Court Opinion

ID: 2792856
Source: CourtListenerOpinion
Date Created: 2015-04-10 15:01:10.152383+00
Date Added: 2024-06-11T11:29:02.738658
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

          OPLUS TECHNOLOGIES, LTD.,
                Plaintiff-Appellee

                           v.

                     VIZIO, INC.,
                  Defendant-Appellant

        SEARS HOLDINGS CORPORATION,
                    Defendant
              ______________________

                      2014-1297
                ______________________

    Appeal from the United States District Court for the
Central District of California in No. 2:12-cv-05707-MRP-
E, Senior Judge Mariana R. Pfaelzer.
                 ______________________

                Decided: April 10, 2015
                ______________________

     MICHAEL E. JOFFRE, Kellogg, Huber, Hansen, Todd,
Evans & Figel, PLLC, Washington, DC, argued for plain-
tiff-appellee. Also represented by ARTHUR A. GASEY;
DANIEL R. FERRI, RAYMOND PARDO NIRO, I, Niro, Haller &
Niro, Chicago, IL.

   ADRIAN MARY PRUETZ, Glaser, Weil, Fink, Jacobs,
Howard, Avchen & Shapiro LLP, Los Angeles, CA, argued
2                    OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.

for defendant-appellant. Also represented by CHARLES
CHRISTIAN KOOLE, DAN LIU, MIEKE K. MALMBERG.
                ______________________

     Before PROST, Chief Judge, MOORE, and O’MALLEY,
                    Circuit Judges.
MOORE, Circuit Judge.
    Vizio, Inc. appeals from the district court’s denial of
attorneys’ and expert witness fees under 35 U.S.C. § 285,
28 U.S.C. § 1927, and the court’s inherent power. We
hold that the district court abused its discretion in deny-
ing fees, and thus vacate and remand.
                       BACKGROUND
    Oplus Technologies, Ltd. originally filed this patent
infringement suit in the Northern District of Illinois
against Vizio and Sears Holding Corporation. The North-
ern District of Illinois granted defendants’ motion to
transfer the case to the Central District of California.
Oplus Techs., Ltd. v. Sears Holdings Corp., No. 11-cv-
8539, 2012 WL 2280696, at *8 (N.D. Ill. June 15, 2012).
After the case was transferred, Oplus moved the Judicial
Panel on Multidistrict Litigation to transfer the case back
to the Northern District of Illinois and consolidate it with
cases Oplus filed against Sears and other companies. The
Panel denied Oplus’s motion. In re Oplus Techs., Ltd.,
Patent Litig., 899 F. Supp. 2d 1373, 1374 (J.P.M.L. 2012).
    The course of this litigation was anything but ordi-
nary as the district court’s opinion thoughtfully chroni-
cles. On the merits, the case concluded when the Central
District of California granted summary judgment of
noninfringement of the asserted patents. Vizio moved to
recover attorneys’ and expert witness fees pursuant to 35
U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent
power. Following briefing and a hearing, the court issued
an opinion with numerous findings regarding Oplus’s
OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.                  3

litigation misconduct. Oplus Techs., Ltd. v. Sears Hold-
ings Corp., No. 2:12-cv-05707-MRP-Ex (C.D. Cal. Feb. 3,
2014), ECF No. 220 (Fees Order). The court found that
from the start Oplus “delayed the litigation by strategical-
ly amending its claims to manufacture venue,” and, in
doing so, “flouted the standards of appropriate conduct
and professional behavior.” Id. at 11. It found that
“Oplus provided only the most tenuous basis in its initial
complaint for bringing suit in Illinois” and that its “first
amended complaint took its first step over the boundaries
of professionalism” because the “amendment rendered its
allegations against Sears prima facie inadequate.” Id. It
chastised Oplus for “ignor[ing] well-settled law” by asking
“the [Panel on Multidistrict Litigation] to return the case
to Illinois after it lost” the motion to transfer to the Cen-
tral District of California. Id.
     The court found that “Oplus misused the discovery
process to harass Vizio by ignoring necessary discovery,
flouting its own obligations, and repeatedly attempting to
obtain damages information to which it was not entitled.”
Id. It found that Oplus implemented an “abusive discov-
ery strategy” that involved “avoid[ing] its own litigation
and discovery obligations while forcing its opponent to
provide as much information as possible about Vizio’s
products, sales, and finances.” Id. The court noted that
its “greatest concern . . . was Oplus’s counsel’s subpoena
for documents counsel had accessed under a prior protec-
tive order.” Id. at 12. In that instance, counsel for Oplus
represented an unrelated patentee in a prior litigation
against Vizio and, pursuant to the protective order in that
prior litigation, retained copies of documents produced by
Vizio. Id. Here, counsel for Oplus, Niro, Haller & Niro,
drafted what it called a tailored subpoena for documents
retained by counsel for the earlier plaintiff, which also
happened to be Niro, Haller & Niro. Id. The court con-
cluded that it “strain[ed] credulity” to believe that Oplus
“issued the subpoena without using any knowledge by
4                    OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.

three attorneys [that both worked on the earlier case and
the present case] as to the content of the discovery
sought.” Id. at 12–13. The court found that “Oplus
blatantly misinterpreted its own prior discovery requests
in an attempt to obtain the same information the Court
had previously refused to compel.” Id. at 13.
     The court found that “Oplus used improper litigation
tactics including presenting contradictory expert evidence
and infringement contentions as well as misrepresenting
legal and factual support.” Id. It found that Oplus’s
response to Vizio’s complaint about contradictory expert
opinions—where Oplus disavowed “its own expert’s
statement when Vizio cited the paragraph, rather than
the paragraph heading” of its expert’s report—was “mere-
ly one example of Oplus’s strategic manipulation of the
facts and evidence provided to the Court.” Id. at 14. In
another example, it noted that whereas “Oplus’s in-
fringement contentions cite[d] a patent to show infringe-
ment” of Oplus’s patents, its “expert testifie[d] that the
same patent did not disclose the methods of Oplus’s
patents.” Id. It found that “Oplus consistently twisted
the Court’s instructions and decisions” and attempted “to
mislead the Court.” Id. It complained that when “Oplus
had no evidence of infringement of one element of a claim,
it simply ignored that element and argued another.” Id.
It found that “Oplus regularly cited to exhibits that failed
to support the propositions for which they were cited” and
that “Oplus’s malleable expert testimony and infringe-
ment contentions left Vizio in a frustrating game of Whac-
A-Mole throughout the litigation.” Id.
    The district court found the case exceptional under 35
U.S.C. § 285 and that Oplus and its counsel were vexa-
tious litigants and engaged in litigation misconduct. Id.
at 10–15. Despite its specific findings regarding Oplus’s
conduct and its ultimate finding that the case was excep-
tional, the court denied Vizio’s request for fees. Id. at 16–
18. It noted that “[a]though Oplus’s behavior has been
OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.                  5

inappropriate, unprofessional, and vexatious, an award of
attorney fees must take the particular misconduct into
account.” Id. at 16. It then stated, without further expla-
nation, that the “case has been fraught with delays and
avoidance tactics to some degree on both sides.” Id. It
noted that “each instance of motion practice occurred
according to normal litigation practice” and that “[t]here
is little reason to believe that significantly more attorney
fees or expert fees have been incurred than would have
been in the absence of Oplus’s vexatious behavior.” Id.
     It also denied fees under § 1927, reasoning that “there
is no evidence suggesting that Oplus’s behavior stemmed
from bad faith or a sufficient intent to harass,” even
though the “Court has ample evidence of Oplus’s litigation
misconduct.” Id. It denied fees under its inherent power,
reasoning that “it would be a mistake for the Court to use
its inherent power” to grant fees because “other tools for
sanctioning behavior exist and apply to the party’s mis-
conduct.” Id. at 18. Vizio appeals; we have jurisdiction
under 28 U.S.C. § 1295(a)(1).
                        DISCUSSION
    We review all aspects of a district court’s determina-
tion under 35 U.S.C. § 285 for abuse of discretion. High-
mark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct.
1744, 1749 (2014). The Ninth Circuit reviews a denial of
sanctions under 28 U.S.C. § 1927 and a court’s inherent
power for abuse of discretion. Trulis v. Barton, 107 F.3d
685, 692, 695 (9th Cir. 1995).
    Section 285 provides: “The court in exceptional cases
may award reasonable attorney fees to the prevailing
party.” When the district court issued its opinion, we had
required that patent litigants establish entitlement to
fees under § 285 by clear and convincing evidence. Brooks
Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378,
1382 (Fed. Cir. 2005). Since the district court issued its
opinion, the Supreme Court rejected this requirement,
6                    OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.

holding that “nothing in § 285 justifies such a high stand-
ard of proof.” Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 134 S. Ct. 1749, 1755, 1758 (2014). This
change in the law lowers considerably the standard for
awarding fees. In light of this change in the law, we
believe it appropriate to vacate and remand this case in
order for the district court to reconsider the propriety of
awarding fees.
    The district court opinion details an egregious pattern
of misconduct. Even Oplus’s counsel “agree[s] that [the
misconduct was] quite severe.” Oral Arg. at 14:40–43,
available     at    http://oralarguments.cafc.uscourts.gov/
default.aspx?fl=2014-1297.mp3. Although an award of
fees is within the discretion of the district court, nothing
in the opinion or in the record substantiates the court’s
decision not to award fees. The court’s opinion details
Oplus’s misconduct. Given that the district court found
counsel’s behavior “inappropriate,” “unprofessional,”
“vexatious,” and “harassing,” it is difficult to imagine how
Vizio had not incurred additional expenses defending
against such filings. E.g., Fees Order at 14, 16. The
district court explained that Oplus’s litigation positions,
expert positions, and infringement contentions were a
constantly moving target, “a frustrating game of Whac-A-
Mole throughout the litigation.” Id. at 14. Defending
against a constantly moving target would logically have
increased the expense of litigation for Vizio. The court
also detailed Oplus’s “abusive discovery strategy,” id. at
11, explaining that “Oplus misused the discovery process
to harass Vizio by ignoring necessary discovery, flouting
its own obligations, and repeatedly attempting to obtain
damages information to which it was not entitled.” Id.
Again, it seems that this sort of discovery abuse would
increase litigation costs for Vizio. The court gave several
examples, including Oplus’s filing of motions to compel,
which were “seriously contradictory and unreasonable”
and sought to compel discovery that it was not entitled to
OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.                7

and had never even requested. Id. at 8–9. Here too it
seems likely that additional litigation expenses would
have been incurred.
    After detailing the serious misconduct and concluding
that the case was exceptional, the explanation the court
gave for denying fees was that the “case has been fraught
with delays and avoidance tactics to some degree on both
sides.” Id. at 16. The court did not specify the delays or
tactics and, at oral argument, counsel for Oplus was
unable to articulate delays that were substantiated in the
record, let alone actions that would warrant the court’s
denial. Oral Arg. at 15:30–18:00. On appeal, “Oplus has
not challenged any finding by the district court” or “any
single thing that [the district court judge] said.” Id. at
14:28–37.
     We have reviewed the record and cannot find a basis
to support the court’s refusal to award fees. Oplus argues
fees are not warranted because Vizio did not promptly
move for summary judgment. We see no unusual delay in
this record. That Vizio did not move for summary judg-
ment at the outset of litigation does not absolve counsel’s
uncontested litigation misconduct nor could it justify
refusal to award fees after summary judgment was filed.
In fact, Oplus admitted, it failed to address multiple
noninfringement contentions in its summary judgment
opposition. Id. at 27:58–30:54; see also Fees Order at 8
n.3 (noting that Oplus’s opposition to summary judgment
failed to even address several steps of the claimed meth-
od). Rather than stipulating to noninfringement, counsel
forced the court to consider its opposition, which was
predicated on the presentation of contradictory expert
testimony. This conduct caused additional process and
wasted party and judicial resources.
    Oplus argues that fees are not warranted because the
court noted that motion practice followed normal litiga-
tion practice. Whether or not this was similar to a normal
8                    OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.

case in that there was discovery and dispositive motion
practice does not mean that Vizio did not incur additional
fees on account of counsel’s misconduct. The discovery
abuses, unprofessionalism, and changing litigation posi-
tions described by the court had to have increased ex-
pense and frustration for all concerned.
    Oplus argues that fees are not warranted because the
court found that Oplus’s allegations against Vizio were
not objectively baseless at filing. Oplus’s reliance on this
section of the court’s decision is misplaced. The court was
deciding whether it would “alternatively award attorney
fees” because Vizio alleged that the case was brought in
subjective bad faith and was objectively baseless, not
whether the lack of objective baselessness weighed
against awarding fees for litigation misconduct. Fees
Order at 15.
    Finally, Oplus argues that the court’s decision to deny
fees was not due to the court’s professed aversion to
awarding fees. J.A. 500 at 11:9–17; J.A. 505 at 16:12–15;
and J.A. 518 at 29:19–22. In light of the detailed findings
of misconduct in this case, the lack of basis for denying
fees and the recent change in the law related to fees by
the Supreme Court (which lowered the standard for
assessing entitlement to fees), we vacate and remand for
reconsideration.
                       CONCLUSION
     Although the award of fees is clearly within the dis-
cretion of the district court, when, as here, a court finds
litigation misconduct and that a case is exceptional, the
court must articulate the reasons for its fee decision. In
light of the court’s fact findings regarding the extent of
harassing, unprofessional, and vexatious litigation, the
change in legal standard by the Supreme Court, and the
lack of sufficient basis to deny fees under § 285, we vacate
and remand for the district court to consider whether and
the extent to which fees are warranted. Because the court
OPLUS TECHNOLOGIES, LTD.   v. VIZIO, INC.                 9

premised its decision regarding fees under § 1927 and its
inherent power at least in part on its decision to deny fees
under § 285, we vacate those rulings and remand for
further proceedings.
             VACATED AND REMANDED