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White Knuckle IP. LLC v. Electronic Arts Inc.

United States District Court, D. Utah

February 23, 2018

WHITE KNUCKLE IP, LLC, a Utah limite liability company, Plaintiff,
v.
ELECTRONIC ARTS INC., a Delaware corporation, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S [152] MOTION FOR RULE 11 SANCTIONS and [165] MOTION FOR ATTORNEYS' FEES

          David Nuffer United States District Judge

         Plaintiff White Knuckle IP, LLC (“White Knuckle”) dismissed its claims in this patent infringement action. After White Knuckle's patent was largely invalidated in proceedings outside of this action, White Knuckle moved to voluntarily dismiss (the “Motion to Dismiss”).[1] The Motion to Dismiss has been granted.[2]

         Defendant Electronic Arts Inc. (“EA”), prevailing party, seeks sanctions against, and attorneys' fees from, White Knuckle for filing this case. EA filed a Motion for Rule 11 Sanctions (the “Motion for Sanctions”).[3] After the order was entered dismissing White Knuckle's claims, EA moved for attorneys' fees (the “Motion for Fees”).[4] White Knuckle opposes both motions.[5]

         The remedies EA seeks are reserved for exceptional or objectively unreasonable cases. White Knuckle's claims, though unsuccessful, were not exceptional or objectively unreasonable. Therefore, both the Motion for Fees and the Motion for Sanction are denied.

         BACKGROUND

         White Knuckle was issued a patent, U.S. Patent No. 8, 529, 350 (the “Patent”), dated September 10, 2013. The Patent claims a system for updating parameters of a video game to keep video games meant to simulate real world events more consistent with developing characteristics of the real world.[6] For example, as a real life football player improves his throwing accuracy, the parameters in the video game for that player would be updated to reflect the improvement.[7] The Patent carried a presumption of validity under 35 U.S.C. § 282.[8] Patent holders are not expected to voluntarily second-guess their own intellectual property rights. “The burden of establishing invalidity of a patent or any claim thereof [rests] on the party asserting such invalidity.”[9] Unless or until the Patent was invalidated, White Knuckle had a right to rely upon and seek to enforce it.

         White Knuckle filed suit against EA for infringement of the Patent.[10] The case was stayed pending inter partes review of the Patent by the Patent Trial and Appeal Board of the United States Patent and Trademark Office (the “Board”), as well as an appeal to the U.S. Court of Appeals for the Federal Circuit of a District of Utah decision invalidating the Patent's parent patent, No. 8, 545, 575, as drawn to a patent-ineligible abstract idea.[11] While this action was stayed, the Federal Circuit affirmed the decision invalidating the parent patent and entered judgment dismissing White Knuckle's appeal.[12] The Board held that claims 1-10, 12-16, and 23 of the Patent are unpatentable for obviousness.[13] With only “one remaining valid independent claim” in the Patent, White Knuckle decided to voluntarily dismiss this action and signed a Unilateral Covenant Not to Sue EA.[14] The Motion to Dismiss was granted.[15] EA now seeks attorneys' fees from White Knuckle and sanctions under Rule 11 for filing the action.

         DISCUSSION

         Rule 11 Sanction Are Denied.

         Prevailing in a patent infringement action on invalidity does not entitle a defendant to sanctions. “Rule 11(b) requires an attorney to conduct a reasonable inquiry into the law and facts before filing a pleading in a court and to certify that the claims contained therein are not frivolous, legally unreasonable, without factual foundation, or asserted for an improper purpose.”[16] Rule 11(c) then permits a district court to impose sanctions on a party and its attorneys for violation of subdivision (b).[17] In patent infringement actions, Rule 11 requires, at a minimum, “that an attorney interpret the asserted patent claims and compare the accused device with those claims” before filing the action.[18] The infringement analysis “can simply consist of a good faith, informed comparison of the claims of a patent against the accused subject matter.”[19]The formality of a claim chart is not required of an owner, inventor, or drafter of a patent, who “ought to have a clear idea of what the patent covers.”[20] EA asserts three bases for imposing sanctions against White Knuckle, each of which is rejected.

         EA asserts that some (but not all) of its accused products could not possibly infringe because EA's servers for those video games were shut down by the time the Patent issued, at which point those games could be played offline only.[21] Without connectivity, the games could not receive updated parameters over a network, as the Patent's claims require. EA argues that the inclusion of the disconnected games in White Knuckle's complaint demonstrates inadequate pre-filing investigation. Counsel for White Knuckle, Andrew Hansen, submitted a declaration describing White Knuckle's pre-filing investigation.[22] Hansen compared the claims of the Patent against EA's NCAA Football and Tiger Woods Golf video games. Hansen's research revealed numerous internet articles that described the features of the NCAA and Tiger Woods video games.[23] In November of 2014, Hansen purchased and tested copies of the accused products to identify features of the video games that met the elements of the asserted claims of the Patent.[24]As for the EA games that were no longer network-connected, White Knuckle had a good faith assertion of provisional rights from the time of the Patent's application in 2010. Despite some disputed facts that needed to be-and were-resolved during the course of litigation, the record of White Knuckle's pre-filing investigation is sufficient to satisfy Rule 11.

         EA also argues that the Patent is invalid as obvious over EA's own prior art publications. The Board determined that all but one of the claims in the Patent are invalid for obviousness. This result justifies White Knuckle's voluntary dismissal but does not require sanctions. Unless or until the Patent was invalidated, White Knuckle had a right to rely on the presumption of validity under 35 U.S.C. § 282.[25] In fact, one independent claim in the Patent survived Board review.[26] And White Knuckle took steps to withdraw its infringement claim with respect to the invalidated claims in the Patent.[27] White Knuckle will not be sanctioned for pursuing its infringement suit in a stayed case while the PTAB took its action.

         EA further argues that the Patent is abstract and patent ineligible on its face under the Supreme Court's decision in Alice Corporation Pty. Ltd. v. CLS Bank International.[28] Under the Alice decision, patent claims drawn to an abstract idea are not patentable, and generic implementation of the idea in a specific fashion, such as by computer, does not transform an abstract idea into a patent-eligible invention.[29] Applying Alice to the Patent and making an abstractness determination is not necessary here, where White Knuckle has voluntarily dismissed its action. And that determination, which has not been adjudicated, is far beyond the issues fairly considered on a sanctions motion. It is sufficient to observe that the Patent included not only the idea for updating parameters in a video game, but also a method for performing the updates.[30] Given the presumption of validity and that the method claim survived Board inter partes review, White Knuckle's defense of its Patent as not abstract is not so unjustified as to impose sanctions under Rule 11.

         Attorneys' Fees Are Denied.

         Under § 285, “the court in exceptional cases may award reasonable attorney fees to the prevailing party” in a patent case. Dispensing with more rigid tests for what constitutes an “exceptional” case, the Supreme Court has held that an exceptional case “is simply one that stands out from others with respect to the substantive strength of a party's litigating position . . . or the unreasonable manner in which the case was litigated” considering the totality of the circumstances.[31] EA argues that this is an exceptional case on the same grounds asserted in support of its Motion for Sanctions. As explained above, White Knuckle's pre-filing investigation and its positions on obviousness and abstractness are defensible. Accordingly, this is not an exceptional case.

         In the cases cited by EA, deterrence is a recurrent factor for imposing attorneys' fees.[32]Deterrence is not needed in this case. White Knuckle has sued EA, but not dozens or hundreds of dubious infringers, as plaintiffs have done in cases where courts factored deterrence into their decision to find a case exceptional. The parties focused on the validity arguments in outside proceedings before undertaking significant discovery in this case, which was stayed in the meantime. Considering the totality of the circumstances, ...


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