Orbis Corporation v. Rehrig Pacific Company
ORDER signed by Judge J P Stadtmueller on 1/27/14: denying 78 Defendant's motion for classification of this case as exceptional; and granting 76 and 85 the parties' motions to seal. See Order. (cc: all counsel) (nm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
Case No. 12-CV-1073-JPS
REHRIG PACIFIC COMPANY,
The plaintiff, Orbis Corporation (“Orbis”), filed this patent
infringement suit against Rehrig Pacific Company (“Rehrig”) on October 22,
2012. Several months thereafter, the Court granted summary judgment in
favor of Rehrig, finding Orbis’ patent invalid under 35 U.S.C. § 102’s on-sale
bar. (Docket #72, at 17). The Court thus dismissed the case. (Docket #72, at 17;
#73). Rehrig then requested that the Court classify the case as “exceptional”
pursuant to 35 U.S.C. § 285, such that it could award attorney fees in Rehrig’s
favor. (Docket #78). Orbis opposed that motion and appealed the Court’s
decision. (Docket #84, #86). The Court let the matter rest for a short period
while the appeal was pending. Then, on December 11, 2013, the Court
received the Federal Circuit’s mandate ordering that the appeal be dismissed,
pursuant to Rule 42 (b) of the Federal Rules of Appellate Procedure. (Docket
#95). Rehrig later filed a letter with the Court to alert it to a recent Federal
Circuit opinion that it believes to be relevant; Orbis responded that the
opinion should not change the Court’s analysis. (Docket #97, #98). In sum,
Rehrig’s attorney fees motion is fully briefed (Docket #79, #84, #94), and the
appeal is no longer pending (Docket #95); the matter is thus ripe for review,
and the Court now turns to address it.
35 U.S.C. § 285 STANDARD TO AWARD ATTORNEY FEES
35 U.S.C. § 285, which controls awards of attorney fees in patent cases,
provides in full that “[t]he court in exceptional cases may award reasonable
attorney fees to the prevailing party.” In other words, the Court may not
award attorney fees to Rehrig unless it first finds that this case is
In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., the Federal Circuit
explained the exceptional case component of § 285 as follows:
A case may be deemed exceptional when there has been some
material inappropriate conduct related to the matter in
litigation, such as willful infringement, fraud or inequitable
conduct in procuring the patent, misconduct during litigation,
vexatious or unjustified litigation, conduct that violates Fed. R.
Civ. P. 11, or like infractions. See, e.g., Cambridge Prods. Ltd. v.
Penn Nutrients, Inc., 962 F.2d 1048, 1050–51 (Fed. Cir. 1992);
Beckman Instruments, Inc., v. LKB Produkter AB, 892 F.2d 1547,
1551 (Fed. Cir. 1989). Absent misconduct in conduct of the
litigation or in securing the patent, sanctions may be imposed
against the patentee only if both (1) the litigation is brought in
subjective bad faith, and (2) the litigation is objectively
baseless. Professional Real Estate Investors v. Columbia Pictures
Industries, 508 U.S. 49, 60–61 (1993); see also Forest Labs., Inc. v.
Abbott Labs., 339 F.3d 1324, 1329–31 (Fed. Cir. 2003).
Brooks Furniture Mfg., Inc. v. Dutailier Int’l, 393 F.3d 1378, 1381 (Fed. Cir.
2005). Recently, in Kilopass Tech., Inc. v. Sidense Corp., the Federal Circuit
quoted Brooks Furniture as setting forth the occurrences that would support
an exceptional case finding, and rejected a party’s request to depart from that
standard. Kilopass Tech., Inc v. Sidense Corp., --- F.3d ----, 2013 WL 6800885, at
*6 (quoting Brooks Furniture, 393 F.3d at 1381), *13–*14 (rejecting defendant’s
request to depart from the Brooks Furniture standard) (Fed. Cir. Dec. 26, 2013).
The Court will, therefore, apply the principles in Brooks Furniture, and will
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not find that the case is exceptional unless it finds either: (1) inappropriate
conduct on Orbis’ behalf; or (2) that the litigation was objectively baseless
and Orbis brought it in subjective bad faith.
The Court must determine whether Rehrig has established either of
those circumstances by “clear and convincing evidence.” See, e.g., Kilopass
Tech., 2013 WL 6800885, at *11–*13 (a party must “prove exceptionality by
clear and convincing evidence.”) (citing Highmark, Inc. v. Allcare Health
Management, 687 F.3d 1300, 1310 (Fed. Cir. 2012); Medtronic Navigation, Inc.
v. BrainLAB Medizinische Computersysteme GmbH, 603 F.3d 943, 954 (Fed. Cir.
2010)). Though the origins of the clear and convincing evidence requirement
are rather vague, the Federal Circuit nonetheless continues to require that it
be applied to motions for attorney fees under § 285. Kilopass Tech., 2013
680085, at *11–*13 (discussing various cases and justifications that support
application of the clear and convincing evidence requirement, and ultimately
determining that (on remand) the district court must “apply a clear and
convincing evidence standard to the exceptionality component of the § 285
Finally, if the Court determines that the case is exceptional, then the
Court must answer two additional questions: whether an award of attorney
fees is appropriate in this case; and, if so, what the amount of that award
should be. Highmark, 687 F.3d at 1308.
Rehrig argues that this case is exceptional. In that regard, it asserts
that Orbis: (1) engaged in litigation misconduct by continuing litigation after
invalidating evidence had come to light (Docket #79, at 6–9); (2) breached its
duty of candor in filing and prosecuting the patent at issue, constituting
inequitable conduct (Docket #79, at 9–15); and (3) brought this suit with
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subjective bad faith, as the suit was objectively baseless from its inception
(Docket #79, at 15–20). The first two of those assertions seem to fall under the
sort of “inappropriate conduct” discussed in Brooks Furniture as a way to
establish that this case is exceptional. See Brooks Furniture, 393 F.3d at 1381.
The third assertion, on the other hand, relates to the alternate path to
establishing exceptionality, as described in Brooks Furniture: that “absent
misconduct in conduct of the litigation or in securing the patent,” Rehrig
may still establish exceptionality by showing that the litigation was brought
in subjective bad faith and is objectively baseless. See id. The Court will
address each of Rehrig’s contentions separately as follows.
“[L]itigation misconduct alone may suffice to make a case
exceptional.” Monolithic Power Sys., Inc. v. O2 Micro Int’l, Ltd., 726 F.3d 1359,
1366 (Fed. Cir. 2013). There is no additional “bad faith” or “objectively
baseless” component to a claim of exceptionality due to litigation
misconduct. Id., at 1367 (“O2 Micro’s arguments challenging the exceptional
case determination hinge on its mistaken conviction that there must be an
additional ‘bad faith’ component to litigation misconduct or that
vexatiousness may be found only when coupled with the assertion of
‘objectively baseless’ positions. Additional components are simply not
required for an exceptional case finding based on litigation misconduct.”).
Of course, an exceptional case assertion on the basis of litigation
misconduct may often relate directly to either bad faith or objective
baselessness. Simply put, it is logical that litigation misconduct will often
occur when the plaintiff has brought an objectively baseless suit or otherwise
acted in bad faith.
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And, essentially, that forms the basis of Rehrig’s argument in this
regard: by filing a suit which it later refused to drop despite having notice of
the potential that its patent was invalid under the on-sale bar, Orbis acted in
bad faith, constituting litigation misconduct. (Docket #79, at 6–9).
It was not misconduct for Orbis to either have filed this suit or having
refused to drop the suit. While the Court granted summary judgment in
Rehrig’s favor, this simply was not a suit that was so clear-cut that Orbis’
pursuit of it should be deemed misconduct. While Rehrig points out that
there is a raft of evidence that would support Orbis’ alleged awareness
that its patent was invalid under the on-sale bar, the legal import of that
evidence would have been unclear without a decision from the Court. The
Court acknowledged as much when it noted that it was “[a] much closer
question…whether any of [Orbis’ pre-critical date actions] constituted a
commercial offer for sale.” (Docket #72, at 8). Those pre-critical date actions
involved receiving a price quote and making two presentations about a
potential product. The Court was required to perform a deep analysis,
applying the Uniform Commercial Code to each of those actions to
determine whether they actually constituted offers. (See Docket #72, at 8–13).
And, while the Court ultimately disagreed with Orbis’ legal contentions, it
did not find Orbis’ position to be unreasonable in any sense. Certainly, the
Court did not find them to be objectively baseless or pursued in bad faith.
There was no Federal Circuit law directly on point in Rehrig’s favor, and thus
the Court believes that Orbis was justified in pursuing this litigation and
seeking a summary judgment decision from the Court.
Moreover, this was not a situation in which Orbis employed the sort
of questionable tactics described in cases such as Monolithic Power, 726 F.3d
at 1366–67, or Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1324–26 (Fed. Cir.
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2011). The litigation was hard-fought, to be sure, and entailed numerous
discovery disputes (some of which the Court decided in Orbis’ favor).
(Docket #35, #45). But, that is often the nature of litigation when all parties
involved have difficulty in resolving their differences.
In the end, whatever evidence Rehrig believes should have been
sufficient to prompt Orbis to either not bring suit or to drop its claims, the
Court finds that such evidence would still have left open reasonable legal
questions for Orbis. None of Orbis’ litigation tactics were so questionable or
abusive as to be termed misconduct.
For these reasons, the Court rejects Rehrig’s argument that this case
should be deemed exceptional on the basis of Orbis’ alleged litigation
Inequitable Conduct in Patent Filing and Prosecution
Likewise, the Court must reject Rehrig’s claims that this case is
exceptional on the basis of inequitable conduct in Orbis’ filing and
prosecution of the patent.
In arguing that the Court should award attorney fees for Orbis’
alleged inequitable conduct in the filing and prosecution of its patent,
Rehrig must prove “[b]oth materiality and intent…by clear and convincing
evidence. Ruiz v. A.B. Chance Co., 234 F.3d 654, 669–70 (citing Kingsdown Med.
Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988)).
Orbis is correct that Rehrig has failed to allege intent, let alone prove
it by clear and convincing evidence. The closest Rehrig comes to alleging
intent is its statement in its reply brief that “Mr. Stahl assumed that Buckhorn
had been disclosed to the Patent Office and was surprised and disappointed
to learn it had not been disclosed.” (Docket #94, at 5). But neither that
allegation nor any of the facts presented could establish by clear and
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convincing evidence that Orbis intended to deceive the examiners reviewing
its patent. At most, if the Court accepted Rehrig’s assertion at face value, Mr.
Stahl and Orbis may have accidentally failed to submit information. There is
no evidence that the mistake was intentional.
Therefore, the Court rejects Rehrig’s argument that this case is
exceptional based upon inequitable conduct.
Objective Baselessness and Bad Faith
Finally, the Court must address Rehrig’s alternative argument that
this case is exceptional because it is objectively baseless and was brought in
bad faith. Again, the Court rejects Rehrig’s argument.
This question is easily dispatched. It is a “high burden to show by
clear and convincing evidence that [a] suit was brought frivolously or that [a]
position…was objectively baseless.” iLOR, LLC v. Google, Inc., 631 F.3d 1372,
1378 (Fed. Cir. 2011). To show objective baselessness, Rehrig must show that
Orbis’ legal position “was so unreasonable that no reasonable litigant could
believe it would succeed.” Id. (citing Dominant Semiconductors Sdn. Bhd. v.
OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008) (“To be objectively
baseless, the infringement allegations must be such that no reasonable
litigant could reasonably expect success on the merits.”)).
Above, the Court already found that Orbis’ legal positions were
reasonable. The on-sale bar question, which was ultimately dispositive, was
a close one, requiring significant discussion by the Court. It was not based
upon well-settled legal precedent, but instead required application of various
legal principles to unique facts. The Court ultimately disagreed with Orbis’
position. But that does not mean that Orbis’ position was unreasonable.
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Therefore, Orbis’ pursuit of this action was not objectively baseless,
and Rehrig cannot establish its alternative argument that this case was
For the reasons set forth above, the Court cannot find that this case is
exceptional. Accordingly, an award of attorney fees under § 285 would be
inappropriate, and the Court is obliged to deny Rehrig’s motion in that
Finally, the Court must address the outstanding motions to seal
(Docket #76, #85). With those motions, the parties request that the Court seal
certain sensitive materials. The Court has reviewed those materials and finds
that there is good cause to seal the documents as requested by the parties.
The requests to seal are not overly broad. Moreover, the Court has not
received any objections to the motions to seal. Therefore, the Court will grant
the parties’ motions to seal.
IT IS ORDERED that Rehrig’s motion for classification of this case as
exceptional (Docket #78) be and the same is hereby DENIED; and
IT IS FURTHER ORDERED that the parties’ motions to seal (Docket
#76, #85) be and the same are hereby GRANTED.
Dated at Milwaukee, Wisconsin, this 27th day of January, 2014.
BY THE COURT:
U.S. District Judge
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