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Inc. v. Lumicor, Inc.

United States District Court, D. Utah, Central Division

September 28, 2018

3FORM, INC., a Utah corporation Plaintiff,
v.
LUMICOR, INC., a Washington corporation, Defendant.

          MEMORANDUM DECISION AND ORDER ORDER GRANTING MOTION FOR ATTORNEY FEES

          CLARK WADDOUPS JUDGE

         Defendant Lumicor moves the court pursuant to 35 U.S.C. § 285 for an order that it is entitled to attorney's fees. (ECF No. 74.) Under the Patent Act, in “exceptional cases” the court may award “reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. The parties do not dispute that Lumicor was the prevailing party; therefore, the only issue before the court is whether this case is “exceptional.” Having considered the parties' briefing and heard oral argument on this matter, the defendants's motion is GRANTED. The court directs Lumicor to submit a supplemental motion in compliance with DUCivR 54-1(f) in support of its “fair estimate” of approximately $250, 000 in attorney's fees. The court further directs the parties that it will not entertain claim-by-claim challenges to the reasonableness of fees, but rather will consider the reasonableness of the total fees requested.

         LEGAL STANDARD

         “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. The moving party bears the burden of demonstrating, by a preponderance of the evidence, that a case is “exceptional.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1758 (2014.) An “exceptional” case is “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.” Id. at 1756. In assessing whether a case is exceptional, the court must consider the totality of the circumstances, id., and may consider such factors as “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, ” id. at 1756 n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). The court may also “consider the instant case in comparison to the full panoply of patent cases with which it has been involved.” Sarif Biomedical LLC v. Brainlab, Inc., 2016 WL 5422479, *3 (D. Del. Sept. 27, 2016). The court does not need to find “material inappropriate conduct, such as willful infringement, fraud, or inequitable conduct related to the matter in litigation.” Octane, 134 S.Ct. at 1754-55.

         ANALYSIS

         The parties argued whether this case qualifies as “exceptional” based almost entirely on the facts of the case, especially whether those facts gave rise to an objectively reasonable basis for 3form's lawsuit and whether 3form subsequently litigated the case in an objectively reasonable manner. The court considers each patent separately.

         1. ‘700 Patent

         Lumicor was the first to invent and seek to patent a two-pressure process to produce laminate panels having decorative innerlayers of reeds, twigs, and other materials. (Mem. Dec. 3, ECF No. 73.) Two years after Lumicor's application to the Patent Office, 3form filed its ‘700 patent application, which the Patent Office initially rejected as being anticipated by Lumicor's application. To secure the ‘700 patent from the Patent Office, 3form distinguished Lumicor's process, asserting that Lumicor's process used pressures that were too high to maintain compressible objects, such as plant leaves, petals, twigs, etc., in a natural, unflattened, conformation. In other words, to obtain the ‘700 patent, 3form unequivocally represented to the Patent Office that panels made by the Lumicor process would not infringe 3form's patent.

         Having obtained its ‘700 patent, as well as a related ‘068 design patent, 3form filed suit against Lumicor in 2009, asserting that Lumicor's products infringed on 3form's patents. Lumicor countersued, seeking to invalidate 3form's ‘700 and ‘068 patents. At the outset of the 2009 litigation, Lumicor pointed out the fatal flaw in 3form's assertion of infringement, namely that 3form obtained its ‘700 patent precisely because it told the Patent Office that the use of high pressures in Lumicor's process meant that products produced pursuant to Lumicor's patent would not infringe on 3form's patent. (Ltr. Dated Dec. 8, 2009; ECF No. 75-2.) Lumicor also explained early in that litigation that it was frivolous or objectively baseless for 3form to secure a patent by arguing to the Patent Office, on the one hand, that its claims do not cover a particular product or process, and then, on the other hand, to assert in subsequent litigation that the distinguished product or process infringes the resulting patent. (Def.'s Mot. 3, ECF No. 74.) 3form was undeterred and proceeded with the 2009 litigation, which was ultimately dismissed because 3form lacked standing. (2:09-cv-990-TS, ECF No. 149-1.) Although 3form had alleged it was the owner of the ‘700 patent and the ‘068 patent, it was only a licensee, not the owner of the patents. 3form subsequently purchased the patents and asserted them again in this action.

         Lumicor repeated the above factual warnings in this action, including reiterating that the prior Lumicor patent application taught the exact thing shown in 3form's ‘068 design patent such that the ‘068 patent was thus plainly invalid. (Answer at 4, 6, ¶¶ 6, 19; ECF No. 9.) In this action, 3form accused every Lumicor twig and reed panel of infringing the ‘700 patent, regardless of the process used. This specifically included panels made exactly in accordance with Lumicor's prior Patent Application, as well as those made with even higher pressures. (See Def.'s MSJ at 25, ECF No. 50 (noting that 3form's damages expert accounted for all Lumicor panels regardless of process used, and that 3form's technical expert opined that every Lumicor reed panel was within the scope of the ‘700 patent); see also Dec. of Dennis Schober ¶ 19-22; ECF No. 50-1 (describing the accused processes).) Thus, in the Patent Office 3form unequivocally stated that panels made by the Lumicor process would not infringe, but in this action 3form accused those same panels of infringing.

         Defendants further assert that no reasonable investigation by 3form ever supported the proposition that the ‘700 patent could be both valid and infringed by Lumicor's accused products. The evidence uniformly showed that every panel made using the process in the Lumicor patent resulted in a substantially natural conformation. Moreover, 3form accused every panel of infringement no matter how Lumicor made it, including panels made with even higher pressures than the 160 psi 3form had told the Patent Office would flatten compressible objects to the point of being two-dimensional.

         For its part, 3form argues that the court should not consider whether 3form committed inequitable conduct while prosecuting the ‘700 patent as part of its attorney's fees analysis. 3form asserts that such conduct was not pled in this action, is not a basis for awarding fees under 35 U.S.C. § 285, and Lumicor failed to make a prima facie case of inequitable conduct. (Pl.'s Opp'n 1, ECF No. 87.) 3form misapprehends the standard for an award of attorney's fees. While 3form is correct that a finding of inequitable conduct requires clear and convincing evidence, the court need not make such a finding here. Instead, after Octane, the court must find, by a preponderance of the evidence, that the case is exceptional considering the totality of the circumstances. Id. at 1751. In its discretion, the court can consider 3form's patent prosecution conduct as it relates to this litigation in its analysis of the totality of the circumstances.

         3form also argues that its litigation position was not objectively baseless because its contentions about the validity of the ‘700 patent and Lumicor's infringement of that patent do not represent an inescapable dichotomy. First, it challenges the notice 3form received from Lumicor in the December 8, 2009 letter. (ECF No. 75-2.) The court has reviewed the letter and finds that it clearly and thoroughly set forth the dichotomy, and that as a result, 3form had an early opportunity to withdraw and resolve the matter. Second, 3form defends its patent prosecution by arguing that it subsequently learned that Lumicor's factory process was “quite different than its patent process.” (Pl.'s Opp'n 6, ECF No. 87.) Thus, it contends, it had a reasonable basis for its '700 patent prosecution claims that using “the higher pressures taught in Lumicor's patent process could flatten compressible objects to an unnatural appearance.” (Id.) 3form does not explain how subsequently acquired knowledge of Lumicor's factory processes give a justifiable basis for its previous uninformed representations to the patent board.[1]

         As for how 3form's subsequently acquired knowledge of Lumicor's factory processes justified its infringement allegations in this lawsuit, the court notes that 3form's opposition to Lumicor's attorney's fees motion merely repeats its unsuccessful “compressible objects” arguments in its summary judgment pleadings, which do not explain what makes those arguments objectively reasonable. 3form then goes on to assert that while it distinguished Lumicor's process before the patent board, it only accused Lumicor's products of infringement. (Pl.'s Opp'n 9, ECF No. 87.) 3form did not limit its accusations, however, to products that allegedly did not follow Lumicor's patent, but instead accused all panels including those made at the ‘327 pressures. Instead, 3form asserts that because “Lumicor has ...


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