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Parallel Iron LLC v. Netapp Inc.

United States District Court, D. Delaware

September 12, 2014

Parallel Iron LLC, Plaintiff;
v.
NetApp Inc., Defendant

Stephen B. Brauerman, Esq. (argued), and Sara E. Bussiere, Esq., Bayard, PA, Wilmington, DE attorneys for the Plaintiff.

Rodger D. Smith, II, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Natalie Hanlon-Leh, Esq. (argued), Faegre, Baker, Daniels LLP, Denver, CO, attorneys for the Defendant.

Page 586

Memorandum Opinion

Richard G. Andrews, UNITED STATES DISTRICT JUDGE.

Presently before this Court for disposition is Defendant NetApp Inc.'s motion for attorney fees. (D.I. 58). This matter has been fully briefed (D.I. 59, 64, 72) and the Court heard oral argument on June 25, 2014. (D.I. 82). The Court also reviewed the Plaintiff's pre-suit claim charts and other supporting materials submitted by the Plaintiff for in camera review pursuant to Court Order. (D.I. 81). Additionally, the Court reviewed copies of the infringement contentions provided from the Plaintiff to the Defendant during litigation. (D.I. 83). The Court also reviewed letters from the parties in response to the Court's Oral Orders. (D.I. 86, 89, 90). An Amicus Curiae brief was filed by Dell Inc., Huawei Technologies Co., Ltd., Kaspersky Lab Zao, Limelight networks, Inc., PNC Financial Services Group, Inc., SAS Institute Inc., Vizio, Inc., and Xilinx Inc. in support of the Defendant. (D.I. 80). For the reasons set forth herein, the Defendant's motion is GRANTED.

I. BACKGROUND

Parallel Iron brought this suit against NetApp on June 18, 2012. (D.I. 1). Parallel Iron alleged that NetApp infringes U.S. Patents No. 7,197,662, 7,958,388, and 7,543,177. Id. The complaint identifies the accused products as " by way of example and without limitation, those implementing" parallel Network File System (pNFS). E.g., Id. at ¶ 13. On February

Page 587

15, 2013 Parallel Iron served its 4(a) disclosures, which identified the Defendant's accused products only in relation to their implementation of pNFS. (D.I. 43-1 at 2-3 (" Parallel Iron is asserting the patents-in-suit against all of NetApp's products and/or services that implement the parallel Network File System . . . including but not limited to, the NetApp E-Series Platform products and products using the Engenio external storage systems. . . ." )). Parallel Iron served its " Amended Disclosures" on April 23, 2013, only identifying products by their use of pNFS. Id. at 5 (" Parallel Iron is asserting the patents-in-suit against all of NetApp's products and/or services that implement the parallel Network File System . . . including, but not limited to: (1) the NetApp E-Series Platform products and products using the Engenio external storage systems . . . ; and (2) the FAS 6200 Series Enterprise Storage Systems." ). On May 7, 2013, Parallel Iron served its second amended 4(a) disclosures, which additionally identified Hadoop related products. Id. at 8. However, the products were still identified based upon the accused products use of pNFS. Id.[1] After receiving Parallel Iron's second amended disclosures, NetApp wrote Parallel Iron on May 16, 2013 regarding " (1) the untimeliness of [Parallel Iron]'s purported amendments to its disclosures; (2) the failure of [Parallel Iron] to sufficiently identify an accused product other than its reference to pNFS; and (3) that the E-Series category of products referenced in [Parallel IronJ's disclosures did not practice pNFS." (D.I. 59 at 13 (citing D.I. 43-1 at 11-14)). Additionally, NetApp's letter requested the pre-suit basis for Parallel Iron's allegations regarding pNFS. (D.I. 59 at 13; D.I. 43-1 at 16). On May 25, 2013 Parallel Iron served 2,600 pages of infringement contentions. (D.I. 59 at 14). The contentions listed specific products, but did not mention pNFS. Id. The parties had a meet and confer call on August 22, 2013, during which Parallel Iron confirmed that it was no longer accusing pNFS. Id. at 15.

Based upon Parallel Iron's indication that it was no longer accusing pNFS, NetApp requested a discovery dispute conference with the Court, and filed a discovery dispute letter as per the scheduling order for this case. (D.I. 43). The Court held a discovery conference on September 27, 2013. (D.I. 47). Based upon a joint stipulation (D.I. 49), the Court granted a stay of this case on October 10, 2013 pending the final resolution of several related cases involving the same patents. (D.I. 50). The Court in part granted this stay as a remedy to NetApp for Parallel Iron's altering its allegations from pNFS to Hadoop. Id. at 1.

On January 22, 2014, Parallel Iron granted a license to the asserted patents to Unified Patents, Inc.[2] (D.I. 59 at 16; D.I. 82 at 7). The Agreement granted a sublicense to NetApp, with no requirement for NetApp to pay any money to Parallel Iron. Id.

II. ANALYSIS

NetApp seeks a fee award under 35 U.S.C. § 285 and the Court's inherent

Page 588

powers. The Court will take these two bases for awarding fees in turn.

A. 35 U.S.C. § 285

i. Legal Standard

The Patent Act provides that " in exceptional cases [the court] may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. Thus, under the statute there are two basic requirements: (1) that the case is " exceptional" and (2) that the party seeking fees is a " prevailing party." The Supreme Court recently defined an " exceptional" case as " simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756, 188 L.Ed.2d 816 (2014). When determining whether a party is a prevailing party, the Federal Circuit has followed the Supreme Court's definition of a prevailing party as used in other fee-shifting statutes. Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, 1320 (Fed. Cir. 2004). In Inland Steel, the Federal Circuit held that district courts are to " apply the general principle that to be a prevailing party, one must receive at least some relief on the merits, which alters . . . the legal relationship of the parties." Id. (quotation marks omitted, ellipses in original).

The Federal Circuit's definition of a prevailing party derives from a series of Supreme Court decisions. The term " prevailing party" is " a legal term of art." Buckhannon Bd. & Care Home, Inc. v. W. Virginia Dep't of Health & Human Res., 532 U.S. 598, 603, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001). The Supreme Court defined a prevailing party, for the purpose of attorney's fees shifting, to be a party which " succeed[s] on any significant issue in litigation which achieves some of the benefit the part[y] sought in bringing suit." Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (defining a prevailing party in the context of a 42 U.S.C. § 1988 attorney fee shifting claim). The Supreme Court later held that, while is it " settled law . . . that relief need not be judicially decreed in order to justify a fee award," there must be at least the " settling of some dispute which affects the behavior of the defendant towards the plaintiff." Hewitt v. Helms, 482 U.S. 755, 761, 107 S.Ct. 2672, 96 L.Ed.2d 654 (1987) (italics omitted). The Supreme Court then further refined its previous rulings by holding that the relief must actually affect the parties' behavior. Farrar v. Hobby, 506 U.S. 103, 111, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992). Furthermore, the Court emphasized that " the touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties." Id. (brackets omitted); see also Lefemine v. Wideman, 133 S.Ct. 9, 11, 184 L.Ed.2d 313 (2012). Independent of what relief is received, it " must directly benefit [the party] at the time of the judgment or the settlement." Id. Even " nominal damages suffices under this test." Buckhannon Bd. & Care Home, Inc., 532 U.S. at 604 (citing Farrar ). Finally, the Supreme Court has made clear that:

We have only awarded attorney's fees where the plaintiff has received a judgment on the merits or obtained a court-ordered consent decree--we have not awarded attorney's fees where the plaintiff has secured the reversal of a directed verdict or acquired a judicial pronouncement that the defendant ...

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