Court Opinion

ID: 3133428
Source: CourtListenerOpinion
Date Created: 2015-10-21 15:01:21.764193+00
Date Added: 2024-06-11T11:53:35.494593
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                 ______________________

  INTEGRATED TECHNOLOGY CORPORATION,
     NEVADA INTEGRATED TECHNOLOGY
              CORPORATION,
              Plaintiffs-Appellees

                            v.

   RUDOLPH TECHNOLOGIES, INC., MARINER
        ACQUISITION COMPANY LLC,
             Defendants-Appellants
            ______________________

                       2014-1820
                 ______________________

    Appeal from the United States District Court for the
District of Arizona in No. 2:06-cv-02182-ROS, Senior
Judge Roslyn O. Silver.
                ______________________

                Decided: October 21, 2015
                 ______________________

    JOSHUA MICHAEL RYLAND, Tucker Ellis LLP, Cleve-
land, OH, argued for plaintiffs-appellees. Also represented
by JAY REED CAMPBELL; TODD ROBERTS TUCKER, Calfee,
Halter & Griswold LLP.
2                 INTEGRATED TECHNOLOGY CORP. v. RUDOLPH
                                      TECHNOLOGIES, INC.

    DANIEL W. MCDONALD, Merchant & Gould P.C.,
Minneapolis, MN, argued for defendants-appellants. Also
represented by RACHEL C. HUGHEY, MICHAEL A. ERBELE.
                ______________________

Before PROST, Chief Judge, MOORE and WALLACH, Circuit
                       Judges.
PROST, Chief Judge.
     On appeal for the second time, Rudolph Technologies,
Inc. and Mariner Acquisition Company LLC (collectively
“Rudolph”) challenge the district court’s determinations
that this case is exceptional and that Rudolph is bound by
an earlier stipulation regarding the amount of attorneys’
fees it owes. We affirm the district court’s exceptionality
finding, but we hold that the district court erred in inter-
preting the stipulation to be binding in this circumstance.
We therefore vacate the district court’s fee award and
remand for the district court to calculate the amount of
reasonable attorneys’ fees Integrated Technology Corpo-
ration and Nevada Integrated Technology Corporation
(collectively “ITC”) incurred as a result of Rudolph’s
misconduct.
                      I. BACKGROUND
    Rudolph and ITC are the sole competitors in the mar-
ket for inspection equipment for probe cards, which are
testers for semiconductor chips. Probe cards test semi-
conductor chips by probing them with thousands of small
wires. Those wires (called probes) can become bent,
damaged, or misaligned. Rudolph’s technology tests the
probes by taking images of the probes as they contact a
“window” of the testing system.
    A key limitation of U.S. Patent No. 6,118,894, the pa-
tent at issue in this appeal, is that the images of the probe
tip are obtained “in a first state where said probe tip is
driven in contact with said window with a first force, and
INTEGRATED TECHNOLOGY CORP.   v. RUDOLPH                 3
TECHNOLOGIES, INC.

in a second state where said probe tip is driven in contact
with said window with a second force . . . .” J.A. 183.
Rudolph’s products—various PRVX models and the
ProbeWoRx product—were designed not to contact the
window in the first state. However, after ITC sued Ru-
dolph, Ronald Seubert, who was the CEO at the time,
tested the PRVX products and found that, due to manu-
facturing tolerances, the PRVX products sometimes did
contact the window in the first state. Rudolph then
slightly modified its software to account for manufactur-
ing tolerances so that the PRVX products could not con-
tact the window in the first state. Rudolph introduced the
redesigned PRVX products on August 15, 2007, seven
months after being sued, and four months after ITC’s
initial infringement contentions. The next day, ITC took
Mr. Seubert’s deposition, and Mr. Seubert disclosed the
redesign. However, when ITC asked Mr. Seubert whether
the probe tips contacted the window in Rudolph’s prod-
ucts, Mr. Seubert responded that he did not know. Mr.
Seubert did not disclose the testing he performed or its
results. Mr. Seubert left the company in December 2007.
    The parties cross-moved for summary judgment in
early 2009. ITC sought summary judgment of infringe-
ment on all products. As to the original products, Ru-
dolph argued that the accused products did not practice a
means-plus-function limitation.     With respect to the
redesigned products, Rudolph argued that the redesign
caused the products to no longer literally infringe because
they cannot contact the window in the first state. Ru-
dolph’s motion for summary judgment of noninfringement
also argued that the redesigned products do not infringe
under the doctrine of equivalents based on prosecution
history estoppel. The district court granted ITC’s sum-
mary judgment motion as to the original products, finding
that Rudolph’s means-plus-function argument was not a
“serious defense.” J.A. 17748. The district court denied
both parties’ motions with respect to the redesigned
4                INTEGRATED TECHNOLOGY CORP. v. RUDOLPH
                                     TECHNOLOGIES, INC.

products, though the district judge did not resolve the
prosecution history estoppel issue. Finally, the court
granted Rudolph summary judgment of noninfringement
as to a second asserted patent no longer at issue in this
case.
    Three main issues proceeded to trial: willfulness on
the original products, and infringement and willfulness as
to the redesigned products. The jury returned a verdict of
infringement and willfulness on the redesigned products,
but the jury found that Rudolph’s infringement before the
redesign was not willful. Presumably, the jury must have
credited ITC’s argument that the redesigned products
infringed under the doctrine of equivalents and that the
redesign was an intentional sham. ITC alleged copying to
establish willfulness on the original products, which the
jury apparently rejected.
     One moment at trial is particularly relevant to the
present appeal. At trial, Mr. Seubert disclosed for the
first time upon questioning that he actually performed
testing on his products when Rudolph was sued. Then,
when Mr. Seubert was asked, “You determined that the
machine actually was covered by the claims in the patent;
right?” he responded “Yes.” J.A. 9480. Mr. Seubert also
confirmed that the testing occurred in April of 2007. J.A.
9479. In its judgment as a matter of law order, the dis-
trict court called this “a startling admission under oath”
because Rudolph continued to contest infringement even
though the CEO personally thought that Rudolph in-
fringed. J.A. 17737.
    The district court denied Rudolph’s motion for judg-
ment as a matter of law. In so doing, the district court
trebled damages, granted a broad injunction, and found
the case exceptional under § 285. The district court’s
analysis was brief: “Rudolph’s conduct during this litiga-
tion and the willfulness finding are ample support for
finding this case exceptional.” J.A. 17751. Rudolph then
INTEGRATED TECHNOLOGY CORP.   v. RUDOLPH                 5
TECHNOLOGIES, INC.

drafted a stipulation in which it agreed not to contest the
reasonableness of ITC’s requested fee award of
$3,252,228.50. The relevant text of the stipulation is as
follows:
   We are mindful, however, that disputing the rea-
   sonableness of your request will result in addi-
   tional fees for both sides. Therefore, Rudolph will
   not contest the reasonableness of ITC’s request for
   fees in the amount of $3,252,228.50. This agree-
   ment solely relates to the reasonableness of the
   dollar amount and does not in any way limit Ru-
   dolph’s ability to contest or appeal ITC’s entitle-
   ment to attorneys’ fees on appeal or otherwise as
   may be appropriate, which right Rudolph specifi-
   cally reserves.
J.A. 18396.1. The judge accepted the stipulation and
awarded $3,252,228.50 in fees. The court then denied a
motion to stay the injunction pending appeal (though this
court ultimately granted the motion). Rudolph appealed.
    On appeal, we found that prosecution history estoppel
applied as a matter of law, so we reversed the infringe-
ment findings on the redesigned products. Integrated
Tech. Corp. v. Rudolph Techs., Inc., 734 F.3d 1352, 1356–
60 (Fed. Cir. 2013). We therefore also vacated the will-
fulness finding, the trebled damages, and the injunction.
Id. at 1360. Finally, this court remanded the attorneys’
fees issue to the district court because the exceptional
case finding relied on the vacated willful infringement
finding. Id. at 1360–61.
    On remand, the district court reinstated its excep-
tional case determination. The substance of the order is
below in full:
   In brief, the record establishes the following: Ru-
   dolph hid its infringement for years, provided
   false discovery responses, filed summary judg-
6                 INTEGRATED TECHNOLOGY CORP. v. RUDOLPH
                                      TECHNOLOGIES, INC.

    ment papers even though it knew its product in-
    fringed, argued a never fully explained theory
    that ITC did not own the underlying patent, and
    during and after trial played semantic games re-
    garding what its machines did and what functions
    were important to it and its customers. (Doc. 546
    at 20 n.9) (explaining Rudolph refused “to be
    forthright regarding how its machines operate”
    and the terms of injunction were an attempt to
    prevent “Rudolph from simply redefining certain
    terms in such a manner so it can claim its ma-
    chines are outside literal coverage”). The striking
    weakness of Rudolph’s position regarding its pre-
    2007 PRVX machines, as well as the unreasonable
    manner in which it litigated the case through trial
    and post-trial motions, satisfy the Supreme
    Court’s standard under § 285 for awarding fees.
    In fact, either the substantive strength of many of
    Rudolph’s litigating positions or the “unreasona-
    ble manner in which the case was litigated” make
    this case stand out from others. An award of fees
    is appropriate. The parties previously stipulated
    to the amount of fees. (Doc. 550-1 at 4).
J.A. 72. Rudolph appeals. This court has jurisdiction
under 28 U.S.C. § 1295(a)(1).
                      II. DISCUSSION
    Under 35 U.S.C. § 285, a “court in exceptional cases
may award reasonable attorney fees to the prevailing
party.” In Octane Fitness, the Supreme Court clarified
that:
    an “exceptional” case is simply one that stands out
    from others with respect to the substantive
    strength of a party’s litigating position (consider-
    ing both the governing law and the facts of the
    case) or the unreasonable manner in which the
    case was litigated. District courts may determine
INTEGRATED TECHNOLOGY CORP.   v. RUDOLPH                   7
TECHNOLOGIES, INC.

   whether a case is “exceptional” in the case-by-case
   exercise of their discretion, considering the totali-
   ty of the circumstances.
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134
S. Ct. 1749, 1756 (2014) (footnote omitted). On appeal, we
review the district court’s exceptional case determination
under § 285 for an abuse of discretion. Highmark Inc. v.
Allcare Health Mgmt. Sys., 134 S. Ct. 1744, 1747 (2014).
                        A. Waiver
    As an initial matter, ITC asserts that Rudolph waived
all of its challenges to the district court’s findings that
Rudolph committed misconduct because, in the first
appeal, Rudolph stated that the district court’s miscon-
duct findings were “wholly irrelevant to the issues on
appeal . . . .” Appellants’ Reply Br. ECF No. 59 at 22,
Integrated Tech. Corp. v. Rudolph Techs., Inc., No. 12-
1593. According to ITC, because Rudolph did not appeal
the misconduct findings in the first appeal, Rudolph
cannot challenge them now.
    We disagree. The district court’s opinion on remand
is a new opinion with new factual findings. In the first
appeal, we vacated the district court’s attorneys’ fees
determination because it was inextricably intertwined
with the district court’s vacated willfulness finding.
Therefore, on remand, the district court had to consider
anew whether the facts of the case supported an excep-
tionality determination under § 285. Accordingly, Ru-
dolph was free to defend against ITC’s renewed
misconduct allegations.    As Rudolph disputed ITC’s
misconduct allegations on remand, the arguments are
preserved for this appeal.
                    B. Exceptionality
    On the merits, we affirm the district court’s excep-
tionality determination. The district court provided five
independent bases supporting exceptionality.       Upon
8                INTEGRATED TECHNOLOGY CORP. v. RUDOLPH
                                     TECHNOLOGIES, INC.

review, we cannot say that the district court, considering
the totality of the circumstances, abused its discretion in
finding the case exceptional under § 285. See, e.g., J.A.
7917 (p. 108, ll. 10–17), 9425 (illustrating Mr. Seubert’s
inconsistent deposition and trial testimony).
                      C. Stipulation
    Rudolph argues that, if we affirm the exceptionality
finding, Rudolph should not be held to the stipulation it
drafted prior to the first appeal regarding the amount of
attorneys’ fees. We agree. We review contract interpreta-
tion de novo and the district court’s ultimate decision for
abuse of discretion. Doe I v. Wal-Mart Stores, Inc., 572
F.3d 677, 681 (9th Cir. 2009) (“Contract interpretation is
a question of law that we review de novo.”); Bywaters v.
United States, 670 F.3d 1221, 1228 (Fed. Cir. 2012) (“[I]n
determining the amount of reasonable attorneys’ fees to
award under federal fee-shifting statutes, the district
court is afforded considerable discretion.”).
    We interpret the stipulation’s text to be binding only
when Rudolph is liable for fees for the entire case. The
stipulation states that “Rudolph will not contest the
reasonableness of ITC’s request for fees in the amount of
$3,252,228.50.” J.A. 18396.1. This language assumes
that the district court has already held Rudolph liable for
fees encompassing the entire case—the stipulation relates
only to “ITC’s request for fees.” Id. Even when a party is
liable for fees covering the entire case, the losing party
may still contest the reasonableness of the prevailing
party’s fee request. The stipulation refers only to this
issue: “the reasonableness of the dollar amount.” Id.
Moreover, Rudolph explicitly reserves the right “to contest
or appeal ITC’s entitlement to attorneys’ fees on appeal or
otherwise as may be appropriate . . . .” Id. In other
words, Rudolph remains able to contest the extent of its
liability for fees. Therefore, as the scope of Rudolph’s
liability has changed, its stipulation on the reasonable-
INTEGRATED TECHNOLOGY CORP.   v. RUDOLPH                  9
TECHNOLOGIES, INC.

ness of ITC’s fees request—which is tied to a different
amount of liability—is inapposite.
    The context in which the stipulation was entered sup-
ports our textual interpretation. The district court had
just resolved the judgment as a matter of law motions
heavily in favor of ITC—the court upheld the jury’s in-
fringement and willfulness verdict, it trebled damages, it
held the case exceptional, and it entered a broad injunc-
tion. In that climate, Rudolph agreed not to contest the
amount of ITC’s requested fees.
     Now, however, the case’s posture has substantially
changed. Indeed, ITC won only a fraction of its original
claims. In this case, ITC asserted two patents against
both Rudolph’s pre- and post-redesign products. It also
accused Rudolph of willful infringement, and it sought
treble damages and an injunction. After the initial dis-
trict court proceedings had concluded, ITC won a complete
victory on one of the two asserted patents. However, on
appeal, we reversed the infringement finding as to the
redesigned products, which vacated the willfulness find-
ing, vacated the injunction, vacated the trebled damages,
and vacated the exceptionality determination. After the
appeal, ITC won only a portion of its original case—
simple infringement of one patent on only the pre-
redesign products.
    Furthermore, the district court provided no explana-
tion in holding Rudolph to the stipulation. The court
merely stated that “[t]he parties previously stipulated to
the amount of fees,” without resolving Rudolph’s argu-
ment that the stipulation was no longer binding. J.A. 72.
As the court provides no reasoning, it is difficult to defer
to the district court’s view of the case.
    Federal Circuit law requires that the amount of the
fee award “bear some relation to the extent of the miscon-
duct.” Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340,
1344 (Fed. Cir. 2001) (quoting Read Corp. v. Portec, Inc.,
10               INTEGRATED TECHNOLOGY CORP. v. RUDOLPH
                                     TECHNOLOGIES, INC.

970 F.2d 816, 831 (Fed. Cir. 1992)). The district court
based the amount of the attorneys’ fee award on an erro-
neous view of the stipulation, and consequently, the
district court abused its discretion. On remand, the
district court must award reasonable attorneys’ fees
commensurate with Rudolph’s misconduct.
                     III. CONCLUSION
    For the foregoing reasons, we affirm the district court
finding that this is an exceptional case under § 285,
vacate the district court’s fee award, and remand for a
determination of the proper fee award.
     AFFIRMED-IN-PART, VACATED-IN-PART,
              AND REMANDED