Adjustacam, LLC v. Newegg, Inc., 070517 FEDFED, 2016-1882

Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
Attorney:John J. Edmonds, Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC, Houston, TX, argued for plaintiff-appellee. Also represented by Shea Neal Palavan, Stephen F. Schlather. Mark A. Lemley, Durie Tangri LLP, San Francisco, CA, argued for defendants-appellants. Also represented by Kent E. Balda...
Judge Panel:Before Reyna, Mayer, and Hughes, Circuit Judges.
Opinion Judge:Reyna, Circuit Judge.
Party Name:ADJUSTACAM, LLC, Plaintiff-Appellee v. NEWEGG, INC., NEWEGG.COM, INC., ROSEWILL, INC., Defendants-Appellants SAKAR INTERNATIONAL, INC., Defendant
Case Date:July 05, 2017
Docket Nº:2016-1882
 
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ADJUSTACAM, LLC, Plaintiff-Appellee

v.

NEWEGG, INC., NEWEGG.COM, INC., ROSEWILL, INC., Defendants-Appellants

SAKAR INTERNATIONAL, INC., Defendant

No. 2016-1882

United States Court of Appeals, Federal Circuit

July 5, 2017

         Appeal from the United States District Court for the Eastern District of Texas in No. 6:10-cv-00329-JRG, Judge J. Rodney Gilstrap.

          John J. Edmonds, Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC, Houston, TX, argued for plaintiff-appellee. Also represented by Shea Neal Palavan, Stephen F. Schlather.

          Mark A. Lemley, Durie Tangri LLP, San Francisco, CA, argued for defendants-appellants. Also represented by Kent E. Baldauf, Jr., Daniel H. Brean, Bryan P. Clark, The Webb Law Firm, Pittsburgh, PA; Richard Gregory Frenkel, Latham & Watkins LLP, Menlo Park, CA.

          Before Reyna, Mayer, and Hughes, Circuit Judges.

          Reyna, Circuit Judge.

         AdjustaCam sued Newegg and dozens of other defendants for patent infringement. Although AdjustaCam voluntarily dismissed most defendants early in the litigation, it continued to litigate against Newegg, including through a Markman order and extended expert discovery. Just before summary judgment briefing, AdjustaCam voluntarily dismissed its infringement claims against Newegg with prejudice. Newegg then filed a motion for attorneys' fees. The district court denied Newegg's motion, and Newegg appealed to this court. We remanded to the district court in light of intervening Supreme Court precedent. On remand, the district court again denied Newegg's motion for fees. Newegg then filed this appeal. Because the district court erred in denying Newegg's motion, we reverse.

         Background

         A. The '343 Patent

         AdjustaCam, LLC is the exclusive licensee of U.S. Patent No. 5, 855, 343 ("'343 patent"), which issued in 1999 and is entitled "Camera Clip." The '343 patent discloses a camera clip that supports a camera both on a flat surface and when attached to a computer monitor. The '343 patent includes a figure of the camera clip:

         (Image Omitted)

         J.A. 164. Claim 1 of the '343 patent provides: 1. Apparatus for supporting a camera, having a lens, on any generally horizontal, substantially planar surface and on an object having a first surface and a second surface and an edge intersecting the first surface and the second surface, comprising:

a. a hinge member adapted to be rotatably attached to the camera, said camera, when the hinge member is so attached, rotating, about a first axis of rotation, relative to said hinge member; and

b. a support frame rotatably attached to said hinge member and configured to support said hinge member on the surface and the object, said hinge member rotating about a second axis of rotation relative to said support frame, said first axis of rotation being generally perpendicular to said second axis of rotation, said second axis of rotation being substantially parallel to the first surface when said hinge member is supported on the object, said support frame having a first disposition positioned on said generally horizontal, substantially planar surface, and said support frame having a second disposition attached to the object when said first surface and said second surface are inclined from a generally horizontal orientation, the camera being maintained adjacent said edge in said second disposition of said support frame.

         J.A. 169-170 (col. 6 l. 49-col. 7 l. 6) (relevant terms emphasized).

         B. Newegg's Accused Products

         Unlike the invention disclosed in the '343 patent, Newegg's accused products use a ball-and-socket joint, which facilitates rotation about multiple axes. See J.A. 6. In its original order denying Newegg's motion for fees, the district court noted that "the products do not have a pure ball-and-socket joint but rather a modified ball-and-socket joint with a channel that restricts movement." Id. Thus, although Newegg's products are constrained in some movements, they still allow rotation about more than one axis. The district court never found that Newegg's products rotate about a single axis.

         C. District Court Litigation

         In July 2010, AdjustaCam sued Newegg, Inc., Newegg.com, Inc., and Rosewill, Inc. (collectively, "Newegg") and dozens of other defendants for infringement of the '343 patent. AdjustaCam moved to dismiss most defendants from the litigation prior to claim construction. Many defendants settled for far less than the cost of litigation. See J.A. 6-7.

         Almost two years later, in April 2012, the district court held a Markman hearing followed by the issuance of a Markman order. The court determined that "the 'rotat-ably attached' terms do not require construction beyond what is contained in the claims." J.A. 22. Nonetheless, it concluded the '343 patent claims describe "rotatably attached" objects as rotating over a single axis. J.A. 20. The Markman order explained that "every reference to a 'rotatably attached' object in the specification and claims describes the attachment as permitting motion over a single axis of rotation, " and "[t]he claims plainly describe each 'rotatably attached' object as rotating about a single axis." J.A. 21-22.

         Shortly after the Markman order, AdjustaCam settled with more defendants. However, AdjustaCam continued to press its case against Newegg. The case proceeded into expert discovery.

         In September 2012, just prior to summary judgment briefing, AdjustaCam moved to dismiss with prejudice its claims against Newegg, contingent on Newegg's right to seek fees after dismissal. In October 2012, Newegg moved for a declaration of exceptional case under 35 U.S.C. § 285 and an award of fees. Newegg argued that this case is exceptional because AdjustaCam brought an objectively baseless lawsuit in bad faith. J.A. 1779. According to Newegg, AdjustaCam brought the case simply to extract nuisance-value settlements unrelated to the merits and far below the costs of defense. Id. Newegg further contended that AdjustaCam had no reasonable expectation of success on its infringement claims against Newegg, particularly after the district court's Markman order. Id. Newegg argued that even after the Markman order, AdjustaCam pressed its frivolous infringement claims, continued to demand a nuisance settlement, and prolonged the litigation in bad faith. Id.

         Specifically, Newegg pointed out that its allegedly infringing products use ball-and-socket joints. J.A. 1786. Comparing Newegg's ball-and-socket products to the '343 patent claims demonstrates the spurious nature of Ad-justaCam's infringement allegations. Id....

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