Aten International Co., Ltd. v. Uniclass Technology Co., Ltd. , 932 F.3d 1371 ( 2019 )

United States Court of Appeals
for the Federal Circuit
______________________
ATEN INTERNATIONAL CO., LTD.,
Plaintiff-Appellee
v.
UNICLASS TECHNOLOGY CO., LTD.,
ELECTRONIC TECHNOLOGY CO., LTD., AIRLINK
101, PHOEBE MICRO, INC., BROADTECH
INTERNATIONAL CO., LTD., DBA LINKSKEY,
BLACK BOX CORPORATION, BLACK BOX
CORPORATION OF PENNSYLVANIA,
Defendants-Appellants
______________________
2018-1922
______________________
Appeal from the United States District Court for the
Central District of California in No. 2:15-cv-04424-AG-
AJW, Judge Andrew J. Guilford.
______________________
Decided: August 6, 2019
______________________
EDWARD NAIDICH, Mei & Mark LLP, Washington, DC,
argued for plaintiff-appellee. Also represented by LEI MEI,
RICHARD HADORN, PHILIP ANDREW RILEY, LAURENCE M.
SANDELL.
JOSEPH PIA, Pia Anderson Moss Hoyt, Salt Lake City,
2 ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY
CO., LTD.
UT, argued for defendants-appellants. Also represented by
ROBERT AYCOCK.
______________________
Before MOORE, WALLACH, and TARANTO, Circuit Judges.
MOORE, Circuit Judge.
Uniclass Technology Co., Ltd. (“Uniclass”), as well as
Electronic Technology Co., Ltd.; Airlink 101; Phoebe Micro,
Inc.; Broadtech International Co., Ltd., d/b/a Linkskey;
Black Box Corporation; and Black Box Corporation of
Pennsylvania (collectively the “customer defendants”) (all
collectively “Appellants”) appeal the United States District
Court for the Central District of California’s order denying
Appellants’ motion for attorney fees. Because we hold the
district court did not abuse its discretion in declining to
find this an exceptional case under 35 U.S.C. § 285, we af-
firm.
BACKGROUND
Uniclass and ATEN International Co., Ltd. (“ATEN”)
are involved in making and selling keyboard-video-mouse
switch systems that allow a user to control multiple com-
puters from a single keyboard, video device, and mouse. In
2011, Uniclass stopped making payments on a license
agreement it entered with ATEN in 2009. In 2014, ATEN
sued Uniclass and the customer defendants alleging in-
fringement, seeking damages and injunctive relief. Uni-
class moved for summary judgment on ATEN’s lost profits
theory of damages, which the district court granted in April
2017. ATEN proceeded to trial based on a reasonable roy-
alty theory of damages, under which its expert testified
that the maximum recovery (not including its requested
treble damages) was $678,337. At trial, a jury found that
Uniclass did not infringe the asserted claims of U.S. Patent
No. 8,589,141 or U.S. Patent No. 7,640,289. It also found
the asserted claims of the ’141 patent invalid. ATEN
ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY 3
CO., LTD.
appealed various aspects of the September 2017 jury ver-
dict separately in No. 18-1606, which we also decide today.
After trial, Uniclass moved to declare this case excep-
tional under 35 U.S.C. § 285, arguing that ATEN did not
conduct an adequate pre-filing investigation, unnecessarily
increased the costs of claim construction, drastically in-
creased discovery costs by frequently changing counsel and
infringement positions, and engaged in unreasonable liti-
gation behavior requiring additional motion practice and
leading to an expensive and disproportionate trial. The
district court denied the motion.
Uniclass timely appealed. We have jurisdiction under
28 U.S.C. § 1295(a)(1).
DISCUSSION
Under § 285, “[t]he court in exceptional cases may
award reasonable attorney fees to the prevailing party.”
“[A]n ‘exceptional’ case 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.” Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U.S. 545, 554 (2014). District
courts should determine whether a case is exceptional on a
case-by-case basis, considering the totality of the circum-
stances. Id. We review the district court’s § 285 determi-
nation for abuse of discretion. Highmark Inc. v. Allcare
Health Mgmt. Sys., Inc., 572 U.S. 559, 561 (2014). “The
abuse-of-discretion standard does not preclude an appel-
late court’s correction of a district court’s legal or factual
error: A district court would necessarily abuse its discre-
tion if it based its ruling on an erroneous view of the law or
on a clearly erroneous assessment of the evidence.” Id. at
563 n.2 (internal quotation marks omitted).
4 ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY
CO., LTD.
I
Appellants focus their arguments on appeal on a theory
that the district court erred in not finding this case excep-
tional based on ATEN’s disregard for the “foundational pol-
icy” of proportionate litigation. Appellants’ Br. 15–16.
Appellants summarize ATEN’s expenses as including over
$700,000 in expert witness fees alone, without considering
other expenses including attorney fees. Appellants argue
that ATEN could recover, at most, $678,337 in reasonable
royalty damages. See J.A. 902 at 7:20–8:4; J.A. 870 at
23:8–11; J.A. 923 at 90:14–15. Accordingly, Appellants ar-
gue this case is exceptional because the cost of litigating
the case exceeded ATEN’s potential recovery at trial. See,
e.g., Appellants’ Br. 15–20, 25–26. We reject this argu-
ment. We see no error in the court’s legal analysis and no
clear error in its fact findings.
There is no per se rule that a case is exceptional if liti-
gation costs exceed the potential damages. The District of
Delaware’s post-Octane decision in EON is persuasive on
this point: “[The court] is unaware of any de minimis ex-
ception for infringement. It cannot be the case that a plain-
tiff may be subjected to monetary sanctions for failing to
drop a case against a defendant if the cost of litigation ex-
ceeds the potential recovery.” EON Corp. IP Holdings,
LLC v. FLO TV Inc., No. 10-812-RGA, 2014 WL 2196418,
at *2 (D. Del. May 27, 2014). Litigation strategies motivat-
ing a patent suit are many, with monetary damages being
one. We routinely hear cases in which damages are not at
issue—for example, in appeals from the International
Trade Commission, in some Hatch-Waxman cases, and
other cases where only an injunction is sought. A patentee
may also bring suit to deter other competitors from in-
fringement, encourage licensing, or test a patent’s ability
to withstand validity challenges. Thermolife Int’l LLC v.
GNC Corp., 922 F.3d 1347, 1363–64 (Fed. Cir. 2019).
ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY 5
CO., LTD.
Moreover, ATEN sought injunctive relief against Uni-
class, its direct competitor. This alone undermines Appel-
lants’ argument. The case could have proceeded to trial
requesting only an injunction, and there would be no po-
tential damages to compare to ATEN’s expenses. We can-
not conclude that the district court’s decision denying
Appellants’ motion for fees under these circumstances
amounts to an abuse of discretion.
Appellants argue the district court should be bound by
its statements during trial that the court was troubled by
disproportionate aspects of the case. But Appellants admit
that such comments were largely directed to the amount of
public resources expended on the limited recovery at issue.
Appellants’ Br. 17–20 (citing J.A. 955 at 12:16–20 (regard-
ing public resources); J.A. 1052 at 73:19–25 (regarding
time spent with one witness); J.A. 1053 at 80:17–22 (re-
garding the length of trial compared to damages at issue);
J.A. 1153 at 102:15–25 (regarding ATEN’s attorney fees
and the amount of time spent with the witness)). Appel-
lants cite an exchange in which the court recognized a sce-
nario in which expenditures might understandably exceed
recovery: “I just don’t understand [expert expenditures of]
$400,000 in a $650,000 case. When I was a lawyer, if I did
that, I would be fired, or frankly, I’d be working for a client
who said: They are competitors. Spend every penny.” Ap-
pellants’ Br. 18 (citing J.A. 956 at 13:2–6 (emphasis
added)). We cannot conclude that the court’s comments
during trial regarding public resources render its subse-
quent decision denying fees an abuse of discretion. We see
no abuse of discretion in the court’s conclusion that under
the totality of the circumstances this litigation was not ex-
ceptional.
II
Appellants also argue the district court erred by failing
to weigh ATEN’s frivolous damages methodology in its
analysis. Specifically, Appellants argue the district court
6 ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY
CO., LTD.
should have weighed the strength of ATEN’s lost profits
theory (rejected at the summary judgment stage), which
Appellants allege was knowingly baseless and brought in
bad faith. Appellants’ Br. 22–25.
The district court did refer to Uniclass’ argument that
ATEN presented a weak case for lost profits that relied on
guesswork, which it listed among the “whole slew” of Uni-
class’ arguments it considered. J.A. 3. The district court
found there were “perhaps . . . shortcomings” in ATEN’s po-
sitions that did not “amount to a showing that [ATEN’s]
behavior was exceptional, amounting to the type of unrea-
sonableness discussed in Octane.” J.A. 4.
Though ATEN’s lost profits theory was not strong
enough to withstand summary judgment, “[a] party’s posi-
tion . . . ultimately need not be correct for them to not
‘stand[ ] out.’” SFA Sys., LLC v. Newegg Inc., 793 F.3d
1344, 1348 (Fed. Cir. 2015) (quoting Octane, 572 U.S. at
544). The district court “had no obligation to write an opin-
ion that reveals [its] assessment of every consideration.”
Univ. of Utah v. Max-Planck-Gesellschaft, 851 F.3d 1317,
1323 (Fed. Cir. 2017). We can find no abuse of discretion
in the district court’s failure to discuss the strength of
ATEN’s lost profits theory.
III
To the extent Appellants argue weakness in ATEN’s
other substantive positions justifies reversing the district
court’s determination that this case was not exceptional,
we do not agree. Today in No. 18-1606, we reverse the dis-
trict court’s denial of JMOL because the jury’s finding of
anticipation was not supported by substantial evidence.
Though we affirm as to noninfringement of the ’141 and
’289 patents, we note that ATEN’s primary argument on
appeal—that the court improperly gave claim construction
disputes to the jury—was rejected because ATEN did not
timely raise this issue with the court below. We find no
abuse of discretion in the district court’s determination
ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY 7
CO., LTD.
that ATEN’s positions were not so objectively unreasonable
or exceptionally meritless as to stand out from other cases.
We have considered Appellants’ other arguments and
find them without merit.
CONCLUSION
We hold the district court did not abuse its discretion
in declining to find this an exceptional case under 35 U.S.C.
§ 285. For the foregoing reasons, we affirm.
AFFIRMED
COSTS
Costs to ATEN.