Rothschild Connected Devices Innovations, LLC v. Guardian Protection Services, Inc. et al. (“ADS Security, L.P.”)

Docket No. 2016-2521

June 5, 2017

Brief Summary: DC denial of request for attorney’s fees under § 285 reversed and remanded (due, e.g., to “Rothschild’s willful ignorance of the prior art”).

Summary: ADS appealed DC denial of its request for attorney’s fees under 35 USC § 285 (2012). The dispute centers on Rothschild’s allegation that ADS’s home security system infringed claim 1 of US Pat. No. 8,788,090. After receiving a letter from Rothschild, ADS offered to settle “if Rothschild paid ADS $43,330 for attorney fees and costs”, which Rothschild rejected. ADS then filed a motion for judgment on the pleadings, arguing that the claim was directed to patent-ineligible subject matter under § 101 and sent Rothschild a Safe Harbor Notice (FRCP 11(c)(2)). Rothschild then voluntarily moved to dismiss its action which ADS opposed and requested attorney’s fees under § 285. ADS argued “Rothschild’s suit was objectively unreasonable because Rothschild knew or should have known claim 1 covers patent-ineligible subject matter under § 101 and is anticipated by prior art under § 102(a)(1)” and was only filed to “‘extract nuisance value settlements’ from various defendants.” The DC granted Rothschild’s motion to dismiss and denied ADS’s motion since Rothschild voluntarily dismissed its action and presented “non-conclusory and facially plausible arguments” regarding § 101, and “ADS neither filed a motion seeking to invalidate claim 1…under § 102(a)(1) nor demonstrated Rothschild failed to conduct a reasonable pre-suit investigation of the prior art.” The FC panel explained that an “exceptional case” is “one that stands out from the others with respect to the substantive strength of a party’s litigating position…or the unreasonable manner in which the case was litigated” under a “preponderance of the evidence” (Octane Fitness, US 2014). And DC decisions are reviewed “for an abuse of discretion” which is found where the DC “base[s] its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence” (Lumen View, FC 2016; SFA Sys., FC 2015; Highmark, US 2014). It found the DC “clearly erred by failing to consider Rothschild’s willful ignorance of the prior art” included in ADS’s Safe Harbor Notice (Rothschild’s “conclusory and unsupported statements…have no evidentiary value.” Phigenix, FC 2017). The FC panel also agreed with ADS’s arguments that Rothschild engaged in “vexatious litigation” (“fifty-eight cases against technologies ranging from video cameras to coffeemakers to heat pumps”) (SFA, FC 2015 (“repeated filing of…actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims”)). It also found the DC “failed to account for the totality of the circumstances by equating Rule 11 to § 285” since “conduct under Rule 11(b) ‘is not the appropriate benchmark’”. Thus, the DC decision was reversed and remanded. Judge Mayer’s concurring opinion noted that “the underlying functional concern” of § 101 “is a relative one: how much future innovation is foreclosed relative to the contribution of the inventor” (Mayo, US 2012 and Motion Picture Patents, US 1917) and stated that “[t]his suit never should have been filed” (Highway Equip., FC 2006; Octocom, FC 1990).

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