Federal Circuit Affirms Award Of Attorneys’ Fees For Patentee’s Forum-Shopping To Avoid An Adverse Section 101 Ruling
On July 27, 2022, the United States Court of Appeals for the Federal Circuit (CAFC) affirmed a decision by the United States District Court for the Central District of California (C.D. Cal.) awarding fees incurred by defendant for two proceedings under its inherent equitable powers and denying fees incurred in earlier, related proceedings. Realtime Adaptive Streaming LLC v. Netflix, Inc., Nos. 2021-1484, 2021-1485, 2021-1518, 2021-1519 (Fed. Cir. July 27, 2022). The CAFC found that the C.D. Cal. did not abuse its discretion in granting attorney’s fees incurred in the C.D. Cal. as a result of the patentee’s improper forum shopping to avoid an adverse ruling, but denying fees incurred in earlier district court and inter partes review (IPR) proceedings because there was no evidence that plaintiff knew or should have known at that time that its claims were weak.
In November 2017, Realtime Adaptive Streaming LLC (Appellant) filed suit against Netflix, Inc. and Netflix Streaming Services, Inc. (Appellees) in the United States District Court for the District of Delaware (D. Del.) for infringement of six patents. Appellees moved to dismiss arguing, inter alia, that four of the asserted patents were patent ineligible under 35 U.S.C. § 101 (Section 101). Appellees also moved to transfer to the United States District Court for the Northern District of California (N.D. Cal.) for convenience, which the D. Del. denied after Appellant argued that transfer to the N.D. Cal. would be an unfair burden.
In December 2018, the D. Del. magistrate judge issued a report and recommendation advising the D. Del. to find the four patents challenged under Section 101 to be patent ineligible. Appellant moved to amend its complaint, relying on five related patents to support eligibility of the four challenged patents. While Appellant’s motion was pending, the Patent Trial and Appeal Board (PTAB) instituted IPR of all six patents asserted against Appellees, and a related patent. In addition, in two parallel cases, the D. Del. invalidated the five related patents as patent ineligible and denied Appellant’s motions to amend in such parallel cases as futile. On July 22, 2019, shortly after the D. Del.’s rulings in the parallel cases but before the D. Del. could rule on the report and recommendation invalidating the four challenged patents as patent ineligible, Appellant voluntarily dismissed the D. Del. action.
The next day, July 23, 2019, Appellant filed two suits against Appellees in the C.D. Cal.—where certain of the asserted claims were found not patent ineligible—asserting the same six patents. Appellants moved to transfer both actions back to D. Del., and for attorneys’ fees. Appellant opposed the transfer motion, arguing that California was more convenient than D. Del. despite its arguments to the contrary before the D. Del. and despite the D. Del.’s experience with the asserted patents. The day before oral argument on Appellees’ motion to transfer and before Appellee’s motion for attorneys’ fees was fully briefed, Appellant voluntarily dismissed both C.D. Cal. suits.
After dismissal, Appellees renewed its motion for attorneys’ fees for the two C.D. Cal. actions, the D. Del. action, and the related IPRs. The C.D. Cal. granted fees for the C.D. Cal. actions, but denied fees for the D. Del. action and related IPRs. Appellant appealed and Appellees cross-appealed.
The CAFC affirmed. The CAFC found the C.D. Cal. did not abuse its discretion granting fees for the C.D. Cal. actions, finding that the C.D. Cal.’s determination that Appellant’s efforts to (1) avoid an unfavorable patent eligibility ruling in the D. Del. and (2) resist transfer back to the D. Del. were “improper” and “totally unjustified” forum shopping that justified invocation of the C.D. Cal.’s inherent powers to grant fees.
The CAFC further found that the C.D. Cal. did not abuse its discretion in denying fees for the D. Del. action and related IPRs because there was no evidence that Appellant knew of the weakness of its claims when it first filed suit in D. Del. or that institution of the IPRs would have apprised Appellant of the weakness of its claims. The CAFC also found it significant that Appellant had not yet engaged in the forum shopping that was the basis of the C.D. Cal.’s grant of attorneys’ fees for the C.D. Cal. actions.