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Case exceptional where plaintiff litigated after a conclusive Markman order, and had nuisance settlements

Case exceptional where plaintiff litigated after a conclusive Markman order, and had nuisance settlements

AdjustaCam v. Newegg was decided on July 5, 2017 on appeal from the Eastern District of Texas. There, Plaintiff AdjustaCam sued Defendant Newegg and dozens of other defendants for patent infringement, voluntarily dismissing most defendants early in the litigation. Though AdjustaCam continued to litigate against Newegg through a Markman order and extended expert discovery, it voluntarily dismissed its infringement claims against Newegg just before summary judgment briefing. Newegg moved for attorney fees. The district court denied the motion, and Newegg appealed. The Federal Circuit remanded in light of Octane Fitness. On remand from the Federal Circuit, the district court (a different judge this time) again denied the motion for fees, concluding that “AdjustaCam’s infringement and validity arguments were not so weak, or its litigation conduct so poor, to constitute an exceptional case.” Newegg appealed a second time.

The Federal Circuit reversed the district court’s denial of attorney fees, and remanded.

The district court abused its discretion by not awarding fees for two independent reasons: (1) it failed to follow the Federal Circuit’s mandate on remand; and (2) its decision was based on a clearly erroneous assessment of the evidence.

The district court erred by failing to review anew the exceptionality of the case. “Instead of engaging in an independent analysis, the district court adopted the previous judge’s factual findings wholesale.” This reliance on previous fact-finding was an abuse of discretion. The district court should have independently evaluated the totality of the case in view of Octane Fitness. “For example, the district court failed to consider and include in its analysis AdjustaCam’s supplemental report that raised new infringement arguments for the first time on remand” to rebut Newegg’s contention that the litigation was objectively baseless. The Federal Circuit will “not defer… to conclusions based on a clear error of judgment in weighing relevant factors.”

Independently, the district court made clearly erroneous factual findings about the substantive strength of AdjustaCam’s case. This case became baseless after the district court’s claim construction in its Markman order. Under this order, “there is no possible way for Newegg’s products to infringe” the asserted patent. Because “[n]o reasonable factfinder could conclude that Newegg’s products infringe,” “AdjustaCam’s litigation position was baseless.”

Further, AdjustaCam litigated the case in an unreasonable manner. For example, AdjustaCam filed a supplemental declaration making new infringement arguments almost two years after the initial fees determination, and did not disclose to the Federal Circuit that they were new declarations. Further, “AdjustaCam asserted nuisance-value damages against many defendants, settled with them for widely varied royalty rates, and continued to press baseless infringement contentions well past an adverse Markman order and expert discovery.” Under the totality of the circumstances, “[t]he irregularities in AdjustaCam’s damages model and the purported nuisance value of many of its settlements should have played a role in the evaluation of whether this is case exceptional.”

 

AdjustaCam, LLC v. Newegg, Inc., 861 F.3d 1353 (Fed. Cir. 2017)

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