United States District Court, D. Delaware
SUE L. ROBINSON, District Judge.
At Wilmington this 31st day of March, 2015, having reviewed defondants' motions for attorney fees, and the papers filed in connection therewith;
IT IS ORDERED that defendants' motions for attorney fees (Civ. No. 14-451, D.I. 126; Civ. No. 12-455) are denied, for the reasons that follow:
1. Background. On April 10, 2012, plaintiff Computer Software Protection, LLC ("CSP") initiated litigation against defendants Adobe Systems Incorporated ("Adobe") (Civ. No. 14-451) and Wolfram Research, Inc. ("Wolfram") (Civ. No. 12-455) alleging infringement of United States Patent No. 6, 460, 140 ("the 140 patent"). The same day, CSP also filed complaints against three other defendants for infringement of the 140 patent - Autodesk, Inc. ("Autodesk"), Nuance Communications, Inc. ("Nuance"), and The MathWorks, Inc. ("The MathWorks"). After reaching a settlement, CSP voluntarily dismissed the case against MathWorks on July 2, 2012. (Civ. No. 12-453, D.I. 14) The four remaining cases were consolidated for discovery and claim construction. Per the custom of this court at that time, the issues of damages and willfulness were bifurcated for discovery and trial. The parties completed fact discovery. (D.I. 134 at 3) CSP then reached a settlement agreement with Nuance, granting a license to third-party Flexera Software LIC ("Flexera"), which also resulted in a release from liability for Autodesk and two of Adobe's three product activation methods accused of infringement in the case at bar, as they utilized Flexera's technology. (D.I. 134 at 4) CSP stipulateid to dismiss the case against Autodesk on December 16, 2013, and the case against Nuance on March 31, 2014. (Civ. No. 12-454, D.I. 73; Civ. No. 12-452, D.I. 67)
2. CSP and the two remaining defendants, Adobe and Wolfram, proceeded to summary judgment and claim construction briefing. The claim construction and summary judgment hearing was scheduled for May 20, 2014, with a pmtrial conference set for August 14, 2014 and jury trial for September 8, 2014. (D.I. 17; D.I. 10f3) On Friday, May 16, 2014, two business days before the hearing, CSP provided Adobe and Wolfram covenants not to sue, without compensation, and thereafter requested that the court cancel the hearing. (D.I. 121) After reaching agreement with Adobe on modified language for the covenant not to sue, a joint motion for dismissal was filed on August 1, 2014, providing that all claims and counterclaims asserted by CSP wem dismissed with prejudice, and all of Adobe's claims and counterclaims were dismissed without prejudice. (D.I. 124) A similarly worded joint motion to dismiss was filed on August 5, 2014 in the case against Wolfram. (D.I. Civ. No. 12-455, D.I. 134)
3. Prevailing Party. Section 285 provides, in its entirety, "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. In determining whether a party is a prevailing party in patent litigation, the Federal Circuit applies the general principle that, "to be a prevailing party, one must "receive at least some relief on the merits, " which "alters... the legal mlationship of the parties." Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, 1320 (Fed. Cir. 2004) (citations omitted). The Federal Circuit has concluded that, "as a matter of patent law, " the dismissal of claims with prejudice when granted by a district court "has the necessary judicial imprimatur to constitute a judicially sanctioned change in the legal relationship of the parties, such that [a] district court properly [can] entetrtain [a] fee claim under 35 U.S.C. § 285." Highway Equip. Co. v. FEGO, Ltd., 469 F.3d 1027, 1035 (Fed. Cir. 2006). Under the circumstances of this case, Adobe and Wolfram are the prevailing parties for the purposes of the present motions.
4. Exceptional case. Consistent with the Supreme Court's decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014), the Court described § 285 as imposing "one and only one constraint on district courts' discretion to award attorney's fees in patent litigation: The power is reserved for exceptional' cases." Id. at 1755-56. Because the Patent Act does not define "exceptional, " the Court construed it "in accordance with [its] ordinary meaning.'" Id. at 1756 (citation omitted). "In 1952, when Congress used the word in § 285 (and today, for that matter), "[e]xceptional' meant uncommon, ' rare, ' or not ordinary.'" Id. (citation omitted). In support of its interpretation, the Court referred to an earlier interpretation of the term "exceptional' in the Lanham Act's identical fee-shifting provision, 15 U.S.C. § 1117(a), to mean uncommon' or not run-of-the-mill.'" Id. The Court concluded that
an "exceptional" case is 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. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances. As in the comparable context of the Copyright Act, "[t]here is no precise rule or formula for making these determinations, ' but instead equitable discretion should be exercised in light of the considerations we have identified.'"
Id. at 1756 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)). In addressing Rule 11 of the Federal Rules of Civil Procedure, the Court expressly heild that "sanctionable conduct is not the appropriate benchmark" for § 285 cases. Under the standard announced in Octane, "a district court may award fees in the rare case in which a party's unreasonable conduct - while not necessarily independently sanctionable - is nonetheless so exceptional' as to justify an award of foes" or "a case presenting either subjective bad faith or exceptionally meritless claims." Id. at 1757. A party seeking attorney fees under § 285 must prove the merits of their contentions by a preponderance of the evidence. Id. at 1758.
5. Analysis. Defendants basically argue that these cases are "exceptional" because they would have prevailed on their various defenses if the cases had not been dismissed. In point of fact, however, none of the defenses posited by defendants are so evident from the record at bar that the court can say with any certainty that defendants not only would have succeeded on the merits, but that the strength of their arguments would have been exceptionally dispositive. Indeed, in a case where settlements were reached with other parties, and the court did not construe the claims, or resolve multiple discovery disputes, or resolve motions to dismiss or for summary judgment, to characterize ...