Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page1 of 8
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`ROTHSCHILD DIGITAL MEDIA
`INNOVATIONS, LLC,
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`SONY COMPUTER ENTERTAINMENT
`AMERICA LLC,
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`Case No. 5:14-cv-03928-PSG
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`ORDER DENYING DEFENDANT’S
`MOTION AND PLAINTIFF’S CROSS-
`MOTION FOR RULE 11 SANCTIONS
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`(Re: Docket Nos. 43, 53)
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` Plaintiff,
`v.
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` Defendant.
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`Defendant Sony Computer Entertainment America LLC moves for Rule 11 sanctions
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`against Plaintiff Rothschild Digital Media Innovations, LLC on the grounds that Rothschild’s
`complaint for infringement of United States Patent No. 6,101,534 is frivolous.1 Rothschild has in
`turn filed a cross-motion for sanctions against Sony and its counsel on the grounds that Sony’s
`sanctions motion is itself frivolous.2 Because the court does not find either pleading frivolous at
`this early stage of the case, both motions are DENIED.
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`1 See Docket No. 43 at 1.
`2 See Docket No. 53 at 1-2.
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page2 of 8
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`I.
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`When making a Fed. R. Civ. P. 11 determination in patent cases, courts apply the law of the
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`regional circuit.3 In the Ninth Circuit, Rule 11(b) sanctions may be imposed when pleadings,
`papers and the like are presented for an improper purpose or include arguments that are
`“frivolous.”4 A frivolous argument is one that is “legally or factually baseless” under an objective
`standard and made “without a reasonable and competent inquiry.”5 Under Rule 11(c), a district
`court may impose sanctions on a party, its attorneys or both.6
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`The’534 patent, issued in 2000 and assigned to Rothschild, describes an online computer
`interface system.7 Claim 1 of the ’534 Patent recites:
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`1. An interactive, remote, computer interface system comprising:
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`a remote server assembly, said remote server assembly including a quantity of primary site
`data;
`said remote server assembly including at least one primary site address, said primary site
`address including at least a portion of said primary site data and being distinct so as to
`identify a location thereof on a computer network;
`a local processor assembly;
`said local processor assembly being coupled in data transmitting and receiving
`communication with said remote server assembly;
`at least one data storage assembly associated with said local processor assembly and
`structured to contain a quantity of auxiliary site data thereon, said auxiliary site data
`being associated with said primary site data;
`said data storage assembly including a compact, portable and interchangeable computer
`readable medium;
`said compact, portable and interchangeable computer readable medium including a plurality
`of remotely accessible, auxiliary site addresses, encoded therein, each of said remotely
`accessible, auxiliary site addresses, including select portions of said quantity of auxiliary
`site data; and
`said remotely accessible, auxiliary site addresses being structured to be remotely accessed
`by said remote server assembly so as to initiate utilization of said select portions of said
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`3 See Raylon, LLC v. Complus Data Innovations, Inc., 700 F.3d 1361, 1367 (Fed. Cir. 2012).
`4 See Intamin Ltd. v. Magnetar Techs., Corp., 483 F.3d 1328, 1338 (Fed. Cir. 2007) (citing
`Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990) (en banc)).
`5 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1299 (Fed. Cir. 2004) (citing Christian v.
`Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002)). Because compliance with Rule 11 is analyzed
`under an objective standard, there is no need to show bad faith. See Kilopass Tech., Inc. v.
`Sidesense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013); Raylon, LLC, 700 F.3d at 1368.
`6 See Fed. R. Civ. P. 11(c).
`7 See Docket No. 43 at 3; Docket No. 1-3 at 5-6.
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page3 of 8
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`quantity of auxiliary site data by said local processor assembly in conjunction with said
`primary site data.
`In an ex parte reexamination of the ’534 patent, the examiner focused on the following
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`limitation: “said remotely accessible, auxiliary site addresses being structured to be remotely
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`accessed by said remote server assembly so as to initiate utilization of said select portions of said
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`quantity of auxiliary site data by said local processor assembly in conjunction with said primary
`site data.”8 The examiner construed “remotely accessed by said remote server” to include both
`direct and indirect access to the auxiliary site addresses by the remote server assembly and
`determined that the claims were anticipated by four prior art references.9 Rothschild appealed to
`the Board of Patent Appeals and Interferences, arguing that a construction that includes indirect
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`access “encompasses situations in which the remote server assembly is not remotely accessing the
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`auxiliary site addresses” and that “‘to allow access’ [to auxiliary site data] is not the same as
`‘accessing.’”10 The BPAI agreed, adopting Rothschild’s narrower construction and finding the
`claims patentable over the prior art.11
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`This suit followed. Sony now argues that because the ’534 claims were narrowed at
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`Rothschild’s urging to include only direct access by the remote server, and Sony’s accused
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`products only include indirect access through the local processor to the consoles, Rothschild’s
`complaint against Sony violates Rule 11.12 Sony asks the court to dismiss the case with prejudice
`and award fees and costs.
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`8 See Docket No. 1-3 at 5-6 (emphasis added). See also Docket No. 43 at 8.
`9 See Docket No. 43-2 at 5.
`10 See id. at 5-6.
`11 See id. at 6.
`12 See Docket No. 43 at 7-9. Sony sent Rothschild two letters and met and conferred with
`Rothschild in person to discuss Rothschild’s claim construction and allegations, only to receive a
`complaint from Rothschild two weeks later. See id. at 11.
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`For the Northern District of California
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page4 of 8
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`II.
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`This court has jurisdiction under 28 U.S.C. §§ 1331 and 1338. The parties further
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`consented to the jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and
`Fed. R. Civ. P. 72(a).13
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`III.
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`At issue is whether a party in a patent infringement case can move for Rule 11 sanctions to
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`dispose of the case before a Markman hearing, and if so, whether Rothschild’s infringement claim
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`is so frivolous as to warrant terminating sanctions under Rule 11. While the court finds that Rule
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`11 sanctions might be warranted at such an early stage in some cases, here they are not.
`First, the case law makes clear that Rule 11 sanctions may be imposed in a patent
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`infringement case before a Markman hearing. Only a few months ago, the Eastern District of
`Texas did just that.14 But the reality is that most cases in which Rule 11 sanctions have been
`imposed proceeded past the claim construction or summary judgment stages.15 That Sony seeks
`such drastic sanctions at such an early stage therefore gives this court pause.
`Second, Rule 11 sanctions in patent cases generally involve either a frivolous claim
`construction16 or a frivolous infringement theory reflected by insufficient investigation.17 Here, the
`issue is claim construction, and specifically, Rothschild’s necessary claim construction. Whenever
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`13 See Docket Nos. 26, 28.
`14 See, e.g., Syneron Medical Ltd. v. Viora Ltd., Case No. 14-cv-00639, 2014 WL 7140643 (E.D.
`Tex. Dec. 12, 2014).
`15 See, e.g., Raylon, LLC v. Complus Data Innovations, Inc., 700 F.3d 1361, 1363 (Fed. Cir. 2012);
`Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1316-17 (Fed. Cir. 2011); Source Vagabond Sys.
`LTD. v. Hydrapak, Inc., 753 F.3d 1291, 1297 (Fed. Cir. 2014).
`16 See, e.g., Syneron Medical, 2014 WL 7140643, at *3; Raylon, 700 F.3d at 1365; Eon-Net LP,
`653 F.3d at 1317, 1319; Source Vagabond Sys. Ltd. v. Hydrapak, Inc., Case No. 11-cv-5379, 2012
`WL 1223928, at *1, *9 (S.D.N.Y. 2012).
`17 See, e.g., Smart Options, LLC v. Jump Rope, Inc., Case No. 12-cv-02498, 2013 WL 500861, at
`*4-9 (N.D. Ill. 2013); Judin v. United States, 110 F.3d 780, 783 (Fed. Cir. 1997). In the case of Q-
`Pharma, the defendant argued that both the claim construction and infringement theory were
`frivolously brought and that plaintiff should thus be sanctioned. 360 F.3d at 1301.
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`For the Northern District of California
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page5 of 8
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`it has addressed claim construction in the context of Rule 11, the Federal Circuit has looked to the
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`intrinsic evidence supporting the construction at issue. For example, in Q-Pharma, the Federal
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`Circuit held that the plaintiff’s claim interpretation “while broad, followed the standard canons of
`claim construction and was reasonably supported by the intrinsic record.”18 In that case, nothing in
`the description of the disputed patent limited the claim terms, and the defendant’s reliance on the
`plain meaning of the claim language thus was reasonable.19 In Raylon the court held that the
`plaintiff’s claim construction was unreasonable and conflicted with intrinsic evidence because the
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`plaintiff relied on a single sentence in its specification to support its proposed interpretation when
`its patent claims explicitly supported other interpretations throughout.20 Syneron Medical might be
`the most analogous to the issue presented in this case.21 In Syneron Medical, the plaintiff’s
`proposed reading of the plain meaning of the disputed claim was supported by the intrinsic
`evidence of the patent, but only to a certain extent.22 The court nevertheless held that “while Viora
`may have a valid claim construction position, it is just that—a position taken during the early
`stages of litigation.”23 Taken together, the case law thus suggests that Rule 11 sanctions before a
`Markman hearing are only warranted when a proposed claim construction is “wholly unsupported”
`by intrinsic evidence.24
`Sony asserts that the claim language covers only the “situation where a remote server
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`directly accesses the auxiliary site addresses in order to initiate utilization of the data stored
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`18 Q-Pharma, 360 F.3d at 1301.
`19 Id. at 1300-01 (citing View Eng’g, Inc., v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir.
`2000); Judin v. United States, 110 F.3d 780, 784 (Fed. Cir. 1997)).
`20 Raylon, 700 F.3d at 1368-69.
`21 See Syneron Medical, 2014 WL 7140643, at *4.
`22 See id.
`23 See id. (emphasis in original).
`24 See Raylon, 700 F.3d at 1368-69.
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`For the Northern District of California
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page6 of 8
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`there.”25 Sony supports this proposition by pointing to a portion of the Order Confirming Validity
`requiring that auxiliary site addresses be structured to be directly—rather than indirectly—accessed
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`by the remote server:
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`Since the language of claim 1 requires that the encoded auxiliary site addresses are
`structured to be accessed by the remote server, we find, according to that claim, that
`the addresses are directly accessed by the remote server. The scope of claim 1 does
`not cover encoded auxiliary site addresses that are structured to be accessed by a
`local processor or any other intermediary, ultimately resulting in the addresses
`being indirectly accessed by the remote server.26
`Sony thus interprets direct access to mean the absence of any intermediary steps—i.e. a process
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`which starts at the remote server and goes straight to the auxiliary site addresses without passing go
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`or collecting $200. For Sony, the dispositive inquiry is about the path of the process.
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`But Rothschild’s construction does not put any stock in this path. Rothschild asserts that
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`“[d]irect access of auxiliary site data by the remote server includes the situation where the remote
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`server is directing the local processor to access the auxiliary site data. Indeed, there is no other
`way the remote server could access the auxiliary data.”27 In other words, for Rothschild, the
`dispositive inquiry is about which device is directing the access regardless of path.
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`To better understand the distinction, imagine that whatever device is directing the access is
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`the “brain” of the operation. Under Rothschild’s construction, as long as the remote server is the
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`brain, whether the path passes through no other devices or through one thousand other devices is
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`irrelevant. It is on this basis that Rothschild successfully distinguished the Mages, Reisman,
`Uranaka and Fidelibus prior art references from the ’534 patent at the Board.28 Taking Mages as
`an example, the remote server sends a key to the local processor, but no actions are ever directed
`by the remote server.29 It is only by initiation of the local processor—or perhaps a user operating
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`25 See Docket No. 43 at 1.
`26 See Docket No. 53-2 at 9 (emphasis omitted).
`27 Docket No. 53 at 12.
`28 See Docket No. 43-4 at 16-18.
`29 See id.
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`For the Northern District of California
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`United States District Court
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page7 of 8
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`the local processor—that the information reaches the auxiliary site addresses.30 In other words, the
`brain of the Mages operation is the local processor—not the remote server. Rothschild made
`similar arguments as to the other three prior art references before the Board.31 None of its
`representations were based on the path from the remote server to its ultimate destination—the
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`auxiliary site addresses. Rather, it focused on what device was running the show.
`Like Sony’s, Rothschild’s construction is supported by the OCV.32 In particular, the Board
`explicitly referenced the importance of the remote server as the brain:
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`[B]roadly interpreting claim 1 to include auxiliary site addresses that are structured
`to be accessed by a local processor would not be consistent with Patentee’s
`Specification. The Specification discloses that “the remotely accessible, auxiliary
`site addresses are specifically encoded so as to restrict access by the local
`processor assembly [] unless the access is directed by the remote server assembly
`[].”33
`From this, it is reasonable to conclude that access by the local processor is permitted, so long as the
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`brain is in the remote server, substantiating Rothchild’s construction.
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`In sum, while Sony has represented that its products include only access by the local
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`processor, Rothschild has a reasonable claim that Sony nevertheless infringes the ’534 patent
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`because access is directed by the remote server assembly. With such a wide yet reasonable divide
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`in constructions between the parties—each drawing support from the OCV—the court cannot yet
`say that this case is frivolous. A Markman hearing and full claim construction is required.34
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`30 See id.
`31 See id.
`32 See Docket No. 53-2 at 9 (emphasis omitted).
`33 Id. at 10 (emphasis added); see id. at 4-5:
`1. Patent [’534] discloses that the “interchangeable computer readable medium [] is
`preferable structured such that only the remote server assembly [] can access the auxiliary
`site data at the auxiliary site addresses.” Col. 13, ll. 59-62.
`2. “[T]he remotely accessible, auxiliary site addresses are specifically encoded so as to
`restrict access by the local processor assembly [] unless the access is directed by the remote
`server assembly [].” Col. 14, ll. 34-37.
`34 Rothschild—in its opposition brief—moves for sanctions against Sony claiming that Sony’s
`sanctions motion is frivolous. But the mere fact that the court denies Sony’s motion does not mean
`that it must be frivolous. The cross-motion is DENIED.
`7
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`Case No. 5:14-cv-03928-PSG
`ORDER DENYING DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR
`RULE 11 SANCTIONS
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`For the Northern District of California
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`United States District Court
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`UnitedStatesDistrict
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`CourtFortheNorthernDistrictofCalifornia
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`Case5:14-cv-03928-PSG Document75 Filed04/02/15 Page8 of 8
`Case5:14—cv—O3928—PSG Document75 Fi|edO4/O2/15 Page8 of8
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`SO ORDERED.
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`Dated: April 2, 2015
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`EAUL S. GREWAL i
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`United States Magistrate Judge
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`Case No. 5:14-cv-03928-PSG
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`ORDER DENYING DEFENDANT ’S MOTION AND PLA]NTIFF’S CROSS-MOTION FOR
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`RULE ll SANCTIONS
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