No. 12-
`
`IN THE
`Supreme Court of the United States
`
`OCTANE FITNESS, LLC,
`
`Petitioner,
`
`v.
`
`ICON HEALTH & FITNESS, INC.,
`
`Respondent.
`
`ON PETITION FOR A WRIT OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`PETITION FOR A WRIT OF CERTIORARI
`
` RUDOLPH A. TELSCHER, JR.,
`Counsel of Record
`KARA R. FUSSNER
`HARNESS, DICKEY & PIERCE, PLC
`7700 Bonhomme Avenue,
`Suite 400
`St. Louis, MO 63105
`(314) 726-7500
`rtelscher@hdp.com
`
`Attorneys for Petitioner,
`Octane Fitness, LLC
`
`246465
`
`A
`
`(800) 274-3321 • (800) 359-6859
`
`
`
`IN THE
`Supreme Court of the United States
`
`OCTANE FITNESS, LLC,
`
`Petitioner,
`
`v.
`
`ICON HEALTH & FITNESS, INC.,
`
`Respondent.
`
`ON PETITION FOR A WRIT OF CERTIORARI TO THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`PETITION FOR A WRIT OF CERTIORARI
`
` RUDOLPH A. TELSCHER, JR.,
`Counsel of Record
`KARA R. FUSSNER
`HARNESS, DICKEY & PIERCE, PLC
`7700 Bonhomme Avenue,
`Suite 400
`St. Louis, MO 63105
`(314) 726-7500
`rtelscher@hdp.com
`
`Attorneys for Petitioner,
`Octane Fitness, LLC
`
`246465
`
`A
`
`(800) 274-3321 • (800) 359-6859
`
`
`
`i
`
`QUESTION PRESENTED
`
`1. Does the Federal Circuit’s promulgation of
`a rigid and exclusive two-part test for determining
`whether a case is “exceptional” under 35 U.S.C. § 285
`improperly appropriate a district court’s discretionary
`authority to award attorney fees to prevailing accused
`infringers in contravention of statutory intent and this
`Court’s precedent, thereby raising the standard for
`accused infringers (but not patentees) to recoup fees and
`encouraging patent plaintiffs to bring spurious patent
`cases to cause competitive harm or coerce unwarranted
`settlements from defendants?
`
`
`
`ii
`
`PARTIES TO THE PROCEEDING AND
`CORPORATE DISCLOSURE STATEMENT
`
`The Plaintiff-below is Icon Health & Fitness, Inc.
`(“Icon).
`
`The Defendant-below/Petitioner is Octane Fitness,
`LLC (“Octane”). Octane is wholly owned by OF Holdings,
`Inc.
`
`
`
`iii
`
`TABLE OF CONTENTS
`
`Page
`QUESTION PRESENTED . . . . . . . . . . . . . . . . . . . . . . . i
`
`PARTIES TO THE PROCEEDING AND
`CORPORATE DISCLOSURE STATEMENT . . . . . . ii
`
`TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . iii
`
`TABLE OF APPENDICES . . . . . . . . . . . . . . . . . . . . . . .v
`
`TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . vi
`
`OPINIONS BELOW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
`
`BASIS FOR THIS COURT’S JURISDICTION . . . . . .1
`
`STATUTE INVOLVED. . . . . . . . . . . . . . . . . . . . . . . . . . .2
`
`STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . .2
`
`a. Oct ane and Its Commercia l ly-
`
`Successful Elliptical Machines . . . . . . . . . . .4
`
`b.
`
`
`
`Icon and the Commercially Defunct
`Elliptical Machine Claimed in the
`’710 Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
`
`c. The ’710 Patent . . . . . . . . . . . . . . . . . . . . . . . .6
`
`d. The Linkage System of Octane’s
`
`Elliptical Machines . . . . . . . . . . . . . . . . . . . . .9
`
`e. The Lawsuit . . . . . . . . . . . . . . . . . . . . . . . . . .11
`
`
`
`iv
`
`Table of Contents
`
`Page
`ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
`
`I. The standard for awarding fees to a
`prevailing accused infringer has strayed
`from the statutory “exceptional case”
`mandate, resulting in a standard that is
`near-impossible to meet, and serves no
`deterrent value . . . . . . . . . . . . . . . . . . . . . . . . . . .20
`
`
`
`II. There is no basis in the statute, this
`Cour t’s precedent, or policy for a
`standard that requires a higher showing
`by prevailing accused infringers versus
`prevailing patentees . . . . . . . . . . . . . . . . . . . . . . .26
`
`
`
`III. The “exceptional case” standard for a
`prevailing accused infringer should allow
`district courts discretion to award fees in
`any case in which the patentee unreasonably
`pursues a case having an objectively
`low likelihood of success . . . . . . . . . . . . . . . . . . . .33
`
`
`
`A. Exceptional case status should not
`
`require proof of a Rule 11 violation. . . . . . .33
`
`B. Exceptional case status should not
`
`require proof of bad faith . . . . . . . . . . . . . . .35
`
`CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
`
`
`
`v
`
`TABLE OF APPENDICES
`
`Page
`
`APPENDIX A — ORDER OF THE UNITED
`STATES COURT OF A PPEA LS FOR
`T H E F EDER A L CI RC U I T, F I L ED
` JANUARY 7, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .1a
`
`A PPENDIX B — JUDGMENT OF THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT, FILED
` JANUARY 7, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .18a
`
`APPENDIX C — MEMORANDUM OPINION
`AND ORDER OF THE UNITED STATES
`DI S T R IC T C OU R T, DI S T R IC T OF
` MINNESOTA, FILED SEPTEMBER 6, 2011 . . .19a
`
`A PPENDIX D — JUDGMENT OF THE
`UNITED STATES DISTRICT COURT,
`DISTRICT OF MINNESOTA , FILED
` JULY 15, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29a
`
`APPENDIX E — MEMORANDUM OPINION
`AND ORDER OF THE UNITED STATES
`DI S T R IC T C OU R T, DI S T R IC T OF
` MINNESOTA, FILED JUNE 17, 2011 . . . . . . . . .31a
`
`APPENDIX F — MEMORANDUM OPINION
`AND ORDER OF THE UNITED STATES
`DI S T R IC T C OU R T, DI S T R IC T OF
` MINNESOTA, FILED DECEMBER 22, 2010 . . .62a
`
`APPENDIX G — ORDER DENYING PETITION
`FOR REHEARING AND REHEARING
`EN BANC OF THE UNITED STATES
`COURT OF APPEALS FOR THE FEDERAL
` CIRCUIT, DATED DECEMBER 27, 2012. . . . . . .87a
`
`
`
`vi
`
`TABLE OF CITED AUTHORITIES
`
`Page
`
`CASES
`
`Amsted Indus. Inc. v.
`Buckeye Steel Castings Co.,
`24 F.3d 178 (Fed. Cir. 1994). . . . . . . . . . . . . . . . . . . . .27
`
`
`
`Automated Bus. Cos. v. NEC America, Inc.,
`
`202 F.3d 1353 (Fed. Cir. 2000) . . . . . . . . . . . . . . . . . .18
`
`Bayer Aktiengesellschaft v.
`Duphar Int’l Research B.V.,
`738 F.2d 1237 (Fed. Cir. 1984) . . . . . . . . . . . . . . . . . .21
`
`
`
`Bilski v. Kappos,
`
`130 S.Ct. 3218 (2010) . . . . . . . . . . . . . . . . . . . . . . . . . .31
`
`Brooks Furniture Mfg., Inc. v.
`Futailer Int’l, Inc.,
`393 F.3d 1378 (Fed. Cir. 2005) . . . . . . . . . . . . . passim
`
`
`
`Central Soya Co., Inc. v. Geo. A. Hormel & Co.,
`
`723 F.2d 1573 (Fed. Cir. 1983) . . . . . . . . . . . . . . . . . .18
`
`Checkpoint Systems, Inc. v.
`All-Tag Security S.A.,
` No. 2012-1085 (Fed. Cir. Mar. 25, 2013). . . . . . . . . . .23
`
`Eltech Sys. Corp. v. PPG Industries, Inc.,
`
`903 F.2d 805 (Fed. Cir. 1990) . . . . . . . . . .21, 27, 29, 30
`
`
`
`vii
`
`Cited Authorities
`
`Page
`
`Eon–Net LP v. Flagstar Bancorp,
`
`653 F.3d 1314 (Fed. Cir. 2011). . . . . . . . . . . . . . . . . . .23
`
`Fogerty v. Fantasy, Inc.,
`
`510 U.S. 517 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
`
`Forest Labs., Inc. v. Abbott Labs.,
`
`339 F.3d 1324 (Fed. Circ. 2003) . . . . . . . . . . . . . . . . .20
`
`Hartman v. Hallmark Cards, Inc.,
`
`833 F.2d 117 (8th Cir. 1987). . . . . . . . . . . . . . . . . . . . .36
`
`Highmark, Inc. v.
`Allcare Health Mgmt. Sys., Inc.,
`687 F.3d 1300 (Fed. Cir. 2012), rehearing
`denied with opinion and dissent, 701 F.3d 1351
`(Dec. 6, 2012). . . . . . . . . . . . . . . . . . . . . . . .20, 21, 23, 27
`
`
`
`
`
`iLOR, LLC v. Google, Inc.,
`
`631 F.3d 1372 (Fed. Cir. 2011). . . . . . . . . . . . . . . 23, 29
`
`In re Ciprofl oxacin Hydrochloride Antitrust
`Litig.,
`544 F.3d 1323 (Fed. Cir. 2008) . . . . . . . . . . . . . . . . . .31
`
`
`
`In re Seagate Technology, LLC,
`
`497 F.3d 1360 (Fed. Cir. 2007) . . . . . . . . . . . . . . . . . .27
`
`Machinery Corp. of America v. Gullfi ber AB,
`
`774 F.2d 467 (Fed. Cir. 1985) . . . . . . . . . . . . . . . . . . .27
`
`
`
`viii
`
`Cited Authorities
`
`Page
`
`Marctec, LLC v. Johnson & Johnson,
`
`07-CV-825-DRH, 2010 WL 680490
`
`(S.D. Ill. Feb. 23, 2010) . . . . . . . . . . . . . . . . . . . . . . . .18
`
`Mathis v. Spears,
`
`857 F.2d 749 (Fed. Cir. 1988). . . . . . . . . . . . . . . . .18, 21
`
`Multiform Desiccants, Inc. v. Medzam, Ltd.,
`
`133 F.3d 1473 (Fed. Cir. 1998). . . . . . . . . . . . . . . . . . .21
`
`Phonometrics, Inc. v. Westin Hotel Co.,
`
`350 F.3d 1242 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . .29
`
`Precision Instrument Mfg. Co. v.
`Auto. Maint. Mach. Co.,
`324 U.S. 806 (1945). . . . . . . . . . . . . . . . . . . . . . . . . . . .31
`
`
`
`Professional Real Estate Investors v.
`Columbia Pictures Industries,
`508 U.S. 49, 113 S.Ct. 1920,
`123 L.Ed.2d 611 (1993) . . . . . . . . . . . . . . . . . . . . 22, 23
`
`
`
`
`Raylon v. Complus Data Innovations, Inc.,
`
`700 F.3d 1361 (Fed. Cir. 2012). . . . . . . . . . . . . . . .29, 34
`
`Rohm & Haas Co. v. Crystal Chem. Co.,
`
`736 F.2d 688 (Fed. Cir. 1984) . . . . . . . . . . . . . . . . . . .22
`
`S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc.,
`
`781 F.2d 198 (Fed.Cir. 1986) . . . . . . . . . . . . . . . . . . . .27
`
`
`
`ix
`
`Cited Authorities
`
`Page
`
`Sun-Tek Indus., Inc. v. Kennedy Sky Lites, Inc.,
`
`929 F.2d 676 (Fed. Cir. 1991). . . . . . . . . . . . . . . . . . . .21
`
`Transclean Corporation v.
`Bridgewood Services, Inc.,
`290 F.3d 1364 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . .27
`
`
`
`Zenith Radio Corp. v. Hazeltine Research, Inc.,
`
`395 U.S. 100 (1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
`
`STATUTES
`
`17 U.S.C. § 505 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
`
`28 U.S.C. § 1254. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
`
`28 U.S.C. § 1331 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
`
`28 U.S.C. § 1338. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
`
`35 U.S.C. § 284. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
`
`35 U.S.C. § 285. . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
`
`42 U.S.C. § 1988. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
`
`42 U.S.C. § 3613 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
`
`
`
`x
`
`Cited Authorities
`
`Page
`
`OTHER AUTHORITIES
`
`Fed. R. Civ. P. 11 . . . . . . . . . . . . . . . . . . . . . . . . . 33, 34, 35
`
`P.J. Federico, Commentary on the New Patent Act,
` Title 35, United States Code Annotated. . . . . . . . . .22
`
`F. Scott Kieff, The Case for Preferring Patent-
`Validity Litigation Over Second-Window
`Review and Gold-Plated Patents: When One
`Size Doesn’t Fit All, How Could Two Do the
` Trick?, 157 U. Pa. L. Rev. 1937 (2009) . . . . . . . . . . . .32
`
`Michael J. Meurer, Controlling Opportunistic
`and Anti-Competitive Intellectual Property
` Litigation, 44 B.C. L. Rev. 509, 512 (2003). . . . . . . .25
`
`S.Rep. 93-1400, 1974 U.S.C.C.A.N. 7134, 7135. . . . . . . .36
`
`S.Rep. No. 1503, 79th Cong., 2d Sess. (1946),
`reprinted in 1946 U.S.Code Congressional
` Service 1386, 13871 . . . . . . . . . . . . . . . . . . . . . . . . . . .22
`
`S.Rep. No. 1979, 82nd Cong., 2d Sess. (1952),
`reprinted in 1952 U.S.Code Cong. & Ad.
` News 2394, 2423. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
`
`
`
`1
`
`OPINIONS BELOW
`
`The below-action was a patent infringement case
`in the District of Minnesota. The District Court for the
`District of Minnesota construed the asserted claims of the
`patent in a Markman decision that issued on December 22,
`2010, is reported at 2010 WL 5376209, and is reproduced
`in the appendix to the Petition (“App.”) at App. 62a-86a.
`The District Court for the District of Minnesota then
`granted summary judgment of non-infringement, in a
`decision that issued on June 17, 2011, is reported at 2011
`WL 2457914, and is reproduced at App. 31a-61a. Octane
`then moved for attorney fees under 35 U.S.C. §285 (the
`subject of the current petition), and the District Court
`denied that motion in a decision that issued on September
`6, 2011, is reported at 2011 WL 3900975, and is reproduced
`at App. 19a-28a.
`
`Both decisions (the underlying summary judgment
`decision and the fee decision) were appealed to the
`Federal Circuit Court of Appeals. The opinion of the
`United States Court of Appeals for the Federal Circuit
`issued on October 24, 2012, and can be found at 2012 WL
`5237021. App. 1a-17a. The order denying the petition for
`rehearing and rehearing en banc, dated December 27,
`2012, is reproduced at App. 87a-88a.
`
`BASIS FOR THIS COURT’S JURISDICTION
`
`The opinion and judgment of the court of appeals
`issued on October 24, 2012. A timely petition for rehearing
`and rehearing en banc was denied on December 27, 2012.
`This Court has jurisdiction pursuant to 28 U.S.C. § 1254.
`
`
`
`2
`
`STATUTE INVOLVED
`
`At issue in this case is 35 U.S.C. § 285, which states:
`
`“The court in exceptional cases may award
`reasonable attorney fees to the prevailing
`party.”
`
`STATEMENT OF THE CASE
`
`The plaintiff in the underlying action was Icon Health
`and Fitness, Inc. (“Icon”), a larger manufacturer/seller
`of exercise equipment. In February 2000, Icon obtained
`U.S. Patent No. 6,019,710, entitled “Exercising Device
`with Elliptical Movement” (“the ’710 patent”). The patent
`is directed to the linkage system of an elliptical machine.
`Though it sells elliptical machines, it was undisputed in
`the case below that Icon never sold a commercial product
`covered by the ’710 patent and that the design disclosed
`in that patent was not commercially viable.
`
`The defendant in the case below was Octane Health
`& Fitness (“Octane”), a much smaller start-up company.
`In 2001, Octane took a license from two prolifi c elliptical
`machine inventors, and designed two commercially
`successful lines of elliptical machines which were at issue
`below. These elliptical machines, which employ technology
`covered by patents that pre-date the ’710 patent, employ a
`linkage which is nothing like that shown in the ’710 patent.
`
`Years after Octane introduced its elliptical machines
`to the market, Icon, in internal emails, recognized
`Octane’s success and hatched a plan to extort royalties
`out of Octane with a weak patent case. As refl ect in the
`
`
`
`3
`
`examples below, Icon took an “old patent . . .that was
`sitting on the shelf”, and asserted it for competitive gain:
`
`As found by the courts below, the ’710 patent is
`directed to a linkage system having a “stroke rail” and
`one end of the rail must move in a linear path (the patent
`calls for “linear reciprocating displacement”). This
`limitation is recited by the Patent Offi ce as a reason for
`allowance. Octane’s machine, in addition to many stark
`differences, has no part that moves in a straight line, much
`less something that could be construed as a “stroke rail.”
`
`After Octane had spent over $1,300,000 defending
`itself through Markman and ultimately prevailing at
`summary judgment, the district court denied fees, fi nding
`that under the Federal Circuit’s two-part test, the case
`was not “objectively baseless” or brought in “subjective
`
`
`
`4
`
`bad faith,” even though no hearing was ever held to assess
`witness credibility. The Federal Circuit affi rmed the grant
`of summary judgment (multiple claim limitations were
`lacking, as a matter of law, both literally and equivalently),
`but summarily affi rmed the district court’s fee decision,
`declining to reassess its fee standard. Further details of
`this case are set forth below.
`
`a. Octane and Its Commercially-Successful
`Elliptical Machines
`
`Octane is a Minneapolis company that was founded in
`2004 by Tim Porth and Dennis Lee, two former executives
`from a large exercise company. (CTA App. A1665 at
`10:6-21; A1670 at 6:15-20, 8:1-3). Sensing a void in the
`marketplace, both Mr. Porth and Mr. Lee had a vision
`of a company that focused solely on high-end elliptical
`exercise machines that are sold to fi tness clubs, specialty
`fi tness stores, and the like. (CTA App. A1668, 53:2-54:1).
`
`At the outset of their business endeavor, Mr. Lee and
`Mr. Porth identifi ed a specifi c linkage system that would
`form the basis of their elliptical machines and licensed
`that system, shown in U.S. Patent No. 6,248,044 (“the ’044
`patent”), from two prolifi c elliptical inventors, Ken Stearns
`and Joe Maresh. (CTA App. A1666, 34:9-36:14). Octane
`engineers then took that patented linkage system and
`developed Octane’s lines of elliptical machines, including
`the Q45 and Q47 series machines that were ultimately at
`issue in the lower court case. (CTA App. A1667, 37:6-14).
`Notably, that technology largely predates the Icon patent
`asserted in the below case, which is discussed in more
`detail below.
`
`
`
`5
`
`Octane’s Q45 and Q47 machines enjoyed great success
`in the marketplace. (CTA App. A1685, 69:18-A1686, 70:1).
`In addition to signifi cant coverage in industry publications
`(CTA App. A1680-A1683), Octane enjoyed strong sales.
`(CTA App. A1687-A1688). For three years in a row, Octane
`was rated as the best elliptical supplier in the industry
`by a third party industry publication. (CTA App. A1678,
`166:25-167:3; A1680-A1683).
`
`b.
`
`Icon and the Commercially Defunct Elliptical
`Machine Claimed in the ’710 Patent
`
`Icon is the self-proclaimed “world’s largest developer,
`manufacturer and marketer of fi tness equipment.” See
`www.iconfi tness.com. However, with regard to elliptical
`machines, Icon primarily sells lower to mid-range elliptical
`machines, having had less success in the high-end elliptical
`machine market. (CTA App. A1674, 30:11-A1675, 35:17;
`A1676, 80:13-22; A1679, 187:16-188:11). The ’710 patent-
`in-suit relates to one of Icon’s commercially unsuccessful
`elliptical machine designs.
`
`Icon fi led the application resulting in the ’710 patent
`on January 6, 1998. (CTA App. A87-A100). The ’710 patent,
`entitled “Exercising Device with Elliptical Movement,”
`describes and claims an elliptical exercise machine with a
`specifi c linkage system. (CTA App. A94, 2:22-58). Because
`of the specifi city of the disclosed invention and narrowness
`of the claims contained in the application, Icon received
`a fi rst offi ce action allowance of the claims. (CTA App.
`A1695-A1697).
`
`Icon never commercialized an elliptical machine under
`the ’710 patent. (CTA App. A1607, 82:10-16; A1677, 148:17-
`
`
`
`6
`
`19; A1694, 54:13-15). After developing the machine and
`showing it to Icon’s customers, no customers expressed
`suffi cient interest in purchasing that type of elliptical.
`(CTA App. A1603, 26:20-A1604, 31:4; A1607, 84:9-12).
`Instead, Icon sold a different front drive elliptical machine
`that it did not invent, paying a royalty to a competitor on
`those sales. (CTA App. A1691, 185:11-A1692, 186:11).
`
`c. The ’710 Patent
`
`In addition to a frame and foot rails (which all elliptical
`machines have), Claim 1 of the ’710 patent, which is
`representative of the claims asserted by Icon, claims a
`linkage system comprising:
`
`c) a pair of stroke rails each having a fi rst end
`and an opposing second end, the second end of
`each stroke rail being hingedly attached to the
`fi rst end of a corresponding foot rail;
`
`(d) means for connecting each stroke rail
`to the frame such that linear reciprocating
`displacement of the fi rst end of each stroke
`rail results in displacement of the second end
`of each stroke rail in a substantially elliptical
`path; and
`
`(e) means for selectively varying the size of the
`substantially elliptical path that the second end
`of each stroke rail travels.
`
`’710 patent col. 7 ll. 11–26 (emphases added).
`
`
`
`7
`
`Figure 1 (below) from the ’710 patent (labeled for ease
`of this Court’s reference) illustrates the core features
`of the linkage system described and claimed in the ’710
`patent. (CTA App. A88).
`
`(Id.)
`
`As shown, Icon’s linkage system connects a “second
`end” 72 of a stroke rail 66 to a foot rail 50. The stroke
`rail extends to a “first end” 70 and the first end is
`
`
`
`8
`
`connected to the frame of the elliptical machine by, inter
`alia, a c-channel and pin/fl ared head arrangement (84
`and 76 respectively). The pin 76 slides up and down in a
`straight path within the c-channel (i.e., causing “linear
`reciprocating displacement”).
`
`Ultimately, the Patent Offi ce granted the patent for
`the ’710 linkage system, but was specifi c about what the
`patent covered:
`
`The prior art fails to show or teach applicant’s
`claimed exercise apparatus comprising a frame;
`a pair of foot rails having foot supports; a pair
`of stroke rails each having one end hingedly
`connected to a respective foot rail and having
`the opposite end connected to the frame
`for linear reciprocating movement and for
`producing an elliptical path.
`
`(CTA App. A1697, ¶3 (emphasis added)). Because all
`elliptical machines have a frame and foot rails that have
`foot supports, the patent examiner clearly regarded the
`“stroke rails each having one end hingedly connected to a
`respective foot rail and having the opposite end connected
`to the frame” and for producing “linear reciprocating
`movement” as the points of novelty in the ’710 patent.
`
`
`
`9
`
`d. The Linkage System of Octane’s Elliptical
`Machines
`
`As can be seen below, Octane’s commercially successful
`elliptical machines are nothing like the commercially
`unsuccessful elliptical machine shown and claimed in the
`’710 patent (compare above). The similarity begins and
`ends with the fact that they are elliptical machines.
`
`Octane’s Q45 Linkage System
`
`(CTA App. A1944).
`
`
`
`10
`
`Octane’s Q47 Linkage System
`
`(Id.)
`
`Most obviously, and as found by the lower court in
`the summary judgment ruling (discussed below), the ’710
`patent requires that one end of a stroke rail slide within a
`c-channel in a straight or “linear” line while the other end
`of the stroke rail moves the foot rails in an elliptical path.
`(CTA App. A36-A41). Octane’s elliptical machines do not
`employ a c-channel linkage structure (or anything close–
`requiring Icon to argue that Octane’s linkage system,
`including a “rocker link”, is somehow “analogous”), and
`no part of the linkage moves along a straight or “linear”
`path (forcing Icon to ignore the main thrust of its invention
`and argue that curved paths are covered by its patent).
`(CTA App. A1046-A1062; A1090-A1094). Icon also had to
`assert that a “stroke rail” could include limitless parts
`– even though the patent only shows a single stroke rail
`component. (Id.) In short, Octane’s linkage, (which in any
`
`
`
`11
`
`event was based on a pre-dating patented linkage system),
`bears no rational resemblance to anything that Icon could
`reasonably claim it invented.
`
`e. The Lawsuit
`
`By joining a small Octane distributor located in
`California, Icon (a Utah-based company) fi led a complaint
`against Octane (a Minnesota-based company) in the
`United States District Court for the Central District of
`California on April 23, 2008. Upon motion by Octane, the
`action was subsequently severed and the case against
`Octane was transferred to the District of Minnesota, while
`the case against the California distributor was predictably
`dismissed. (CTA App. A2; A61;. A101-A106; A320-A324;
`A329; A2610-A2613).1
`
`The complaint as initially filed by Icon alleged
`infringement of two unrelated patents: the ’710 patent
`and U.S. Patent No. 5,104,120, entitled “Exercise
`Machine Control System” (“the ’120 patent”). (CTA App.
`A101-A106; 339-341). That complaint specifi cally identifi ed
`only Octane’s Q47 series of elliptical machines of allegedly
`infringing each of the two patents, but Icon broadly sought
`discovery on all of Octane’s products, claiming that its
`infringement allegations were not only limited to the Q47
`series. (CTA App. A104; A438-A441; A2453-A2454).
`
`Neither patent-in-suit–each of which utilize means-
`plus-function claim terms extensively–disclosed or
`claimed an elliptical machine linkage system (the subject
`
`1. The District Court had subject matter jurisdiction
`pursuant to 28 U.S.C. §§ 1331 and 1338.
`
`
`
`12
`
`matter of the ’710 patent) or an exercise machine control
`system (the subject matter of the ’120 patent) similar to the
`setup of Octane’s commercial exercise machine products.
`For this reason, and from the start of the case, Octane’s
`counsel tried, unsuccessfully, to convince Icon to drop its
`claims (e.g., CTA App. A478-A479). Ultimately, but over
`one year into the litigation, the claims relating to the ’120
`patent were dismissed after Icon received an adverse
`claim construction ruling in an Eastern District of Texas
`infringement action against another Icon competitor.
`
`As detailed more fully below, Icon’s assertions relating
`to the ’710 patent were equally baseless and in June 2010,
`after repeated efforts to resolve the dispute failed, (e.g.,
`CTA App. A478-A479; A2453-A2454), Octane moved for
`summary judgment of non-infringement. (CTA App. A75).
`At Icon’s insistence, however, the district court decided
`that a separate Markman hearing was needed before
`reaching summary judgment, and on June 21, 2010, the
`district court held that Octane’s then pending Motion for
`Summary Judgment “must be rescheduled after th[e]
`Court rules on issues to be presented at the scheduled
`Markman hearing.” (CTA App. A76).
`
`In October 2010, following claim construction briefi ng
`by the parties, the district court held a Markman hearing
`and, in December 2010, issued a Memorandum Opinion and
`Order construing various terms of the ’710 patent. (CTA
`App. 62a-86a). In that Opinion, the district court largely
`adopted Octane’s constructions, which properly construed
`the means-plus-function limitations in the claims
`consistent with the structure recited in the specifi cation
`for performing the claimed functions, and rejected Icon’s
`overly-broad and baseless constructions which had little
`to no support in the specifi cation. Id.
`
`
`
`13
`
`Despite a Markman ruling largely rejecting
`its assertions, and which made Icon’s infringement
`contentions even more unreasonable, Icon continued to
`prosecute its claims undeterred. Octane renewed its
`motion for summary judgment of non-infringement of the
`’710 patent, noting that multiple claim limitations were
`lacking as a matter of law both literally and equivalently.
`
`Constrained by the district court’s adverse Markman
`ruling, in order to oppose the motion, Icon simply reargued
`its unreasonably-broad and previously-rejected claim
`constructions and advanced expert testimony removed
`from the disclosures of the patent and unrelated to
`anything Icon actually invented. For example, in order
`to oppose summary judgment, Icon speciously argued
`that a “stroke rail” as used in the patent could include
`any combination of parts and linkages–so long as some
`linkage connects the foot rail of an elliptical machine to
`the frame, the limitation is supposedly met. Of course,
`this is true of every elliptical machine.
`
`Further, because Octane’s machines did not utilize
`a c-channel linkage confi guration that moved in a linear
`path, Icon repeatedly tried to read the limitation for
`“linear reciprocating displacement” out of the claims.
`When this strategy failed, Icon relied on the doctrine of
`equivalents, putting up an expert who generally discussed
`similarities of elliptical machines without regard to the
`functional purposes recited in the patent. For example, to
`support his unreasonable position that Octane’s rocker link
`was equivalent to a c-channel, Icon’s expert contended that
`both constrain lateral movement. Yet, the ’710 patent does
`not recite constraining lateral movement as a function of
`the claimed means; the patent only discusses a structure
`that causes the stroke rail to move up and down in a linear
`
`
`
`14
`
`path. Herein lies the problem: where competitive products
`are involved, there is always some similarity of operation,
`but the question is whether the similarity resides in the
`patentable invention, not ancillary functions that are
`common to all competitive devices. Litigants, like Icon
`here, use experts to exploit the situation in an effort to
`create fact issues and disguise the case as meritorious.
`
`On June 17, 2011, the court issued a Memorandum
`Opinion and Order granting Octane’s motion for summary
`judgment. App. 31a-61a. The district court found several
`elements missing both literally and equivalently, including
`the “stroke rail” and “means for connecting” limitations
`noted above. A complete copy of the district court’s opinion
`is included in the Appendix. Id. Icon and Octane then
`stipulated to the dismissal of Octane’s counterclaim for a
`declaratory judgment of invalidity of the ’710 patent, and
`the district court entered fi nal judgment on July 15, 2011.
`App. 29a-30a. Icon appealed that decision to the Federal
`Circuit. (CTA App. A2614-A2615).
`
`Meanwhile, in the district court, Octane, which had
`by that point incurred attorney’s fees and costs of over
`$1.3 million, moved the district court to declare the case
`exceptional and award it fees pursuant to 35 U.S.C. § 285.
`(CTA App. A2619-A2641). The unreasonable and baseless
`positions taken and maintained by Icon throughout the
`litigation, in addition to damning emails and deposition
`testimony, showed the litigation to be vexatious and
`unjustifi ed in nature, warranting a fi nding of exceptional
`case status and fees. (See e.g., CTA App. A2645; A1608;
`A1233, 87:24-88:10).
`
`More specifically, documents uncovered in the
`litigation reflected that Icon decided to sue Octane
`
`
`
`15
`
`with an “old patent” it had “sitting on the shelf” as
`a way of hampering the upstart competitor. In email
`correspondence sent soon after the start of the litigation,
`Pat McGinnis, Icon’s Vice President of Global Sales, wrote
`to other Icon employees suggesting that the lawsuit was a
`tool against a competitor: “We are suing Octane. Not only
`are we coming out with a great product to go after them,
`but throwing a lawsuit on top of that”. (CTA App. A2645).
`The August 2008 email by Mr. McGinnis was forwarded
`on to a potential customer/retailer with a message from
`another Icon employee stating “just clearing the way
`and making sure you guys have all your guns loaded!”.
`(CTA App. A2645). Then, in an email dated September 16,
`2009, another Icon sales associate wrote to Mr. McGinnis
`stating, “I heard we are suing Octane!” (CTA App. A1608).
`In response, Mr. McGinnis wrote back, “Yes – old patent
`we had for a long time that was sitting on the shelf.
`They are just looking for royalties.” (Id.) Further, when
`asked in deposition if Icon sought to gain a competitive
`advantage over the smaller Octane with the lawsuit, Icon’s
`corporate designee indicated that this is implied in every
`litigation. (CTA App. A1233, 87:24-88:10). In other words,
`Icon fi led suit as a way to hamper a smaller competitor
`and potentially extract a royalty from Octane’s successful
`high-end elliptical machine sales.
`
`Despite the above evidence, and without conducting
`a hearing on the fee motion, on September 6, 2011, the
`district court denied Octane’s motion for attorney’s
`fees. App. 19a-28a. The district court, citing the line
`of Federal Circuit cases holding that in the absence of
`litigation misconduct, fees may only be awarded if the
`allegations are both objectively baseless and there is clear
`and convincing evidence of subjective bad faith, found
`that neither prong was met. According to this standard,
`
`
`
`16
`
`the district court stated that in order to be exceptional
`“‘the plaintiff’s case must have no objective foundation,
`and the plaintiff must actually know this.’” Applying
`that standard, the district court reasoned that the case
`was not objectively baseless, fi nding that Icon’s proposed
`claim constructions were not frivolous because they
`were not necessarily precluded by the broad language
`of the claim or the disclosures in the specifi cation, and
`that Icon’s reassertion of its previously-rejected claim
`construction in its summary judgment argument was
`“confused and repetitive,” but not objectively baseless.
`Further, the district court “had no reason to doubt” Icon’s
`mere representations that it had actually purchased and
`inspected a Q47 machine and had secured opinions from
`experts and counsel, despite the fact that Icon did not
`raise this assertion until Octane moved for attorney fees,
`and never produced any documentation supporting this
`assertion.
`
`With respect to the subjective bad faith element, the
`district court disregarded Icon’s incriminating emails
`as “stray remarks by employees with no demonstrated
`connection to the lawsuit” (even though the emails were
`from Icon’s Vice President of Global Sales) and that “[s]
`imply bringing suit to gain a competitive advantage is
`not evidence of bad faith.” The full text of this decision is
`included in the Appendix. Id.
`
`Octane timely appealed the denial of fees to the
`Federal Circuit and the two appeals (Icon’s appeal of the
`decision granting summary judgment and Octane’s appeal
`of the decision denying fees) were consolidated on January
`10, 2012. On October 24, 2012, the Federal Circuit affi rmed
`both rulings. App. 1a-17a. First, the Federal Circuit
`
`
`
`17
`
`found that the district court properly granted summary
`judgment, agreeing that the “stroke rail” and “means
`for connecting” limitations were not present literally or
`under the doctrine of equivalents as a matter of law. Id.
`at App. 8a-17a.
`
`As to the denial of fees, the Federal Circuit devoted
`only one paragraph to the issue, summarily concluding
`that “we have reviewed the record and conclude that the
`court did not err in denying
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