Plaintiff Gives Thanks That Texas Court Denied Prevailing Defendants Their Attorneys' Fees Despite Plaintiff's Claim Construction and Infringement Theories That "Stretch[ed] the Bounds of Reasonableness"

November 24, 2011

In three patent cases brought by the same plaintiff, Raylon LLC, against numerous defendants, Judge Davis of the Eastern District of Texas denied Rule 11 sanctions and motions for attorneys' fees under Section 285 of the Patent Statute, and Section 1927 of Title 28.

Following the grant of summary judgment of noninfringement, Defendants filed motions contending that Raylon's infringement theory was "so legally untenable" that fees and costs should be awarded under Sections 285 and 1927. Defendants earlier had filed a Rule 11 motion seeking sanctions. Raylon asserted U.S. Patent No. 6,655,589 ("the '589 patent") against all of the defendants. All of the claims of the '589 patent require a "display being pivotably mounted on said housing." Raylon argued that this should be construed to mean "an electronic device attached to a housing that visually presents information and allows the display to be moved or pivoted relative to the viewer's perspective" and alleged that infringement was found where the entire device, not just the display, could be pivoted to the view. Defendant EZ Tag sought a construction of the term to mean that "an integral computer screen which can move positions with regard to the computer housing and is not maintained in a fixed position." The remaining defendants argued that it should mean "the display must be mounted on the housing and the mounting of the display on the housing must be pivotable so that the display and housing may pivot with respect to each other." The Court construed the term as "the display must be mounted on the housing so that the display and housing may pivot with respect to each other." Because it was undisputed that all of the defendants' accused products had displays that were rigidly mounted as to the housing, the court granted summary judgment of noninfringement, both literally and under the doctrine of equivalents.

In denying Defendants' subsequent motion for Rule 11 sanctions, the Court stated its concern "about plaintiffs who file cases with extremely weak infringement positions in order to settle for less than the cost of defense and have no intention of taking the case to trial." The court further stated that "[w]here it is clear that a case lacks any credible infringement theory and has been brought only to coerce a nuisance value settlement, Rule 11 sanctions are warranted." On the other hand, the court countered that "there may be legitimate cases where a plaintiff settles with a few smaller defendants in an effort to raise needed capital in order to proceed to trial against the remaining major defendants. In those situations, plaintiffs typically settle with smaller defendants and proceed to trial against larger defendants who have larger damage potential. Such is a legitimate trial strategy. Moreover, the Court does not want to discourage early settlement of some or all defendants. This Court has always taken a favorable view of business resolutions to legitimate commercial disputes when those settlements are based on the case's merits and risks."

In denying the attorneys' fees motion based on Section 285, the Court held that while the plaintiff's claim construction arguments and infringement theory "do stretch the bounds of reasonableness," they are not objectively frivolous. Taking a losing position also does not constitute material misconduct. As such, the Court held that the case was not an exceptional one under Section 285.

Finally, in denying attorneys' fees under Section 1927, the Court held that there was no evidence that the litigation was "patently meritless."

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This case illustrates the difficulty of obtaining attorneys' fees after successfully defending a claim of patent infringement. In this instance, even though the Court found that the plaintiff's infringement theory stretched the bounds of reasonableness, that was not enough to warrant sanctions under Rule 11, make it an exceptional case under 35 U.S.C. 285, or qualify under Section 1927 as vexatious litigation.

Raylon LLC v. Complus Data Innovations, et al., Case No. 6:09-cv-355; Raylon LLC v. Advanced Public Safety, Inc, et al., Case Nos. 6:09-cv-356; Raylon LLC v. EZ Tag Corporation, et al., Case Nos. 6:09-cv-357 (E.D. Texas October 31, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Greg Cordrey at 949.623.7236 or GCordrey@jmbm.com.