Adjustacam, LLC v. Newegg, Inc. ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
ADJUSTACAM, LLC,
Plaintiff-Appellant
v.
NEWEGG, INC., NEWEGG.COM, INC.,
ROSEWILL, INC.,
Defendants-Cross Appellants
SAKAR INTERNATIONAL, INC.,
Defendant-Cross Appellant
______________________
2013-1665, -1666, -1667
______________________
Appeals from the United States District Court for the
Eastern District of Texas in No. 10-CV-0329, Chief Judge
Leonard Davis.
______________________
Decided: September 17, 2015
______________________
JOHN J. EDMONDS, Collins, Edmonds, Pogorzelski,
Schlather & Tower PLLC, Houston, TX, argued for plain-
tiff-appellant. Also represented by STEPHEN F.
SCHLATHER, SHEA NEAL PALAVAN.
2 ADJUSTACAM, LLC v. NEWEGG, INC.
RICHARD GREGORY FRENKEL, Latham & Watkins LLP,
Menlo Park, CA, argued for defendants-cross appellants
Newegg, Inc., Newegg.com, Inc., Rosewill, Inc. Also repre-
sented by EDWARD R. REINES, Weil, Gotshal & Manges
LLP, Redwood Shores, CA; KENT E. BALDAUF, JR., DANIEL
H. BREAN, ANTHONY W. BROOKS, The Webb Law Firm,
Pittsburgh, PA; YAR ROMAN CHAIKOVSKY, Paul Hastings
LLP, Palo Alto, CA; MARK A. LEMLEY, LAURA MILLER,
Durie Tangri LLP, San Francisco, CA.
EZRA SUTTON, Ezra Sutton, P.A., Woodbridge, NJ, for
defendant-cross appellant Sakar International, Inc.
STEVEN MOORE, Kilpatrick Townsend & Stockton
LLP, San Francisco, CA, for amici curiae Garmin Interna-
tional, Inc., Kaspersky Lab, Limelight Networks, Inc.,
SAP America, Inc., SAS Institute Inc., Xilinx, Inc.
______________________
Before NEWMAN, PLAGER, and HUGHES, Circuit Judges.
HUGHES, Circuit Judge.
Cross-appellants Newegg, Newegg.com, Rosewill, and
Sakar appeal the district court’s denial of their motions
for a declaration of an “exceptional case” under 35 U.S.C.
§ 285. Because we must afford the district court an
opportunity to apply an intervening change in the law, we
remand for reconsideration in light of the Supreme
Court’s recent clarification of the “exceptional case”
standard. AdjustaCam appeals the district court’s claim
construction. We dismiss for lack of jurisdiction Ad-
justaCam’s appeal because the district court’s claim
construction had no bearing on the final judgment, en-
tered after the district court granted AdjustaCam’s mo-
tions to dismiss its claims against the cross-appellants as
moot.
ADJUSTACAM, LLC v. NEWEGG, INC. 3
I
AdjustaCam, LLC, is the exclusive licensee of U.S.
Patent No. 5,855,343. In July 2010, AdjustaCam filed
suit against fifty-eight defendants in the Eastern District
of Texas, alleging infringement of the ’343 patent. Among
the defendants were the cross-appellants here: Newegg,
Inc., Newegg.com, Inc., and Rosewill, Inc. (collectively,
Newegg); and Sakar International, Inc. (Sakar).
The ’343 patent relates to a convertible clip for sup-
porting portable cameras. The clips are designed espe-
cially for use with a laptop computer. They are capable of
supporting a camera on a flat surface, such as a table, as
well as on the edge of a laptop screen. They are also
capable of converting into a retracted position in which
they protect the camera and are easily stored during
transport. ’343 patent col. 1 ll. 54–59.
AdjustaCam began settling with defendants shortly
after filing suit, dismissing its claims against most of the
original fifty-eight defendants prior to the Markman
order. Once the Markman order issued, AdjustaCam
dropped sixteen accused products from the suit and
stipulated to the dismissal of its claims against several
other defendants. AdjustaCam proceeded with discovery
4 ADJUSTACAM, LLC v. NEWEGG, INC.
and pre-trial motions on its claims against Newegg,
Sakar, and Kohl’s—Sakar’s primary distributor.
On August 27, 2012, AdjustaCam filed a motion to
dismiss its claims against Newegg and Newegg’s counter-
claims. AdjustaCam explained that, because of the set-
tlement licenses granted to upstream suppliers, Newegg’s
damages liability had become de minimus. According to
AdjustaCam, Sakar and Kohl’s were the only defendants
left with substantial damages liability. Further, Ad-
justaCam explained that it had granted Newegg a cove-
nant not to sue. Newegg initially opposed the motion.
On August 30, 2012, the Patent and Trademark Office
issued a Final Office Action in an ex parte reexamination
rejecting all of the asserted claims of the ’343 patent. On
September 20, 2012, AdjustaCam elected to cancel the
asserted claims to allow issuance of a reexamination
certificate with new and amended claims.
AdjustaCam subsequently filed a new motion to dis-
miss its claims against Newegg with prejudice and
Newegg’s counterclaims without prejudice. Newegg did
not oppose the motion. AdjustaCam explained that the
case had become moot due to the cancellation of the
claims and a covenant not to sue Newegg. The district
court granted the motion on September 27, 2012. Later,
AdjustaCam filed an unopposed motion to dismiss its
claims against Sakar and Kohl’s with prejudice and their
counterclaims without prejudice. This motion also stated
that the case had become moot due to cancellation of the
claims and a covenant not to sue granted to those parties.
The district court granted the motion on December 17,
2012.
Newegg and Sakar filed motions for a declaration that
this case was “exceptional” under 35 U.S.C. § 285, re-
questing attorney fees and expert fees. They argued that
AdjustaCam’s infringement contentions were objectively
baseless in light of the district court’s claim construction;
ADJUSTACAM, LLC v. NEWEGG, INC. 5
that AdjustaCam’s validity arguments were objectively
baseless; that AdjustaCam brought the case in subjective
bad faith, as shown by its “nuisance value” settlements
with other defendants; and that AdjustaCam committed
litigation misconduct and Rule 11 violations. The district
court disagreed and denied these motions on August 19,
2013.
After the district court entered final judgment in the
case and denied Newegg and Sakar’s motions for fees,
AdjustaCam filed an appeal to this court challenging the
district court’s claim construction. Newegg and Sakar
filed cross-appeals, arguing the district court erred in
denying attorney and expert fees.
II
Our jurisdiction is generally limited to appeals from a
final judgment. 28 U.S.C. § 1295(a) (conferring jurisdic-
tion “of an appeal from a final decision of a district
court”); SanDisk Corp. v. Kingston Tech. Co., Inc., 695
F.3d 1348, 1353 (Fed. Cir. 2012). The requirement of a
final judgment is often applied to preclude review of
certain interlocutory decisions. See, e.g., Spread Spec-
trum Screening LLC v. Eastman Kodak Co., 657 F.3d
1349, 1354–60 (Fed. Cir. 2011). But it also limits the
issues we may consider to those that are the subject of a
final judgment when one is entered. Mass. Inst. of Tech.
& Elecs. for Imaging, Inc. v. Abacus Software, 462 F.3d
1344, 1350 (Fed. Cir. 2006). Thus, where “a party’s claim
construction arguments do not affect the final judgment
entered by the court, they are not reviewable.” SanDisk
Corp., 695 F.3d at 1354 (declining to consider the con-
struction of claims withdrawn prior to the final judgment
on the issue of infringement).
Here, AdjustaCam appeals the district court’s claim
construction order. AdjustaCam argues that we have
jurisdiction over its appeal because the district court
entered final judgment in the case. But claim construc-
6 ADJUSTACAM, LLC v. NEWEGG, INC.
tion had no effect on the district court’s final judgment.
The district court entered judgment solely on the basis of
the parties’ joint motions to dismiss, including Ad-
justaCam’s voluntary motions to dismiss Newegg and
Sakar. The stated basis for those motions was that Ad-
justaCam’s infringement allegations had become moot
due to cancellation of the asserted claims and covenants
not to sue Newegg and Sakar. Because the district court’s
non-final claim construction order had no bearing on its
final judgment, we must dismiss AdjustaCam’s appeal for
lack of jurisdiction. 1
III
To determine whether this case was “exceptional” un-
der 35 U.S.C. § 285, the district court applied the stand-
ard set out in Brooks Furniture Manufacturing v.
Dutailier International, Inc., 393 F.3d 1378, 1381 (Fed.
Cir. 2005). Under that standard, a case is exceptional
only “when there has been some material inappropriate
conduct” or when the litigation is both “objectively base-
less” and “brought in subjective bad faith.” Brooks Furni-
ture, 393 F.3d at 1381. The party seeking attorney fees
must prove these factors by clear and convincing evidence.
Id. at 1382.
Since the district court’s decision, the Supreme Court
decided Octane Fitness, LLC v. Icon Health & Fitness,
Inc., 134 S. Ct. 1749 (2014). In that case, the Supreme
1 After this case was argued and Newegg filed a
motion for attorney fees and costs, alleging that Ad-
justaCam’s appeal was frivolous, AdjustaCam filed a
motion to terminate its appeal. See Voluntary Dismissal
of Appeal, AdjustaCam, LLC v. Newegg, Inc., No. 2013-
1665 (May 28, 2015). Because we dismiss AdjustaCam’s
appeal for lack of jurisdiction, we deny this motion as
moot.
ADJUSTACAM, LLC v. NEWEGG, INC. 7
Court rejected the Brooks Furniture test as overly rigid.
It 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 . . . or the unrea-
sonable manner in which the case was litigated.” Id. at
1756. A district court “may determine whether a case is
‘exceptional’ in the case-by-case exercise of their discre-
tion, considering the totality of the circumstances.” Id.
Further, the Supreme Court held that the governing
burden of proof is not clear and convincing evidence, but a
preponderance of the evidence, as in other aspects of civil
litigation. Id. at 1758.
Although the governing standard has changed,
Newegg and Sakar argue that remand is not necessary.
They argue that in Octane Fitness, the Supreme Court
relaxed the test for finding a case “exceptional” under
§ 285. Because the district court erred under the more
“rigid” Brooks Furniture standard, they say, it necessarily
erred under the new Octane Fitness standard. But the
Supreme Court did not simply relax the standard under
§ 285. It substantially changed the analysis. The district
court may now consider the totality of the circumstances
to determine whether this case is “exceptional,” and the
district court is not necessarily required to find evidence
of the specific factors outlined in Brooks Furniture.
Further, the Supreme Court lowered the burden of proof
for establishing that a case is “exceptional.” We decline to
substitute our judgment for that of the district court in
applying these new standards in the first instance.
Accordingly, we remand for reconsideration in light of
Octane Fitness. 2
2 We note, however, that Newegg and Sakar’s ar-
guments appear to have significant merit, particularly
their argument that AdjustaCam’s continued pursuit of
8 ADJUSTACAM, LLC v. NEWEGG, INC.
IV
Because the district court’s claim construction was not
the subject of a final judgment, we dismiss AdjustaCam’s
claim construction appeal for lack of jurisdiction. And
because the district court must be afforded an opportunity
to evaluate whether this case is “exceptional” under the
totality of the circumstances and a lower burden of proof,
we vacate the district court’s denial of attorney fees and
remand for reconsideration in light of Octane Fitness. We
also vacate and remand the district court’s denial of
expert fees, which was premised on its finding that this
case is not “exceptional” under § 285.
DISMISSED IN PART, VACATED IN PART, AND
REMANDED
its infringement claims after the district court construed
the claim term “rotatably attached” was baseless.