B.E. Technology, L.L.C. v. Facebook, Inc. ( 2019 )

United States Court of Appeals
for the Federal Circuit
______________________
B.E. TECHNOLOGY, L.L.C.,
Plaintiff-Appellant
v.
FACEBOOK, INC.,
Defendant-Appellee
______________________
2018-2356
______________________
Appeal from the United States District Court for the
Western District of Tennessee in No. 2:12-cv-02769-JPM-
tmp, Chief Judge Jon P. McCalla.
______________________
Decided: October 9, 2019
______________________
DANIEL J. WEINBERG, Freitas & Weinberg LLP, Red-
wood Shores, CA, argued for plaintiff-appellant. Also rep-
resented by KAYLA ANN ODOM.
EMILY E. TERRELL, Cooley LLP, Washington, DC, ar-
gued for defendant-appellee. Also represented by HEIDI
LYN KEEFE, Palo Alto, CA; ORION ARMON, Broomfield, CO.
______________________
Before LOURIE, PLAGER, and O’MALLEY, Circuit Judges.
Opinion for the court filed by Circuit Judge LOURIE.
2 B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC.
Concurring opinion filed by Circuit Judge PLAGER.
LOURIE, Circuit Judge.
B.E. Technology, L.L.C. (“B.E.”) appeals from a deci-
sion of the United States District Court for the Western
District of Tennessee affirming the Clerk’s Order finding
Facebook, Inc. (“Facebook”) to be the prevailing party in
their lawsuit and taxing $4,424.00 in costs against B.E.
B.E. Tech., LLC v. Facebook, Inc., No. 2:12-cv-2769-JPM-
TMP, 2018 WL 3825226, at *1 (W.D. Tenn. Aug. 10, 2018)
(“Decision”). For the reasons detailed below, we affirm.
BACKGROUND
On September 7, 2012, B.E. filed suit in the Western
District of Tennessee accusing Facebook of infringing
claims 11, 12, 13, 15, 18, and 20 of its U.S. Patent 6,628,314
(“the ’314 patent”). Approximately a year into the case, Fa-
cebook and two other parties B.E. had also accused of in-
fringement, Microsoft and Google, filed multiple petitions
for inter partes review of the asserted claims. The district
court stayed its proceedings in this case pending the out-
come of the Board’s review. B.E. Tech., LLC v. Amazon
Digital Servs., Inc., No. 2:12-cv-2767-JPM-TMP, 2013 WL
12158571, at *1 (W.D. Tenn. Dec. 6, 2013).
The Board instituted review of the ’314 patent and held
the claims unpatentable in three final written decisions.
See Google, Inc. v. B.E. Tech., LLC, Nos. IPR2014-00038,
IPR2014-00699, 2015 WL 1735099, at *1 (P.T.A.B. Mar. 31,
2015); Microsoft Corp. v. B.E. Tech., LLC, Nos. IPR2014-
00039, IPR2014-00738, 2015 WL 1735100, at *1 (P.T.A.B.
Mar. 31, 2015) (“Microsoft Decision”); Facebook, Inc. v. B.E.
Tech., LLC, Nos. IPR2014-00052, IPR2014-00053, IPR2014-
00698, IPR2014-00743, IPR2014-00744, 2015 WL 1735098, at
*2 (P.T.A.B. Mar. 31, 2015). B.E. appealed, and we affirmed
the Microsoft Decision, dismissing the remaining appeals
as moot. B.E. Tech., LLC v. Google, Inc., Nos. 2015-1827,
B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC. 3
2015-1828, 2015-1829, 2015-1879, 2016 WL 6803057, at *1
(Fed. Cir. Nov. 17, 2016).
Facebook then moved in the district court for judgment
on the pleadings under Fed. R. Civ. P. 12(c), seeking a dis-
missal with prejudice and costs under Rule 54(d). B.E.
agreed that dismissal was appropriate but argued that the
claims should be dismissed for mootness, rather than with
prejudice. The district court ultimately agreed with B.E.,
issuing an Order holding that, “[i]n light of the cancellation
of claims 11–22 of the ’314 patent, B.E. no longer ha[d] a
basis for the instant lawsuit” and that its patent infringe-
ment “claims [were] moot.” J.A. 37. As for costs, the court
initially declined to award Facebook costs because the re-
quest was lodged before entry of judgment. J.A. 39.
Facebook renewed its motion for costs after judgment
was entered, and this time the district court awarded costs
under Rule 54(d). The Clerk of Court held a hearing on the
motion and ultimately taxed $4,424.20 in costs against
B.E. B.E. sought review by the court, and the court af-
firmed. In its decision, the court relied on CRST Van Ex-
pedited, Inc. v. E.E.O.C., 136 S. Ct. 1642 (2016), to hold
that, although the case was dismissed for mootness, Face-
book “obtained the outcome it sought: rebuffing B.E.’s at-
tempt to alter the parties’ legal relationship.” Decision,
2018 WL 3825226, at *2. The court thus held Facebook to
be the prevailing party in B.E.’s lawsuit and affirmed the
Clerk’s order.
B.E. timely appealed, and we have jurisdiction under
28 U.S.C. § 1295(a).
DISCUSSION
The Federal Rules of Civil Procedure provide that
“[u]nless a federal statute, these rules, or a court order pro-
vides otherwise, costs—other than attorney’s fees—should
be allowed to the prevailing party.” Fed. R. Civ. P. 54(d)(1)
(emphasis added). The district court determined here that
4 B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC.
Facebook was the prevailing party, and we review the
court’s interpretation of the term “prevailing party” de
novo, Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027,
1032 (Fed. Cir. 2006), and apply Federal Circuit law, Ma-
nildra Milling Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178,
1182 (Fed. Cir. 1996). We interpret the term consistently
between different fee-shifting statutes, CRST, 136 S. Ct. at
1646, and between Rule 54(d) and 35 U.S.C. § 285, Raniere
v. Microsoft Corp., 887 F.3d 1298, 1307 n.3 (Fed. Cir. 2018)
(“We have treated the prevailing party issue under Rule 54
and § 285 in a similar fashion.”); see Manildra Mill, 76 F.3d
at 1182 (“By establishing a single definition of prevailing
party in the context of patent litigation, we promote uni-
formity in the outcome of patent trials.”).
The parties’ dispute centers entirely around the defini-
tion of “prevailing party.” B.E. argues that, because the
case was dismissed as moot based on the Board’s decision,
which we affirmed, Facebook did not “prevail” in the dis-
trict court. According to B.E., once the asserted claims
were cancelled, the district court action lacked a live case
or controversy, and the court’s dismissal lacked the requi-
site judicial imprimatur to render Facebook the prevailing
party. Appellant’s Br. 11 (citing Buckhannon Bd. & Care
Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532
U.S. 598, 600 (2001)).
Facebook responds that the district court properly de-
termined that it was the prevailing party because it suc-
cessfully “rebuffed B.E.’s claims.” Appellee’s Br. 7 (citing
CRST, 136 S. Ct. at 1651). According to Facebook, the
court’s dismissal of the case, albeit not on the merits, pro-
vided the required judicial imprimatur. Id. at 15.
We agree with Facebook that it is the prevailing party.
In making that determination, we look to the Supreme
Court’s guidance on the interpretation of that term. In
Buckhannon, the issue concerned whether a party has pre-
vailed when it “failed to secure a judgment on the merits or
B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC. 5
a court-ordered consent decree, but has nonetheless
achieved the desired result because the lawsuit brought
about a voluntary change in the defendant’s conduct.” 532
U.S. at 600. Several circuits had recognized a “catalyst”
theory, where a party could prevail without judicially sanc-
tioned change in the legal relationship of the parties, pro-
vided that the litigation brought about the desired result
through a voluntary change in the defendant’s conduct. Id.at 601–02. In rejecting this theory, the Court established
that some manner of judicial relief is required for a party
to prevail. Id. at 605. A defendant’s voluntary change in
conduct, even if it “accomplish[es] what the plaintiff sought
to achieve by the lawsuit, lacks the necessary judicial im-
primatur on the change.” Id. Thus, the Court stated, a
“plaintiff who, by simply filing a nonfrivolous but nonethe-
less potentially meritless lawsuit (it will never be deter-
mined), has reached the ‘sought-after destination’ without
obtaining any judicial relief” would not be a prevailing
party. Id. at 606. A decision with judicial imprimatur is
required to give rise to prevailing party status.
Almost fifteen years later, in CRST, the Court consid-
ered whether a defendant could be declared the prevailing
party absent a judgment on the merits. 136 S. Ct. 1642,
1651. The issue there presented itself in the context of Ti-
tle VII of the Civil Rights Act of 1964, which provides that
a court may allow the “prevailing party” a “reasonable at-
torney’s fee.” Id. at 1646 (quoting 42 U.S.C. § 2000e–5(k)).
CRST had obtained a dismissal of all of the claims against
it, including 67 claims that were dismissed for failure to
meet presuit obligations. The district court held that CRST
was the prevailing party, but the Eighth Circuit vacated its
decision, holding that, for CRST to be eligible for fees, there
must have been a favorable judicial decision on the merits.
The Eighth Circuit also commented that a case has not
been decided on the merits if it was dismissed for lack of
subject matter jurisdiction, on res judicata grounds, or
based on the statute of limitations.
6 B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC.
The Court disagreed, holding that a merits decision is
not a prerequisite to a finding of prevailing party status.
The Court explained that “[c]ommon sense undermines the
notion that a defendant cannot ‘prevail’ unless the relevant
disposition is on the merits.” Id. Instead, it held that a
“defendant has . . . fulfilled its primary objective whenever
the plaintiff’s challenge is rebuffed, irrespective of the pre-
cise reason for the court’s decision,” and that a “defendant
may prevail even if the court’s final judgment rejects the
plaintiff’s claim for a nonmerits reason.” Id.
In so holding, the Court noted that one purpose of the
fee-shifting provision is to deter the bringing of lawsuits
without foundation. It recognized that various courts had
awarded fees after nonmerits dispositions where a claim
was “frivolous, unreasonable, or groundless if the claim is
barred by state sovereign immunity, or is moot.” CRST,
136 S. Ct. at 1652–53 (internal citations omitted). And the
Court commented that awarding fees in these frivolous
cases made good sense. In such cases, “significant attorney
time and expenditure may have gone into contesting the
claim,” and “Congress could not have intended to bar de-
fendants from obtaining attorney’s fees in these cases on
the basis that, although the litigation was resolved in their
favor, they were nonetheless not prevailing parties.” Id. at
1653. Accordingly, a defendant can be deemed a prevailing
party even if the case is dismissed on procedural grounds
rather than on the merits.
We have applied CRST in interpreting the term “pre-
vailing party” as implicated by attorney fees in an excep-
tional case under 35 U.S.C. § 285. In Raniere v. Microsoft
Corp., 887 F.3d 1298 (Fed. Cir. 2018), the defendants se-
cured dismissal of the plaintiff’s claims for lack of standing
in district court and sought to be declared the prevailing
party. We explained that in identifying a prevailing party,
we must consider whether the district court’s decision “ef-
fects or rebuffs a plaintiff’s attempt to effect a ‘material al-
teration in the legal relationship between the parties.’” Id.B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC. 7
at 1306 (quoting CRST, 136 S. Ct. at 1646, 1651). Although
the dismissal in Raniere was not based on the substantive
merit of the plaintiff’s claim, we held that a merits decision
was not required after CRST. Given that the defendants
expended “significant time and resources,” “prevented Ra-
niere from achieving a material alteration of the relation-
ship between them” with a “decision marked by judicial
imprimatur,” and “received all relief to which they were en-
titled,” we held that the district court did not err in finding
them to be prevailing parties. Id. at 1306–07 (citation
omitted).
Here, unlike Raniere, Facebook obtained a dismissal
for mootness, not for lack of standing. But that distinction
does not warrant a different result. The PTO instituted
review of the asserted claims and found them unpatenta-
ble. We affirmed the Board’s decision, and the claims were
cancelled. Facebook moved for judgment that the case be
dismissed on the pleadings, and, citing Fresenius, the dis-
trict court appropriately did so on the ground of mootness.
As the district court held, Facebook obtained the outcome
it sought via the mootness dismissal; it rebuffed B.E.’s at-
tempt to alter the parties’ legal relationship in an infringe-
ment suit. This is true even though the mootness decision
was made possible by a winning a battle on the merits be-
fore the PTO.
B.E. maintains that mootness has no preclusive effect
and could not alter the legal relationship between the par-
ties. But that argument puts form over substance and con-
flicts with the common-sense approach outlined in CRST.
CRST explains that a defendant, like Facebook, can prevail
by “rebuffing” plaintiff’s claim, irrespective of the reason
for the court’s decision. That language squarely controls
here, and B.E. fails to point to any controlling authority
suggesting otherwise. That the merits of the decision can-
celling the claims occurred in the PTO rather than the dis-
trict court does not change the fact that the district court
dismissed the claims it had before it, albeit for mootness.
8 B.E. TECHNOLOGY, L.L.C. v. FACEBOOK, INC.
It thereby placed a judicial imprimatur upon B.E.’s claim
for patent infringement.
CONCLUSION
We have considered the parties’ remaining arguments
but find them unpersuasive. Accordingly, for the reasons
above, we affirm the district court’s award of costs to Face-
book under Fed. R. Civ. P. 54(d).
AFFIRMED
COSTS
Costs to Facebook.
United States Court of Appeals
for the Federal Circuit
______________________
B.E. TECHNOLOGY, L.L.C.,
Plaintiff-Appellant
v.
FACEBOOK, INC.,
Defendant-Appellee
______________________
2018-2356
______________________
Appeal from the United States District Court for the
Western District of Tennessee in No. 2:12-cv-02769-JPM-
tmp, Chief Judge Jon P. McCalla.
______________________
PLAGER, Circuit Judge, concurring.
I fully concur in and join the court’s decision. That it
is clearly correct can be seen had Facebook moved for, and
been granted, not a “moot” dismissal, but a dismissal
under Fed. R. Civ. P. 12(b)(6) on the ground that, once the
asserted patent claims had been determined to be invalid,
the plaintiff failed to state a claim upon which relief can
be granted. That leaves no doubt that Facebook prevailed
in the infringement suit and avoids any litigation about
litigation.