The U.S. Supreme Court handed Newegg, the online computer retailer and its general counsel Lee Cheng another loss in an attempt to saddle a patent enforcer with exceptional case fees that effectively drive it out of business.
The high court denied a petition for certiorari filed by Los Angeles-based Newegg in May against MacroSolve.
The case stemmed from a patent infringement action filed by MacroSolve against Newegg and others in 2011. The case involved alleged infringement of an electronic questionnaire patent. After the Patent and Trademark Office invalidated the patent in suit in a post grant review, MacroSolve dismissed the action. Newegg decided to try to make an example of MacroSolve by filing its motion for exceptional case fees based on the Supreme Court's Octane Fitness v. ICON Health and Fitness ruling. The motion was denied by the U.S. District Court in the Eastern District of Texas and upheld by the Court of Appeals for the Federal Circuit.
The questions involved in the petition included whether in denying a motion for attorneys’ fees under 285 of the Patent Act brought by a defendant, the Eastern District of Texas and the Federal Circuit were right to disregard the high court’s analytical framework provided in Octane Fitness, LLC v. ICON Health & Fitness. It also asked the high court whether the district court and Federal Circuit erred in creating and applying a special, heightened burden of proof whenever the patent plaintiff avoids adjudication on the merits by unilaterally dismissing its case before judgment. In addition, Newegg asked the high court whether the Eastern District of Texas rule requiring proof by clear and convincing evidence that a lawsuit is frivolous improperly limits or circumvents Octane.
"We realized that getting a cert grant in any case was a long shot," Cheng said in an emailed statement. "We filed one after careful consideration in MacroSolve because we felt that we had an issue that was cert worthy and because we believe that we had to at least try to raise the issue. The alternative would be silent acquiescence to injustice, and to a systematic implementation of law by judges in EDTX that enables the abuse of the legal and patent system.
Cheng said Newegg was "told years ago that fighting back against patent trolls was futile. We did anyway because it was the right and necessary thing to do. Wiping out Soverain Software, one of the most high profile and shameless patent abusers around, was one of the fruits of the effort, along with largely being left alone by patent abusers."
"When we do what we believe is right, under law and otherwise, outcomes that are not optimal at any given time and in any specific circumstances aren't particularly troubling. Ultimately, at Newegg, we sleep well at night."
Newegg failed to prevail even though it was represented by a long list of prominent patent attorneys including Richard G. Frenkel, a partner at Latham & Watkins, Edward R. Reines, a partner with Weil Gotschal & Manges, Yar R. Chaikovsky, a partner with Paul Hastings, Mark A. Lemley, counsel of record with Durie Tangri LLP, and Kent E. Baldauf Jr. and Daniel Brean, of the Webb Law Firm.
Matt Antonelli, a partner with Antonelli, Harrington & Thompson LLP, said MacroSolve always believed the petition would be denied and was pleased. He denied that MacroSolve had in any way abused the system in its effort to enforce its patent and noted that it did the responsible thing in dismissing the cases when confronted with the invalidation of the patent by the PTO.
“What is really an abuse of the system is Newegg’s program of trying to impose as much cost as possible on small patent owners who dare to assert their patents against Newegg," Antonnelli said. "Their fee motion, as well as the subsequent appeals, were nothing more than attempts to further that very publicly announced program."
“Anyone who wants to understand what was really going on in this case should look at the briefs filed in the Federal Circuit. Newegg’s positions in support of its fee motion, and the subsequent appeals, were ridiculous. The claim that we acted inappropriately was just irresponsible.”
Newegg and Cheng also have been unsuccessful in winning other attempts at fee shifting.
In March, Acacia Research Corp. (ACTG), the patent licensing company run by CEO Marvin Key, won a second reprieve from a motion for exceptional case fees in an enforcement dispute between its AdjustaCam unit and Newegg 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.”
—To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or at firstname.lastname@example.org