A Taste of their Own Medicine – Federal Courts May Be Able to Use Newly-Issued Supreme Court Standards to Deter Non-Practicing Entities from Bringing Patent Claims

Posted on November 12th, 2014 by Legal Fee Advisors

In Lumen View Tech. LLC v. Findthebest.com, Inc.[1], Judge Denise Cote Court ordered, Lumen, a Non-Practicing Entity, to pay attorney fees after finding this qualified as an “exceptional case” under an attorney fee-shifting statute[2]. The criteria for an “exceptional case” was recently liberalized[3] in the Supreme Court’s decision Octane Fitness[4]. The Court instructed that an “exceptional” case is one that stands out based on the respective strength of the party’s litigating positions or their unreasonable litigation behavior[5]. The Court highlighted an exemplary list of factors to be considered including “frivolousness, motivation, objective unreasonableness and […] deterrence[6].”

In Lumen, the defendant FTB – provider of a consumer research search engine – was sued by Lumen, a “patent holding Non Practicing Entity that acquires patents and instigates patent infringement lawsuits.[7]” Lumen attempted a quick settlement with FTB for $85,000. FTB opted to litigate. In November 2013, SDNY district court invalidated Lumen’s patent, at which point FTB moved to declare this an “exceptional case” and award them attorney’s fees.

In granting FTB’s motion, Judge Cote found that “[n]o reasonable litigant could have expected success on the merits” because even the most “basic pre-suit investigation” would have revealed that FTB did not rely on the search methodology described in Lumen’s patent. However, of more interest to us, Judge Cote’s decision was based, in part, on Lumen’s motivation, “to extract a nuisance settlement,” as evidenced by Lumen’s tactics including threats of “protracted discovery” and “a settlement demand escalator.” Judge Cotes also grounded her decision to award attorney’s fees in the deterrence prong of Octane Fitness, highlighting Lumen’s lack of due diligence and the number of similar lawsuits filed within a short time frame as indicative of Lumen engaging in an overarching “predatory strategy aimed at reaping financial advantage from the inability or unwillingness of defendants to engage in litigation against even frivolous patent lawsuits[8].”

Recently, we discussed[9] an unsuccessful attempt by Apple to recover attorney’s fees against Samsung under the new Octane Fitness standard. While district courts may hesitate to award attorney fees when there is any viability to the litigant’s underlying claims, instances of Non-Practicing Entities, less diplomatically referred to by some as “Patent Trolls,[10]” bringing frivolous patent infringement claims may be an important way for district court judges to use the newfound discretion granted to them in Octane Fitness.

G. Gotimer

Legal Fee Advisors © 2014

[Update]: Distinguished by Anchor Sales & Mktg., Inc. v. Richloom Fabrics Grp., Inc., No. 15-CV-4442 (RA), 2016 WL 6126388, at *2 (S.D.N.Y. Oct. 20, 2016), regarding the fact that the Plaintiff’s case was “”simply not as weak”” as that in Lumen

[1] Lumen View Tech., LLC v. Findthebest.com, Inc., 24 F. Supp. 3d 329 (S.D.N.Y. 2014), aff’d, 811 F.3d 479 (Fed. Cir. 2016)

[2]35 U.S. Code § 285.

[3] John F. O’Rourke, Patrick Soon, and Rebecca Bellow, Silver, Garlic, And Attorney’s Fees, Orange County Lawyer, October 2014.

[4]Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (April 29, 2014).

[5] Id. At 1756.

[6]Id.

[7] 13 CIV. 3599 DLC, 2014 WL 2440867 (S.D.N.Y May 30, 2014).

[8] Id.

[9]E. Burgess, Apple Denied Attorney’s Fees in Case Applying Supreme Court’s New Standard, LFA Dispatch https://legalfeeadvisors.com/lfa-dispatch-september-24-2014/, (September 24, 2014).

[10] O’Rourke, supra.

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