Power Analytics Corporation v. Operation Technology, Inc. et alREPLY NOTICE OF MOTION AND MOTION for Attorney Fees 405 ETAP's Reply to Plaintiff's Opposition to Motion for Attorney FeesC.D. Cal.March 21, 2018 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Trevor Stockinger (Cal. Bar No. 226359) tstockinger@kbslaw.com David W. Kesselman (Cal. Bar No. 203838) dkesselman@kbslaw.com KESSELMAN BRANTLY STOCKINGER LLP 1230 Rosecrans Avenue, Suite 690 Manhattan Beach, CA 90266 Telephone: 310-307-4555 Counsel for Defendant OPERATION TECHNOLOGY, INC. [Additional Counsel Listed on Signature Pages] UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION POWER ANALYTICS CORPORATION, Plaintiff, v. OPERATION TECHNOLOGY, INC., d/b/a ETAP, OSISOFT LLC, and SCHNEIDER ELECTRIC USA, INC., Defendants. Case No. 8:16-cv-01955-JAK-FFM ETAP’S REPLY TO PLAINTIFF’S OPPOSITION TO MOTION FOR ATTORNEY FEES Date: May 14, 2018 Time: 8:30 a.m. Courtroom: 10B Before: Hon. John A. Kronstadt Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 1 of 22 Page ID #:12960 i 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page I. THE MATERIAL FACTS AND INFERENCES ASSERTED IN ETAP’S MOTION ARE UNREBUTTED ......................................................................... 1 II. PLAINTIFF PRESENTS NO ADMISSIBLE EVIDENCE JUSTIFYING ITS BEHAVIOR ................................................................................................................. 5 III. THIS IS AN EXCEPTIONAL CASE UNDER OCTANE FITNESS ................................. 6 IV. THERE IS NO NEED FOR A MINI TRIAL ON PALADIN BECAUSE THE FACTS ARE UNDISPUTED .................................................................................... 9 V. THE COURT HAS NOT ALREADY RULED ON SUBSTANCE OF THIS MOTION ................................................................................................................. 11 VI. PLAINTIFF DOES NOT REBUT THE REASONABLENESS OF ETAP’S FEES ................................................................................................................... 11 VII. EQUITY DOES NOT BAR THIS MOTION ................................................................... 14 VIII. THE COURT SHOULD DENY PLAINTIFF’S MOTION FOR SANCTIONS ............. 15 IX. CONCLUSION ................................................................................................................. 15 Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 2 of 22 Page ID #:12961 ii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Hensley v. Eckerhart, 461 U.S. 424 (1983) .............................................................................................12 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) .......................................................................... 6, 7, 10, 11 Rules Fed. R. Civ. P. 1 ......................................................................................................... 9 Fed. R. Civ. P. 33(b)(5) .............................................................................................. 6 Fed. R. Civ. P. 54(d) .................................................................................................. 9 Fed. R. Evid. 602 ....................................................................................................... 6 Fed. R. Evid. 802 ....................................................................................................... 6 Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 3 of 22 Page ID #:12962 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. THE MATERIAL FACTS AND INFERENCES ASSERTED IN ETAP’S MOTION ARE UNREBUTTED Plaintiff did not attempt to rebut the evidence, facts and reasonable inferences on which ETAP’s Motion for Attorney Fees is based with Plaintiff’s own evidence and facts. ETAP’s motion primarily cited Plaintiff’s own statements-statements made in its Paladin prior art publications, to the Patent Office, or to the Court. In response, Plaintiff has submitted no declarations or exhibits disputing the authenticity, accuracy, or import of ETAP’s evidence. Plaintiff instead responds mostly with sweeping denouncements and declarations that it stands by its behavior. That does not refute the facts or the reasonable inferences ETAP draws therefrom. Specifically, the following sixteen facts and inferences in ETAP’s motion are unrefuted, and constitute the bulk of the totality of the circumstances on which ETAP’s motion rests. The issue before the Court is who should bear ETAP’s attorney fees under these unrefuted circumstances: 1. “Plaintiff knew or should have known that: (1) the patents’ alleged ‘invention’ was in Plaintiff’s own Paladin prior art; (2) the patents use two figures from prior art Paladin publications to describe the ‘invention’; (3) Plaintiff did not tell the Patent Office that these figures and Paladin were prior art; and (4) Plaintiff told the Patent Office that the prior art lacked features that were in its Paladin prior art.” (ECF No. 405 at 1:13-18.) (Plaintiff cites no evidence to the contrary.) 2. Nine Paladin prior art publications “describe Plaintiff’s Paladin software as having features the patents assert as their ‘invention,’” (id. at 6:9- 10), including the exemplary descriptions quoted in ETAP’s motion (id. at Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 4 of 22 Page ID #:12963 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6:22-8:8). (These documents are all publicly available and all but one was produced during discovery.)1 (Plaintiff cites no evidence to the contrary.) 3. “These prior art publications also show Paladin, with the patents’ features, was on sale before the critical date.” (Id. at 8:9-10.) (Plaintiff cites no evidence to the contrary.) 4. “Plaintiff affirmatively deceived the Patent Office by falsely declaring that features Plaintiff touted in its prior art Paladin publications were not in the prior art.” (Id. at 8:14-15.) (Plaintiff cites no evidence to the contrary.) 5. “Plaintiff’s false statements and deceptive withholding are material as a matter of fact [and] falsely stating that Paladin features were not in the prior art [is] material as a matter of law.” (Id. at 9:6-14.) (Plaintiff cites no evidence to the contrary.) 6. “The sale of Paladin software to the FAA evidenced by” “the November 16, 2005, $170,000 sales invoice to the FAA” (first revealed in Plaintiff’s slide deck on the Section 101 reconsideration motion (ECF No. 349-2 at slide 13)) “is presumptively prior art.” (ECF No. 405 at 11:12-12:4), but Plaintiff withheld it during discovery. (Plaintiff cites no evidence to the contrary.) 1 Loesch Decl. (ECF No. 405-1) Ex. A (ETAP-PA00006592); Ex. B (ETAP- PA00012830-31); Ex. C (ETAP-PA00006816-17); Ex. D (ETAP-PA00006818- 19); Ex. E (ETAP-PA00589255-64); Pellikaan Decl. (ECF No. 161-2) Ex. A (ETAP-PA00037549-50); Ex. B. (ETAP-PA00012821-22); Ex. C (ETAP- PA00006593-98); Ex. D (ETAP-PA00031791-98); Ex. I (ETAP-PA00006444-47). Only Pellikaan Decl. Ex. H was not produced, but the detailed hyperlinks from Exhibit H were produced with Bates numbers (i.e., at ETAP-PA00006444-47; ETAP-PA00008200. Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 5 of 22 Page ID #:12964 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7. Plaintiff did withhold the other Paladin-related evidence that ETAP asserts was wrongfully withheld. (Id. at 12:6-22, 14:5-24.) (Plaintiff cites no evidence to the contrary.) 8. Plaintiff’s “national security” objection to producing Paladin documents, and its attorney’s assertion that “I was told that the FBI would visit me” if the documents were produced, were “in bad faith,” “intentionally deceptive,” and “legally baseless,” in part because: (1) Plaintiff’s counsel possessed the documents apparently without FBI approval, (2) there is no evidence the FBI or FAA objected to production of any documents, (3) there is no evidence of Plaintiff asking the FAA to relieve Plaintiff of any confidentiality obligations, (4) in 2005-2006, the FAA, Plaintiff, and its partners publicized details of this Paladin technology as installed at FAA facilities, and (5) “there is no evidence that Plaintiff sought the FAA’s permission to disclose the details of Paladin software installed at the FAA in Plaintiff’s patent applications, web site, press releases, and brochure.” (Id. at 15:2-16:12.) (Plaintiff cites no evidence to the contrary.) 9. “All or nearly all of what Plaintiff told this Court were the ‘key aspects of the claimed inventions’ and ‘not present in prior art systems or methods’ were described in Plaintiff’s own Paladin prior art publications” (id. at 5:19-22) (citations omitted), and Plaintiff knew that when making that representation to the Court (id. at 16:17-19). (Plaintiff cites no evidence to the contrary.) 10. “Plaintiff falsely told the Court (Judge Mumm) that Paladin before August 2005 did not have real-time capability” (id. at 16:20-17:6), but the Paladin prior art documents described Paladin as having real-time capability before August 2005 (id. at 17:6-13). (Plaintiff cites no evidence to the contrary.) Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 6 of 22 Page ID #:12965 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11. “Plaintiff told the Court that it had ‘produced the non-privileged responsive documents to which Defendant is entitled,’” only to later admit that it was withholding documents under an NDA with the FDA. (Id. at 18:9- 14.) (Plaintiff cites no evidence to the contrary.) 12. In its Section 101 opposition, Plaintiff “expressly identified the ‘focus’ of the claimed ‘invention’ (Alice step one) as being data manipulations.” (Id. at 4:22-27.) (Plaintiff cites no evidence to the contrary.) 13. On Alice step two, “Plaintiff identified no new or improved hardware or arrangement of hardware.” (Id. at 4:27-5:1.) (Plaintiff cites no evidence to the contrary.) 14. In Markman, Plaintiff argued that two terms (“data acquisition component” and “calibration engine”) recite no functions, but those terms expressly recite functions. (Id. at 19:20-22.) (Plaintiff cites no evidence to the contrary.) 15. “In both Section 101 and Markman, Plaintiff cited cases that had been vacated or overruled on the points for which Plaintiff cited them.” (Id. at 20:15-17.) (Plaintiff cites no evidence to the contrary.) 16. “Plaintiff either did not read the Patent Office files of the asserted patents pre-suit, or asserted patent claims knowing they had been cancelled.” (Id. at 20:20-21.) (Plaintiff cites no evidence to the contrary and never explained why it asserted 25 cancelled claims from the ’808 patent.) On each of these sixteen facts and inferences, the evidence is one-sided. There is no factual dispute to resolve. For example, Plaintiff cites no evidence that Plaintiff’s Paladin publications were not published on the dates indicated by ETAP’s evidence. Plaintiff cites no evidence that Plaintiff disclosed these prior art Paladin publications to the Patent Office, or told the Patent Office that Paladin was prior art, or told the Patent Office that two figures it submitted to describe the alleged Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 7 of 22 Page ID #:12966 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “invention” were its prior art published depictions of its prior art Paladin software. Plaintiff cites no evidence that it corrected its false statements to the Patent Office that features (in Paladin) were not in the prior art. Plaintiff cites no evidence that the patents claim “inventions” different than those described in the Paladin prior art. Plaintiff cites no evidence that it produced the $170,000 FAA invoice in discovery, or admissible evidence that the sales activity leading to that invoice was not presumptively prior art. Plaintiff cites no evidence that the features Plaintiff told this Court were lacking in the prior art (viz., “real-time” capabilities and the putative “key aspects” of the alleged invention) were missing from its own Paladin prior art despite its prior art Paladin publications describing those features. Plaintiff cites no evidence that it read the Patent Office files before bringing this lawsuit. The Court therefore should find that ETAP has established these material facts and inferences under the governing preponderance of the evidence standard. (See ECF No. 405 at 2:11-14.) II. PLAINTIFF PRESENTS NO ADMISSIBLE EVIDENCE JUSTIFYING ITS BEHAVIOR Plaintiff cites no admissible evidence to justify any of its behavior established by the above sixteen unrefuted facts and inferences. For example, Plaintiff provides no innocent explanation for withholding Paladin prior art from the Patent Office, or for not telling the Patent Office that Paladin (including two figures in the patent applications describing Paladin and the putative “invention”) was prior art, or for telling the Patent Office that features it knew were in Paladin were not in the prior art, or for telling this Court that those features were not in the prior art, or for withholding the $170,000 FAA sales invoice in discovery, or for representing to the Court that Paladin did not have real-time capabilities before August 2005 when its own publications before that date declared otherwise, or for telling the Court that it Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 8 of 22 Page ID #:12967 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was not withholding non-privileged Paladin documents when it knew that was untrue, or for asserting patent claims that had been cancelled, etc. Instead, Plaintiff repeats the same misleading statement that “Paladin was disclosed to the PTO throughout the provisional patent applications.” (ECF No. 419 at 16:8-9.) But, as ETAP explained in its opening brief, Plaintiff never identified Paladin as prior art- it identified Paladin as being the alleged invention. (ECF No. 405 at 17:14-18:2.) Plaintiff provides no justification for failing to disclose to the Patent Office and for not admitting to the Court that Plaintiff did not disclose to the Patent Office that Paladin is prior art. An innocent party in Plaintiff’s position, responding to ETAP’s motion, would have submitted such evidence (if it existed). The putative “evidence” Plaintiff submits in response to ETAP’s motion is largely inadmissible attorney argument.2 The Court should find that Plaintiff has cited no admissible evidence justifying any of its behavior reflected in the above sixteen unrebutted facts and inferences. III. THIS IS AN EXCEPTIONAL CASE UNDER OCTANE FITNESS The unrefuted facts and inferences here show that this case qualifies as an exceptional case, applying the considerations cited by Octane Fitness: “District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances” including “frivolousness, motivation, objective unreasonableness (both in the factual and legal 2 Plaintiff submits an unverified interrogatory response (ECF No. 426) signed only by outside counsel, to which ETAP objects under Federal Rules of Evidence 602 (no personal knowledge) and 802 (hearsay), and Federal Rule of Civil Procedure 33(b)(5) (requiring signature of the person answering the interrogatory). This unverified response is signed by an attorney who Plaintiff retained more than a decade after the pertinent time period and thus has no personal knowledge of the matters addressed. ETAP objects to the Diaw declaration (ECF No. 419-1) under Federal Rules of Evidence 602 and 802 on the same grounds. Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 9 of 22 Page ID #:12968 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 & n.6 (2014). Deterrence: One factor is whether a fees award will deter similar behavior by Plaintiff or others. It is undeniable that Plaintiff’s behavior has benefitted Plaintiff- awarding Plaintiff patents it should not have obtained and thwarting ETAP’s efforts to obtain the discovery needed to prove its Paladin-related defenses, for example. Nothing in Plaintiff’s opposition suggests remorse or penance. On the contrary, its response evinces an attitude that it need not even try to muster evidence or facts to justify its behavior. If fees are not awarded, despite the sixteen unrefuted facts and inferences listed above, then the lesson for Plaintiff and anyone of like attitude, is that deception and bad faith litigation practices are a sound investment: they increase the chances of winning a litigation, and likely will not be punished. That lesson, of course, would not serve considerations of deterrence. Compensation: Another factor is whether a fees award will advance considerations of compensating the prevailing party where it would be grossly unjust for it to incur its attorney fees. It would be grossly unjust for ETAP to incur its attorney fees. First, ETAP did nothing wrong. It obeyed the Local Rules by disclosing its full invalidity contentions (on Paladin and other prior art, Section 112 defenses, and other defenses) and reasonably pursued discovery on the Paladin prior art, only to be thwarted throughout by Plaintiff. Second, it hired counsel with reasonable billing rates who spent reasonable hours on reasonable tasks, considering that Plaintiff was seeking an injunction against ETAP products. Third, ETAP is not a large company who can easily absorb such fees without an impact on its business. Fourth, but for Plaintiff’s deception of the Patent Office, there would have been no lawsuit or fees to incur. Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 10 of 22 Page ID #:12969 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Frivolousness: Another factor is whether Plaintiff took frivolous positions. As briefed herein and in the opening brief, Plaintiff did, in Markman briefing, Section 101 briefing, and discovery motions. Its opposition to this motion contains many more frivolous assertions. For example, Plaintiff asserts issue preclusion (ECF No. 419 at 9:9-18) which, of course, does not apply to interlocutory orders in the same proceeding. Plaintiff argues “there was no order to produce the purported Paladin documents” and therefore its failure to produce the documents is not improper (ECF No. 419 at 11:2- 4), but the Paladin documents are relevant, non-privileged, and proportional. Thus, under FRCP 26, they should have been produced without any court order. Plaintiff asserts that exhibits filed with the Court on February 28, 2017 (ECF No. 161-2) are “new matter” because they did not bear Bates numbers. In defending telling this Court that features Plaintiff knew were described in its Paladin prior art publication were not in the prior art, Plaintiff cites to Patent Office examinations that were conducted without knowledge of that Paladin prior art, thanks to Plaintiff. (ECF No. 419 at 15:19-26.) None of these arguments are unusual for Plaintiff, but each is frivolous. Motivation: One reason why Plaintiff’s deception of the Patent Office is material to this motion is that this lawsuit could not have been filed but for that deception. Another is that Plaintiff’s deception of the Patent Office was a primary motivation for many of Plaintiff’s misdeeds in this action. The most reasonable inference is that Plaintiff wrongfully withheld Paladin source code, invoices, technical documentation, contracts, etc.; lodged frivolous objections and assertions to thwart Paladin discovery; and misrepresented the prior art to this Court, because it knew the full evidence it possessed and General Atomics possessed, would demonstrate that the patents are invalid over Paladin and that it had committed fraud on the Patent Office vis-à-vis that invalidating Paladin prior art. Its bad faith Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 11 of 22 Page ID #:12970 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 litigation practices had a very specific purpose-to cover up its fraud. This is the most reasonable inference in part because Plaintiff has responded to this motion with no evidence supporting a different, innocent motivation for its behavior. Objective Unreasonableness on the Facts and Law: ETAP has explained several ways in which Plaintiff’s positions on Section 101, Markman, and Paladin discovery, were objectively unreasonable. Plaintiff’s behavior vis-à-vis Paladin in particular stands out. ETAP is unaware of any patent owner who so blatantly deceived the Patent Office, using prior art drawings of its prior art product as drawings of the invention in its patent applications, without telling the Patent Office so, and telling the Patent Office that features it knew were in its prior art publications and product, were not in the prior art-and then doubling down in court, telling the Court that the features it knew were in its Paladin prior art publications and software were not in the prior art. Moreover, the Court should consider that all of the above evidence, facts and inferences have been established despite Plaintiff having withheld hundreds if not more of Paladin documents on a frivolous confidentiality ground. IV. THERE IS NO NEED FOR A MINI TRIAL ON PALADIN BECAUSE THE FACTS ARE UNDISPUTED Like all rules in the Federal Rules, Rule 54(d) (Attorney’s Fees) “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. The Court must balance judicial economy with what is just, here measured in view of the goals advanced by an award of attorney fees, such as compensation and deterrence. If this motion required a mini trial or second major litigation, then interests of judicial economy would disfavor granting the motion. But this motion is a far cry Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 12 of 22 Page ID #:12971 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 from that. As noted, the material facts and inferences are unrefuted. ETAP has met its preponderance of the evidence burden with exhibits predominately written by Plaintiff. In response, Plaintiff has offered no admissible evidence. There simply are no factual disputes to resolve or conflicting evidence to weigh, on any of the sixteen unrefuted facts and inferences cited above. The Court need not balance competing expert declarations because there are none. No witness credibility determinations are needed. The unrefuted material evidence is of a modest volume. As Plaintiff says (ECF No. 419 at 10:13-15), the Paladin exhibits mostly are short. ETAP quoted the most important points in its moving brief (ECF No. 405 at 6:22-8:8) and Plaintiff disputed none of those quotes. The Court also is well placed to evaluate Plaintiff’s statements to the Court cited in ETAP’s motion. To achieve a “just” determination, the perspective of the prevailing defendant must be considered. It would not be just to disregard the Paladin-based grounds for this motion simply because ETAP, to reduce its fees, moved on the matter-of-law defense of Section 101, before the Paladin-related defenses were ripe for adjudication. Despite the strength of its Section 101 defense, it was reasonable for ETAP to also pursue the equally strong, but fact-based, Paladin defenses, considering what was at stake in the litigation. ETAP should not be faulted or disadvantaged by that prudent choice. To achieve a “just” determination, Plaintiff’s perspective also should be considered. Based on the sixteen above-listed unrebutted facts and inferences, Plaintiff knowingly deceived the Patent Office to get these patents, willfully tried to cover up that deception in this litigation, and made multiple misrepresentations and frivolous objections to the Court-all forcing ETAP to expend fees in its defense. Should such behavior go unscrutinized under Octane Fitness because Plaintiff’s case was meritless on another ground as well on which ETAP prevailed? Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 13 of 22 Page ID #:12972 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 V. THE COURT HAS NOT ALREADY RULED ON SUBSTANCE OF THIS MOTION As Plaintiff says, the Court’s prior orders discussed some of the topics raised here, but in a different context: a discovery dispute and the Section 101 motion for reconsideration. The Court did not then consider the complete picture (the “totality of the circumstances”) painted by the sixteen above-recited unrebutted facts and inferences established on this motion. In particular, the Court previously was unaware of the central role Paladin played in this litigation beginning in December 2016, with various Local Rule 37 letter exchanges, meet-and-confers, and motions to compel. (See ECF No. 405 at 10:13-11:2.) The Court’s ruling on ETAP’s previous motion to compel production of Paladin documents Plaintiff wrongly withheld was limited to a determination of whether further discovery was moot in view of the summary judgment ruling. It did not address the question presented here, namely whether Plaintiff improperly withheld clearly responsive discovery prior to the Court’s summary judgment ruling. The issue presented here, seeking to recoup about $1 million in fees ETAP should not have had to incur, is significantly more important than the prior motion to compel. In its discovery motion, ETAP did not present the full facts and legal arguments presented here, nor would that have been appropriate on such a narrow discovery motion. It would not be fair to ETAP to dismiss this motion based on that earlier, narrower motion that did not present all the factors relevant under Octane Fitness. VI. PLAINTIFF DOES NOT REBUT THE REASONABLENESS OF ETAP’S FEES Plaintiff does not dispute that ETAP’s attorney billing rates, the hours ETAP’s attorneys spent, the tasks they performed, the distribution of work among ETAP’s Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 14 of 22 Page ID #:12973 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 attorneys, or the total fees incurred by ETAP in light of the stakes and issues, were reasonable. Instead, Plaintiff makes unfounded misstatements about ETAP’s litigation conduct. For example, ETAP never suggested anything but a “reasonable briefing schedule” (see ECF No. 419 at 23:16-17), as the Court’s Standing Order and Local Rules govern briefing schedules. And ETAP agreed to extend the hearing and opposition dates-beyond what is required by the Court-on the motion for partial summary judgment. (ECF No. 169.) ETAP never filed any joint stipulation without fully complying with the Local Rules, and Plaintiff never (even during the Court- ordered meet-and-confer) explained how ETAP supposedly did not comply with the Local Rules. Plaintiff cites a Supreme Court decision for the proposition that fees “must be limited to work that contributed to that ultimate outcome” of prevailing under Section 101. (ECF No. 419 at 24:10-15.) Plaintiff is incorrect. The decision said that the fees cannot include work on unrelated claims where the action asserted “distinctly different claims for relief that are based on different facts and legal theories.” Hensley v. Eckerhart, 461 U.S. 424, 434-35 (1983). In accord with this rule, ETAP seeks fees on the patent counts, not the non-patent counts. Thus, ETAP seeks $933,251.75 in fees, instead of the total amount of $1.87 million (and counting) that ETAP has incurred in defending this litigation. (ECF No. 405 at n.1; ECF No. 408 at 1:11-12.) This is a reduction by half of ETAP’s total fees. As ETAP explained in its motion, this reduction is part of its cautious attempt to avoid seeking any fees related solely to the non-patent portion of the case. ETAP seeks fees for “preliminary patent analysis” (not “preliminary analysis” as claimed by Plaintiff (ECF No. 419 at 24:16-17)). It is reasonable, of course, for a defendant to access its risk, the strength of the claims asserted against it, etc. In a patent case, this includes analyzing the patents, file histories, cited prior art, accused Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 15 of 22 Page ID #:12974 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 products, etc., and requires learning about the technology and conducting prior art searches. Had Plaintiff similarly conducted some analysis prior to suit, it certainly would not have asserted 25 cancelled claims from the ’808 patent. Nor would it have waited nearly a year after filing suit to contact the FAA. Nor would it have asserted patents covering its own Paladin prior art. Nor would it have asserted patents invalid under Section 101. ETAP seeks fees for “patent case management” (not “case management” as claimed by Plaintiff (ECF No. 419 at 24:17)). This involves managing tasks, discovery, deadlines, motions, key defenses, etc.-related to the patent case. Again, it is reasonable and necessary for any party to manage deadlines and tasks in a litigation. ETAP seeks fees related to the motion to transfer. That motion was necessary even if Plaintiff had asserted no non-patent causes of action. Plaintiff filed suit in Delaware. Again, had Plaintiff conducted its pre-suit investigation, it would have easily learned that ETAP is a California corporation, based in Irvine, with no offices or employees in Delaware. (See ECF No. 30.) It also would have known that Plaintiff itself was based in San Diego (not Delaware) until shortly before filing suit, and two- of-the-three named inventors still reside in Southern California (not Delaware). (ECF No. 33 at 4-5.) And ETAP did not seek all its fees related to the motion to transfer. Accordingly, ETAP’s fees related to the motion to transfer are recoverable. To the extent ETAP’s time entries included block billing, ETAP did not include time entries in its fees request that could not be separated easily into the tasks (ECF No. 405-1 ¶ 33) and did not include any entries that were even arguably focused on or largely related to the non-patent issues (id. ¶¶ 33-39). Because ETAP was overly cautious not to include any fees that arguably were related only to the non-patent claims, ETAP sought minimal fees related to document review and Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 16 of 22 Page ID #:12975 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 responding to Plaintiff’s motion to compel, as a majority of that was related to the non-patent issues. (See id.) Notably, Plaintiff cites no authority or evidence for its contention that ETAP’s fees are “unreasonably high.” For example, Plaintiff did not submit to the Court, for comparison, the billing rates of its attorneys or the hours its attorneys spent on the patent case. A fees award of almost $1 million, for a litigation lasting nearly two years, asserting four patents, accusing a company’s core software, and involving significant discovery motion practice, exacerbated by Plaintiff’s misbehavior, is not unreasonable. VII. EQUITY DOES NOT BAR THIS MOTION Plaintiff faults ETAP for not asserting Section 101 invalidity in 2009. That was before Mayo and Alice and at a time when the Federal Circuit was not following Flook as later interpreted by Alice. Plaintiff notes that the Patent Office allowed these patents originally and in reexamination, but in part that was because Plaintiff had deceptively withheld its Paladin prior art and told the Patent Office that features it knew to be in that prior art, were not in the prior art. Plaintiff says that ETAP should not have filed this motion because Plaintiff’s counsel said that Plaintiff cannot pay a judgment for fees. Plaintiff has presented no evidence supporting its assertion. ETAP does not know whether Plaintiff can pay an award of fees, and ETAP’s counsel did not, as Plaintiff asserts, say that Plaintiff “likely” cannot pay its fees. A party cannot bring a baseless lawsuit against a defendant and force the defendant to bear the full expense thereof by the simple expedient of its counsel saying, without proof, that the party cannot afford to pay those fees. Plaintiff’s unsubstantiated assertion is another reason, however, to decide this motion now, rather than post appeal. If Plaintiff is failing in business as its counsel Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 17 of 22 Page ID #:12976 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 asserts, then there is a risk that by the time the Federal Circuit rules, Plaintiff will be insolvent or have declared bankruptcy and ETAP will be saddled with $1 million in fees it never should have incurred. VIII. THE COURT SHOULD DENY PLAINTIFF’S MOTION FOR SANCTIONS For all the reasons set forth in ETAP’s opening brief and this brief, the Court should deny Plaintiff’s motion for sanctions against ETAP’s attorney(s). IX. CONCLUSION The evidence is one-sided; Plaintiff’s behavior was egregious; and ETAP deserves to be compensated for the fees it was forced to incur. Dated: March 21, 2018 Respectfully submitted, By: /s/Salumeh R. Loesch Klaus H. Hamm (Cal. Bar No. 224905) klaus.hamm@klarquist.com Sarah E. Jelsema (pro hac vice) sarah.jelsema@klarquist.com Salumeh Loesch (pro hac vice) salumeh.loesch@klarquist.com John D. Vandenberg (pro hac vice) john.vandenberg@klarquist.com Garth A. Winn (pro hac vice) garth.winn@klarquist.com KLARQUIST SPARKMAN, LLP 121 S.W. Salmon Street, Suite 1600 Portland, OR 97204 Telephone: 503-595-5300 Trevor V. Stockinger (Cal. Bar No. 226359) tstockinger@kbslaw.com David W. Kesselman (Cal. Bar No. 203838) dkesselman@kbslaw.com KESSELMAN BRANTLY STOCKINGER LLP Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 18 of 22 Page ID #:12977 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1230 Rosecrans Avenue, Suite 690 Manhattan Beach, CA 90266 Telephone: 310-307-4555 Counsel for Defendant OPERATION TECHNOLOGY, INC. Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 19 of 22 Page ID #:12978 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in the County of Multnomah, State of Oregon. I am over the age of 18 and not a party to the within action. My business address is 121 SW Salmon Street, Suite 1600, Portland, Oregon 97204. On March 21, 2018, I served the foregoing document(s) described as: ETAP’S REPLY TO PLAINTIFF’S OPPOSITION TO MOTION FOR ATTORNEY FEES on the interested parties to this action, by electronic mail to each addressee named below, as follows: Robert F. Ruyak (pro hac vice) Richard Ripley (pro hac vice) Arthur Farrell (pro hac vice) Amadou Kilkenny Diaw (pro hac vice) Brittany V. Ruyak (pro hac vice) RUYAK CHERIAN LLP 1700 K Street NW, Suite 810 Washington, DC 20006 (202) 838-1560 robertr@ruyakcherian.com rickr@ruyakcherian.com tedf@ruyakcherian.com amadoukd@ruyakcherian.com brittanyr@ruyakcherian.com Don F Livornese RUYAKCHERIAN LLP 222 North Sepulveda Boulevard Suite 2000 El Segundo, CA 90245 310-586-7689 donl@ruyakcherian.com Korula Cherian RUYAKCHERIAN LLP 1936 University Avenue Suite 350 Berkeley, CA 94704 (510) 944-0190 sunnyc@ruyakcherian.com Attorneys for Plaintiff POWER ANALYTICS CORPORATION Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 20 of 22 Page ID #:12979 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Michael J Sacksteder Adam Michael Lewin FENWICK AND WEST LLP 555 California Street, 12th Floor San Francisco, CA 94104 415.875-2434 alewin@fenwick.com msacksteder@fenwick.com Joseph Stephen Belichick FENWICK AND WEST LLP 801 California Street Mountain View, CA 94041 650-988-8500 jbelichick@fenwick.com Attorneys for Defendant OSISOFT, LLC Kirsten Hicks Spira Michael P McNamara Nick Saros Reginald J. Hill Shaun M. Van Horn Benjamin J. Bradford Lisa M. Schoedel JENNER AND BLOCK LLP 633 West Fifth Street Suite 3600 Los Angeles, CA 90071 213-239-5100 KSpira@jenner.com mmcnamara@jenner.com nsaros@jenner.com rhill@jenner.com svanhorn@jenner.com bbradford@jenner.com lschoedel@jenner.com Kendall Turner JENNER AND BLOCK LLP 1099 New York Ave. NW, Suite 900 Washington, DC 20001-4412 202-639-6000 kturner@jenner.com Attorneys for Defendant SCHNEIDER ELECTRIC USA INC. BY COURT’S CM/ECF SYSTEM: Pursuant to the Local Rule, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which sent notification of that filing to the registered CM/ECF users in this action to be served by the CM/ECF System. BY ELECTRONIC MAIL: I caused such documents to be transmitted via electronic mail to the offices of the addressee(s) at the listed electronic mail address(es). BY U.S. MAIL: I deposited such envelope in the mail at Portland, Oregon. The envelopes were mailed with postage thereon fully prepaid. Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 21 of 22 Page ID #:12980 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Federal: I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct and that I am employed in the offices of Klarquist Sparkman, LLP and Salumeh R. Loesch, at whose direction the service was made. /s/ Amy M. Kendig Print Name /s/ Amy M. Kendig Signature Case 8:16-cv-01955-JAK-FFM Document 430 Filed 03/21/18 Page 22 of 22 Page ID #:12981
