Pragmatus Telecom LLC v. Newegg Inc. , 625 F. App'x 528 ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
PRAGMATUS TELECOM LLC,
Plaintiff-Appellee
v.
NEWEGG INC.,
Defendant-Appellant
______________________
2014-1777
______________________
Appeal from the United States District Court for the
District of Delaware in No. 1:12-cv-01533-RGA, Judge
Richard G. Andrews.
______________________
Decided: July 31, 2015
______________________
MARC BELLOLI, Feinberg Day Alberti & Thompson
LLP, Menlo Park, CA, argued for plaintiff-appellee. Also
represented by ELIZABETH DAY, IAN NEVILLE FEINBERG,
CLAYTON W. THOMPSON, II; THOMAS RICHARD BURNS, JR.,
Adduci, Mastriani & Schaumberg, LLP, Washington, DC.
MARK A. LEMLEY, Durie Tangri LLP, San Francisco,
CA, argued for defendant-appellant. Also represented by
KENT E. BALDAUF, JR., DANIEL H. BREAN, CHRISTIAN D.
EHRET, The Webb Law Firm, Pittsburgh, PA; RICHARD
GREGORY FRENKEL, Latham & Watkins LLP, Menlo Park,
2 PRAGMATUS TELECOM LLC v. NEWEGG INC.
CA; EDWARD R. REINES, Weil, Gotshal & Manges LLP,
Redwood Shores, CA.
______________________
Before PROST, Chief Judge, BRYSON, and DYK, Circuit
Judges.
PER CURIAM.
I
This appeal arises from a patent infringement action
in the United States District Court for the District of
Delaware, in which Pragmatus Telecom LLC accused
Newegg Inc. of patent infringement. In its complaint,
Pragmatus alleged that Newegg’s online retail website
infringed two of Pragmatus’s patents by providing “live
chat service over the Internet.” The accused features on
Newegg’s website were implemented by software obtained
from third-party software providers LivePerson, Moxie,
and Oracle.
Each of the three software providers is now licensed
to practice the patents-in-suit. Oracle took a license to
the patents prior to the commencement of the Newegg
suit. LivePerson and Moxie filed declaratory judgment
actions after the commencement of the Newegg suit, and
ultimately reached settlements in which they also took
licenses to the patents-in-suit.
After the LivePerson and Moxie settlements, Prag-
matus moved unilaterally to dismiss its action against
Newegg since Newegg’s allegedly infringing activities
(utilizing software provided by LivePerson, Moxie, and
Oracle) were now authorized under the licenses to the
three software providers. The district court granted
Pragmatus’s motion.
In its order, the district court dismissed with preju-
dice “all claims brought by Pragmatus that relate to live
chat products or services provided to Newegg by Moxie,
PRAGMATUS TELECOM LLC v. NEWEGG INC. 3
LivePerson and Oracle Corporation.” It also dismissed
with prejudice “[a]ll of Pragmatus’ claims against Newegg
that accrued before the date of its motion [to dismiss].” It
dismissed without prejudice “[a]ll other claims by Prag-
matus.” Finally, the court dismissed without prejudice
“[a]ll of Newegg’s counterclaims.”
Newegg then moved for attorney fees and costs. The
district court denied the motions on the ground that
Newegg was not a “prevailing party” under 35 U.S.C.
§ 285 and Fed. R. Civ. P. 54(d)(1). Newegg appeals from
the district court’s order denying its motions.
II
The question in this case is whether Newegg is a
“prevailing party” for purposes of awarding costs and
attorney fees. We review the district court’s determina-
tion of prevailing party status de novo, applying Federal
Circuit law. See Power Mosfet Techs., L.L.C. v. Siemens
AG, 378 F.3d 1396, 1407 (Fed. Cir. 2004); Waner v. Ford
Motor Co., 331 F.3d 851, 857 (Fed. Cir. 2003).
“[T]o be a prevailing party, one must ‘receive at least
some relief on the merits,’ which ‘alter[s] . . . the legal
relationship of the parties.’” Former Emps. of Motorola
Ceramic Prods. v. United States, 336 F.3d 1360, 1364
(Fed. Cir. 2003), quoting Buckhannon Bd. & Care Home,
Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S.
598, 601, 605 (2001). Newegg argues that the district
court’s order on Pragmatus’s voluntary motion to dismiss
satisfies that test.
The district court concluded that Newegg was not a
prevailing party, because it was merely the incidental
beneficiary of the licensing agreements between Prag-
matus and the software providers. The district court
explained that it had “made no finding regarding any
substantive issue in the case” and stated that it “cannot
be correct that a party can benefit from a bona fide license
4 PRAGMATUS TELECOM LLC v. NEWEGG INC.
agreement, obtained after litigation began, and claim to
be the prevailing party, without a single substantial court
decision that favors that party.”
To the extent the district court interprets our prece-
dents to require a prevailing party to have won a dispute
or benefitted from a substantive court decision, the dis-
trict court is incorrect. Such a requirement goes beyond
the Supreme Court’s statements in Buckhannon, which
require only that the party has obtained a “judgment on
the merits,” 532 U.S. at 603, resulting in “a corresponding
alteration in the legal relationship of the parties,” id. at
605.
“The dismissal of a claim with prejudice . . . is a judg-
ment on the merits under the law of the Federal Circuit.”
Power Mosfet, 378 F.3d at 1416. At least where such a
dismissal is paired with a covenant not to sue, this court
has held that the dismissed party must be regarded as the
prevailing party. See Highway Equip. Co. v. FECO, Ltd.,
469 F.3d 1027, 1035 (Fed. Cir. 2006) (“[A]s a matter of
patent law, the dismissal with prejudice, based on the
covenant [not to sue] and granted pursuant to the district
court’s discretion under Rule 41(a)(2), has the necessary
judicial imprimatur to constitute a judicially sanctioned
change in the legal relationship of the parties, such that
the district court properly could entertain [a party’s] fee
claim under 35 U.S.C. § 285.”).
The parties disagree about whether the dismissal in
this case contained a covenant not to sue. The dismissal
order entered by the court dismisses with prejudice “all
claims brought by Pragmatus that relate to live chat
products or services provided to Newegg by Moxie, Live-
Person and Oracle Corporation.” But Pragmatus claims
that it did not accuse Newegg’s use of Oracle software
because Oracle had already licensed the patents-in-suit.
Pragmatus argues, therefore, that the district court’s
PRAGMATUS TELECOM LLC v. NEWEGG INC. 5
order applies only to the claims exhausted by the Moxie
and LivePerson licenses.
Pragmatus’s argument fails to account for why Oracle
was mentioned at all in the dismissal order (which was
drafted by Pragmatus). It is also at odds with the generic
infringement language contained in Pragmatus’s com-
plaint, which asserted that “Newegg has and continues to
infringe directly one or more claims of the ’231 Patent,
including at least by using the system of claim 1 of the
’231 Patent to provide live chat service over the Internet.”
And it is inconsistent with Pragmatus’s infringement
contentions, which asserted “infringement of every claim
identified with respect to the patents-in-suit in response
to Patent Local Rule 3-1(a) above by at least the following
products: any and all Live Chat products/services that
have been offered by Newegg during the period from 6
years prior to the filing of the complaint to the present.”
The dismissal order (again following the language pro-
posed by Pragmatus) further provides, in even broader
terms, that the dismissal extends to “[a]ll of Pragmatus’
claims against Newegg that accrued before the date of the
motion” to dismiss. That language is therefore clearly not
limited to claims covered by the Moxie and LivePerson
licenses.
Based on the documents before us, the broad language
of the proposed (and final) order appears to have been
included to guarantee that there would be no current
infringement claims against Newegg and therefore that
Newegg’s counterclaims would also have to be dismissed.
In its motion to dismiss, Pragmatus stated that “[b]ased
on the representations made herein, and because there
are no current infringement claims against Newegg,
Newegg’s counterclaims currently have no independent
basis for jurisdiction and should be dismissed.” Thus, it
appears clear that Pragmatus intended for the dismissal
order to cover any possible infringement claims and did
6 PRAGMATUS TELECOM LLC v. NEWEGG INC.
not explicitly limit itself to the exhausted claims relating
to software provided by LivePerson and Moxie.
Given the comprehensive scope of the dismissal mo-
tion and order, we find the dismissal includes a covenant
not to sue Newegg for any of its activities prior to the
motion as to which Pragmatus might claim infringement,
including any possible infringement resulting from
Newegg’s provision of live chat services using Oracle
software. Accordingly, we hold that the court’s analysis in
Highway Equipment controls this case, and that Newegg
must be regarded as the prevailing party in the underly-
ing litigation.
In so ruling, we do not, of course, make any determi-
nation as to whether Newegg is entitled to attorney fees
and costs in connection with the district court litigation.
We remand for the district court to determine whether
Newegg is entitled to an award of fees or costs in connec-
tion with the proceedings before that court under govern-
ing standards.
Costs on appeal to Newegg.
REVERSED AND REMANDED