Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 1 of 8 PageID #: 19855
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
`
`
`CHRIMAR SYSTEMS, INC., CHRIMAR
`HOLDING COMPANY, LLC,
`
`
`
`Plaintiffs,
`
`
`
`
`v.
`
`ALCATEL-LUCENT ENTERPRISE USA
`INC.,
`
`
`
`CIVIL ACTION NO. 6:15-CV-00163-JDL
`
`
`
`
`
`
`
`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
`
`
`
`
`
`Defendant.
`
`
`
`
`MEMORANDUM OPINION AND ORDER
`
`
`
`
`
`
`
`
`Before the Court is Defendant Alcatel-Lucent Enterprises USA, Inc. (“ALE”) Motion to
`
`Declare this Case Exceptional and For Attorney’s Fees. (Doc. No. 494.) Plaintiffs Chrimar
`
`Systems, Inc. d/b/a CMS Technologies and Chrimar Holding Company LLC (“Chrimar”) have
`
`filed a response (Doc. No. 497), to which ALE has filed a reply (Doc. No. 500), and Chrimar has
`
`filed a sur-reply (Doc. No. 503). For the reasons stated herein, the Court DENIES ALE’s Motion
`
`(Doc. No. 494).
`
`BACKGROUND
`
`
`
`On March 9, 2015, Plaintiffs filed the instant action against Defendant ALE. (Doc. No.
`
`3.) Chrimar alleged infringement of U.S. Patent Nos. 8,115,012 (“the ’012 Patent”), 8,902,760
`
`(“the ’760 Patent”), 8,942,107 (“the ’107 Patent”), and 9,019,838 (“the ’838 Patent”) (“patents-
`
`in-suit”)). This case proceeded through claim construction, dispositive motions and pretrial, and
`
`the trial between Chrimar and ALE commenced on October 3, 2016. Prior to trial, ALE
`
`stipulated to infringement, and the following claims, defenses, and counterclaims were presented
`
`
`
`1
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 2 of 8 PageID #: 19856
`
`to the jury: damages, invalidity based on derivation and improper inventorship, fraud, and breach
`
`of contract. (Doc. No. 350.) On October 7, 2016 the trial concluded and the jury returned a
`
`verdict as follows: (1) Claims 31, 35, 43, and 60 of the ’012 Patent were not invalid; Claims 1, 5,
`
`72, and 103 of the ’107 Patent were not invalid; Claims 1, 59, 69, 72, and 145 of the ’760 Patent
`
`were not invalid, and Claims 1, 7, and 26 of the ’838 Patent were not invalid; (2) the sum of
`
`money that would fairly and reasonably compensate Chrimar for ALE’s infringement was
`
`$324,558.34; (3) ALE did not prove by a preponderance of the evidence that Chrimar committed
`
`fraud against ALE; and (4) ALE did not prove by a preponderance of the evidence that Chrimar
`
`breached a contract with the IEEE. (Doc. No. 349.)
`
`After the conclusion of the trial, on November 10, 2016, Chrimar moved to declare this
`
`case exceptional under 35 U.S.C. § 285 and requested attorney’s fees. (Doc. No. 380.) The court
`
`declined to declare this case exceptional and denied Chrimar’s request for attorney’s fees. (Doc.
`
`No. 412.) The Court then entered final judgment affirming the findings of the jury and awarding
`
`post judgment ongoing royalties. (Doc. No. 423.) Both ALE and Chrimar filed appeals. (Doc.
`
`Nos. 440, 447.)
`
`On appeal, the Federal Circuit affirmed the verdict in its entirety, but rejected the claim
`
`construction of the term “adapted” as set forth in claim 31 of the ’012 Patent. (Doc. No. 463.)
`
`Specifically, the Federal Circuit rejected the Court’s construction of the claim term “adapted” as
`
`“designed, configured, or made” and adopted ALE’s proposed construction that “adapted” means
`
`“modified.” Id. The remainder of the Court’s rulings were affirmed, including the infringement
`
`damages award, the Court’s ruling on fees, and the fraud judgment. Id. The case was remanded
`
`for further proceedings consistent with that opinion and the corresponding mandate subsequently
`
`issued. (Doc. No. 465.)
`
`
`
`2
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 3 of 8 PageID #: 19857
`
`
`
`On July 10, 2018, the Court held a status conference to discuss how to proceed with the
`
`case on the sole issue before the Court—liability as to claim 31 of the ’012 Patent based upon the
`
`Federal Circuit’s modified construction of the term “adapted” found therein. (Doc. No. 467.) At
`
`that time, Chrimar offered to dismiss the ’012 Patent and ALE raised, for the first time, an
`
`argument that it should not have to pay any damages, including ongoing royalties, because the
`
`patents-in-suit had since been found invalid by the Patent Trial and Appeal Board (“PTAB”).
`
`
`
`The Court ultimately dismissed the asserted claim of infringement of the ’012 Patent with
`
`prejudice and denied ALE’s request to stay and/or sever the ongoing royalties. (Doc. No. 476.)
`
`In its reasoning for denying a stay, the court noted that “the ongoing royalties were affirmed by
`
`the Federal Circuit with the Circuit Court’s express knowledge that the PTAB had invalidated at
`
`the patents-in-suit.” (Doc. No. 476, at 5 –6, citing Doc. No. 463, at 6 n. 1 (“The claims of the
`
`’107, ’838, ’012, and ’760 patents to which ALE stipulated infringement in this case were all
`
`determined to be unpatentable by the Patent Trial and Appeal Board in four final written
`
`decisions.”). ALE filed a motion to reconsider, which the Court denied. (Doc. No. 480.) The
`
`Court then issued an amended final judgment. (Doc. No. 481.) ALE filed an appeal. (Doc. No.
`
`485.) Without deciding the issues on the merits on appeal, the Federal Circuit determined that
`
`this case was still “pending” as a result of arguments raised by ALE and therefore applied the
`
`then-affirmed unpatentability decisions of the PTAB, vacating this Court’s final judgment and
`
`remanding the case for dismissal. (Doc. No. 490.) The Court subsequently entered an amended
`
`final judgment consistent with the mandate of the Federal Circuit. (Doc. No. 493.) Thereafter,
`
`ALE brought the instant motion for attorney’s fees. (Doc. No. 494.)
`
`
`
`
`
`
`
`3
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 4 of 8 PageID #: 19858
`
`LEGAL STANDARD
`
`35 U.S.C. § 285 provides that a “court in exceptional cases may award reasonable
`
`attorney fees to the prevailing party.” A case is exceptional when it “stands out from others with
`
`respect to the substantive strength of the 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., 134 S. Ct. 1749, 1756 (2014).
`
`Whether or not a case is deemed “exceptional” is a matter left to the Court’s discretion and must
`
`be made on a case-by-case basis, with consideration of “the totality of the circumstances.” Id.;
`
`see also Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1748 (2014) (“[T]he
`
`determination of whether a case is ‘exceptional’ under § 285 is a matter of discretion.”); Eon-Net
`
`LP v. Flagstar Bancorp, 653 F.3d 1314, 1324 (Fed. Cir. 2011) (“we are mindful that the district
`
`court has lived with the case and the lawyers for an extended period.”).
`
`Some factors the Court may consider in making its determination under § 285 are
`
`“frivolousness, motivation, objective unreasonableness (both in the factual and legal components
`
`of the case) and the need in particular circumstances to advance considerations of compensation
`
`and deterrence.” Octane, 134 S. Ct at 1756 n.6. To be considered exceptional, conduct need not
`
`be “independently sanctionable.” See id. Nor is a finding of bad faith required; “a case presenting
`
`either subjective bad faith or exceptionally meritless claims” may warrant an award of fees. Id. at
`
`1757. “After determining that a case is exceptional, the district court must determine whether
`
`attorney fees are appropriate,” which is within the Court’s discretion. Cybor Corp. v. FAS Techs.,
`
`Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (citations omitted). Ultimately, a party must prove
`
`entitlement to attorney’s fees by a preponderance of the evidence. Octane Fitness, 134 S. Ct. at
`
`1758.
`
`
`
`4
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 5 of 8 PageID #: 19859
`
`DISCUSSION
`
`
`
`ALE argues that this Court has the inherent authority to award fees for Chrimar’s abuse
`
`of the judicial process and to declare this case exceptional. (Doc. No. 494, at 5–6.) ALE cites the
`
`following reasons for finding this case exceptional and awarding fees: (1) Chrimar failed to
`
`stipulate to non-infringement of the ’012 Patent after the Federal Circuit vacated the Court’s
`
`claim construction and instead moved to dismiss the ’012 Patent with an insufficient covenant
`
`not to sue; (2) Chrimar refused to stay this case pending appellate review of the PTAB’s final
`
`written decisions; (3) Chrimar engaged in conduct prior to the trial in this case that renders the
`
`case exceptional; and (4) Chrimar’s opposition to the motion for costs lacks a legitimate basis.
`
`(Doc. No. 494.) Chrimar argues that its efforts to dismiss the ’012 Patent and oppose a request to
`
`sever ongoing royalties were made in good faith to efficiently end this litigation, and that ALE’s
`
`complaints of pre-trial litigation misconduct are unfounded. (Doc. No. 497.)
`
`
`
`The Court will focus first on the post-trial conduct cited by ALE as a basis for fees given
`
`that the Court has already declined to find this case exceptional based upon pre-trial and trial
`
`conduct (Doc. No. 412), and the post-trial conduct is what ultimately rendered ALE the
`
`prevailing party on the asserted claims of infringement. As to the conduct pertaining to the
`
`asserted claim of the ’012 Patent after remand, the Court does not find that conduct to render this
`
`case exceptional. As discussed above, the Federal Circuit had affirmed the finding of
`
`infringement for three of the four asserted patents and vacated the claim construction as to the
`
`’012 Patent. (Doc. No. 463.) ALE contends that the Federal Circuit’s interpretation of the word
`
`“adapted” in the ’012 Patent should have resulted in a stipulation of non-infringement by
`
`Chrimar. (Doc. No. 494.) Chrimar instead offered to dismiss the ’012 Patent with prejudice and
`
`provide a covenant not to sue. This dispute between the parties ultimately turned on the terms of
`
`
`
`5
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 6 of 8 PageID #: 19860
`
`Chrimar’s covenant not to sue and whether ALE’s customers and distributors would be fully
`
`protected by the covenant.1 As the Court found, ALE’s contentions were speculative at best and
`
`the ’012 Patent had now been invalidated therefore rendering concerns of future litigation moot.
`
`(Doc. No. 476, at 3–4.) Ultimately, the Court agreed to allow Chrimar to dismiss the asserted
`
`claim of the ’012 Patent with prejudice on its covenant not to sue. (Doc. No. 476.) Chrimar’s
`
`actions appeared to the Court to be a good faith effort to resolve this litigation after years of
`
`numerous disputes, a trial, and two appeals. The Court cannot therefore find Chrimar’s conduct
`
`in offering to dismiss the claim with a covenant not to sue in lieu of a stipulation to non-
`
`infringement to be per se unreasonable.
`
`
`
`Similarly, the Court does not find Chrimar’s refusal to stay this case pending review of
`
`the PTAB’s final written decisions to be unreasonable. Here, Chrimar was awarded damages by
`
`the jury upon a finding of infringement prior to a decision by the PTAB invalidating the patents-
`
`in-suit. (Doc. No. 349.) Moreover, the Federal Circuit affirmed that award with the express
`
`knowledge that the PTAB had since invalidated the patents-in-suit. See Doc. No. 463, at 6 n. 1
`
`(“The claims of the ’107, ’838, ’012, and ’760 patents to which ALE stipulated infringement in
`
`this case were all determined to be unpatentable by the Patent Trial and Appeal Board in four
`
`final written decisions.”). The fact that the case was not stayed pending an appeal of those
`
`decisions speaks more to the unique procedural posture of this action, which has now been
`
`pending for over five years, and less to Chrimar’s conduct.
`
`
`
`Regarding the pre-trial conduct that ALE cites as a basis for fees, the Court does not find
`
`this conduct to merit fees. As an initial matter, the Court has already considered the conduct of
`
`
`1 To the extent Chrimar engaged in conduct, as ALE alleges, with respect to the dismissal of the appeal and ultimate
`agreement to ALE’s terms of a covenant not to sue, that conduct was before the Federal Circuit, not the district
`court. The Court cannot therefore consider whether such conduct renders this case exceptional at the district court
`level as the appellate record is not before the Court.
`
`
`
`6
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 7 of 8 PageID #: 19861
`
`both parties during pre-trial and trial and found that this case was not exceptional. (Doc. No.
`
`412.) As to the specific pre-trial conduct now cited by ALE, ALE points specifically to
`
`Chrimar’s refusal to comply with the Court’s Order regarding apportionment, withholding of a
`
`damages expert’s report in related litigation, and attempting to add new infringement and
`
`invalidity theories on the eve of trial. (Doc. No. 494, at 14–17.)
`
`
`
`As to the argument on apportionment, the Court did indeed strike more than one version
`
`of Plaintiffs’ damages expert’s report. (Doc. Nos. 253, 301.) However, at trial, Plaintiffs’
`
`damages expert ultimately provided admissible testimony to support the jury’s damages award.
`
`The Court scrutinized this testimony in upholding the jury’s damages award during post-trial
`
`proceedings. (Doc. No. 414.) This award was ultimately affirmed by the Federal Circuit. (Doc.
`
`No. 463.) Certainly, if each case where a damages expert’s report was stricken, even more than
`
`once, would render the case exceptional, nearly every patent dispute before this Court would be
`
`deemed to be exceptional. As such, the Court does not find this conduct to result in a finding that
`
`the case is exceptional.
`
`As to the failure to provide a damages report from a related litigation, this dispute
`
`ultimately resulted in a motion to compel by ALE that was denied by the Court because the
`
`expert report was subject to a protective order of another court. (Doc. No. 179.) ALE contends
`
`that Chrimar ultimately delayed in producing a redacted version of this expert report until a
`
`month before trial. (Doc. No. 494, at 16.) This issue was resolved by the Court in Chrimar’s
`
`favor during the course of preparation for trial. (Doc. No. 179.) To the extent an issue remained
`
`with respect to a late production of a redacted version of the report, that issue was never raised
`
`with the Court. Moreover, the relevance of this report to this case was exceedingly low. As such,
`
`the Court does not find this conduct to merit an award of fees.
`
`
`
`7
`
`

`

`Case 6:15-cv-00163-JDL Document 507 Filed 04/21/20 Page 8 of 8 PageID #: 19862
`
`As to Chrimar’s alleged attempts to add new theories on the eve of trial, again this issue
`
`was not clearly presented to the Court as ongoing misconduct. As the parties are well aware,
`
`many claims and defenses are adjusted or altered as the parties narrow disputes for trial and
`
`receive rulings from the Court. Indeed, the Court previously discussed how ALE’s dropping of
`
`numerous defenses on the eve of trial did not render the case exceptional. (Doc. No. 412.) The
`
`Court ultimately does not find this conduct to render the case exceptional or to merit an award of
`
`fees.
`
`Lastly, as to Chrimar’s opposition to the motion for costs, the Court does not find such
`
`opposition to render the case exceptional for the reasons discussed with respect to the issues
`
`presented in the Court’s order for costs.
`
`For these reasons, the Court finds this case is not an “exceptional case” that warrants the
`
`award of attorney’s fees to ALE and the Court declines to award fees under its inherent
`
`authority.
`
`CONCLUSION
`
`For the reasons discussed above and pursuant to 35 U.S.C. § 285, the Court finds that this
`
`is not an exceptional case. The Court further declines to award attorney’s fees. Accordingly,
`
`ALE’s Motion (Doc. No. 494) is DENIED.
`
`
`
`
`
` So ORDERED and SIGNED this 21st day of April, 2020.
`
`
`
`
`
`8
`
`