Order Denying Defendant's Motions for Sanctions and Attorney Fees, Kreative Power, LLC, v. Monoprice, Inc., Case No. 14-cv-02991-SI (Judge Susan Illston)
Little more than a year has passed since the Supreme Court articulated a more lenient standard for awarding fees in a patent case pursuant to 35 U.S.C. § 285. In two unanimous rulings—Octane Fitness and Highmark—the Supreme Court threw out the old test, finding it was so demanding that it rendered Section 285 essentially meaningless, because it conflated a statutory award of fees with the Court's inherent power to sanction. In Octane Fitness, the Supreme Court held that an "'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigation position (considering both the governing law and facts of the case) or the unreasonable manner in which the case was litigated. ... considering the totality of the circumstances." See Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). The Supreme Court drew inspiration from the Copyright Act and declined to provide a precise rule or formula in rendering its opinion.
The Octane Fitness decision inspired speculation as to the effect the new standard would have on patent litigation. Would it cause more companies to fight against blatantly frivolous lawsuits? Would it curb lawsuits brought by non-practicing entities? The jurisprudence on the contours of a case that "stands out from others" remains in flux.
Judge Illston's April 30th ruling in Kreative Power, LLC v. Monoprice, Inc. provides a guidepost for an unexceptional case in the Northern District of California under Octane Fitness's framework. After Judge Illston granted summary judgment, Monoprice sought fees under 35 U.S.C §285 and 17 U.S.C §505, and sanctions under Rule 11. Responding separately to each of these theories, Judge Illston held that Kreative's losing arguments did not justify a fees award or sanctions.
First, in support of its fees demand pursuant to 35 U.S.C §285, Monoprice asserted two arguments: (1) Kreative failed to present reasonable claim constructions under a plausible infringement allegation; and (2) Kreative asserted frivolous doctrine of equivalents arguments to rebut a presumption of prosecution history estoppel.
Both companies compete in the electronics industry, offering power outlets and surge protectors. Kreative, in support of its literal infringement allegations, proposed that the Court construe the term "circular" to mean "like a circle, round" and the term "hingedly attached" to mean "where one member is utilized to join two other members." Kreative argued these constructions supported reasonable infringement allegations, because the conducting wire in the accused device was connected in a circular fashion, and "hingedly attached" did not require the accused product to be attached physically to the hub of the device, but could be "hinge-like." Judge Illston recognized that Kreative made losing arguments which "may have been weak," but found they weren't frivolous and did not justify an award of fees.
On the doctrine of equivalents issue, Kreative acknowledged that the "hingedly attached" limitation was added by amendment during prosecution; however, Kreative argued that an exception to prosecution history estoppel should apply because the amendment was merely tangential to the patentability of the invention. Judge Illston again found fees were not warranted, noting that "the Court devoted nearly five pages of the Summary Judgment order" to analyzing this issue in concluding that Kreative's argument was "plausible."
Second, Monoprice sought fees for allegations tied to Kreative's design patent based primarily on the finding that the patent is invalid. In disagreeing with Monoprice, Judge Illston stated "[t]here is no reason to expect that Kreative, as the owner of an issued design patent, would conclude at the outset of the case that the patent was invalid, especially when Kreative's attorneys performed a pre-suit investigation and prepared a claim chart."
Third, Monporice sought attorney fees for Kreative's copyright claim pursuant to 17 U.S.C §505—the same act from which the Supreme Court derived inspiration in its Octane Fitness holding. Judge Illston again found the losing arguments insufficient to warrant fees, because there is simply no reason to believe the plaintiff should have known from the outset that its chances of success were "slim to none."
Finally, Monoprice's request for sanctions was similarly denied. In seeking Rule 11 sanctions, Monoprice advanced the same arguments it did under 35 U.S.C §285 and 17 U.S.C §505. Because no fees were warranted under either of these statutes, it followed that sanctions were inappropriate.
Ultimately, this opinion confirms that attorney fees will not automatically be awarded as a matter of course to a prevailing party, even where the plaintiff asserts infringement based on weak and losing arguments.
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