Acacia Research Corp. (ACTG), the patent licensing company run by interim CEO Marvin Key, won a second reprieve from a motion for exceptional case fees in an enforcement dispute between its AdjustaCam unit and Newegg Ltd. and Sakar International.

The denial of exceptional case fees against AdjustaCam was handed down by Judge Rodney Gilstrap, of the U.S. District Court in Tyler, Texas.

Los Angeles-based Newegg and Sakar had each filed their fee shifting motions in 2012 after AdjustaCam dismissed its claims against them. They were among 58 defendants sued by AdjustaCam in 2010 in a case originally overseen by Judge Leonard Davis, who has since retired.

Judge Gilstrap noted in his ruling that the two companies had opposed the motion to dismiss and only agreed to it in order to preserve their rights to seek exceptional case fees.

Judge Gilstrap's denial came after the Court of Appeals for the Federal Circuit remanded the original denial for a rehearing "in light of the Supreme Court's recent clarification of the 'exceptional case' standard."

In 2014, the U.S. Supreme Court decided in Octane Fitness LLC vs. ICON Health & Fitness found that the Brooks Furniture framework previously used for deciding fee shifting motions was “unduly rigid" and "impermissibly encumbered 'the statutory grant of discretion to district courts.'”

Judge Gilstrap noted that the Supreme Court held that “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."

The high court went on to say that district courts may determine whether a case is exceptional on a case by case basis in exercise of their discretion and considering the totality of the circumstances.

In rejecting the motion, Judge Gilstrap noted that the Federal Circuit had previously upheld a district court's second denial of exceptional case fees in Site Update Solutions vs. CBS Corp. Site Update Solutions is also an Acacia unit. Newegg also was a defendant in that case.

"The Federal Circuit recently acknowledged (post-Octane Fitness) the discretion afforded to district courts evaluating attorney fee awards under § 285 in Site Update Solutions," Judge Gilstrap said.

In that case, the Federal Circuit affirmed a district court’s second denial of attorney fees under
Section 285, recognizing that “the district court ruled from a position of great familiarity with the case
and the conduct of the parties, and it determined that Site Update’s tactical blunders and mistakes
do not warrant fees."

Moreover, he noted that the Federal Circuit also noted that “[t]he new Octane Fitness standard for an exceptional case applies both ways: discretion is entitled to a district court’s findings that Section 285 attorney’s fees are not applicable, as much as discretion is owed to findings that they are applicable. As the Supreme Court explained, matters of attorney’s fees, and the effective contours illuminating this area, are committed to the sound discretion of the trial court.”

In a footnote to its ruling, the Federal Circuit had said that "Newegg and Sakar's arguments appear to have significant merit, particularly their argument that AdjustaCam continued its pursuit of its infringement claims after the district court construed the claim 'rotably attached' was baseless."

Judge Gilstrap addressed the Federal Circuit's footnote by saying "this court has endeavored not to circumvent by hindsight the judgments and in-person evaluations that the trial judge who dealt with this case in the courtroom arena was best positioned to have made, considering both the facts as well as the unavoidable human intangibles that a 'totality of the circumstances' contemplates."

"After a careful review of the entirety of the record, as well as the parties’ arguments and additional briefing, the court, in an exercise of its statutory grant of discretion, does not find that AdjustaCam’s infringement and validity arguments were so weak, or its litigation conduct so poor, as to make this case stand out from others."

Representatives for Newport Beach, Calif.-based Acacia couldn't be reached for comment.

Newegg is "not surprised," said Newegg chief counsel Lee Cheng. "The legal system is still very much stacked against defendants and there's very little accountability for plaintiffs to file frivolous lawsuits. More reform is needed and that's what we are trying to promote."

Representatives of Sakar also couldn't be reached.

—To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or at dan@thepatentinvestor.com