UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
LUMEN VIEW TECHNOLOGY LLC,
Plaintiff,
v.
FINDTHEBEST.COM, INC.,
Defendant.
No. 13 CV 3599
ECF CASE
DEFENDANT FINDTHEBEST.COM, INC.’S REPLY IN SUPPORT OF ITS MOTION
FOR DECLARATION OF EXCEPTIONAL CASE AND
AWARD OF FEES AND NONTAXABLE EXPENSES
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TABLE OF CONTENTS
I. THIS CASE IS EXCEPTIONAL PURSUANT TO SECTION 285 ....................................... 2
A. Lumen’s Lawsuit Was Frivolous and Unjustified ............................................................... 2
1. The Litigation Against FTB Was Objectively Baseless................................................... 2
2. Lumen Brought the Litigation in Subjective Bad Faith ................................................... 3
B. Lumen Filed This Lawsuit for an Improper Purpose ........................................................... 7
C. Lumen Engaged in Other “Offensive Litigation Tactics” ................................................... 8
II. FTB’S MOTION SHOULD NOT BE DENIED PENDING APPEAL.................................. 9
III. CONCLUSION ..................................................................................................................... 10
i.
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TABLE OF AUTHORITIES
Cases
Digitech Image Techs., LLC v. Newegg, Inc.,
2013 U.S. Dist. LEXIS 147633 (C.D. Cal. Oct. 11, 2013) ......................................................... 6
Eltech Sys. v. PPC Indus.,
903 F.2d 805 (Fed. Cir. 1990)................................................................................................. 5, 6
Eon-Net LP v. Flagstar Bancorp,
653 F.3d 1314 (Fed. Cir. 2011)................................................................................................... 7
Forest Labs., Inc. v. Abbott Labs.,
339 F.3d 1324 (Fed. Cir. 2003)................................................................................................... 5
Highmark, Inc. v. Allcare Health Management,
687 F.3d 1300 (Fed. Cir. 2012)............................................................................................... 4, 5
iLOR, LLC v. Google, Inc.,
631 F.3d 1372 (Fed. Cir. 2011)............................................................................................... 3, 4
In re Seagate Tech., LLC,
497 F.3d 1360 (Fed. Cir. 2007)................................................................................................... 4
Kilopass Tech., Inc. v. Sidense Corp.,
2013 WL 6800885 (Fed. Cir. Dec. 26, 2013) ................................................................. 1, 4, 5, 6
Mach. Corp. of Am. v. Gullfiber Ab.,
774 F.2d 467 (Fed. Cir. 1985)..................................................................................................... 5
Octane Fitness, LLC v. ICON Health & Fitness, Inc.,
2013 WL 1309080 (S. Ct. Mar. 27, 2013) .................................................................................. 9
Wireless Ink Corp. v. Facebook, Inc.,
2013 U.S. Dist. LEXIS 180182 (S.D.N.Y. Dec. 17, 2013) ........................................................ 8
Statutes
35 U.S.C. § 101 ............................................................................................................................... 6
35 U.S.C. § 285 ...................................................................................................................... passim
35 U.S.C. § 299 ............................................................................................................................... 6
Federal Rule of Appellate Procedure 4 ........................................................................................... 9
ii.
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In Kilopass Tech., Inc. v. Sidense Corp., 2013 WL 6800885 (Fed. Cir. Dec. 26, 2013), the
Federal Circuit clarified the standard for the subjective bad faith prong of the exceptional case
determination: a finding of subjective bad faith does not require actual knowledge, as Lumen
erroneously argues, but instead requires a showing that Lumen knew or should have known that
its claim lacked foundation and acted recklessly based upon consideration of the totality of the
circumstances. Lumen claims that its litigation against FTB was simply an effort to pursue a
“patent infringement claim...pursuant to their [sic] rights under a valid patent.” (Opp. at 10-11.)
However, as the Federal Circuit reiterated in Kilopass, “one’s misguided belief, based on
zealousness rather than reason, is simply not sufficient by itself to show that a case is not
exceptional in light of objective evidence that a patentee has pressed meritless claims.”
Kilopass, 2013 WL 6800885, *8. The facts show that Lumen litigated not under a “misguided
belief,” but pursued meritless claims in bad faith, using improper means, for the improper
purpose of extorting licensing fees. This warrants an exceptional case finding.
Lumen presents no new evidence to rebut the conclusion that its litigation (1) was
objectively baseless, and (2) was brought in subjective bad faith. As FTB’s Motion establishes,
Lumen’s infringement claims against FTB were objectively baseless. Even a cursory
examination of FTB’s website conclusively demonstrates that FTB’s system does not match two
or more party preference profiles and, thus, does not infringe the claims of the ‘073 Patent.
Lumen presents nothing to support the substance of its claims of infringement, relying only on
the supposed procedural compliance of its complaint with Form 18 and its preliminary
infringement contentions with the Local Rules. (Opp. at 12, 15.) Further, nothing in Lumen’s
Opposition alters the inexorable conclusion that it brought its suit against FTB in bad faith.
Tellingly, Lumen offers no facts to bolster its conclusory statements that it “extensively
1.
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investigated its claim”—no billing records, no estimates of time spent, no identification of team
members who performed the alleged investigation, no screenshots of FTB webpages reviewed—
only a single statement that Lumen and its counsel performed “weeks of infringement analysis.”
(Opp. at 11; Wasserbauer Aff., ¶ 9.)1 Nor does Lumen dispute the facts FTB offers about
Lumen’s offensive litigation tactics, instead attempting to downplay its campaign to prolong the
litigation and extort “licensing fees” by comparing its discovery conduct to that committed in
other egregious cases. (Opp. at 8-9.) As demonstrated below, Lumen offers no factual or legal
basis on which FTB’s Motion could properly be contested and FTB’s Motion should be granted.
I. THIS CASE IS EXCEPTIONAL PURSUANT TO SECTION 285
In its opening brief, FTB demonstrated that this case should be declared exceptional on
three separate grounds: the litigation was frivolous, unjustified, and brought in bad faith;
Lumen’s suit was filed for an improper purpose; and Lumen engaged in litigation misconduct.
In response, Lumen makes conclusory allegations unsupported by evidence, attempts to rely only
on the procedural compliance of its pleadings, and draws narrow factual distinctions between its
conduct and the cases cited by FTB in an effort to downplay Lumen’s conduct.
A. Lumen’s Lawsuit Was Frivolous and Unjustified
1. The Litigation Against FTB Was Objectively Baseless
Rather than bolster its Infringement Contentions with any evidence showing that its
infringement claims were well-founded, Lumen draws a smokescreen by pointing to FTB’s
allegedly “inconsistent” claim construction positions. (Opp. at 15-16.) Lumen is mistaken.
1 FTB concurrently submits its January 17, 2014 letter brief objecting to paragraphs 7, 8, 9, and
10 of the Affidavit of Damian Wasserbauer in Support of Plaintiff’s Memorandum in Opposition
to Defendant’s Motion for Attorneys’ Fees and requesting that the Court strike them, on the
grounds that they constitute hearsay, improper opinion testimony, and violate the best evidence
rule.
2.
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FTB’s interpretation of the scope of the claim language—with which Lumen itself agreed in its
proposed claim constructions—has always been that the claims of the ‘073 Patent do not cover
unilateral decisionmaking and require matching of preference data from at least two parties. (See
Dkt. Nos. 26, 28, 38, 49.) Contrary to Lumen’s assertions, the Court did not “approve” the
substance of Lumen’s Infringement Contentions. (Opp. at 18.) The Court simply evaluated
whether Lumen’s Infringement Contentions complied with the Patent Local Rules. (See Dkt.
Nos. 17, 25.) Indeed, review of the documents Lumen appended to its Infringement Contentions
demonstrates that FTB’s website performs only unilateral decisionmaking and does not match
preference data from at least two parties. (See Motion, Ex. 3.) In its Opposition, Lumen presents
no evidence to the contrary. In view of the record evidence that FTB’s website performs only
unilateral decisionmaking, it is clear that Lumen’s infringement claims were objectively
baseless.
Lumen inflates the importance of the early stage of the litigation and the status of its
infringement claims when the Court invalidated Lumen’s patent. When the Court invalidated the
‘073 Patent, Lumen had disclosed its Infringement Contentions and FTB had disclosed its
Invalidity Contentions, the parties had engaged in written discovery, and claim construction
positions were fully briefed. There is ample evidence in the record for the Court to determine
that Lumen’s pursuit of its claims of infringement of the ‘073 Patent, which covers only the
matching of preference data from two or more parties, against FTB’s website performing only
unilateral decisionmaking was objectively baseless. (See Motion at 12.)
2. Lumen Brought the Litigation in Subjective Bad Faith
Lumen relies on iLOR, LLC v. Google, Inc., 631 F.3d 1372 (Fed. Cir. 2011) to
erroneously argue that the standard for evaluating exceptional case under § 285 requires Lumen
3.
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to “actually know” that its infringement claims were baseless. However, in Kilopass, the Federal
Circuit expressly rejected any implication that iLOR imposed a heightened requirement:
[T]o the extent that the district court did require actual knowledge of objective
baselessness, it erred. The language from iLOR and MarcTec that Sidense
interprets as requiring actual knowledge does not reflect this court’s law
governing § 285, and is dictum. As we made clear in Highmark, Inc. v. Allcare
Health Management, 687 F.3d 1300 (Fed. Cir. 2012), subjective bad faith only
requires proof that the “lack of objective foundation for the claim ‘was either
known or so obvious that it should have been known. Id. at 1309 (emphases
added) (quoting In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007)
(en banc)). Thus, actual knowledge of baselessness is not required.
Kilopass, 2013 WL 6800885, *7. Instead, FTB need only prove that Lumen’s conduct was
reckless—that Lumen knew or should have known that its claims were baseless—to satisfy the
subjective prong of the § 285 analysis.2 Id.
Lumen attempts to paint a rosier picture of its investigation and litigation conduct than
exists in reality, making the unsupported contention that Lumen “extensively” investigated
infringement and “performed weeks of infringement analysis with respect to the FTB website.”
(Opp. at 11, 18; Wasserbauer Aff., ¶ 9.) Despite allegedly conducting this extensive, weeks-long
analysis, which undoubtedly generated work product in order for Lumen and its counsel to
“identif[y] on an element-by-element basis, presence of each claim limitation of claim 1 in the
‘073 patent in the FTB website,” (Wasserbauer Aff. ¶¶ 9-10), Lumen submits nothing to the
Court to prove up such an investigation. Lumen provides only conclusory statements from its
litigation counsel—no names of individuals conducting the investigation, no affidavits of the
alleged investigators, no billing records, no dates on which the investigation was conducted, no
screenshots of pages from FTB’s website showing that it performs two-party preference
matching, and no offer to submit work product to the Court in camera. Silence speaks volumes.
2 Kilopass was decided on December 26, 2013. Lumen’s brief was filed on January 10, 2014 and
cites Kilopass, yet utilizes the incorrect standard. (Opp. at 16.)
4.
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Given the baselessness of Lumen’s infringement allegations, FTB doubts the veracity of
Lumen’s assurances that it conducted an adequate investigation.
The Kilopass court also noted that “[s]ubjective bad faith is difficult to prove directly,
essentially requiring the discovery of a smoking gun, and evidence of a lack of subjective bad
faith is easy to provide[.]” Id. Thus, “where ‘the patentee is manifestly unreasonable in
assessing infringement, while continuing to assert infringement in court, an inference is proper of
bad faith.’” Id., quoting Eltech Sys. v. PPC Indus., 903 F.2d 805, 811 (Fed. Cir. 1990) at 811.
Further, when a patentee pursues claims that are devoid of merit, circumstantial evidence “such
as the failure to conduct an adequate pre-suit investigation, vexatious or unduly burdensome
litigation tactics, misconduct in procuring the patent, or an oppressive purpose are factors which
can be indicative of bad faith. The wide variety of ways available to establish bad faith is why
our case law has long required a party seeking fees under § 285 ‘to prove the other guilty of bad
faith litigation by clear and convincing evidence in light of the totality of the circumstances.’”
Kilopass, quoting Eltech, 903 F.2d at 811 (emphasis in original); also citing Highmark, 687 F.3d
at 1311 (quoting Mach. Corp. of Am. v. Gullfiber Ab., 774 F.2d 467, 473 (Fed. Cir. 1985));
Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1330 (Fed. Cir. 2003) (considering the record
as a whole in determining whether the patentee maintained its infringement counterclaim in bad
faith). In sum, Kilopass makes it clear that it is not just the hours or “weeks” of time Lumen
spent on infringement analysis that is determinative of whether Lumen pursued its infringement
claims with subjective bad faith. What matters is the “totality of the circumstances,” not just
“evidence allegedly indicative of a party’s good faith.” Kilopass, quoting Highmark, 687 F.3d at
1311 and Mach. Corp., 774 F.2d at 473.
5.
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“A wide variety of proofs can provide the requisite showing of bad faith under § 285”
and “objective baselessness alone can create a sufficient inference of bad faith to establish
exceptionality under § 285, unless the circumstances as a whole show a lack of recklessness on
the patentee’s part.” Kilopass, quoting Eltech, 903 F.2d at 811. Here, the baselessness of
Lumen’s claims, coupled with Lumen’s litigation conduct and the purpose of its relentless
pursuit of easy “marks” from whom to extract “licensing fees,” taken as a whole, compel the
finding that Lumen pursued its infringement claims against FTB in subjective bad faith.
Lumen emphasizes Digitech Image Techs., LLC v. Newegg, Inc., 2013 U.S. Dist. LEXIS
147633 (C.D. Cal. Oct. 11, 2013) in support of its argument that a campaign of litigation
designed to extract settlements ended by a determination of invalidity under § 101 is neither
objectively baseless nor brought in bad faith. Lumen’s reliance is misplaced. In Digitech, the
court noted that Digitech’s multiplicity of lawsuits was simply a function of the joinder
requirements of the America Invents Act: Digitech sued manufacturers and retailers of digital
cameras that allegedly infringed its patents, which was dismissed for misjoinder under 35 U.S.C.
§ 299, forcing Digitech to refile each suit individually. Id. Moreover, according to the court,
Newegg did not present admissible evidence that any “shake-down” negotiations took place. Id.
In contrast, FTB has provided evidence that Lumen filed suit against FTB with no basis for its
claims, offered to dismiss the lawsuit if FTB paid an $85,000 “licensing fee” prior to answering
the complaint, and engaged in the same tactics with numerous companies. (See Motion at 10-11;
Leventhal Decl., ¶¶ 3, 5, 10-11.) As the court in Digitech noted, “[o]f course, parties that abuse
the patent system exist—that is what § 285 is for.” Digitech, 2013 U.S. Dist. LEXIS 147633.
Lumen’s subjective bad faith in bringing an objectively baseless litigation in order to extract
6.
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settlement payments is precisely the type abuse of the patent system that § 285 was designed to
remedy.
B. Lumen Filed This Lawsuit for an Improper Purpose
Lumen asserts that both its attempt to obtain a nuisance settlement in this case and its
practice of seeking and obtaining such settlements in countless other cases are essentially
irrelevant to whether this suit was brought for an improper purpose. (Opp. at 18-21.) Lumen is
wrong. To the contrary, as Lumen’s demand letter reveals, Lumen’s business model would
likely not survive if Lumen did not force its targets to either (1) capitulate to a nuisance
settlement or (2) spend many times the settlement amount defending this action. (See Motion,
Exs. 1, 2.)
Lumen contends that its prosecution of this case was simply a “[pursuit] of their [sic]
rights under the ‘073 Patent.” (Opp. 14.) However, in Eon-Net, the Federal Circuit noted that:
Eon–Net argues that it is not improper for a patentee to vigorously enforce its
patent rights or offer standard licensing terms, and Eon–Net is correct. But the
appetite for licensing revenue cannot overpower a litigant’s and its counsel’s
obligation to file cases reasonably based in law and fact and to litigate those cases
in good faith. Here, the district court did not clearly err when it found that Eon–
Net filed an objectively baseless infringement action against Flagstar and brought
that action in bad faith, specifically to extract a nuisance value settlement by
exploiting the high cost imposed on Flagstar to defend against Eon–Net’s baseless
claims.
See Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011). Lumen’s litigation
conduct, baseless claims, and settlement demands to FTB—and the 20 other companies it sued in
15 months—indicate that Lumen brought its litigation against FTB for an improper purpose and
in bad faith. Lumen cannot and does not explain how or why its campaign to extract “licensing
fees” in this case is distinguishable from those cited at page 10 of FTB’s opening brief, which
hold, among other things, that a case may be declared exceptional where a defendant’s purpose
7.
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in commencing litigation is (1) “to force defendants into settlement” or (2) “to force” a defendant
to take a patent license “by threatening [defendant] with a suit, the defense of which would entail
considerable expenses.” (E.g., Motion at 11 (cases cited).)
Accordingly, Lumen’s conduct in connection with its scheme to profit from asserting (or
threatening to assert) baseless infringement claims is properly considered in connection with the
application of § 285 here. Indeed, such conduct makes this case exceptional. (See Motion 11
(cases cited).)
C. Lumen Engaged in Other “Offensive Litigation Tactics”
The only supposed explanation Lumen offers for its various other litigation abuses is that,
when FTB’s Director of Operations contacted Lumen’s attorney, he “counseled” him to “obtain
counsel” and “otherwise declined to discuss the specifics of Lumen’s case[.]” (Opp. at 8;
Wasserbauer Aff., ¶¶ 18-23.) However, Lumen offers no justification or explanation for the
other conduct FTB identifies in its Motion. Instead, Lumen points to offending discovery
conduct in other patent infringement cases, in essence claiming, “we’re not that bad” because
Lumen provided timely discovery responses. (Opp. at 8-9.) Lumen’s efforts are unavailing, as
are Lumen’s efforts to tie itself to the result in Wireless Ink Corp. v. Facebook, Inc., 2013 U.S.
Dist. LEXIS 180182 (S.D.N.Y. Dec. 17, 2013). Lumen’s timeliness and compliance with Court
orders is not at issue. Lumen’s efforts to “gag” FTB’s executives, extort a “licensing fee” by
threatening criminal charges against FTB and its executives, and hide discovery amongst “shell
entities” in order to hide its tactics from public view are at issue. Rather than being attempts to
navigate “a prolonged and complex litigation,” Lumen’s conduct was designed to prolong the
litigation in the first instance in order to extract a “licensing fee” from FTB. (Motion at 4;
8.
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Leventhal Decl. ¶¶ 3, 5-7.) As set forth in FTB’s Motion, Lumen’s tactics and gamesmanship
support the finding that this is an exceptional case. (Motion at 13.)
II. FTB’S MOTION SHOULD NOT BE DENIED PENDING APPEAL
In its Opposition, Lumen asserts that FTB’s Motion should be denied without prejudice
pending “resolution of Lumen’s pending appeal on the merits.” (Opp. at 23.) However, Federal
Rule of Appellate Procedure 4(a)(4)(B) addresses the circumstance in which a notice of appeal is
filed before the prevailing party files a motion for attorneys’ fees. Such a notice “is, in effect,
suspended until the motion is disposed of.” Fed. R. App. P. 4(a)(4) (adv. comm. notes). There is
no reason to deviate from that procedure here. Should the Court grant FTB’s Motion, Lumen
may appeal the order in conjunction with its currently-pending appeal.
Lumen also claims that “the Supreme Court’s ultimate ruling in Octane Fitness, LLC v.
ICON Health & Fitness, Inc. will potentially impact the standard for awarding fees under § 285.”
(Opp. at 23.) The question raised in Octane’s petition for certiorari is whether the Federal
Circuit’s two-part test for determining an exceptional case under 35 U.S.C. § 285 improperly
appropriates a district court’s discretionary authority to award attorney fees to prevailing accused
infringers…thereby raising the standard for accused infringers (not patentees) to recoup fees and
encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce
unwarranted settlements from defendants.” Octane Fitness, LLC v. ICON Health & Fitness,
Inc., 2013 WL 1309080 (S. Ct. Mar. 27, 2013). FTB has established that an exceptional case
finding is warranted under the current standard, much less any potentially lower standard issued
by the Supreme Court in the Octane appeal.
9.
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III. CONCLUSION
For the foregoing reasons, FTB respectfully requests that the Court grant its Motion for
Declaration of Exceptional Case and Award of Fees and Nontaxable Expenses.3
Dated: January 17, 2014 Respectfully submitted,
By: /s/ Joseph S. Leventhal___________
JOSEPH S. LEVENTHAL
THE LEVENTHAL LAW FIRM, APC
600 West Broadway, Suite 700
San Diego, CA 92101
Ph: (619) 356-3518
Fx: (619) 615-2082
jleventhal@leventhallaw.com
3 Lumen argues that FTB’s request for leave to submit briefing regarding the specific amount of
attorneys’ fees and costs to be reimbursed constitutes a “reckless pursuit” of attorneys’ fees.
(Opp. at n.9.) To the contrary, the evidentiary submissions supporting the amount of fees and
costs is sensitive information for FTB and its counsel, and, as such, FTB believes it is only
necessary to provide such information once it becomes relevant, i.e. upon the Court’s
determination that this is an exceptional case.
10.
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