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Straight Path IP Group, Inc. v. Cisco Systems, Inc.

United States District Court, N.D. California

November 20, 2019

APPLE INC., Defendant.




         In these related actions for patent infringement, defendants move for attorney's fees and costs. For the reasons stated below, the motions are Granted in part and Denied in part.


         This order finds that the shifting sands of the patent owner's delineations of the claimed invention's scope - instigated by its narrowing of scope to avoid invalidity before the Federal Circuit, followed by its broadening of scope to accuse others of infringement in the district court - render the above-captioned actions “exceptional” within the meaning of Section 285 of Title 35 of the United States Code.

         The procedural background of these related actions has been described in prior orders but will be summarized herein (see No. 16-3582, Dkt. Nos. 61, 78). Plaintiff Straight Path IP Group, Inc. sued defendant Cisco Systems, Inc., alleging infringement of United States Patent Nos. 6, 009, 469 (“the '469 patent”), 6, 108, 704 (“the '704 patent”), 6, 131, 121 (“the '121 patent”), and 6, 701, 365 (“the '365 patent”). In a related action, Straight Path also sued defendant Apple Inc. for allegedly infringing these four patents plus United States Patent No. 7, 149, 208 (“the '208 patent”).

         The patents-in-suit belong to the same family and generally relate to establishing a point-to-point communication link. Specifically, they “disclose a point-to-point Internet communications protocol that enables: (1) a first computer program to query a connection server to determine if a second computer program is currently connected to the network, and (2) if the second computer program is connected, to obtain its existing network address so that the desired point-to-point communication can be established at the time it is sought” (Nos. 16-3463, Dkt. No. 1 ¶ 12; 16-3582, Dkt. No. 84 ¶ 12).

         Over the past five years, these patents have been put through the judicial wringer. Starting in 2014, Straight Path first filed suit against both defendants (among others) (Nos. 14-4302, 14-4312). Shortly after filing suit, Straight Path sought to stay those actions based on pending inter partes review proceedings. Soon after a prior order denied the request to stay, Straight Path and both defendants executed a “Standstill Agreement” under which Straight Path agreed not to use the 2014 lawsuit as the basis for claiming pre-suit notice of infringement for purposes of an enhanced damages claim in any future lawsuit (No. 16-3582, Dkt. No. 214 at 3-4). Straight Path then voluntarily dismissed the actions without prejudice.

         For the next two years (and before Straight Path filed the instant actions), inter partes review of the '704, '121, and '469 patents ensued before the Patent Trial and Appeal Board and the United States Court of Appeals for the Federal Circuit. Crucial to the instant motions - and the prior order granting summary judgment of noninfringement for both defendants - those proceedings focused on the “is connected” limitation, as found in representative Claim 1 of the '704 patent (id., Dkt. No. 84-2 at 11:2-23 (emphasis added)):

A computer program product for use with a computer system, the computer system executing a first process and operatively connectable to a second process and a server over a computer network, the computer program product comprising:
a computer usable medium having program code embodied in the medium, the program code comprising:
program code for transmitting to the server a network protocol address received by the first process following connection to the computer network;
program code for transmitting, to the server, a query as to whether the second process is connected to the computer network;
program code for receiving a network protocol address of the second process from the server, when the second process is connected to the computer network; and
program code, responsive to the network protocol address of the second process, for establishing a point-to-point communication link between the first process and the second process over the computer network.

         In 2013 and 2014, the Board construed the “is connected to the computer network” limitation during inter partes proceedings challenging the '704 patent's validity. Prior art references in play during those proceedings included NetBIOS and WINS. The Board initially found that the broadest reasonable construction of “is connected to the computer network” involved “a processing unit that is ‘active and on-line at registration.' ” Sipnet EU S.R.O. v. Straight Path IP Grp., Inc., No. IPR2013-00246, 2014 WL 5144564, at *4 (P.T.A.B. Oct. 9, 2014). Based in part on that construction, the Board held that “(1) claims 1-7, 32, and 38-42 [were] anticipated by NetBIOS, (2) claims 1-7 and 32-42 [were] anticipated by WINS, and (3) claims 33-37 [were] obvious over NetBIOS and WINS.” Id. at *15.

         The Federal Circuit reversed. Straight Path argued before the appellate court that the Board had erroneously construed the “is connected” limitation, insisting instead that its claimed invention focused on “the determination of whether a process is currently connected to the computer network, not whether it was previously connected, ” since “having once registered with a name server is no indication that a computer is actually connected to a computer network or is on-line at the time a particular communication is sought.” That is, the crux of the invention, according to Straight Path, was a “temporal focus on the process's on-line status at the time the desired communication is sought” - i.e., “at the very instant in time when the first process queries whether the second process is available” (No. 16-3463, Dkt. No. 125-9 at 12 (bold in original), 23, 43). During oral argument in Sipnet, Attorney James Wodarski (then-counsel for Straight Path) drove this point home by specifically arguing that “critical to the 704 system as opposed to the prior art is . . . when the process goes offline, it has to communicate that to the server.[1] The server is obliged and required to update that status by either deleting that information of that process or flagging it as offline” (No. 16-3582, Dkt. No. 169 at 5). In light of the foregoing, the Federal Circuit agreed with Straight Path and construed “is connected to the computer network” as “is connected to the computer network at the time that the query is transmitted to the server.” Straight Path IP Grp., Inc. v. Sipnet EU S.R.O., 806 F.3d 1356, 1363 (Fed. Cir. 2015); see also Id. at 1366 n.2.

         In May 2016, the Board applied this construction and upheld the validity of the challenged claims on remand. See LG Elecs., Inc. v. Straight Path IP Grp., Inc., Nos. IPR2015-00196, IPR2015-00198, IPR2015-00209, 2016 WL 2640549, at *5-6, 10-11 (P.T.A.B. May 9, 2016). On appeal, Attorney Wodarski emphasized once again during oral argument that the claimed invention “has to track whether you are continuing to stay on line. We either have to - there has to be some mechanism in the system to flag you as off line. . . . The issue in SIPNET and the issue that controls here is that the claim plainly requires that it track that online status so that it can [make] the determination at the time that the query is transmitted to the server” (see No. 16-3582, Dkt. No. 131-19 at 17:7-25 (emphasis added)). This temporal aspect, Straight Path once again argued, distinguished the claimed invention from those in the prior art. In June 2017, the Federal Circuit agreed with Straight Path and affirmed the Board's finding of validity.

         Meanwhile, in June 2016, Straight Path - armed with a favorable finding of validity by the Board - filed the instant actions. In October 2017, both defendants moved for summary judgment of noninfringement as to all asserted patents (with the sole exception of the '208 patent in Apple's case) (Nos. 16-3463, Dkt. No. 125; 16-3582, Dkt. No. 131). Those motions hinged on whether the accused products met the “is connected” limitation.

         In November 2017, an order granted defendants' motions for summary judgment (“summary judgment order”) (see, e.g., No. 16-3582, Dkt. Nos. 155, 169). That summary judgment order found that “the invention that Straight Path described to the Federal Circuit requires a server that is able to, at the very moment in time that a first process asks, determine whether or not a second process is online by checking its own database, which must always remain accurate by continuously tracking the online or offline status of endpoint processes so that it can answer this very question” (id., Dkt. No. 169 at 13). It further found that the undisputed facts showed that because both defendants' products determined the online status after the query was transmitted to the server, they did not infringe (id., Dkt. No. 169 at 13, 22). That ...

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