United States District Court, S.D. New York
AlphaCap Ventures, LLC and Richard Juarez Marie A. McCrary
Gutride Safier LLP
Gust Inc. Frank A. Bruno White and Williams LLP
OPINION & ORDER
DENISE, COTE United States District Judge.
core litigation between these parties consumed roughly two
years and spanned two jurisdictions. AlphaCap Ventures, LLC
(“AlphaCap”) sought to extract a quick settlement
from Gust, Inc. (“Gust”) while eschewing any
defense of its business method patents (the “AlphaCap
Patents”). Gust refused to cooperate with that plan and
pressed its contention that the AlphaCap Patents were
demonstrably invalid in light of Alice Corp. Pty. Ltd. v.
CLS Bank International, 134 S.Ct. 2347 (2014).
Ultimately, even though AlphaCap unilaterally issued Gust a
Covenant Not to Sue (“Covenant”), Gust pursued
its contention that the patents at issue were invalid and
that AlphaCap and its attorneys had pursued the litigation in
December 8, 2016, the Court awarded $508, 343 in
attorneys' fees and costs, as well as prejudgment
interest, pursuant to 35 U.S.C. § 285 (“Section
285”) against AlphaCap. See Gust, Inc. v. AlphaCap
Ventures, LLC, 15cv6192 (DLC), 16cv1784 (DLC), 2016 WL
7165983 (S.D.N.Y. Dec. 8, 2016) (“Gust”). Gust
held AlphaCap's counsel jointly and severally liable
pursuant to 28 U.S.C. § 1927 (“Section
1927”) for vexatiously and unreasonably multiplying the
proceedings in this case.
January 3, 2017, AlphaCap filed this motion to reconsider,
alter, amend, and grant relief from judgment pursuant to
Rules 59(e) and 60, Fed. R. Civ. P. For the reasons
set forth below, AlphaCap's motion for reconsideration is
19, 2014, the Supreme Court issued its decision in Alice.
Alice expounded upon the longstanding rule that “[l]aws
of nature, natural phenomena, and abstract ideas are not
patentable.” 134 S.Ct. at 2354 (citation omitted).
Alice applied the two-step analytical framework set forth in
Mayo Collaborative Services v. Prometheus
Laboratories, Inc., 132 S.Ct. 1289 (2012), to determine
the eligibility of certain patents under 35 U.S.C. § 101
(“Section 101”), which defines the subject matter
eligible for patent protection.
the claims at issue in Alice were directed to an abstract
idea -- the use of a third party to mitigate settlement risk
-- the Court proceeded to analyze whether the claims recited
an “inventive concept” sufficient to
“transform” the abstract idea into a
patent-eligible application. Alice, 134 S.Ct. at
2357. Of particular interest to the instant
litigation, the Court noted that “the mere recitation
of a generic computer cannot transform a patent-ineligible
abstract idea into a patent-eligible invention. Stating an
abstract idea while adding the words ‘apply it' is
not enough for patent eligibility.” Id. at
2358 (citation omitted). Accordingly, the Court held the
following claims unpatentable for failing to recite an
inventive concept beyond application through a computer: (1)
a “method for exchanging [financial] obligations,
” (2) “a computer system configured to carry out
the method for exchanging obligations, ” and (3)
“a computer-readable medium containing program code for
performing the method of exchanging obligations.”
Id. at 2353.
Alice and its implications for the AlphaCap Patents, in
January 2015, AlphaCap sued Gust and nine similar defendants
in the Eastern District of Texas (the “Texas
Action”). The ten defendants represented nearly every
major provider of internet crowdfunding services. The Texas
Action alleged infringement of three business method patents.
The AlphaCap Patents claim computer-implemented methods of
managing information related to “equity and debt
financing” through the use of “data collection
templates” and “semi-homogenous profiles.”
These ten actions were pursued on a contingency fee basis by
counsel. By June 23, 2015, AlphaCap had settled each action
it filed in the Eastern District of Texas, except for the
action against Gust. None of the settlements exceeded $50,
000 and some settlements were for substantially less money.
answered AlphaCap's complaint on March 26 by asserting
six counterclaims seeking a declaratory judgment of
non-infringement and invalidity for each of the three
AlphaCap Patents. On June 19, AlphaCap's counsel called
Gust's attorney to present AlphaCap's opening demand
to settle the Texas Action.
rejected the demand. On June 22, Gust filed a motion to
transfer venue to the Southern District of New York pursuant
to 28 U.S.C. § 1404 or, in the alternative, 28 U.S.C.
§ 1406. The ensuing negotiations and litigation between
the parties is described in Gust, 2016 WL 7165983, at
*2-4, which is incorporated by reference.
Only those events of particular significance to the pending
motion for reconsideration are described here.
though neither Gust nor AlphaCap had any apparent connection
with the Eastern District of Texas, and Gust sought to
transfer the action to its home jurisdiction, AlphaCap
pursued extensive and expensive discovery as it opposed the
motion. At the end of the day, AlphaCap was only able to
identify, although not by name, some end users of the
purportedly infringing product who resided in the Eastern
District of Texas. On March 2, 2016, Gust's motion to
transfer was granted. In doing so, the federal court in Texas
observed that New York was “clearly a more convenient
venue” than the Eastern District of Texas. Pending the
decision on the transfer motion, and pursuant to the Eastern
District of Texas rules for automatic discovery in patent
cases, the parties engaged in expensive claim construction
with its motion to transfer AlphaCap's action to the
Southern District of New York pending, Gust filed its own
action against AlphaCap in the Southern District of New York
(the “New York Action”). The New York Action,
which was filed on August 6, 2015, sought a declaratory
judgment of non-infringement and invalidity of the AlphaCap
Patents, among other things. Following the transfer of the
Texas Action to this jurisdiction the two lawsuits were
consolidated. The parties were ordered to provide a report to
the court by May 20, 2016 describing, inter alia,
contemplated motions. On May 18, two days before the report
was due, AlphaCap unilaterally provided Gust with the
Covenant. In a May 20 report to the Court, AlphaCap took the
position that the Covenant required dismissal of all of its
infringement claims and Gust's claims seeking a
declaratory judgment of non-infringement and invalidity. Gust
asserted, however, that it would still seek to show that the
AlphaCap Patents were invalid to support its remaining claims
and to obtain an award of fees. At a June 10 conference with
the Court, AlphaCap continued to assert that it was
unnecessary to address the validity of the AlphaCap Patents
in light of the Covenant, while Gust continued to assert that
a validity determination remained relevant and necessary.
28, this Court issued an opinion granting AlphaCap's
pending motions to dismiss since the Covenant rendered moot
the claims and counterclaims related to the infringement and
validity of the AlphaCap Patents. See Gust, Inc. v.
AlphaCap Ventures, LLC, 15cv6192 (DLC), 16cv1784 (DLC),
2016 WL 4098544, at *3 (S.D.N.Y. July 28, 2016). The Opinion
noted that the parties were in agreement that the Covenant
did not affect Gust's requests for attorneys' fees
and costs. Id. at *3-4.
August 19, 2016, Gust moved for attorneys' fees and costs
against AlphaCap and its counsel pursuant to 35 U.S.C. §
285 and 28 U.S.C. § 1927. On December 8, 2016, the Court
largely granted Gust's motion for attorneys' fees,
finding the case “extraordinary” under 35 U.S.C.
§ 285 and finding AlphaCap's counsel jointly and
severally liable under 28 U.S.C. § 1927.
January 3, 2017, AlphaCap filed the present motion for
reconsideration pursuant to Rules 59(e) and 60, Fed. R.
Civ. P.Also on January 3, AlphaCap filed an
emergency motion to stay enforcement of the December 8
judgment. On January 4, the Court entered a stay of ...