Plaintiff eDekka LLC (“eDekka”) sued a large number of defendants in Eastern District of Texas alleging infringement of U.S. Patent No. 6,266,674 (“the ‘674 Patent”) titled “Random Access Information Retrieval Utilizing User Defined Labels.” As explained by the district court, the ‘674 Patent relates to storing and labeling information and discloses a preferred embodiment that includes a cassette tape recorder with multiple buttons, a microphone, and a speaker. The majority of eDekka’s suits stemming from the ‘674 Patent target online retailers that offer a shopping cart feature on their e-commerce websites. It is this shopping cart functionality that eDekka alleges infringes the ‘674 Patent.
Numerous defendants filed motions to dismiss under 35 U.S.C. § 101, contending that the ‘674 Patent was directed to unpatentable subject matter under Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014). The district court granted defendants’ motions and held that the claims of the ‘674 Patent were patent-ineligible under § 101. Defendants then filed a motion asking the district court to find the cases “exceptional” under 35 U.S.C. § 285.
The Defendants asserted that the case should be found “exceptional” under § 285 for two reasons: (1) eDekka’s case was objectively unreasonable; and (2) eDekka litigated in an unreasonable manner.
Turning to the first point, the district court found that eDekka’s § 101 position was objectively unreasonable by reviewing the claim terms and referencing the arguments that were made at the hearing on the motion to dismiss. The district court noted that the ‘674 Patent is “demonstrably weak on its face, despite the initial presumptions created when this patent was issued by the PTO. The ‘674 Patent generically refers to a ‘data structure,’ but does not require such structure to be limited to a computer. The claims are not tied to a generic computer, let alone a specialized one. Claim 1 essentially describes the common process of receiving, labeling, and storing information, while Claim 3 encompasses retrieving such information.”
Despite the weakness of the claims, the district court found that “rather than acknowledging the inherent weaknesses of the ‘674 Patent, eDekka proffered completely untenable arguments to the Court throughout the § 101 briefing process and at the September 10, 2015 hearing. For example, eDekka asserted that the patented claims ‘improve the functioning of technology’ by reducing ‘the time to retrieve information and the amount of information that must be retrieved.'” The district court found “absolutely no basis in the claim language to support eDekka’s newfound position that the ‘674 Patent was meant to serve as a teaching tool for computer users.”
The district court also found that eDekka litigated in an unreasonable manner. The district court noted that “eDekka’s litigation history in this District–which includes filing strikingly similar lawsuits against over 200 defendants–reflects an aggressive strategy that avoids testing its case on the merits and instead aims for early settlements falling at or below the cost of defense. Based upon the record of the above-captioned cases, as well as the Court’s in camera review of eDekka’s ‘674 Patent settlements to date, the Court finds a pattern of defendants that agreed to settlements at relatively early points in the litigation for amounts significantly below the cost of taking a patent case to trial. Further, on September 8, 2015, just two days before the September 10, 2015 § 101 hearing, counsel for eDekka contacted numerous defendants with offers to settle their cases for three-thousand dollars each. These offers represent extraordinarily low amounts.”
As a result, the district court found “it is reasonable to conclude that eDekka acted with the goal of “exploiting the high cost to defend complex litigation” to extract “nuisance value settlement[s]” from defendants. See Eon-Net v. Flagstar Bancorp, 653 F.3d 1314, 1326-27 (Fed. Cir. 2011) (affirming the district court’s finding of an “indicia of extortion” where a plaintiff filed over 100 lawsuits and “[e]ach complaint was followed by a ‘demand for a quick settlement at a price far lower than the cost of litigation . . . .'” (citation omitted)). Such tactics contribute significantly to the Court’s finding that this case is “exceptional.” See id. at 1328 (“[T]he appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably based in law and fact and to litigate those cases in good faith.”).
Accordingly, the district court found the case exceptional and directed the defendants to file the requested amount for attorney’s fees.
eDekka v. 3Balls.com, Inc., Case No. 2:15-CV-541-JRG (E.D. Tex. Dec. 17, 2015)
The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.