The court denied defendants' motion for Rule 11 sanctions and rejected the argument that plaintiff's "settlements with other defendants for less than the cost of defending the case is evidence that [plaintiff's] infringement theory was frivolous." "In some situations, a plaintiff asserting a large damages model while making very low offers of settlement early in the case may indicate that the plaintiff realizes its case is very weak or even frivolous. While the numbers cannot be determinative, they may be indicative of the good-faith nature with which the case is brought. Defendants contend that at least one of the settling defendants sells billions of dollars of products yet settled for less than one million dollars, but [plaintiff] points out that its accused products were an extremely small portion of its business. [Plaintiff] described its damages model to the Court, which was not large for a patent case. Given that description, the earlier settlements were not so unreasonable as to indicate that [plaintiff] believed its case was weak or frivolous. . . . [T]his Court has some concerns about plaintiffs who file cases with extremely weak infringement positions in order to settle for less than the cost of defense and have no intention of taking the case to trial. . . . In contrast, there may be legitimate cases where a plaintiff settles with a few smaller defendants in an effort to raise needed capital in order to proceed to trial against the remaining major defendants. In those situations, plaintiffs typically settle with smaller defendants and proceed to trial against larger defendants who have larger damage potential. Such is a legitimate trial strategy. Moreover, the Court does not want to discourage early settlement of some or all defendants."
Raylon, LLC v. EZ Tag Corporation, et. al., 6-09-cv-00357 (TXED March 9, 2011, Order) (Davis, J.)