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Digitech Image Technologies, LLC v. Newegg, Inc.

United States District Court, Ninth Circuit

October 11, 2013

DIGITECH IMAGE TECHNOLOGIES, LLC, Plaintiff,
v.
NEWEGG, INC. and NEWEGG.COM, INC., Defendants.

ORDER DENYING DEFENDANTS' MOTION FOR ATTORNEYS' FEES [41]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

Newegg moves for an award of attorneys' fees and costs incurred defending against Digitech's patent-infringement suit. (ECF No. 41.) Newegg argues that Digitech's infringement allegations were objectively baseless and brought in bad faith to obtain nuisance-value settlements. (Mot. 5.) Newegg styles itself a champion of the bullied who "must take a stand against litigation-extortion [ sic ]." (Mot. 7.) But despite Newegg's gallant intentions, the Court DENIES Newegg's Motion for Attorneys' Fees for the reasons discussed below.[1]

II. FACTUAL BACKGROUND

On October 2, 2012, Digitech filed a patent-infringement suit against Newegg and Newegg.com accusing them of infringing U.S. Patent No 6, 128, 415. (Opp'n 5.) The 415 Patent concerns a device profile and method of generating a device profile. (415 Patent 1:1-6; 1:10-15, 1:26-31.)

Newegg was one of numerous defendants in Digitech's crosshairs. Digitech originally sued 45 defendants, which included both retailers and manufacturers of various digital cameras that allegedly infringed the 415 Patent. Digitech Image Techs., LLC v. Agfaphoto Holding, GMBH, Case No. 8:12-cv-01153-ODW (MRWx) (C.D. Cal. closed October 1, 2012). The Court dismissed that action for misjoinder under 35 U.S.C. § 299. Id. at ECF No. 190. Digitech then refiled individual infringement suits the next day. In total, Digitech brought 32 lawsuits against 70 defendants-20 of which were ultimately litigated.

During the litigation, the Court stayed the actions against Newegg and the other retailers under the "customer-suit exception." Digitech Image Techs., LLC v. Elecs. For Imaging, Inc., Case No. 8:12-cv-01324-ODW (MRWx), ECF No. 39 (C.D. Cal. closed August 6, 2013). Thus, the action against Newegg was stayed for most of the litigation while the Court resolved the manufacturer suits.

On July 31, 2013, some of the manufacturer-suit defendants-which did not include Newegg-brought a Motion for Summary Judgment. The Court granted the Motion, invalidating the 415 Patent under 35 U.S.C. § 101. Digitech Image Techs., LLC v. Elecs. For Imaging, Inc., Case No. 8:12-cv-01324-ODW (MRWx), ECF No. 89 (C.D. Cal. closed August 6, 2013). The Court entered judgment in this action for Newegg on August 6, 2013, as a result of the invalidation of the 415 Patent. (ECF No. 39.)

Newegg now seeks to recover $64, 851.73 in attorneys' fees under 35 U.S.C. § 285 incurred defending Digitech's suit. (Opp'n. 6.) Newegg is the sole defendant out of the 20 litigated cases to file a motion for attorneys' fees.

III. LEGAL STANDARD

Meritless patent litigation places a particular strain on judicial and party resources. In recognition of this strain, section 285 of the Patent Act gives district courts discretion to award fees to prevailing parties in qualifying cases. 35 U.S.C. § 285. Attorneys'-fees awards are appropriate in "exceptional cases" in which sanctions are necessary to deter parties from bringing clearly unwarranted suits. Id.; Automated Bus. Cos. v. NEC Am., Inc., 202 F.3d 1353, 1354 (Fed. Cir. 2000); Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011).

When deciding whether to award attorneys' fees, courts engage in a two-step inquiry. First, the Court must determine whether the prevailing party has proved by clear and convincing evidence that the case is "exceptional." MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012). If the Court finds that the case is exceptional, it must then determine whether an award of attorneys' fees is justified. Id. at 916.

Absent misconduct in the litigation or in securing the patent, a case is exceptional under § 285 if (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). Litigation is objectively baseless if the allegations are "such that no reasonable litigant could reasonably expect success on the merits." Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008).

Once the Court determines that the challenged litigation is objectively baseless, it may examine the litigant's subjective motivation. Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61(1993). The Court presumes that a patent-infringement assertion is made in good faith. Brooks Furniture, 393 F.3d at 1382. But if the record indicates by clear and convincing evidence that a patentee was manifestly unreasonable in assessing and pressing its infringement allegations, then a court may infer that the claims were brought in bad faith. Eltech Sys. Corp. v. PPG Indus., Inc., 903 F.2d 805, 810-11 (Fed. Cir. 1990). A patent holder's continued pursuit of an infringement claim is manifestly ...


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