United States District Court, N.D. California
IN RE PROTEGRITY CORPORATION AND PROTEGRITY USA, INC. PATENT LITIGATION
ORDER RE ATTORNEYS' FEES RE: DKT. NOS. 112, 114,
DONATO United States District Judge.
coda to this multidistrict patent litigation, defendants
Aptos, Inc. (“Aptos”), Corduro, Inc.
(“Corduro”) and Informatica, LLC
(“Informatica”) seek to recover attorneys'
fees from plaintiffs Protegrity Corporation and Protegrity
USA, Inc. (together, “Protegrity”) under 35
U.S.C. § 285. The motions are denied.
consolidated litigation arises out of Protegrity's
efforts to enforce two of its patents, U.S. Patent Nos. 6,
321, 201 and 8, 402, 281. The '201 patent was issued on
November 20, 2001, and generally claims the invention of
cell-level encrypted database technology that functions by
allowing or disallowing access to an encrypted data element
in one database based on calls to data access rules in a
second database. Dkt. No. 127-2 ('201 Patent). The
'281 patent was issued on March 19, 2013, is a
continuation of the same application as the '201 patent
and claims a substantially similar invention. Dkt. No. 127-3
2008 and 2010, Protegrity filed infringement cases asserting
the '201 patent against three of its competitors. Dkt.
No. 127-1 at 7-8. The first settled after five years of
litigation, the second mid-trial, and the third
“without much discovery.” Id. At oral
argument here, Protegrity's counsel represented that the
company had collected approximately $20, 000, 000 in the
these successes, Ulf Mattsson, Protegrity's former CTO,
was tasked with researching the encrypted database industry
to identify other potential infringers of Protegrity's
patents. Id. at 8. His investigation led to the
filing of a number of lawsuits in several district courts,
including the cases involving Aptos (formerly “Epicor
Software Corporation”), Corduro and Informatica that
are at issue here.
2014, Informatica, Aptos and another party petitioned the
Patent Trial and Appeal Board (“PTAB”) to do a
Covered Business Method (“CBM”) review of all the
asserted claims of the '201 and '281 patents. Dkt.
No. 37 at 1-2. On November 7, 2014, while venue challenges
were underway in several of the underlying cases, Protegrity
moved under 28 U.S.C. § 1407 to centralize all district
court proceedings in the District of Connecticut, where
Protegrity had originally filed its cases. On February 20,
2015, the Judicial Panel on Multidistrict Litigation
consolidated the proceedings but transferred the cases to the
Northern District of California and this Court. Dkt. No. 1 at
Court held an initial case management conference on April 1,
2015. Dkt. No. 17. With an eye toward containing litigations
costs and avoiding potentially duplicative adjudications, the
Court proposed, without objection by any party, to stay the
consolidated actions in their entirety pending the PTAB's
response to defendants' petitions to institute review.
Id. Over the next three months, the PTAB instituted
CBM reviews on all of the claims asserted by Protegrity. Dkt.
No. 37 at 1-2. The Court extended the stay through the
PTAB's completion of the CBM reviews. Dkt. No. 55. In
2016, the PTAB issued several Final Written Decisions
invalidating the '201 and '281 patents primarily for
lack of patent eligibility under 35 U.S.C. § 101.
See Dkt. No. 84 at 2.
Court held another case management conference on June 29,
2016, to solicit the parties' views on how to proceed in
light of the PTAB determinations. Dkt. No. 91. Protegrity
stated its intention not to appeal the PTAB decisions, and
said it was in the process of dismissing defendants.
Id. Shortly after the conference, Protegrity
stipulated to a judgment of invalidity, Dkt. No. 103, which
the Court entered on July 15, 2016. Dkt. No. 106.
many defendants were content to walk away at this stage, five
accused infringers, including the three moving parties here,
expressed the intent to pursue attorneys' fees under
Section 285 as prevailing parties in an
“exceptional” patent case. The Court referred the
issue to Magistrate Judge Donna Ryu for a settlement
conference. Dkt. No. 107. Protegrity settled with two of the
five accused infringers but not with Aptos, Corduro or
Informatica. Dkt. No. 110. These defendants filed
the separate motions for attorneys' fees that are the
subject of this order. Dkt. Nos. 112, 114, 116. While the
motions have unique fact details on some specific points,
they raise largely overlapping arguments and so are treated
Patent Act provides that “the court in exceptional
cases may award reasonable attorney fees to the prevailing
party.” 35 U.S.C. § 285. In 2014, the Supreme
Court overturned the Federal Circuit's “rigid and
mechanical formulation” of rules governing fee shifting
under Section 285 that had been in effect since 2005.
Octane Fitness, LLC v. ICON Health & Fitness,
Inc., 134 S.Ct. 1749, 1754 (2014) (overruling Brooks
Furniture Mfg., Inc. v. Dutailier Int'l Inc., 393
F.3d 1378 (Fed. Cir. 2005)). In lieu of the tests under
Brooks Furniture of objective baselessness and
subjective bad faith, to be proven by clear and convincing
evidence, the Supreme Court held that the plain language of
Section 285 “imposes one and only one constraint on
district courts' discretion to award attorney's fees
in patent litigation: The power is reserved for
‘exceptional' cases.” Id. at
1755-56. Since the Patent Act did not define
“exceptional, ” the Supreme Court adopted its
everyday meaning of “rare, ” “unusual,
” or “special.” Id. at 1756. It
added the guidance that “an ‘exceptional'
case is simply 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
district court determines whether an action qualifies as
exceptional in light of the totality of the circumstances in
each case. Id. Relevant factors include, but are not
limited to, “frivolousness, motivation, objective
unreasonableness (both in the factual and legal components of
the case) and the need in particular circumstances to advance
considerations of compensation and deterrence.”
Id. at 1756 n.6 (quoting Fogerty v. Fantasy,
Inc., 510 U.S. 517, 534 n.19 (1994)). A preponderance of
the evidence standard applies, id. at 1758, and the
disposition of the fee request is entrusted to the district
court's sound discretion. Highmark Inc. v. Allcare
Health Mgt. Sys., Inc., 134 S.Ct. 1744, 1748 (2014);
Site Update Solutions LLC v. CBS Corp., 639 Fed.
App'x. 634, 637 (Fed. Cir. 2016).
Octane Fitness replaced the Federal Circuit's
strict tests with a more discretionary inquiry, it did not
declare an open season for fee awards in every case where the
defendant prevails. The “American Rule” -- where
each litigant bears its own fees, win or lose -- remains a
bedrock principle. Octane Fitness, 134 S.Ct. at
1753. Section 285 allows for a departure from that rule only
in rare and exceptional circumstances. Id. at 1756;
see also Stragent, LLC v. Intel Corp., Case No.
6:11-cv-421, 2014 WL 6756304, at *3 (E.D. Tex. Aug. 6, 2014)
(Dyk, Circuit Judge, sitting by designation). To be sure,
conduct need not be independently sanctionable to warrant fee
shifting. Octa ...