SFA Systems, LLC v. Newegg Inc.


Docket No. 2014-1712

O’MALLEY, CLEVENGER, HUGHES
July 10, 2015

Brief Summary: FC found no abuse of discretion in DC’s denial of a motion for attorney’s fees under 35 USC § 285, concluding that “[e]ven under the new, lower standard for an exceptional case designation, Newegg has provided no evidence that the case ‘stands out from others with respect to the substantive strength of [SFA’s] litigating position’” (Octane Fitness, US 2014).

Summary: Newegg appealed DC denial of a motion for attorney’s fees under 35 USC § 285, concluding that “[e]ven under the new, lower standard for an exceptional case designation, Newegg has provided no evidence that the case ‘stands out from others with respect to the substantive strength of [SFA’s] litigating position’” (Octane Fitness, US, 2014) The DC disagreed with Newegg that it would have prevailed on the merits because its attempts to limit the scope of the asserted patent through claim construction was rejected, its SJ motion had been denied, and “the fact that SFA had filed several lawsuits against numerous defendants is insufficient to render this case exceptional.” The FC reviewed the DC decision for an abuse of discretion under Highmark (US, 2014). It explained that the SC “made clear” in Octane Fitness that it is the “‘substantive strength of the party’s litigating position’ that is relevant to an exceptional case determination, not the correctness or eventual success of that position.” It concluded the DC “did not abuse its discretion in finding that SFA’s claim construction and indefiniteness positions did not stand out” and noted that it had “considered and rejected Newegg’s claim construction arguments not once, but twice, after a fulsome claim construction process.” The FC also held that under Octane Fitness the DC must consider whether a case was litigated in an unreasonable manner and “may turn to pre-Octane Fitness case law for guidance” (e.g., Eon-Net, FC 2011 (litigation misconduct based on patentee’s destruction of relevant documents and lodging of incomplete and misleading extrinsic evidence); Monolithic Power, FC 2013 (“an overall vexatious litigation strategy and numerous instances of litigation misconduct”)). It agreed with Newegg “that a pattern of litigation abuses characterized by repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination” but that, in this case, there was no record supporting the characterization of SFA’s motivations as improper. Thus, the FC concluded the DC did not abuse its discretion in finding this case not to be exceptional.

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