Crossing the Threshold of Exceptionality – Judge Gilstrap Grants Section 285 Motion in 89-defendant eDekka Litigation

Originally published by Michael C. Smith.

eDekka v. 3Balls.com, et al., 2:15cv541-JRG (12/17/15) (Gilstrap, J.)

As I have previously posted, in April and May of this year, plaintiff eDekka filed lawsuits against 89 defendants alleging infringement of a single patent. On September 21, 2015 Judge Gilstrap granted defendants motions to dismiss under 35 USC 101, contending that the patent was directed to unpatentable subject matter under Alice. He also required any motion seeking fees under section 285 to be filed as a single brief within two weeks. Yesterday, Judge Gilstrap granted the 285 motion, finding that the case was in fact "exceptional" both because the plaintiff's case was "objectively unreasonable" and because it had been litigated unreasonably.  Submissions on fees were due within 14 days.

The Court's opinion sets forth the standards for findings of exceptionality following the Supreme Court's establishment of the current standard in Octane Fitness.  "Significantly," it noted, "sanctionable conduct is not the standard for awarding fees under § 285."

Objectively Unreasonable

With respect to the first basis for exceptionality, whether the party's case was "objectively unreasonable", the Court found that the patent was "demonstrably weak on its face." "The Court did not need the benefit of claim construction to find that the claims were directed to an abstract idea," Judge Gilstrap wrote, finding that "no reasonable litigant could have reasonably expected success on the merits when defending against the numerous section 101 motions filed in this case." In addition the Court found that rather than acknowledging the inherent weaknesses in the patent the plaintiff proffered "completely untenable arguments to the Court throughout the section 101 briefing process and at the September 10, 2015 hearing." This caused the court to question whether the plaintiff had engaged in a reasonable and thorough pre-suit investigation regarding the standard for patentability before filing a significant number of lawsuits. "In these particular and focused circumstances, the Court identifies a clear need to advance considerations of deterrence," the Court wrote concluding that the case was exceptional under the "objectively unreasonable" standard.

Litigating in an Unreasonable Manner

Judge Gilstrap then addressed eDekka's litigation history – which he noted included filing "strikingly similar" lawsuits against over 200 defendants – reflected "an aggressive strategy that avoids testing its cases on the merits and instead aims for early settlements falling at or below the cost of defense."  The Court then addressed the specific facts regarding plaintiff's settlement strategy in this case:

Based upon the record of the above-captioned cases, as well as the Court’s in camera review of eDekka’s ’674 Patent settlements to date, the Court finds a pattern of defendants that agreed to settlements at relatively early points in the litigation for amounts significantly below the cost of taking a patent case to trial. Further, on September 8, 2015, just two days before the September 10, 2015 § 101 hearing, counsel for eDekka contacted numerous defendants with offers to settle their cases for three-thousand dollars each. These offers represent extraordinarily low amounts. Such offers remained open until they were withdrawn during the evening of September 9, 2015. This clearly suggests an intent to settle with the remaining defendants rather than defend the ’674 Patent claims in court. 

(Emphasis mine).  The Court went on find that it was reasonable to conclude that eDekka acted with the goal of “exploiting the high cost to defend complex litigation” to extract “nuisance value settlement[s]” from defendants, and that these tactics contributed significantly to the Court’s finding that this case is “exceptional.” 

Judge Gilstrap's opinion concluded with considerations similar to those expressed in cases I previously posted on by Judge Yeakel and Judge Costa. "This Court does not view every plaintiff’s loss as an automatic indicator that the case is exceptional. A finding of exceptionality is something that this Court arrives at reluctantly, lest we unintentionally narrow the public’s access to the courts by chilling future decisions to seek redress for a case in which success is not guaranteed. However, the threshold of exceptionality has been crossed by eDekka in this case." 

 

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