INTELLECTUAL VENTURES I LLC, Plaintiff-Appellant v. TREND MICRO INCORPORATED, TREND MICRO INC. (USA), Defendants-Appellees
2019-1122
United States Court of Appeals for the Federal Circuit
December 19, 2019
Appeal from the United States District Court for the District of Delaware in No. 1:12-cv-01581-LPS, Chief Judge Leonard P. Stark.
JOHN PIERRE LAHAD, Susman Godfrey LLP, Houston, TX, argued for plaintiff-appellant. Also represеnted by RICHARD W. HESS; PARKER C. FOLSE, III, Seattle, WA.
YAR ROMAN CHAIKOVSKY, Paul Hastings LLP, Palo Alto, CA, argued for defendants-appellees. Also represented by DAVID BECKWITH, PHILIP OU.
Before DYK, TARANTO, and STOLL, Circuit Judges.
This is an appeal from the district court‘s finding of exceptionality under
BACKGROUND
In 2010, Intellectual Ventures I LLC filed a complaint for рatent infringement against Trend Micro, Inc., Symantec Corp., and two other defendants for infringement of claims in U.S. Patent Nos. 5,987,610, 6,073,142, 6,460,050, and 7,506,155. The district court severed the claims against Trend Micro from the claims against Symantec (hereinafter, the “Trend Micro action” and the “Symantec action“) and set separate trials in each action.1
The ‘050 patent is directed to systems and methods for filtering data files (such as email messages) based on their сontent. The word “characteristic” appears in asserted claims 9, 16, and 22 of the ‘050 patent.
During claim construction in the Symantec action, the parties disputed the meanings of several terms containing the word “сharacteristic.” Throughout claim construction and pretrial proceedings in the Symantec action, Intellectual Ventures‘s expert consistently opined that a “characteristic” is “an attribute of the document such as whether it contains a virus or is SPAM or bulk email or includes copyrighted content.” J.A. 610 (emphasis added); see also J.A. 614 ¶ 178 (expert
Ventures‘s proposed constructions for the “characteristic” claim terms in the Symantec action. The district court also adopted its claim construction order from the Symantec action in the Trend Micro action.
The jury trial against Symantec proceeded first. During cross-examination at trial, Intellectual Ventures‘s expert changed his opinion, testifying that bulk email was not a characteristic for purposes of claim 9 of the ‘050 patent. J.A. 630–33. He further testified that he “changed [his] opinion after [he] had a chance to prepare for trial working with Intellectual Ventures‘[s] lawyers.” J.A. 633 ll. 21–24. The jury found that Symantec did not infringe the asserted claims of the ‘050 patent but that Symantec had infringеd the asserted claims of the ‘142 and ‘610 patents.
Following the completion of trial in the Symantec action, Trend Micro moved for clarification of the district court‘s claim constructions in light of the expert‘s changed opinion. During the hearing on Trend Micro‘s motion, Intellectual Ventures‘s counsel maintained that the expert had not changed his opinion, despite the expert‘s clear trial testimony to the contrary. J.A. 824. Intellectual Ventures further argued that bulk email “never was” within the scope of claim 9 under the court‘s claim construction, because “bulk does not describe the content.” J.A. 811. The district court granted Trend Micro‘s motion for clarification and included “bulk email” as an example of a “characteristic” in its revised constructions for the “characteristic” terms in claims 9, 16, and 22. The district court reasoned that it “learn[ed] only at the last minute” that Intelleсtual Ventures understood the claim construction to mean “that bulk email was excluded from claim 9 when it was clearly in the other claims.” J.A. 1077. This “was a surprise inconsistent with the representations from” Intellectual Ventures, and “not what [the court] had intended” by its original claim construction. Id.
After the trial against Symantec, the district court also granted leave for Symantec and Trend Micro to file motions for judgment as a matter of law that the assertеd patent claims were invalid under
Trend Micro then moved for attorney fees under
DISCUSSION
I
Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”
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., 572 U.S. 545, 554 (2014). “District courts may determine whether a case is ‘excеptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.
We “apply an abuse-of-discretion standard in reviewing all aspects of a district court‘s § 285 detеrmination.” Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 564 (2014). “The abuse-of-discretion standard does not preclude an appellate court‘s correction of a district court‘s legal or factual error.” Id. at 563 n.2.
II
It is not clear that the district court applied the proper legal standard when it considered whether the case was exceptional under
Instead of determining whether the case was exceptional, it appears that the district court may have focused on whether one discrete portion of the case stood out “from other cases, from all the other portiоns of this case[,] in terms of either the substantive strength of a position [Intellectual Ventures] was advocating or the manner with which [Intellectual Ventures] was litigating.” J.A. 58. This
is not the appropriate analysis. Section 285 gives the district court discretion to depart from the American Rule and award attorney fees “in exceptional cases.” Accordingly, under the statute, the district court in this case should have determined whether the circumstancеs surrounding the expert‘s changed opinion were such that, when considered as part of the totality of circumstances in the case, the case stands out as exceptional.
Intellectual Ventures argues thаt a district court may never find a case exceptional based on a single, isolated act. According to Intellectual Ventures, a case is exceptional only when there are “repeated instаnces—i.e., a pattern—of bad faith, sharp tactics, and unreasonable litigation positions.” Reply Br. 3. The district court made clear that it did not view the circumstances
We hold that a district court has discretion, in an appropriate case, to find a case exceptional based on a single, isolated act. The Supreme Court has made clear that “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, сonsidering the totality of the circumstances.” Octane, 572 U.S. at 554. The Court has also explained that “[t]here is no precise rule or formula for making these determinations,” and disapproved a formulation that “superimpose[d] an inflexible framework onto statutory text that is inherently flexible.” Id. at 554–55 (first alteration in original) (citation omitted). Rather, “[section] 285 commits the determination whether a case is ‘exceptional’ to the discretion of the district cоurt.” Highmark, 572 U.S. at 563. Whether the conduct is a single, isolated act or otherwise, the relevant question for the district court is the same. The district court must determine whether the conduct, isolated or otherwise, is such that when considered as part of and along with the totality of circumstances, the case is exceptional,
i.e., the case stands out among others with respect to the substantive strength of a party‘s litigating position or the unreasonаble manner in which the case was litigated. Octane, 572 U.S. at 554.
Trend Micro notes that courts frequently award attorney fees under
CONCLUSION
We have considered Intellectual Ventures‘s remaining arguments and do not find them persuasive. For the foregoing reasons, we vacate the district court‘s finding of exceptionality and grant of attorney fees and remand to the district court to consider whether the circumstances surrounding the expert‘s changed testimony render the case exceptional under
VACATED AND REMANDED
COSTS
No costs.