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Joao Control & Monitoring Systems, LLC v. Digital Playground, Inc.

United States District Court, S.D. New York

March 28, 2018

JOAO CONTROL & MONITORING SYSTEMS, LLC, Plaintiff,
v.
DIGITAL PLAYGROUND, INC., et al, Defendants. JOAO CONTROL & MONITORING SYSTEMS, LLC, Plaintiff,
v.
CITY OF YONKERS, et al, Defendants.

          OPINION AND ORDER

          RICHARD J. SULLIVAN, DISTRICT JUDGE.

         Defendants in these related patent infringement actions - a group of entities referred to as the "Manwin Defendants" and American Traffic Solutions, Inc. ("ATS") - collectively move for attorneys' fees pursuant to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the Court's inherent power. For the reasons set forth below, Defendants' motions are denied.[1]

         I. Background[2]

         The Court assumes the parties' familiarity with the facts and history of this case, which are recounted in the Court's August 6, 2015 Memorandum and Order. (Doc. No. 119.) Accordingly, this Opinion and Order sets out only those facts relevant to the instant request. Non-party Raymond Joao is the sole named inventor of U.S. Patent Nos. 6, 587, 046 ("the '046 patent") and 7, 277, 010 ("the '010 patent"). (Id. at 2.) Joao assigned those patents to Plaintiff Joao Control & Monitoring Systems, LLC, of which he is the sole member. (Id.) As the Court recognized in its order entering judgment on the pleadings, the '046 and '010 patents "are virtually identical, and, broadly speaking, each is for a computerized system designed to remotely monitor or control a vehicle or premises while receiving data from that vehicle or premises via the internet." (Doc. No. 148 at 2.)

         On September 7, 2012, Plaintiff filed case number 12-cv-6781 (RJS), Joao Control & Monitoring Systems, LLC v. Digital Playground, Inc., seeking damages for infringement of the '046 and '010 patents. After two rounds of amendment. Plaintiff filed its Third Amended Complaint against Digital Playground and the Manwin Defendants on March 11, 2013. (Doc. No. 23.)

         Plaintiff filed case number 12-cv-7734 on October 17, 2012, naming the City of Yonkers as the sole defendant. The case was originally assigned to Judge Karas, and on January 4, 2013, ATS filed a pre-motion letter seeking to intervene under Federal Rule of Civil Procedure 24. (12-cv-7734, Doc. No. 7.) Although ATS was the "manufacturer of the products and systems that [were] subject to the patent infringement claims" (id. at 1), Plaintiff initially opposed ATS's request, arguing that intervention would require it to "spend significant time and resources analyzing each of ATS's products and systems in light of the patents in its portfolio ... in order to determine what claims of infringement must be brought in this case." (12-cv-7734, Doc. No. 10 at 2.) Nonetheless, barely a month later - notwithstanding its professed aversion to reviewing ATS's product offerings Plaintiff sued ATS in the District of Delaware for infringing the '046 and '010 patents. (D. Del. Case. No. 13-cv-243, Doc. No. 1.) Plaintiff ultimately stipulated to ATS's intervention in this action on March 13, 2013, and filed an amended complaint naming ATS as a defendant on March 22, 2013. (12-cv-7734, Doc. Nos. 18, 23.)

         Despite ATS's entry into this case, Plaintiff served the Delaware complaint on ATS on March 25, 2013. (D. Del. Case. No. 13-cv-243, Doc. No. 5.) On April 15, 2013, ATS moved to dismiss Plaintiffs Delaware complaint, arguing that the two cases were duplicative and that the New York case took precedence under the ''first-filed rule.1' (D. Del. Case No. 13-cv-243, Doc. No. 7 at 5 9). On that same day, ATS answered the amended complaint in this case and included three counterclaims seeking declaratory judgments of invalidity as to the '046 and '010 patents. (12-cv-7734, Doc. No. 34.) Although Plaintiffs two cases against ATS were proceeding simultaneously, Plaintiff opposed dismissal in the Delaware action (D. Del. Case No. 13-cv-243, Doc. No. 11), and subsequently moved to dismiss ATS's counterclaims in this suit, arguing that the Delaware action was the first-filed case and that Plaintiff would be "unduly and unreasonably" burdened if ATS were permitted to challenge the '046 and '010 patents in this case. (12-cv-7734, Doc. No. 43.)

         On July 15, 2013, Judge Forrest, to whom this case had been reassigned, denied Plaintiffs motion to dismiss, recognizing that "there is no question that the current action is the first-filed action." (12-cv-7734, Doc. No. 58 at 4 n. 1.) In light of Judge Forrest's ruling. Plaintiff voluntarily dismissed the Delaware lawsuit two months later. (D. Del. Case No. 13-cv-243. Doc. Nos. 20, 21.) On October 22, 2013, the case was reassigned to my docket as related to Plaintiffs suit against the Manwin Defendants. Three weeks later. Plaintiffs two suits were consolidated for discovery and pretrial proceedings, including claim construction. (12-cv-7734, Doc. No. 101.)

         After about a year of discovery, the parties filed claim construction papers in late 2014 (Doc. Nos. 90, 93-96.) Following a claim construction hearing on May 1, 2015, the Court issued its claim construction order adopting some of the positions advocated by each side on August 6, 2015. (Doc. No. 119.) Defendants thereafter moved for judgment on the pleadings. (See Doc. Nos. 124, 125.) On September 30, 2016, the Court granted judgment for Defendants, concluding that Plaintiffs claims were collaterally estopped by the Northern District of Illinois's decision in Joao Control & Monitoring Systems, LLC v. Telular Corp., 173 F.Supp.3d 717 (N.D. Ill. 2016) and that, in any event. Plaintiffs patents were invalid under 35 U.S.C. § 101, which sets the boundaries of patent-eligible subject matter. (Doc. No. 148.) Plaintiff subsequently filed a motion for reconsideration, which the Court denied on October 31, 2016. (Doc. No. 158.) Thereafter, Plaintiff filed an appeal to the United States Court of Appeals for the Federal Circuit, but dismissed that appeal before briefing. (See Fed. Cir. Case No. 17-1133.)

         After Plaintiff dismissed its appeal to the Federal Circuit, Defendants filed a pre-motion letter seeking leave to move for attorneys' fees under 35 U.S.C. § 285 (the Patent Act), 28 U.S.C. § 1927, and the Court's inherent authority. (Doc. No. 161.) The Manwin Defendants argue that fees are justified as a result of (1) Plaintiffs inadequate presuit investigation (including Plaintiffs assertion of claims that were barred by the doctrine of collateral estoppel); (2) Plaintiffs "'merifless" substantive positions; and (3) Plaintiffs "unreasonable" conduct throughout this litigation. (Doc. No. 175.) ATS, for its part, argues that fees are warranted because of (1) Plaintiffs opposition to its entry into this case and subsequent attempt to maintain two lawsuits against it; (2) Plaintiffs dilatory or otherwise improper conduct during discovery and settlement negotiations; and (3) Plaintiffs unnecessary motion practice. (12-cv-7734, Doc. No. 264.) Because each Defendant adopted the arguments made in the other Defendant's brief, the Court treats the arguments as made by both Defendants.

         II. Attorneys' Fees Under the Patent Act

         Section 285 of the Patent Act authorizes courts to "award reasonable attorney fees to the prevailing party" in "exceptional cases." 35 U.S.C. § 285. "[A]n 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014). Unlike the Federal Circuit's previously applicable test, which required a finding of either "litigation-related misconduct of an independently sanctionable magnitude" or "that the litigation was both 'brought in subjective bad faith' and 'objectively baseless, '" Octane Fitness permits district courts to ''determine whether a case is 'exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances." Id. (quoting Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005)). In doing so, courts are directed to consider factors including, but not limited to, "frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. at 1756 n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). ''After Octane Fitness, a fee- seeking party must show that it is entitled to § 285 fees by a 'preponderance of the evidence."' Bayer CropScience AG v. Dow AgroSciences LLC, 851 F.3d 1302, 1305 (Fed. Cir. 2017) (quoting Octane Fitness, 134 S.Ct. at 1758).

         Defendants argue that Plaintiffs substantive positions were unreasonable throughout this lawsuit because Plaintiff should have either (1) realized before bringing suit that the '046 and '010 patents were invalid under 35 U.S.C. § 103, which dictates that "[a] patent for a claimed invention may not be obtained" if the "claimed invention as a whole would have been obvious" at the time the patent application was filed, or (2) understood, after the Supreme Court issued its opinion in Alice Corp. Pty. Ltd v. CLS Bank Int'l, 134 S.Ct. 2347 (2014), that the '046 and '010 were directed at patent-ineligible abstract ideas and did not sufficiently transform those ideas into patent-eligible inventions within the scope of 35 U.S.C. § 101. (Manwin Mot. at 13-14; ATS Mem. at 14-16.) Although the Court agrees that Plaintiffs case was weak, the Court cannot agree that it was so "exceptionally meritless" as to justify the award of fees based on this factor alone. Octane Fitness, 134 S.Ct. at 1757 (noting that, in some circumstances, "exceptionally meritless claims" may justify fee-shifting without regard to other considerations).

         As to Defendants' Section 103 argument that Plaintiff "should have been aware that Joao's monitoring patents were invalid" when it filed suit in 2012, the law is clear that a determination regarding whether a patented invention is obvious is a fact-bound question. See Sanofi v. Watson Labs. Inc.,875 F.3d 636, 646 (Fed. Cir. 2017) ("Obviousness under 35 U.S.C. § 103 is a question of law based on underlying questions of fact."); Meiresonne v. Google, Inc., 849 F.3d 1379, 1382 (Fed. Cir. 2017) ("What the prior art teaches, whether a person of ordinary skill in the art would have been motivated to combine references, and whether a reference teaches away from a claimed invention are questions of fact."). The Court has not considered - or even been asked to consider - whether Plaintiffs patents covered obvious inventions, and will not make that determination on the record now presented. Accordingly, the Court is not ...


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