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Optis Wireless Technology, LLC v. Huawei Device USA, Inc.

United States District Court, E.D. Texas, Marshall Division

November 15, 2019

OPTIS WIRELESS TECHNOLOGY, LLC, PANOPTIS PATENT MANAGEMENT, LLC, OPTIS CELLULAR TECHNOLOGY, LLC., Plaintiffs,
v.
HUAWEI DEVICE USA, INC., HUAWEI DEVICE SHENZHEN CO., LTD., Defendants.

          MEMORANDUM OPINION AND ORDER

          RODNEY GILSTRAP UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiffs Optis Wireless Technology, LLC; PanOptis Patent Management, LLC; and Optis Cellular Technology, LLC's (collectively, “PanOptis”) Motion for Exceptional Case Status and Attorney Fees (the “Motion”). (Dkt. No. 376.) Having considered the briefing, case record, and relevant authorities the Court is of the opinion the Motion should be GRANTED for the reasons set forth herein.

         I. BACKGROUND

         PanOptis sued Defendants Huawei Device USA, Inc. and Huawei Device (Shenzhen) Co., Ltd. (collectively, “Huawei”) for patent infringement on February 10, 2017. (Dkt. No. 1.) PanOptis alleged that Huawei infringed U.S. Patent Nos. 7, 769, 238 (the “'238 Patent”); 6, 604, 216 (the “'216 Patent”); 8, 208, 569 (the “'569 Patent”); 8, 385, 284 (the “'284 Patent”); and 8, 437, 293 (the “'293 Patent”) (collectively, the “Asserted Patents”). The '216, '569, '284, and '293 patents have been declared “essential” to the LTE cellular communications standard and the '238 patent overlaps with portions of the H.264 standard; these patents are known as “Standard Essential Patents” (“SEPs”). (Dkt. No. 325 at 4.)

         In its Complaint, PanOptis requested declaratory judgment (“Count IX”) affirming that it had complied with its obligation to offer a license to its SEPs on fair, reasonable, and non-discriminatory terms. (“FRAND”). (Dkt. No. 1 ¶ 143.) Huawei raised five FRAND affirmative defenses alleging that PanOptis violated its commitments by failing to offer and grant a license on FRAND terms. (Dkt. No. 70, at 32.) At the urging of Huawei, the PanOptis claims were bifurcated into a jury trial and a bench trial with the declaratory action being relegated to the bench trial. (See Dkt. No. 244 at 22:17-24:17; Dkt. No. 243 at 21.)

         Throughout the jury trial, Huawei vigorously asserted its FRAND affirmative defenses arguing that PanOptis had failed to offer a license to its SEPs to Huawei on FRAND terms. (See Dkt. No. 225 at 8.) After jury deliberations began, the Court proceeded to take up the bench trial issues, particularly Count IX. Before the Court began the bench trial, Huawei announced it was dropping its FRAND affirmative defenses. (Dkt. 310 No. at 101:3-5.) Following this announcement, Huawei argued that the Court lacked subject matter jurisdiction over Count IX, and as such, Count IX should be dismissed. (Dkt. No. 280 at 2.) To consider this late-breaking assertion as to a lack of jurisdiction, the Court delayed the bench trial. (Dkt. No. 310 at 111:16- 21.)

         Ultimately, the jury returned a verdict in favor of PanOptis finding that (1) Huawei infringed each of the asserted claims of the Asserted Patents (the “Asserted Claims”); (2) that the infringement was willful; (3) that none of the Asserted Claims were invalid; and (4) that PanOptis was entitled to damages in the amount of $10, 553, 565 as a running royalty. (Dkt. No. 291.)

         Over Huawei's objections, the Court held a bench trial on August 27, 2018 as to Count IX. (Dkt. No. 313.) However, in the exercise of its discretion, the Court declined to issue a declaratory judgment finding that the Court was not presented with evidence from which it could adjudicate whether PanOptis had or had not complied with its FRAND obligations. (Dkt. No. 373.) The Court entered final judgment on March 18, 2019 designating PanOptis as the prevailing party. (Dkt. No. 374 at 4.) Additionally, in light of the verdict of willfulness, the Court awarded enhanced the damages by 25 percent. (Id. at 6.) PanOptis now moves for a finding of exceptionality and an award of attorneys' fees under 35 U.S.C. § 285 (Dkt. No. 376.)

         II. LEGAL STANDARD

         In “exceptional cases, ” a district court “may award reasonable attorney fees to the prevailing party” pursuant to the Patent Act. 35 U.S.C. § 285. An “exceptional case” is “simply one that stands out from others with respect to the substantive strength of a party's litigating position . . . or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014); see also Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S.Ct. 1744, 1748 (2014) (noting that “the word ‘exceptional' in § 285 should be interpreted in accordance with its ordinary meaning” (citing Octane Fitness, 134 S.Ct. at 1755)). Notably, it is not necessary that the litigation conduct at issue be independently sanctionable, e.g., because it involves bad faith or some other misconduct. See Id. at 1756-57 (holding that “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”).

         District courts must determine whether any particular case is “exceptional” in a “case-by-case exercise of their discretion, considering the totality of the circumstances.” Octane Fitness, 134 S.Ct. at 1756. Whether a case is “exceptional” or not “is a factual determination, ” Forcillo v. Lemond Fitness, Inc., 168 Fed.Appx. 429, 430 (Fed. Cir. 2006), and the court must make its discretionary determination by a “preponderance of the evidence, ” Octane Fitness, 134 S.Ct. at 1758 (rejecting the prior requirement that a patent litigant establish its entitlement to fees under § 285 by “clear and convincing” evidence). A district court's determination of whether a case is “exceptional” under § 285 is reviewed for an abuse of discretion. See Highmark Inc., 134 S.Ct. at 1748; see also Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 858 F.3d 1371, 1374 (Fed. Cir. 2017) (“On appeal, all aspects of a district court's § 285 determination are reviewed for an abuse of discretion.” (citation omitted)).

         In assessing the “totality of the circumstances, ” courts may consider factors such as “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.” Octane Fitness, 134 S.Ct. at 1756 n.6 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.9 (1994)) (addressing a similar fee-shifting provision in the Copyright Act). As previously noted, Octane Fitness made clear that a party's conduct need not be independently sanctionable to warrant an award of fees under § 285. Id. at 1756-57. That said, courts have cautioned that fee awards should not be used “as a penalty for failure to win a patent infringement suit.” See Id. at 1753 (quotation omitted); see also Checkpoint Sys., Inc., 858 F.3d at 1376.

         While an exceptional case finding is no longer constrained to “inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement, ” Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002), “the absence of such conduct also weighs against an ...


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