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Parallel Networks, LLC v. Blizzard Entertainment, Inc.

United States District Court, D. Delaware

June 7, 2018

PARALLEL NETWORKS, LLC, Plaintiff,
v.
BLIZZARD ENTERTAINMENT, INC., Defendant.

          MEMORANDUM ORDER

         Pending before the Court is Defendant's Motion for an Award of Fees. (D.I. 174). The issues have been fully briefed. (D.I. 175, 181, 185). For the reasons stated herein, Defendant's motion is DENIED.

         I. BACKGROUND

         On May 9, 2013, Plaintiff filed suit against Blizzard and numerous other entities[1] for infringement of U.S. Patent Nos. 7, 188, 145 ("the '145 patent") and 7, 730, 262 ("the '262 patent) owned by Plaintiff. (D.I. 1). After hearing oral argument, I denied Plaintiffs motion for partial summary judgment and granted Defendant's motion for summary judgment on August 31, 2016. (D.I. 151, 163). Final judgment was entered on September 21, 2016, and the pending motion was timely filed two weeks later. (D.I. 170, 174). The grant of summary judgment was affirmed by the Federal Circuit. (D.I. 190).

         Defendant contends that this case merits an award of fees because Plaintiff was unreasonable in litigating its case. According to Defendant, Plaintiffs refusal to stipulate to noninfringement after being on notice that its case was meritless and Plaintiffs unnecessary spoliation motions practice make this case exceptional. (D.I. 175, pp. 2-3). Defendant requests that I award fees from August 17, 2015, the date of the Markman hearing. (D.I. 175, pp. 18-19). Plaintiff counters that this case is not exceptional and does not merit a fees award, because proceeding with its infringement case was reasonable, and Plaintiffs spoliation motions practice was necessitated by Defendant's unreasonable conduct. (D.I. 181, p. 2).

         The parties' briefing identifies three broad issues as relevant to the reasonableness of Plaintiffs continued litigation of this case after the Markman hearing: (1) Defendant's destruction of Tracker Log data relevant to Plaintiffs damages theory, (2) Plaintiff s behavior after the Markman hearing, and (3) Plaintiffs review of Defendant's source code.

         In February 2015, Plaintiff began seeking Tracker Log data from Defendant in order to develop Plaintiffs damages theory, which involved calculating the amount of data served using peer-to-peer technology. (D.I. 181, p. 13; D.I. 182-1 at 5). During Plaintiff s 30(b)(6) deposition of Defendant on August 5, 2015 regarding peer-to-peer efficiency and data issues, Defendant admitted that prior to litigation, Defendant purged Tracker Log files after 30 days as a standard business practice.[2] (D.I. 182-6 at 59 (Lauffer Dep. 32:12-20)). On August 31, 2015, Plaintiff sought agreement from Defendant to stipulate as to the efficiency rate of Blizzard's peer-to-peer data usage and the amount of data served during the relevant time period. (Id. at 147-49). The parties could not agree on an appropriate efficiency rate, and did not reach a stipulation. (See Id. at 142-45). Seven weeks before the close of fact discovery, Plaintiff requested a discovery conference regarding the Tracker Log data, and the Court scheduled a conference for October 19, 2015. (D.I. 121).

         On August 17, 2015, I held a Markman hearing, during which I identified the parties' primary dispute about the "re-allocating" term as "whether each peer can cache 100 percent of the content." (D.I. 111 at 115:4-9). I stated that I did "not think that each peer can pursuant to the claims." (Id.). One week later, I entered a claim construction order construing "reallocating/reallocate the cache storage of the content among the peers in the cache community" to mean, "re-allocating/re-allocate the portions of the content to be stored by each peer's cache storage." (D.I. 114).

         On August 28, 2015, Defendant wrote a letter to Plaintiff stating that the accused products could not infringe, "given the Court's ruling that a new client does not satisfy the asserted claims when it receives 100 percent of the content in response to joining the community." (D.I. 176 at 73). Five days later, Plaintiff responded, [3] acknowledging receipt of Defendant's letter, providing Defendant with amended infringement contentions, and proposing a stipulation for the parties to pursue early summary judgment. (D.I. 182-1 at 2-3). Plaintiffs proposed stipulation would bifurcate discovery, staying damages discovery and moving forward with discovery relating to liability only. (Id. at 2). Plaintiff also indicated its "willing[ness] to work with [Defendant] on some basic stipulations in an effort to avoid unnecessary depositions." (Id.). On September 21, 2015, Plaintiff and several defendants had agreed to a modified version of Plaintiffs proposed stipulation.[4] (D.I. 182-6 at 119). The agreed -upon stipulation stayed damages discovery pending the results of early and expedited summary judgment on liability. (Id.). Blizzard did not join the other defendants in agreeing to this stipulation. (Id. at 121). Four days later, Plaintiff renewed its request that Defendant enter into a stipulation that would expedite briefing for early summary judgment as to the "associating" and "re-allocating" limitations only and stay all discovery except technical discovery necessary to the limited summary judgment proceedings. (Id. at 124). On October 29, 2015, Plaintiff and Defendant filed a stipulation agreeing to file early summary judgment motions limited to the "associating" and "reallocating" limitations, and agreeing to stay activity on all remaining issues pending the resolution of the early summary judgment motions. (D.I. 139). Fact discovery closed the same day. (D.I. 44, p. 4).

         Plaintiffs review of Defendant's source code proceeded in tandem with Plaintiffs efforts to reach a stipulation with Defendant that would expedite resolution of the case. In September 2015, Plaintiff and Defendant spent three weeks negotiating the details of Plaintiff s second review of Defendant's source code. (D.I. 182-1 at 164-71). Plaintiff completed review of Defendant's source code on October 7, 2015, and deposed one of Defendant's corporate representatives eight days later to clarify remaining issues related to Defendant's source code. (D.I. 181, pp. 8, 10-11). On October 26, 2015, Plaintiff served supplemental infringement contentions, which identified "the Blizzard Downloader (and any 'flavors' thereof)" as accused products. (D.I. 138; D.I. 176 at 84). In summary judgment briefing filed on February 23, 2016, Defendant stated that it accused only "Blizzard Downloader major versions 1.0 and 2.0 and all related minor versions and patches" of infringement, "but d[id] not accuse Blizzard Downloader major version 3.0 or its minor versions or patches." (D.I. 151 at 48-49).

         I held oral argument on the parties' early summary judgment motions on May 3, 2016. (D.I. 161). On August 31, 2016, 1 granted Plaintiffs motion for summary judgment, stating that "the problem with Parallel's [infringement] theory" was that "the '145 patent does not require a reallocation 'of the order the [p]ieces will be downloaded;' it requires a reallocation of the 'portions of content to be stored' among the peers." (D.I. 162, p. 14 (brackets in original)).

         II. LEGAL STANDARD

         The Patent Act provides that the court "in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The Supreme Court has 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 (2014). When considering whether a case is exceptional, district courts are to exercise their discretion on a case-by-case basis, considering the totality of the circumstances. Id. Relevant factors for consideration include "frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. at 1756 n. 6 (citation omitted). A movant must establish its entitlement to attorney fees under § 285 by a preponderance of the evidence. Id. at 1758.

         III. ANALYSIS

         Defendant advances two primary arguments that this case is exceptional. First, Defendant asserts that Plaintiffs refusal to stipulate to non-infringement after the Markman hearing was unreasonable because my oral ruling and subsequent claim construction order clarified that Plaintiffs infringement theory was baseless. (D.I. 175, p. 2). Second, Defendant argues that Plaintiffs spoliation motions practice was unnecessary, ...


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