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United States: Plaintiff Gives Thanks That Texas Court Denied Prevailing Defendants Their Attorneys' Fees Despite Plaintiff's Claim Construction And Infringement Theories That "Stretch[Ed] The Bounds Of Reasonableness"
In three patent cases brought by the same plaintiff, Raylon LLC,
against numerous defendants, Judge Davis of the Eastern District of
Texas denied Rule 11 sanctions and motions for attorneys' fees
under Section 285 of the Patent Statute, and Section 1927 of Title
28.
Following the grant of summary judgment of noninfringement,
Defendants filed motions contending that Raylon's infringement
theory was "so legally untenable" that fees and costs
should be awarded under Sections 285 and 1927. Defendants earlier
had filed a Rule 11 motion seeking sanctions. Raylon asserted U.S.
Patent No. 6,655,589 ("the '589 patent") against all
of the defendants. All of the claims of the '589 patent require
a "display being pivotably mounted on said housing."
Raylon argued that this should be construed to mean "an
electronic device attached to a housing that visually presents
information and allows the display to be moved or pivoted relative
to the viewer's perspective" and alleged that infringement
was found where the entire device, not just the display, could be
pivoted to the view. Defendant EZ Tag sought a construction of the
term to mean that "an integral computer screen which can move
positions with regard to the computer housing and is not maintained
in a fixed position." The remaining defendants argued that it
should mean "the display must be mounted on the housing and
the mounting of the display on the housing must be pivotable so
that the display and housing may pivot with respect to each
other." The Court construed the term as "the display must
be mounted on the housing so that the display and housing may pivot
with respect to each other." Because it was undisputed that
all of the defendants' accused products had displays that were
rigidly mounted as to the housing, the court granted summary
judgment of noninfringement, both literally and under the doctrine
of equivalents.
In denying Defendants' subsequent motion for Rule 11
sanctions, the Court stated its concern "about plaintiffs who
file cases with extremely weak infringement positions in order to
settle for less than the cost of defense and have no intention of
taking the case to trial." The court further stated that
"[w]here it is clear that a case lacks any credible
infringement theory and has been brought only to coerce a nuisance
value settlement, Rule 11 sanctions are warranted." On the
other hand, the court countered that "there may be legitimate
cases where a plaintiff settles with a few smaller defendants in an
effort to raise needed capital in order to proceed to trial against
the remaining major defendants. In those situations, plaintiffs
typically settle with smaller defendants and proceed to trial
against larger defendants who have larger damage potential. Such is
a legitimate trial strategy. Moreover, the Court does not want to
discourage early settlement of some or all defendants. This Court
has always taken a favorable view of business resolutions to
legitimate commercial disputes when those settlements are based on
the case's merits and risks."
In denying the attorneys' fees motion based on Section 285,
the Court held that while the plaintiff's claim construction
arguments and infringement theory "do stretch the bounds of
reasonableness," they are not objectively frivolous. Taking a
losing position also does not constitute material misconduct. As
such, the Court held that the case was not an exceptional one under
Section 285.
Finally, in denying attorneys' fees under Section 1927, the
Court held that there was no evidence that the litigation was
"patently meritless."
This case illustrates the difficulty of obtaining attorneys'
fees after successfully defending a claim of patent infringement.
In this instance, even though the Court found that the
plaintiff's infringement theory stretched the bounds of
reasonableness, that was not enough to warrant sanctions under Rule
11, make it an exceptional case under 35 U.S.C. 285, or qualify
under Section 1927 as vexatious litigation.
Raylon LLC v. Complus Data Innovations, et al., Case
No. 6:09-cv-355; Raylon LLC v. Advanced Public Safety, Inc, et
al., Case Nos. 6:09-cv-356; Raylon LLC v. EZ Tag
Corporation, et al., Case Nos. 6:09-cv-357 (E.D. Texas October
31, 2011)
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