Federal Circuit Affirms Award of Fees Pursuant to Inherent Equitable Powers

The case is Realtime Adaptive Streaming LLC v. Netflix, Inc., precedential opinion by Judge Chen, joined by Judge Newman and by Judge Reyna concurring-in-part and dissenting-in-part. The first three paragraphs of the opinion summarize the facts leading to the imposition of fees:

Plaintiff-Appellant Realtime Adaptive Streaming LLC (Realtime) filed three separate patent infringement actions against Defendants-Cross-Appellants Netflix, Inc. and Netflix Streaming Services, Inc. (collectively, Netflix). Realtime first asserted six patents in the District of Delaware. While the Delaware action was ongoing, Netflix filed seven petitions for inter partes review before the Patent Trial and Appeal Board seeking a determination that many of the claims asserted in the Delaware action were unpatentable. Netflix also moved to dismiss the complaint for failure to state a claim, arguing that four of the six asserted patents were ineligible under 35 U.S.C. § 101. Netflix fully briefed, and Realtime full responded to, those patent-ineligibility theories. Following institution of all seven inter partes review proceedings and a thorough report and recommendation from the Delaware magistrate judge finding claims of four of the patents ineligible under § 101, Realtime voluntarily dismissed the Delaware action—before the district court could rule on the magistrate judge’s ineligibility findings.

 

Although Realtime was done with Delaware, it was not done with Netflix. The next day, Realtime started fresh, re-asserting the same six patents against Netflix, this time in the Central District of California—despite having previously informed the Delaware court that transferring the Delaware action across the country to the Northern District of California would be inconvenient and an unfair burden on Realtime. Netflix then simultaneously moved for attorneys’ fees and to transfer the California actions back to Delaware. Prior to a decision on either motion, Realtime again avoided any court ruling by voluntarily dismissing its case.

Netflix then renewed its motion for attorneys’ fees for the California actions as well as the related Delaware action and inter partes review proceedings. The district court awarded fees for both California actions pursuant to § 285 and, in the alternative, the court’s inherent equitable powers. The district court declined to award fees for the related Delaware action or inter partes review proceedings under either § 285 or Federal Rule of Civil Procedure 41(d). . . . Realtime now appeals the court’s fee award for the California actions and Netflix cross-appeals the court’s denial of fees for the related proceedings. Because we hold that the district court did not abuse its discretion in awarding fees pursuant to its inherent equitable powers or in denying fees for the related proceedings, we affirm. We need not reach the question of whether the award also satisfies the requirements of § 285 (pp.2-3).

The court declines the invitation to decide (1) if FRCP 41(d) permits a district court to award fees (p.3 n.1); (2) if Realtime’s two voluntary dismissals rendered Netflix a “prevailing party” under § 285 (p.3 n.2); and (3) whether courts have authority to award fees under § 285 for related USPTO proceedings (p.12), stating that “nothing obligates the district court to award fees in related actions” and in this case “the district court’s fact findings support differentiating the related proceedings” (p.13).

In Judge Reyna’s separate opinion, he writes:

 

I concur with the majority’s holding that the district court did not abuse its discretion in awarding fees under its inherent powers to sanction. I dissent in part because I  also believe that the district court did not err in determining that two voluntary dismissals without prejudice is sufficient to confer prevailing party status under 35 U.S.C. § 285.