TheBrain Technologies, LP v. AnyLogic North America, LLC

MOTION

N.D. Ill.June 3, 2019

1 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ) THEBRAIN TECHNIOLOGIES LP, , ) ) Plaintiff and Counterclaim-Defendant, ) ) Case No. 17-CV-6574 v. ) ) Judge Sharon Johnson Coleman ANYLOGIC NORTH AMERICA, LLC, ) ) Defendant and Counterclaim-Plaintiff. ) ) ANYLOGIC NORTH AMERICA, LLC’S MOTION FOR ATTORNEYS’ FEES UNDER 35 U.S.C. § 285 Plaintiff should never have brought this patent infringement litigation. The plaintiff in this case, TheBrain Technologies LP (“TheBrain”), did not own the asserted patent, and, thus, had no standing to sue defendant AnyLogic North America, LLC (“AnyLogic”) for patent infringement. Despite bearing the burden of proving the threshold requirement of standing through patent ownership, TheBrain wholly failed to provide any material evidence of patent assignee status or citation of relevant authorities that might otherwise support its false allegations of patent ownership. Indeed, this Court easily concluded that TheBrain lacked patent ownership and dismissed plaintiff’s claim for want of subject matter jurisdiction. (See D.I. 77.) Because assertions of patent infringement without patent ownership on the facts of this case are antithetical to reasonable litigation conduct, this case is exceptional for purposes of 35 U.S.C. § 285, and AnyLogic should be awarded its reasonable attorney fees incurred in defending against this meritless action. Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 1 of 10 PageID #:918 2 LEGAL STANDARDS Section 285 of the Patent Act authorizes a district court to award attorney’s fees in patent litigation: “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” As articulated by the Supreme Court “an ‘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). “District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of circumstances.” Id.; accord Marshall Feature Recognition, LLC v. Wendy’s Int’l, Inc., No. 14-cv-00865, 2016 U.S. Dist. LEXIS 158436, *4-5 (N.D. Ill. Nov. 16, 2016) (Coleman, J). In so doing, it should be noted that “fee-shifting provision[s] [exist] ‘to deter the bringing of lawsuits without foundation.’” CRST Van Expedited, Inc. v. EEOC, 136 S. Ct. 1642, 1652 (2016) (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 420 (1978)). Accordingly, where a prevailing party demonstrates, by a preponderance of the evidence, that a case is “exceptional,” the Court should award fees to such a prevailing party. Octane Fitness, 134 S. Ct. at 1758. ARGUMENT Because AnyLogic is a “prevailing party” and this case is “exceptional,” the Court should award AnyLogic the reasonable attorneys’ fees it incurred in defending against this meritless action.1 1 This motion is timely under Local Rule 54.3, having been brought before entry of final judgment. The existing judgment (D.I. 78) dismisses TheBrain’s claim, but leaves pending AnyLogic’s counterclaims for noninfringement and invalidity (D.I. 29, at 13-15). See SafeTCare Mfg., Inc. v. Tele-Made, Inc., 497 F.3d 1262, 1267 (statement by district court that judgment is “final” not enough to make it so); Nystrom v. TREX Co., 339 F.3d 1347, 1351 (Fed. Cir. 2003) (repeating rule that a judgment that does not dispose of Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 2 of 10 PageID #:919 3 I. AnyLogic Is A “Prevailing Party.” AnyLogic is the “prevailing party” for Section 285 purposes because it obtained a dismissal for want of subject matter jurisdiction. Dismissals on procedural grounds (like dismissals on substantive/merits grounds) confer “prevailing party” status on the successful party for the purpose of fee-shifting statutes: Common sense undermines the notion that a defendant cannot “prevail” unless the relevant disposition is on the merits. Plaintiffs and defendants come to court with different objectives. A plaintiff seeks a material alteration in the legal relationship between the parties. A defendant seeks to prevent this alteration to the extent it is in the plaintiff’s favor. The defendant, of course, might prefer a judgment vindicating its position regarding the substantive merits of the plaintiff’s allegations. The defendant has, however, fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed irrespective of the precise reason for the court’s decision. The defendant may prevail even if the court’s final judgment rejects the plaintiff’s claim for a nonmerits reason. CRST Van Expedited, Inc. v. EEOC, 136 S. Ct. 1642, 1651 (2016) (emphasis added).2 The key to “prevailing party” status is whether there has been a “material alteration of the legal relationship of the parties.” Id. at 1646 (internal quotations omitted). This is a case in which AnyLogic prevailed because TheBrain lacked ownership of the asserted patent. (D.I. 77 at 6.) AnyLogic’s victory achieved an objective—dismissal of the lawsuit brought by TheBrain—and it makes no difference for fee-shifting purposes whether that dismissal was merits-based or otherwise. See CRST, 136 S. Ct. at 1652 (“It would make little sense if Congress’ policy of ‘sparing defendants from the costs of frivolous litigation[]’ depended on the distinction between merits-based on non-merits based frivolity.” (citations omitted)). In other counterclaims is not a final judgment). Even if the existing judgment were final as to all claims among all parties, this motion would comply with the 91-day deadline of Local Rule 54.3. 2 Although CRST involved a Title VII fee-shifting statute, “Congress has included the term ‘prevailing party’ in various fee-shifting statutes, and it has been the [Supreme] Court’s approach to interpret the term in a consistent manner.” 136 S. Ct. at 1646. Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 3 of 10 PageID #:920 4 words, AnyLogic’s defense in this case “prevent[ed] [an] alteration [of legal rights] to the extent it is in the plaintiff’s favor.” Id. at 1651. Moreover, the dismissal altered the parties’ respective legal rights materially in favor of AnyLogic. The dismissal of TheBrain’s patent infringement action effectively serves as an adjudication on the merits with respect to any charge of infringement as to acts occurring prior to March 4, 2013. In that regard, 35 U.S.C. § 286 places a critical limitation on patent infringement damages: “no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint….”3 Accordingly, although a complaint dismissed without prejudice may be re-filed, any such re-filed complaint remains subject to the six-year pre-filing limit on damages. “[T]he filing of the first complaint does not establish the starting date for the second action.” H.R. Techs., Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1383 (Fed. Cir. 2002). Here, plaintiff TheBrain filed a new complaint against AnyLogic in Massachusetts (Exhibit A), but no recovery may be had for the time period from May 15, 2011 to March 4, 2013—a period of potential damages recovery irrevocably lost as a result of the dismissal of the complaint in this case. See Sweepstakes Patent Co. v. Chase Burns, No. 6:14-cv-151-Orl-22KRS, 2015 U.S. Dist. LEXIS 175691, *8-11 (M.D.Fla. Nov. 24, 2015) (explaining, in accordance with Section 286, that the re-filing of a complaint dismissed without prejudice for want of standing results in a loss of damages otherwise available in the initial, dismissed action, securing “prevailing party” status for defendant under Section 285). Thus, to the extent any relief on the merits remains a necessary predicate to “prevailing party” status after CRST (and it does not), the dismissal in this case was tantamount to such a judgment. 3 AnyLogic’s Answer includes a Sixth Affirmative Defense that invokes the damages limitation of 35 U.S.C. § 286. (D.I. 29, at 9.) The Answer also includes a Thirteenth Affirmative Defense of lack of standing (D.I. 29, at 10), as well as a request for Section 285 fee shifting in its Prayer for Relief. (D.I. 29, at 7). Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 4 of 10 PageID #:921 5 The Federal Circuit also recently confirmed that a dismissal predicated on a lack of standing confers “prevailing party” status to the accused infringer in patent cases. See Raniere v. Microsoft Corp., 887 F.3d 1298, 1303-07 (Fed. Cir. 2018). In so doing, it applied CRST’s holding “that a favorable judgment on the merits is not necessary for a defendant to be deemed a prevailing party for purposes of statutory fee-shifting.” Id. at 1303. To be sure, Raniere involved the unusual situation in which the lack of standing resulted in a dismissal with prejudice. 887 F.3d at 1304 (“a dismissal for lack of standing is generally to be without prejudice because it is not an adjudication on the merits”). But only after concluding that the defendant had “prevailing party” status in accordance with CRST did the Federal Circuit in Raniere begin to address the nature of the dismissal: “Even without CRST … the district court’s dismissal with prejudice … for lack of standing is tantamount to a judgment on the merits.” Id. at 1303 (emphasis original); accord id. at 1307 (“Even without the benefit of CRST’s clarification … [t]he district court’s dismissal with prejudice … was tantamount to a decision on the merits, making it sufficient to establish Appellees as prevailing parties.” (emphasis original)).4 Indeed, the Federal Circuit later explained that “although a judgment on the merits is sufficient to confer prevailing-party status, it is not necessary.” Robinson v. O’Rourke, 891 F.3d 976, 981 (Fed. Cir. 2018) (emphasis original). Thus, under Raniere, a dismissal for lack of standing—without or without prejudice— suffices to confer “prevailing party” status on the successful defendant. Other courts have determined that a party “prevailed” as the result of a dismissal without prejudice grounded on a lack of jurisdiction or otherwise. Owners Ins. Co. v. Warren Mech., LLC, 324 F. Supp. 3d 650, 4 At least one other court has recognized the with-prejudice dismissal in Raniere as an alternative basis for its result. See Citi Trends, Inc. v. Coach Inc., No. RDB-17-1763, 2018 U.S. Dist. LEXIS 84130, *9 n.8 (D. Md. May 17, 2018). Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 5 of 10 PageID #:922 6 656-57 (D.S.C. 2018) (“prevailing party” status rested on a “dismiss[al] without prejudice based on lack of subject matter jurisdiction, not on the merits”); Beach Blitz Co. v. City of Miami Beach, 1:17-cv-23958-UU, 2018 U.S. Dist. LEXIS 165462, *25-26 (S.D. Fla. Sept. 24, 2018) (“new non- precluded suit” only possible if plaintiff alleges “additional actions,” therefore dismissal without prejudice made winner a prevailing party); Direct Fitness Solutions, LLC v. Direct Fitness Solutions, LLC, 281 F. Supp. 3d 697, 701-02 (N.D. Ill. 2017) (defendant “prevailed” on the basis of a dismissal for lack of personal jurisdiction even though defendant properly could be sued in a different venue).5 Further, as explained already, under Section 286, the dismissal in this case cuts off TheBrain’s ability to collect two years’ worth of patent infringement damages. The effect of the dismissal here is tantamount to a decision on the merits.6 There can be no credible dispute that the legal relationship between the parties has been altered in favor of AnyLogic or that AnyLogic is a “prevailing party.” II. This Case Is “Exceptional.” For any number of reasons, this case easily “stands out from others” and, thus, is “exceptional.” Octane Fitness, 134 S. Ct. at 1756. 5 At least one district court had reached a contrary result, albeit, before issuance of the Federal Circuit’s Raniere decision. In CTP Innovations, LLC v. Geo Graphics Inc., a Maryland district court determined that a dismissal without prejudice on standing grounds did not confer “prevailing party” status on the successful party. MDL No. 14-MD-2581, 2017 U.S. Dist. LEXIS 147970, *14 (D. Md. Sept. 12, 2017). There, the court noted that “[t]he Federal Circuit has not addressed a dispute about the meaning of a prevailing party since CRST was decided” and relied on the Federal Circuit’s pre-CRST precedent for determining “prevailing party” status, including Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318 (Fed. Cir. 2004). CTP Innovations, U.S Dist. LEXIS 147970, at *11-14. Among other things, the district court quoted a Federal Circuit statement that “‘[t]o be a ‘prevailing party,’ our precedent requires that a party have received at least some relief on the merits.’” Id. at *13. In Raniere, however, the Federal Circuit stated unequivocally that “defendant need not prevail on the merits to be classified as a ‘prevailing party’” and “[t]o the extent inconsistent with this conclusion, our prior case law to the contrary—Inland Steel and its progeny—is abrogated accordingly.” 887 F.3d at 1306. Thus, the district court in CTP Innovations applied abrogated law. It should not be followed here. 6 This is not true of all patent cases. For example, no damages are lost in connection with the re-filing of an action dismissed without prejudice if the patent issued less than six years prior to the re-filing date. Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 6 of 10 PageID #:923 7 First, the fact that TheBrain did not own the asserted patent alone suffices to make this case exceptional. As put by a New York district court addressing comparable facts involving a lack of patent ownership: Applying the Supreme Court’s Octane Fitness ruling, this case is exceptional. I have never before had a case on my docket in which the purported owner of the patent-in-suit did not in fact own the patent—that alone makes this case “exceptional,” for I have no basis on which to believe that suing on a patent one does not own falls within the bounds of normal litigation behavior. Advanced Video Techs. LLC v. HTC Corp., No. 1:11 Civ. 08908 (CM), 2015 U.S. Dist. LEXIS 122423, *21 (S.D.N.Y. Aug. 28, 2015) (emphasis added), aff’d 677 Fed. Appx. 684 (Fed. Cir. 2017). This Court itself awarded Section 285 fees in a proceeding about which this Court commented that it “certainly has never seen another case like it.” Marshall, 2016 U.S. Dist. LEXIS 158436, at *5.7 Indeed, a case is “exceptional” if it is “uncommon,” “rare” or “not ordinary.” Octane Fitness, 134 S. Ct. at 1756. Second, TheBrain’s allegations of patent ownership were “exceptionally meritless.” Octane Fitness, 134 S. Ct. at 1757; accord Max Sound Corp. v. Google, Inc., No. 14-cv-04412- EJD, 2017 U.S. Dist. LEXIS 168541, *18-24 (N.D. Cal. Sep. 25, 2017), aff’d 756 Fed. Appx. 995 (Fed. Cir. 2019) (finding that plaintiff’s litigation position regarding standing and patent ownership was “exceptionally weak”). Among other pre-filing requirements, TheBrain “had a duty to investigate its chain of title before initiating this suit.” Advanced Video, 2015 U.S. Dist. LEXIS 122423, at *30; see also Max Sound, 2017 U.S. Dist. LEXIS 168541, at *25 (“Max Sound brought this lawsuit without performing sufficient due diligence as to whether it had standing.”). However, TheBrain admitted that it does not possess all required agreements purporting to have led to its 7 This Court in Marshall applied the practice in this District to defer the parties’ fee calculation efforts until the actual ruling awarding fees. See also Callpod, Inc. v. GN Netcome, Inc., No. 6 C 4961, 2010 U.S. Dist. LEXIS 115809, *6 (N.D. Ill. Nov. 1, 2010) (“[T]he Court … concludes that until it determines whether the case is exceptional, any work as to the amount of fees is premature.”). Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 7 of 10 PageID #:924 8 ownership of the patent-in-suit. (D.I. 77 at 4.) And in opposing AnyLogic’s motion to dismiss for want of standing, TheBrain did not provide a shred of relevant evidence that it acquired patent ownership rights in writing through a chain of title, in accordance with well-established law. (Id. at 4-5.) TheBrain further argued that the necessary assignment took place by operation of law, but cited no relevant authorities to support such a theory. (Id. at 5-6.) In short, TheBrain had no reasonable argument for its assertion of patent ownership. Its position on standing was “exceptionally meritless.” Third, and compounding matters, TheBrain knew it had a chain of title problem. Its “2015 Confirmatory Assignment” underscores that TheBrain obviously perceived a serious chain of title defect (i.e., no record of a necessary written assignment). Rather than accept its fatal lack of evidence of patent ownership and standing, however, TheBrain attempted to paper over the problem with its so-called “2015 Confirmatory Assignment” and engage AnyLogic in costly, yet frivolous, litigation. This behavior should not be countenanced. Fourth, fee-shifting is warranted on policy grounds. As with the plaintiff in Advanced Video, TheBrain “didn’t just lose; it had no right to bring the case in the first place.” 2015 U.S. Dist. LEXIS 122423, at *31. Fee-shifting here would “serve as a deterrent” to those “who might prefer to ignore doubts about their title, warning them to make sure they own the patent before initiating suit.” Id. Here, TheBrain did not merely have “doubts” about its title; it knew it could not provide evidence of a proper written assignment in the chain, yet proceeded to occupy this Court’s resources and force AnyLogic to defend against a meritless cause-of-action. Fee-shifting is even more appropriate here than in Advanced Video. Unfortunately, this patent enforcement scheme ensnared numerous victims beyond AnyLogic. TheBrain used its false assertions of patent ownership (and the inherent threat of costly Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 8 of 10 PageID #:925 9 litigation) as leverage for negotiating numerous license agreements. (Exhibit B (under seal).) Similar to the plaintiff in Advanced Video, TheBrain “bluffed by confidently asserting that it owned the patent, knowing that no one was likely to call its bluff and force it to prove what it knew it could not really prove.” 2015 U.S. Dist. LEXIS 122423, at *29. TheBrain accepted a series of settlement payments, each eclipsed by the cost of patent infringement proceedings, including the amount spent to date by AnyLogic. TheBrain’s obvious purposes to extract settlements without rights to do so weighs strongly in favor of fee-shifting. See Marshall, 2016 U.S. Dist. LEXIS 158436, at *5 (noting party’s “goal in filing th[e] action was settlement” as grounds supporting fee-shifting). AnyLogic paid a hefty price to call TheBrain’s bluff, and it would not be fair for AnyLogic to bear its own fees for exposing the falsity of TheBrain’s patent ownership claims. Fifth, this Court’s decision that TheBrain lacked patent ownership has done nothing to stop its continuing campaign of attempting to extract ill-gotten rewards. Running from this judicial district, despite the continued pendency of this action as a whole (see n.1, above), TheBrain filed a second suit against AnyLogic in Massachusetts, alleging infringement of the same patent and invoking the very same two ownership theories rejected by this court. (Compare Exhibit A with D.I. 77.) This Court has stated that making “arguments that were foreclosed by th[is] Court … support[s] the Court’s finding that the case is exceptional.” Marshall, 2016 U.S. Dist. LEXIS 158436, at *5. CONCLUSION For the foregoing reasons, defendant AnyLogic respectfully requests that the Court declare this case “exceptional” under 35 U.S.C. § 285 and award AnyLogic its reasonable attorneys’ fees incurred in defending against this patent infringement action knowingly brought by a party without Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 9 of 10 PageID #:926 10 proper evidence of patent ownership. AnyLogic stands ready to abide by the Court’s practice of documenting its fees upon the issuance of the exceptional case finding. Dated: June 3, 2019 Respectfully submitted, s/ Robert P. Greenspoon Robert P. Greenspoon FLACHSBART & GREENSPOON, LLC 333 North Michigan Avenue, 27th Floor Chicago, Illinois 60601-3901 Telephone: (312) 551-9500 E-mail: rpg@fg-law.com Attorney for Defendant and Counterclaim-Plaintiff ANYLOGIC NORTH AMERICA, LLC Case: 1:17-cv-06574 Document #: 81 Filed: 06/03/19 Page 10 of 10 PageID #:927