United States District Court, E.D. Texas, Marshall Division
MEMORANDUM OPINION AND ORDER
PAYN, EUNITED STATES MAGISTRATE JUDGE.
won summary judgment of noninfringement, BlueStone now moves
to declare this case exceptional under 35 U.S.C. § 285
and requests $700, 000 in attorneys' fees. Dkt. No. 187.
Although certain elements of this case and others filed by
Effective Exploration weigh in favor of finding
exceptionality, the totality of the circumstances do not
justify such a finding. Accordingly, BlueStone's motion
Exploration is a non-practicing entity formed in 2013. Since
its inception, Effective has filed 25 patent infringement
lawsuits alleging infringement of one or more patents related
to the operation of oil and gas wells. Thirteen of these
lawsuits involved U.S. Patent No. 8, 813, 840, the patent
asserted against BlueStone. Of Effective's 25 lawsuits,
BlueStone contends that Effective walked away from nine suits
without settlement, see Dkt. No. 187 at 3 n.8, and
settled the remaining fourteen, id. at 3 n.7. The
defendants that settled with Effective paid from $12, 500 to
$650, 000, with the upper end of the range being a gross
outlier. The average settlement amount was $117, 142.86, the
median was $60, 000, and nine of the fourteen settlements
fell between $12, 500 and $65, 000. See Dkt. Nos.
187-1-187-13. Most of the cases settled relatively early,
with the lawsuit against BlueStone being the only case to
reach a final resolution on the merits.
problem with Effective's case against BlueStone began at
claim construction. The '840 patent is directed to
systems and methods for recovering oil or gas from
subterranean geological formations utilizing certain
configurations of directed bore holes. See Dkt. No.
108. The claims' preamble recites “[a] system for
accessing a subterranean zone of shale, ” and the
claims specify that the system includes a wellbore extending
into a subterranean zone, “wherein the subterranean
zone is shale.” See '840 patent at cl. 1. Effective
asked the Court to construe the zone of “shale”
limitation as a “depth interval including one or more
layers of rock composed primarily of shale and that in the
aggregate is composed primarily of shale.” See Dkt. No.
108 at 18-26; Hr'g Tr. at 7:17-23 (June 9, 2017), Dkt.
claim construction hearing, the Court and the parties
discussed difficulties in determining whether the accused
subterranean zone was in fact “composed primarily of
shale and that in the aggregate is composed primarily of
shale, ” see Hr'g Tr. at 38:2- 17, 41:3-8,
Dkt. No. 89, and the Court clarified that it would be a
question of fact “as to what the zone of shale is,
” id. at 40:4-6. The Court ultimately rejected
BlueStone's proposal that zone of “shale” be
defined as “a known and named shale formation, ”
see Id. at 42:15-45:6, and adopted Effective's
proposed construction. See Dkt. No. 108 at 18-26. In
doing so, the Court emphasized that whether the zone of
“shale” limitations are met by “a
particular section of the earth . . . is something for the
experts or the fact witnesses to talk about.” Hr'g
Tr. at 44:7-10, Dkt. No. 89.
lost the case because it never came forward with evidence to
support the “shale” zone limitation.
Effective's expert, Dr. Enick, never put forth an opinion
regarding the geology of the accused subterranean zone, nor
did Dr. Enick ever opine that the accused well site includes
a subterranean zone of “one or more layers of rock
composed primarily of shale and that in the aggregate is
composed primarily of shale.” See Dkt. No. 176
at 2-3. Rather, Dr. Enick seemed to assume that because the
accused subterranean zone was called the “Barnett
Shale, ” the zone must necessarily satisfy the
“shale” zone limitation. See Id. This
faulty assumption, however, was discussed with the parties at
length during the claim construction hearing, and it should
have been clear to Effective that under their own proposed
construction, more would be required. Ultimately, in light of
the lack of evidence regarding the “shale” zone
limitation, the Court recommended that summary judgment of
noninfringement be granted, and this recommendation led to
the final resolution of the case. See id.; see
also Dkt. No. 183.
285 of the Patent Act allows a district court, in an
exceptional case, to award reasonable attorney fees to the
prevailing party. 35 U.S.C. § 285. “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). An
exceptional case under § 285 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.”
Id. The party seeking fees must prove that the case
is exceptional by a preponderance of the evidence.
Id. at 1758.
elements of Effective's cases, including the case against
BlueStone, weigh in favor of finding exceptionality. The
first is Effective's litigation campaign. The record
could support a conclusion that Effective filed and
maintained lawsuits for the purpose of forcing nuisance-value
settlements. Of the fourteen settlement agreements in the
record, most were for around $60, 000. See Dkt. Nos.
187-1-187-13. The settlement amounts were well below what
BlueStone spent in this case through summary judgment (around
$700, 000) and well below the average cost to defend a patent
infringement lawsuit through trial. See Dkt. No. 187
at 3 n.9. In light of the settlement amounts and given that
only the case against BlueStone reached a final merits
determination, one could conclude that Effective was filing
lawsuits “for the sole purpose of forcing settlements,
with no intention of testing the merits of [the]
claims.” SFA Sys., LLC v. Newegg Inc., 793
F.3d 1344, 1350 (Fed. Cir. 2015). This supports a finding of
exceptionality. See Rothschild Connected Devices
Innovations, LLC v. Guardian Prot. Servs., Inc., 858
F.3d 1383, 1389-90 (Fed. Cir. 2017).
litigation position was also weak, but not exceptionally so.
This case is distinguishable from others in which it was
clear that the case should never have been brought from the
outset, such as a case involving patent claims that are
“manifestly directed to an abstract idea.”
See Inventor Holdings, LLC v. Bed Bath & Beyond,
Inc., 876 F.3d 1372, 1378 (Fed. Cir. 2017). The validity
of the '840 patent was tested with an early motion for
summary judgment, but the Court held that a factual dispute
regarding the prior art wells precluded a summary
determination. See Dkt. No. 124. The ultimate fate
of the case unfolded primarily because Effective insisted on
a claim construction of the “shale” zone
limitation that was difficult to prove. Effective's
position was difficult to explain, and it was not surprising
that the case was ultimately resolved at summary judgment,
but “losing a summary judgment motion should not
automatically result in a finding of exceptional
conduct.” See Honeywell Int'l Inc. v. Fujifilm
Corp., No. 2017-1070, 2018 WL 358079, at *2 (Fed. Cir.
Jan. 11, 2018). Effective lost because of a failure of proof,
which does not make this case stand out from any other patent
case lost at summary judgment.
relying on Effective's weak summary judgment position in
evaluating attorneys' fees is difficult because of timing
and the extent to which this weak position permeated the rest
of the case. Attorneys' fees must have been caused by the
conduct that renders the case exceptional. See Goodyear
Tire & Rubber Co. v. Haeger, 137 S.Ct. 1178, 1186-90
(2017) (explaining but-for causation requirement for
determining attorneys' fees). Yet as for the merits of
the case, the primary misstep BlueStone relies on is
Effective's lack of evidence to overcome summary
judgment. Effective's obligation to come forward with
evidence was not triggered, however, until BlueStone moved
for judgment, and BlueStone's motion was based on a claim
construction ruling that issued on July 27, 2017.
See Dkt. No. 108. At most, Effective's liability
for attorneys' fees-based on the weak summary judgment
position-could conceivably extend from July until summary
judgment was granted. But such liability should extend only
insofar as the “shale” zone issue. In other
words, the weakness of Effective's position, as far as
the Court can tell, was limited primarily to the
“shale” zone limitation. It is not clear how this
one misstep impregnated the rest of the case to render
Effective liable for $700, 000 in attorneys' fees.
from Effective's weak summary judgment position,
BlueStone highlights two other circumstances that merit
discussion. The first is best characterized as
Effective's aggressive litigation strategy. In
particular, BlueStone emphasizes that Effective served a Rule
11 sanctions motion the night before a scheduled mediation.
See Dkt. No. 187 at 6. The sanctions motion was
based on BlueStone's early (and ultimately unsuccessful)
motion for summary judgment of invalidity. The Court denied
the motion for sanctions, and in doing so emphasized that the
summary judgment question was close. See Dkt. No.
125. Although filing a motion for sanctions in response to a
defendant who attacks a position is not advisable, it is not
enough in this case to weigh in favor of exceptionality.
second circumstance that merits discussion is BlueStone's
allegation that Effective did not perform an adequate presuit
investigation. The basis of this allegation is deposition
testimony from Effective's corporate representative
stating that he personally never investigated the accused
well sites, nor did he review relevant public documents.
See Dkt. No. 187 at 8-9. But the corporate
representative stated that counsel presumably performed these
tasks. See Paul Heath Dep. at 40:15-41:24, Dkt. No.
187-17. In addition, oil wells are the type of
instrumentality that generally require some discovery to
solidify a theory of infringement, and any presuit
investigation based purely on publicly-accessible materials
would necessarily have been difficult. See K-Tech