DocketNumber: Case No. 15–cv–02177–SI
Citation Numbers: 293 F. Supp. 3d 1038
Judges: Illston
Filed Date: 3/14/2018
Status: Precedential
Modified Date: 7/25/2022
On March 2, 2018, the Court held a hearing on the motion by defendant Truven Health Analytics ("Truven") for attorneys' fees and nontaxable expenses related to Truven's defense against plaintiff Cave Consulting Group's ("CCGroup") assertion of
BACKGROUND
In December 2014, prior to filing this lawsuit, CCGroup sent Truven a letter listing the '981 patent, as well as five other *1041patents, and asserting that "certain of Truven's products generally relate to the technology described and claimed in CCGroup's patents." Dkt. No. 348-11. Among the other patents listed were
The '126 patent issued from U.S. Patent Application No. 10/794,216 ("the '216 application"), having an effective filing date of March 2, 2004. Dkt. No. 358-8 ('126 Patent at cover page). The application giving rise to the '981 patent, U.S. Patent Application No. 13/012,219 ("the '219 application"), was filed on January 24, 2011, as a continuation-in-part ("CIP")
On May 14, 2015, CCGroup filed this lawsuit alleging that Truven infringed numerous claims of the '726 patent and claims 13 and 20 of the '981 patent. Dkt. No. 1. In its infringement contentions, CCGroup expressed its intent to "claim a priority date at least as early as March 2, 2004" for all asserted claims, and identified "its own Marketbasket System as practicing at least claims 13 and 20 of the '981 patent...." Dkt. No. 348-6 at 3:18-22. In response to Truven's interrogatories, CCGroup again stated that the "asserted claims are entitled to a priority date of March 2, 2004" and identified the "Marketbasket System as practicing and/or embodying the limitations of the asserted claims." Dkt. No. 348-5 at 4:19-5:2. CCGroup later stated in its response to Truven's Request for Admissions that "its own system, which existed prior to March 2, 2004, used medical claims data to form episodes of care." Dkt. No. 348-7 at 3:3-4. It is not disputed that as early as March 14, 2006, CCGroup made its Marketbasket System publicly available. Dkt. No. 348-8.
On November 13, 2015, Truven served its invalidity contentions on CCGroup. Dkt. No. 362-3. In those contentions, Truven asserted that the priority date for the '981 patent was the filing date of the '981 patent application, January 24, 2011, and that the priority date could not be March 2, 2004, because (a) the '981 patent issued from a CIP of an earlier application and (b) the patent claims encompassed new matter not disclosed in the earlier applications. Dkt. No. 362-3. Specifically, Truven asserted,
The '981 patent was filed on January 24, 2011 as a continuation-in-part of application No. 12/769,090 ("the '090 application"), filed on April 28, 2010, now abandoned. The '090 application is a continuation of application No. 10/794,216 ("the '216 application"), filed on March 5, 2004, now issued as U.S. Patent Number 7,739,126.3
*1042In order for the '981 patent to claim priority to the '090 and '216 applications, the claims in the '981 patent must be "supported by the specification and claims of the parent application." M.P.E.P. § 706.02(VI) ; see also Cordance Corp. v. Amazon.com, Inc. ,658 F.3d 1330 , 1334-1335 (Fed. Cir. 2011).
The claims in the '981 patent are not supported by the specification and claims of the parent applications. For example, all independent claims in the '981 patent include at least the new matter directed to "variable window periods" and "static window periods." See U.S. Pat. No. 8,340,981, claims 1, 11, 12, 13, 20, 21, col. 45, l. 44-col. 48, l. 5, Figs. 3-5. This new matter directed to "variable window periods" and "static window periods" is not mentioned, disclosed, or supported in the parent '090 and '216 applications.
Thus, all claims in the '981 patent"have an effective filing date equal to the filing date of the new application," which is January 24, 2011. See M.P.E.P. § 706.02(VI).
Five days later, on November 18, 2015, CCGroup filed an amended complaint that continued to allege that the '981 patent was valid and that Truven infringed it. Dkt. No. 44 at ¶¶ 10, 17. CCGroup also attached as an exhibit a Certificate of Correction ("Certificate") for the '981 patent issued by the U.S. Patent and Trademark Office ("PTO") on September 22, 2015.
On October 12, 2016, Truven informed CCGroup that the priority date for the '981 patent was January 24, 2011, and that the CCGroup Marketbasket System therefore invalidates its patent under
On November 4, 2016, CCGroup moved for leave to file an amended complaint, in which CCGroup would withdraw its claim under the '981 patent. Dkt. No. 95. In its opposition to that motion, Truven noted that it "proposed a joint dismissal with prejudice, with an unrestricted covenant not to sue and payment of the fees Truven has incurred in defending against the '981 Patent," and that CCGroup ignored the proposal. Dkt. No. 110 at 1:11-14.
On December 2, 2016, CCGroup filed a petition with the Patent and Trademark Office ("PTO") requesting ex parte reexamination of the '981 patent because there were substantial new questions as to the validity of the '981 patent due to, inter alia, questions about whether the '981 patent was entitled to the priority date of the '126 *1043date and whether the '981 patent was invalidated by prior art. Dkt. No. 129-1. CCGroup's request for reexamination proposed amending the independent claims of the '981 patent to delete "the recitation of the 'variable window periods,' " and thus, according to CCGroup's request, "resulting in all of the subject matter of independent claims 1, 11, 12, 13, 20, and 21 as amended being conclusively supported by the disclosure of the parent '126 patent."Id. at 7.
This Court granted CCGroup's motion for leave to file an amended complaint on December 22, 2016, under the conditions that the withdrawal of the claim under the '981 patent was with prejudice and that CCGroup execute a covenant not to sue Truven on the existing claims of the '981 patent. Dkt. No. 136 at 2:4-6.
On January 9, 2017, CCGroup filed another motion for leave to file an amended complaint, requesting permission to add claims related to misappropriation of trade secrets. Dkt. No. 138. CCGroup argued that during discovery it had obtained evidence showing Truven had misappropriated CCGroup's trade secrets.
On February 21, 2017, CCGroup filed its third amended complaint, which removed the claim under the '981 patent and added the trade secret misappropriation claims. Dkt. No. 159. Truven moved to dismiss the newly added claims and the Court granted the motion in part and denied it in part. Dkt. Nos. 167, 205. Subsequently, CCGroup dropped the non-patent claims, leaving only its claim under the '726 patent. Dkt. No. 223. On December 15, 2017, this Court granted Truven's motion for summary judgment of invalidity of the '726 patent claims under
On January 18, 2018, Truven moved for attorneys' fees and nontaxable expenses related to its defense against the '981 patent, pursuant to
DISCUSSION
I. Attorneys' fees under
A. Legal Standard
Section 285 of the Patent Act provides that a court may award "reasonable attorney fees to the prevailing party" in "exceptional cases."
Under its discretion, a district court may consider factors such as "the litigant's objective unreasonableness in litigating *1044the case, subjective bad faith, frivolousness, motivation, and the need in particular circumstances to advance considerations of compensation and deterrence." Bayer CropScience AG v. Dow AgroSciences LLC ,
B. Analysis
It is undisputed that Truven is the prevailing party with regard to the '981 patent infringement claims. Truven argues that this case is "exceptional" under
CCGroup argues that this case is not exceptional because the "[t]he § 102(b) issue arises from a technical oddity relating to the structure of the '981 patent claims." Dkt. No. 358 at 8:8-9. CCGroup argues that both the original '126 patent and the '981 patent describe the CCGroup Marketbasket System, and that "[i]t is counterintuitive to think that the same product, described in both the original patent and the child patent, can be prior art to the child patent."
The Court agrees with Truven and finds that this case is exceptional because CCGroup knew or should have known that the '981 patent was invalid prior to filing suit. "Under
Here, CCGroup chose to file the '981 patent as a continuation-in-part, presumably at least in part because the '981 application added new material-the "variable window periods"-that was not disclosed in the parent application (the '216 application, which issued as the '126 patent). Dkt. No. 348-9 at 67-68. In order for the asserted claims of the '981 patent to receive the benefit of the filing date of the '126 patent, there must be adequate written description in the '126 patent disclosure to support the asserted claims. CCGroup's "technical oddity" argument acknowledges that the "variable window periods" were first described in the '981 patent application, and therefore that there is no written description support for the independent claims of the '981 patent in the '126 patent disclosure. Accordingly, the '981 patent was not entitled to the earlier filing date, and CCGroup could and should have recognized, based on the relationship between the '981 and '126 patents, that the priority date of the '981 patent was January 24, 2011. See Cordance Corp. ,
Further, there was ample evidence to show the Marketbasket System was used and publicly available more than one year before January 2011, the filing date of the '981 patent. In its communications with Truven, CCGroup repeatedly asserted that the Marketbasket System practiced "the limitations of the asserted claims," which included "claims 13 and 20 of the '981 patent." See Dkt. Nos. Dkt. No. 348-5, 348-6. CCGroup also admitted that its system "existed prior to March 2, 2004." See Dkt. No. 348-7. It is undisputed that the Marketbasket System was publicly available as early as March 2006. See Dkt. No. 348-8. Therefore, CCGroup knew that its own product practiced the asserted claims of the '981 patent as early as March 2004, and made the product publicly available as early as March 2006. CCGroup does not dispute these facts.
Asserting patent claims that "a cursory review of the asserted patent's prosecution history would have revealed" to be invalid may constitute "gross negligence or studied ignorance, neither of which justifies placing the burden" of litigation on the defendant. ICU Med., Inc. v. Alaris Med. Sys., Inc. , No. SA CV 04-00689 MRP (VBKx),
The Court finds CCGroup's failure to recognize that its own Marketbasket System was invalidating prior art for the '981 patent, based on the patent's relationship with the '126 patent, was grossly negligent, just as the Alaris court found the plaintiff was grossly negligent when it failed to "perform a reasonable investigation of the asserted patents and their relatedness" that would have revealed invalidity of the asserted claims "before initiating the litigation." See Alaris ,
*1047CCGroup argues that the priority date of the '981 patent"escaped the notice of both the applicant and the Examiner during prosecution," that the "issue was just so subtle as to pass undetected by the Examiner," that the "Examiner endorsed the claims and allowed them to issue without amendment," and that CCGroup relied on the statutory presumption of validity of issued patents. Id. at 9:8-10:10. CCGroup cannot place the burden of determining the proper priority date of the '981 patent on the PTO. As an initial matter, the MPEP provides that the patent examiner is not required to determine whether a CIP application is entitled to the priority date of the parent application, unless the applicant relies on that priority date in a proceeding before the PTO. See MPEP § 201.08.
Further, CCGroup could not have had a presumption of validity of the '981 patent priority date when that issue was not raised during prosecution. "The rebuttable presumption of validity that attaches to an issued patent extends to a CIP application's claim to the priority filing date of a parent application in cases where the PTO explicitly has made a finding that the CIP application is entitled to the benefit of that date." Bone Care Int'l, LLC v. Pentech Pharm., Inc. ,
CCGroup also asserts that it "immediately withdrew" the claim related to the '981 patent"once the issue arose." Dkt. No. 358 at 8:3. CCGroup relies on Intellectual Ventures I LLC v. Capital One Financial Corporation , No. 1:13CV0740 (AJT/TCB),
The Court finds that Intellectual Ventures is distinguishable from the present case. There, the plaintiff asserted five patents against the defendant, but voluntarily dismissed most of the claims after claim construction, in part because the plaintiff found proving defendant's liability to be "problematic." Intellectual Ventures ,
The Court also disagrees with CCGroup's characterization that it withdrew its claim under the '981 patent with "due dispatch." On November 13, 2015, Truven served its invalidity contentions informing CCGroup of its position that the effective filing date of the '981 patent was *1048January 24, 2011. Dkt. No. 362-3. Thus, by November 13, 2015, CCGroup had been provided with actual notice of all of the information necessary to conclude that the Marketbasket System was invalidating prior art for the '981 patent. Notwithstanding this information, CCGroup filed an amended complaint shortly thereafter which continued to allege infringement of the '981 patent. Dkt. No. 44. CCGroup did not withdraw its claim under the '981 patent for almost a year, and did so only after Truven notified CCGroup of the § 102(b) issue in October 2016, and after litigation regarding the proper method of dismissal. Dkt. No. 348 at 2:20-22; Dkt. No. 358 at 5:8-9. Under these circumstances, the Court finds this case exceptional. See Bayer ,
II. Reasonable Fee Award
In the event the Court awards Truven fees and costs, the parties disagree regarding the proper methodology to calculate a reasonable fee. Truven contends that CCGroup's assertion of the '981 patent at most doubled the amount of work, and Truven "conservative[ly]" requests 25% of the total fees for patent-related work incurred from the filing of the complaint until the '981 patent was withdrawn to account for the "overlap in defending against the two related patents." Dkt. No. 362 at 6:24-7:4.
CCGroup opposes Truven's requested award amount on two grounds. First, CCGroup argues that fees should be allocated under a "but-for" standard and that Truven should not be compensated for any fees "it would have incurred even if the '981 patent had never been asserted." Dkt. No. 358 at 11:13-17. Second, CCGroup argues that Truven's work related to the '981 patent after October 12, 2016, was "unnecessary and the result of Truven's own choice" because Truven knew the patent was not at issue after that date. Dkt. No. 358 at 11:13-16, 13:12-25.
A. "But-for" Standard
In Fox v. Vice , the Supreme Court held that when a plaintiff asserts a mix of frivolous and non-frivolous claims, the defendant may be entitled to recover only costs "incurred because of, but only because of, [the] frivolous claim."
This Court finds that the "but for" standard applies, and thus Truven is entitled to recover only those fees and costs it incurred because of CCGroup's assertion of the '981 patent, such as fees related to infringement and invalidity arguments specific to the '981 patent, and fees related to the motion for attorneys' fees. The Court notes that Truven does not actually dispute that the "but for" standard applies. Instead, Truven asserts that its request for 25% of the total patent fees incurred during the period the '981 patent was at issue is a "reasonable and conservative approach" to determining what fees and costs are attributable to the '981 patent. However, Truven acknowledges that given the substantial similarity between the '726 and '981 patents, much of the time spent litigating this case was applicable to both patents. See Dkt. No. 362 at 8:6-9:7 (Truven discussing its work on various issues). The Court finds that while Truven's 25% flat rate request is not unreasonable in theory, Truven has not cited any authority that would permit the Court to award fees under that methodology. The Court further finds that the supporting documentation submitted by Truven does not satisfy the "but-for" standard.
B. Time Period Eligible for Fee Award
CCGroup also contends that Truven should not be compensated for work done after CCGroup informed Truven of its intention to withdraw the '981 patent *1050claim in October 2016. CCGroup cites Romag Fasteners, Inc. v. Fossil, Inc. ,
The Court finds that CCGroup's reliance on Romag is misplaced. In Romag , the district court had "concluded that [the defendant] declined to abandon [its] defenses until after trial," and that the "failure to formally withdraw its...invalidity defenses until after the close of evidence" was a "key factor for awarding fees to" the plaintiff.
Here, unlike in Romag , the Court has concluded that the assertion of the '981 patent renders this case exceptional so as to warrant a fee award. Further, although CCGroup informed Truven in October 2016 that it intended to withdraw the '981 patent, a dispute regarding the '981 patent continued to exist because the parties could not agree regarding the appropriate mechanism for dismissal of the '981 patent claims, thus requiring further litigation until the '981 claims were dismissed in February 2017. The Court ultimately agreed with Truven that the dismissal should be with prejudice and under the condition that CCGroup execute a covenant not to sue Truven on the existing claims of the '981 patent. Under the circumstances of this case, the Court finds that the relevant time period for awarding a reasonable fee award related to defending against the '981 patent is between May 14, 2015 and February 21, 2017.
CONCLUSION
For the foregoing reasons and for good cause shown, the Court hereby GRANTS in part Truven's motion for attorney's fees and nontaxable expenses pursuant to
IT IS SO ORDERED .
A continuation-in-part application is "an application filed during the lifetime of an earlier ...application, repeating some substantial portion or all of the earlier...application and adding matter not disclosed in the earlier...application." Manual of Patent Examining Procedure ("MPEP") § 201.08 (9th ed. Oct. 2015).
A continuation application is "an application for the invention(s) disclosed in a prior-filed ...application....The disclosure presented in the continuation must not include any subject matter which would constitute new matter if submitted as an amendment to the parent application." MPEP § 201.07.
The '126 patent claims the benefit of Provisional Application Ser. No. 60/549,601, filed March 2, 2004.
Truven notes that CCGroup submitted the request for the Certificate one month after filing the suit against Truven, on June 12, 2015. Dkt. No. 348 at 4 n.3; Dkt. No. 348-10.
A patent is invalid if the invention was publically used or on sale in this country for more than one year before the priority date.
The '126 patent has an additional inventor, Kyu Sung Cho. See Dkt. No. 129-1 at 12.
"The Office does not need to make a determination as to whether the requirement of 35 U.S.C. 120 that the earlier nonprovisional application discloses the invention of the second application in the manner provided by 35 U.S.C. 112(a) [including the written description requirement] is met unless the filing date of the earlier nonprovisional application is relied upon in a proceeding before the Office." MPEP § 201.08.
Because this case is exceptional under § 285, the Court finds it unnecessary to address Truven's alternative requests for fees and expenses pursuant to
In compliance with Civil Local Rule 54-5(b)(2)-(3), Truven submitted: A summary of tasks performed by each person involved (Dkt. No. 348-3); a summary of the time spent by each person and his or her hourly rates (Dkt. No. 348-2); a statement describing how time records were kept (Dkt. No. 348-1 at ¶¶ 3-4); a description of the relevant qualifications and experience (Dkt. No. 348-4); and report indicating the customary hourly charges of IP litigation in the San Francisco Bay Area (Dkt. No. 348-14). Dkt. No. 348-1; Dkt. No. 362 at 7:8-20. All fees and nontaxable expenses are related to the patent claims, and exclude expenses related to non-patent claims.
At the hearing, Truven's counsel stated that two timekeepers independently arrived at the 25% estimate based on their review of time entries.
To the extent that CCGroup asserts that Truven should only be permitted to recover fees and costs for work relating to the "maximum duration rule" recited in the '981 patent claims (and not recited in the '726 patent ), the Court disagrees. Although it is true that much of the work on the patent claims overlapped, there may be other work specific to the '981 patent that would not have been performed but for the inclusion of that patent in this case.