Federal Circuit Again Finds an Abuse of Discretion in Denying a Fee Award

Judge Reyna's opinion, Adjustacam, LLC v. Newegg, Inc., was handed down Wednesday and is available here.  From the opinion (pp. 10-16):

The district court erred by ignoring our mandate “to evaluate whether this case is ‘exceptional’ under the totality of the circumstances and a lower burden of proof” in the first instance. Remand Order, 626 F. App’x at 991. Instead of engaging in an independent analysis, the district court adopted the previous judge’s factual findings wholesale. . . .

The district court’s failure to follow our mandate is sufficient reason to find an abuse of discretion. Separate and apart from that issue, however, the district court’s clearly erroneous findings about the substantive strength of AdjustaCam’s case independently support reversal. . .  .

The district court found that the strength of AdjustaCam’s litigation position was not exceptional because Newegg’s ball-and-socket products were constrained in such a way that AdjustaCam could reasonably argue they rotated on a single axis. J.A. 6. But AdjustaCam did not advance that argument. Instead, AdjustaCam argued that the constraint on Newegg’s ball-and-socket joint limited the rotation to a single axis at a time. See J.A. 482–83; see also J.A. 484 (acknowledging “two axes” but arguing “they are separate”). AdjustaCam did not introduce any evidence that Newegg’s ball-and-socket products were limited to a single axis of rotation. We find no dispute that Newegg’s cameras rotate about at least two axes. As such, there is no possible way for Newegg’s products to infringe the ’343 patent. No reasonable factfinder could conclude that Newegg’s products infringe; therefore, AdjustaCam’s litigation position was baseless. These are traits of an exceptional case. The district court’s contrary conclusion was based on “a clearly erroneous assessment of the evidence.” Highmark, 134 S. Ct. at 1748 n.2. Fees are warranted. 

Octane disclosed another reason why this case is exceptional that was not considered by the district court: AdjustaCam litigated the case in an “unreasonable manner.” Octane, 134 S. Ct. at 1756. This measure of exceptionality is evident through AdjustaCam’s repeated use of after-the-fact declarations. . . .

Finally, we take note of AdjustaCam’s damages model. We agree with the district court that there is no minimum damages requirement to file a patent infringement case. J.A. 7. Asserting seemingly low damages against multiple defendants—or settling with defendants for less than the cost of litigation—does not necessarily make a case “exceptional” under § 285. But here, AdjustaCam asserted nuisance-value damages against many defendants, settled with them for widely varied royalty rates, and continued to press baseless infringement contentions well past an adverse Markman order and expert discovery. The original judge stated that AdjustaCam’s damages theory was not “so outrageous and unreliable to support an award of attorney fees,” J.A. 9, which the subsequent judge repeated, J.A. 1_6. Under the governing clearly erroneous standard of review, we would be inclined to affirm if AdjustaCam’s damages methodology were the only issue. In light of AdjustaCam’s frivolous infringement argument and unreasonable manner of litigation, however, we conclude that the district court clearly erred by failing to consider AdjustaCam’s damages methodology as part of a totality-of-the-circumstances analysis. The irregularities in AdjustaCam’s damages model and the purported nuisance value of many of its settlements should have played a role in the evaluation of whether this is case exceptional.

Meanwhile, in a nonprecedential opinion handed down the same day (Parallel Networks, LLC v. Kayak Software Corp.), the court (per Judge Chen) affirmed a denial of a fee award, on the ground among others that there was some room for debate (albeit not enough to overcome a motion for summary judgment) over whether the defendants' "applets" infringed.  See pp. 7-8 ("The defendants first contend that the district court abused its discretion in concluding that Parallel Networks had a plausible infringement theory because their applets  were no different than those accused applets we previously held were non-infringing. But that is not quite so. . . .  [S]ome daylight existed between the accused applets from our earlier decision and the accused applets here.").  Overall, though, the Federal Circuit over the past month arguably seems to be showing a somewhat greater willingness to require fee awards, see previous discussion on this blog here and here.

For coverage of the Adjustacam case on Patently-O, see here.