Rothschild Connected Devices Innovations, LLC v. Guardian Protection Services, Inc.
858 F.3d 1383
Fed. Cir.2017Background
- Rothschild sued ADS for infringement of claim 1 of U.S. Patent No. 8,788,090, a patent claiming a system/method for customizing products using a remote server. Rothschild has filed dozens of suits asserting the ’090 patent against a wide range of technologies.
- ADS responded with an answer, counterclaims, a motion for judgment on the pleadings under 35 U.S.C. § 101 (patent-ineligible subject matter), and a Rule 11 Safe Harbor Notice attaching prior-art references it said anticipated claim 1 under 35 U.S.C. § 102(a)(1).
- Rothschild voluntarily dismissed its complaint within the Rule 11 safe-harbor period. ADS then moved for attorneys’ fees under 35 U.S.C. § 285, arguing the case was "exceptional." The district court denied fees, reasoning Rothschild’s voluntary withdrawal and its facially plausible § 101 arguments were reasonable and finding insufficient evidence of an inadequate pre-suit investigation of prior art.
- On appeal, the Federal Circuit reviewed the district court’s § 285 determination for abuse of discretion and reversed and remanded, holding the district court had abused its discretion by failing to consider Rothschild’s willful ignorance of prior art, the pattern of litigation, and by improperly conflating Rule 11 safe-harbor conduct with the § 285 exceptional-case inquiry.
- The Federal Circuit instructed the district court to conduct additional proceedings on remand consistent with its opinion, including fee calculation; costs were awarded to ADS.
Issues
| Issue | Plaintiff's Argument (Rothschild) | Defendant's Argument (ADS) | Held |
|---|---|---|---|
| Whether this case is "exceptional" under 35 U.S.C. § 285 | Rothschild: sued in good faith; advanced non-conclusory, facially plausible § 101 arguments; dismissed within Rule 11 safe-harbor, showing reasonable conduct | ADS: Rothschild’s claims were objectively weak, and dismissal during safe-harbor does not erase exceptional conduct; prior art showed anticipation | Reversed: district court abused discretion; must reassess § 285 considering totality of circumstances and prior art conduct |
| Whether Rothschild knowingly ignored or failed to investigate prior art | Rothschild: counsel and founder asserted a good-faith belief in validity and infringement | ADS: affidavits show counsel/founder did not analyze ADS’s provided prior art; statements were inconsistent and unsupported, indicating willful ignorance | Court: district court erred by not addressing these inconsistencies; failure to assess willful ignorance was abuse of discretion |
| Whether Rothschild’s overall litigation pattern supports an exceptional-case finding | Rothschild: asserting patent widely and settling is not alone bad faith | ADS: Rothschild filed dozens of suits across disparate technologies and settled for nuisance amounts to avoid testing merits | Court: pattern of repeated suits and settlement practice, combined with lack of reasonable pre-suit inquiries, is relevant and supports remand for § 285 consideration |
| Whether Rule 11 safe-harbor withdrawal precludes a § 285 fee award | Rothschild: withdrawal within safe-harbor shows conduct was reasonable and should weigh against fees | ADS: Rule 11 safe-harbor is not dispositive; § 285 uses a broader Octane Fitness totality inquiry and can award fees even if conduct is not sanctionable under Rule 11 | Court: district court erred by treating Rule 11 aims as controlling; Octane Fitness permits fees for unreasonable but not independently sanctionable conduct |
Key Cases Cited
- Octane Fitness v. ICON Health & Fitness, 134 S. Ct. 1749 (2014) (describing § 285 exceptional-case standard and totality-of-circumstances test)
- Highmark v. Allcare Health Mgmt. Sys., 134 S. Ct. 1744 (2014) (standard of review for abuse of discretion in fee determinations)
- Newegg Inc. v. SFA Sys., 793 F.3d 1344 (Fed. Cir. 2015) (pattern of litigation abuse relevant to § 285)
- Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314 (Fed. Cir. 2011) (settlement offers well below defense costs can indicate baseless suits filed to extract nuisance payments)
- Phigenix, Inc. v. ImmunoGen, Inc., 845 F.3d 1168 (Fed. Cir. 2017) (conclusory, unsupported attorney declarations have no evidentiary value)
- Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) (abstract ideas implemented using generic computer components are ineligible under § 101)
- Bilski v. Kappos, 561 U.S. 593 (2010) (§ 101 is a threshold test)
- Mayo Collaborative Servs. v. Prometheus Labs., 566 U.S. 66 (2012) (patent-eligibility inquiry considers how much future innovation is foreclosed)