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Rothschild Mobile Imaging Innovations LLC v. Mitek Systems Inc.

United States District Court, D. Delaware

July 27, 2018

ROTHSCHILD MOBILE IMAGING INNOVATIONS, LLC, Plaintiff,
v.
MITEK SYSTEMS, INC., JPMORGAN CHASE & CO. and JPMORGAN CHASE BANK, N. A. Defendants ROTHSCHILD MOBILE IMAGING INNOVATIONS, LLC, Plaintiff,
v.
BANK OF AMERICA CORPORATION, BANK OF AMERICA, N.A., NCR CORPORATION and MITEK SYSTEMS, INC. Defendants. ROTHSCHILD MOBILE IMAGING INNOVATIONS, LLC, Plaintiff,
v.
CITIGROUP, INC., CITIBANK, N.A., NCR CORPORATION and MITEK SYSTEMS, INC. Defendants. ROTHSCHILD MOBILE IMAGING INNOVATIONS, LLC, Plaintiff,
v.
WELLS FARGO & COMPANY, WELLS FARGO BANK, N.A., FISERV, INC. and MITEK SYSTEMS, INC. Defendants.

          MEMORANDUM

         I. INTRODUCTION

         Plaintiff Rothschild Mobile Imaging Innovations, LLC ("RMII") filed a patent infringement suit against defendant Mitek Systems, Inc. ("Mitek"); JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A. (collectively, "JPMC"); Bank of America Corporation and Bank of America, N.A. ("BoA"); Citigroup Inc. and Citibank, N.A. ("Citi"); Wells Fargo & Company and Wells Fargo Bank, N.A. ("Wells Fargo"); NCR Corporation ("NCR"); and Fiserv, Inc. ("Fiserv") alleging infringement of U.S. Patent Nos. 7, 450, 163 (the "'163 patent"), 7, 456, 872 (the '"872 patent"), 7, 991, 792 (the '"792 patent"), and 7, 995, 118 (the '"118 patent") (collectively, the "patents-in-suit"). (D.I. I[1]; C.A. No. 14-1142, D.I. 1, 55; C.A. No. 14-1143, D.I. 1, 60; C.A. No. 14-1144, D.I. 1, 58.) The U.S. Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB") instituted inter partes review ("IPR") on all of the asserted claims of the '163, '792, '872, and '118 patents. The PTAB found that the asserted claims of the '163, '792, and '118 patents were unpatentable and entered an adverse judgment against the '872 patent upon RMII's request. Subsequent to the PTAB's decisions, RMII moved to dismiss its case against Mitek. (D.I. 81.) The court granted dismissal with prejudice. (D.I. 90.) Mitek's motion now seeks an award of attorney's fees and expenses pursuant to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court's inherent power. (D.I. 92.) Also before the court is RMII's motion to strike Mitek's motion for attorney's fees and expenses and to strike certain evidence submitted in support of Mitek's motion. (D.I. 102.) For the following reasons, the court will deny Mitek's motion for attorney's fees and expenses as well as RMII's motion to strike as moot.

         II. BACKGROUND

         RMII is one of several non-practicing entities that are run by Managing Director and inventor of the patents-in-suit, Leigh M. Rothschild. (D.I. 104 at 3.) On May 16, 2014, RMII initiated a suit against Mitek claiming infringement of the patents-in-suit. (D.I. 1.) On June 12, 2014, RMII amended its Complaint to add JPMC as a defendant. (D.I. 7.) On September 8, 2014, RMII filed three additional actions naming Mitek's customers BoA, Citi, and Wells Fargo as defendants. (C.A. No. 14-1142, D.I. 1; C.A. No. 14-1143, D.I. 1; C.A. No. 14-1144, D.I. 1.)

         On September 29, 2014, the parties engaged in settlement conversations where RMII's counsel commented that it intended to "sue every customer/direct infringer and not entertain any 'wholesale level' settlement offers." (D.I. 28 at Ex. 4.) Further, RMII's counsel warned Mitek that it was "too small to afford to play in the space, so it needs to be put out of business through horrific indemnity obligations. In light of [Mitek's] bad faith conduct to date, I am happy to be the agent of their demise." (Id.) RMII's counsel alleged that "actions will take the place of threats in due course" and that "RMII will stomp Mitek out of existence." (D.I. 28 at Ex. 5.) On November 19, 2014, Mitek served RMII with a notice pursuant to Federal Rule of Civil Procedure 11 ("Rule 11 letter"), which expressed Mitek's concerns with the sufficiency of RMII's pre-filing investigation. (D.I. 95 at Ex. BB.) Specifically, the Rule 11 letter detailed how at least one limitation in each asserted claim was not satisfied by the accused products. (Id.) The Rule 11 letter complained that had RMII conducted a sufficient pre-filing investigation, it would have determined that there was no good faith basis for alleging infringement of the asserted claims. (Id.) Mitek did not include any attachments to the Rule 11 letter, and Mitek did not follow the Rule 11 letter with a motion for sanctions.

         On January 26, 2015, Mitek filed IPR petitions claiming that all of RMII's asserted claims were unpatentable as obvious over the cited prior art. (D.I. 93 at 3; D.I. 94 at Exs. B-E.) On July 8, 2015, RMII amended the Complaint to name NCR and Fiserv as defendants. (C.A. No. 14-1142, D.I. 55; C.A. No. 14-1143, D.I. 60; C.A. No. 14-1144, D.I. 58.) Between July and August of 2015, the PTAB instituted review on all of the asserted claims in the patents-in-suit. (D.I. 104 at 6; D.I. 76 at 1.) Following the PTAB's institution decisions, the parties submitted a joint stipulation to stay the litigation. (D.I. 73.) The court entered a stay in the case on August 19, 2015. (D.I. 74.) During the course of the settlement negotiations that took place during the stay, RMII's counsel rejected Mitek's offers as "idiotic" and proclaimed that "Mitek can roll along on the brink of bankruptcy." (D.I. 95 at W.) The settlement discussions, again, were fruitless.

         On January 26, 2016, RMII filed a petition for IPR against Mitek's patent, U.S. Patent No. 8, 379, 914. (D.I. 95 at Ex. CC.) RMII's petition was rejected seven months later. IPR2016-00457. By July 20, 2016, the PTAB had either invalidated or entered an adverse judgment on all of the asserted claims of the patents-in-suit. (D.I. 84 at Ex. 1 at 51, 98-99, 137; D.I. 95 at Ex BB.) Following the PTAB's decisions, the parties submitted two joint requests and two stipulations to extend the length of the stay in the district court litigation from August 3, 2016 until September 16, 2016. (D.I. 76, 77, 78, 79.) On September 16, 2016, RMII filed a motion to dismiss its Complaint without prejudice. (D.I. 81.) On September 15, 2017, the court ordered RMII's Complaint dismissed with prejudice. (D.I. 90.) Fourteen days later, on September 29, 2016, Mitek filed the present motion for attorney's fees. (D.I. 92.) On November 13, 2017, RMII opposed Mitek's motion for attorney's fees and filed the pending motion to strike. (D.I. 103.)

         III. STANDARD OF REVIEW

         In patent law cases, a court is authorized by statute "in exceptional cases [to] . . . award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The Supreme Court has held that an "exceptional" case is "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). A party moving for attorney's fees must demonstrate, by a preponderance of the evidence, that the case is "exceptional." Id. at 1758. Exceptional cases involve "litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement." Epcon Gas Sys. Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002). Ultimately, the court must make a decision based on the totality of circumstances. See Octane Fitness, 134 S.Ct. at 1756.

         A court may also award attorney's fees under 28 U.S.C. § 1927. According to the statute, "[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably or vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorney's fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. The Third Circuit has held that sanctions are warranted under Section 1927 if an attorney has "(1) multiplied proceedings; (2) unreasonably and vexatiously; (3) thereby increasing the cost of the proceedings; (4) with bad faith or with intentional misconduct." LaSalle Nat'l Bank v. First Conn. Holding Group, L.L.C. XXIII, 287 F.3d 279, 288 (3d Cir. 2002). A finding of willful bad faith is required. Id. at 181.

         In addition to Section 1927, the Supreme Court has authorized a district court to use its "inherent power to police itself and "assess attorney's fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) (internal quotation marks omitted); see LaSalle Nat'l Bank, 287 F.3d at 288 ("[A]n award of fees and costs pursuant to the court's inherent authority to control litigation will usually require a finding of bad faith.")

         IV. DISCUSSION

         A. Fees Under 35 U.S.C. § 285

         The parties do not dispute that Mitek is the prevailing party as required by Section 285. The award of attorney's fees, therefore, turns on whether this case is exceptional. ...


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