- ·- ,-- ·-.... -
`- ,.. .
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 1 of 22
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
`
`Case No. 09-81046-CIV-RYSKAMP/HOPKINS
`
`~UG 3_ 0 2012
`STEVEN M- LAR\MORf
`CLERK U. S. D\ST. C .
`5. D. of FLA. - W.P.B.
`
`INNOVATIVE BIOMETRIC
`TECHNOLOGY, LLC,
`
`Plaintiff,
`
`v.
`
`TOSIDBA AMERICA INFORMATION
`SYSTEMS, INC.,
`
`Defendant,
`
`and
`
`AUTHENTEC, INC.,
`
`____________________________/
`
`Intervenor.
`
`FILED UNDER SEAL
`
`SEALED
`
`ORDER GRANTING MOTION FOR FEES AND COSTS. REQUESTING SUBMISSION
`OF MATERIALS FOR IN CAMERA REVIEW AND GRANTING MOTION TO STRIKE
`
`TillS CAUSE comes before the Court pursuant to Defendants' consolidated motion for
`
`attorneys' fees and costs, filed November 28, 2011 [DE 289]. Plaintiff responded on December
`
`6, 2011 [DE 297]. Defendants replied on December 13, 2011 [DE 304]. This cause is also
`
`before the Court pursuant to Defendants' motion to strike the declaration of Robert A. Vitale,
`
`filed December 13, 2011 [DE 302]. Plaintiff responded on December 28, 2011 [DE 307].
`
`Defendants replied on January 1, 2012 [DE 308]. The Court held a hearing on these motions on
`
`March 30, 2012. Intervenor AuthenTec, Inc. filed a supplemental brief on April 13, 2012 (DE
`
`321], to which Plaintiffresponded on April17, 2012 [DE 325]. AuthenTec replied on April24,
`
`2012 [DE 331]. These motions are ripe for adjudication.
`
`Exhibit 1236 Page 01 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 2 of 22
`
`2
`
`I.
`
`BACKGROUND
`
`IBT is a non-capitalized entity without products, employees or sales. Scott Harris
`
`("Harris"), the inventor of the '016 patent, is an experienced patent prosecutor and is a former
`
`principal at the Fish & Richardson law firm. While still at Fish & Richardson, Harris prosecuted
`
`patents in his own name, including the '0 16 patent. In 2006, Harris began enforcing his patents
`
`through litigation with the help of the Niro Haller & Niro law firm. In 2007, Harris filed suits
`
`against Dell and Google, both Fish & Richardson clients. Harris was asked to and did resign
`
`shortly thereafter. Harris then "sold" his patents to a number of shell companies. At least six
`
`Harris-related shell companies, IBT included, are purportedly "owned" and "controlled" by
`
`James Beauregard Parker ("Parker"), a Florida attorney. Parker created IBT on July 27, 2007 and
`
`is listed as its sole owner and managing partner. Parker admitted that he never made the capital
`
`contribution required under IBT's formation document, nor did he maintain a bank account or
`
`accounting papers for IBT. Parker admitted that he would follow Harris's directions with regard
`
`to corporate affairs involving any Harris patents.
`
`On July 30, 2007, pursuant to a Patent Sale Agreement, Harris transferred the '016 patent
`
`to IBT. IBT was to enforce the '016 patent, with Harris receiving 70% of the proceeds. The
`
`Niro finn decides which companies IDT will accuse of infringement and when and how to
`
`commence enforcement efforts and has authority to file complaints and pursue other litigation
`
`strategies on behalf of IBT.
`
`In early 2009, the Niro firm sent notice letters and claim charts regarding the alleged
`
`infringement of the '0 16 patent to several parties. Each party independently reviewed the claims
`
`Exhibit 1236 Page 02 of 22
`
`

`
`... - .. --· - -- -··-·
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 3 of 22
`
`_____ _ __ ,. _____ _
`
`3
`
`and responded with the same substantive argument, informing IBT that its interpretation of the
`
`"limited exception mode" would not withstand scrutiny and that prior art invalidated the patent. 1
`
`Undeterred, IBT filed an amended complaint on February 12, 2010. Trial was set for
`
`December 2011. Claim construction briefing concluded on February 25, 2011. IBT's claim
`
`construction materials included the same infringement claim charts that it included with its notice
`
`letters.
`
`On March 15, 2011, the Court issued an order indicating an intent to appoint a special
`
`master. Defendants opposed the proposed appointment and moved for summary judgment on
`
`March 25, 20 11. IBT did not respond to the summary judgment motion and pressed the Court to
`
`appoint the special master. Notably, IBT still had not taken any depositions by that time. IBT
`
`even suggested that its own claim constructions could be wrong and filed a Rule 56( d)
`
`declaration in which counsel affirmed under oath that additional discovery was necessary to form
`
`a substantive response to the summary judgment motion.
`
`After filing its Rule 56( d) declaration, IBT pursued and obtained discovery from each
`
`Defendant. Depositions IBT conducted demonstrated no real efforts to pursue any questioning
`
`with AuthenTec regarding the functionality or material differences between the Protector Suite
`
`software cited in IBT's infringement contentions and the Protector Suite identified as
`
`invalidating prior art in Defendants' Motion for Summary Judgment. It is also evident from the
`
`record that IBT's counsel did not thoroughly examine documents produced during discovery. On
`
`the last day of the discovery period, IBT alleged that AuthenTec withheld broad categories of
`
`1 The Veridicom prior art disclosed prior to the filing of this action is a later version of the same Veridicom
`software that Defendants asserted as invalidating prior art in their swnmary judgment motion.
`
`Exhibit 1236 Page 03 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 4 of 22
`
`4
`
`documents- even though the documents were produced nearly a month prior, along with an
`
`index for reference purposes.
`
`After the close of discovery, the Court set a hearing on the summary judgment motion
`
`even though IBT had not substantively responded to same. At the eleventh hour, IBT requested
`
`permission to respond on the merits to the summary judgment motion, again seeking to delay any
`
`type of ruling on the merits. The Court granted permission to respond, stating that "Defendants
`
`and Intervenor are understandably upset. .. The Court, too, wishes that Plaintiff had not waited
`
`until the eleventh hour to file this motion."
`
`IBT responded to the summary judgment motion on July 5, 2011. The opposition did not
`
`cite to a single piece of the discovery that counsel had attested under oath in the Rule 56( d)
`
`declaration was needed to oppose the summary judgment motion. Instead, IBT attached the
`
`declaration of Dr. Koopman, who had a long-standing relationship with the Niro firm and had
`
`been retained for this case by March 9, 2011- before the filing of the summary judgment motion.
`
`The record evidence contradicted Dr. Koopman's opinions on every dispositive factual
`
`issue. For example, Dr. Koopman claimed that the Veridicom PCT application does not directly
`
`or inherently disclose "decrypting." But the Veridicom PCT application expressly teaches using
`
`"cryptographic storage techniques" to store biometric features and references the co-pending
`
`Veridicom patent application for those techniques. Dr. Koopman also ignored that the co-
`
`pending Veridicom patent application patent specifically states: "[a]ccording to another aspect of
`
`the present invention, ... a cryptographic key can be generated ... from the user's fingerprint. This
`
`cryptographic key can be used to decrypt information meant for the user." (Ex. 20, disclosing
`
`encryption, including use of cryptographic keys and codes.) Dr. Koopman made a similar claim
`
`Exhibit 1236 Page 04 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 5 of 22
`
`5
`
`with regard to the BioLogon materials, but his opinion was again contradicted on the face of the
`
`materials. His theory of why decryption was not necessary to compare fingerprints was refuted
`
`by a textbook authored by experts in the fi~ld of fingerprint matching who were not paid by the
`
`Niro firm or any party in this matter to offer an opinion in this case. Fujitsu told IBT in
`
`September 2009 that, when it comes to fingerprints, matching is not as simple as comparing
`
`whether "A=B"- and yet the entirety of Dr. Koopman's opinion rests on that notion.
`
`At the summary judgment hearing, the Court expressed serious concerns about IBT's
`
`position:
`
`Now, the defendants have supplied the Court with a number of
`statements and exhibits indicating that for some years this
`information- I should say for some years even prior to this patent
`that fingerprint recognition was an accepted method, others have
`used it, and there's another patent involved in it.
`
`And I may be missing something here, but this seems like a fairly
`simple case. I know you're making it very complicated with a lot
`of talk .... Now, there might be some unusual little variance to this
`thing, which I don't know how significant it would be, but it seems
`to me that this technology has been around ....
`
`Transcript, 6:5-18 (Ex. 22). During the hearing, the undersigned noted IBT's improper strategy
`
`in this case:
`
`What you're really saying is there's nobody financially responsible
`on the plaintiffs side for all of the costs they're incurring to the
`defendant.. .. That's so typical of these kinds of claims. You've got
`nothing to lose. Because if you lose, you're not going to pay
`anything. If you win, you might get paid nuisance value or
`something like that. I would be interested in how big the
`settlements were with the people you settled with. They're
`probably nominal settlements, weren't they? ... And that's what I'm
`concerned with ....
`
`Exhibit 1236 Page 05 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 6 of 22
`
`6
`
`Jd., 42: 20-22; 43: 4-10; 43: 17-19 (Ex. 22).
`
`The undersigned also stated that once it discovered the truth, it would punish the party
`
`that was misrepresenting the facts: "And there's going to be serious consequences to this if it
`
`eventually appears who is not telling the truth in this case." !d., 32: 22-24. IBT then urged the
`
`Court to delay ruling on the summary judgment motion until a special master construed the
`
`claims.
`
`Following the hearing, the Court informed the parties that it intended to appoint Stanford
`
`Law School professor Mark Lemley as special master and also indicated that IBT would have to
`
`pay $30,000. Even though IBT previously urged the Court to appoint a special master, IBT now
`
`opposed the appointment of a special master and objected to paying the $30,000. The Court
`
`appointed Professor Lemley over IBT's objections. IBT posted the $30,000 bond, then settled
`
`with Fujitsu. AuthenTec and Toshiba refused to settle, however. With judgment day
`
`approaching and with the possibility that the special master was already using IBT' s bond
`
`money, IBT unilaterally issued a covenant not to assert and moved to dismiss the case with
`
`prejudice.
`
`IBT never notified Defendants of its intent to file the covenant not to assert and to dismiss
`
`this case with prejudice. IBT never informed the Court that it had not notified Defendants of its
`
`filing. Accordingly, the Court granted the motion to dismiss with prejudice before Defendants
`
`responded. Defendants filed a motion to vacate.
`
`IBT claimed that it moved to dismiss because the matter was no longer worth pursuing in
`
`light of the "de minimus" remaining "damages," but this contention is incredible given that
`
`Exhibit 1236 Page 06 of 22
`
`

`
`-·-·--·· --·-- - - --
`-·-
`Case 9:09-cv-81046-KLR Document 340 *SEALED*
`Page 7 of 22
`
`Entered on FLSD Docket 08/31/2012
`
`7
`
`Toshiba is a major U.S. computer supplier- significantly larger than ACI, MSI and others who
`
`settled. Essentially, there was no possibility of securing a damages award, as judgment day had
`
`arrived, and there was no possibility of a final settlement with either AuthenTec or Toshiba.
`
`IDT's sudden and unilateral effort to withdraw from this case confirms that it never
`
`intended to try this case on the merits. Rather, IDT and its counsel used this Court and the
`
`judicial system as a tool in their extortive efforts. In a role reversal, it was Defendants that
`
`sought to move this case to judgment, with the plaintiff dragging its feet. Even though IDT only
`
`filed claims of indirect infringement, IBT never pursued the third party discovery required to
`
`prove its case. IDT's witness list, which does not identify any actual infringing user, speaks
`
`volumes.
`
`Discovery confirmed that IDT conducted little, if any, pre-filing investigation. It was
`
`unable to provide any evidence that it obtained the accused products, tested the accused products,
`
`or conducted prior art searches before filing suit. The only reference to any examination of a
`
`potentially infringing device was Scott Harris's self-serving statements that he happened to
`
`already own a Lenovo laptop and that his children happened to use a Toshiba laptop. When
`
`asked about IDT's pre-filing investigation as IBT's 30(b)(6) witness on this topic, Harris was
`
`instructed not to answer questions relating to the pre-filing investigation, and IBT produced no
`
`documents evidencing any pre-suit investigation.
`
`IDT continues to take frivolous positions to avoid liability. When it first secured
`
`dismissal in this matter (an order that was subsequently vacated), Defendants served a draft bill
`
`of costs and supporting documentation seeking less than $20,000 in compensation. IBT's lead
`
`trial counsel, Mr. Ray Niro, refused to engage in a meaningful meet and confer, objecting to the
`
`Exhibit 1236 Page 07 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 8 of 22
`
`8
`
`costs but refusing to explain the legal basis for his objection, stating: "File your motion and
`
`you'll see why." Although Defendants withdrew their requests for statutory costs when the Court
`
`re-opened this case, IBT's opposition arguments were even more outrageous. IBT proclaimed
`
`that Defendants were not "prevailing parties," ignoring cited controlling Federal Circuit case law
`
`holding on identical facts that the Defendants were the prevailing party. IBT argued that fees
`
`could not be awarded because "this Court had used its discretion to dismiss all claims pursuant to
`
`41(a)(2) and close this case." IBT, its principals and attorneys continue to evidence their
`
`deliberate disregard for this Court and the financial harm they have imposed on Defendants.
`
`A.
`
`Retention of Jurisdiction
`
`II.
`
`DISCUSSION
`
`This Court retains jurisdiction to award fees and costs even after a voluntary dismissal is
`
`requested. A court's jurisdiction to impose fees, costs or sanctions continues even if the court is
`
`without subject matter jurisdiction over the underlying action. See Cooter & Gel/ v. Hartmarx
`
`Corp., 496 U.S. 384, 395 (1990) ("It is well established that a federal court may consider
`
`collateral issues after an action is no longer pending."); Willy v. Coastal Corp., 503 U.S. 131,
`
`138-39, 112 S.Ct. 1076, 1081 (1992) (court may impose sanctions even if it is later determined to
`
`be without subject matter jurisdiction). IBT's covenant not to assert and requested dismissal
`
`does not prevent this court from awarding fees and costs. See Cooter& Gell, 496 U.S. at 396
`
`("Like the imposition of costs, attorney's fees, and contempt sanctions, the imposition of a Rule
`
`11 sanction is not a judgment on the merits of an action .... Such a determination may be made
`
`after the principal suit has been terminated.").
`
`Exhibit 1236 Page 08 of 22
`
`

`
`···-··-- -
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 9 of 22
`
`9
`
`IBT relies on Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F .3d 1054, 1059
`
`(Fed. Cir. 1995) for the proposition that the filing of a covenant not to sue in a patent
`
`infringement case immediately divests the Court of subject matter jurisdiction. If the covenant
`
`not to sue complies with Super Sack, the Court is divested of jurisdiction only over the
`
`declaratory judgment claims, not the affirmative infringement claims.
`
`B.
`
`Bases for Fees and Costs Award
`
`The Court is empowered to award attorneys' fees and costs under four separate grounds:
`
`Rule 41(a)(2), 35 U.S.C. § 285, Rule 56 and 28 U.S.C. § 1927.
`
`1.
`
`Rule 41(a)(2)
`
`A vohmtary dismissal under Rule 41 ( a)(2) may be conditioned upon reimbursement of a
`
`defendant's litigation-related expenses. The decision to grant a voluntary dismissal and the
`
`conditions accompanying same are entrusted to the Court's discretion. "[A] plaintiff may only
`
`voluntarily dismiss an action 'by court order, on terms that the court considers proper"' under
`
`Rule 4J(a)(2). Thus, the Court maintains the "power to set terms and conditions" of any such
`
`dismissal. See Tesma v. Maddox-Joines, Inc., 254 F.R.D. 699, 702 (S.D. Fla. 2008). Pursuant to
`
`Rule 41(aXl)(i), once a party files an answer or a motion for summary judgment, a plaintiff has
`
`no right to an unconditional dismissal of his action.
`
`The Court elects to set two conditions to IBT' s dismissal of its action. First, IBT' s
`
`covenant not to assert will run with the '016 patent so as to bar enforcement against Defendants,
`
`including Defendants' customers and supply chain, by any future patent owner. This condition is
`
`necessary to protect Defendants from any possibility of another lawsuit concerning the '-16
`
`Exhibit 1236 Page 09 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 10 of 22
`
`10
`
`patent. A covenant not to assert, like a license, may be considered a promise of the patent owner
`
`not to sue. See Transcore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271, 1276
`
`(Fed. Cir. 2009). Thus, a covenant not to assert may be personal and non-transferrable, thereby
`
`allowing the next owner able to bring another suit. Ownership of the '016 patent can
`
`contractually revert to Harris because offfiT's failure to meet the contractual milestone of paying
`
`Harris $1,000,000 in licensing revenue. Second, the Niro firm, Harris, Parker and IDT have
`
`demonstrated a disregard for a contractual obligation in that they sued ACI even though they
`
`were each a party to a covenant not-to-sue that precluded the suit against ACI.
`
`Second, IDT will be required to reimburse Defendants' litigation expenses. A "plaintiff
`
`ordinarily will not be permitted to dismiss an action without prejudice under Rule 41 (a)(2) after
`
`the defendant has been put to considerable expense in preparing for trial, except on the condition
`
`that the plaintiff reimburse the defendant" for litigation expenses. McCants v. Ford Motor Co.,
`
`781 F.2d 855, 860 (11th Cir. 1986) (remanding case for ruling on defendant's request that
`
`conditions be attached to any dismissal of case) (citations omitted); see also McCants v. Ford
`
`Motor Co., 789 F.2d 1539, 1540 (11th Cir. 1986) (affirming court's decision to require plaintiff
`
`to reimburse defendant's litigation expenses). Reimbursable costs "may include all litigation-
`
`related expenses incurred by the defendant, including reasonable attorneys' fees." See McCants,
`
`781 F.2d at 860. Courts in this district routinely condition a plaintiffs request for voluntary
`
`dismissal under Rule 4l(a)(2) on reimbursement of a defendant's litigation expenses. Tesma,
`
`254 F.R.D. at 701-02 (requiring payment of costs and fees as condition of dismissal where
`
`defendant "forced to litigate [ meritless claims] without reason"); So be News, Inc. v. Ocean Drive
`
`Fashions, Inc., 199 F.R.D. 377, 378 (S.D. Fla. 2001) (conditioning voluntary dismissal on
`
`Exhibit 1236 Page 10 of 22
`
`

`
`·--·----- ·. ·- - - - - ... - -·-
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 11 of 22
`
`II
`
`reimbursement of defendants litigation expenses); In re Great Lakes Dredge & Dock Co., I79
`
`F.R.D. 336, 340 (S.D. Fla. 1996) (finding plaintiff"abused the process ofthis Court" and
`
`conditioning voluntary dismissal on reimbursement of defendant's litigation expenses). An
`
`award of attorneys' fees and litigation costs as a condition of dismissal is warranted here.
`
`2.
`
`35 u.s.c. § 285
`
`This case is exceptional under 35 U.S.C. § 285. Defendants are prevailing parties in light
`
`ofiBT's voluntary dismissal of all claims. Highway Equip Co. Inc. v. FECO, Ltd., 469 F.3d
`
`I027, 1036 (Fed. Cir. 2006) (Rule 41(a)(2) dismissal after a covenant not to sue has been granted
`
`confers prevailing party status on dismissed defendant); Mathews v. Crosby, 480 F.3d I265, I276
`
`(II th Cir. 2007) ("The Defendants, having obtained from [Plaintiff] a voluntary dismissal with
`
`prejudice, are considered prevailing parties.").
`
`Prevailing parties may be awarded attorneys' fees under 35 U.S.C. § 285 when the court
`
`determines that: (1) the case is "exceptional" by clear and convincing evidence; and (2) an award
`
`of attorneys' fees, in the Court's discretion, is appropriate. See Eon-Net LP v. Flagstar Bancorp,
`
`653 F.3d 1314, 1323-24 (Fed. Cir. July 29, 20II). "The decision to award attorney fees is within
`
`the discretion of the trial judge, but the conclusion that a case is exceptional is a finding of fact
`
`reviewable only for clear error." Takeda Chern. Indus. v. My/an Labs. , 549 F.3d 1381, 1385
`
`(Fed. Cir. 2008) (case is exceptional and Takeda awarded $16,800,000 for attorney fees,
`
`expenses, and expert fees, plus interest) (citing Beckman Instruments, Inc. v. LKB Produkter AB,
`
`892 F.2d I547, I551 (Fed. Cir. 1989) (remanding exceptional case for new determination of
`
`fees)).
`
`Exhibit 1236 Page 11 of 22
`
`

`
`- - -·· --
`· - ··- - .
`. ·-
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 12 of 22
`
`12
`
`Several factors weigh in favor of an exceptional case finding against a patent plaintiff,
`
`including litigation misconduct, submission of frivolous finding, vexatious or unjustified
`
`litigation, or maintenance of a meritless claim. "[M]any varieties of misconduct can support a
`
`district court's exceptional case finding, including lodging frivolous filings and engaging in
`
`vexatious or unjustified litigation." Eon-Net, 653 F.3d at 1324 (citing Takeda, 549 F.3d at 1387-
`
`88). "Litigation misconduct and unprofessional behavior are relevant to the award of attorney
`
`fees, and may suffice to make a case exceptional." Taltech Ltd. v. Esquel Enters., 604 F.3d 1324,
`
`1329 (Fed. Cir. 2010) (citing Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1574 (Fed. Cir.
`
`1996)). Examples of misconduct include the failure to engage in good faith discovery or
`
`litigation efforts, lodging frivolous filings, causing undue delay, or engaging in vexatious and
`
`unjustified litigation. Eon-Net, 653 at 1324 (citing Takeda, 549 F.3d at 1387-88)).
`
`Absent misconduct, sanctions under this provision "may be imposed against the patentee
`
`only if both (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively
`
`baseless." Id. at 1324. Specifically, a case is deemed "exceptional when a patentee maintains its
`
`claims after realizing, or on reasonable investigation should know, that its claims are baseless.
`
`Moreover, a court may infer bad faith where a patentee is manifestly unreasonable in assessing
`
`infringement, while continuing to assert infringement. ... " F &G Research, Inc. v. Google Inc. ,
`
`No. 06-60905-CIV, 2007 WL 2774031, at *12 (S.D. Fla. 2007) (citations omitted). Bad faith
`
`may be inferred when a patentee's contentions are manifestly unreasonable: "Where, as here, the
`
`patentee is manifestly unreasonable in assessing infringement, while continuing to assert
`
`infringement in court, and inference is proper of bad faith, whether gounded in or denominated
`
`wrongful intent, recklessness, or gross negligence." Eltech Sys. Corp. v. P PG Indus., Inc., 903
`
`Exhibit 1236 Page 12 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 13 of 22
`
`13
`
`F.2d 805, 811 (Fed. Cir. 1990). A plaintiff's pre-filing preparation is also relevant- including an
`
`analysis (or lack thereof) of the accused products, preparation of claim charts, and good-faith
`
`efforts to construe the claims. See Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d
`
`1358, 1378 (Fed. Cir. 2001) (remanding case to determine whether attorneys' fees were
`
`warranted, including an assessment of plaintiffs pre-filing diligence. This Court has defined a
`
`"frivolous suit" as one "where the patentee knew, or should have known by reasonable
`
`investigation, that the suit was groundless." F&G Research, 2007 WL 2774031, at* 12. A case
`
`can be found to be exceptional if it is objectively meritless, or where the plaintiff si objectively
`
`reckless in initiating or maintaining the action. See iLOR, LLC v. Google, Inc., 631 F.3d 1372,
`
`1377 (Fed. Cir. 2011) ("The objective baselessness standard for enhanced damages and
`
`attorneys' fees against a non-prevailing plaintiff under Brooks Furniture is identical to the
`
`objective recklessness standard for enhanced damages and attorneys' fees against an accused
`
`infringer for§ 284 willful infringement actions under In Re Seagate Technology, LLC, 497 F.3d
`
`1360 (Fed. Cir. 2007) (en bane).").
`
`Here, Defendants have proven by clear and convincing evidence that IBT, its principals,
`
`and counsel - all lawyers - have abused the legal process by filing, pursuing, and then dismissing
`
`this frivolous case. First, IBT and its counsel knew or should have known that this case was
`
`frivolous, or worse yet, in view of its strategy, proceeded with reckless disregard for the truth.
`
`IBT produced no documents evidencing any infringement investigation. See Micromesh Tech.
`
`Corp. v. American Recreation Products, Inc., No. C-06-6030 (MHP), 2007 WL 2501783, at *4
`
`(N.D. Cal. Aug. 30, 2007); see also F&G Research, 2007 WL 2774031, at* 13 (Rule II and 35
`
`U.S.C. § 285 sanctions warranted in part because "counsel made no reasonable inquiry into the
`
`Exhibit 1236 Page 13 of 22
`
`

`
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 14 of 22
`
`14
`
`veracity of the allegations."). This failure is particularly egregious since the ProtectorSuite
`
`software was freely available for download via the Internet, and fingerprint reader "dongles"
`
`were widely available for around $50 before IBT filed suit. And in spite of Federal Circuit
`
`authority requiring that a plaintiff obtain and test accused devices before filing suit, IBT did not
`
`do so. See Judin v. United States, 110 F.3d 780, 784 (Fed. Cir. 1997).
`
`IBT and its counsel also knew or should have known that its contrived construction of
`
`"limited exception mode" would not withstand scrutiny. Each party that IBT approached
`
`regarding infringement independently informed IBT that its claim construction argument was
`
`frivolous, but IBT proceeded undeterred.
`
`IBT also failed to perform a reasonable inquiry to ensure that its contentions avoided the
`prior art. See F&G Research, 2007 WL 2774031, at * 13-14. Before the suit was filed, various
`
`defendants provided evidence that IBT's claim construction positions rendered the asserted claim
`
`invalid. Indeed, there were a multitude of invalidating biometric prior art products on the market
`
`that functioned identically to the accused products long before the patent was filed - and IBT and
`
`its counsel knew about them. The accused ProtectorSuite software distributed by AuthenTec and
`
`used by Toshiba was a direct descendant of the prior art Veridicom software identified to IBT
`
`and its counsel by Acer before the suit was filed. For these reasons alone, the case is exceptional.
`
`IBT and its counsel's strategy and litigation tactics comprise misconduct that forms an
`
`independent reason to find this case exceptional. IBT's conduct demonstrates that it never had
`
`any intention to try this case, but instead that its tactics were motivated solely to keep the case
`
`going and drive up Defendants' costs to extract settlements from those who knew the case lacked
`
`merit, but settled to avoid litigation costs. Throughout the case, IBT pursued discovery, but IBT
`
`Exhibit 1236 Page 14 of 22
`
`

`
`·- -· -- ·-- --.. ---
`---- · ~ · --- - -..
`- - -··· ··- --
`-··-- - -
`-
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 15 of 22
`
`15
`
`made no effort to obtain the evidence it would need to try this case. IBT did not even review the
`
`materials it received. Remarkably, two years into the case, ffiT filed with the Court the exact
`
`same infringement charts that it had sent with its notice letter. In its witness list filed with the
`
`Court, IBT admitted that it had not yet identified users of the alleged method- evidence
`
`necessary to pursue the case. IBT also avoided questioning deponents about the substance of the
`
`summary judgment motion, even objecting when the prior art was raised on redirect.
`
`To keep this case going, ffiT went as far as to argue that its own claim constructions
`
`could be wrong, but still failed to revise its positions. See 4/8/2011 IBT's Rule 56( d) Response
`
`at 1 [DE 183]. IBT' s reliance on its original claim constructions after it itself said they may be
`
`wrong reeks of objective baselessness: "simply placing words on a document does not constitute
`
`good-faith litigation practice unless the plaintiff's assertion is supported by a minimally
`
`competent investigation and analysis." Micromesh, 2007 WL 2501783, at *6.
`
`IBT's strategy with regard to Defendants' summary judgment motion is more of the same.
`
`Defendants' motion established that IBT's theory of infringement was baseless and without
`
`merit. Rather than address the motion on the merits, ffiT delayed this case via an objectively
`
`baseless Rule 56( d) motion. Given the opportunity to file an untimely substantive response, IBT
`
`did not cite a single production document- even though its counsel declared under penalty of
`
`perjury that it could not respond without additional discovery. At the July 2011 summary
`
`judgment hearing, ffiT wasted the Court's and the Defendants' time, wholly unwilling or unable
`
`to explain the merits of its case. See Transcript, 43: 17-19. IBT evaded this Court's direct
`
`questioning, misrepresented the state of the prior art, and avoided answering questions
`
`concerning IBT's capitalization, ownership, and licensing activities. Ultimately, IBT retreated to
`
`Exhibit 1236 Page 15 of 22
`
`

`
`····· ·-
`
`·- · - - - - · - - -
`Case 9:09-cv-81046-KLR Document 340 *SEALED* Entered on FLSD Docket 08/31/2012
`Page 16 of 22
`
`16
`
`requesting additional delay by again urging the Court to appoint a special master.
`
`When the Court finally indicated it would appoint a special master, IBT changed its mind
`
`and objected to the appointment. When the special master was appointed over IBT's objection,
`
`IBT moved for a voluntary dismissal with prejudice to avoid a determination on the merits. At
`
`each tum, IBT's behavior evidences vexatious tactics designed to drive up litigation costs and
`
`avoid a timely disposition on the merits solely to extort settlements. IBT and its counsel's
`
`actions have led this Court to determine that this is an exceptional case under Section 285.
`
`Repayment of Defendants' attorneys' fees and litigation costs is necessary to avoid a
`
`gross injustice. Since the Court has determined that this case is exceptional, the decision to
`
`award attorney fees "is discretionary and permits the judge to weigh intangible as well as tangible
`
`factors: the degree of culpability of the infringer, the closeness of the question, litigation behavior
`
`and any other factors whereby fee shifting may serve as an instrument of justice." Superior
`
`Fireplace Co., 270 F.3d at 1378 (quotation omitted). An intervenor is entitled to its attorneys'
`
`fees and costs just as any other prevailing party. See Int 'I Rectifier Corp. v. Samsung Elecs. Co.,
`
`424 F.3d 1235, 1241 (Fed. Cir. 2005) ("the mere fact that a party voluntarily intervened does not
`
`preclude an award of attorney fees").
`
`Complete repayment by IBT of all attorneys' fees and litigation costs incurred by
`
`Defendants is warranted. IBT's litigation tactics leveraged IBT's ability to force practicing
`
`entities to incur substantial litigation costs to fight IBT on the merits, rather than bowing out for a
`
`nuisance-value settlement. IBT candidly admitted to this Court that a patent case routinely
`
`involves the expenditure of millions of dollars in attorneys'