Case Information
*2 Before T ARANTO , S CHALL , and C HEN , Circuit Judges. T ARANTO , Circuit Judge.
Robert Mankes owns U.S. Patent No. 6,477,503, which describes and claims methods for managing a reservation system that divides inventory between a local server and a remote Internet server. In October 2013, Mr. Mankes sued Vivid Seats Ltd. and Fandango, LLC in the Eastern District of North Carolina, alleging that their operation of Internet-based reservation systems, in con- junction with the operation of local reservation systems by movie theaters and other entertainment venues, infringes the ’503 patent. Because it is undisputed that no one person performs all of the steps of the method claims, Mr. Mankes’s case depends on establishing what has been called “divided infringement.”
When Mr. Mankes filed his complaints, the law relat- ing to divided infringement was in the midst of a multi- year process of active judicial reconsideration, including by this court sitting en banc and by the Supreme Court. This court had granted en banc review to address the standards for direct-infringement liability for divided infringement but, in its decision, had left existing direct- infringement standards in place without reconsidering them, while providing an independent inducement basis for divided-infringement liability. Akamai Techs., Inc. v. Limelight Networks, Inc. , 692 F.3d 1301 (Fed. Cir. 2012) (en banc) ( Akamai II ). By mid-2014, however, the Su- preme Court had reversed Akamai II , held that divided- infringement liability of the sort at issue here requires some person to be liable for direct infringement under 35 U.S.C. § 271(a), and remanded for possible reconsidera- tion of direct-infringement standards by this court. Limelight Networks, Inc. v. Akamai Techs., Inc. , 134 S. Ct. 2111, 2120 (2014) ( Limelight ).
In early 2015, the district court in the present cases, applying the law on direct-infringement liability as it then stood, concluded that Mr. Mankes’s allegations are insufficient to establish direct infringement under § 271(a), and on that basis the court granted judgments on the pleadings for Vivid Seats and Fandango. When Vivid Seats thereafter sought attorney’s fees against Mr. Mankes under 35 U.S.C. § 285, the court denied the request, finding the case not to be exceptional, a prerequi- site to a fee award under § 285. Mr. Mankes has appealed the merits judgments against him, and Vivid Seats has appealed the denial of fees.
During the briefing on the merits appeal here, the le-
gal standards applied by the district court were first
reinforced, then revised, by further decisions of this court
in the Akamai-Limelight case. In
Akamai Technologies,
Inc. v. Limelight Networks, Inc.
, 786 F.3d 899 (Fed. Cir.
2015) (
Akamai III
), a panel of this court, on remand from
the Supreme Court, rejected direct-infringement liability
for Limelight—as had the initial panel in the case in
2010,
Akamai Techs., Inc. v. Limelight Networks, Inc.
, 629
F.3d 1311, 1318–22 (Fed. Cir. 2010) (
Akamai I
), and the
en banc court in 2012,
Akamai II
,
Three months later, however, the en banc court vacat-
ed
Akamai III
and decided
Akamai Technologies, Inc. v.
Limelight Networks, Inc.
, 797 F.3d 1020 (Fed. Cir. 2015)
(en banc) (
Akamai IV
),
cert. denied
,
We need not say how much broadening occurred in Akamai IV . In the present cases, the district court’s rulings and the arguments of Fandango and Vivid Seats to the district court were squarely based on the earlier, narrower standard. We vacate the judgments on the pleadings against Mr. Mankes and remand for further proceedings in light of Akamai IV .
We affirm the denial of attorney’s fees to Vivid Seats. Not only is Vivid Seats no longer a prevailing party (given our vacatur of the judgment in its favor), but we readily conclude that the district court did not abuse its discre- tion in deeming the case not to be exceptional even under the state of the law before Akamai IV . Mr. Mankes rested his case on reasonable arguments for adjustment of legal standards that this court had already granted en banc review to consider in Akamai II and that remained in play, as indicated by Akamai II ’s postponing reconsidera- tion of those standards, by Limelight ’s remand, and, ultimately, by Akamai IV ’s adoption of broadened stand- ards. In these circumstances, the district court did not err in refusing to deem unreasonable Mr. Mankes’s pursuit of this case to date.
B ACKGROUND
The ’503 patent, entitled “Active Reservation System,” recognizes that, to serve a national market, vendors have begun selling their goods and services both through the Internet and at their physical locations. ’503 patent, col. 1, lines 31–37. [1] To do so, the patent says, vendors have typically divided their inventory, allocating a portion to the physical site and ceding control of the remaining inventory to the remote Internet site. Id. , col. 1, lines 38– 47. But when the inventory is split, “neither [site] ha[s] contemporaneous information on the overall state of the local inventory,” which may result in underselling when one site has exhausted its allocation but the other still has available inventory, or may require the vendor to undertake the costly task of reallocating its inventory between the sites. Id. , col. 1, lines 43–67.
The specification describes means of controlling the entire inventory from a local site. The local site main- tains the total inventory of available goods and services and designates pricing. Id. , col. 3, lines 24–27. It com- municates what portion of the inventory is available to an Internet server, which makes that inventory accessible for purchase by consumers online. Id. , col. 3, lines 27–32. When a sale is requested over the Internet, the Internet site contacts the local site, which confirms the sale and updates the total inventory. Id. , col. 3, lines 32–38. The adjusted inventory is then transmitted to the Internet site, along with a confirmation of the sale, which is for- warded to the consumer. Id. , col. 3, lines 38–42. In this way, any time a sale is made, whether at the local or Internet site, the local site can keep an up-to-date account of its total inventory and communicate that information to both sites. Id. , col. 3, lines 16–19.
Claim 1 is illustrative, stating:
1. A method for operating an Internet based active reservation system for the purchase of goods and services, comprising: (a) providing an owner event server located at and operated by a local event owner having an available inventory of goods and services at a local site;
(b) providing an active reservation server locat- ed at and operated by user remote from said local site, said active reservation server ac- cepting only data from said owner event serv- er and formatting said data for viewing by an Internet-based consumer; (c) allocating said available inventory by only said owner event server at all times between local inventory and Internet inventory; (d) adjusting said available inventory by only said event owner at said owner event server at all times based on purchases of goods and services at said local event site; (e) communicating said allocated Internet in- ventory only to said active reservation server; (f) receiving purchase requests for goods and services in said Internet inventory at said ac- tive reservation server from said Internet- based consumer;
(g) communicating said purchase requests from said active reservation server to said owner event server;
(h) accepting said purchase requests solely at said local event server and adjusting said In- ternet inventory only by said owner event server at all times to establish an adjusted In- ternet inventory;
(i) communicating said accepting and said ad- justed Internet inventory from said owner event server to said active reservation server; and
(j) communicating said accepting and confirma- tion indicia relative thereto from said active reservation system to said Internet consumer.
Id. , col. 8, lines 33–67.
In these cases, filed in October 2013, Mr. Mankes has alleged that Vivid Seats and Fandango infringe the ’503 patent by operating Internet-based reservation systems for reserving, buying, and selling tickets to movies, sport- ing events, and concerts. He has admitted that Vivid Seats and Fandango do not themselves perform every step of the claims. He has urged a finding of divided infringe- ment, however, on the asserted ground that local enter- tainment venues perform the remaining steps.
When these suits began, divided-infringement law
was in flux, as reflected in the developments in the case
brought by Akamai against Limelight. In 2010, a panel of
this court had held that Limelight could not be held liable
for direct infringement, applying
Muniauction
and
BMC
.
Akamai I
, 629 F.3d at 1318–22. But in 2011, this court
granted en banc review.
Akamai Techs., Inc. v. Limelight
Networks, Inc.
,
When the Supreme Court granted certiorari,
Lime-
light Networks, Inc. v. Akamai Techs., Inc.
,
Vivid Seats and Fandango moved for judgment on the pleadings, arguing that they could not be liable for direct infringement because, based on the prevailing standard, Mr. Mankes had not alleged enough to attribute the ticket sellers’ actions to them. In his responses, Mr. Mankes noted the various changes in the state of the law, and he continued to argue for changing the law on divided in- fringement. In February 2015, in two materially similar opinions, the district court granted the defendants’ mo- tions—addressing the merits of both direct infringement and inducement. The court relied on the prevailing divided-infringement law and found that Mr. Mankes had not “allege[d] facts permitting the inference that defend- ant[s] direct[ ] or control[ ] the theaters in their actions.” 15-1500 J.A. 8, 18. The court entered final judgment for Vivid Seats and, after Fandango dismissed its counter- claims without prejudice, entered final judgment for Fandango.
After the district court granted judgment on the pleadings, Vivid Seats filed a motion requesting attorney’s fees under 35 U.S.C. § 285. On June 30, 2015, the district court, considering all of the circumstances, found the case not exceptional and therefore denied Vivid Seats’ motion.
Meanwhile, on May 13, 2015, before Mr. Mankes filed
his opening brief in his (consolidated) appeals from the
merits judgments, a panel of this court decided
Akamai
III
, applying a divided-infringement standard sufficiently
limiting that, as in
Akamai I
and
Akamai II
, the court
held Limelight to be entitled to judgment of no direct
infringement as a matter of law.
Akamai III
, 786 F.3d at
899–915. In August 2015, however, before briefing was
completed, the en banc court vacated that opinion,
see
Akamai Techs., Inc. v. Limelight Networks, Inc.
, 612 F.
App’x 617 (Fed. Cir. 2015), and decided the case anew in
Akamai IV
. In that decision, the court ruled against
Limelight, reversing the district court judgment in its
favor and holding it liable for direct infringement based
on the articulation of the broadened liability standards
quoted above.
We have jurisdiction to review the merits and fees judgments under 28 U.S.C. § 1295(a)(1). 11
D ISCUSSION A
We review the district court’s judgments on the plead-
ings de novo.
buySAFE, Inc. v. Google, Inc.
, 765 F.3d
1350, 1352 (Fed. Cir. 2014);
Drager v. PLIVA USA, Inc.
,
A sufficient reason, reflected in the district court’s si- lence about waiver, is that Vivid Seats did not expressly argue waiver to the district court. In opposing Vivid Seats’ motion for judgment on the pleadings in November 2014, after the June 2014 Limelight decision, Mr. Mankes relied on direct infringement—despite having told Vivid Seats by email in March 2014, before Limelight rejected the independent inducement theory of Akamai II , that he was not pressing direct infringement in his amended complaint, 15-1500 J.A. 125–26. But Vivid Seats re- sponded to Mr. Mankes’s shift in emphasis to direct infringement only by stating that it was “surprising”; Vivid Seats did not argue that Mr. Mankes must be held to have waived a direct-infringement claim. Reply Br. in Support of Def. Vivid Seats Ltd.’s Mot. for Judgment on the Pleadings at 1, Mankes v. Vivid Seats Ltd. , No. 5:13- cv-00717 (E.D.N.C. Dec. 11, 2014), ECF No. 40. Without a waiver argument having been directly made by Vivid Seats, we cannot fault the district court for deciding the merits of the direct-infringement contention rather than considering it waived.
Vivid Seats’ waiver argument amounts to a new ar-
gument on appeal, but it makes no showing of the plain
error or miscarriage of justice required to justify reversal
based on a new argument.
See Karpel v. Inova Health
Sys. Servs.
,
On the merits, we conclude that Mr. Mankes’s cases warrant reinstatement and a remand for further proceed- ings in light of the broadened divided-infringement standard articulated by the en banc court in Akamai IV . Mr. Mankes has alleged that each step of claim 1 is per- formed by some entity. Some steps, i.e. , (b), (e)–(g), (j), involve operating an online system for selling tickets and communicating sales to the inventory holder; Mr. Mankes has alleged that Vivid Seats and Fandango perform those steps. The remaining steps, i.e. , (a), (c)–(d), (h)–(i), in- volve maintaining an inventory of tickets and updating the amounts in response to local and Internet sales; Mr. Mankes has alleged that local venues perform those steps. In the district court, there was no serious dispute that Mr. Mankes has sufficiently alleged in each case that the identified entities—the defendant Internet entity and the associated local venues—together perform all steps and deal with each other in making the reservation systems work. The dispute was over whether Mr. Mankes has alleged sufficient facts to justify attributing the local venues’ actions to Vivid Seats and Fandango under the then-governing standards for such attribution. And the district court held, in agreement with Vivid Seats and Fandango, that Mr. Mankes has not done so because he has not alleged that the local venues either are the de- fendants’ agents or are required by the defendants to take the particular actions that constitute performance of steps (a), (c)–(d), (h)–(i). 15-1500 J.A. 5–8, 15–18.
Although Mr. Mankes noted at oral argument that his claim could not survive under the direct-infringement standards pre-dating Akamai IV (as Akamai’s direct- infringement claim did not survive under those stand- ards), 15-1500 Oral Arg. at 1:16–2:02, those are no longer the governing standards. Under Akamai IV , the district court’s analysis is now insufficient to support rejection of direct-infringement liability here. This court in Akamai IV articulated circumstances warranting attribution not previously enumerated in such terms, and it changed an Akamai loss into a Limelight loss on direct infringement on that basis. 797 F.3d at 1023 (“an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance”). Akamai IV also is explicit that “other factual scenarios may arise which warrant attributing others’ performance of method steps to a single actor,” to be assessed “in the context of the particular facts present- ed.” Id. In at least those ways, Akamai IV makes clear that it does not suffice to reject direct-infringement liabil- ity here to conclude that local venues are not agents of the defendants and are not required by the defendants to take the claim steps that they perform.
When the governing legal standards have changed during an appeal, it may be appropriate, in the exercise of our authority under 28 U.S.C. § 2106, to vacate a deter- mination made under superseded standards and to re- mand for consideration under the new standards and for any proceedings made necessary and appropriate by the new standards. See , e.g. , Patterson v. Alabama , 294 U.S. 600, 607 (1935) (“We may recognize [an intervening legal] change, which may affect the result, by setting aside the judgment and remanding the case so that the . . . court may be free to act.”); Oplus Techs., Ltd. v. Vizio, Inc. , 782 F.3d 1371, 1374–75 (Fed. Cir. 2015) (vacating and re- manding attorney’s fees case in light of Supreme Court decision changing the legal standard); Meadaa v. K.A.P. Enters., L.L.C. , 756 F.3d 875, 885 (5th Cir. 2014); GDG Acquisitions, LLC v. Gov’t of Belize , 749 F.3d 1024, 1029 (11th Cir. 2014); McCravy v. Metro. Life Ins. Co. , 690 F.3d 176, 180–82 (4th Cir. 2012). In the present case, such a disposition is appropriate.
We do not ourselves rule on whether the allegations Mr. Mankes has already made might be interpreted to justify attribution under Akamai IV , or what additional factual allegations might do so. Nor are we prepared to find that the record here makes clear that the judgments under review are correct under the newly articulated standards regardless of what facts might now be forth- coming with those standards in mind. Mr. Mankes has already alleged that Vivid Seats and Fandango market their reservation systems to local venues and offer them financial incentives “to perform . . . the other steps of the claimed invention by having the Sellers use the Vivid Seats [and Fandango] reservation system[s],” 15-1500 J.A. 64 ¶¶ 21–22, 87 ¶¶ 18–19, and that local venues’ decisions to use the Vivid Seats or Fandango systems initiate commercial arrangements involving continuing communications about sales of tickets to permit the sellers to update their inventories, 15-1500 J.A. 63 ¶ 14, 86 ¶ 14. For such an ongoing interactive commercial relationship, it is plausible that Vivid Seats and Fandan- go establish rules governing the needed coordination. Given what he already has alleged, Mr. Mankes should have the opportunity to allege facts that allow for a more informed evaluation than is possible on the present record, which was not developed with Akamai IV in mind, of whether the defendants’ accused activities come within the ambit of the Akamai IV “conditions participation” standard or might otherwise justify finding direct- infringement liability for divided infringement.
We do not think it appropriate to rule out at this stage any particular theory of direct infringement, including the joint-enterprise theory and the possibility of other bases of attribution recognized in Akamai IV . Nor do we pre- scribe the course of proceedings required on remand beyond ruling that, given the early stage of this litigation, Mr. Mankes must at least have the chance to amend his complaints, if he believes such amendment might be useful or the district court determines it is necessary, based on this court’s new articulation of divided- infringement standards. See Laber , 438 F.3d at 426. [2] With that exception, we leave it to the district court in the first instance to apply Akamai IV to the current com- plaints, or to newly amended complaints, under the standards that govern whether a complaint suffices to allow litigation to continue past the stage of the opening pleadings. We also note that it is up to the district court to apply the usual standards for following any rulings that alter the governing law while the case is on remand. We vacate the district court’s judgments on the pleadings and remand.
B
We affirm the denial of Vivid Seats’ motion for attor-
ney’s fees. We review for abuse of discretion the district
court’s determination that attorney’s fees were not war-
ranted under § 285 because the case is not exceptional.
Highmark Inc. v. Allcare Health Mgmt. Sys., Inc.
, 134 S.
Ct. 1744, 1749 (2014). Section 285 permits a court, in an
“exceptional” case, to “award reasonable attorney fees to
the prevailing party.” 35 U.S.C. § 285. Because we
vacate and remand judgment on the pleadings and no
other relief runs in Vivid Seats’ favor, Vivid Seats is no
longer the “prevailing party” under § 285.
Inland Steel
Co. v. LTV Steel Co.
,
In any event, independently of whether legal stand- ards undergo further changes or whether Mr. Mankes eventually loses, we think it clear and worth ruling that the district court committed no error in rejecting an exceptional-case contention even under the law before Akamai IV . As the Supreme Court has explained, 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). Here, the district court could readily view Mr. Mankes as having reasonably, openly, and in good faith pressed arguments for plausibly result-altering changes in governing legal standards that were demonstrably under active judicial reconsideration in this court and the Supreme Court at the time. While Mr. Mankes’s case was pending before the district court, the law on divided infringement re- mained uncertain, with both our court and the Supreme Court weighing in on possible changes, and Mr. Mankes’s litigation conduct appropriately reflected that shifting legal landscape. Without addressing other situations, we conclude that, in these circumstances, the district court properly determined that this case, to date, has not been exceptional in a way that would justify an award of fees against Mr. Mankes.
C ONCLUSION
For the foregoing reasons, we vacate the district court’s judgments dismissing the cases and remand for further proceedings, and we affirm the denial of Vivid Seats’ motion for attorney’s fees.
No costs.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED
Notes
[1] The patent also refers to telephone reservation systems, but the claims all involve the Internet, and we limit our discussion to Internet systems.
[2] See also Ladapo v. Target Stores, Inc. , 615 F. App’x 842, 843 (5th Cir. 2015); Marrero v. City of Hialeah , 625 F.2d 499, 512 (5th Cir. 1980); Rogers v. White Metal Rolling & Stamping Corp. , 249 F.2d 262, 264 (2d Cir. 1957) (vacatur and amendment warranted when “the controlling law has been altered or clarified during the time the appeal has been pending”); 6 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, Richard L. Marcus & Adam M. Steinman, Federal Practice and Procedure § 1473 (3d ed. 2015) (courts broadly permit amendment to “enable a party to assert matters that were overlooked or were unknown at the time the party inter- posed the original complaint”); id. § 1474 (“Courts also have allowed a party to amend in order to change the nature or theory of the party’s claim . . . .”); cf. Hartis v. Chicago Title Ins. Co. , 694 F.3d 935, 948 (8th Cir. 2012) (change in law may warrant amendment even after scheduling-order deadline).