 2012); Sentius Int’l, LLC v. Microsoft Corp., No. 5:13-cv-825, 2015
WL 451950, at *3 & n.24 (N.D. Cal., Jan. 27, 2015); CPNE Corp, v. Apple, Inc., No. 5:12-cv2885, 2014 WL 1494247, at *9-10 (N.D. Cal. Apr. 16, 2014); Dynasty Design Solutions, Inc. v.
Synopsis, Inc., No. 5:11-cv-5973, 2013 WL 4537838, at *7 (N.D. Cal. Aug. 22, 2013). This fact
directly contradicts Red Robin’s argument that “past settlements provide absolutely no reliable
information about the expected damages for any particular party.” The evidentiary value of a

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particular license in a particular case may depend on multiple contextual factors, but the fact that
“every single party settled for well below the cost of litigation” does not automatically discredit
DietGoal’s expert’s opinion.
Red Robin’s second objection to DietGoal’s damages theory is that DietGoal’s expert did
not sufficiently connect the previous settlements with this case. Ordinarily, the question whether
an expert’s ultimate damages determination was sufficiently supported by the cited data goes to
the weight of the expert’s opinion, not its admissibility. i4i Ltd. P'ship v. Microsoft Corp., 598
F.3d 831, 856 (Fed. Cir. 2010) (“While the data were certainly imperfect, and more (or different)
data might have resulted in a ‘better’ or more ‘accurate’ estimate in the absolute sense, it is not
the district court's role under Daubert to evaluate the correctness of facts underlying an expert's
testimony. Questions about what facts are most relevant or reliable to calculating a reasonable
royalty are for the jury.”) (citation omitted). In order to have the expert’s evidence excluded at
trial, Red Robin would need to show that the connection between the data and the expert’s
opinion was too tenuous to allow it to be considered by the finder of fact.
To be sure, the way the expert related the settlement evidence to his ultimate conclusions
raises serious questions, such as the expert’s use of only the highest and lowest settlement
amounts rather than median or average amounts. In addition, the expert’s report does not explain
in any detail why the previous settlements are applicable to Red Robin’s case, other than that
they are settlements with a number of defendants accused of infringing the ’516 patent. Those
concerns and others may have formed a basis on which Red Robin could have moved to have the
expert’s evidence excluded from trial. But even if the expert’s evidence were excluded, that
would not necessarily render this case exceptional. It is not unusual for evidence set forth in an

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expert’s report to be limited or excluded altogether by the Court, but cases in which evidence is
restricted or struck do not thereby become exceptional cases in which fee awards are granted.
The parties’ briefing and evidence regarding the expert’s evidence in this case is quite
limited. Although Red Robin’s arguments are sufficient to raise serious questions about the
soundness of the opinions offered by DietGoal’s expert, the Court is not prepared, based on the
limited nature of Red Robin’s showing in its motion and the accompanying documents, to hold
that DietGoal’s expert’s opinion was so unfounded as to render this case exceptional.
IV.

Bad Faith Litigation

Red Robin also argues that DietGoal has proceeded in bad faith in this litigation. In
making that claim, Red Robin does not point to any particular evidence of bad faith, but simply
repeats the arguments addressed previously. Repackaging those arguments and labeling them as
evidence of bad faith does not make those arguments any more persuasive. Moreover, the Court
does not find the recent decision of the district court in Lumen View Technology, LLC v.
Findthebest.com, Inc., 24 F. Supp. 3d 329 (S.D.N.Y. 2014), cited by Red Robin, to be applicable
here. Red Robin emphasizes that in Lumen View, as here, the plaintiff was a “non-practicing
entity” that had filed similar suits against numerous defendants seeking what Red Robin calls
“nuisance value settlements.” Dkt. No. 103, at 13. What is critical, however, is that the court in
Lumen View found that the plaintiff’s case on the merits was so weak that “no reasonable
litigant could have expected success on the merits.” 24 F. Supp. 3d at 335. If a party can
reasonably hope for success on the merits of its claim, it does not matter whether that party is a
non-practicing entity, whether it sues numerous defendants, or whether it settles its claims for
relatively small sums. The “exceptional case” finding turns mainly on whether the claim is

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plausible or objectively baseless. The court in Lumen View found that the plaintiff had pursued
a plainly meritless infringement theory.

The Court in this case does not reach the same

conclusion and therefore does not find, as the district court did in that case, that the
circumstances justify an attorney fee award.
V.

Conclusion

Considering the evidence as a whole, the Court finds that this case does not qualify as an
exceptional case and that award of fees is not warranted.
IT IS SO ORDERED.
SIGNED this 20th day of March, 2015.

_____________________________
WILLIAM C. BRYSON
UNITED STATES CIRCUIT JUDGE

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