Failure to Show Subjective Bad Faith Sinks Request for Attorneys' Fees for Alleged Frivolous Lawsuit

The court denied defendant's motion for attorneys' fees under 35 U.S.C. § 285 following summary judgment based on plaintiff's alleged filing of a frivolous lawsuit. "Unless the request for attorneys’ fees is based on litigation misconduct or inequitable conduct before the PTO, a court should award attorneys’ fees 'only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.' . . . Defendant argues that attorneys’ fees should be awarded because Plaintiff filed this frivolous lawsuit. However, Defendant has not provided any evidence of Plaintiff’s subjective bad faith. As such, Defendant has not met its burden to show that this is an exceptional case which merits attorneys’ fees."

Mark Hunter v. Lamps Plus Inc., et. al., 8-10-cv-00298 (CACD December 27, 2010, Order) (Anderson, J.)

Instructions to an Arms Length Business Partner do not Constitute "Control or Direction" for Joint Infringement

In granting defendants' motions for summary judgment of no literal infringement, the court rejected plaintiff's joint infringement theory based on defendants' alleged control of certain third parties. "[E]ven if [plaintiff] had argued and proven that the stored procedures unequivocally 'gain entry' to all records of open orders, and even if [defendants'] vendors undisputedly wrote stored procedures pursuant to instructional guides provided by [defendants], [plaintiff] could not prevail on a joint infringement theory because the issuance of calls to [vendor] databases and the provision of instructions to an arms length business partner do not constitute ''control or direction' over the entire process such that every step is attributable to' [defendants]. In other words, [plaintiff] misconstrues 'the control or direction standard,' which inquires whether 'the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party.' But [plaintiff] does not dispute (and has put forth no evidence refuting) [defendants'] showing that their relationships with OMS vendors amount to no more than 'mere "arms-length cooperation"' that 'will not give rise to direct infringement by any party.'"

Liquidnet Holdings, Inc. v. Pulse Trading, Inc, 1-07-cv-06886 (NYSD December 21, 2010, Order) (Scheindlin, J.).

Attorneys' Fees Determination May Render Patent Unenforceable Despite Earlier Dismissal of Inequitable Conduct Claim

Plaintiff's motion to dismiss its own claims with prejudice, and defendant's counterclaims without prejudice, was granted but the court gave defendant leave to move for attorneys' fees under 35 U.S.C. § 285 which could result in a post-dismissal determination of unenforceability. "In [Leviton Mfg Co. v. Shanghai Meihao Elec., Inc., 613 F. Supp. 2d 670 (D. Md. 2009)] . . . the Federal Circuit’s holding did nothing to unsettle the district court’s initial steps of dismissing the patent claims with prejudice and granting the defendant leave to move for fees. . . . Inequitable conduct is one possible theory at issue in the overall § 285 fees context. If it is established, unenforceability 'follows automatically' as a matter of law."

Gordon-Darby Systems, Inc. v. Applus Technologies, Inc., 1-10-cv-01863 (ILND December 23, 2010, Order) (Zagel, J.)

Concurrent Representation of Plaintiff in Patent Suit and Defendant in Reexamination Involving Different Patents Warrants Disqualification

Defendant's motion to disqualify plaintiff's counsel was granted where counsel represented plaintiff in the current dispute and was subsequently retained by defendant in connection with a reexamination proceeding involving different patents and an unrelated indemnity dispute. "Once [plaintiff's counsel] accepted [defendant] as a client, the firm owed [defendant] a duty of loyalty. [Plaintiff's counsel] breached that duty . . . by assisting [plaintiff] in advancing patent infringement claims against [defendant]. Although the consequence of that breach -- per se disqualification -- does negatively impact [plaintiff's counsel's] first client, [plaintiff], allowing [it] to avoid that consequence by simply withdrawing as counsel for [defendant], a secondly acquired but nonetheless fully engaged client, is not the best way to restore confidence in the legal profession. . . . Once a client engages a lawyer, that client must be able to expect undivided loyalty. Even though disqualification is a harsh penalty, allowing a law firm to resolve voluntarily created conflicting loyalties by simply dropping the less favored client undermines this expectation."

Fujitsu Limited v. Belkin International, Inc., et. al., 5-10-cv-03972 (CAND December 22, 2010, Order) (Koh, J.)

False Marking Fine for Christmas Tree Stands Exceeds Selling Price for Certain Units

In calculating a false marking fine upon plaintiffs' motion for default judgment, the court applied a fine that was greater than the selling price of some falsely marked products (Christmas tree stands). "Defendant falsely marked 24,000 articles. The Court notes that the items manufactured vary materially in price from $30.27 per unit to $169.70. Because of this price variation, the Court determines that the $169.70 per unit price should be reduced by fifty percent (50%) and this price ($84.75) will be applied to the 20,400 units sold at prices of $30.27 or $67.70. The Court determines that applying the highest unit price of $84.75 for these substantially lower price units achieves the deterrent goal of § 292’s fine provisions. Using the 'highest point of the price range,' $169.50, for the 3,600 articles amounts to a total fine for these units of $610,200. Applying an $84.75 highest point of the price range to the remaining 20,400 articles amounts to a total fine for them of $1,728,900, for an aggregate fine of $2,339,100."

Polytree (Hong Kong) Co., Ltd., et. al. v. Forests Manufacturing, Ltd., 1-09-cv-03377 (GAND December 20, 2010, Order) (Duffey, J.)

Scrivener's Error in Patent Marking Does Not Preclude Finding of Intent to Deceive

Defendant's motion for Rule 11 sanctions for plaintiffs' filing of a qui tam false marking action was denied despite defendant's arguments that plaintiffs' counsel knew the mismarking was a scrivener's error that could not be corrected due to a lack funds. "[A]lthough Defendant has asserted potentially plausible arguments that he lacked the requisite intent for liability under § 292, these assertions go to the merits of the false marking claim, which the Court is in no position to prejudge as of this early stage of the case. Those arguments do not, by themselves, substantiate a claim that Plaintiffs’ attorneys abused the litigation process by contending that Defendant did in fact possess the requisite intent."

Lundeen, et. al. v. John T. Minemyer, 1-09-cv-03820 (ILND December 17, 2010, Order) (Dow, J.)

Question of Whether to Incur "Substantial Expenses" for Testing and Clinical Trials does not Create Substantial Controversy Sufficient

to Assert Declaratory Relief Claim
Defendant's motion to dismiss plaintiff's declaratory relief claims of noninfringement and invalidity for lack of subject matter jurisdiction was granted because plaintiff's device was still in early development. "[Plaintiff] argues that the present controversy satisfies the immediacy prong of [MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)] because '[plaintiff] has reached a point where it would incur substantial expenses in conducting bench, animal and clinical testing.' However, in light of Plaintiff’s own allegations that '[p]rior to being introduced for commercial sale, [plaintiff's] medical devices undergo rigorous and intensive laboratory testing, in vitro and in vivo studies, and clinical trials,' and that '[t]ypically, a product may undergo many years of testing and clinical trials . . . before being ready for commercial sale,' it remains uncertain when, if ever, the declaratory plaintiff would engage in potentially infringing activity. While Plaintiff contends that it 'has completed the design of its products,' it has not yet submitted them for approval by the [FDA], which suggests, consistent with its own factual allegations, that it has yet to initiate the 'many years' of testing and clinical trials required prior to commercialization. That Plaintiff has reached a point where it would 'incur substantial expenses' by embarking on bench, animal, and clinical testing is also insufficient to satisfy the immediacy requirement where the potentially infringing activity could still be 'many years' away."

W.L. Gore and Associates Inc. v. GI Dynamics, 3-10-cv-08088 (AZD December 15, 2010, Order) (Snow, J.)