True Grit Wins Attorneys’ Fees In Exceptional 101 Case
The Central District of California awarded Kindred Studio Illustration and Design LLC (aka True Grit) $72,400 in attorneys' fees after the court found that Electronic Communication Technology's (ECT) legal positions and litigation tactics were objectively unreasonable.
The case began ordinarily as any other patent litigation. ECT sent True Grit a letter alleging infringement of its patent and offered an early settlement for $12,000. True Grit, instead of countering, responded by filing its declaratory judgment complaint and sought declarations that the patent was invalid, not infringed, and unenforceable. On top of that, True Grit included state law claims for unlawful competition.
The case was transferred to Judge Wu because he had presided over related cases. Once transferred, ECT provided a covenant not to sue (CNS) to True Grit, stating that the CNS "moots all controversies between ECT and True Grit." The parties eventually settled the remaining claims and dismissed the complaint, with only one remaining issue to be decided: whether exceptional case fees were appropriate. Magistrate Judge Gail J. Standish pulled no punches deciding this issue.
Judge Standish first looked at the related case, noted that the claims were all related, and concluded that "no reasonable patent litigant would have believed that [this claim] was viable" based on the earlier case and the current state of Section 101 law.
Judge Standish next provides an anatomy lesson of a non-practicing entity (NPE). She notes that ECT's predecessor is Eclipse IP and that ECT is related to Shipping & Transit, ArrivalStar, and Melvino Technologies, NPEs that have filed well over 500 lawsuits. She also noted that Shipping & Transit only stopped sending demand letters when several federal courts awarded "fees to the victims of its licensing campaign" and, in response, Shipping & Transit filed for bankruptcy with assets valued at $2.00.
ECT defended itself, contending "that if True Grit had simply responded to its initial demand and negotiated with ECT," none of this would have happened. Judge Standish was not persuaded. "ECT never intended to litigate this case. It never intended a more fulsome investigation. It intended only to engage in a quick 'smash and grab.'"
Judge Standish finally remarked that there is a need for deterrence: ECT's actions both pre and post complaint "demonstrate ECT's 'in terrorem' tactics – threatening litigation in hopes of a quick settlement with no intention of ever resting the strength of its patent or its allegations of infringement."