Lumen View Technology LLC v. Findthebest.com, Inc.

United States Court of Appeals
for the Federal Circuit
______________________
LUMEN VIEW TECHNOLOGY LLC,
Plaintiff-Appellant
v.
FINDTHEBEST.COM, INC.,
Defendant-Appellee
______________________
2015-1275, 2015-1325
______________________
Appeals from the United States District Court for the
Southern District of New York in No. 1:13-cv-03599-DLC,
Senior Judge Denise Cote and 1:13-cv-03386-DLC, Senior
Judge Denise Cote.
______________________
Decided: January 22, 2016
______________________
DAMIAN WASSERBAUER, Wasserbauer Law LLC,
Collinsville, CT, argued for plaintiff-appellant.
CAROLYN V. JUAREZ, The Leventhal Law Firm, APC,
San Diego, CA, argued for defendant-appellee. Also repre-
sented by JOSEPH S. LEVENTHAL.
______________________
Before LOURIE, MOORE, and WALLACH, Circuit Judges.
LOURIE, Circuit Judge.
2 LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC.
Lumen View Technology LLC (“Lumen View”) appeals
from the decisions of the United States District Court for
the Southern District of New York finding the patent
infringement case before it exceptional and awarding
enhanced attorney fees to Findthebest.com, Inc. (“FTB”).
Lumen View Tech., LLC v. Findthebest.com, Inc., 24 F.
Supp. 3d 329 (S.D.N.Y. 2014); Lumen View Tech., LLC v.
Findthebest.com, Inc., 63 F. Supp. 3d 321 (S.D.N.Y. 2014).
Because the district court did not err in finding the case
exceptional, but did not properly explain the calculation of
its award of attorney fees, we affirm in part, vacate in
part, and remand.
BACKGROUND
Lumen View is the exclusive licensee of U.S. Patent
8,069,073 (“the ’073 patent”), which is directed to a meth-
od for facilitating bilateral and multilateral decision-
making. The claims are directed to a method of matching
parties, involving analyses of preference data from both a
first class of parties and a second class of counterparties.
FTB operated a specialized search website with a
comparison feature entitled “AssistMe” that provided
users with personalized product and service recommenda-
tions. The AssistMe feature prompted the user with a
series of questions about various attributes of the desired
product or service, and provided a list of results based on
the user’s inputted criteria.
Lumen View filed suit in May 2013, alleging that FTB
infringed the claims of the ’073 patent. On several occa-
sions, FTB’s counsel informed Lumen View that FTB’s
accused feature did not use a bilateral or multilateral
preference matching process. Before receiving any dis-
covery, Lumen View served its preliminary infringement
contentions, including a claim chart identifying the alleg-
edly infringing features of the AssistMe service. FTB
moved to strike or modify the infringement contentions as
insufficient, but the district court denied the motion.
LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC. 3
FTB then filed a motion for judgment on the plead-
ings under Federal Rule of Civil Procedure 12(c). Lumen
View opposed the motion and included claim construction
arguments in its opposition. The district court granted
FTB’s motion for judgment on the pleadings, holding that
the claims of the ’073 patent are directed to an abstract
idea and therefore are invalid for failure to claim patent-
eligible subject matter under 35 U.S.C. § 101. The court
found that claim construction was unnecessary for the
§ 101 analysis.
FTB then moved for an award of attorney fees on the
ground that the case was exceptional under 35 U.S.C.
§ 285. The district court determined that the case was
exceptional under the totality of the circumstances test
outlined in Octane Fitness, LLC v. ICON Health & Fit-
ness, Inc., 572 U.S. __, 134 S. Ct. 1749 (2014). The court
found that the suit was frivolous and objectively unrea-
sonable, because the bilateral matching method of the
’073 patent requires the preference data of two or more
parties, and “the most basic” pre-suit investigation would
have shown that the accused AssistMe feature only used
the preference data of one party. Lumen View Tech., 24 F.
Supp. 3d at 336. The court pointed out that even Lumen
View’s claim construction briefing construed the claims as
requiring two or more parties’ preference data. The court
further found that Lumen View’s motivation for filing suit
was to extract a nuisance settlement from FTB, and that
Lumen View’s “predatory strategy” of baseless litigation
showed the need for deterrence. Id. The court therefore
found that the case was exceptional and granted the
motion for fees.
The parties then submitted briefing directed to the
amount of fees to be awarded. In its decision awarding
the fees, the district court expounded upon several factors
that supported enhancing the lodestar amount, including
“the need to deter the plaintiff’s predatory strategy, the
plaintiff’s desire to extract a nuisance settlement, the
4 LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC.
plaintiff’s threats to make the litigation expensive, and
the frivolous nature of the plaintiff’s claims.” Lumen View
Tech., 63 F. Supp. 3d at 326. Although these factors were
already discussed in the court’s finding of exceptionality,
the court specifically noted that “[i]n rare cases, the
lodestar will be insufficient to deter baseless litigation.”
Id. In this case, the court noted that the lodestar was
uncharacteristically low due to the court’s expeditious
resolution of the case. As a result, the court found that,
here, the lodestar amount alone would be insufficient to
deter similar misconduct by Lumen in the future, justify-
ing an enhancement of the lodestar amount. The court
accordingly awarded fees, with an enhancement by a
multiplier of two.
Lumen View timely appealed from the district court’s
finding of exceptionality and award of attorney fees. We
have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
Section 285 provides that “[t]he court in exceptional
cases may award reasonable attorney fees to the prevail-
ing party.” 35 U.S.C. § 285. We review all aspects of a
district court’s § 285 determination for an abuse of discre-
tion. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc.,
572 U.S. __, 134 S. Ct. 1744, 1749 (2014). The statute
imposes “one and only one constraint on district courts’
discretion to award attorney’s fees in patent litigation:
[t]he power is reserved for ‘exceptional’ cases.” Octane
Fitness, 134 S. Ct. at 1755–56.
A. Exceptionality
An “exceptional” case is “one that stands out from
others with respect to the substantive strength of a par-
ty’s litigating position (considering both the governing law
and the facts of the case) or the unreasonable manner in
which the case was litigated.” Octane Fitness, 134 S. Ct.
at 1756. “District courts may determine whether a case is
LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC. 5
‘exceptional’ in the case-by-case exercise of their discre-
tion, considering the totality of the circumstances.” Id.The determination whether a case is “exceptional” is
indisputably committed to the discretion of the district
court. Highmark, 134 S. Ct. at 1748.
Lumen View argues that the case was not exceptional
because its actions in asserting its patent rights were
appropriate and reasonable. Lumen View maintains that
it conducted a pre-suit investigation compliant with Rule
11, satisfied all pleading requirements, and consistently
asserted infringement of a presumptively valid patent.
Lumen View faults the district court for showing a clear
bias by making unsupported factual findings about its
settlement offers, its litigation against other defendants,
and the reasonableness of the offered licensing fee.
Moreover, Lumen View asserts, the court improperly
found noninfringement without a claim construction
hearing and decision, and the noninfringement determi-
nation was the basis for the court’s flawed assessment of
the infringement case as frivolous and unreasonable.
FTB responds that the district court, as directed by
Octane Fitness, considered the totality of the circumstanc-
es, based on extensive record evidence, in order to find the
case exceptional. Because Lumen View failed to provide
evidence of its pre-filing investigation and infringement
assessment to the district court at the proper time, FTB
asserts that Lumen View waived any argument of rea-
sonable conduct. FTB further counters that the presump-
tion of validity does not excuse a baseless claim of
infringement. FTB also disputes that a claim construc-
tion hearing and decision were necessary because the
court found noninfringement using Lumen View’s own
proposed constructions.
We decline to find an abuse of discretion by the dis-
trict court in finding the case to be exceptional under
§ 285 and in deciding to award attorney fees. Even if
6 LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC.
Lumen View’s litigation conduct was not quite sanctiona-
ble, the court reasonably determined that the case was
exceptional. See Octane Fitness, 134 S. Ct. at 1757 (“[A]
district court may award fees in the rare case in which a
party’s unreasonable conduct—while not necessarily
independently sanctionable—is nonetheless so ‘exception-
al’ as to justify an award of fees.”). The allegations of
infringement were ill-supported, particularly in light of
the parties’ communications and the proposed claim
constructions, and thus the lawsuit appears to have been
baseless. Claim construction was unnecessary before
finding noninfringement in this case, especially because
Lumen View conceded that the claims require preference
data from multiple parties. We therefore affirm the
district court’s finding of exceptionality.
B. Calculation of Attorney Fee Award
The determination of reasonable attorney fees is also
“a matter that is committed to the sound discretion” of a
district court judge. Perdue v. Kenny A. ex rel. Winn, 559
U.S. 542, 558 (2010). We therefore also review the calcu-
lation of an attorney fee award under § 285 for an abuse
of discretion.
In calculating an attorney fee award, a district court
usually applies the lodestar method, which provides a
presumptively reasonable fee amount, id. at 554, by
multiplying a reasonable hourly rate by the reasonable
number of hours required to litigate a comparable case,
id. at 551. This method has been characterized as “readi-
ly administrable” and “objective,” but “not perfect” and
“never intended to be conclusive in all circumstances.” Id.
at 551–52, 554.
We have noted that “although the amount the client
paid the attorney is one factor for the court to consider in
determining a reasonable fee, it does not establish an
absolute ceiling.” Junker v. Eddings, 396 F.3d 1359, 1365
(Fed. Cir. 2005). In “rare” and “exceptional” cases, a
LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC. 7
district court may enhance the lodestar amount based on
various factors, provided they are not adequately taken
into account by the lodestar calculation. Bywaters v.
United States, 670 F.3d 1221, 1229 (Fed. Cir. 2012) (citing
Pennsylvania v. Del. Valley Citizens’ Council for Clean Air
(Del. Valley I), 478 U.S. 546, 564–65 (1986); Perdue, 559
U.S. at 552); see also Pennsylvania v. Del. Valley Citizens’
Council for Clean Air (Del. Valley II), 483 U.S. 711, 728
(1987) (noting that enhancement of lodestar can be justi-
fied in exceptional cases).
Lumen View argues that the district court misapplied
the Octane Fitness factors to the determination of enhanc-
ing fees because those factors should only apply to the
exceptionality analysis. Allowing double consideration of
those factors, Lumen View contends, would mean that
exceptional cases will always result in enhanced fee
awards. Lumen View moreover asserts that Octane
Fitness and § 285 only authorize the award of reasonable
fees, not the enhancement of fee awards. Lumen View
also emphasizes that unlike the punitive purpose of
enhancing damages under § 284, the award of attorney
fees under § 285 is only intended to be compensatory.
Because deterrence is already factored in by the award of
attorney fees in the first place, Lumen View argues that
enhancing that award as a further deterrent would be
unreasonable. Lumen View also disputes whether the
court gave any reasonable explanation for the specific
multiplier of two for enhancement.
FTB responds that the lodestar amount may be ad-
justed in rare and exceptional circumstances in which it
does not adequately account for a factor in determining a
reasonable fee, and this case represents such a circum-
stance because of Lumen View’s egregious conduct. FTB
disagrees that § 284 jurisprudence would be necessarily
implicated by allowing enhancement under § 285, particu-
larly because Octane Fitness made the § 285 standard
more flexible and thus not analogous to the more restric-
8 LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC.
tive § 284 standard. FTB also posits that enhancement of
the lodestar amount may still constitute “reasonable”
attorney fees. Moreover, FTB emphasizes the intended
compensatory and deterrent effects of the enhancement,
as shown by the district court’s specific statement that the
enhancement was not punitive. FTB contends that the
record and the district court’s opinion provided sufficient
support for the multiplier of two: the expedited schedule
contributed to the lower-than-expected lodestar amount,
and any enhancement had to be large enough to serve the
purpose of deterrence, but the overall amount had to
remain reasonable. FTB also claims that the court’s
selected multiplier is bolstered by objective evidence of
the average range of costs for similar litigation.
We agree with Lumen View that the district court
failed to provide a proper rationale to justify enhancing
the attorney fee award by a multiplier of two. The district
court justified its award based on the specific circum-
stances of the case, the court’s proactive case manage-
ment and expeditious resolution on the merits, which
resulted in an “extremely low” lodestar. Lumen View
Tech., 63 F. Supp. 3d at 326–27. If the court had adopted
Lumen View’s proposed schedule, it stated, FTB would
have reasonably incurred “significantly greater” attorney
fees. Id. at 327. That analysis, however, appears to align
more with the “results obtained” rationale disfavored by
Supreme Court precedent, rather than being a justifica-
tion for enhancing the lodestar determination. See By-
waters, 670 F.3d at 1230–31 (explaining that “the ‘results
obtained’ factor is generally subsumed within the lodestar
calculation and thus normally should not provide an
independent basis for a departure from the lodestar
figure.” (citing Blum v. Stenson, 465 U.S. 886, 900 (1984);
Perdue, 559 U.S. at 554)).
The district court further reasoned that the calculated
lodestar amount would be insufficient to deter an ongoing
predatory strategy of baseless litigation, and thus the
LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC. 9
deterrent aspect of awarding fees would not be well
served by a relatively low amount. But deterrence is not
generally a factor to be considered in determining a
reasonable attorney fee under § 285. Although deterrence
may be a consideration when determining whether to
award attorney fees, it is not an appropriate consideration
in determining the amount of a reasonable attorney fee,
which is principally based on the lodestar method. Unlike
sanctions that are explicitly tied to an amount that suffic-
es to deter repetition of conduct, see Fed. R. Civ. P.
11(c)(4), § 285 only specifies “reasonable attorney fees”
once an exceptional case is found. And the lodestar
method, yielding a presumptively reasonable attorney fee
amount, focuses on the counsel retained by the prevailing
party: higher standing attorneys are theoretically reflect-
ed by higher rates charged, and more complex issues are
reflected by more hours worked.
Adjusting the lodestar has been condoned for situa-
tions in which the prevailing party’s attorney’s perfor-
mance or conduct somehow is not factored into the
lodestar calculation. Perdue, 559 U.S. at 554–56 (finding
that enhancement may be appropriate where lodestar
does not adequately measure attorney’s “true market
value”; attorney is subjected to “extraordinary outlay of
expenses” for protracted litigation; or “exceptional delay”
in payment of fees). However, factors outside the realm of
performance or conduct attributable to the prevailing
party’s attorney have not been accepted as justifying an
enhancement. See id., 559 U.S. at 554 (noting that “infe-
rior performance by defense counsel, unanticipated de-
fense concessions, unexpectedly favorable rulings by the
court, an unexpectedly sympathetic jury, or simple luck”
cannot justify an enhanced award).
As such, we do not find proper support for the district
court’s decision to enhance the lodestar amount by the
specified multiplier as a reasonable fee award. Even
armed with the deference accorded to a district court’s
10 LUMEN VIEW TECHNOLOGY LLC v. FINDTHEBEST.COM, INC.
discretionary determinations, the court may enhance the
lodestar only when it “fails to take into account a relevant
consideration.” Bywaters, 670 F.3d at 1229; see also
Perdue, 559 U.S. at 554 (noting that enhancement may be
appropriate when lodestar inadequately accounts for “a
factor that may properly be considered in determining a
reasonable fee”). Because we conclude that the expedited
schedule and the deterrence purpose are unrelated to the
suitability of compensation of FTB’s attorneys, and hence
not relevant to enhancement of the lodestar, we conclude
that the district court has not properly justified the
amount awarded.
We therefore vacate the attorney fee award and re-
mand the case for recalculating a reasonable attorney fee
award and determining whether there may be other
issues open for consideration relating to attorney conduct.
Whether the court wishes to utilize Rule 11 or any other
statutory framework is of course up to the district court.
We have considered the remaining arguments and con-
clude that they are without merit.
CONCLUSION
Because the district court did not abuse its discretion
in finding the case exceptional, we affirm the finding of
exceptionality and the corresponding decision to award
attorney fees. However, because the district court did not
properly explain its determination of reasonable attorney
fees, we vacate the attorney fee award and remand for
further consideration in accordance with this opinion.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED
COSTS
No costs.