October 19, 2020

D. Delaware Awards Attorneys' Fees Due To Weak Section 101 Arguments, Patent Litigation Conduct

Holland & Knight Section 101 Blog
Anthony J. Fuga
Section 101 Blog

CompanyCam moved to dismiss plaintiff's complaint because the asserted '872 patent, titled "Device and Method for Embedding and Retrieving Information in Digital Images," was directed to ineligible subject matter. The U.S. District Court for the District of Delaware agreed and stated during the hearing that it would grant the motion. Plaintiff quickly dismissed the case after the hearing before the decision was even docketed.

Following the court's decision on the motion to dismiss, CompanyCam sought attorneys' fees and argued that the case was exceptional for three reasons: 1) the '872 patent was clearly not eligible for patent protection under § 101; 2) the plaintiff engaged in vexatious litigation related to both the asserted patent and its other patents; and 3) plaintiff's infringement allegations were deficient. The court addressed these three issues in turn.

Section 101 Issues

In March, the court concluded that the claims of the '872 patent were ineligible but whether or not it was a "clear" decision was a more difficult question. On the one hand, plaintiff did not seek reconsideration, an appeal, or even seek to amend its complaint. In fact, the plaintiff quickly moved to dismiss the case after the hearing before the decision could be docketed. Additionally, the U.S. District Court for the Northern District of California addressed the same patent and found the claims to be directed to ineligible subject matter.

On the other hand, the N.D. California allowed the plaintiff the opportunity to amend its complaint. The court also noted that the § 101 jurisprudence is not straightforward and "rarely lends itself to easily predicted outcomes."

Plaintiff's Vexatious Litigation

CompanyCam told the court that plaintiff had filed 820 patent lawsuits (!) but had not prevailed on the merits on any of them. This included 46 lawsuits asserting the '872 patent, none of which even made it past the pleadings stage. CompanyCam also provided examples of the plaintiff settling its cases for nuisance value.

The court noted that this type of litigation could form a basis for a finding of exceptional case. Here, the plaintiff knew the court's position on the '872 patent and attempted to "exert pressure on other defendants to settle or be left to spend money litigating a patent that had twice been found to cover ineligible subject matter." The plaintiff only reversed course when the court forced the plaintiff to explain itself. The court found this to be troubling behavior.

Plaintiff's Infringement Allegations

CompanyCam argued that no reasonable litigant would think that CompanyCam's smartphone app could infringe the asserted patent. CompanyCam, however, did not raise any infringement issues in its motion to dismiss so the court was left only with attorney argument. The issue, which was raised for the first time in a motion for attorneys' fees, was simply "not an issue that the court can adequately address on the record before it."

The Totality of the Circumstances

Assessing the totality of the circumstances, the court found that plaintiff's case with respect to § 101 issues was relatively weak. But if that were the only basis for the motion, the court likely would have denied CompanyCam's exceptional motion.

In addition to the § 101 issue, plaintiff showed a pattern of troubling litigation conduct. Almost all of the plaintiff's cases failed to advance beyond the pleadings. And, in this case, the plaintiff unilaterally dismissed its case against CompanyCam before the court's order was entered but then prolonged litigation against defendants in other cases. The plaintiff only stopped that behavior when the court called out the plaintiff. In light of the above, the court found the case to be exceptional.

While an exceptional case does not require an award of attorneys' fees, the court here agreed that an award of at least some attorneys' fees is merited in light of the totality of the circumstances. The court asked CompanyCam to submit an accounting of the fees it seeks along with an explanation as to why they are reasonable.

The case is Rothschild Digital Confirmation, LLC v. CompanyCam, Inc., No. CV 19-1109 (MN), 2020 WL 6043911 (D. Del. Oct. 13, 2020).

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