Blackbird Tech LLC v. Health In Motion LLC (Fed. Cir. 2019)
This case involves U.S. Patent No. 6,705,976 (“the ’976 patent”) owned by Blackbird. The patent claims an exercise equipment with a bow-shaped contour with cable-exit ports. And HIM’s M1-Multi-Gym was accused of infringement (Compare patent image with product below).
After of 1.5 years of litigation Blackbird voluntarily dismissed its complaint with prejudice and executed a covenant not to sue the accused infringers. However, rather than simply dismissing the case, the district court also paused to award attorney fees ($300k) to the defendants. On appeal, the Federal Circuit has affirmed the fee award.
35 U.S.C. 285 provides discretionary authority for a district court to award attorney fees to the prevailing party, although only in “exceptional cases.”
The court in exceptional cases may award reasonable attorney fees to the prevailing party.
Id. In Octane Fitness, the Supreme Court interpreted an “exceptional case” as one that “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014). Applying that standard, the district court noted that Blackbird’s litigation position was substantively weak; that the case was litigated in an unreasonable manner; and that fees were warranted “to deter future abusive litigation.”
Weak Case: Although the accused device includes the bowed shape, it has several differences from the claims and the Federal Circuit found that “the exercise of even a modicum of due diligence by Blackbird, as part of a pre-suit investigation, would have revealed the weaknesses in its litigation position.” Although no motion for sanctions was filed, Blackbird was aware from early-on (the original answer) that HIM was planning to seek attorney fees and thus had sufficient “notice” to ensure its affairs were in order and correct defects in the case.
Nuisance Offers: During the litigation, Blackbird made several offers to settle at what the Federal Circuit called “nuisance value settlement offers” ranging from $80k to $15k. Each of these were “significantly less than the cost of litigation.” On appeal, the Federal Circuit affirmed that low settlement offers may be considered when determining bad faith and exceptional cases. Citing Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314 (Fed. Cir. 2011) (patentee had “acted in bad faith by exploiting the high cost to defend complex litigation to extract a nuisance value settlement”).
Future Abusive Litigation: According to the Federal Circuit, Blackbird is an entity owned and controlled entirely by attorneys. The firm makes its money by purchasing patents and then litigating them. Notably, the company has filed over 100 infringement lawsuits since 2014, none of which have reached a full, final decision on the merits. The district court partially justified its fee award here on the idea that it would help deter Blackbird from bringing similarly weak positions in the future. On appeal, the Federal Circuit affirmed — finding that reasoning proper to the exceptional case finding. “The District Court therefore did not abuse its discretion by considering the need to deter future abusive litigation.” This holding falls in-line with the court’s previous statement in Inventor Holdings:
We conclude that the district court acted within the scope of its discretion in finding this case to be exceptional based on the weakness of IH’s § 101 arguments and the need to deter similarly weak arguments in the future.
Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., 876 F.3d 1372 (Fed. Cir. 2017).
Fee award affirmed.
This part I find a bit disturbing as a basis for fees:
Blackbird “has filed over one hundred patent infringement lawsuits, and none have been decided, on the merits, in favor of [Blackbird]”
The vast majority of civil suits end up settling (maybe 95%) and settlement is strongly encouraged by many federal courts. So the fact that they settled their cases does not make the case exceptional.
Perhaps in combination with the fact that the case was very weak, litigated poorly, and that this plaintiff is a frequent flyer, then there is a legitimate basis for fees. I get the deterrence rationale — Plaintiff is not a one-time litigant, so the potential for future abuse is real.
But the fact that they settle cases should not be in the mix. IMO.
B.L. I think it was not just the number of their settled patent suits but also their willingness to take very small settlement amounts to escape demonstratively baseless suits without any final judgments against their patents and thus keep their patents alive and with judicially undefined claim scope?
More importantly, also note the litigation conduct allegations, apparently including document discovery violations
Good point, B.L.
“The law strongly favors settlement of litigation, and there is a compelling public interest and policy in upholding and enforcing settlement agreements voluntarily entered into. Bergh v. Department of Transp., 794 F.2d 1575, 1577 (Fed.Cir.), cert. denied, ___ U.S. ___, 107 S.Ct. 437, 93 L.Ed.2d 386 (1986).”
Hemstreet v. Spiegel, Inc., 851 F.2d 348 (Fed. Cir. 1988).
“But the fact that they settle cases should not be in the mix.”
Had the same thought Bored.
Settlements, even allegedly “nuisance” ones, should be encouraged.
A settlement is a settlement.
Very good point. The settlements are being treated as evidence that the lawsuits were not strong. There is definitely a negative inference from the settlements according to the holding.
Maybe a basis for en banc review? Or cert?
Who are these attorney tr-0lls, where do they live, and what is their political affiliation?
MM doesn’t know that he helped make me worth 1k more (call it 2.5 if including 401k valuation), just today alone. And the trading day is not over yet!
Thanks bro, your work really helps my bottom line!
Hey 6 — did you take that pvt sector job and make that (very expensive but beautiful) move to S.D.?
Nah bro, didn’t. Wasn’t economically a good match as I’m by far better off here with all the extra costs and they figured they could get someone for not much more than what I’m making now. I wished them gl, I’m sure they’ll be able to find someone a few years out of school or that wants to live out there. Many thanks to all those that contribed to my making a good decision though.
Sure; you’re welcome 6. Happy to lend my 2 cents worth.
Probably the right decision 6. Private industry right now is brutal and government jobs seem to keep getting better.
But remember, numerous commentators have insisted that there is no such thing as “patent trolls.”
At least here there was apparently no confusion as to whether the patent owner or its litigation attorneys should be the one’s paying the sanctions if they were one and the same.
Paul,
Put your pom-poms down.
It is not “NO” Tr011s, but rather the level of “Tr011s” and “bad patents” that is a meme exploited by those seeking to weaken patent rights.
If anything here, THIS story shows that the system already has power (sanctions) and that weakening patent rights is NOT needed.
As to sanctions inadequacies, Dennis notes from the decision that “the company has filed over 100 infringement lawsuits since 2014, none of which have reached a full, final decision on the merits. ” In other words they have apparently successfully collected more than 100 litigation-avoidance payoffs from more than 100 defendants AND avoided sanctions, until they finally sued two companies here willing to stand up to that tactic.
Then THAT should be the focus of change — and NOT making patent rights weaker.
Do you really need to be told that?
“THIS story shows that the system already has power (sanctions) and that weakening patent rights is NOT needed.”
Bingo.
The bright light of facts scatter troll narrators . . . . just as a bright light scatters roaches.
The issues in most attorney fee sanction cases like this one have nothing to do with the AIA, 101 Sup. Ct. cases, or other changes or weakening in patent rights. They have to do with a business model of PAE’s set up for buying patents and filing and continuing numerous patent suits even on patents clearly shown not infringed or invalid, counting on the vast majority of defendants being willing to pay them substantial sums just to avoid high D.C. defense litigation expenses. Only a small % of all patent suits go to trial.
Yes, one can argue that they have to some extent “poisoned the well” for what used to better patent licensing.
P.S. It will be interesting to know of this sanction award even gets paid, since many such suits are brought in the name of shell companies set up for the litigation, not the real party or parties in interest.
Well then, there’s a few more non-patent avenues to focus on, eh?
” filing and continuing numerous patent suits even on patents clearly shown not infringed or invalid,”
Isn’t this the reason for FRCP rule 11? It is attorney’s misconduct in filing the suit — not the inventor or those who disclose the invention to the world by obtaining a patent.
Getting sanctions for initially suing on what is later shown to be a clearly not infringed or invalid patent is not normally available under Rule 11, albeit there have been at least a couple of cases in which it was obtained by being able to show that numerous suits were being filed with no pre-suit infringement investigation whatsoever.
Paul,
I think that you are missing a key point here.
Maybe I should chalk it up to a general anti-patent disposition of “how dare you try to enforce”…
“initially suing on what is later shown to be a clearly not infringed or invalid patent”
If non-infringement or invalidity only comes to light because that is “later shown” to be the case negates a finding that the filing of the complaint makes the case an “exceptional case” as one that “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
Not if the lawsuit is still pursued well after it has been demonstrated to be unfounded, just as here, OR with other litigation miss-conduct.
BTW, attorney fee sanctions cut both ways. They can be and have been awarded against a number of defendants.
P.S. A motion for sanctions WAS filed, per the authorization of the judge: “In June 2018, the District Court dismissed Blackbird’s claims with prejudice and denied Blackbird’s Motion to Dismiss, while authorizing Appellees to “seek to recover their costs, expenses, and/or attorney[] fees.” J.A. 1383–85. That same month, Appellees filed a motion for attorney fees and expenses,..”
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