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CertusView Technologies, LLC v. S&N Locating Services, LLC

United States District Court, E.D. Virginia, Norfolk Division

February 9, 2018

CERTUSVIEW TECHNOLOGIES, LLC, Plaintiff,
v.
S&N LOCATING SERVICES, LLC, and S&N COMMUNICATIONS, INC., Defendants.

          OPINION AND ORDER

          MARK S. DAVIS, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on "Defendants' Renewed Motion for Exceptional Case Finding and Attorneys' Fees, " filed by S&N Locating Services, LLC and S&N Communications, Inc. (collectively "Defendants" or "S&N"). ECF No. 573. In their motion, Defendants request that the Court award them attorneys' fees because this is an "exceptional case" within the meaning of 35 U.S.C. § 285. The motion has been fully briefed. Because the Court finds that oral argument is not necessary, the matter is now ripe for decision.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff, CertusView Technologies, LLC ("Plaintiff" or "Certusview") holds the five related patents, involving technology for prevention of damage to underground infrastructure, at issue in this matter: United States Patent No. 8, 340, 359 (w/359 Patent"), United States Patent No. 8, 265, 344 (w/344 Patent"), United States Patent No. 8, 290, 204 ("'204 Patent"), United States Patent No. 8, 532, 341 ("'341 Patent"), and United States Patent No. 8, 407, 001 ("'001 Patent") (collectively, the "Patents-in-Suit"). August 2, 2016 Op. & Order, 17-18, ECF No. 542. The Patents-in-Suit issued in 2012 and 2013.

         CertusView's products were developed as a means to improve record-keeping and documentation of "locate operations, " id. at 23, that is, "the application of paint, flags, or some other marking object or material to indicate the presence of an underground facility, " Joint Claim Construction Chart 2, ECF No. 101-2. Specifically, the Patents-in-Suit claim inventions related to CertusView's e-Sketch technology. ECF No. 542, at 24. Stated broadly, the e-Sketch technology allows locators to document a locate operation more accurately and to create a searchable electronic record that includes such documentation and additional specific data regarding the locate operation. Id.

         On May 29, 2013, CertusView filed a patent infringement action in this Court against S&N. Compl., ECF No. 1. On December 6, 2013, CertusView filed an amended complaint, alleging infringement of the five Patents-in-Suit. See Am. Compl., ECF No. 55. On December 23, 2013, S&N filed an Answer denying CertusView's allegations of infringement and asserting counterclaims against CertusView, seeking declaratory judgments of non-infringement and invalidity regarding all five Patents-in-Suit. S&N's Answer, Affirmative Defenses, Countercls., ECF No. 61.[1] After the Supreme Court issued its June 2014 Alice decision, on October 28, 2014 -- following a Markman hearing, issuance of a claim construction order, and a limitation on the number of asserted patent claims -- S&N filed a Motion for Judgment on the Pleadings, pursuant to Federal Rule of Civil Procedure 12(c), contending that the Patents-in-Suit were invalid as they did not claim patentable subject matter under 35 U.S.C. § 101. Mot. J., ECF No. 197. On January 21, 2015, the Court granted S&N's Motion for Judgment on the Pleadings and found that all of the asserted claims of the Patents-in-Suit were invalid for failure to claim patentable subject matter under 35 U.S.C. § 101. Sec. 101 Op. & Order, ECF No. 250.

         On November 10, 2015, U.S. Patent 9, 183, 646 ("the '646 patent") issued. Id. at 1, ECF No. 576-3. "On the face of the '646 patent, under 'Related U.S. Application Date, ' it shows that the '646 patent is [a] ' [c] ontinuation of application No. 13/950, 655, filed on Jul. 25, 2013, which is a continuation of application No. 13/796, 487, filed on Mar. 12, 2013, now Pat. No. 8, 532, 341 . . . .'" Teja Aff. at 2, ECF No. 576-1. "U.S. Patent No. 8, 532, 341 ('the '341 patent') is the *parent patent' to the 646 patent and was asserted in this litigation." Id. "The '646 patent is titled Apparatus, Systems and methods to Generate Electronic Records of Underground Facility Marking Operations Performed with GPS-Enabled Marking Devices.'' Id. at 1. The '341 patent is titled Electronically Documenting Locate Operations for Underground Utilities. Id. at 14, ECF No. 250. Because the '646 patent is a continuation of the '341 patent, "they share the same specification and are directed to the same invention, though there may be some variation in the scope of the subject matter claimed in the two patents." ECF No. 576-1, at 2; Transco Products Inc. v. Performance Contracting, Inc., 38 F.3d 551, 555-56 (Fed. Cir. 1994) ("A' continuation' application claims the same invention claimed in an earlier application, although there may be some variation in the scope of the subject matter claimed. See MPEP § 201.07."). The '341 patent issued September 10, 2013, over three months after this suit was filed, but before the Alice decision of June 19, 2014. The '646 patent issued November 10, 2015, "over a year after Alice and after CertusView submitted this Court's § 101 [Opinion and] Order to the examiner." Pl's Resp. Opp'n at 9, ECF No. 576; ECF No. 576-1, at 2 (attaching exhibit showing Information Disclosure Statement signed by Examiner Bhatnagar disclosing § 101 Order at entry C488).

         On March 8, 2016, the matter proceeded to a five-day bench trial on S&N's declaratory judgment counterclaim against CertusView for inequitable conduct. The Court then took the matter under advisement pending submission of post-trial briefs. On June 15, 2016, after the conclusion of the bench trial, CertusView filed its Motion for Partial Reconsideration of Judgment of Patent Ineligibility under 35 U.S.C. § 101. Mot. Partial Recons., ECF No. 533. On August 2, 2016, the Court denied S&N's declaratory judgment counterclaim for inequitable conduct on each of the five grounds alleged. August 2, 2016 Op. & Order, ECF No. 542. On August 10, 2016, the Court denied CertusView's motion for partial reconsideration. Reconsid. Op. Sc Order, ECF No. 545. Final judgment was entered on August 10, 2016. Final Judg., ECF No. 547. On August 24, 2016, Defendants filed their second Motion for Exceptional Case Finding and Attorneys' Fees. ECF No. 549. By Order of November 21, 2016, the Court denied Defendants' second motion without prejudice to Defendants' right to refile their motion within fourteen (14) days after the United States Court of Appeals for the Federal Circuit issued a mandate finalizing judgment on the merits of the Plaintiff's pending appeal. Mem. Order, ECF No. 560. The Federal Circuit affirmed this Court's § 101 invalidity ruling on August 11, 2017, ECF No. 570, and issued a mandate finalizing the judgment on September 18, 2017, ECF No. 571. S&N filed this renewed motion for exceptional case finding and attorneys' fees on October 2, 2017. Certusview opposes such motion. ECF No. 573.

         II. LEGAL STANDARD

         Pursuant to Section 285 of the Patent Act, 35 U.S.C. § 285, w[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party."[2] Construing the word "exceptional . . . in accordance with [its] ordinary meaning, " the Supreme Court recently explained 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. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.

Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014).

         Under the standard adopted in Octane Fitness, "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 'exceptional' as to justify an award of fees." Id. at 1757. When weighing the evidence to determine whether a case is exceptional, the court may "consider a 'nonexclusive' list of 'factors, ' including 'frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. at 1756 n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n. 19 (1994)) (noting a nonexclusive list of factors district courts may utilize in determining whether to award fees under similar provision in Copyright Act). Any such exceptional case determination must find support in a "preponderance of the evidence." Octane Fitness, 134 S.Ct. at 1758.

         III. DISCUSSION

         Defendants S&N move for an exceptional case finding on the grounds that Plaintiff CertusView 1) asserted objectively unreasonable patent claims, and 2) conducted the litigation in an unreasonable manner. Defs.' Br. Support 1, ECF No. 574.

         A. Assertion of Objectively Unreasonable Patent Claims

         S&N alleges that Plaintiff Certusview asserted objectively unreasonable patent claims when it "knowingly filed and maintained this action for infringement of patent claims drawn to the abstract idea of documenting a locate operation - a process that has long been performed by hand - even though its claims were facially ineligible from the outset." Id. S&N claims that, w[a]s a result, CertusView7s continued assertion of the claims-in-suit in the face of such authority was objectively-unreasonable." Id. at 2. S&N argues that this case is also exceptional because CertusView knowingly asserted facially ineligible patent claims for more than a year and half. Id. at 3. S&N relies on Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., No. 14-448-GMS, 2016 U.S. Dist. LEXIS 70345 at *6-7 (D. Del. May 31, 2016)[3] as a case on point, noting that the patent holder there filed suit after Bilski v. Kappos, 561 U.S. 593 (2010) and before Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347 (2014), and the court found that especially after Alice, the patent owner "was on notice that its claims, much like the claims in Bilski and Alice, . . . were objectively ineligible under § 101" so as to support an exceptional case finding. ECF No. 574 at 4. S&N concludes that, because CertusView has knowingly asserted claims that describe a manual process simply being implemented electronically using computing components, and because Supreme Court precedent before this suit and many opinions after filing have squarely rejected such claims as unpatentable, CertusView has asserted objectively baseless patent claims rendering this case truly exceptional. Id. at 9.

         Certusview responds that its patent eligibility positions were sufficiently strong to overcome an exceptional case finding because it acted reasonably in bringing and maintaining this suit as ' [i] t was not unreasonable for CertusView to conclude, based on the fact that its patents were examined and issued under [Mayo Collaborative Servs. v. Prometheus Labs, Inc., 566 U.S. 66 (2012)], that they claimed patent-eligible subject matter", and were entitled to a presumption of validity. ECF No. 576, p. 1, 4-5. CertusView asserts that the two-part test for patent eligibility established in 2012 in Mayo (prior to the filing of this suit), applied to the "law of nature" exception, and that such test was extended to the "abstract idea" exception to patentability in 2014 (after this suit was filed) by Alice, 134 S.Ct. 2347. ECF No. 576 at 1, 11. Certusview goes on to note that even after the Supreme Court's Alice decision, "the Patent Office allowed issuance of a closely related continuation patent of the e-Sketch patents-in-suit - underscoring that reasonable minds could differ regarding eligibility." Id. at 1. Certusview further argues that it was not unreasonable "to conclude, based on the Patent Office's repeated allowances of e-Sketch patents after Mayo, and the allowance of another continuation patent after Alice was decided, that its patents claimed patent-eligible subject matter." Id.

         As support for this position, CertusView points to the evolving state of § 101 jurisprudence after Alice, and this Court having twice observed that the eligibility issues in this case were "substantial and novel" as evidenced by S&N's delay of seventeen months in raising a § 101 defense. Id. at 5. Certusview further posits that, notwithstanding the fact that its "patents were later invalidated after Alice was decided [and] while this suit was pending . . . that does not make CertusView7s lawsuit ' exceptional, ' even if CertusView's position was ultimately incorrect." Id. at 1.

         In reply, S&N argues that "CertusView7s infringement claims were objectively unreasonable from the outset in light of the Supreme Court's clear guidance in Bilski v. Kappos, 561 U.S. 593 (2010) and Mayo . . ., both of which issued well before CertusView filed this action on May 29, 2013." Defs'. Reply Br. at 3, ECF No. 577. Moreover, S&N argues, "[w]hile CertusView may claim some arguable uncertainty in the law under Bilski, by the time of Alice, CertusView was on ample notice that its claims covered an abstract idea and that the introduction of a computer did not alter the result that they were ineligible." Id. at 5-6.

         1. Presumption Coupled with Post-Mayo Issuance

         Section 282(a) of the Patent Act provides that "[a] patent shall be presumed valid, " and that "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." 35 U.S.C. § 282(a). CertusView argues that '[w]hen [it] filed this case, [it] was entitled to rely on the presumption that the Patent Office did its job, and that patent claims issued under the current legal standards are valid when issued." ECF No. 576, at 5. CertusView concludes that, since each asserted patent issued after the Supreme Court's decisions in Bilski and Mayo, it was not unreasonable for it to conclude that patents issued by the Patent Office under the prevailing Mayo standard for patent eligibility were in fact eligible for patenting. Id. at 5-6. S&N does not question whether there is a presumption of validity in this context, instead responding that 'the mere fact that the Patent Office issued its claims after Bilski and Mayo does not mean that it was objectively reasonable to conclude that those claims were eligible, particularly after Alice" and in light of ...


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